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Epiroc
Earnings Release • Jan 31, 2020
2908_10-k_2020-01-31_39f8e353-c0c0-4c96-b155-7a566f8346a0.pdf
Earnings Release
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Epiroc interim report Q4
- Orders received decreased 2% to MSEK 9 276 (9 468), organic decline of 7%
- Revenues decreased 3% to MSEK 10 280 (10 558), organic decline of 7%
- Operating profit was MSEK 2 016 (2 162), including items affecting comparability of MSEK -115*
- Operating margin was 19.6% (20.5). Adjusted operating margin was 20.7%*
- Basic earnings per share were SEK 1.23 (1.35)
- Operating cash flow of MSEK 2 827 (2 242)
- The Board proposes a dividend of SEK 2.40 (2.10) per share to be paid in two installments
- Helena Hedblom appointed new President and CEO as from March 1, 2020
| 2019 | 2018 | 2019 | 2018 | |||
|---|---|---|---|---|---|---|
| MSEK | Q4 | Q4 | Δ | Full year | Full year | Δ |
| Orders received | 9 276 | 9 468 | -2% | 39 492 | 39 400 | 0% |
| Revenues | 10 280 | 10 558 | -3% | 40 849 | 38 285 | 7% |
| Operating profit | 2 016 | 2 162 | -7% | 8 136 | 7 385 | 10% |
| Operating margin, % | 19.6% | 20.5% | 19.9% | 19.3% | ||
| Profit before tax | 1 922 | 2 116 | -9% | 7 843 | 7 201 | 9% |
| Profit margin, % | 18.7% | 20.0% | 19.2% | 18.8% | ||
| Profit for the period | 1 489 | 1 623 | -8% | 5 884 | 5 437 | 8% |
| Operating cash flow | 2 827 | 2 242 | 26% | 6 688 | 3 884 | 72% |
| Basic earnings per share, SEK | 1.23 | 1.35 | -9% | 4.89 | 4.50 | 9% |
| Diluted earnings per share, SEK | 1.22 | 1.35 | -10% | 4.89 | 4.49 | 9% |
| Return on capital employed, % | 27.6 | 32.0 | ||||
| Net debt/EBITDA, ratio | 0.05 | 0.14 |
Key figures
* Information on items affecting comparability, see page 4.
Key figures for 2018 are not restated for IFRS 16. See pages 12-13.
CEO comments
Record revenues and profit in a strong 2019
Epiroc's revenues, profit and cash flow increased in 2019, supported by strong growth of our service business and efficiency initiatives. Revenues increased 7% to almost BSEK 41, our operating profit increased 10% compared to 2018 and we improved our operating margin and cash flow. Our customers continue to show interest in our innovative productivity solutions, even if the overall demand for equipment softened.
Continued growth in service in Q4
Order intake in Q4 remained at a similar level as in Q3, which was expected. Compared to the previous year, we saw a continued solid development in service with an organic order growth of 6%, while the demand for equipment softened with a decline in orders.
It is clear that our customers remain cautious in making investment decisions. In the near-term we expect that demand will remain largely at the level seen in the fourth quarter.
Improved underlying margin and cash flow
In spite of record revenues for the full year, we had a year-on-year decline in revenues in Q4 as orders for equipment have gradually softened throughout 2019. Revenues decreased by 3% to MSEK 10 280 with an organic decline of 7%. The operating profit was MSEK 2 016, including items affecting comparability of MSEK -115. The adjusted operating margin improved to 20.7%. Operating cash flow improved both compared to the previous quarter and year-on-year and amounted to MSEK 2 827.
Continued actions for resilience
Epiroc's business model is agile and designed to be resilient. We continuously adapt the organization to prevailing business activity, and in Q4 we reduced our headcount by 521, or 3%, and also identified further areas for efficiency improvements. These are expected to give visible effects in the first half of 2020.
We continue to adapt our product portfolio and production footprint. We completed the restructuring of the handheld rock drilling tools business in Tools & Attachments in the quarter. Going forward, we will continue to optimize our product portfolio and related footprint.
Innovation and commitment to value creation
We continue to focus on innovations, such as automation, digitalization and electrification. In Q4 we signed a collaboration agreement with Pucobre in Chile to further digitalize their mining operations, boosting productivity and safety. We assist our customers in connecting existing machine fleets regardless of make or model, and to optimize processes through automation, system integration and information management. In other words, we deliver smart, safe and seamless operations. During the quarter we also announced our partnership with world-leading commercial explosives provider Orica to jointly develop a semi-automated explosives delivery system, enabling safer and more productive blasting operations in underground mines.
Through passion, commitment and collaboration, we support our customers in achieving higher productivity, and a cost effective, safe and sustainable business. This enables us to create long-term value and further strengthen Epiroc for the future.
Handing over to Helena Hedblom
In November we announced that I will be stepping down and that Helena Hedblom will take over as President and CEO starting March 1, 2020. My mission from the beginning was to establish the new company, list it on the stock exchange, and ensure it stands strong for the future. The mission is accomplished and I am happy to be handing over to Helena. She has deep knowledge and experience of the business, a strong drive, and a strong focus on innovation and customers' needs. She is a highly appreciated leader and perfect to lead the company into the future.
Thank you!
Per Lindberg President and CEO
Orders and revenues
| 2019 | 2018 | 2019 | 2018 | |||
|---|---|---|---|---|---|---|
| MSEK | Q4 | Q4 | Δ | Full year | Full year | Δ |
| Orders received | 9 276 | 9 468 | -2% | 39 492 | 39 400 | 0% |
| Revenues | 10 280 | 10 558 | -3% | 40 849 | 38 285 | 7% |
| Operating profit | 2 016 | 2 162 | -7% | 8 136 | 7 385 | 10% |
| Operating margin, % | 19.6% | 20.5% | 19.9% | 19.3% |
Orders and revenues
Book to bill, %
Revenues, MSEK
Orders received
Orders received decreased 2% to MSEK 9 276 (9 468), corresponding to an organic decline of 7% year-on-year. Currency contributed positively with 3% and structural changes with 2%. Sequentially, i.e. compared to the previous quarter, orders received decreased 3%, mainly due to currency.
Compared to the previous year, orders received in local currency increased in Asia/Australia, Africa/Middle East and Europe, while they decreased in North and South America.
Mining customers represented 76% of orders received in the quarter.
Revenues
Revenues decreased 3% to MSEK 10 280 (10 558), corresponding to an organic decline of 7%. Currency contributed positively with 3% and structural changes with 1%. The book to bill ratio was 90% (90).
The aftermarket represented 64% (59) of revenues in the quarter.
| Sales Bridge | Orders Received | Revenues |
|---|---|---|
| MSEK, Δ% | MSEK, Δ% | |
| Q4 2018 | 9 468 | 10 558 |
| Organic | -7 | -7 |
| Currency | +3 | +3 |
| Structure and other* | +2 | +1 |
| Total | -2 | -3 |
| Q4 2019 | 9 276 | 10 280 |
*Includes acquisitions and contract manufacturing. Contract manufacturing of road construction equipment was discontinued at year end 2018.
Profits and returns
Capital employed and return on capital employed*
| Profit bridge | Operating profit | |||
|---|---|---|---|---|
| MSEK, Δ | Margin, %, Δ pp | |||
| Q4 2018 | 2 162 | 20.5 | ||
| Organic | -172 | -0.3 | ||
| Currency | +175 | +1.2 | ||
| Structure and other* | -149 | -1.8 | ||
| Total | -146 | -0.9 | ||
| Q4 2019 | 2 016 | 19.6 |
*Includes operating profit/loss from acquisitions, contract manufacturing, items affecting comparability, one-time items, and change in provision for share-based long-term incentive programs. Contract manufacturing of road construction equipment was discontinued at year end 2018.
Operating profit decreased 7% to MSEK 2 016 (2 162), including items affecting comparability of MSEK -115. These items include costs of MSEK -45 related to efficiency improvements, MSEK -28 related to the agreement with the departing President and CEO, and change in provision for share-based long-term incentive programs of MSEK -42 (+67). The operating profit was negatively impacted by the organic revenue decline and acquisitions, but supported by currency. The operating margin was 19.6% (20.5). Excluding the items affecting comparability, the margin was 20.7%, positively impacted by currency and mix, but diluted by acquisitions and lower revenue volume.
Net financial items were MSEK -94 (-46), negatively impacted by exchange rate differences. Interest net was MSEK -35 (-37).
Profit before tax was MSEK 1 922 (2 116), corresponding to a margin of 18.7% (20.0). Income tax expense amounted to MSEK -433 (-493), corresponding to an effective tax rate of 22.5% (23.3).
Profit for the period totaled MSEK 1 489 (1 623). Basic earnings per share were SEK 1.23 (1.35).
The return on capital employed during the last 12 months was 27.6% (32.0), diluted by acquisitions, accumulation of cash, and by the implementation of IFRS 16 Leases. Return on equity was 28.3% (33.2).
Employees
On December 31, 2019, the number of employees was 14 268 (13 847). The number of consultants/external workforce was 1 366 (1 610). For comparable units, the total workforce decreased with 987 compared to the previous year.
New President and CEO
*Numbers for 2018, not restated for IFRS 16.
Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419
Average capital employed, MSEK Return on capital employed, 12 month, % 0% 5% 10% 15% 20% 25% 30% 35%
On November 26, the Board of Directors of Epiroc AB appointed Helena Hedblom as the new President and CEO of Epiroc AB, effective March 1, 2020. She will replace Per Lindberg, who will leave the company after having successfully established Epiroc as a listed company. Link to press release.
Balance sheet
Net working capital
Average net working capital/revenues, %
Net debt and Net debt/EBITDA*
Net working capital
Net working capital increased 2% to MSEK 13 153 (12 897) compared to the previous year, due to currency and acquisitions. For comparable units and currency adjusted, net working capital decreased 6%, with a reduction in both trade receivables and inventories. Trade payables and advance payments were lower, which partly offset the improvement year-on-year. As a percentage of revenues last 12 months, the average net working capital was 34.4% (31.8).
Supply chain program
The supply chain improvement program for parts and consumables with the aim to improve delivery service to customers, reduce costs, e.g. for transport, and reduce capital tied-up in inventories, continued according to plan with gradual improvements.
Net debt
The Group's net debt amounted to MSEK 483 (1 208), of which MSEK 596 (283) was attributable to post-employment benefits. The implementation of IFRS 16 has increased the net debt by MSEK 1 956 as of December 31, 2019. The second part of the dividend was paid in November 2019 and amounted to MSEK 1 263. The net debt/EBITDA ratio was 0.05 (0.14). The net debt/equity ratio was 2.1% (6.4).
Dividend
The Board of directors proposes to the Annual General Meeting a dividend of SEK 2.40 (2.10) per share, equal to MSEK 2 887 (2 523). The dividend is proposed to be paid in two equal installments with record dates May 14 and October 29, 2020.
Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419
Cash flow
Operating cash flow
The operating cash flow improved to MSEK 2 827 (2 242). The working capital decreased by MSEK 1 062 (415) sequentially, compared to the previous quarter, mainly due to a reduction of inventories and trade receivables.
Acquisitions and divestments
Cash flow from acquisitions and divestments was MSEK +10 (-64), see pages 19 and 23.
Divestment of credit portfolios
Epiroc divested some credit portfolios in the quarter, which gave proceeds from other financial assets of MSEK 113.
Equipment & Service
The Equipment & Service segment provides rock drilling equipment, equipment for mechanical rock excavation, rock reinforcement, loading and haulage, ventilation systems, drilling equipment for exploration, water, oil and gas, as well as related spare parts and service for the mining and infrastructure industries.
| 2019 | 2018 | 2019 | 2018 | |||
|---|---|---|---|---|---|---|
| MSEK | Q4 | Q4 | Δ | Full year | Full year | Δ |
| Orders received | 6 710 | 7 116 | -6% | 28 509 | 29 695 | -4% |
| Revenues | 7 740 | 8 094 | -4% | 29 891 | 28 540 | 5% |
| Operating profit | 1 853 | 1 876 | -1% | 7 474 | 6 751 | 11% |
| Operating margin, % | 23.9% | 23.2% | 25.0% | 23.7% |
Q4 in brief
Orders received in service increased by 6% organically
Orders and revenues
- Equipment orders declined 22% organically
- Operating margin improved to 23.9% (23.2)
Orders received
The orders received for Equipment & Service decreased 6% to MSEK 6 710 (7 116), corresponding to an organic decline of 7%. Currency contributed positively to orders received with 2%, while structural changes had a net negative impact of 1%. Compared to the previous quarter, orders received decreased 2%. Compared to the previous year, orders received in local currency increased in Asia/Australia, Africa/Middle East and Europe, while they decreased in North and South America.
The orders received for service increased 9% to MSEK 4 104 (3 761), corresponding to an organic growth of 6%. Compared to the previous year, service orders in local currency increased in all regions, except in North America, with the highest growth rate in Africa/Middle East. The share of orders from service in the segment was 61% (53).
Equipment orders decreased 22% organically compared to the previous year and amounted to MSEK 2 606 (3 355). Orders for both underground and surface equipment decreased. Compared to the previous year, equipment orders in local currency increased in Asia/Australia and in Europe, but decreased in all other regions. More than half of the equipment orders from mining customers continued to relate to expansion in or adjacent to existing mines. The share of orders from equipment in the segment was 39% (47).
Revenues
Revenues decreased 4% to MSEK 7 740 (8 094), corresponding to an organic decline of 6%. Revenues for service increased 5% while revenues for equipment declined 15% organically. The share of revenues from service in the segment was 52% (46). The book to bill ratio was 87% (88).
Revenue split, %
Book to bill, %
| Equipment & Service | Equipment | Service | ||||
|---|---|---|---|---|---|---|
| Sales Bridge | Orders Received | Revenues | Orders Received | Revenues | Orders Received | Revenues |
| MSEK, Δ% | MSEK, Δ% | MSEK, Δ% | MSEK, Δ% | MSEK, Δ% | MSEK, Δ% | |
| Q4 2018 | 7 116 | 8 094 | 3 355 | 4 350 | 3 761 | 3 744 |
| Organic | -7 | -6 | -22 | -15 | +6 | +5 |
| Currency | +2 | +3 | +2 | +2 | +3 | +3 |
| Structure and other* | -1 | -1 | -2 | -2 | +0 | +0 |
| Total | -6 | -4 | -22 | -15 | +9 | +8 |
| Q4 2019 | 6 710 | 7 740 | 2 606 | 3 712 | 4 104 | 4 028 |
*Acquisitions and contract manufacturing. Contract manufacturing of road construction equipment was discontinued at year end 2018.
Operating profit and margin
Operating margin, %
Epiroc Pit Viper 270 XC series with advanced rig control system with several automation features.
Operating profit and margin
Operating profit decreased 1% to MSEK 1 853 (1 876), including costs of MSEK -28 related to efficiency improvements, corresponding to a margin of 23.9% (23.2). The margin was supported by currency and mix, but negatively impacted by lower volumes and costs related to efficiency improvements.
| Profit bridge | Operating profit | ||
|---|---|---|---|
| MSEK, Δ | Margin, %, Δ pp | ||
| Q4 2018 | 1 876 | 23.2 | |
| Organic | -139 | -0.4 | |
| Currency | +145 | +1.2 | |
| Structure and other | -29 | -0.1 | |
| Total | -23 | +0.7 | |
| Q4 2019 | 1 853 | 23.9 |
Business development
During the quarter, Epiroc entered into a partnership with world-leading commercial explosives provider Orica to jointly develop a semiautomated explosives delivery system, enabling safer and more productive blasting operations in underground mines.
In January 2020, it was announced that Epiroc will consolidate the dimension stone industry manufacturing to its existing production facility in Nashik, India. The relocation will place the development and manufacturing in the center of the strong and growing dimension stone industry market in India. This will facilitate a solid and efficient development of the product offering and shorten time to market. The manufacturing at Epiroc Stonetec in Bagnolo, Italy, will be closed by mid-2020, affecting about 40 employees.
Innovations
Epiroc has launched the surface drill rig PowerROC D60, equipped with a Tier 4 engine. The D60 is a powerful and safe rig that is easy to use and repair. The new version offers high productivity and reduced environmental footprint.
Epiroc has launched the new Pit Viper 270 XC series blasthole drilling rig. It is equipped with Epiroc's latest Rig Control System, which offers several automation features and provides a foundation to add new functionality and options. Autonomous drilling can be implemented with almost no human interaction with the drill. It can also be configured to provide higher bit load capacity.
Tools & Attachments
The Tools & Attachments segment provides rock drilling tools and hydraulic attachments that are attached to machines used mainly for drilling, deconstruction and recycling as well as rock excavation. It also provides related service and spare parts and serves the mining and infrastructure industries.
| 2019 | 2018 | 2019 | 2018 | |||
|---|---|---|---|---|---|---|
| MSEK | Q4 | Q4 | Δ | Full year | Full year | Δ |
| Orders received | 2 517 | 2 306 | 9% | 10 768 | 9 611 | 12% |
| Revenues | 2 503 | 2 440 | 3% | 10 799 | 9 519 | 13% |
| Operating profit | 295 | 324 | -9% | 1 252 | 1 239 | 1% |
| Operating margin, % | 11.8% | 13.3% | 11.6% | 13.0% |
Q4 in brief
- Orders received increased 9% supported by acquisitions, but decreased 4% organically
- Revenues declined 10% organically
- Operating margin was 11.8% (13.3)
Book to bill, %
Orders and revenues
Orders received
The orders received for Tools & Attachments increased 9% to MSEK 2 517 (2 306), corresponding to an organic decline of 4%. Acquisitions and divestments, net, contributed to the increase with 10% and currency with 3%. The order intake of rock drilling tools was negatively impacted by the exit from handheld rock drilling tools and optimization of the product offering and decreased somewhat organically. The orders received for hydraulic attachment tools decreased organically compared to the previous year. Compared to the previous quarter, orders received for Tools & Attachments decreased 6%.
Compared to the previous year, orders received in local currency increased in Africa/Middle East and South America, while they decreased in Europe. Asia/Australia and North America had a flat development. Acquisitions contributed positively to the order intake.
Revenues
Revenues increased 3% to MSEK 2 503 (2 440), corresponding to an organic decline of 10%. Acquisitions contributed to the increase with 10% and currency with 3%. The book to bill ratio was 101% (95).
| Sales Bridge | Orders Received | Revenues |
|---|---|---|
| MSEK, Δ% | MSEK, Δ% | |
| Q4 2018 | 2 306 | 2 440 |
| Organic | -4 | -10 |
| Currency | +3 | +3 |
| Structure and other | +10 | +10 |
| Total | +9 | +3 |
| Q4 2019 | 2 517 | 2 503 |
Operating profit and margin
Operating profit and margin
Operating profit was MSEK 295 (324), including costs of MSEK -17 related to efficiency improvements. The operating profit was negatively impacted by the organic revenue decline and acquisitions, but was supported by currency. The operating margin was 11.8% (13.3), supported by currency, but diluted by acquisitions.
| Profit bridge | Operating profit | ||
|---|---|---|---|
| MSEK, Δ | Margin, %, Δ pp | ||
| Q4 2018 | 324 | 13.3 | |
| Organic | -34 | +0.2 | |
| Currency | +35 | +1.2 | |
| Structure and other | -30 | -2.9 | |
| Total | -29 | -1.5 | |
| Q4 2019 | 295 | 11.8 |
The new M-series down-the-hole hammers that are shorter, lighter and faster compared to its predecessors.
Business development
Epiroc has ongoing actions to optimize its product portfolio and exit noncore areas to increase focus and efficiency. In the quarter, the factory of handheld rock drilling equipment and tools in Shandong, China, was closed, and a manufacturing facility for handheld drilling consumables in Sweden was divested.
Innovations
A new range of down-the-hole hammers has been launched. It features a new patented design and the hammers are shorter, lighter and faster compared to its predecessors. Lighter hammers mean easier handling and increased safety. A unique piston design allows much higher impact frequency and faster drilling, which also means lower fuel consumption and running costs.
Sustainability development
Epiroc has four prioritized areas within sustainability: We live by the highest ethical standards; We invest in safety and well-being; We grow together with passionate people and courageous leaders; We use resources responsibly and efficiently. For each area there are several targets and key performance indicators.
| 2019 | 2018 | |
|---|---|---|
| Sustainability measurements | Full year | Full year |
| Work-related lost time injury frequency rate, LTIFR (12 months) | 2.7 | 3.4 |
| Sick leave (%, 12 months) | 2.1 | 2.2 |
| MWh energy from operations/Cost of sales (MSEK, 12 months) | 6.8 | 7.6 |
| Transport CO2 (tonnes)/Cost of sales (MSEK, 12 months) | 4.5 | 5.6 |
Lost time injury frequency rate and sick leave
The number of work related lost time injuries per million working hours (LTIFR) decreased in 2019. Preventive measures and a continued focus on safety awareness, training and activities contributed to the reduction.
Sick leave continued to stay on a low level.
Energy and CO2 emissions
MWh energy from operations/Cost of sales has continued to decrease, supported by the changes in the rock drilling tools business and several initiatives to increase energy efficiency.
CO2 emissions from transport improved compared to the 12 months period ending in December 2018, mainly due to a higher share of shipments by sea instead of air freight.
Full year 2019 in summary
Orders received in 2019 were MSEK 39 492 (39 400), corresponding to an organic decline of 5%. Revenues increased 7% to MSEK 40 849 (38 285), corresponding to 1% organic increase. Currency and structural changes contributed positively to revenues with 4% and 2%, respectively.
| Sales Bridge | Orders Received | Revenues |
|---|---|---|
| MSEK, Δ% | MSEK, Δ% | |
| 2018 | 39 400 | 38 285 |
| Organic | -5 | +1 |
| Currency | +3 | +4 |
| Structure and other | +2 | +2 |
| Total | +0 | +7 |
| 2019 | 39 492 | 40 849 |
Operating profit was MSEK 8 136 (7 385). The operating profit was supported by currency, organic revenue growth, acquisitions and efficiency, while it was negatively affected by change in provision for share based long-term incentive programs of MSEK -194 (-66) and other items affecting comparability of MSEK -252. The operating margin was 19.9% (19.3). Excluding change in provision for long-term incentive programs and other items affecting comparability, the margin was 21.0% (20.3).
| Profit bridge | Operating profit | ||||
|---|---|---|---|---|---|
| MSEK, Δ | Margin, %, Δ pp | ||||
| 2018 | 7 385 | 19.3 | |||
| Organic | +180 | +0.3 | |||
| Currency | +657 | +0.9 | |||
| Structure and other | -86 | -0.6 | |||
| Total | +751 | +0.6 | |||
| 2019 | 8 136 | 19.9 |
Profit before tax was MSEK 7 843 (7 201), corresponding to a margin of 19.2% (18.8). Profit for the period totaled MSEK 5 884 (5 437). Basic earnings per share were SEK 4.89 (4.50). Operating cash flow was MSEK 6 688 (3 884).
Key events after the end of the period
In January 2020, it was announced that Epiroc will consolidate the dimension stone industry manufacturing to its existing production facility in Nashik, India. The operation at Epiroc Stonetec in Bagnolo, Italy, will be closed by mid-2020, affecting about 40 employees. See also page 7.
Risks and uncertainty factors
The Group's and Parent Company's significant risks and uncertainty factors include market and external risks, financial risks, operational and commercial risks, and legal risks. Further information on risks and risk management can be found in Epiroc's Annual and Sustainability Report 2018. See www.epirocgroup.com/en/investors.
Epiroc AB
Nacka, January 31, 2020 Per Lindberg, President and CEO This report has not been audited.
Accounting principles
The consolidated financial statements of the Epiroc Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU. The accounting principles applied in the preparation of this interim report apply to all periods and comply with the accounting principles presented in Epiroc's "Annual and Sustainability Report 2018" in note 1 Significant accounting principles except for the adoption of new standards effective as of January 1, 2019, which comply with the accounting principles presented below. The interim report is prepared in accordance with IAS 34 Interim financial reporting.
IFRS 16 Leases
IFRS 16 Leases is effective from January 1, 2019 and replaced the lease standard IAS 17 Leases and related interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. The changes relate mainly to the accounting treatment of the lessee. IFRS 16 introduces a single accounting model for leases and requires the recognition of substantially all leases in the balance sheet and the separation of depreciation of right-of-use assets from interest of lease liabilities in the income statement.
The Epiroc Group as Lessee under IFRS 16
The Epiroc Group as lessee recognizes a right-of-use asset in the balance sheet as well as a lease liability. On commencement date, the lease liability is initially measured at the present value of the unpaid lease payments, discounted using the interest rate implicit in the lease, or if the rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments included in the measurement comprise of fixed payments, variable lease payments that depend on an index or a rate, amounts to be paid under a residual value guarantee and lease payments due to the exercise of any options in the contract, if the Group is reasonably certain to use the option. The lease liability is subsequently measured at amortized cost adjusted for any remeasurement.
The right-of use assets comprise of the initial measurement of the corresponding lease liability with the addition of any lease payments made at or before the commencement day and any initial direct costs. The leased asset is subsequently measured at cost less accumulated depreciation and impairment and adjusted for any remeasurement. The leased asset is depreciated over the lease term on a straight-line basis or over its useful life of the underlying asset if it is assessed to be reasonably certain that the Group will obtain ownership at the end of the lease term. The depreciation starts at the commencement date of the lease. The depreciation is recognized within operating profit and interest expense on the lease liability within net financial items. The right-of-use asset is tested for impairment following the principle described in Epiroc's "Annual and Sustainability Report 2018" in Note 1 under section "Impairment of nonfinancial assets".
If the lease contract is considered to include a low value asset or has a lease term that is less than 12 months, or includes non-lease components such as cost for maintenance, such payments are recognized as an expense on a straight-line basis over the lease term. The Group has leases of certain office equipment (i.e. personal computers, printing and photocopying machines) that are considered leases of low value.
Transition to IFRS 16
The standard has been applied by the Epiroc Group from January 1, 2019, using the modified retrospective approach. Comparative information has therefore not been restated. The Group has chosen the option to set the right-of-use asset equal to the lease liability at transition and the lease liability is calculated based on the incremental borrowing rate (IBR) at transition. The Group has at transition further decided to apply the practical expedient that permits not to reassess whether a contract is, or contains, a lease at the date of initial application. The Group has also applied a practical expedient to exclude leases that ends within 12 months of initial application, and leases for which the underlying asset is of low value. IFRS 16 has not resulted in any changes for the Epiroc Group as lessor compared to the accounting under IAS 17.
At the date of initial application of IFRS 16 the Group recognized a right-of-use asset of MSEK 2 158 within "Other property, plant and equipment" and "Rental equipment". A corresponding lease liability amounted to MSEK 2 153, Whereof MSEK 1 760 reported as "non-current interest bearing liability" and MSEK 393 as "current interest bearing liability". The transition to IFRS 16 has no impact on the Group's equity. The table below presents the difference between operating lease commitments under IAS 17 at December 31, 2018 and the initial measurement of lease liabilities under IFRS 16 at January 1, 2019:
Reconciliation of operating lease commitment and lease liabilities as of January 1, 2019:
| MSEK | |
|---|---|
| Operating lease commitment at December 31, 2018 (IAS 17) | 1 550 |
| Discounting effect | -77 |
| Operating lease commitment at December 31, 2018 (discounted) | 1 473 |
| Adjusted for | |
| Low-value and short-term leases | -62 |
| Costs attributable to extension option (discounted) | 636 |
| Lease liability as a result of initial application of IFRS 16 of previous operating leases at January 1, 2019 | 2 047 |
| Finance lease liabilities at December 31 2018 | 106 |
| Total lease liability at January 1, 2019 | 2 153 |
The weighted average Incremental borrowing rate (IBR) as of January 1, 2019 was approximately 1.5%. Epiroc Group has established the IBR at the date of transition based on the different contract currencies and lease terms.
Due to the adoption of IFRS 16, the Group's tangible assets and interest-bearing liabilities have increased. The Group's leased properties in Sweden contributes to a large extent to the right-of-use asset and lease liability. There is no material impact on the Groups income statement. The lease expenses for previous operating leases in operating profit have been replaced by depreciation on the right-of-use asset and interest expense on the lease liability, the latter is presented in net financial items. EBITDA has increased after transition to IFRS 16 due to that lease expenses being replaced by depreciation and interest expense. Average capital employed increases while return on capital employed (%) decreases, due to a larger amount of leased assets within the Group. Net debt and the net debt/EBITDA ratio has increased due to additional interest-bearing liabilities. The timing of cash flows are not impacted by the new standard. However, the amortization portion of Epiroc's lease payment is reported as a financing cash flow instead of operating cash flow. Lease payments for low value and short term leases will continue to be reported as operating cash flows together with interest payments on the lease liability.
In 2019, the new accounting standard IFRS 16 impacted EBITDA positive with approximately MSEK 484 (MSEK 150 in Q4), net debt increased with approximately MSEK 1 956 (MSEK -56 in Q4) and capital employed with approximately MSEK 1 926 (MSEK -61 in Q4) compared to accounting under IAS 17. Operating cash flow during 2019 increased with approximately MSEK 447 (MSEK 142 in Q4) due to the shift of lease payments from operating activities to financing activities.
Accounting principles of the parent company
The interim financial statements of Epiroc AB have been prepared in accordance with the Swedish Annual Accounts Act and the recommendation RFR 2, "Accounting for Legal Entities", issued by the Swedish Financial Reporting Board. The accounting principles used in this interim report are the same as those described in Epiroc's "Annual and Sustainability Report 2018" in Note A1 in the Parent Company accounts. As from 2019, no changed accounting standards and interpretations are considered to have any material effect on the Parent Company's financial statements. The Parent Company will recognize leases in accordance with the exemption rule for IFRS 16 provided in RFR 2, which results in no change compared to previous year (2018).
Condensed consolidated income statement
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| MSEK | Q4 | Q4 | Full year | Full year |
| Revenues | 10 280 | 10 558 | 40 849 | 38 285 |
| Cost of sales | -6 377 | -6 721 | -25 547 | -24 317 |
| Gross profit | 3 903 | 3 837 | 15 302 | 13 968 |
| Marketing expenses | -690 | -668 | -2 797 | -2 574 |
| Administrative expenses | -848 | -621 | -3 261 | -2 589 |
| Research and development expenses | -262 | -281 | -1 035 | -977 |
| Other operating income and expenses | -87 | -105 | -73 | -443 |
| Operating profit | 2 016 | 2 162 | 8 136 | 7 385 |
| Net financial items | -94 | -46 | -293 | -184 |
| Profit before tax | 1 922 | 2 116 | 7 843 | 7 201 |
| Income tax expense | -433 | -493 | -1 959 | -1 764 |
| Profit for the period | 1 489 | 1 623 | 5 884 | 5 437 |
| Profit attributable to | ||||
| - owners of the parent | 1 485 | 1 622 | 5 874 | 5 430 |
| - non-controlling interests | 4 | 1 | 10 | 7 |
| Basic earnings per share, SEK | 1.23 | 1.35 | 4.89 | 4.50 |
| Diluted earnings per share, SEK | 1.22 | 1.35 | 4.89 | 4.49 |
Key ratios
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| Q4 | Q4 | Full year | Full year | |
| Basic number of shares outstanding, millions | 1 203 | 1 201 | 1 201 | 1 206 |
| Diluted number of shares outstanding, millions |
1 204 | 1 201 | 1 202 | 1 206 |
| Operating margin, % | 19.6% | 20.5% | 19.9% | 19.3% |
| Equity per share, period end, SEK | 19.00 | 15.63 | 19.00 | 15.63 |
| Return on capital employed, % | 27.6 | 32.0 | 27.6 | 32.0 |
| Return on equity, % | 28.3 | 33.2 | 28.3 | 33.2 |
| Net debt/EBITDA, ratio | 0.05 | 0.14 | 0.05 | 0.14 |
| Net debt/equity, ratio, period end, % | 2.1 | 6.4 | 2.1 | 6.4 |
| Equity/assets, ratio, period end, % | 55.6 | 52.1 | 55.6 | 52.1 |
| Number of employees, period end | 14 268 | 13 847 | 14 268 | 13 847 |
Condensed consolidated statement of comprehensive income
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| MSEK | Q4 | Q4 | Full year | Full year |
| Profit for the period | 1 489 | 1 623 | 5 884 | 5 437 |
| Other comprehensive income | ||||
| Items that will not be reclassified to profit or loss | ||||
| Remeasurements of defined benefit pension plans | 55 | -93 | -274 | -122 |
| Income tax relating to items that will not be reclassified | -20 | 20 | 52 | 25 |
| Total items that will not be reclassified to profit or loss | 35 | -73 | -222 | -97 |
| Items that may be reclassified subsequently to profit or loss | ||||
| Translation differences on foreign operations | -602 | 79 | 547 | 8 |
| - realized and reclassified to profit and loss | - | - | -7 | - |
| Cash flow hedges | 23 | 22 | -22 | 22 |
| Income tax relating to items that may be reclassified | -5 | -5 | 5 | -5 |
| Total items that may be reclassified subsequently to profit or loss |
-584 | 96 | 523 | 25 |
| Other comprehensive income for the period, net of tax | -549 | 23 | 301 | -72 |
| Total comprehensive income for the period | 940 | 1 646 | 6 185 | 5 365 |
| Total comprehensive income attributable to | ||||
| - owners of the parent | 940 | 1 643 | 6 175 | 5 358 |
| - non-controlling interests | 0 | 3 | 10 | 7 |
Condensed consolidated balance sheet
| 2019 | 2018 | |
|---|---|---|
| Assets, MSEK | Dec 31 | Dec 31 |
| Intangible assets | 4 226 | 3 620 |
| Rental equipment | 1 213 | 1 233 |
| Other property, plant and equipment | 4 613 | 2 473 |
| Investments in associated companies and joint ventures | 201 | 208 |
| Other financial assets and receivables | 1 007 | 1 119 |
| Deferred tax assets | 630 | 543 |
| Total non-current assets | 11 890 | 9 196 |
| Inventories | 10 508 | 10 516 |
| Trade receivables | 7 287 | 8 005 |
| Other receivables | 1 597 | 1 289 |
| Income tax receivables | 353 | 333 |
| Financial assets | 862 | 944 |
| Cash and cash equivalents | 8 540 | 5 872 |
| Total current assets | 29 147 | 26 959 |
| Total assets | 41 037 | 36 155 |
| Equity and liabilities, MSEK | ||
| Share capital | 500 | 500 |
| Retained earnings | 22 261 | 18 297 |
| Total equity attributable to owners of the parent | 22 761 | 18 797 |
| Non-controlling interest | 52 | 50 |
| Total equity | 22 813 | 18 847 |
| Interest bearing liabilities | 7 724 | 5 095 |
| Post-employment benefits | 596 | 283 |
| Other liabilities and provisions | 423 | 412 |
| Total non-current liabilities | 8 743 | 5 790 |
| Interest bearing liabilities | 705 | 1 702 |
| Trade payables | 4 050 | 4 711 |
| Income tax liabilities | 507 | 605 |
| Other liabilities and provisions | 4 219 | 4 500 |
| Total current liabilities | 9 481 | 11 518 |
| Total equity and liabilities | 41 037 | 36 155 |
Fair value of derivatives and borrowings
The carrying value and fair value of the Group's outstanding derivatives and borrowings are shown in the tables below. The fair values of bonds are based on level 1 and the fair values of derivatives and other loans are based on level 2 in the fair value hierarchy. Compared to 2018, no transfers have been made between different levels in the fair value hierarchy for derivatives and borrowings and no significant changes have been made to valuation techniques, inputs or assumptions.
| Outstanding derivatives recorded to fair value |
2019 | 2018 | ||
|---|---|---|---|---|
| MSEK | Dec 31 | Dec 31 | ||
| Non-current assets and liabilities | ||||
| Assets | 2 | 0 | ||
| Liabilities | - | - | ||
| Current assets and liabilities | ||||
| Assets | 99 | 108 | ||
| Liabilities | 74 | 7 | ||
| Carrying value and fair value | 2019 | 2019 | 2018 | 2018 |
| MSEK | Dec 31 | Dec 31 | Dec 31 | Dec 31 |
| Carrying value | Fair value | Carrying value | Fair value | |
| Bonds | 1 995 | 2 082 | 1 996 | 2 010 |
| Other loans | 6 434 | 6 504 | 4 801 | 4 852 |
| 8 429 | 8 586 | 6 797 | 6 862 |
Condensed consolidated statement of changes in equity
| Equity attributable to | |||
|---|---|---|---|
| MSEK | owners of the parent |
non-controlling interests |
Total equity |
| Opening balance, January 1, 2019 | 18 797 | 50 | 18 847 |
| Total comprehensive income for the period | 6 175 | 10 | 6 185 |
| Dividend | -2 523 | -8 | -2 531 |
| Acquisition and divestment of own shares | 340 | 340 | |
| Share-based payments, equity settled | -28 | -28 | |
| Closing balance, December 31, 2019 | 22 761 | 52 | 22 813 |
| Opening balance, January 1, 2018 | 12 041 | 6 | 12 047 |
| Impact of change in accounting policy | 1 | - | 1 |
| Restated balance January 1, 2018 | 12 042 | 6 | 12 048 |
| Changes in equity for the period | |||
| Total comprehensive income for the period | 5 358 | 7 | 5 365 |
| Transactions with shareholders | 2 693 | 37 | 2 730 |
| Acquisition and divestment of own shares | -1 308 | - | -1 308 |
| Share-based payments, equity settled | 12 | - | 12 |
| Closing balance, December 31, 2018 | 18 797 | 50 | 18 847 |
Condensed consolidated statement of cash flows
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| MSEK | Q4 | Q4 | Full year | Full year |
| Cash flow from operating activities | ||||
| Operating profit | 2 016 | 2 162 | 8 136 | 7 385 |
| Depreciation, amortization and impairment | 482 | 350 | 1 978 | 1 369 |
| Capital gain/loss and other non-cash items | -28 | -81 | -252 | 101 |
| Net financial items received/paid | -25 | -24 | -410 | -483 |
| Taxes paid | -257 | -326 | -2 157 | -1 747 |
| Pension funding and payment of pension to employees | -18 | 4 | -61 | -52 |
| Change in working capital | 1 062 | 415 | 337 | -1 875 |
| Increase in rental equipment | -189 | -238 | -915 | -896 |
| Sale of rental equipment | 134 | 225 | 572 | 522 |
| Net cash from operating activities | 3 177 | 2 487 | 7 228 | 4 324 |
| Cash flow from investing activities | ||||
| Investments in other property, plant and equipment | -100 | -151 | -486 | -577 |
| Sale of other property, plant and equipment | 17 | 2 | 60 | 26 |
| Investments in intangible assets | -179 | -146 | -537 | -459 |
| Sale of intangible assets | 15 | - | 16 | - |
| Acquisition of subsidiaries and associated companies | -3 | -64 | -1 137 | -546 |
| Sale of subsidiaries | 13 | - | 153 | - |
| Proceeds to/from other financial assets, net | 244 | 118 | 276 | 219 |
| Net cash from investing activities | 7 | -241 | -1 655 | -1 337 |
| Cash flow from financing activities | ||||
| Dividend | -1 263 | - | -2 523 | - |
| Dividend to non-controlling interest | - | - | -8 | - |
| Sale/ Repurchase of own shares | 45 | -207 | 340 | -1 307 |
| Change in interest-bearing liabilities | -181 | -110 | -820 | 2 367 |
| Net cash from financing activities | -1 399 | -317 | -3 011 | 1 060 |
| Net cash flow for the period | 1 785 | 1 929 | 2 562 | 4 047 |
| Cash and cash equivalents, beginning of the period | 6 814 | 3 949 | 5 872 | 1 808 |
| Exchange rate differences in cash and cash equivalents | -59 | -6 | 106 | 17 |
| Cash and cash equivalents, end of the period | 8 540 | 5 872 | 8 540 | 5 872 |
| Operating cash flow | ||||
| Net cash flow from operating activities | 3 177 | 2 487 | 7 228 | 4 324 |
| Net cash from investing activities | 7 | -241 | -1 655 | -1 337 |
| Acquisition and divestments of subsidiaries | -10 | 64 | 984 | 546 |
| Other adjustments | -347 | -68 | 131 | 351 |
| Operating cash flow | 2 827 | 2 242 | 6 688 | 3 884 |
Condensed segments quarterly
Epiroc has two reporting segments, Equipment & Service and Tools & Attachments. In addition, Epiroc reports common group functions, which includes Payment Solutions, offering financing to customers, Group management and common functions, as well as eliminations. Payment Solutions receives payments from credit arrangements, for example financial leases, which is reported as financial income. Payment Solutions also has a rental fleet generating operating lease payments, which are reported as revenue.
| 2018 | 2018 Full |
2019 | 2019 Full |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Orders received, MSEK | Q1 | Q2 | Q3 | Q4 | year | Q1 | Q2 | Q3 | Q4 | year |
| Equipment & Service | 7 442 | 7 947 | 7 190 | 7 116 | 29 695 | 7 248 | 7 677 | 6 874 | 6 710 | 28 509 |
| Equipment | 4 054 | 4 234 | 3 601 | 3 355 | 15 244 | 3 442 | 3 580 | 2 727 | 2 606 | 12 355 |
| Service | 3 388 | 3 713 | 3 589 | 3 761 | 14 451 | 3 806 | 4 097 | 4 147 | 4 105 | 16 154 |
| Tools & Attachments | 2 550 | 2 470 | 2 285 | 2 306 | 9 611 | 2 760 | 2 826 | 2 665 | 2 517 | 10 768 |
| Common group functions | 44 | 66 | -62 | 46 | 94 | 55 | 50 | 61 | 49 | 215 |
| Epiroc Group | 10 036 | 10 483 | 9 413 | 9 468 | 39 400 | 10 063 | 10 553 | 9 600 | 9 276 | 39 492 |
| Revenues, MSEK | ||||||||||
| Equipment & Service | 5 943 | 7 325 | 7 178 | 8 094 | 28 540 | 7 115 | 7 702 | 7 334 | 7 740 | 29 891 |
| Equipment | 2 678 | 3 640 | 3 570 | 4 350 | 14 238 | 3 313 | 3 638 | 3 198 | 3 712 | 13 861 |
| Service | 3 265 | 3 685 | 3 608 | 3 744 | 14 302 | 3 802 | 4 064 | 4 136 | 4 028 | 16 030 |
| Tools & Attachments | 2 245 | 2 452 | 2 382 | 2 440 | 9 519 | 2 605 | 2 926 | 2 765 | 2 503 | 10 799 |
| Common group functions | 45 | 66 | 91 | 24 | 226 | 65 | -2 | 59 | 37 | 159 |
| Epiroc Group | 8 233 | 9 843 | 9 651 | 10 558 | 38 285 | 9 785 | 10 626 | 10 158 | 10 280 | 40 849 |
| Operating profit and profit before tax, MSEK | ||||||||||
| Equipment & Service | 1 364 | 1 747 | 1 764 | 1 876 | 6 751 | 1 719 | 1 970 | 1 932 | 1 853 | 7 474 |
| Tools & Attachments | 287 | 304 | 324 | 324 | 1 239 | 371 | 429 | 157 | 295 | 1 252 |
| Common group functions | -136 | -241 | -190 | -38 | -605 | -160 | -136 | -162 | -132 | -590 |
| Epiroc Group | 1 515 | 1 810 | 1 898 | 2 162 | 7 385 | 1 930 | 2 263 | 1 927 | 2 016 | 8 136 |
| Net financial items | -57 | -44 | -37 | -46 | -184 | -100 | -38 | -61 | -94 | -293 |
| Profit before tax | 1 458 | 1 766 | 1 861 | 2 116 | 7 201 | 1 830 | 2 225 | 1 866 | 1 922 | 7 843 |
| Operating margin, % | ||||||||||
| Equipment & Service | 22.9% | 23.9% | 24.6% | 23.2% | 23.7% | 24.2% | 25.6% | 26.3% | 23.9% | 25.0% |
| Tools & Attachments | 12.8% | 12.4% | 13.6% | 13.3% | 13.0% | 14.2% | 14.6% | 5.7% | 11.8% | 11.6% |
| Epiroc Group | 18.4% | 18.4% | 19.7% | 20.5% | 19.3% | 19.7% | 21.3% | 19.0% | 19.9% | 19.9% |
| Items affecting comparability, MSEK | ||||||||||
| Change in provision for LTI-program | 0 | 77 | 56 | -67 | 66 | 59 | 39 | 54 | 42 | 194 |
| Agreement with CEO | - | - | - | - | - | - | - | - | 28 | 28 |
| Costs for split from Atlas Copco | 95 | 104 | 70 | 59 | 328 | - | - | - | - | - |
| Costs in Equipment & Service | - | - | - | - | - | - | - | - | 28 | 28 |
| Costs in Tools & Attachments | - | - | - | - | - | - | - | 179 | 17 | 196 |
| Epiroc Group | 95 | 181 | 126 | -8 | 394 | 59 | 39 | 233 | 115 | 446 |
| Adj. margin for items affecting comparability, % | ||||||||||
| Adjusted operating margin, % | 19.6% | 20.2% | 21.0% | 20.4% | 20.3% | 20.3% | 21.7% | 21.3% | 20.7% | 21.0% |
| Adjusted operating margin, E&S, % | 22.9% | 23.9% | 24.6% | 23.2% | 23.7% | 24.2% | 25.6% | 26.3% | 24.3% | 25.1% |
| Adjusted operating margin, T&A, % | 12.8% | 12.4% | 13.6% | 13.3% | 13.0% | 14.2% | 14.6% | 12.2% | 12.5% | 13.4% |
| Split and incentive program costs, MSEK* | ||||||||||
| Change in provision for LTI-program | - | 77 | 56 | -67 | 66 | 59 | 39 | 54 | 42 | 194 |
| Costs for split from Atlas Copco | 95 | 104 | 70 | 59 | 328 | 17 | 23 | 11 | 11 | 62 |
| Epiroc Group | 95 | 181 | 126 | -8 | 394 | 76 | 62 | 65 | 53 | 256 |
* Reported in Common group functions. Change in provision for long-term incentive programs is reported as administrative expenses.
Geographical distribution of orders received
| MSEK | 2018 | 2018 | 2019 | Δ,% | 2019 | Δ,% | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % currency adjusted | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 | Q4 | Y-o-Y | Full year | Y-o-Y |
| Epiroc group | 10 036 | 10 483 | 9 413 | 9 468 | 39 400 | 10 063 | 10 553 | 9 600 | 9 276 | -5 | 39 492 | -3 |
| North America | 2 176 | 2 076 | 2 180 | 2 379 | 8 812 | 2 160 | 2 262 | 2 360 | 1 962 | -22 | 8 744 | -7 |
| South America | 1 488 | 1 844 | 1 236 | 1 657 | 6 225 | 1 344 | 1 481 | 1 451 | 1 120 | -31 | 5 396 | -15 |
| Europe | 2 488 | 2 503 | 2 388 | 1 969 | 9 349 | 2 430 | 2 399 | 2 063 | 2 165 | 6 | 9 057 | -6 |
| Africa/Middle East | 1 478 | 1 518 | 1 191 | 1 260 | 5 446 | 1 311 | 1 409 | 1 274 | 1 474 | 16 | 5 468 | 0 |
| Asia/Australia | 2 406 | 2 542 | 2 418 | 2 203 | 9 568 | 2 818 | 3 002 | 2 452 | 2 555 | 14 | 10 827 | 10 |
| Equipment & Service |
7 442 | 7 947 | 7 190 | 7 116 | 29 695 | 7 248 | 7 677 | 6 874 | 6 710 | -8 | 28 509 | -7 |
| North America | 1 426 | 1 385 | 1 572 | 1 709 | 6 093 | 1 265 | 1 444 | 1 529 | 1 278 | -30 | 5 516 | -16 |
| South America | 1 255 | 1 633 | 1 023 | 1 449 | 5 360 | 1 041 | 1 207 | 1 189 | 884 | -37 | 4 321 | -21 |
| Europe | 1 662 | 1 765 | 1 790 | 1 275 | 6 491 | 1 690 | 1 655 | 1 436 | 1 474 | 11 | 6 255 | -6 |
| Africa/Middle East | 1 127 | 1 056 | 811 | 906 | 3 899 | 893 | 863 | 716 | 959 | 5 | 3 431 | -13 |
| Asia/Australia | 1 972 | 2 108 | 1 994 | 1 777 | 7 852 | 2 359 | 2 508 | 2 004 | 2 115 | 17 | 8 986 | 11 |
| Tools & Attachments |
2 550 | 2 470 | 2 285 | 2 306 | 9 611 | 2 760 | 2 826 | 2 665 | 2 517 | 6 | 10 768 | 8 |
| North America | 737 | 662 | 689 | 634 | 2 721 | 867 | 783 | 797 | 665 | 0 | 3 112 | 7 |
| South America | 232 | 211 | 213 | 209 | 865 | 303 | 274 | 262 | 236 | 13 | 1 075 | 21 |
| Europe | 804 | 715 | 598 | 691 | 2 807 | 724 | 738 | 613 | 675 | -6 | 2 750 | -4 |
| Africa/Middle East | 350 | 462 | 380 | 354 | 1 547 | 418 | 547 | 557 | 515 | 43 | 2 037 | 31 |
| Asia/Australia | 427 | 420 | 405 | 418 | 1 671 | 448 | 484 | 436 | 426 | -1 | 1 794 | 4 |
Geographical distribution of revenues
| MSEK | 2018 | 2018 | 2019 | Δ,% | 2019 | Δ,% | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % currency adjusted | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 | Q4 | Y-o-Y | Full year | Y-o-Y |
| Epiroc group | 8 233 | 9 843 | 9 651 | 10 558 | 38 285 | 9 785 | 10 626 | 10 158 | 10 280 | -5 | 40 849 | 3 |
| North America | 1 888 | 2 118 | 2 141 | 2 300 | 8 447 | 2 227 | 2 403 | 2 191 | 2 119 | -13 | 8 940 | -1 |
| South America | 1 024 | 1 199 | 1 230 | 1 573 | 5 026 | 1 571 | 1 616 | 1 646 | 1 547 | -1 | 6 380 | 24 |
| Europe | 1 864 | 2 471 | 2 224 | 2 545 | 9 104 | 2 432 | 2 473 | 2 154 | 2 372 | -10 | 9 431 | 1 |
| Africa/Middle East | 1 103 | 1 350 | 1 444 | 1 456 | 5 353 | 1 182 | 1 396 | 1 351 | 1 504 | 2 | 5 433 | 1 |
| Asia/Australia | 2 354 | 2 705 | 2 612 | 2 684 | 10 355 | 2 373 | 2 738 | 2 816 | 2 738 | 0 | 10 665 | 0 |
| Equipment & Service |
5 943 | 7 325 | 7 178 | 8 094 | 28 540 | 7 115 | 7 702 | 7 334 | 7 740 | -7 | 29 891 | 1 |
| North America | 1 173 | 1 410 | 1 412 | 1 644 | 5 639 | 1 425 | 1 580 | 1 362 | 1 477 | -15 | 5 844 | -3 |
| South America | 813 | 981 | 1 020 | 1 361 | 4 175 | 1 327 | 1 341 | 1 356 | 1 271 | -6 | 5 295 | 24 |
| Europe | 1 235 | 1 696 | 1 488 | 1 807 | 6 225 | 1 674 | 1 682 | 1 469 | 1 697 | -9 | 6 522 | 2 |
| Africa/Middle East | 766 | 972 | 1 054 | 1 031 | 3 823 | 787 | 847 | 792 | 1 003 | -4 | 3 429 | -11 |
| Asia/Australia | 1 956 | 2 266 | 2 204 | 2 251 | 8 678 | 1 902 | 2 252 | 2 355 | 2 292 | 0 | 8 801 | -1 |
| Tools & Attachments |
2 245 | 2 452 | 2 382 | 2 440 | 9 519 | 2 605 | 2 926 | 2 765 | 2 503 | 0 | 10 799 | 10 |
| North America | 700 | 681 | 703 | 641 | 2 725 | 773 | 848 | 802 | 637 | -6 | 3 060 | 5 |
| South America | 211 | 218 | 210 | 212 | 851 | 244 | 276 | 290 | 274 | 28 | 1 084 | 24 |
| Europe | 607 | 750 | 688 | 738 | 2 783 | 733 | 777 | 669 | 658 | -13 | 2 837 | 0 |
| Africa/Middle East | 337 | 378 | 390 | 425 | 1 530 | 395 | 549 | 559 | 501 | 16 | 2 004 | 31 |
| Asia/Australia | 390 | 425 | 391 | 424 | 1 630 | 460 | 476 | 445 | 433 | -1 | 1 814 | 7 |
Condensed parent company income statement
| 2019 | 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| MSEK | Q4 | Q4 | Full year | Full year |
| Administrative expenses | -85 | -26 | -258 | -143 |
| Marketing expenses | -5 | -4 | -18 | -13 |
| Other operating income and expenses | 73 | -9 | 109 | -43 |
| Operating profit/loss | -17 | -39 | -167 | -199 |
| Financial income and expenses | -4 | -8 | -13 | -17 |
| Appropriations | 3 887 | 4 424 | 3 887 | 4 424 |
| Profit/loss before tax | 3 866 | 4 377 | 3 707 | 4 208 |
| Income tax | -820 | -963 | -772 | -927 |
| Profit/loss for the period | 3 046 | 3 414 | 2 935 | 3 281 |
Condensed parent company balance sheet
| 2019 | 2018 | |
|---|---|---|
| MSEK | Dec 31 | Dec 31 |
| Total non-current assets | 52 016 | 50 823 |
| Total current assets | 5 106 | 5 553 |
| Total assets | 57 122 | 56 376 |
| Total restricted equity | 503 | 503 |
| Total non-restricted equity | 50 277 | 49 553 |
| Total equity | 50 780 | 50 056 |
| Total provisions | 216 | 167 |
| Total non-current liabilities | 6 029 | 5 023 |
| Total current liabilities | 97 | 1 130 |
| Total equity and liabilities | 57 122 | 56 376 |
Acquisitions and divestments
| Date | Acquisitions | Divestments | Segment | Revenues* | Employees |
|---|---|---|---|---|---|
| 2019 Oct 23 | Consumables manufacturing facility | T&A | -40 | ||
| 2019 Sep 3 | Geotechnical consumables | T&A | -275 | -40 | |
| 2019 Apr 2 | New Concept Mining | T&A | 645 | 900 | |
| 2019 Feb 1 | Noland Drilling Equipment | E&S | 8 | ||
| 2019 Jan 3 | Fordia | T&A | 580 | 250 | |
| 2018 Nov 2 | Sautec | E&S | 6 | ||
| 2018 Oct 30 | ASI Mining (34%)** | E&S | 55 | ||
| 2018 Feb 1 | Hy-Performance Fluid Power | E&S | 50 | 26 | |
| 2018 Jan 3 | Rock Drill Services Australia | E&S | 90 | 37 | |
| 2018 Jan 3 | Cate Drilling Solutions | E&S | 35 | ||
| 2018 Jan 2 | Renegade Drilling Supplies | T&A | 22 |
* Annual revenues, MSEK, and number of employees at time of acquisition/divestment. For distributors, revenues are not disclosed. ** Not consolidated.
The acquisitions of Fordia and New Concept Mining were finalized in 2019. As per December 31, the acquisitions made during the year 2019 have a total cash flow effect of MSEK 1 117. According to the preliminary purchase price allocation, total consideration amount to MSEK 1 196. The acquired businesses have contributed to revenues with MSEK 1 140 and to operating profit with MSEK 87 since their respective dates of acquisition. In addition, a one-time cost of MSEK -18 related to acquisitions were recorded in the quarter.
| MSEK | 2019 |
|---|---|
| Net assets identified | 713 |
| Intangible assets | 234 |
| Goodwill | 249 |
| Total consideration | 1 196 |
| Net cash outflow | 1 117 |
Transactions with related parties
Significant related-party transactions are described in Note 28 to the consolidated accounts in Epiroc's Annual and Sustainability Report 2018. Except for the agreement with the President and CEO, described on page 4, no material changes have taken place in relations or transactions with related parties compared with the description in Epiroc's Annual and Sustainability Report 2018.
Share buy-backs
The Board of Directors of Epiroc has been authorized to purchase, transfer and sell own shares in relation to Epiroc's performance based personnel option plans. More information regarding the option plans can be found in Epiroc's Annual and Sustainability Report 2018, see www.epirocgroup.com/en/investors. In the quarter, Epiroc divested 400 194 A shares for SEK 45 098 952 in accordance with mandates granted. As of December 31, 2019, Epiroc AB held 10 786 679 shares class A. The total numbers of issued Epiroc shares at the end of the period were 1 213 738 703 shares, whereof 823 765 854 shares class A and 389 972 849 shares class B.
Financial definitions
Financial definitions can be found on Epiroc's website, https://www.epirocgroup.com/en/investors/financial-publications. Non-IFRS measures are also presented in this report since they are considered to be important supplemental measures of the company's performance. Information on how these measures have been calculated can also be found on the website.
Financial calendar
Webcast & conference call
At 10.00 CET on the report issue date, Epiroc will host a combined presentation and conference call for investors, analysts and media. The presentation, which will be conducted in English, will be held in Epiroc's office, Sickla Industriväg 19, Nacka, Sweden. The report will be presented by President and CEO Per Lindberg and CFO Anders Lindén. Please see www.epirocgroup.com under Investor Relations for the webcast link and presentation material.
Dial-in numbers for the conference call:
- Sweden: +46 8 566 42651
- United Kingdom: +44 333 300 0804
- United States: +1 631 913 1422
PIN: 80868744#
Upcoming investor events
- March 12, 2020: Annual and Sustainability Report 2019 published on www.epirocgroup.com
- April 23, 2020: Q1 2020
- May 12, 2020: Annual General Meeting in Stockholm
- July 23, 2020: Q2 2020
- October 23, 2020: Q3 2020
Further information
Analysts and investors:
Mattias Olsson, Senior Vice President Corporate Communications E-mail: [email protected] Tel: +46 72 729 8295
Media:
Ola Kinnander, Media Relations Manager E-mail: [email protected] Tel: +46 70 347 2455
Epiroc AB (publ)
Reg. No. 556041-2149 Box 4015 SE-131 04 Nacka, Sweden Tel: +46 10 755 0000 www.epirocgroup.com
Epiroc in brief
Epiroc is a leading productivity partner for the mining and infrastructure industries. With ground-breaking technology, Epiroc develops and produces innovative, safe and sustainable drill rigs, rock excavation and construction equipment and tools. The company also provides world-class service solutions for automation and interoperability. The company is based in Stockholm, Sweden, and had revenues of BSEK 41 in 2019 and has more than 14 000 passionate employees supporting and collaborating with customers in more than 150 countries.
This information is information that Epiroc AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 07:30 CET on January 31, 2020.