Epiroc AB (publ)

Hello and a warm welcome to the Epiroc Q3 results presentation. My name is Karin Larsson and I'm heading the IR department here at Epiroc. And with me today, I have our CEO, Helena Hedlund. our CFO, Anders Lindén. And I must say I'm very glad to see you guys and all of the other colleagues here today in person because because of safety measures, we have been working very much from at home and we do still encourage people to take safety measures. Today, we will present the result, excuse me, Today we will present the results, and it's good results, so I know you're eager to hear the presentation. We will do it like we always do. First we do the presentation, and then we do Q&A session, and we will have quite some time for the Q&A today. Please keep your questions short, maximum one each, maybe two as a follow-up. And with that, and without further ado, Helena, please, the stage is yours. Thank you.

Thank you, Karin. So welcome to the EPROC Q3 presentation. I will lead you through the results today together with Anders, our CFO. I will also highlight the development of my prioritized areas, which is innovation, aftermarket, operational excellence and sustainability. But before we go into the results, I really would like to say that I am proud of our organization. We have adjusted in a challenging situation. We have found new ways of working. We have supported our customers and we have stayed safe. So great job done by the organization. Then we move over to the key highlights of the quarter. All in all, recovery in orders and solid results. We achieved organic growth compared to last year, and the order intake was clearly stronger than in the second quarter, both for equipment as well as for aftermarket. The customer demand improved compared to Q2, and we have seen less impact and restrictions from COVID-19. In Q2, if you remember, June was clearly better than April and May, and that continued also into Q3. I'm really pleased to see the strong development in our service business, and that our customers also took decisions to invest in equipment. There were a couple of larger orders in the quarter, including the order to Norilsk Nickel that we announced this week. but we could clearly see more smaller and medium-sized orders in the quarter. The restrictions in the world, in some parts of the world, did, however, impact the aftermarket business negatively, mainly in our tools and attachment segment. There is also a strong interest for our technology solutions, and that is why we keep on investing within these areas. And we've won several new automation orders in the quarter. So far, 2020 has been a year heavily impacted by the pandemic with many related challenges. We have managed the situation well. Our efficiency actions were executed according to plan, and we have made permanent adjustments to our cost base. The savings have supported the profit, and all in all, this translated into a solid result and cash flow in the quarter. Epiroc's financial position is strong, and that is also why the board has proposed a second dividend for the year 2019. And now some comments on the financials. Anders will dive deeper into this later on, so I will be brief. Our orders received increased 10% organically, equipment up 25%, and service up 9%. 2,000 attachment orders were down slightly. Revenue decreased 3% organically, however, with growth in service, which was up 3% organically. Operating profit was negatively impacted by the decline in revenue and currency, while restructuring cost was clearly lower this year compared to Q3 2019. We managed to reduce cost in administration and marketing, but we were impacted by lower activity levels in our manufacturing and we had under absorption in our operations. Our margins were supported by currency and the adjusted operating margin improved to 21.7%. And cash flow solid came in at 1.4 billion SEK. Then I will give you an update on the latest related to COVID-19. So today, fewer customers are temporarily closed or working with reduced capacity compared to quarter two. In the quarter, however, the overall number has been relatively stable since the middle of July. Our aftermarket was still impacted in Q3 in some parts of the world, and we see it mainly in consumables. In North America, we see that the mining activities are coming back in Canada, but that the US activities are still impacted, both for mining as well as infrastructure. In South America, it is a mixed picture, with Peru and Argentina still impacted by restrictions, while Chile and Brazil are going strong. Europe is recovering well, and Russia has stayed strong throughout the quarter. In Africa, the southern Africa has recovered from the big drop we saw in quarter two, but there is still an impact in South Africa. In Asia, China is going strong, and also the mining activities in Australia have stayed strong throughout both Q2 and Q3. Within our operations, all our distribution centers and our manufacturing facilities are operational, and we are adjusting the capacity to the demand. Our supply chains, both on inbound and outbound, are also operational and stable. And we have been able to do commissioning of equipment and to perform our services in a more normal way during Q3. So to summarize, I would like to highlight that there are still, of course, some uncertainties regarding the COVID-19 pandemic, and certainly with the most recent development in Europe. So we say that the situation is stable, but that it is fragile. And we are, of course, monitoring the situation carefully. So we continue to do what we have done so far. We prioritize health. We support our customers with aftermarket so they can stay up running. And we adapt to the situation. Then over to my priorities, and this time we start with aftermarket. We stay focused on supporting our customers to the best of our ability with our aftermarket services and products. And this is to safeguard that they can stay up running. Our organization has a very strong focus on the aftermarket, and we work in a structured way to develop the aftermarket further. And the work pays off. Also, in challenging times, we increase our customer share, which is really good to see. In line with this, we also continue to invest in our service presence. We hire and we educate service personnel, and we continue to invest in our supply chain program. In the quarter, we have secured several new service contracts in Asia, in Africa, and in North America. And we have also received orders for midlife rebuilds, including one nice one in South America. And this had a positive impact on the order growth in the quarter. Sequentially, organic order and revenue for aftermarket grew double-digit. And in total, our aftermarket now corresponds to almost 70% of revenue. And we will continue to stay focused on our aftermarket to grow it even further. If we then move over to operational excellence, so we continuously strive to be better, to do things in a smarter way and improve. And we have quite a few actions ongoing internally to make Epiroc stronger, both in the short and in the long run. The cost-saving programs of more than 500 million SEK annually was implemented successfully with full impact now in Q3, and this is mainly impacting the functional cost. Additional savings is expected from year-end, including savings from the organizational changes we're doing in Sweden. We also see positive effects from short-term actions this quarter. I also briefly mentioned the supply chain program, and this is a long-term program which aims to improve delivery performance to our customers, to reduce cost from transports, and to reduce tied capital in inventory. And we already now see good results with improved availability on both parts and consumables. But still, we're just halfway, and we have more work to do here. So we will continue to build an even stronger company to strive for operational excellence while allowing us to continue to prioritize innovation and further develop our technology leadership. And talking about innovation, it is exciting times with the major technology shifts ongoing in our industry. And as an organization, innovation is in our DNA. And there is a strong interest and demand from our customers for our solutions. Our automation solutions in operations are delivering good value to our customers now. And we have won several new automation orders in the quarter. For example, we will deliver another fleet of autonomous surface drill wigs to another customer in Southern Africa. And also happy to report that we have successfully deployed advanced traffic management solutions for OEM agnostic mixed fleet automation, both for underground and surface application. For underground, we have automated our loaders together with machines from another OEM. And for surface, we are automating haul trucks. Very exciting step forward. We also continue the rollout of our connectivity system. to get more and more machines connected. And we have also a growing demand for our powerful and reliable battery electrical vehicles. And within our niches, we have the broadest range of battery equipment product in the market. This quarter, we also write about a new type of service agreement, a TCO supervisory agreement, and a new rotary drill bit with improved service life. Then moving from innovation to sustainability, it is clear that our innovation agenda goes hand in hand with our customers' sustainability agenda. So this is a great growth opportunity for us. And we have major technology shifts in the industry that will transform the industry to become more productive and also more sustainable. With automation, we can remove people from the dangerous areas so it enhances safety. Also, our customers wish to reduce CO2 emission. And we have our battery electrical mining equipment here with zero emission. So that's a great benefit for our customers. Beyond this, we, of course, carry out a number of actions also to improve sustainability performance within EPROC. And I'm really pleased also that we also achieve results here. Our supply chain program that I mentioned has led to lower emissions from transports. The share of air freight is lower than ever. And we have also a reduction in accidents and incidents and sick leave are on a stable level, which I think is good given the COVID-19 situation. And we also continue to invest to build an even better safety culture in the company. We are rolling out the Safe Start program and that is progressing well. So with that, I conclude this brief introduction and I leave over to you, Anders.

Thank you, Helena. So from sustainability results to financial results. Our operating profit was 1,820,000,000 SEK and the operating margin was 20.9%. But if we exclude items affecting comparability, the margin came to 21.7% compared to the 21.3% last year. On this slide, I would like to highlight three different things. Firstly, the profit. It was down $107 million to $1,820,000. We have focused our actions on permanent cost savings. It means that we have used reduction in time to much lesser extent in Q3 than in Q2. For example, in Örebro and Fagersta, where we gave notice, all employees have been on full-time work during Q3. Also, transport costs have been higher than normally due to capacity constraints around the world, and it also means that we have had underabsorption in our operations as we have been doing this. We have not received any material government support for COVID-19 and we have not utilized any support in Sweden for short-time work. We have seen positive results from our actions that we took both the long-term and the short-term that we took in Q2. The positive results from the activities and initiatives taken in Q3 will mainly come with a time lag, and we will see that later during the year. We had less restructuring costs this year than last year. Last year, it was the 179 million in tools and attachments. This year, we had restructuring costs of 55 million, mainly related to the changes of the organization in Sweden. The change in provision for long-term share-based incentive programs was 21 million this year, and it was 54 million last year. On margin, the second point, of course, Lower one-time items have also improved the margin. Excluding these, as mentioned, the operating margin was 21.7%. Thirdly, on the exchange rates, of course, we do not hedge, as you have seen and heard before. We don't hedge, which means that we are more exposed to the spot rates. and also noted that the operating profit was negatively impacted by currency. but not to the extent that we had anticipated. And if we look at the margin, it was a positive currency effect in the bridge, and that is partly related to the one-time effects. And the reason is, of course, that we do a little bit of revaluation and a flex revaluation of inventory around the world. Having said that, we have to remember that this is also a bridge effect compared to the same quarter last year. Overall, currency was headwind, not the least, on revenue and on orders received. If we look ahead then on currency, of course, with these current rates, we estimate a negative profit effect also in Q4. So coming to the segments and we start with equipment and service. Strong organic growth development both year over year with 15% organic growth but also sequentially with 22%. Service orders plus 9%, equipment orders plus 25% as already mentioned by Helena. And compared to the previous year, orders received in local currency increased in all the regions except in North America and South America, where there was a negative development. Orders for underground as well as for surface equipment increased together with our automation solutions orders. Revenues down minus 2% organically, but with the growth in service of 3%, as mentioned. And now I'll move to discuss the profit a little bit. Operating profit, 1,646,000. million in total reported margin of 25.4 negative impact from the lower volumes and restructuring costs and over 33 million SEC but with a little bit of support from mix and the currency the adjusted margin came to 25.9 percent and also note we had a negative impact on the profit from currency But the exchange rate comments that I made on the group level is also valid for the segment equipment and service. Now looking at tools and attachments. Orders received for tools and attachments decreased by 16%, but with a strong negative impact on currency of 11%, so organically 3% down. Orders received increased for hydraulic attachments decreased. but decreased for rock drilling tools. Depending on restrictions to the COVID-19 pandemic has created, the order and take varied very much between countries and regions. So compared to previous year, orders received in local currency increased in Europe, but decreased in all other regions, especially for rock drilling tools. However, globally, It improved for rock drilling tools sequentially during the quarter, and also sequentially orders to seed for tools and attachments increased organically by 20% compared to Q2. Revenues decreased by 21%, also with a lot of currency impact, so 8% organic decline. Also impacting the profit, of course. I will elaborate a little bit more on the profit on the next slide. Profit came in at 254 million, including the restructuring costs of 22 million SEK. Last year, as mentioned, we had the restructuring costs of 179 million SEK. Now, of course, that means we have a big jump in the positive effect in the bridge on structure. Last year, the restructuring costs were related to the rock drilling tools as we divested the handheld drilling and also the geotechnical consumables. Also in this segment, not yet having the full effect of the long-term efficiency actions, so we'll see that come later. Adjusted margin 12.6% compared to 12.2% last year, with lower volumes and currency having a negative impact. This graph speaks very much for itself. We have managed to lower administration costs and the marketing costs also when taking the currency into consideration. And that is, of course, very good to see that we now see progress on all the actions. And it also allows us to prioritize, which was mentioned by Helena, for example, on innovation and on the aftermarket. The financial net came in slightly higher than last year when it comes to tax expenses. It's rather normal quarter. We keep our guidance below the 25%. If we look at last year, it was higher slightly, but that was due to the restructuring in tools and attachments where it was mostly deemed not to be tax deductible. If we look at the capital, We had a strong financial position already by the end of the last quarter and it's even stronger now. That is also why the board has proposed a second dividend for the fiscal year of 2019. A second dividend of 120 SEK per share, which means that the total dividend including the May part or the May payment of 240 SEK per share. Looking at the net working capital, it went down by 22% compared to last year, out of which 12% due to currency. On the net working capital percent, yes, it's somewhat higher, comparable. But the rapid change in volumes and the fact that we're using an average capital employed from the last four quarters in the calculation gives a lag in the KPI calculation. Return on capital employed during the last 12 months were 21.6%. affected by the lower profit of course as well as increased capital employed mainly from the accumulation of cash. The effect from these two components were about half-half lower profit and more cash. Now coming to cash flow. How did we manage the cash flow? I would say we did so rather well. It was a solid cash flow in the quarter and operating cash flow was very much in line with the net profit. Despite the challenges, lower profit naturally had a negative impact and we had a small outflow of working capital compared to last year. But in fact, inventory organically went down. And the increase came from higher receivables from the higher sales that we experienced in Q3 compared to Q2. And with that, I conclude the financial part and hand over to Helena again.

Thank you, Anders. So to summarize then, so demand recovered, but there is still, of course, restrictions impacting. Service is once again proving its resilience. Really glad to see that. Our customers are investing for the future with strong interest for automation. Our efficiency actions has been executed according to plan. We have solid results and a strong cash flow. And the second dividend is being proposed. Again, great job done by the organization. And if you want to learn more about our innovation agenda and our work strengthening our aftermarket, you are most welcome to join our upcoming Capital Market Day FICA on November 23rd. So what to expect onwards? Well, we expect that the demand, both for equipment and aftermarket, will remain stable in the near term. But that said, there are, of course, uncertainties regarding the pandemic and related restrictions, which can have an adverse effect on the demand. So by that, I leave the word over to you, Karin.

Thank you very much, Helena, and thank you, Anders, both of you, for a good presentation. So it's time for the Q&A session, and I will repeat myself. Please keep it short if you can. There are a lot of questions, and by that, operator, please start the Q&A session.

Thank you, and ladies and gentlemen, if you do wish to ask a question, please press zero and then one on your telephone keypad now. If you wish to withdraw a question, please press zero two to cancel. First question is from the line of Claes Berglund from Citi. Please go ahead. Your line is open.

Hi, Helena and Anders and Karin, Claes and Citi. So the first one is on services. I want to understand how the underlying production, Helena, compares pre-COVID in the mines where you are particularly present, so you're addressable of the market. So where are we versus previous peaks looking at productions? I'm obviously trying to figure out where services for you can end up once COVID restrictions are lifted. So I will start there.

So if we look on the production level in the basket of our commodities, we estimate that there is roughly 3% disruption still, both for gold and copper, for example, and iron ore. I would say a big portion of the recovery here on the service side is, of course, our very structured work where we gain customer share of existing fleet.

Exactly. And that is exactly my follow-up. So on the self-help in services, your own initiatives, remanufactured parts, rebuilt and so forth. Where are we in that journey, Helena? What is the opportunity still out of the existing fleet? You are obviously climbing the service ladder on one side, but then you're providing innovative solutions as well. Maybe you can't give us exactly like the share of rebuilds and so forth, but it would be good to understand the verticals a bit better and further upside potential.

Our service products that we have developed over the years is generating really good traction here. And as I have described before, it's mainly towards certain type of machines that we have focused on. But there are also other type of segments, more low utilization equipment where we have an untapped potential. But of course we need to develop products and also develop channels to reach that potential. But there is still an upside and that is of course what we are working very hard to capture.

Very quick final one on M&A. You said that you want to improve the process flow from analyzing the raw quality to drill and blast and to crushing and screening and you believe that there are several M&A opportunities. to lead such a tech software M&A. Are you still targeting those type of acquisitions or are you also open to do bigger deals?

We are looking into the technology area. I believe that it goes very much hand in hand with our organic agenda and where we also invest. So the technology areas and the aftermarket area, that is where we are looking into opportunities for M&A.

Thank you.

Next question is from the line of from Bank of America. Please go ahead. Your line is open.

Yes, hi. Thanks for taking my question. First question is on the FX impact on operating profit. Typically, you know, the drop through from the FX is about 30 to 40%, but this quarter we are seeing It's actually very small, almost a billion impact on revenues, but just under about 100 million on operating profit. So if you could, you know, explain a bit in more detail what happened there, why this drop through was so low. And secondly, what should we expect in terms of the future drop through rates on FX? Yeah.

It's true that the negative impact on the operating profit in the quarter was less than we had anticipated. And you may recall I mentioned we do not have any hedges on the operational flows, which means that when the currencies are volatile, as they've been in the quarter, and And with the changes, it's a balance sheet day situation. So we had a little bit of a pickup on that when we closed the books. And it's a little bit more than we anticipated, for sure. The underlying currencies are still very much negative for us. And for your question on Q4, we don't expect to have that, let's say, impact. So it's more, as it looks right now with the current rates, it would be more normal, of course, now when we have adjusted.

Okay. And in terms of the order during the quarter, if you could give, you know, like how much was the total large orders during the quarter which was booked, if you could give a number on that total number.

So in the quarter, we had a couple of larger orders, like the one we announced to Norilsk Nickel. But the majority of the orders on capital equipment is actually small and medium-sized orders. So that means, you know, two, three machines to each and every customer. So I was saying the majority is small and mid-sized orders, not so much helped by large orders.

So, I mean, with your comments, it looks like it's a genuine change in the underlying demand trend from your customers. And I remember, you know, on the previous calls, you were saying that customers are hesitant on taking CAPEX decisions. So are you comfortable saying that, you know, that hesitation is now gone away and this is something which should basically stop? signify how the next few quarters of CAPEX decisions will take place?

It's difficult to say, but if we look on, you know, what we saw in Q1 and Q2 was clearly that decisions were being pushed out in time, but not that they were off the list, or they were still, you know, the mines were still planning to go ahead, so it's more a timing issue. What we saw now in Q3 is You know, more and more of these were actually coming through. And that, of course, is really good to see. Of course, it is supported also by the commodity prices. I think the overall, I would say, restrictions, you know, I think companies can also now start to focus on. I think Q2 was very much trying to manage the situation with the pandemic. So I'm really happy that we started to see that customers also now take decision to invest again.

Okay. Thank you very much.

Next question is from Max Yates from Credit Suisse. Please go ahead. Your line is open.

Thank you. Just my first question is around where we are in the cycle. I think a lot of people try and look at your business in terms of the U.S. dollar terms and where we are versus peak. Could you give us a sense of just in terms of units of your business, of some of your major products, whether it's drill rigs or loaders, where we are versus sort of previous 2012 peaks? And how do you think about a sort of healthy mid-cycle recovery versus that number over the next two to three years, assuming we continue to see commodity prices being supportive? Thank you.

I think we are lower than the peak or the super cycle there, 11 and 12. There's also a difference in commodities. If we look on the demand we see now, it's very much towards gold and copper. What we saw during 2012 was a lot towards iron ore, for example. But, of course, we also see that the fleet is aging, and we have talked about that also during the different calls here. And, of course, that is an opportunity for us on the service side, which we are capturing. But eventually, of course, there also needs to be replacement. If we look on where we are and where we have been, the last couple of quarters, we have been more or less of an average demand level of equipment. And, of course, now in Q3, we came in somewhat better.

Okay. And just a follow-up question. If we think about your business going into 2021, obviously the mix is going to be a little bit different in terms of this year has been kind of service growing and equipment down heavily. Next year will be more favored in equipment. Do you still think going into 2021 you can increase your margins year over year with those kind of mix headwinds? Do you still see cost offsetting mixed headwinds, or do you think actually it will be more difficult in the context in 2021 to get margins up given the different shares of the business?

we are also at the same time as of course we are growing, we are also investing as I said, so to grow the service business also comes with an investment and of course we will continue to do that then of course all the actions we are doing now with the program we have executed now from an efficiency standpoint is of course to position us stronger for the future so you know Whatever mix there will be in the coming years, I think no one really can tell right now, you know, given the uncertainties. But we stay focused on making sure that we can continue to invest in innovation and in aftermarket to support the growth, both in equipment and service long term.

Sure. And just for housekeeping, could Anders give us the cost savings tailwind for this quarter? That would be very helpful, the cost savings benefit to EBIT.

It's a couple of hundred millions in the quarter.

A couple of hundred millions, and you will have achieved that full 500 million. Is that a run rate, or that will have all been in the P&L scene this year, or is there still some more to come in the P&L in 2021?

It's a run rate, but it may not be all of it in this year, but we will see most of it this year.

Okay, fantastic. Thank you.

Next question is from the line of Gustav Schilling from Henry Sanken. Please go ahead.

Your line is open. First, if we can start with a few words around your comments on order intake being higher at the end of the quarter. Any color on the exit rate there would be helpful. And if you don't want to give me that, then perhaps the trend during the quarter, if it was a gradual improvement or more sharp towards the end of September. Thank you.

As I said, June was clearly better in activity levels overall in the aftermarket. And then that continued into Q3. But we have also seen that the number of mines that are temporary closed or are working with reduced capacity is more or less still the same as we had in the mid-July. So that has been stable. But what we see is that activities are coming back, which means that You know, the customers are increasing their production rates. So there is an increase throughout the quarter. And we can see it most, of course, parts of service is one thing. That is not really so clearly linked to the production levels. But you can see it clearly on consumables that, you know, that had a sequential improvement throughout the quarter.

And then on your guidance for stable demand in the short term, I mean, should we use that as compared to Q3 as a whole, or is that more to the x-ray than Q3?

No, so Q3 as a whole, because there is still, you know, there is still uncertainties, and as I said, there are still, you know, parts of the world that is impacted. So that is our guidance.

Great. And then lastly, on my side, I'm a bit curious to hear on the automation side how much that grew year on year and sequentially.

Also, I mentioned that in Q2 as well, there's clearly a larger interest for our automation solutions. And I can see that the mining industry is pushing these type of investments forward now. So that is really good. We landed a number of really nice orders here in Q3 on automation. We did the same in Q2. So that's fantastic. We have also, as I mentioned, deployed the first mixed fleet automation or advanced traffic management solutions, which is also a very exciting step forward on the journey towards, you know, fully automated mixed fleet.

Okay, great. Thank you.

Next question is from Andreas Koske from Nordea. Please go ahead. Your line is open.

Thank you, and good morning. I also have a question on the outlook, and I want to elaborate a bit, because in June, I think that you had an order intake of around 2.83 billion, and your communication, Helena, during the quarter, I think, was that demand remained stable from that level. Now you report an order intake of 9.4 billion. and commenting that September was strong, implying that September run rates probably was closer to 3.5 billion, implying a quarterly run rate of 10.5. Still, you expect demand to be in line with the full Q3 level in the near term. Could you explain what that is?

more related to the christmas season that we are going to see or do you expect a season or an underlying weakening from the september level going into the fourth quarter we were supported in september with you know really nice orders for rebuilds as well and that is not something that we can expect so on the service side that was that helped uh you know in the end of the quarter But on the consumers, as I say, we have seen a gradual improvement month by month. But to the best of our knowledge, we guide the same level as we have seen during Q3. And it's mainly related to that there is still such a mixed picture. It might look in one way when you look at it overall, but when you deep dive into each and every country, it's very much a mixed picture. Understood.

And then secondly is on your cost side, and if we can come back to slide 16 and your SG&A costs, you're in Q3 at the level of 1.4 billion. We have seen a nice decrease in the cost base, but you're trying to take out further costs, so shall we expect that to come down further going into 2021 due to the cost activities that you are working with?

Yes, so the announcement that we have, the changes we're doing in Sweden will give another couple of hundred millions in yearly run rate.

Yeah. So going into 2021, sales volumes are likely to increase based on the order intake that you are now reporting and the output that you provide. I think that your SG&A to sales level has been between 15% and 18% since 2018. But based on the level where you are right now, it should be possible to get SG&A to sales down to 14% or even below that in 2021. Do you agree with that?

Of course, as I said, you know, we have done all of this to position us better for the future. There are, of course, some short-term savings, you know, less travel, et cetera, that we can see, but that is, you know, the smaller part. What we have been focused on is the permanent cost reductions, and, of course, that will stay there. So, you know, we are, as I said, we are focused on the permanent savings to position us better for the future.

And that maybe to add, maybe also given that it's hurt us a little bit in the short term. What I mentioned was that when we gave notice, everybody went back to full-time work, and that was for employees in Sweden. Yes, in the short term we have been suffering a little bit, but our actions are focused on a permanent cost reduction.

It sounds like you do not disagree with my thinking.

We cannot comment on the number as such, but we have ambitions.

Great, thank you.

Next question is from . Please go ahead. Your line is open.

Hi. Good morning, everyone. I have two questions, if I can. Firstly, Elena, sorry to come back to the outlook, but I think you can hear nobody believes in a stable outlook into the fourth quarter. So, maybe I can try my luck with each of the three segments, starting with equipment, You talked about a couple of larger orders in the third quarter. I think I only saw the $100 million Norilsk order. Can you clarify the impact of larger orders in the quarter for equipment? Secondly, in services, you've been flagging larger midlife upgrade orders. Can you remind us how big these can be and what the impact in Q3 was? And then finally, on P&A, I wonder whether you're a bit worried about restocking and potential destocking effects in that business, i.e., did we see perhaps a more meaningful boost from miners' inventory restocking in the third quarter? And do you worry that's not sustainable into the fall? Cheers.

So we start on equipment. So as I said, we had a couple of larger orders, but that was not really what made the difference. So the difference were the very many smaller and mid-size orders. On service, yes, we had a nice order, as I said. I can't share the size of that, but that was related to mid-life rebuilds of a fleet in South America. On tools and attachment, I don't really see that there is a destocking or a risk for a bulwark effect from that one. Here we are very close to the customers and we follow the production level very closely. You know, we are not down that much compared to last year, if we look organic. It looks better on attachment. We are a little bit more down on consumables, but as I said, that also recovered throughout the quarter. So it is clear that the overall activity levels, it is gradually coming back, and we see it both supporting, of course, the growth in service, and eventually it will also, of course, reflect the activity levels in consumers.

I guess you're growing 20% sequentially across both divisions. You were saying September better. Again, I think we're struggling with that sequential outlook in the fourth quarter. But I'll leave it at that. Can I just ask, secondly, to your battery electric units, thanks for the presentation there. I don't want to steal your thunder at the Capital Markets Day in a month's time, but perhaps you can help us with the ramp in electric units. sort of year-to-date, just to sort of scope the impact on the business. I know it's still small, but I want to get a sense for how that's ramping. And related to that, can I ask, are you selling at this point battery as a service contract alongside those, or maybe more generally, where are you in terms of commercializing your battery as a service offering?

So we continue to see a good interest and demand from our battery electrical offering. And we have received orders both in Q1, in Q2 and in Q3. It's still, you know, compared to the total, it's still small, I would say. We also are rolling out the battery as a service offering, which we have, you know, the largest agreement is with Vale. But I will say it's really early stage. I will say comparing electrification automation, automation is much further ahead than electrification.

I'll leave it at that. Thank you. Thanks.

Next question is from Christian Hinderaker from Liberum. Please go ahead. Your line is open.

Yes, good morning, Helena Anders. Thank you for taking my question. You commented on several new automation orders in the quarter. Are you able to comment at all on whether these are opening up any new customer sets or whether they're part of the replacement cycle? And then, secondly, your less discussed infrastructure business saw a greater 23% share of orders in the quarter. Just wondering whether that reflects a slightly slower order rate in the core mining business or whether we're seeing a slightly higher underlying run rate within infrastructure, perhaps as a function of government fiscal expansion around the world.

Thank you. So on automation orders, it has been mainly replacement of equipment. So it goes hand in hand. So it's new equipment order then bundled with fully autonomous solutions and offering. So it's very much related to existing customers. On the infrastructure side, as I said, there is still an impact in the U.S., which is one of the largest infrastructure markets for us. As I said, also Europe, we start to see infrastructure coming back. We also have really good development of the infrastructure in China.

Next question is from the line of Robert Davies from Morgan Stanley. Please go ahead. Your line is open.

Yeah, thanks for taking my question. Just on your EV units that you are selling, I just wondered if you could give us a little more color on the expected sort of lifetimes. Is there any operational performance differences between these new units and what you traditionally sold in terms of lifetime usage?

So we have, you know, this journey started many, many years ago. Of course, we have gone through different generations. The generation that we sell today, which is our generation two, has a completely different technology built in. It's a modernized concept. It's the cell density that is needed to be able to move equipment up to 42 ton using, you know, at the pace that is required also up the ramp. So from a technology standpoint, it's something completely different that we're rolling out today than a couple of years ago, built on the partnership we have with Northvolt, where we have developed the latest technology here, both for cells as well as for models.

Thank you. I just had a second one, just on your, I guess, your automation, your digital offering. In terms of the customers that are buying those, are they going particularly into sort of new mine sites or new mine shafts? Are they sort of being, you know, retrofitted into kind of existing sites, mix and match in a particular mine? Where are you getting sort of most traction on those type of products?

On digital, you know, I would say it's very much the same situation both for automation, electrification and digital. So the majority of what we're selling is towards existing customers. So it's not new mines, really. There's huge opportunities to be gained from a productivity and a safety standpoint and sustainability standpoint just by start to move in these technologies in existing mines. Of course, if you do an expansion and you can plan the mine, and built in the opportunities that these technologies bring, then of course you can get much more out of it. But when we look at the demand we have, and we have had during the last, I would say, three or four years, it is existing customers.

Thank you. And then my final one is just around larger projects, I guess. You mentioned, obviously, there was quite a lot of base and smaller orders within the mix in the quarter. In terms of your conversations with customers, what are they thinking about in terms of sort of larger projects as we head into 2021? Do you think as we get into 21, those type of projects could come back? Or is your sort of working assumption for next year we just continue to see a sort of cautious outlook around larger big-ticket item spending projects? You keep having a high proportion of these smaller mid-type size projects. Thank you.

When I look at the pipeline, as I said last quarter as well, there is also expansion projects or larger expansion projects ongoing in the world. What we have seen is that it takes longer time for the companies to actually decide to go ahead. So I think it's very difficult to comment when the companies will eventually take the decision. But of course, you know, the pandemic has, you know, did not help during Q2. So I think, you know, what we see now with a number of smaller, say, orders, it's a good sign that, you know, you take it maybe in steps. And we have also seen that the last couple of quarters, that these big packages are sometimes split up into smaller ones. Great.

Thank you. Thanks.

Next question is from Eric Carlson from Casey Capital. Please go ahead. Your line's open.

Hi. It's Eric from Casey. Thanks for taking my question. You added a tremendous amount of shareholder value by doing mainly acquisitions and strengthen your position industrially. Hopefully, you can continue to do that, but I was wondering, What scope do you see to do a larger deal? And specifically, do you think from an industrial standpoint it would make sense to diversify downstream on the mining cycle? Thank you.

As I say, our M&A agenda very much should support the overall strategy and organic agenda as well. And we have a very strong focus on the innovation side, and there are opportunities there. There are also opportunities to speed up and to grow the aftermarket even further. So that is where our focus is today.

Okay, and just as a follow-up, would it make sense to buy a lot of aftermarket business that you could integrate into your existing aftermarket infrastructure?

Yeah, so we say that we have a little bit more than 50% customer share, and that of course means that there are other players out there that... that sits with the rest, and of course, you know, we need to understand, you know, if there is, if we should grow that organically, but there could also be a combination of M&A.

Okay. Thank you so much.

Next question is from Andrea Scott from Nordea. Please go ahead. Your line is open.

Well, yes, thanks. I thought I withdraw my question, but okay, I can ask it. It was about the large orders, because you are saying that you have had a couple of large orders in the quarter, but of course, we want to try to understand what the amount of those large orders are. So what's your definition of a large order, or can you specify how, what the amount was for those large orders? Thank you.

We can't specify the amount, but when I say a large order, it's more than 30 million. That's the definition. Then, of course, when we communicate externally, we announce orders that are in the range of 100 million. But we also have cases where customers don't want us to announce it, of course, and then we need to respect that. But when I say a large order, then it's more than 30 million. And when I say midsize and smaller, then it's, you know, it's in that range.

But for the quarter, the large orders did not exceed four or five hundred million in total.

It was less than that, or? No. It was a little bit more, I would say. A little bit more. Okay.

Okay.

Thank you. But maybe to say with that definition, it's not very different than any other quarter. No.

No, I understand that, that you always have large orders. Yes. I understand that.

Next question is from Nick Housen from RBC Capital Markets. Please go ahead. Your line is open.

Yes. Hi there. Thank you for taking my question. So you had, as we've mentioned, very strong equipment order intake in the quarter. Can you just clarify whether that was from customers looking to replace existing equipment or whether they're actually expanding their equipment fleet? And maybe just to comment on pricing as well.

So, it's both replacement and expansion. If we look on pricing, our pricing is very much tied to the value we can create for our customers. So, we continue to increase prices also in times like this.

Okay, thanks very much.

So with that, I need to interrupt you guys. Thank you very much for good questions. And as always, we all are happy to help you with further questions if you have some. And I would like to highlight Helena already mentioned, but we do have our Capital Markets Day FICA. Coming up soon, registration was open today. So if you see our press releases, you can just click on the link and register. Many of you already had. Thank you for that. We look forward to see you then and tell you much, much more about innovations and aftermarket and the potential for organic growth. Thank you very much, all of you, for listening, taking the time. And as always, we wish you successful investments. Thank you. Thank you.

Thank you so much.