Epiroc AB

STO:EPI A

Earnings Call Transcript

[Unknown Attendee]

Hello, Helena. So Epiroc today reported its financial results for the fourth quarter and full year 2023. First of all, how would you summarize the year?

[Helena Hedblom, executive]

Well, it's a strong year with major achievements. We ended the year about SEK 60 billion in revenue. So that's a milestone. 21.8% in adjusted operating margin. We have seen strong activity levels when it comes to mining, both on the [ quick mine ] side and aftermarket, while construction has been slower throughout the year.

But all in all, I would say a very strong year. The largest equipment order ever we landed to DRC, to Kamoa in DRC during the year. And also recently, in Q4, we landed the largest digitalization order. So in many aspects, a very, very exciting year.

[Unknown Attendee]

And if we look specifically at Q4, what is your take on the quarter?

[Helena Hedblom, executive]

We see very similar picture. So very strong, stable demand from Mining. We grew 13% in Equipment, 6% in Imports & Service, while then Tools & Attachment had a decrease organic of 6%, and that is driven by the slower activities in housing and aggregates. So it's on the attachment side. Consumables is still growing at a healthy pace.

So that is the demand picture. Lower margin, 20.7% adjusted operating margin. So we are taking a number of efficiency measures to address that, mainly in the Tools & Attachment segment. But then in Q4, we also announced the acquisition of STANLEY Infrastructure in the later part of the quarter. So that's, of course, an exciting news as well.

[Unknown Attendee]

Yes. Please tell us a little bit more about this acquisition of STANLEY infrastructure. It is the largest acquisition that Epiroc has ever made once the acquisition is completed. Please tell us about STANLEY and the reason for acquiring STANLEY Infrastructure.

[Helena Hedblom, executive]

So we -- of course, the construction segment today show a weak demand. But we believe strongly in this segment long term. Both the deconstruction side, the recycling trend is clear. And STANLEY Infrastructure, having a very strong position in U.S., complementary products to our offering when it comes to attachments, together will be a very strong player in the attachment space. And we're looking -- very much looking forward to welcome 1,400 of the STANLEY employees into Epiroc.

[Unknown Attendee]

And looking ahead, Epiroc said that in the near term, it expects that the underlying mining demand, both for equipment and aftermarket, will remain at a high level, while demand from construction customers is to remain soft. Can you expand on this?

[Helena Hedblom, executive]

Yes. So the commodity prices are still holding up. When we look at the age of our fleet out there, part of this fleet will have to be replaced during the year. We also see projects in the pipeline when it comes to brownfield expansion within mining. So we expect that mining will continue to be on a healthy, solid level.

We also have, of course, the ESG trend, the focus on ESG, on technology, on automation, on digitalization supporting that. Then when it comes to infrastructure, we expect that we will not see a change short term in demand when it comes to housing and aggregates, but we still see that infrastructure tunneling, et cetera, will keep up well.

[Unknown Attendee]

Any final words?

[Helena Hedblom, executive]

No, I think it's -- we have been growing 21% in 2023 on revenue. It's a strong performance. We have landed -- we have closed 3 acquisitions. We have signed another 2. And of course, STANLEY, as I mentioned, being the largest one so far. So it's a great achievement by the organization and the employees. So I would like to say thank you to everyone in Epiroc for another great year.

[Unknown Attendee]

Thank you, Helena.

[Helena Hedblom, executive]

Thank you.