April 22, 2020
Challenging start in 2020
The Covid-19 pandemic has significantly impacted the world in the beginning of 2020. For Epiroc, our first priority is to ensure the health and well-being of our colleagues, customers and business partners, and their families as well as the local communities we are a part of. Our next priority is to ensure business continuity and to support our customers with spare parts, rock drilling tools, and other essential products and services to keep their operations running. The whole organization has adjusted the way of working to reflect this new situation. Our business in China was impacted by the pandemic in February, but the situation has since improved. During March however, the impacts of the growing pandemic created a rapidly changing global situation, as restrictions from various governments and authorities started to disrupt the supply of components, transportation systems and manufacturing facilities. Some customers stopped or reduced the activity. As most of the impact was towards the end of the quarter, the financial impact in Q1, however, was limited. We expect that the demand both for equipment and in the aftermarket will be lower and that the effects of the pandemic will have a significant negative impact on revenues and profit in Q2.
Strong growth for service
The activity level at our customers was high in Q1 and orders received for our service business increased 12% organically compared to the previous year. Orders for equipment, rock drilling tools and attachments, however, decreased. Total orders received for the Group were MSEK 9 772, down 4% organically. Sequentially, orders received increased by 5%.
Improved operating margin
Revenues declined 8% organically to MSEK 9 134, mainly because of lower equipment revenues, and partly as Covid-19 caused some delays in deliveries. The service business was, again, strong, which contributed to the resilience in our profitability. The adjusted operating margin improved to 20.9% (20.3).
Actions to reduce costs and adapt operations
Epiroc has an agile business model where we continuously adapt to the market. Due to the expected negative development going forward, we have implemented contingency measures to reduce operating costs. Actions with short-term effects include reduction of temporary workforce and consultants, work-time reduction, and reduction of discretionary spending and travelling. Actions with long-term impact were initiated in 2019 and additional actions have been added this year. The long-term actions are expected to lower costs with more than MSEK 500 annually with full effect in the second half of 2020.
Innovative autonomous trucks to Australia
Even in this challenging time, we continue to invest in innovations, such as automation, digitalization and electrification, and to support our customers to the best of our ability. In the quarter, we entered into a partnership with Australian mining company Roy Hill to convert its fleet of haul trucks to autonomous mode. This solution will boost safety and productivity for Roy Hill.
Sustainability goals for 2030
In the quarter, we established long-term sustainability goals supporting the Paris Agreement and the UN 2030 Agenda for Sustainable Development. Our ambition is to halve CO2 emissions from operations, transport and, most importantly, from use of Epiroc equipment. We have also set ambitious targets to further support health and safety, improve gender diversity and strengthen our commitment to the Code of Conduct.
Building a stronger Epiroc
In the near term, we will focus on our aftermarket business, supporting our customers’ operations, while health and safety remains our first priority. We will keep investing in innovations while taking the necessary actions to reduce costs and adapt our operations. Epiroc will deal with the short-term challenges, and at the same time, take advantage of the opportunities to strengthen our customer relations and build an even stronger company for the future.
President and CEO
For more information please contact:
Mattias Olsson, Senior Vice President Corporate Communications
+46 72 729 8295
Ola Kinnander, Media Relations Manager
+46 70 347 2455
This information is information that Epiroc AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 19:45 CEST on April 22, 2020.
Epiroc is a leading global productivity partner for the mining and infrastructure industries. With ground-breaking technology, Epiroc develops and produces innovative, safe and sustainable drill rigs, rock excavation and construction equipment and tools. The company also provides world-class service and solutions for automation and interoperability. Epiroc is based in Stockholm, Sweden, had revenues of SEK 41 billion in 2019, and has more than 14 000 passionate employees supporting and collaborating with customers in more than 150 countries. Learn more at www.epirocgroup.com.