Epiroc AB (publ)

Hello and a warm welcome to the Epiroc Q3 results presentation. My name is Karin Larsson. I'm head of IR and media here at Epiroc. Before we start the presentation, I would like to say thank you to all 80 plus investors and analysts who joined us in Las Vegas for our Capital Markets Day last month. I also would like to thank you who joined on the live webcast. From the feedback that we have gathered, it's clear that you would like to have more color on the margin. And we will do our best today to provide you with more information. And with me today to present the results, I have our CEO, Helena Hedblom, and our CFO, Håkan Folin. They will briefly present the results before we end with a Q&A session. So without further ado, Helena, please, the stage is yours.

Thank you, Karin. So let's get going then. So starting then with the highlights from the quarter. And we had a strong demand from our mining customers with several large equipment orders. In total, they amounted to 1.4 billion, which is record high. And last year in Q3, we had 1 billion in large orders. And the organic equipment growth for orders was strong at 11%, and the demand for service was also high, translating into an organic order growth of 6%. Construction, on the other hand, was weak as anticipated, and it also softened further in the U.S. And this impacted mainly our attachment business. As Karin mentioned, in September we hosted our Capital Markets Day and the main purpose of the event was to provide insights into how Eproc is positioned for profitable, resilient growth in an ever-changing world. And we also provided updates on the progress of our financial and sustainability goals. After the capital markets day, we went to the Mine Expo, which is the world's largest mine exhibit. And there we showcased many of our groundbreaking innovations. Over 44,000 mining professionals from 126 countries gathered in Las Vegas, walking a show floor that presented many interesting concepts in an industry that is rapidly changing. An industry Epiroc aims to remain in the forefront of by offering the best equipment and service and leading the race within automation, electrification and digitalization. And I will tell you more about our innovations soon. If we look into the details on the demand, slide 3, we achieved 8% growth in orders received year on year to 15.5 billion, up from 14.4 last year. And organic growth was strong at 6%, driven by mining, while construction was weak. We had a positive contribution from acquisitions, with Stanley Infrastructure being the largest contributor. Sequentially, compared to the previous quarter, we had a negative organic order development of minus 3%. Moving on to innovation, and here we have many great things to share, which we also did at Mine Expo in Las Vegas. So one innovation that attracted a lot of interest was the large capacity mine truck MT66S eDrive. And this is our first mine truck with both an electric drivetrain and a powerful diesel engine, in other words, a hybrid. and it combines the cost-effectiveness of a traditional mine truck with the productivity of an electrical one, without requiring changes to a mine's infrastructure. Our goal is to provide the best machines for getting the job done and the customers should be able to choose the energy source that is best for them while at the same time reduce emissions. So we believe that especially underground mining will be electric in the future and we are proud to offer our customers solutions that are battery electric, troll electric, hybrid, but also other energy sources that are more fuel efficient than diesel, such as biofuel and HVO. One of our best sellers, the Pit Viper 271 Surface Drill Rig, was also shown in Vegas. And the Pit Viper that was on display was a cable electric version. And today, 11% of the Pit Viper fleet population are in electric versions. Another innovation that's gaining traction in the market is the automatic bit changer, which is an option when customers buy new pit wiper drill rigs. And with this solution, the machine changes drill bits by itself, eliminating the manual work. So thanks to this automation solution, both safety and efficiency is strengthened. And speaking about drill bits at the Mine Expo, we also showcased the PowerBitX, which is enabling much longer drilling time, and is therefore a perfect drill bit for autonomous drilling. The R&D expense in relation to revenues was 3% in the quarter, and this is adjusted for acquisition-related impairment of intangible assets in equipment and service of 346 million. Moving then over to aftermarket, which represented 67% of the revenues in the quarter. We had good mining demand for digital solutions, including mixed-fit automation solutions, as well as high demand for ground engagement tools, which are reported in T&A. The weak construction demand impacted mainly the attachment business, but also tools that are used at construction sites and quarries to some extent. The revenue mix has of course an impact on group margins. Service revenues were 43% in the quarter versus 46% last year. In general, the service business has a higher margin than the rest of the business. So on the operational excellence, we have been working hard to show progress on profitability and more actions have been carried out as planned in the quarter. We achieved a sequential reduction of workforce by around 450. And looking back year to date, this number is now around 1,000. And this is for comparable units. So it's important here to mention that we are really pinpointing what we are doing in regards to efficiency. And this is something that takes a bit of time, but that will strengthen Epiroc in the long run. Obviously, we do a lot in areas where the revenue growth or the profit levels is not satisfactory. But we also take measures where we can do more with the same level of input and resources. So in the end, we will be more efficient. I'm therefore pleased to say that we have lowered our cost level in marketing and administration this quarter. Another improvement is the reduction of inventory by 1.2 billion, and we achieved this by addressing bottlenecks in the final stages of delivery, which led to more machines delivered in the quarter. If we then spend a few minutes on sustainability and starting with people, we have improved our safety metrics yet again, and the total recordable injury frequency rate the last 12 months decreased to 4.4. And I would like to emphasize that it's not only about making our own operations more safe, it's also about helping our customers to become better. And at the Capital Markets Day, we provided numbers on our market-leading position within safety solutions and mixed fleet automation, or in other words, driverless machines, and currently covering around 3,100 vehicles around the world. The number of EPPROC employees increased to 18,900 in the quarter, with acquisitions being the main reason for the increase compared to previous year. And we make good progress on the proportion of women employees and women managers, which both increased now at 19.6% and 24% respectively. And on diversity, I would like to share some positive news. In India, we have increased our female managers from 7% in 2019 when we started this journey to 17% in Q3 2024. And that's something to be proud of. India is a key growth market and an important manufacturing and innovation hub for the EPROC group. And in recent years, we have seen good growth in the Hyderabad product company, and therefore we are now expanding our manufacturing facility for rock drilling tools there. And in Q3, we also opened a new innovation and technology center in Hyderabad. Another achievement related to India was the 13th International Mine Rescue Competition held in Colombia, organized by the National Mining Agency. And in this competition, 26 elite teams from across the world joined, and among them, mining company Hindustan Sinks' first-ever all-women underground mine rescue team participated. In fact, this was India's first-ever all-women team. And one of the members of this team was our colleague Alka Chindalya, a service engineer from Epbrock, India. And that team secured an extraordinary second place. So these women have not just only made history, but they also set the stage for an even more inclusive and diverse future in mining. So well done. And let me show you a video on this.

I am what I always wanted to be. I am a part of something extraordinary. Something that requires strength. What's my strength? Courage. In every challenge, I discover my power. At every chance, I redefine what's possible. I am more than a woman. I am a movement. But when it comes to safety, I can do what you can't even imagine. For some, I'm an inspiration. And for some, I'm a hero. But it's not about becoming a hero. It's about being responsible. It's about facing the challenge. It's about breaking the stereotypes. And together, we are India's first all-women underground mine rescue team. And we are always ready.