Earnings Release • Oct 25, 2018
Earnings Release
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| 2018 | 2017* | 2018 | 2017* | 2017* | |||
|---|---|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Δ | Q1-Q3 | Q1-Q3 | Δ | Full year |
| Orders received | 9,413 | 8,591 | 10% | 29,932 | 25,773 | 16% | 33,831 |
| Revenues | 9,651 | 7,610 | 27% | 27,727 | 22,900 | 21% | 31,364 |
| Operating profit | 1,898 | 1,520 | 25% | 5,223 | 4,402 | 19% | 5,930 |
| Operating margin, % | 19.7 | 20.0 | 18.8 | 19.2 | 18.9 | ||
| Profit before tax | 1,861 | 1,501 | 24% | 5,085 | 4,350 | 17% | 5,793 |
| Profit margin, % | 19.3 | 19.7 | 18.3 | 19.0 | 18.5 | ||
| Profit for the period | 1,412 | 1,067 | 32% | 3,814 | 3,194 | 19% | 4,298 |
| Operating cash flow | 777 | 1,242 | -37% | 1,642 | 3,666 | -55% | 4,610 |
| Basic earnings per share, SEK | 1.18 | 0.88 | 34% | 3.18 | 2.63 | 21% | 3.55 |
| Diluted earnings per share, SEK | 1.18 | - | 3.17 | - | - | ||
| Return on capital employed, % | 30.9 | - | 27.4 | ||||
| Net debt/EBITDA ratio | 0.39 | - | 0.75 |
*Financial statements prior to 2018 are combined. See page 12.
Q3 2018
Revenues and profits grew significantly and order volumes were somewhat higher than last year. Revenues increased with 19% organically to SEK 9,651 million, and orders received reached SEK 9,413 million, up 3% organically. Our operating profit reached SEK 1,898, including costs of SEK 126 million related to the split from Atlas Copco and a change in provision for personnel option programs. The operating margin was 21.0%, excluding the costs related to the split and incentive programs.
We saw a continued good sentiment and customer demand in the market. Mining production remained high in all major markets and activities in infrastructure continued to be good. The order intake was higher than the previous year, and I am pleased with the strong order development for our service business and also for our surface equipment. We had, however, lower order intake than in the past two record quarters. This was partly due to fewer large orders received. Such large orders are not evenly distributed over time, and will consequently impact quarterly order intake. Orders received are also typically lower in quarter three compared to quarters one and two. For mining equipment a majority of the orders continued to be for expansion in existing mines. In the quarter we have seen a decrease in metal prices, but in the near-term future we do not expect the overall market sentiment to change significantly. We expect the demand to remain at current level.
The equipment deliveries were largely in line with the second quarter. Our factory capacity has improved and our efforts to bring it on par with the demand are yielding results. The operating margin was strengthened by currency and also by the growth, primarily in the Equipment & Service segment. For Tools & Attachments, the margin improved somewhat compared to the most recent quarters, reinforced by our efficiency actions. Working capital increased in the quarter. This is not satisfactory and we continue to address the issue both short-term and long-term.
Our innovation initiatives in new technologies generate strong interest from our customers and a high share of our equipment delivered is ready for automation. Our newly inaugurated Control Tower in Örebro, Sweden, is designed to be an innovation arena for exploring and developing automation solutions. We will introduce the second generation of battery-operated equipment in the fourth quarter. All-in-all, our customers will benefit from increased productivity, safety and energy efficiency.
Our goal is to deliver profitable growth. It is essential that we focus on what will create value going forward. We have comprehensive strategies for sales growth and several programs for excellence: in supply-chain, manufacturing, sourcing and service, as well as initiatives to improve our agility. Our journey continues.
Per Lindberg President and CEO
Epiroc Group
| 2018 | 2017 | 2018 | 2017 | |||
|---|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Δ | Q1-Q3 | Q1-Q3 | Δ |
| Orders received | 9,413 | 8,591 | 10% | 29,932 | 25,773 | 16% |
| Revenues | 9,651 | 7,610 | 27% | 27,727 | 22,900 | 21% |
| Operating profit | 1,898 | 1,520 | 25% | 5,223 | 4,402 | 19% |
| Operating margin, % Return on capital |
19.7 | 20.0 | 18.8 | 19.2 | ||
| employed, 12 months, % | 30.9 | - |
The demand for Epiroc Group's products and services remained strong in the third quarter 2018. Orders received increased 10% to SEK 9,413 million (8,591), corresponding to 3% organic growth. Sequentially, the orders received for the Group decreased by 10% compared to the record Q2 2018, partly due to fewer large equipment orders.
Orders received increased in all geographic regions with the exception for Africa/Middle East where orders were down compared to a strong Q3 2017. Europe had the highest growth rate in the quarter.
Mining customers represented approximately 70% of orders received.
Revenues increased 27% to SEK 9,651 million (7,610), corresponding to 19% organic increase. Revenues from acquisitions and contract manufacturing of road construction equipment contributed with 3% growth and currency with 5%. The book to bill ratio was 98%. Asia/Australia had the Group's highest revenue share in the quarter.
| Orders received | Revenues | Operating profit | ||
|---|---|---|---|---|
| SEK million, | SEK million, | SEK million, | Margin, | |
| Δ, % | Δ, % | Δ | %, Δ, pp | |
| Q3 2017 | 8,591 | 7,610 | 1,520 | 20.0 |
| Organic | +3 | +19 | +309 | +0.2 |
| Currency | +5 | +5 | +168 | +1.0 |
| Structure and other | +2 | +3 | -99* | -1.5 |
| Total | +10 | +27 | +378 | -0.3 |
| Q3 2018 | 9,413 | 9,651 | 1,898 | 19.7 |
*Includes operating profit/loss from acquisitions, contract manufacturing, one-time costs, and change in provision for share-based long-term incentive programs.
The operating profit increased to SEK 1,898 million (1,520) and includes costs related to the split from Atlas Copco and change in provision for long-term incentive programs of SEK 126 million (15). Costs related to the split and the listing process were SEK 70 million and change in provision for share-based long-term incentive programs was SEK -56 million (-15). The costs for Epiroc Group's corporate functions were SEK 63 million in the quarter.
The operating margin was 19.7% (20.0), affected positively by currency and negatively by split and incentive program costs. The costs related to the split and the change in provision for the long-term incentive programs had a negative impact of 1.3 percentage points (0.2) on the margin.
Net financial items were SEK -37 million (-19). Net interest was SEK -34 million (-13).
Profit before tax amounted to SEK 1,861 million (1,501), corresponding to a margin of 19.3% (19.7). Income tax expense amounted to SEK -449 million (-434), corresponding to an effective tax rate of 24.1% (28.9).
Profit for the period totaled SEK 1,412 million (1,067). Basic earnings per share were SEK 1.18 (0.88).
The return on capital employed during the last 12 months was 30.9%. Return on equity was 32.6%.
Operating cash flow was SEK 777 million (1,242). Net cash flow from operating activities was SEK 920 million (1,419). Net financial items paid was SEK -88 million (27). Taxes paid in the quarter was SEK -741 million (-210), affected by payments of preliminary income taxes. Working capital increased by SEK 599 million (114), mainly due to higher inventories. Net investments in rental equipment were SEK 101 million (66). Net investments in property, plant and equipment were SEK 128 million (69) and investments in intangible assets were SEK 102 million (108).
No acquisitions of subsidiaries and associated companies took place in the quarter (SEK -65 million). Other investments were SEK 292 million, net, including divestment of some Payment Solutions credit portfolios.
Net working capital was SEK 13,465 million (9,795) at the end of the period, an increase of 37% compared to last year, mainly driven by higher volumes and the related increase in inventories and receivables, partly offset by higher payables. As a percentage of revenues last 12 months, the average net working capital was 31.9%. Sequentially the average net working capital as percentage of revenues remained at approximately the same level as in Q2 2018.
Net working capital
The supply-chain improvement program that was initiated in the first quarter, 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. The North American markets will implement the new supply-chain set-up in the fourth quarter.
The Group's net debt amounted to SEK 3,146 million, of which SEK 212 million was attributable to post-employment benefits. The net debt/EBITDA ratio was 0.39. The net debt/equity ratio was 18.1%.
The net debt was affected by share buy-backs related to the long-term incentive programs. As of September 30, Epiroc had repurchased own shares to a total amount of SEK 1.1 billion.
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, infrastructure and natural resources industries.
| 2018 | 2017 | 2018 | 2017 | |||
|---|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Δ | Q1-Q3 | Q1-Q3 | Δ |
| Orders received | 7,190 | 6,263 | 15% | 22,579 | 18,786 | 20% |
| Revenues | 7,178 | 5,406 | 33% | 20,446 | 16,121 | 27% |
| Operating profit | 1,764 | 1,261 | 40% | 4,875 | 3,669 | 33% |
| Operating margin, % | 24.6 | 23.3 | 23.8 | 22.8 | ||
The orders received for Equipment & Service increased by 15% to SEK 7,190 million (6,263), corresponding to 7% organic growth.
Geographically, orders received increased in all regions except for Africa/Middle East where orders were down compared to a strong Q3 2017. Europe outperformed the other regions in relative terms with a strong order growth.
Equipment had an organic growth of 2% and orders received amounted to SEK 3,601 million (3,281). The demand for equipment from mining and infrastructure customers was good both in surface and underground. Orders for surface equipment grew, while orders for underground equipment were somewhat lower compared to last year. Sequentially the orders for equipment decreased compared to the record Q2 2018, mainly due to fewer large orders. Most of the orders from mining customers continued to relate to expansion in or adjacent to existing mines rather than to replacement.
The service business continued to perform well and orders received increased by 20% to SEK 3,589 million (2,982). The organic growth was 13%, supported by a continued positive market development and additional marketing and sales activities. Acquisitions contributed with 3%.
Revenues increased by 33% to SEK 7,178 million (5,406), corresponding to an organic growth of 25%. Currency contributed with 5% and revenues from acquisitions and contract manufacturing of road construction equipment with 3% growth. The book to bill ratio was 100%. Equipment accounted for 50% (45) of the revenues in the segment and service 50% (55). Asia/Australia had the segment's highest revenue share in the quarter.
| Orders received SEK million, Δ, % |
Revenues SEK million, Δ, % |
Operating profit SEK million, Δ |
Margin, %, Δ, pp |
|
|---|---|---|---|---|
| Q3 2017 | 6,263 | 5,406 | 1,261 | 23.3 |
| Organic | +7 | +25 | +348 | +0.5 |
| Currency | +5 | +5 | +145 | +1.2 |
| Structure and other | +3 | +3 | +10* | -0.4 |
| Total | +15 | +33 | +503 | +1.3 |
| Q3 2018 | 7,190 | 7,178 | 1,764 | 24.6 |
*Includes operating profit/loss from acquisitions and contract manufacturing.
| Equipment | Service | ||||
|---|---|---|---|---|---|
| Orders received | Revenues | Orders received | Revenues | ||
| SEK million | SEK million | SEK million | SEK million | ||
| Q3 2017 | 3,281 | 2,414 | 2,982 | 2,992 | |
| Organic,% | +2 | +39 | +13 | +14 | |
| Currency,% Structure and |
+5 | +5 | +4 | +4 | |
| other,% | +3 | +4 | +3 | +3 | |
| Total,% | +10 | +48 | +20 | +21 | |
| Q3 2018 | 3,601 | 3,570 | 3,589 | 3,608 |
Operating profit was SEK 1,764 million (1,261), corresponding to a margin of 24.6% (23.3). The margin was supported by currency and volume, but negatively affected by dilution from acquisitions and contract manufacturing.
A Control Tower was inaugurated in Epiroc's facilities in Örebro, Sweden. In the Control Tower visitors can explore remote controlled and automated machines which can be operated anywhere around the globe. Epiroc automation and digital solutions are displayed through telematics and integrated systems, demonstrating the digital and connected mine.
Minetruck MT2200 is a truck with the same dimensions as its predecessor MT2010, but can transport 10 percent heavier loads. The truck is ergonomic, provides safety essentials, speed, high maneuverability and serviceability.
RigLife agreement is the latest addition to Epiroc's service agreements portfolio. The scope of RigLife is the collection of machine data through Certiq (Epiroc's telematics system), RigScan audits (inspections) and extended warranty. This provides customers with information and guidance for more efficient machine maintenance.
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, infrastructure and natural resources industries.
| 2018 | 2017 | 2018 | 2017 | |||
|---|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Δ | Q1-Q3 | Q1-Q3 | Δ |
| Orders received | 2,285 | 2,239 | 2% | 7,305 | 6,850 | 7% |
| Revenues | 2,382 | 2,141 | 11% | 7,079 | 6,599 | 7% |
| Operating profit | 324 | 279 | 16% | 915 | 928 | -1% |
| Operating margin, % | 13.6 | 13.0 | 12.9 | 14.1 | ||
The business environment in both the infrastructure and mining industry continued to be good for Tools & Attachments. The orders received increased by 2% to SEK 2,285 million (2,239), corresponding to an organic decline of 4%. The negative development is partly due to strong comparisons in Q3 2017, partly due to measures to improve the product mix and efficiency actions in the rock drilling tools business.
Geographically, North America had a positive development, while Europe had the largest decline.
Revenues increased to SEK 2,382 million (2,141), corresponding to an organic growth of 5%. Currency contributed with 5%. The book to bill ratio was 96%. North America had the segment's highest revenue share in the quarter.
| Tools & Attachments | |||||||
|---|---|---|---|---|---|---|---|
| Orders received SEK million, Δ,% |
Revenues SEK million, Δ, % |
Operating profit SEK million, Margin, %, Δ Δ, pp |
|||||
| Q3 2017 | 2,239 | 2,141 | 279 | 13.0 | |||
| Organic | -4 | +5 | +17 | +0.1 | |||
| Currency | +5 | +5 | +25 | +0.5 | |||
| Structure and other | +1 | +1 | +3* | +0.0 | |||
| Total | +2 | +11 | +45 | +0.6 | |||
| Q3 2018 | 2,285 | 2,382 | 324 | 13.6 |
*Includes operating profit/loss from acquisitions.
Operating profit was SEK 324 million (279), corresponding to a margin of 13.6% (13.0). The margin was positively affected by currency. Sequentially the margin improved.
In October, an agreement was signed to acquire Fordia Group Inc., a Canadian manufacturer of exploration drilling tools. Fordia has about 250 employees and had revenues for the 12 months ending September 2018 of about CAD 85 million (SEK 580 million). The acquisition is expected to be completed in the first quarter 2019.
A new range of reverse circulation drill pipes without o-rings were introduced. Reverse circulation is used in exploration and the pipes without o-rings significantly reduce pressure drop in the drill string. This contributes to higher productivity, lower cost per meter and better samples recovery and quality.
Number of work-related accidents per million working hours (12 months)
| 2018 | 2017 | 2017 | |
|---|---|---|---|
| Q3 | Q3 Full year | ||
| Number of work related accidents per million working hours (12 months) |
4.1 | 4.1 | 4.3 |
| Sick leave (%, 12 months) MWh energy from operations/Cost of sales (SEK |
2.2 | 2.1 | 2.2 |
| million, 12 months) Transport CO2 (tonnes)/Cost of sales (SEK million, |
7.4 | 8.5 | 8.5 |
| 12 months) | 5.7 | 5.4 | 5.8 |
Work-related accidents remained on the same level compared to the 12 month period ending September 30, 2017 and decreased compared to the full year 2017. There is a continued focus on training and activities to reduce the number of accidents.
MWh energy from operations/Cost of sales has continued to decrease in the last 12 months period from concentration of production to fewer entities in US and China.
CO2 emissions from transport increased compared to the 12-months period ending in September 2017. The high customer demand continued to require use of more air freight.
On September 30, 2018, the number of employees was 13,837 (12,579). The number of consultants/external workforce was 1,706 (1,310). For comparable units, the total workforce increased by 11% from September 30, 2017. The increase of the workforce mainly took place in service. Sick leave continued to stay on a low level.
Orders received in the first nine months of 2018 increased to SEK 29,932 million (25,773) corresponding to an organic growth of 14%. Revenues were SEK 27,727 million (22,900), corresponding to 19% organic increase.
Operating profit was SEK 5,223 million (4,402) including costs for the split from Atlas Copco of SEK 269 million and change in provision for share-based long-term incentive programs of SEK -133 million (-113). The operating margin was 18.8% (19.2). Excluding split and incentive program costs, the operating margin was 20.3% (19.7).
Profit before tax was SEK 5,085 million (4,350), corresponding to a margin of 18.3% (19.0). Profit for the period totaled SEK 3,814 million (3,194). Basic earnings per share were SEK 3.18 (2.63). Operating cash flow amounted to SEK 1,642 million (3,666).
On June 18, Epiroc entered into two credit facility agreements with a group of banks, a SEK 4,000 million revolving credit facility (not utilized) and a SEK 6,000 million bridge facility. The revolving credit facility has a maturity of five years with two one-year extension options. The bridge facility has a maturity of twelve months with two six-month extension options. SEK 5,000 million of the bridge facility is utilized and the intention is to replace the bridge facility with medium and/or long-term financing. In addition, Epiroc has been granted a bilateral loan of EUR 100 million from the European Investment Bank with a maturity of four years.
In October, an agreement was signed to acquire Fordia Group Inc., see page 9.
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 the prospectus "Admission to trading of shares in Epiroc AB on Nasdaq Stockholm" published in May 2018. See www.epirocgroup.com/en/investors.
Nacka, October 25, 2018
Epiroc AB
Per Lindberg President and CEO
This report has not been audited.
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 the prospectus "Admission to trading of shares in Epiroc AB on Nasdaq Stockholm" in note 1 Significant accounting in the combined financial statements except for the adoption of new standards effective as of January 1, 2018, which comply with the accounting principles presented in note 2 Changes in accounting policies in the combined financial statements. The interim report is prepared in accordance with IAS 34 Interim financial reporting.
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement. Comparative information was not restated. Among other things, IFRS 9 introduced a new model for impairment of financial assets. The purpose of the model is to recognize credit losses earlier than IAS 39. Additionally, the classification of some financial instruments have changed. For Epiroc there were no material effects due to the implementation of IFRS 9.
IFRS 15 Revenue from Contracts with Customers replaces IAS 11 Construction Contracts and IAS 18 Revenue. The standard has been applied by Epiroc Group from January 1, 2018, using the full retrospective method. The same accounting principle for revenue recognition has therefore been applied for all periods presented in the interim report. For further details regarding the effects on the timing of revenue recognition due to the implementation of IFRS 15, see note 2 Changes in accounting policies in the combined financial statements in the prospectus "Admission to trading of shares in Epiroc AB on Nasdaq Stockholm".
| Balance sheet | |||
|---|---|---|---|
| Sep 30, 2017 before | Sep 30, 2017 after | ||
| SEK million | restatement | Restatement | restatement |
| Deferred tax assets | 347 | 12 | 359 |
| Inventory | 7,797 | 137 | 7,934 |
| Equity | 12,564 | -43 | 12,521 |
| Other liabilities and provisions | 3,027 | 192 | 3,219 |
| Q3 2017 before | Q3 2017 after | |
|---|---|---|
| restatement | Restatement | restatement |
| 22,921 | -21 | 22,900 |
| -14,563 | 25 | -14,538 |
| -1,155 | -1 | -1,156 |
The term "combined financial statements" refers to financial information prepared by aggregating financial information for entities under common control that do not meet the definition of a group according to IFRS 10. The formation of the Epiroc Group comprised transactions between entities that are under common control. Since these transactions are not covered by any IFRS standard, a suitable accounting principle has been applied in accordance with IAS 8. A suitable and established method is to use the previous carrying amount (predecessor basis of accounting), which is the principle that the Epiroc Group has applied.
The accounting principles are also available in the prospectus "Admission to trading of shares in Epiroc AB on Nasdaq Stockholm" published in May 2018. See www.epirocgroup.com/en/investors.
The interim financial statements of Epiroc AB have been prepared in accordance with the Swedish Annual Accounts Act and the accounting standard RFR 2, accounting for legal entities. The most recent annual financial statements of Epiroc AB have been prepared in accordance with the Annual Accounts Act and the standard from the Swedish Accounting Standards Board BFNAR 2012:1 Annual report and consolidated accounts (K3). The transition did not have an impact on the parent company.
Participations in subsidiaries are accounted for by the Parent Company at historical cost. The carrying amounts of participations in subsidiaries for the group are reviewed for impairment in accordance with IAS 36, Impairment of Assets.Transaction costs incurred in connection with a business combination are accounted for by the Parent Company as part of the acquisition costs and are not expensed.
Defined benefit plans are not accounted for in accordance with IAS 19. In the Parent Company defined benefit plans are accounted for according to the Swedish law regarding pensions, "Tryggandelagen" and regulations issued by the Swedish Financial Supervisory Board. The primary differences as compared to IAS 19 are the way discount rates are fixed, that the calculation of defined benefit obligations is based on current salary levels, without consideration of future salary increases and that all actuarial gains and losses are included in profit or loss as they occur.
Financial guarantees issued by the Parent Company for the benefit of subsidiaries are not valued at fair value. They are reported as contingent liabilities, unless it becomes probable that the guarantees will lead to payments. In such case, provisions will be recorded.
In Sweden, Group contributions are deductible for tax purposes but shareholders' contributions are not. Group contributions are recognized as appropriations in the income statement. Shareholders' contributions are recognized as an increase of Shares in Group companies and tested for impairment.
| 2018 | 2017 | 2018 | 2017 | 2017 |
|---|---|---|---|---|
| Q3 | Q3 | Q1-Q3 | Q1-Q3 | Full year |
| 9,651 | 7,610 | 27,727 | 22,900 | 31,364 |
| -6,095 | -4,874 | -17,596 | -14,538 | -20,101 |
| 3,556 | 2,736 | 10,131 | 8,362 | 11,263 |
| -630 | -526 | -1,906 | -1,683 | -2,280 |
| -691 | -469 | -1,968 | -1,552 | -2,121 |
| -217 | -189 | -696 | -563 | -795 |
| -120 | -32 | -338 | -162 | -137 |
| 1,898 | 1,520 | 5,223 | 4,402 | 5,930 |
| -37 | -19 | -138 | -52 | -137 |
| 1,861 | 1,501 | 5,085 | 4,350 | 5,793 |
| -449 | -434 | -1,271 | -1,156 | -1,495 |
| 1,412 | 1,067 | 3,814 | 3,194 | 4,298 |
| 1,410 | 1,067 | 3,808 | 3,194 | 4,298 |
| 2 | 0 | 6 | 0 | 0 |
| 2018 | 2017 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Q1-Q3 | Q1-Q3 | Full year |
| Basic earnings per share, SEK | 1.18 | 0.88 | 3.18 | 2.63 | 3.55 |
| Diluted earnings per share, SEK Basic number of shares outstanding, |
1.18 | - | 3.17 | - | - |
| millions | 1,210 | 1,212 | 1,210 | 1,212 | 1,212 |
| Diluted number of shares outstanding, | |||||
| millions | 1,211 | - | 1,211 | - | - |
| Operating margin, % | 19.7 | 20.0 | 18.8 | 19.2 | 18.9 |
| Equity per share, period end, SEK | 14.45 | 10.33 | 9.94 | ||
| Return on capital employed, % | 30.9 | - | 27.4 | ||
| Return on equity, % | 32.6 | - | 29.1 | ||
| Net debt/EBITDA ratio | 0.39 | - | 0.75 | ||
| Net debt/equity ratio, period end, % | 18.1 | 32.2 | 45.0 | ||
| Equity/assets ratio, period end, % | 50.5 | 45.3 | 43.7 | ||
| Number of employees, period end | 13,837 | 12,579 | 12,948 | ||
| 2018 | 2017 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Q1-Q3 | Q1-Q3 | Full year |
| Profit for the period | 1,412 | 1,067 | 3,814 | 3,194 | 4,298 |
| Other comprehensive income | |||||
| Items that will not be reclassified to profit or loss | |||||
| Remeasurements of defined benefit pension plans | -31 | 0 | -29 | 61 | 65 |
| Income tax relating to items that will not be reclassified | 8 | 0 | 5 | -14 | -14 |
| Total items that will not be reclassified to profit or | |||||
| loss | -23 | 0 | -24 | 47 | 51 |
| Items that may be reclassified subsequently to profit or loss |
|||||
| Translation differences on foreign operations | -417 | -442 | -71 | -1,047 | -756 |
| Total items that may be reclassified subsequently to profit or loss |
-417 | -442 | -71 | -1,047 | -756 |
| Other comprehensive income for the period, net of tax |
-440 | -442 | -95 | -1,000 | -705 |
| Total comprehensive income for the period | 972 | 625 | 3,719 | 2,194 | 3,593 |
| Total comprehensive income attributable to | |||||
| - owners of the parent | 973 | 625 | 3,715 | 2,194 | 3,594 |
| - non-controlling interests | -1 | 0 | 4 | 0 | -1 |
| 2018 | 2017 | 2017 | |
|---|---|---|---|
| SEK million | Sep 30 | Sep 30 | Dec 31 |
| Intangible assets | 3,532 | 3,076 | 3,121 |
| Rental equipment | 1,277 | 1,220 | 1,215 |
| Other property, plant and equipment | 2,421 | 2,213 | 2,271 |
| Investments in associates | 91 | 95 | 94 |
| Financial assets and other receivables | 1,199 | 1,426 | 1,101 |
| Deferred tax assets | 526 | 359 | 425 |
| Total non-current assets | 9,046 | 8,389 | 8,227 |
| Inventories | 10,789 | 7,934 | 8,440 |
| Trade receivables | 7,821 | 5,707 | 6,271 |
| Other receivables | 1,277 | 984 | 1,362 |
| Income tax receivables | 576 | 111 | 287 |
| Financial assets | 1,029 | 3,769 | 1,152 |
| Cash and cash equivalents | 3,949 | 728 | 1,808 |
| Total current assets | 25,441 | 19,233 | 19,320 |
| Total assets | 34,487 | 27,622 | 27,547 |
| Share capital | 500 | 20 | 21 |
| Retained earnings | 16,859 | 12,495 | 12,020 |
| Total equity attributable to equity holders of the parent | 17,359 | 12,515 | 12,041 |
| Non-controlling interest | 47 | 6 | 6 |
| Total equity | 17,406 | 12,521 | 12,047 |
| Interest bearing loans | 1,097 | 6,194 | 2,250 |
| Post-employment benefits | 212 | 177 | 181 |
| Other liabilities and provisions | 418 | 251 | 289 |
| Total non-current liabilities | 1,727 | 6,622 | 2,720 |
| Interest bearing loans | 5,786 | 733 | 4,808 |
| Trade payables | 4,421 | 3,387 | 3,966 |
| Income tax liabilities | 683 | 1,140 | 436 |
| Other liabilities and provisions | 4,464 | 3,219 | 3,570 |
| Total current liabilities | 15,354 | 8,479 | 12,780 |
| Total equity and liabilities | 34,487 | 27,622 | 27,547 |
The carrying value and fair value of the Group's outstanding derivatives and borrowings are shown in the tables below. The fair value of derivatives and other loans are based on level 2 in the fair value hierarchy, no financial instruments are valued in category 3. Compared to 2017, 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, input or assumptions. The carrying value of borrowings per December 31, 2017 corresponds to fair value since the interest duration is short.
| 2018 | 2017 | |
|---|---|---|
| SEK million | Sep 30 | Dec 31 |
| Current assets and liabilities | ||
| Assets | 87 | 193 |
| Liabilities | 24 | 21 |
of borrowings
| 2018 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|
| SEK million | Sep 30 | Sep 30 | Dec 31 | Dec 31 |
| Carrying value | Fair value | Carrying value | Fair value | |
| Other loans | 6,883 | 6,890 | 7,058 | 7,058 |
| Equity attributable to | |||
|---|---|---|---|
| non | |||
| SEK million | owners of the parent |
controlling interests |
Total equity |
| 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 | 3,715 | 4 | 3,719 |
| Transactions with shareholders | 2,692 | 37 | 2,729 |
| Acquisition and divestment of own shares | -1,100 | - | -1,100 |
| Share-based payments, equity settled | 10 | - | 10 |
| Closing balance, Sep 30, 2018 | 17,359 | 47 | 17,406 |
| Opening balance, January 1, 2017 | 15,813 | - | 15,813 |
| Impact of change in accounting policy | -47 | - | -47 |
| Restated balance January 1, 2017 | 15,766 | - | 15,766 |
| Changes in equity for the period | |||
| Total comprehensive income for the period | 2,194 | 0 | 2,194 |
| Dividends to Atlas Copco | -3,956 | - | -3,956 |
| Transactions with shareholders | -1,531 | 6 | -1,525 |
| Share-based payments, equity settled | 42 | - | 42 |
| Closing balance, Sep 30, 2017 | 12,515 | 6 | 12,521 |
| Opening balance, January 1, 2017 | 15,813 | - | 15,813 |
| Impact of change in accounting policy | -47 | - | -47 |
| Restated balance January 1, 2017 | 15,766 | - | 15,766 |
| Changes in equity for the period | |||
| Total comprehensive income for the period | 3,594 | -1 | 3,593 |
| Dividends to Atlas Copco | -5,178 | - | -5,178 |
| Transactions with shareholders | -2,096 | 7 | -2,089 |
| Share-based payments, equity settled | -45 | - | -45 |
| Closing balance, December 31, 2017 | 12,041 | 6 | 12,047 |
Transaction with shareholders represents the shareholder contribution from Atlas Copco of SEK 4.1 billion, offset by the acquisition of subsidiaries owned by Atlas Copco of SEK 1.3 billion and other cash transfers between Atlas Copco and Epiroc, totaling SEK 2.7 billion net as cash transfer between Epiroc and Atlas Copco.
| 2018 | 2017 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Q1-Q3 | Q1-Q3 | Full year |
| Cash flow from operating activities | |||||
| Operating profit | 1,898 | 1,520 | 5,223 | 4,402 | 5,930 |
| Depreciation, amortization and impairment | 362 | 285 | 1,019 | 913 | 1,254 |
| Capital gain/loss and other non-cash items | 199 | 3 | 182 | -22 | -134 |
| Net financial items received/paid | -88 | 27 | -459 | -65 | -344 |
| Taxes paid | -741 | -210 | -1,421 | -486 | -666 |
| Pension funding and payment of pension to employees | -10 | -26 | -56 | -77 | -90 |
| Change in working capital | -599 | -114 | -2,290 | -246 | -403 |
| Investments in rental equipment | -215 | -189 | -658 | -550 | -793 |
| Sale of rental equipment | 114 | 123 | 297 | 291 | 422 |
| Net cash from operating activities | 920 | 1,419 | 1,837 | 4,160 | 5,176 |
| Cash flow from investing activities | |||||
| Investments in property, plant and equipment | -136 | -85 | -426 | -309 | -424 |
| Sale of property, plant and equipment | 8 | 16 | 24 | 31 | 70 |
| Investments in intangible assets | -102 | -108 | -313 | -216 | -289 |
| Acquisition of subsidiaries and associated companies | - | -65 | -482 | -137 | -137 |
| Other investments, net | 292 | 3,043 | 101 | 3,312 | 6,323 |
| Net cash from investing activities | 62 | 2,801 | -1,096 | 2,681 | 5,543 |
| Cash flow from financing activities | |||||
| Dividend to/from Atlas Copco | - | -3,727 | - | -3,956 | -5,178 |
| Acquisition of non-controlling interest | - | - | - | 6 | 6 |
| Sale/ Repurchase own shares | -1,100 | - | -1,100 | - | - |
| Change in interest-bearing liabilities | -92 | 297 | 2,477 | -945 | -889 |
| Net cash from financing activities | -1,192 | -3,430 | 1,377 | -4,895 | -6,061 |
| Net cash flow for the period | -210 | 790 | 2,118 | 1,946 | 4,658 |
| Cash and cash equivalents, beginning of the period | 4,205 | 610 | 1,808 | 481 | 481 |
| Exchange differences in cash and cash equivalents | -46 | -27 | 23 | -47 | -39 |
| Other cash flow from transactions with shareholders | - | -645 | - | -1,652 | -3,292 |
| Cash and cash equivalents, end of the period | 3,949 | 728 | 3,949 | 728 | 1,808 |
| Operating cash flow | |||||
| Net cash flow from operating activities | 920 | 1,419 | 1,837 | 4,160 | 5,176 |
| Net cash from investing activities | 62 | 2,801 | -1,096 | 2,681 | 5,543 |
| Acquisition of subsidiaries and associated companies | - | 65 | 482 | 137 | 137 |
| Other adjustments | -205** | -3,043* | 419** | -3,312* | -6,246* |
| Operating cash flow | 777 | 1,242 | 1,642 | 3,666 | 4,610 |
*Mainly changes in cash-pool with Atlas Copco and currency hedges of loans.
**Mainly currency hedges of loans and divestment of Payment Solutions portfolios.
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.
| 2017 | 2017 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 |
| Equipment & Service | 6,200 | 6,323 | 6,263 | 5,788 | 24,574 | 7,442 | 7,947 | 7,190 |
| Equipment | 3,147 | 3,142 | 3,281 | 2,676 | 12,246 | 4,054 | 4,234 | 3,601 |
| Service | 3,053 | 3,181 | 2,982 | 3,112 | 12,328 | 3,388 | 3,713 | 3,589 |
| Tools & Attachments | 2,341 | 2,270 | 2,239 | 2,197 | 9,047 | 2,550 | 2,470 | 2,285 |
| Common group functions | -21 | 69 | 89 | 73 | 210 | 44 | 66 | -62 |
| Epiroc Group | 8,520 | 8,662 | 8,591 | 8,058 | 33,831 | 10,036 | 10,483 | 9,413 |
| 2017 | 2017 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 |
| Equipment & Service | 5,220 | 5,495 | 5,406 | 6,262 | 22,383 | 5,943 | 7,325 | 7,178 |
| Equipment | 2,219 | 2,469 | 2,414 | 3,174 | 10,276 | 2,678 | 3,640 | 3,570 |
| Service | 3,001 | 3,026 | 2,992 | 3,088 | 12,107 | 3,265 | 3,685 | 3,608 |
| Tools & Attachments | 2,161 | 2,297 | 2,141 | 2,139 | 8,738 | 2,245 | 2,452 | 2,382 |
| Common group functions | 30 | 87 | 63 | 63 | 243 | 45 | 66 | 91 |
| Epiroc Group | 7,411 | 7,879 | 7,610 | 8,464 | 31,364 | 8,233 | 9,843 | 9,651 |
| 2017 | 2017 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 |
| Equipment & Service | 1,166 | 1,242 | 1,261 | 1,438 | 5,107 | 1,364 | 1,747 | 1,764 |
| Tools & Attachments | 321 | 328 | 279 | 218 | 1,146 | 287 | 304 | 324 |
| Common group functions | -73 | -102 | -20 | -128 | -323 | -136 | -241 | -190 |
| Operating profit | 1,414 | 1,468 | 1,520 | 1,528 | 5,930 | 1,515 | 1,810 | 1,898 |
| Net financial items | -23 | -10 | -19 | -85 | -137 | -57 | -44 | -37 |
| Profit before tax | 1,391 | 1,458 | 1,501 | 1,443 | 5,793 | 1,458 | 1,766 | 1,861 |
| 2017 | 2017 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 |
| Equipment & Service | 22.3% | 22.6% | 23.3% | 23.0% | 22.8% | 22.9% | 23.9% | 24.6% |
| Tools & Attachments | 14.8% | 14.3% | 13.0% | 10.2% | 13.1% | 12.8% | 12.4% | 13.6% |
| Epiroc Group | 19.1% | 18.6% | 20.0% | 18.1% | 18.9% | 18.4% | 18.4% | 19.7% |
| 2017 | 2017 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 |
| Change in provision for share-based long-term incentive programs |
-45 | -53 | -15 | -50 | -163 | 0 | -77 | -56 |
| Costs for split from Atlas Copco | - | - | - | - | - | -95 | -104 | -70 |
| Epiroc Group | -45 | -53 | -15 | -50 | -163 | -95 | -181 | -126 |
*Split and incentive program costs are reported in common group functions. Incentive program costs are reported as administrative expenses.
Geographical distribution of orders received SEK million 2017 2017 2018 % currency adjusted Q1 Q2 Q3 Q4 Full year % Q1 Q2 Q3 % Epiroc group 8,520 8,662 8,591 8,058 33,831 +21 10,036 10,483 9,413 +5 North America 1,967 2,092 1,897 1,657 7,613 +19 2,176 2,076 2,180 +8 South America 1,167 1,189 1,105 1,262 4,723 +23 1,488 1,844 1,236 +6 Europe 2,246 2,190 1,937 2,031 8,404 +21 2,488 2,503 2,388 +20 Africa/Middle East 1,033 990 1,339 1,220 4,582 +14 1,478 1,518 1,191 -16 Asia/Australia 2,107 2,201 2,313 1,888 8,509 +25 2,406 2,542 2,418 +2 Equipment & Service 6,200 6,323 6,263 5,788 24,574 +25 7,442 7,947 7,190 +10 North America 1,371 1,349 1,179 1,008 4,907 +25 1,426 1,385 1,572 +26 South America 928 1,015 896 1,062 3,901 +25 1,255 1,633 1,023 +8 Europe 1,518 1,498 1,280 1,368 5,664 +25 1,662 1,765 1,790 +37 Africa/Middle East 690 675 983 881 3,229 +18 1,127 1,056 811 -22 Asia/Australia 1,693 1,786 1,925 1,469 6,873 +28 1,972 2,108 1,994 +1 Tools & Attachments 2,341 2,270 2,239 2,197 9,047 +12 2,550 2,470 2,285 -2 North America 646 701 623 604 2,574 +10 737 662 689 +3 South America 239 174 216 201 830 +13 232 211 213 -5 Europe 709 677 646 641 2,673 +14 804 715 598 -10 Africa/Middle East 343 315 358 339 1,355 +5 350 462 380 +1 Asia/Australia 404 403 396 412 1,615 +18 427 420 405 -1 Geographical distribution of revenues SEK million 2017 2017 2018 % currency adjusted Q1 Q2 Q3 Q4 Full year % Q1 Q2 Q3 %
| Epiroc group | 7,411 | 7,879 | 7,610 | 8,464 | 31,364 +14 | 8,233 | 9,843 9,651 +21 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| North America | 1,806 | 1,722 | 1,785 | 1,823 | 7,136 +14 | 1,888 | 2,118 2,141 +12 | |||
| South America | 1,100 | 1,104 | 969 | 1,103 | 4,276 +18 | 1,024 | 1,199 1,230 +21 | |||
| Europe | 1,758 | 2,109 | 1,977 | 2,148 | 7,992 +14 | 1,864 | 2,471 2,224 | +9 | ||
| Africa/Middle East | 997 | 1,003 | 1,037 | 1,048 | 4,085 | +2 | 1,103 | 1,350 1,444 +33 | ||
| Asia/Australia | 1,750 | 1,941 | 1,842 | 2,342 | 7,875 +19 | 2,354 | 2,705 2,612 +37 | |||
| Equipment & Service | 5,220 | 5,495 | 5,406 | 6,262 | 22,383 +17 | 5,943 | 7,325 7,178 +23 | |||
| North America | 1,126 | 958 | 1,084 | 1,189 | 4,357 +17 | 1,173 | 1,410 1,412 +18 | |||
| South America | 827 | 880 | 745 | 859 | 3,311 +21 | 813 | 981 1,020 +26 | |||
| Europe | 1,323 | 1,564 | 1,484 | 1,710 | 6,081 +20 | 1,235 | 1,696 1,488 | -6 | ||
| Africa/Middle East | 615 | 647 | 691 | 685 | 2,638 | +1 | 766 | 972 1,054 +41 | ||
| Asia/Australia | 1,329 | 1,446 | 1,402 | 1,819 | 5,996 +21 | 1,956 | 2,266 2,204 +47 | |||
| Tools & Attachments | 2,161 | 2,297 | 2,141 | 2,139 | 8,738 | +9 | 2,245 | 2,452 2,382 | +5 | |
| North America | 649 | 683 | 635 | 546 | 2,513 +11 | 700 | 681 | 703 | +2 | |
| South America | 189 | 184 | 196 | 213 | 782 | +7 | 211 | 218 | 210 | +1 |
| Europe | 638 | 694 | 641 | 620 | 2,593 | +8 | 607 | 750 | 688 | +4 |
| Africa/Middle East | 319 | 324 | 320 | 334 | 1,297 | +3 | 337 | 378 | 390 +14 | |
| Asia/Australia | 366 | 412 | 349 | 426 | 1,553 +12 | 390 | 425 | 391 | +7 |
| 2018 | 2017 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|---|
| SEK million | Q3 | Q3 | Q1-Q3 | Q1-Q3 | Full year |
| Administrative expenses | -47 | 0 | -117 | 0 | -8 |
| Marketing expenses | -3 | - | -9 | - | - |
| Other operating income and expenses | 39 | -2 | -34 | -2 | -6 |
| Operating profit/loss | -11 | -2 | -160 | -2 | -14 |
| Financial income and expenses | -6 | 0 | -9 | 0 | -1 |
| Appropriations | - | - | - | - | 15 |
| Profit/loss before tax | -17 | -2 | -169 | -2 | 0 |
| Income tax | 0 | 0 | 36 | 0 | - |
| Profit/loss for the period | -17 | -2 | -133 | -2 | 0 |
| 2018 | 2017 | 2017 | |
|---|---|---|---|
| SEK million | Sep 30 | Sep 30 | Dec 31 |
| Total non-current assets | 46,893 | - | 45,574 |
| Total current assets | 6,279 | 39 | 4,555 |
| Total assets | 53,172 | 39 | 50,129 |
| Total restricted equity | 503 | 24 | 24 |
| Total non-restricted equity | 46,345 | 13 | 43,886 |
| Total equity | 46,848 | 37 | 43,910 |
| Total provisions | 229 | - | 0 |
| Total non-current liabilities | 1,030 | - | - |
| Total current liabilities | 5,065 | 2 | 6,219 |
| Total equity and liabilities | 53,172 | 39 | 50,129 |
| Assets pledged | 3 | - | 0 |
| Contingent liabilities | 57 | - | - |
| Revenues | Number of | |||
|---|---|---|---|---|
| Date | Company | Segment | SEK million* | employees* |
| 2018 Feb 1 | Hy-Performance Fluid Power | Equipment & Service | 50 | 26 |
| 2018 Jan 3 | Rock Drill Services Australia | Equipment & Service | 90 | 37 |
| 2018 Jan 3 | Cate Drilling Solutions | Equipment & Service | 35 | |
| 2018 Jan 2 | Renegade Drilling Supplies | Tools & Attachments | 22 | |
| 2017 Jul 4 | Mobilaris MCE AB (34%)** | Equipment & Service | 30 | 20 |
| 2017 Feb 2 | Erkat | Tools & Attachments | 110 | 38 |
*Annual revenues and number of employees at time of acquisition. For distributors, revenues are not disclosed.
**Included as an associated company.
During 2018 there have been transactions between Atlas Copco Group and Epiroc Group related to lending and allocation of net debt between the groups. These transactions have been classified as transactions with shareholders and been carried out via equity and are presented in the consolidated statement of changes in equity. On March 31, 2018 Epiroc AB received an unconditional shareholder's contribution of SEK 4,150 million from Atlas Copco AB. As of April 26, 2018 the foreign exchange derivatives between Epiroc Treasury AB and Atlas Copco AB matured and was cash settled. On June 18, 2018 Epiroc AB repaid the borrowing of SEK 3,752 million to Atlas Copco AB. Receivables and payables between Atlas Copco and Epiroc from the period when Atlas Copco AB was the parent company, have been included in the balance sheet as external balances. The balances between Atlas Copco and Epiroc are not material. Since the distribution of the Epiroc shares from Atlas Copco on June 18, 2018, Atlas Copco is no longer a related party.
In the combined financial statements for the annual report December 31, 2017 accounts receivables and accounts payables include receivables and payables that will be collected and paid by another Group entity than the entity included in the combined financial statements.
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 the prospectus "Admission to trading of shares in Epiroc AB on Nasdaq Stockholm" published in May 2018. See www.epirocgroup.com/en/investors.
In the third quarter, Epiroc purchased 11,860,359 shares class A and divested 514,480 shares class A in accordance with mandates granted. As of September 30, 2018, Epiroc AB held 11,345,879 shares class A.
The total numbers of issued Epiroc shares as of September 30, 2018 were 1,213,738,703 shares, whereof 823,765,854 shares class A and 389,972,849 shares class B.
Financial definitions can be found on Epiroc's website www.epirocgroup.com/en/investors. Non-IFRS measures are also presented in the report since they are considered to be important supplemental measures of the company's performance. Further information on how these measures have been calculated can also be found on www.epirocgroup.com/en/investors.
Analysts and investors: Ingrid Östhols, Vice President Investor Relations E-mail: [email protected] Tel: +46 10 755 0106
Media: Ola Kinnander, Media Relations Manager E-mail: [email protected] Tel: +46 70 347 2455
February 5, 2019 March 13, 2019 April 30, 2019 May 9, 2019 July 19, 2019 October 25, 2019 January 31, 2020 Q4 2018 Annual report 2018 Q1 2019 Annual General Meeting 2019 Q2 2019 Q3 2019 Q4 2019
This information is information that Epiroc AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 07:30 CEST on October 25, 2018.
Epiroc is a leading productivity partner for the mining, infrastructure and natural resources industries. With cuttingedge technology, Epiroc develops and produces innovative drill rigs, rock excavation and construction equipment, and provides world-class service and consumables. The company was founded in Stockholm, Sweden, and has passionate people supporting and collaborating with customers in more than 150 countries. Learn more at www.epirocgroup.com.
Epiroc AB (publ) Reg. No. 556041-2149 Box 4015 SE-131 04 Nacka Sweden Tel: +46 10 755 0000 www.epirocgroup.com
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