Epiroc AB (publ)

Thank you, Karin, and hello everyone. So starting with the highlights. So the mining activity continued to be strong in the quarter as anticipated, and our large orders amounted to 950 million SEK, which is up from 550 last year. And the demand picture within mining is stable at the high level, and there is a lot of business cooking, or in other words, the pipeline of potential large orders is solid. The construction market, on the other hand, weakened further in the quarter and impacting the aftermarket business negatively. In the quarter, we completed the acquisition of Stanley Infrastructure and we also announced the acquisition of ACB+. Together, we will be a leader within attachments and quick couplers, providing customers with a more complete range of productivity solutions. Long term, the construction market is attractive with an anticipated annual growth rate over 4-5% and with attachments used for deconstruction and recycling of steel and copper expected to grow even more. When it comes to profitability, we had a lower margin compared to the previous year and there are several reasons as to why and we will go through it soon. However, efficiency measures were carried out as planned in the quarter and sequentially the number of employees for comparable units decreased with around 450 in the quarter, mainly within service and manufacturing. Within automation and electrification, many exciting things are happening. For example, we have successfully deployed a battery electric trolley truck system for underground mining with ABB and Boliden. Moving on to slide three, providing some more insights on the development on orders received. So our orders increased 6% versus last year to 16.3 billion, and it corresponds to an organic increase of 1%. The demand picture was mixed. We had a positive 7% contribution from acquisitions, mainly the Stanley Infrastructure acquisition, which came into the books on April 1st. Sequentially, compared to the previous quarter, we achieved 5% organic growth driven by mining equipment. Moving on to slide four, innovation, one of our strategic focus areas. So within automation, I'm excited about our solutions, including mixed fleet, both for surface and underground applications. which create great value for our customers. Increased productivity, improved safety and lower emissions are some of the benefits confirmed by our customers. On the 3rd of July, we acquired the remaining shares of ASI Mining, one of our collaboration partners in the Roy Hill project in Australia. In this project, we are converting a mixed fleet of around 100 haulage trucks to driverless operations. and thereby creating the world's largest autonomous mine of mixed fleet. There is high demand from customers that want to connect machines from different manufacturers and have these work together fully autonomously. And we are the one-stop shop for mixed fleet automation and remote control solutions, regardless of manufacturer or type of equipment, partly thanks to acquisitions such as ASI Mining and RCT. And around recycling is increasingly important for our mining and construction customers. So by recycling and reusing steel and metals, also such as tungsten, the need to extract virgin material is reduced. And our recycling program for carbide inserts from drill bits is expanding into even more markets. Another innovation highlight in the quarter was that we successfully deployed a battery electric trolley truck system for underground mining in close collaboration with Boliden and ABB. And this brings the mining industry closer to realizing the all electric mine of the future with sustainable, productive operations and improved working conditions. Another strategic focus area is the aftermarket. I'm now on slide five. We had a strong organic service growth of 5% supported by midlife upgrades and a strong demand for mixed fleet automation. The construction demand on the other hand weakened, impacting not only attachments but also tools used at construction sites. Important markets such as the United States and Europe were especially weak. When it comes to operational excellence, now on slide 6, our adjusted operating margin EBIT was down to 19.7% from 21.6% last year. Efficiency measures were carried out as planned in the quarter and actions have been taken to strengthen efficiency and the number of employees for comparable units has decreased with around 450 in the quarter. And further measures to strengthen efficiency have already been initiated. We are also taking initiatives within our sourcing. It is a cross-functional effort, including R&D and marketing, that will lead to increased resilience within sourcing and delivery, improve the cost efficiency, and also ensuring compliance within sourcing. And as a reminder, on the 1st of May, we split our tools and attachments division into two divisions. in order to sustain optimal focus on each business line and continue fostering profitable growth externally the reporting segment will however remain unchanged moving on then to the people slide number seven safety is always our and my top priority and i'm glad to see further improvements here the total recordable injury frequency rate decreased further to 4.7 a meaningful decline from 5.5 previous year. As we completed the Stanley infrastructure this quarter, we have grown our EPPROC family meaningful, but we have also completed the acquisitions of ASI Mining, Yieldpoint and Waco. So a warm welcome to all new employees, and we hope that you will enjoy being part of the EPPROC family and share our values of innovation, commitment and collaboration. At EPROC our work is driven by trust and responsibility in a culture where everyone contributes and feels valued. So we see continued good progress when it comes to increasing the proportion of women and the share of women employees is now 19.2% and women managers are now at 23.6% both up meaningfully compared to last year. Moving to slide 8, where we have our planet goals. Our CO2e emissions from operations decreased 32% thanks to a higher share of renewable energy and installation of solar panels. The CO2e emissions from transport, however, increased 11% due to higher volumes delivered. So we have ambitious climate goals that were science-based validated already in 2021. In June, we got a significant acknowledgement of our work to reduce emissions. Time magazine listed Eproc as the world's 95th most sustainable company. And among manufacturing and industrial production companies, we were number seven. So well done to the whole organization. I will now give the word to Håkan to talk us through and discuss the financials.

Thank you, Helena, and I will continue with slide 9, group revenues and EBIT. Our revenues decreased 1% organically. In total, though, they increased to 16.5 billion, up from 15.9 billion last year. The adjusted operating margin was 19.7%, and the lower margin than compared to last year is mainly explained by overall higher cost level, negative mix effects within service, and also dilution from acquisition, which was 0.9 percentage points in the quarter. As Helena said, efficiency measures were carried out as planned in the quarter. The number of employees excluding acquisitions decreased with around 450 sequentially, and this was mainly within service and manufacturing. Further measures that we have already initiated will lead to a similar reduction of employees in the second half of the year. And in this quarter, we took 104 million in restructuring costs, and we do not foresee further restructuring costs in the third quarter for the actions that we have already initiated. If we then take a look at the EBIT bridge, and this is now on slide 10. In absolute term, our EBIT came in at 2.9 billion. This was down from 3.4 billion last year. But in this, we had items affecting comparability of 325 million. And these were including transaction integration costs related to acquisition of 130, restructuring costs 104. We have made a provision for earn out for the acquisition of RCT of 73. And then also for the long-term incentive program, 18 million Swedish kronor. And the reported operating margin in EBIT was 17.7%. In the bridge, you can see that we had a negative impact from organic and structure. Currency, however, supported the margin. And I do want to remind you that this is a bridge effect. So it's comparing the outcome in this quarter with the same quarter last year. In Q2 2023, we had a negative absolute bridge effect of 243 million and a negative margin effect of 2.7 percentage points. And some of that is now being reversed. So all in all, we ended up with an adjusted EBIT of 3.2 billion and an adjusted EBIT margin of 19.7%. If I then move on to the segments and slide number 11, and I will start with equipment and service. And these segments enjoyed a strong demand for mining. Year on year, the orders received organically increased 3% to 12.4 billion and including 950 million in large orders. And this should be compared with 550 million in large orders in Q2 2023 and 400 million in the previous quarter. And we have said this before and we'll say it again. Large orders are lumpy by nature. Sometimes you get more and sometimes you get less in a certain quarter. But we still see that there is a lot of business cooking out there in order for us to hopefully grab large orders also for the coming quarters. One of the large orders we received in the quarter was from Hindustan Sink in India, 250 million kroner. They ordered a fleet of mine tracks as well as rigs for rock enforcement, phase drilling, and production drilling. If we look sequentially, so if we compare with the previous quarter, our orders increased 9% organically. On slide 12, we have the equipment and service revenues, which were up 1% organically to 12.5 billion, an overall flat year on year. We had 44% equipment revenues in the segment, which is actually the same level as we had last year. So that means that the equipment service mix effect was flat this time. But if we look within service, however, we had some negative mix effects. We had a few items affecting comparability in total negative 142 million. These consist of the earn out for RCT, 73 million that I mentioned before. And this is an acquisition then developing better than anticipated. And then we have to provide more for the earn out. And then we also had restructuring cost of 69 million. And we did mention reduction of employees before on group level. And this is also the case in this segment. And our action here are very specific. I can almost say that you can say that they are pinpointed since this is actually a segment where we see good growth. But it is about strengthening our efficiency within this segment in the long run. If I then move on to the profit bridge for equipment and service, which you find on slide 13, we started with a profit of 3 billion last year and ended now with 2.7. Adjusted our EBIT was 2.9 billion, which is then corresponding to a margin of 23%, sorry, 23.2%. And you can compare that with same quarter last year when we had 23.9%. The lower margin is mainly explained by higher cost and then, as I mentioned, negative mixed effects within service, while currency contributed positively. The illusion from acquisition was 0.1 percentage points. Action has been taken. As I said, we should not forget, though, that we are experiencing strong growth from our mining customers. So we need to take these actions very carefully to safeguard a profitable growth also onwards. If I can quickly move on to the other segment, tools and attachment, on slide 14. Here, our orders increased 24% to 3.9 billion. This was up from 3.2 billion last year and supported by the acquisition of Stanley Infrastructure, which was included the entire quarter as we closed the acquisition on April 1st. In total, acquisitions impacted the growth positively with 31%. Organically, though, we saw a decrease of 6% as the demand from construction customers remained weak, and this was impacting both attachment and also rock drilling tools used within construction projects. The demand for rock drilling tools for mining customers, on the other hand, was good. Sequentially, order intake decreased 10% organically for this segment, explained by weakened demand in important markets such as the US and Europe, as Helena mentioned. The weak development in construction also impacted the revenues for tools and attachments negatively, down 10% organically. In absolute terms, though, up 17% supported by the Stanley acquisition. I'm now on slide 15. The EBIT, if we adjust 465 million of items affecting comparability, which was transaction integration cost for M&A, also restructuring cost, came in at 448 million, which corresponds to an EBIT margin of 11.2%. In the profit bridge of page 16, you can see then the margin headwind. In structure, we had the transaction and integration cost that I mentioned, 130 million kronor, and also restructuring cost of 35 million. And we also had dilution from acquisition. If we adjust for the items affecting comparability, The dilution from acquisition was 2.2 percentage point to the tools and attachment market. And the organic weakness then is mainly explained by under absorption and also product mix. Moving on to cost on slide 17, both year on year and sequentially, the cost for administration, marketing, R&D increased in absolute terms with the acquisitions explaining the increase. As a percentage of revenues, though, we are down sequentially, and we hope to continue this trend in Q3, given the actions that we have taken. Net financials were higher, explained by higher interest-bearing debt. Income tax, we had at 23.0%. This is up somewhat from 22.6%. And we do still stick to our guidance that the tax rate should be between 22% and 24%. Next slide, number 18, is on our operating cash flow. If we start looking at the graph to the right, which shows a positive development where we can see now that our cash conversion rate is 90% in the last 12 months, which is meaningfully higher than where we were a year ago when we were at 54%. In the table to the left, you see the operating cash flow, which increased year on year from 1.5 to 1.6 billion. The lower profit had a negative impact on the cash flow, but this was compensated by a lower buildup of working capital. And speaking of working capital, we have more details now on slide 19. It was up 12% year on year, both in total and also adjusted for acquisition and FX, and now represents 37.8% of revenues. If we dig into the details then, we had an increase of acquired inventory both year-on-year and sequentially, as well as a higher level of receivables given the increase in sales, while payables were lower. If we look sequentially and exclude acquisitions, we actually had a positive inventory development, mainly due to the increased sales of equipment. The next slide is about capital efficiency, and this is then slide 20. We ended the period with a meaningfully higher portion of debt. We're now at 15.8 billion versus 9.1 billion a year ago. And after having acquired Stanley and also paid a dividend of 2.3 billion, we now have a net debt to EBITDA of 1.04 times at the end of the quarter. Return on capital decreased to 22.4, and this was negatively impacted by intangible assets such as Goodwill. If we then shift a little bit of focus on slide number 29, and we look at why we are building a position for future growth within attachment. And in short, you can summarize this slide as we're building a leading position within attachment and quick couplers, given the acquisitions we have made of Stanley Infrastructure and also ACB+. And this will provide our customer with a more complete range of productivity solutions. And quick cuppers then, they are essential for excavator companies that strive to work with different types of attachment in an efficient and productive way. Long term, as Helena said and we talked about before, the construction market is attractive with an anticipated annual growth rate of 4-5%. And attachment used for deconstruction and recycling of steel and copper are expected to grow even more. So this is us positioning to capture future profitable growth. On slide 22, we have some financial impact from the acquisition of Stanley Infrastructure. Most things on this slide we have actually shown to you before, but I will therefore concentrate on the news. Transaction integration costs were 130 million in the second quarter. We also had costs in the first quarter, but now after Q1 and Q2, we will not have more transaction or integration costs. The Stanley Infrastructure EBIT A margin in Q2 was low double digit if we adjust for items affecting comparability and also the impact from step-up valuation of inventory. And if I pause there a bit and talk about what is the step-up value of inventory, Well, when we do the purchase price allocation for the acquisition, Stanley, we value the inventory to market value instead of cost. And then this has an impact in terms of lower gross profit as we sell the finished goods. This impact will last until we have turned all of that inventory around, which will be for three quarters. So basically until the end of 2024, we will have that impact. Previously, we have provided you with the guidance for the full year dilution of ABTA margin in TNA for 0.5 to 0.7 percentage point from the acquisition. And we do still stick to that comment. Given the weakening demand in the second quarter, the anticipated dilution is currently at the higher level of the range. But we have identified and taken actions which will mitigate the effects of lower demand. For example, we will consolidate the manufacturing footprint for Stanley Infrastructure in North America, which is affecting around 130 employees. Also for the group, we stick to this margin comment as this acquisition and its impact on both revenue and profit is smaller now than we originally anticipated. So with this, I will conclude the financial comments and leave the word back to you, Helena.

Thank you, Håkan. So I will then summarize the quarter. So we had strong demand from mining customers with large orders at 950 million. And the business cooking looks promising. And on the service side, we had an organic growth of 5%. Construction, on the other hand, was weak and also weakened further in the quarter, which impacted the aftermarket negatively. We have taken actions as planned and we will take more to improve profitability. And restructuring costs for this have already been taken. We are building a leading position within attachments with our acquisitions of Stanley Infrastructure and ACB+. And we are accelerating our leadership within automation, especially within mixed fleet, by acquiring the remaining share of ASI Mining. And together with Boliden and ABB, we have deployed a battery electric trolley truck system for underground mining. helping the mining industry towards zero emissions. And we got a significant acknowledgement of our work to reduce emissions from Time Magazine, who listed Epiroc as the world's 95th most sustainable company. So all in all, a busy quarter for us at Epiroc, and we keep on working hard to provide customers with the right solutions for the future. So together we make it happen. And finally, then, looking ahead, now on slide 24, in the near term, we expect that the underlying mining demand, both for equipment and aftermarket, will remain at a high level, while the demand from construction customers is expected to remain weak. So, thank you, and over to you, Karin.