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Epiroc books battery-electric equipment order from Canada underground mine

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Epiroc received a large order for its battery-electric underground equipment from Canada in the March quarter, the company confirmed in its latest quarterly results.

The company, in November, launched its second-generation battery-electric solutions in Örebro, Sweden, presenting 14 t and 18 t LHDs, a 42 t truck (MT42) and its mid-sized drilling family including face drilling, production drilling and rock reinforcement rigs.

In the March quarter results, the company did not mention the name of the miner, the site the equipment will be deployed at, or which machines will be used at the operation, but, at a Bauma media roundtable event, President and CEO, Per Lindberg, said of the recent second generation launch: “We can say that the reception has not been worse than expected. It has been better than expected, and we have high expectations.”

And, earlier this month at The Electric Mine conference, in Toronto, Canada, Morgan Rody, Senior Project Manager: Sustainable Intelligent Mining Systems (SIMS), Global Strategic Projects and Alliances, Epiroc, said one of Epiroc’s second-generation battery-electric drill rigs was set to arrive at Agnico Eagle’s Kittilä gold mine, in Finland, in a matter of weeks as part of the SIMS project.

Going back to the mining equipment manufacturer’s Q1 results, the company said orders received came in at SEK 10.06 billion ($1.06 billion) during the quarter, a year-on-year organic decline of 5%, while both revenues and operating profit rose – 19% to SEK 9.79 billion for the former and 27% to SEK 1.93 billion for the latter.

The company’s operating margin went from 18.4% a year earlier to 19.7%, while its basic earnings per share jumped from SEK 0.89/share to SEK 1.14/share.

Lindberg said, during the quarter, the company’s service business continued to grow “healthily”, having a positive impact on the group’s overall profit.

“Equipment revenues increased versus last year, but fell sequentially compared to the very strong Q4, which had a negative effect on our cost efficiency in the quarter,” he said.

“In the Tools & Attachments segment, we are pleased to see that our efficiency actions had a positive effect on the operating profit and margin. Working capital increased in the quarter, and continues to be a focus area for improvement. The operating cash flow was lower than in the previous quarter as a result.”

He said customer demand in the March quarter was “largely in line with our expectations”, with equipment orders at similar levels to the second half of 2018.

“The majority of mining equipment orders are still for expansion in or close to existing mines rather than for replacement,” he said. “The aftermarket business remained strong, reflecting the solid activity in the market, both in mining and in infrastructure.

“While our customers continue to be active and relatively confident about the future, and the mineral prices are at healthy levels, there are still uncertainties related to the economic development.

“We see that our customers primarily invest in lower-risk projects with focus on increased productivity and efficiency. We do not see any clear indications that the current market situation will change and expect that the demand will remain at the current level in the near term.”

During the quarter, the company completed its earlier announced acquisitions of Fordia and New Concept Mining, strengthening its position in exploration and rock reinforcement, and adding some SEK 1.2 billion in annual revenues, according to Lindberg.

On innovations, automation, digitalisation and battery power, Lindberg remarked: “We are pleased to see that we received several inquiries and orders for automation and battery solutions.”

On top of the battery equipment order from Canada, he said orders were booked for Mobilaris Mining Intelligence and, at the Bauma exhibition in early April, the company had presented a number of innovations, including My Epiroc, “a digital tool to help our customers to become more efficient in managing their fleet”, and its new generation SmartROC D65, an automation-ready surface drill rig.

Lindberg concluded: “In 2018, we put a lot of effort into the split and listing of Epiroc. In 2019, we will focus on improving and developing the business further. Besides the continued emphasis on innovation and new product development, a key focus will be on improving efficiency, agility and resilience throughout the company.”

Epiroc M&A likely to continue, Per Lindberg says

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The President and CEO of Epiroc, Per Lindberg, says the mining equipment maker is likely to continue making acquisitions as it strives for long-term growth over the latest business cycle.

In the company’s first full year of operation, Epiroc has, among other transactions, acquired a minority stake in mining autonomy major ASI Mining, agreed to buy rock tools manufacturer Fordia, and purchased Sautec.

Lindberg said in the company’s December quarter results that Epiroc is targeting to grow at least 8% per year on average over a business cycle.

“While we grew well beyond that in Q4 and in 2018, we believe we continuously need to make acquisitions to secure long-term growth as well as access to new technologies, markets and geographies,” he said.

On the recent Fordia, New Concept Mining and Sautec buys, Lindberg said Epiroc expected strengthened positions in exploration, rock reinforcement and service, and an additional SEK 1.2 billion ($132 million) in annual revenues.

In the December quarter, Epiroc said its orders received increased 17% to SEK9.47 billion, revenue jumped up 25% to SEK10.56 billion and its operating profit went from SEK1.53 billion to SEK2.16 billion, including costs related to the split from Atlas Copco and change in provision for long-term incentive programmes of net SEK8 million.

Lindberg reflected on this quarterly performance, saying: “We have been able to ramp up our capacity in manufacturing and service to support our customers, and revenues reached a record SEK10.56 billion, up 19% organically.”

He added: “In our first year as Epiroc we achieved strong growth in both top and bottom line, in parallel to a successful split and introduction of the new company. Reported orders and revenues increased 16% and 22%, respectively. Our operating profit increased by 25% and the operating margin, adjusted for split costs and provision for long-term incentive programmes, increased from 19.4% to 20.3%.”

Lindberg said customer demand for Epiroc’s equipment, services and tools remained at a good level during the quarter. “In mining we continue to see that the majority of the equipment orders are for expansion, including also some orders for greenfield projects,” he said, while aftermarket business was supported by high activity among its customers, leading to strong growth.

During the most recent quarter, Epiroc launched the second generation of its battery-operated equipment at an event in Örebro, Sweden.

Lindberg said the event created strong interest from Epiroc’s customers and orders have already started to come in.

In terms of the future technology transition in mining, in general, Lindberg said: “Our customers are ready for a major technology shift towards more automation, digitalisation and battery power.

“While the complete transition will take time, it is exciting to already now see the positive customer reactions.”

Looking into 2019, Lindberg said: “We will continue to focus on improving our customer offerings, our efficiency, agility and resilience. These are, and will continue to be, the strengths of Epiroc.”