Epiroc AB (publ)

Hello and a warm welcome to this epilogue Q4 results presentation. My name is Karin Larsson and I'm head of a yard here at Ebrock with me today. I have a CEO, Helena Hedlo and our CFO Håkan Folin. They will briefly present the results before we do a Q&A session. Please note today the unit register in advance to receive the phone numbers to the Q&A session. The link is provided in the invitation as well as on our home page. So with this, Helena, please. The stage is yours.

Thank you, Karin. So starting with the full year highlights for 2022, a strong performance in a challenging market. On the demand side, the customer activity remained high and we won many large equipment orders and we had a strong development in the aftermarket. During the year, we handled significant supply chain challenges, including disruptions as a consequence of the war in Ukraine. And in March, we stopped deliveries into Russia, which at the time was our fourth largest market. But despite all this, the organization executed well and we delivered record results and profitable growth. So well done to everyone. We also launched many groundbreaking innovations and we made several acquisitions that help customers increase safety and productivity as well as reduce emissions. Demand is continuously increasing for electrification, digitalization and automation solutions. And we strengthened our position as a market leader in these areas. So all in all, it was a record year for Epprock. So moving on to the fourth quarter, then the demand remained high. That said, large equipment orders are lumpy in nature. And in the fourth quarter, we did not receive as many large orders as in the previous quarters. We had around 400 million of large orders in Q4. Service continued to grow strongly, supported by a high customer activity. So after a period of strong growth, the easing supply challenges in combination with a good output level from our production sites led to record high revenues and operating profit. We also had a high acquisition pace in the quarter and we finalized four acquisitions with a combined annual revenues of 1.9 billion SEK. And on top of this, we signed another two. We also launched many innovations, but some of them are more game changing than others. And one example is our collaboration with Roy Hill, an ASI mining in Australia to create the world's largest autonomous mine. And the goal is to convert Roy Hill's haul trucks, regardless of OEM supplier, from manned to autonomous use. And you might remember our announcement a few years back. Well, the testing phase has been a success. In fact, the mixed fleet that is now running autonomously proved to be more productive and safe than manual use. I will tell you more about this later on. Another successful milestone is Avatel's first commercial blast in Agniko Eagles Kittela mine in Finland. The Avatel is the world's first semi automated charging system for underground use. It is and will be a game changer for the mining industry as it significantly improves safety during the charging cycle. The Avatel has been created in collaboration with Orica, a world leader in commercial explosives and advanced blasting systems. So a few words on the financials in the quarter. In total, our orders increased 18 percent, though with some help from currency and acquisitions. Organically excluding Russia, we achieved 3 percent growth. We did, as I said, not receive as many large orders as in the previous quarters. Large orders are lumpy, but we still have a good pipeline of potential orders ahead. And in Q1, we have already announced one large order from African rainbow minerals for use at a platinum mine in South Africa. In total, the orders received in the fourth quarter was 13.7 billion and sequentially it's up 4 percent organically. Our revenues were record high at 13.9 billion and grew 8 percent organically and our adjusted margin increased to 23.7 percent. Our cash flow was lower than last year and amounted to 1.5 billion. So after a period of strong growth in equipment with long lead times due to supply chain disruptions, we have a large portion of work in progress as well as receivables. So back to one of my favorite topics, innovation. I did already mention the milestone we achieved with Avatel and safety is, as you know, always prioritized. Another purpose with our innovations is to reduce emissions and therefore we are particularly happy to take our battery electric offering one step further. We are collaborating with SSAB, a Swedish quality steel manufacturer, and we have created a 42 tons battery electric mine truck made by fossil free steel. So to use fossil free steel in this mine truck saves 10 tons of carbon emissions per bucket. And on the topic of electrification, we have the widest offering in the market today and we see great demand for all our battery electric machines. In fact, we received the first battery electric order from an underground infrastructure customer in the quarter for a tunneling project. So it's good to see that our offering is also attractive for the infrastructure segment as well. In addition to providing the best machines, we also provide critical battery electric infrastructure solutions on site, which enable the electrification. And as we have a standardized approach to our battery solution with all its benefits, we also take this approach when it comes to the charging solutions. So in Q4, we joined the Char-In, which is a leading global association with over 300 members promoting interoperability based on the combined charging system. So we want to make it easy for our customers to do the transformation into electrification. And finally, then back to the world's largest autonomous mixed fleet solution, which we are very proud of, of course. I will show you a short movie where Roy Hill can tell you about the project, the success and the next step.

Over the next 12 to 18 months, we're actually going to go from 10 trucks autonomous that's running at the moment to the full 90 plus trucks. So this is an ideal opportunity for us to retrain our truck drivers to actually go and work in the lab, become apprentices, trades assistants, go and work at Porton Rail. So it's a great way for us to actually give a next career, a different career to our truck drivers, and we're absolutely committed to this.

To get to this incredible milestone is so exciting for the whole community. And I think as we put that message out today, it's really going to make a seismic shift in what people believe is possible.

We are setting a new world standard for autonomous college when it comes to automation together. So it's very exciting and it's breaking new ground.

None of us would have been here. None of us would have been able to do this if it wasn't for the vision of our chairman, Mrs. Reinhardt. This was just a patch of dirt and she saw the potential in it. And it's the same with the autonomy right from the beginning. And she actually led the way to actually talk about how important it's going to be that we are the world's best mining company.

So to make our customers more successful is something that really inspires me. And if you did not know it, I actually started my career working in the R&D department. And I have learned by experience that even though we invest more than ever in R&D, around 3% of revenue, we cannot do all by ourselves. So to really drive and accelerate the transformation, we collaborate with the best and we also acquire companies as well. And since the end of September, we have announced and completed six acquisitions. Four acquisitions of companies with combined annual revenues of more than 1.9 billion and 700 employees were completed. So let me briefly present all of them. So CER is a strong player in ground engagement tools. So by this acquisition, we are entering into a new niche of productivity increase in consumables. Mernock Electronic gives us products and capabilities to roll out the highest level of collision avoidance systems in the world. Remote control technologies makes Epprock the world leading automation solution provider, not only for surface and underground rock drilling, but also for underground loading and haulage. And the solution enables automation of any brand. So key in this solution is that we can now, just as with electrification, retrofit any machine out there. And this is valuable to customers that wants to speed up the automation journey. Wayne Roy strengthens our presence in the North American construction market and increases our manufacturing capacity for advanced attachments in that region. Redlink is a provider of wireless communication infrastructure, both on surface and underground, and enables a smooth implementation of automation. And then we have GeoScan. It complements Epprock's offering with our body knowledge. So it's short in short, it's an automated way of analyzing the drill core and make the drilling process more productive. As a matter of fact, I have one drill core with me here. So this is how it looks like. In addition, I can mention one acquisition that was announced already before the quarter, but not yet finalized AARD minor equipment. And it complements Epprock's underground offering with low profile equipment, which is commonly used in Africa. So this also gives us a good manufacturing footprint in South Africa. And speaking of footprint, at year end, we had more than 7,100 service technicians. So our relentless focus on aftermarket and service has proven to be right so many years now. And in total, our aftermarket revenues represent 65% of our revenues. And the fourth quarter was strong in service with high customer activity and organic growth of 4%. If we exclude Russia, it was actually up 11% organic and it was strong all over the line. We continue to land large rebuild orders and even further widening our offering. The regionalization of the Parts and Services Division is now in place. So we will be closer to the customer. We will be more precise in our offering. We will be faster in responding to our customer needs and we will be a stronger productivity partner. Tools and attachments on the other side had somewhat weaker development. Sequentially, the organic order growth was plus 4%. However, it was down versus Q4 last year when attachments had a particularly strong development. And just as in Q3, exploration is somewhat weaker. So my next slide is about operational excellence. So one important success factor is to deliver spare parts and consumables when customers need them. And in the quarter, we opened a new regional distribution center in Santiago, Chile. It will further strengthen our service to customers in the South American region by improving availability and optimizing inventory levels. Already today, we have distribution centers in Sweden, in the US, in South Africa, in Belgium and next in line is Singapore. And speaking about inventory, with a networking capital of 18.6 billion, we can certainly do better and Håkan will elaborate on this later. But following a period of strong equipment growth with lead times of around 9 to 12 months and extended freight times, it's naturally to tie up capital. Another improvement is the new organization for battery assembly in Örebro in Sweden. So with a strong and accelerating demand for our battery electric offering, we need to safeguard that we are efficient and have scale in production. So looking at units, the battery electric machines are still representing a small portion of all machines sold. But year on year, we have seen the numbers increase threefold. Our standardized approach when it comes to BEVs has many advantages. It enables a quicker rollout of new BEV models and it gives us scale advantage in production going forward. So in short, we are ready to meet the increasing demand. So moving on then to another favorite topic, sustainability. At year end, we were almost 17,000 employees in the group. Roughly 1,300 were added through acquisitions throughout the year. So if you are listening, a warm welcome to the EPROC family. Our commitment to increase the number of women in operational roles as well as managers is visible in the numbers. So both the proportion of women employees and women managers at the end of the period increased. We are putting a strong focus on inclusion and diversity at EPROC. And personally, I'm convinced that diversity leads to increased creativity, innovation and ultimately better results for EPROC. So it's then pleasing to see that EPROC was named a European diversity leader by Financial Times in the quarter and we scored a top 20% position. In our annual employee survey, our inclusion and diversity index improved as well. One thing that did not improve though was the total recordable injury frequency rate. Or in other words, the frequency of recordable work related injuries of illness for each one million hours worked. And already today we have many initiatives in place to improve this and more will be added. I want every EPROC employee to know that this is really on top of the agenda. Moving on to the environmental impact then. Again, we have lowered our emissions from operations 31% year on year. And this improvement is driven by several initiatives, including the installation of solar panels and a higher share of renewable electricity. However, due to a strong period of growth, the emissions from transport have increased in absolute numbers despite an improved mix where we utilize sea freight to a greater extent than ever before. So with this, I hand over to Håkan to cover the financials.

Thank you, Helena. Eight quarters in a row, our profit has increased. We ended the year at the record level of 3.2 billion corresponding to an increase of 25%. If we add back the cost for the long-term incentive program, we landed an adjusted operating profit at 3.3 billion. The margin adjusted came in at 23.7%, which is a great achievement from the organization. If we look into the details, our operating profit increased 25% to 3.2 billion. We had a strong organic contribution of .5% percentage points. We got some help from the currency as well, but some headwind from acquisitions. And on the group, we had a dilution effect from acquisition, which was .8% point. Item effecting comparability was minus 67 million, which is representing the provisions for the share-based long-term incentive program. Previous year also included a positive revaluation effect related to mobiliaries of 167 million. The reported operating margin was 23.2%, and as I said, excluding items effecting comparability, it was 23.7%. We go into a bit more detail then and start with equipment and service. And excluding Russia, the orders received increased 7% organically. Of the total growth of 24%, acquisitions contributed with 14% and currency with another 12%. The orders received also included orders on hand from the acquired companies, and these have a positive impact of approximately 11%, mainly RCT and Radlink. And of the four completed acquisitions in the quarters, three of these are reporting into equipment and service. For equipment specifically, excluding Russia, orders received increased 1%, while they increased as much as 11% for service, excluding Russia. So as you see, we continue our very strong growth journey in our service business. And this is driven by two things. It's a combination of a high activity level among our customer as well as an increased customer share. We had a strong organic development in revenues, up 12%, and I will cover the profit bridge now on the next page. So the operating profit for equipment and service increased 22% to 2.8 billion. It was supported by strong organic growth and currency, but negatively impacted by dilutions from acquisitions. And just as with the group, the previous year was impacted by this positive revaluation effect for Mobilaris. Operating margin was .7% down from previous year or 27.3%. However, adjusted the margin was up to .7% versus .4% last year. Dilutions from acquisition was .1% in the segment. If we then move on to tools and attachments, order increased 5% to 2.9 billion, excluding Russia, orders received decreased 4% organically. We had positive contribution from currency, 10%, acquisition, 2%. Sequentially for tools and attachments, orders were up 4% organically. And as Helena said, Q4 last year, attachment had a particularly strong development, so the comparables are tough. The profit bridge for tools and attachment is rather easy this time. Operating profit increased 9% to 523 million, and operating margin was 17.5%. It was supported by currency, but negatively impacted by higher cost. We had somewhat lower output from our manufacturing site, thereby impacting under absorption cost, as well as some M&A related costs in the quarter. And as you have seen, we announced two acquisitions within this segment this quarter. Continuing then on the cost side, our cost increased in the quarter, and around half of the increase versus last year is due to acquisition and currency. Also the strong growth, higher activity levels, as well as investments in R&D are also part of the explanation. Cash flow in the quarter was 1.5 billion operating cash flow. Normally Q4 is a strong cash flow quarter, and even if we had good contribution from profit, we also had a few headwinds. Main one is the change in working capital, but also taxes paid and net financial items limited the operating cash flow to some extent. This slide is a new one, as I think that the working capital development requires some additional comments. Working capital was up 33% year on year if we exclude acquisitions and currency. This is not the level where we're happy about, but there are a few things that explain the development here. Following a period of strong equipment growth where we have lead times over around 9 to 12 months and extended seed freight lead times as well, inventory is building up. And in addition, there are disruptions in the supply chain that also impact the aftermarket negatively. And on top of that, the general cost inflation on input material has an impact on our working capital level. But this is definitely a focus area for us, and we expect to see a positive development of the working capital ratio in the coming year. If we then move over to capital efficiency, the high acquisition pace is of course reflected in our net debt and also in our capital employed levels. And after paying 4.2 billion for acquisitions in the quarter and also paying 1.8 billion in dividend, we ended the period with a net debt level of 3.7 billion. And this corresponds to a net debt to EBTA ratio of 0.28. And this is mainly due to our improved operating result. Our return on capital employed has improved this year by almost 2 percentage points from 26.1 up to 28.0. And this is mainly due to our improved operating result. Next slide now is about dividend. We have a goal of providing long-term, stable and rising dividend to our shareholders. And the dividend should correspond to 50% of net profit over the cycle. And the board proposes to the AGM, which is on the 23rd of May, that we should pay 3.40 krona per share in dividend, which is equivalent to 49% of net profit. And it's also an increase of 30% from previous year. The dividend will be paid into installments, record dates on May 25 and October 24. And before I leave the board back to you, Helena, again, I would just like to emphasize that these strong financial results that I had the honor to present today, it's really coming from a teamwork by everyone here at EPIROC. So thank you all for a very good 2022.

Thank you, Håkan. So then I would like to briefly conclude the quarter. Our employees are our greatest asset and I'm proud of all the hard work and all the achievements. You know, it was a strong but challenging 2022. We had a high customer activity in Q4. We deliver profitable growth with record high operating profit. We dare to think new and take innovations to the market that will transform the industry. So as we enter 2023, EPIROC stands stronger than ever. And in the short term, we expect that the underlying demand both for equipment and aftermarket will remain at a high level. So thank you. And Karin, over to you.

Thank you, Helena. Thank you, Håkan. Well done. Before I open up the Q&A session, if you don't, or if you haven't already signed up to our capital markets day in Örebro in June, please do. We have limited seats and registrations is open. So now with this beautiful picture of our SmartRock T35E, the world's first ever top hammer battery electric drill, I open up the Q&A session and today we do it. So you need to register first. Operator, please open the line.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Lars Brorsen from Barclays. Please go ahead.

Good afternoon, Helena, Håkan, Karin. Three if I can, probably two for Håkan. Håkan, first of all, on your recognition of orders on hand from acquired companies, so RCT and Radlink, there's about a billion or so that you are recognizing automation license fees, I guess. Can you help us understand a little bit what exactly, so these are subscription contracts, are they? And you are now recognizing all of that in your order intake. And so when we model out structural impact in 2023 from these two companies, assuming, should we say, subscription contracts, so sort of two or three year duration, should we think of book to bill of some 0.6, 0.7 times? That would be helpful if I can start there, please.

So we haven't gone into the split of these contracts, what they are. RCT is, as you mentioned, the automation company, Radlink, it's more about the infrastructure for the mine. So they have a somewhat different type of business and we won't specify exactly what type of contracts and how much come from each of the companies. But some of them would be subscription fees, yes. But I'm sorry, I won't go into too much of that details, actually.

Okay, it would be helpful, of course, so we can model out that sort of structure impact correctly over the next few quarters. But I'll leave it at that.

We can look into it and see if we can provide some more details.

That will be helpful. Thank you, Håkon. Secondly, maybe slightly bigger picture. Can you help me a little bit with thinking about equipment and service margins for 2023? I appreciate this is not your favorite topic in terms of forward-looking guides. I'm not looking for that, but consensus is looking for stable margins year over year. Can you help us maybe talk through some of the key headwinds and some of the key tailwinds that you see to that? Maybe if I can help you along. Particularly mix, which should be quite a meaningful headwind for you this year on margins. How to think about the ramp in equipment? Can we get to sort of a more normalized mix in equipment and service from what has been a very unusual mix over the last couple of years? And also within that, can I ask you to the ramp in battery electric deliveries in 2023? Should we think of that as being dilutive to your equipment margins and potentially quite a significant headwind? Thank you.

No, but I think the mix, of course, as we have talked about for many quarters, of course, with more equipment, we will expect, you can expect a mix effect. But I think as we have continuous been growing, very successful as well in the aftermarket, you know, so, you know, but of course, when, you know, when we get the pace up in production, when it comes to equipment, of course, you know, you will see that that effect. I think on deliveries when it comes to battery machines, that will not, let's say dilute, dilute or be more costly than other type of machines that we deliver.

Okay, so we shouldn't think of battery electric deliveries ramping up as being diluted to your equipment margins.

No,

no. Thirdly, and if I can finally, Helena, obviously a big acquisition, I think the biggest in the five-year history of Epiroc announced with CR, I thought quite interesting entry into ground engaging tools. We didn't get a chance to catch up after that announcement. Help us a little bit if you would just briefly on some of the synergies you see with your core T&A business and maybe talk a little bit about what you see in terms of driving, she would say more the premiumization of ground engaging tools, particularly I guess in construction applications.

No, but we see great, you know, the ground engagement tools business is very similar to tools and attachments actually, you know, it's material, it's heat treatment, it's, you know, productivity product. So it's very similar, the type of contracts, you know, that you have with customers are very similar to the consumables setup. But when it comes to also, it's very also similar to our attachment business, when it's where it is OEM agnostic and we can then put it on, you know, on whatever carrier really. So I see this, you know, this acquisition is a very strategic one. We're moving into a new niche and of course we have, you know, strong footprint both when it comes to the tools and attachment, Salesforce globally, but also we have a very good relationship with our surface customers, where we already have people on site, for example, with, you know, maintenance people, etc. So that's how I see it, very good strategic fit. I see also great opportunities in the construction area with these solutions, as well as underground, you know, to produce more smart, smart buckets. It's also a portion of CR, they are very advanced when it comes to the digital solution and building intelligence into the buckets and the teeth. So I think also there I see, you know, great opportunities.

Helpful, thank you.

The next question comes from Klaas Berglind from Citi. Please go ahead.

Hi Helena Håkan, Klaasar Citi. So the first question I had was on seasonality and thinking about orders. We know construction lead demand is typically stronger as we enter the spring, but trying to understand the mining side better. Large orders can improve if they're lumpy, as you said, but if we focus on underlying demand, do you think underlying first quarter orders could be higher quarter on quarter? And the reason for asking is that if we strip out the acquired backlog, calculate underlying orders in US dollar to make this like for like, then expectations are to look pretty high up 15% quarter on quarter. So I'll start there, thanks.

I think, you know, as we have said many times, the large orders are always lumpy. But I think what has been good during Q4 now is the underlying activity levels among in all regions, I would say. So and also what we, you know, we still see that, you know, roughly half of the capital equipment orders are for expansion projects. So 50%, roughly 50% is replacement and 50% is expansion projects. You know, I think so your question if the underlying activity level will be higher in Q1, that was more. I think it's difficult to say. It will always, you know, vary when we have, of course, our definition of a large order. And a lot of things can happen also with medium sized orders that will can tilt it between quarters. But as I said, also, you know, we have already announced one large orders already in Africa now in January. But the good thing though, and what we are focused on is the underlying activity levels and that is healthy.

Yeah, I totally get, you know, your comment on the market. What's out there? I'm just trying to understand. I mean, if I look history, it looks like first is stronger than the fourth. But at the same time, trying to understand whether mining companies typically order more first over fourth, right? I totally get the construction piece, but that was really my question. Because the US dollar taking out the acquired backlog, expectations look quite high.

I don't think I dare to comment on that, to be honest.

My second and final one is on the drop through. It's very solid, even if you had just for a lower corporate line. And we've seen component costs going up a lot in the quarter value. Add is going up quite a lot in Europe following the higher energy prices in the third and in the fourth. So, but you're still surprised positively on the drop through. So, I'm trying to understand if you had much higher pricing moving through the backlog in the fourth quarter versus the third. And if pricing year over year now in the P&L will fade, or do you think you will have still similar level of pricing running through the P&L as you go through the year? You've been very good at compensating on cost. I'm just trying to understand the price levels through 2023 and if they moved up a lot in the fourth. Thank you.

I would say it's been a gradual increase throughout 2022. We were quite, I would say the organization out there were quite fast in terms of starting to increase prices. And we have continued doing that throughout the year. And like you say, you know, cost inflation keeps going on. So, we are all the time looking to see what we can do and increase prices, but also even more important at the same time, add more value to our equipment that we are selling to our customers. So, it's been a gradual journey throughout the year. And I think looking at what we see in terms of cost inflation, we will need to continue with this journey also in 2023. Will we do it at exactly the same pace remains to be seen.

Hiking from current levels, Håkan, is that what you're trying to say? That's the intention.

And again, you know, by making sure that we actually add some value to our customers as well. They are not going to be prepared to just pay because we want to have compensation. We need to bring something to them as well.

Thank you. For us, we started with aftermarket because that's also what is turning faster. So, I think in the beginning of the year, we had, you know, we got contribution from that. And then at the later part of the year, also the equipment started to give results.

Thank you.

The next question comes from Vlad Sergevski from Bank of America. Please go ahead.

Yes, thank you very much for taking my questions. I will start with housekeeping one of the order intake. Would you be able to give us the number in million or billion SEC, which impacted the order intake from backlogs, which you recognized from acquired companies? I understand it's about a billion, but would you be able to give us any more precise number here, please?

I would say it is close to one billion. So, I think that that will be close enough, good enough. Then it's very close to one billion. So, I don't have exactly the same the figure, but it's not one point two or zero point eight. It is close to one billion.

Yeah, that's helpful. Thank you so much. And then if I do the simple exercise by subtracting this from your order intake and then converting it into dollars, the order intake in Q4 is frankly quite materially lower in dollars compared to what it was at the beginning of this year. You had some phenomenal quarters in Q1, Q2, Q4 last year. And yet during this period, your commentary on the order intake was that it remains at a high level. Yet the absolute number declined quite a bit. Would you be able to kind of comment on what was driving that?

I think Russia is obviously one big impact factor as well. If we look at the organic order intake excluding Russia, it's up three percent compared to the similar quarter last year. So, from that point of view, we are still growing, actually, if we include Russia.

And then my final one, if I may, a more broader one. If you look at what mining companies are reporting, the big public ones, I mean, the majority of them are actually missing their production targets for 2022. And absolute production levels of key commodities, be it gold, copper, et cetera, are actually not impressive in 2022. Yet you and your peers are actually referring to very high customer activity and very high utilization. Would you be able to help us to reconcile those two things? Because the idea would be if you utilize equipment more than you produce more.

But I think it's due to the aging fleet. So we have seen this over many years now that the fleet out there is growing older for every year. And older machines need more spare parts, larger rebuilds, et cetera. But also, I would say that there is a lot of larger rebuilds taking place. Finally, customers also need to do larger rebuilds. So we have also seen that has really contributed to the growth during 2022.

That's great. Thank you so much.

We have James Moore from Redburn. Please go ahead.

Hi, everyone. Thanks for taking the question. I wonder if we could talk about the profitability in equipment and service. I think the overall margin was flat 26.1 year on year. I know you don't disclose it, but would it be possible just to talk directionally about whether service profitability was flat also versus equipment and how they independently moved from a year on year basis? That's the first question, if I could.

If we look at the segment as such, adjust that it was up slightly from 25.4 to 25.7. But more or less flat, you can say like you alluded to. And I wouldn't say there's a big difference in service margin. It's fairly stable on a good level. So no major change.

And if we look at the price, we talked about price, gross price earlier. If we took a look at the price cost impact within your organic aspect of the bridge, could you just talk a little bit about how that's developing your major competitor as currently, certainly in the second half of 22, seeing quite a significant dilutionary impact that they anticipate improving through the course of 23. You mentioned that you're quite quick to respond. I'm just trying to think about whether you have been doing better so far or whether you've got an improvement ahead of you.

I wouldn't compare us to our competitors, but I would say that we were, as we said before, we were the decentralized organization. We're really quick out there seeing what was coming and making sure that we started adjust our pricing towards our customers. And that is to a large extent what you see in the organic, what we're getting from the organic growth. It's of course a combination of increased cost that we are compensating for via the price and also volume wise. But all in all, I would say, you know, we were quite agile in terms of adjusting and in the organic portion there, it's definitely partly price included as well.

Thanks. And last of all, if I could, can I get back to this order backlog? From the acquisitions being put into the orders received, what made you decide to include backlog in order received? Because that's not something you have done in the past. Is that something that is explained by the nature of those businesses? We

have, we have treated it in the same way historically as well.

And by doing that, what we actually want to do is we want to give you full transparency, transparency in terms of what you can expect us invoicing going forward. So that's actually the reason why we have done that. And it's the same way as we have done in previous quarters. But it's not been the magnitude as you have seen in this quarter. That's the big difference.

But it's fair to say that the base is closer to 12.8 billion, if you like, and not 13.7. So we should think about sequential demand removing that billion, because that was not new orders received in the quarter. That was exactly

when you look into Q1. That's the good way to look at Q4. Yes. Thank you.

Okay. So, so your comment of stable at the high level, we should compare it to the lower number, the 12.8, just to be clear.

Yes.

Yeah, thank you. Thanks very much.

The next question comes from Andreas Koski from BNP Paribas Exane. Please go ahead.

Yes. Good afternoon. I hope you can hear me. I also want to ask on the acquired backlog that you recognize in order intake. Is all of that sitting in the service business or what's the split between the different segments?

The vast majority of it is sitting in the service business as the larger acquisitions were part of service.

Thank

you. If you take, sorry, tools and attachment, the one acquisition we closed there was rather small. So more or less all of it is sitting in equipment service.

In equipment and service, but how much of that is relating to service backlog? Oh, yeah, the vast majority is. On the last question earlier, it was about software, et cetera. Yeah. Okay. And then secondly, on battery electric vehicles, would you like to share how large part of your equipment orders that came from battery electric machines in 2022? And if the lion's share of that is related to load and haul.

So, as I said, you know, we have, you know, it has really started to take off and we have, you know, it's threefold up compared to the previous year. We have not shared the numbers, but in relation to 2021, it's up threefold.

And what was it in 2021?

Lower. Lower.

Okay. But it's in the billions or is it just a few hundred million? Just if you could give an indication, at least. I will

not de-indicate that. But I think also back to our offering, you know, we have a very broad offering now when it comes to electrification in general. So it's both equipment, it's retrofits and it's also electrical infrastructure. And it's growing nicely.

Okay. Thank you very much.

The next question comes from Anders Eidborg from ABG Sundal Kalia. Please go ahead.

Yeah, hi. Good afternoon. So I just wanted to ask about the profitability of the acquisitions. I mean, you've done a few now. And I wanted to ask firstly on what happened in this quarter. If we look at the bridge on equipment and service, even if we add back that capital gain that you had last year, it looks like a slight negative from structure. So is there any sort of initial adjustments there? So that's number one. And number two, what should we expect in terms of dilution, you know, from the acquisitions that you've closed already?

For equipment and service, we had the dilution of the acquisitions of .1% in the quarter. 0.8 on group level and .1% in equipment and service. I don't recall any other from the top. Last year, as you mentioned, we had this Mobilaris revaluation effect, but no other major structure this quarter in equipment and service.

Am I wrong in thinking that's a negative EBIT in absolute terms?

That you, that I think you're wrong in thinking, yes.

Okay.

Once you also remember, we are all the time showing EBIT and not EBIT A, so you will also have included in the dilution that we mentioned. You also have the amortization of intangibles.

But I think also it's fair to say that, you know, when we, you know, when we acquire companies, we seldom find the companies with the same profitability level or the margin level that we sit at. So, of course, you know, that is also so, you know, I think, you know, we always see dilution in the beginning and then we work ourself back to the level that we expect as a company. So I think that's a general statement.

Okay, so put it this way. Sorry, the level of dilution that you saw in Q4, that is pretty much what we should expect in Q1 as well.

In that neighborhood, then we didn't have actually the acquisitions the full quarter either. So if you look at when we have announced when we closed the larger ones being Radlink and RCT, and they were not included in the full quarter. And then, of course, once they include in the full quarter, it will be somewhat of a bigger impact.

All right. Thank you.

Thank you very much, everyone. It seems like we have no further questions. So either everything was crystal clear or you are holding back your questions and we're happy to help you with those. Håkan, Helena and I just reached out. And as always, we wish you successful investments and we hope to see all of you soon again. Thank you very much. Thank you.

Thank you.