Interim report

Q3 2019

October 25, 2019

Per Lindberg, President and CEO

Anders Lindén, CFO

Key highlights Q3 2019

• Strong aftermarket - High customer activity

• Solid and improved underlying margin

– Revenue mix positive

• Good cash flow

• High interest for automation and information

management, and for battery-electric vehicles

• Order intake of equipment lower than expected

– Infrastructure relatively weaker than mining

• Actions to improve resilience and safety

– Restructuring in Tools & Attachments

2

Growth in aftermarket, lower equipment demand

19.1 18.620.0

18.1 18.4 18.419.7 20.5 19.7

21.319.0

0

5

10

15

20

25

30

0

2 000

4 000

6 000

8 000

10 000

12 000

Q1 2017 Q1 2019

1 414

9 651

1 468

Q2 2017 Q3 2017

1 898

Q4 2017

1 528

10 626

Q1 2018

1 515 1 810

Q2 2018 Q3 2018

1 520

Q4 2018

1 930 2 263

7 411

Q2 2019

1 927

Q3 2019

8 2337 879 7 6108 464

9 84310 558

9 785 10 158

2 162

Operating margin, %

Adj. Operating margin, %

Operating Profit, MSEK

Revenues, MSEK

Revenues, operating profit and margin

Key financials Q3 2019

• Order intake up 2%, -6% organic

• Revenues up 5%, -3% organic

• Operating profit up 2%

– Currency and acquisitions contributed positively

– Restructuring costs of MSEK 179 in Tools & Attachments

• Margin at 19.0% (19.7)

– Adjusted for restructuring costs and LTI at 21.3%

• Operating cash flow improved to MSEK 1 883 (777)

3

0

9 000

9 400

9 200

9 600

CurrencyOrganic

+3%

+5%-6%

Q3 2018

9 413

9 600

Q3 2019Structure & Other

+2%

Orders received, MSEK, and change %

Leading the way in innovation

• Strong market attention for the 6th Sense

automation and information management

solutions

• A large mining equipment service contract

won in Chile with possible implementation of

automation features

• No. of connected machines increasing rapidly

• Strong interest for battery-electric equipment

• Scooptram Automation Total

• Mobilaris Onboard™

• New Powerbit Underground

Q3 2019

Scooptram ST14 Battery and Minetruck MT42 Battery at Agnico Eagle’s Kittilä mine, Finland.

The batteries are supplied from Northvolt, aiming for minimal carbon footprint and the highest levels of recycling

• Workforce reduced by 500 organically in 2019

• Further efficiency improvements will be carried out in

the coming quarters and expected to give visible effects

in the first half of 2020

• Divestment of geotechnical consumables product line in

Tools & Attachments

• Restructuring of handheld rock drilling tools in China

• Supply chain program progressing according to plan

• Expansion of a production facility in Örebro, Sweden

Q3 2019

Continuous strive to improve operational excellence

Sustainability as a competitive advantage

• Safety and well-being

– Positive trend in reducing work-related injuries

• Highest ethical standards

– “Speak Up” launched

• Passionate people and courageous leaders

– Epiroc Days – Leaders committed to value creation

for all stakeholders

• Responsible use of resources

– CO2 emissions from transport improved

– Energy/CoS decreased

Q3 2019

6

High proportion of recurring business

Per segment Q3 2019

32%

41%

27%

Revenues in the quarter

Equipment Service Tools & Attachments

68% Aftermarket

(63)

7

2 285

3 589

2 665

3 601

4 147

2 727

Q3 2019

Service

Q3 2018

Equipment

Tools & Attachments

9 413 9 600

+2% / -6%

Order intake, MSEK and growth, % (Total growth / Organic growth)

-24 / -27

+16 / +11

+17 / -3

Segment: Equipment & Service

• Orders received down 4%, -8% organic

• Service orders up 11% organic

– High customer activity

• Equipment orders down 27% organic

– Investment decisions postponed

– Cancellation of large order

• Revenues up 2%

– Supported by currency

• Margin increased to 26.3% (24.6)

– Positive revenue mix

8

7 200

0

6 600

6 800

7 000

-8%

Currency

-1%

Structure & OtherQ3 2018 Q3 2019

7 190

6 874

+5%

Organic

-4%

Orders received, MSEK and change, %

6 200 6 323 6 263 5 788

7 4427 947

7 190 7 116 7 2487 677

6 874

5 220 5 495 5 4066 262 5 943

7 325 7 178 8 094

7 1157 702 7 334

0

2 000

4 000

6 000

8 000

10 000

25

24

26

23

0

27

28

29

30

22.6

25.6

Q4 2018

23.9

Q1 2018

26.3

Q2 2017

22.3

Q1 2017 Q3 2017 Q3 2019

23.0

Q2 2018Q4 2017

23.3

24.6

Q3 2018

23.2

24.2

22.9

Q2

2019

Q1 2019

Operating margin, % Order intake, MSEK Revenues, MSEK

Orders received, revenues and operating margin

Segment: Tools & Attachments

• Orders received up 17%, -3% organic

– Rock drilling tools orders negatively impacted by

optimization of product offering

– Hydraulic attachment tools decreased organically

• Revenues up 16%, -3% organic

• Margin of 5.7% (13.6)

– Restructuring cost of MSEK 179

o Handheld rock drilling tools in China

o Divestment of geotechnical consumables

o Adj. for restructuring, the margin was 12.2%

– Collection claim towards distributor, provision of MSEK -41

9

2 300

0

2 400

2 500

2 600

2 700 2 665

+15%

Q3 2018

2 285

Structure & OtherOrganic

+5%

Currency Q3 2019

-3%

+17%

Orders received, MSEK and growth, %

2 341 2 2702 239

2 197 2 550 2 4702 285 2 306

2 760 2 826

2 161

2 297

2 141 2 139 2 245

2 452 2 3822 440 2 605

2 765

14.8 14.313.0

10.2

12.8 12.413.6 13.3

14.2 14.6

0

2

4

6

8

10

12

14

16

18

0

1 000

2 000

3 000

4 000

5 000

6 000

Q3 2017 Q4 2017Q1 2017 Q2 2017 Q1 2018 Q2 2018 Q4 2018Q3 2018 Q1 2019 Q2 2019

5.7

Q3 2019

2 926

2 665

Adj. operating margin, %

Order intake, MSEK

Revenues, MSEK

Operating margin, %

Orders received, revenues and operating margin

Financials

Profit impacted by restructuring costs

Q3 2019Operating profit and margin

11

* Q1 2017-Q4 2018 includes costs related to the split from Atlas Copco.

* Q1 2017-Q3 2019 includes change in provision for long-term incentive plans.

* Q3 2019 includes restructuring costs of MSEK 179 in Tools & Attachments.

1 414 1 468 1 520 1 528 1 5151 810 1 898

2 1621 930

2 2631 927

181233

19.118.6

20.0

18.1 18.4 18.4

19.720.5

19.7

21.3

19.0

-4

-2

0

2

4

6

8

10

12

14

16

18

20

22

24

1 000

1 500

3 000

0

2 000

500

2 500

3 500

4 000

Q3 2018Q1 2017 Q2 2018

45 53

Q2 2017

1 610

15

Q3 2017

50

Q4 2017 Q4 2018Q1 2018

126

-8

59

Q1 2019

39

Q3 2019Q2 2019

1 459 1 521 1 535 1 578

1 991 2 0242 154

1 989

2 3022 160

95

Operating margin, % Items affecting comparability*, MSEK Operating profit, MSEK Operating margin, adj., %*

Profit impacted by restructuring costs

Looking into the numbers Operating profit and margin

12

54

2 000

2 200

1 950

1 900

1 850

2 250

0

2 050

50

2 150

2 100

Reported

adj. margin

1 898

1 927

2 160

2 201

Q3 2018

+41

Restructuring Underlying margin

+89

-0.1pp

Organic

+179

Structure

and other

Collection claimCurrency

-63

-1.3pp

+3

+0.7pp

Q3 2019 LTI

+2% +14% +16%

Margin: 19.7% Margin: 19.0%Underlying

margin: 21.7%Adj. margin: 21.3%

“Structure and other” includes operating profit/loss from acquisitions and contract manufacturing MSEK 55, one-time items MSEK -120 (restructuring costs of -179 + net split costs of +59 = -11-(-70), and change in provision for long-

term incentive programs MSEK +2 = -54-(-56) “Items affecting comparability” includes change in provision for long-term incentive programs MSEK -54 and restructuring costs of MSEK 179 in Tools & Attachments. Provision for

collection claim of MSEK -41 is included in “Organic”.

13

Equipment & Service: Profit bridge

1 860

0

1 820

1 920

1 840

1 940

1 900

1 880

20

1 740

1 760

1 780

1 800

Q3 2018

+102

+1.7pp

Organic Currency

+5

+0.3pp

1 932

Structure

and other

Q3 2019

1 764

+61

-0.3pp

+10%

Margin: 24.6% Margin: 26.3%

Looking into the numbers

14

Tools & Attachments: Profit bridge

Looking into the numbers

0

260

200

240

280

380

140

20

220

360

340

160

320

180

300

157

377

+50

+1.4pp

+41

RestructuringStructure

and other

-88

-2.0pp

Collection

claim

Reported

adj. margin

336

Organic Currency

-129

-7.3pp

Q3 2018

+179

Underlying

margin

Q3 2019

324

Margin: 13.6% Margin: 5.7%Underlying

margin: 13.6%Adj. margin: 12.2%

Costs, net financials and tax

• Marketing and administration expenses higher

– Growth, but also some inefficiencies

– Acquisitions and currency

– Expenses adjusted for change in provision for

LTI MSEK -54 (-56)

– Expenses adjusted for restructuring costs MSEK 62

• Net financial items were MSEK -61 (-37)

– Interest net was MSEK -54 (-34)

• Tax expense MSEK -525 (-449)

– Effective tax rate 28.1% (24.1), affected negatively by the

restructuring costs in Tools & Attachments

– Guidance: below 25%

Q3 2019

Administration, marketing and R&D expenses

15

1 239 1 277

1 169

1 348 1 386

1 5691 482

1 637 1 6631 745

1 671

16.7 16.215.4

15.916.8

15.9 15.4 15.517.0 16.4 16.5

0

5

10

15

20

25

30

0

500

1 000

1 500

2 000

Q4

2018

Q3

2017

Q2

2018

Q1

2017

Q2

2017

Q1

2018

Q4

2017

Q3

2018

Q1

2019

Q2

2019

Q3

2019

Expenses in % of revenues

A, M and R&D expenses, adj. for change in LTI provisions and restructuring, MSEK

Capital structure

Q3 2019

• Net debt was MSEK 2 416 (3 146)

– Post-employment benefits MSEK 640 (212)

• IFRS 16 increased net debt by MSEK 2 012

• Net debt/EBITDA ratio at 0.24 (0.39)

• Net debt/equity ratio was 11.1% (18.1)

• Second part of the dividend will be paid in November

– SEK 1.05 per share

– Ex-date Oct. 29

16

Net debt and Net debt/EBITDA

2 550

3 027 3 146

1 208

1 6592 092

404

1 982

2 125

2 012

0.35

0.40 0.39 0.39

0.43

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

6 000

Q3 2019

0.24

Q4 2018Q2 2018Q1 2018 Q3 2018

0.14

Q1 2019 Q2 2019

2 416

3 641

4 217

Net debt, MSEK, end of period

Net debt/EBITDA ratio

Net debt, IFRS 16, MSEK, end of period

* Numbers for 2018 not restated for IFRS 16.

Q3 2019

• Net working capital up 12%

– Increase of 11% due to currency and acquisitions

– Both trade receivables and inventories decreased, while this

improvement was more than offset by lower payables.

• ROCE at 29.5% (30.9)

– IFRS 16 impact 1.0 percentage points

17

Capital efficiency

Capital employed and ROCE

Net working capital

9 99112 158

14 124 13 46515 120

31.9 31.834.3

31.934.3

0

10

20

30

40

50

0

5 000

10 000

15 000

20 000

25 000

30 000

20182017 Q3 2019 Q3 2018 Q3 2019

Avg. NWC/revenues, % Avg.NWC, MSEK End of period, NWC, MSEK

21 674 23 08628 050

24 501

27.4

32.029.5 30.9 29.5

0

10

20

30

40

0

10 000

20 000

30 000

40 000

50 000

2017 Q3 2019Q3 20192018 Q3 2018

31 101

Avg. capital employed, MSEKROCE, 12m, % End of period, capital employed, MSEK

MSEK Q3 2019 Q3 2018

Operating profit +1 927 +1 898

Depreciation, amortization and impairment +556 +362

Capital gain/loss and other non-cash items -104 +199

2 379 2 459

Net financial items received/paid -113 -88

Taxes paid -559 -741

Change in working capital +126 -599

Investments, incl. rental equipment* -72 -39

Pension funding and other** +122 -215

Operating cash flow 1 883 777

Acquisitions and divestments +33 -

Operating cash flow

Q3 2019

18* Investments include rental investments, net, other PPE, net, intangibles and other financial assets, net.

** Other includes currency hedges of loans.

1 111

1 3131 242

944

666

199

777

2 242

472

1 506

1 883

1 049 1 078 1 104 1 081

1 3211 412

1 623

1 374

1 680

0

10

20

30

40

50

60

70

80

90

100

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

Q2 2018Q1 2018 Q4 2018Q4 2017Q1 2017 Q3 2018Q2 2017 Q3 2017 Q1 2019 Q2 2019 Q3 2019

1 067

1 341

Operating cash flow, MSEK Net proft, MSEK

Operating cash flow and Net profit

Summary and

outlook

Key highlights Q3 2019

• Strong aftermarket - High customer activity

• Solid and improved underlying margin

– Revenue mix positive

• Good cash flow

• High interest for automation and information

management, and for battery-electric vehicles

• Order intake of equipment lower than expected

– Infrastructure relatively weaker than mining

• Actions to improve resilience and safety

– Restructuring in Tools & Attachments

20

Growth in aftermarket, lower equipment demand

Demand expectations

“In the near-term, we expect that the demand will remain largely at the

level seen in the third quarter. That said, the economic environment

continues to be uncertain.”

Capital Markets Day

November 14, 2019

Stockholm

Registration open!

Q&A

Disclaimer - Some statements in this presentation, or in conclusion to it, are forward-looking and the actual outcome may be different. In addition to the factors explicitly commented upon, the actual

outcome may be affected by other factors such as macroeconomic conditions, movements in foreign exchange- and interest-rates, political risks, competitor behavior, supply- and IT-disturbances.

Appendix

Geographical overview

26

North

America

23%

* Rolling twelve months , Orders received excluding corporate.

69%66%

34%34%

20182017

31%

66%

2019 Q2*

7 481

8 814 9 028

Orders received, MSEK and % of Group orders

South

America

15%

14%

82%86%

18%

2017

18%

2018

82%

2019 Q3*

4 731

6 225 5 934

2017

68%

32%

2018 2019 Q3*

70%

30%

69%

31%

8 3379 298 8 822

64%70%

30% 28%

2017

72%

36%

2018 2019 Q3*

4 584

5 446 5 254

Europe

23%

Africa/

Middle

East

13%

2018

19%

81%

17%

2017

82% 83%

18%

2019 Q3*

8 4889 523

10 434

Asia/

Australia

26%

Equipment & Service

Tools & Attachments

% of Group ordersTop 10 areas

% of revenues in 2018

Australia 11%

USA 10%

Canada 8%

Russia 7%

Chile 5%

South Africa 5%

China 5%

India 4%

Peru 3%

Sweden 3%

Income statement

Q3 2019

27

2017 2018 2019 Q3 2019 2018 2019 2018

MSEK Full year Full year 12M Sep Q3 Q3 YTD YTD

Revenues 31 364 38 285 41 127 10 158 9 651 30 569 27 727

Cost of sales -20 101 -24 317 -25 891 -6 431 -6 095 -19 170 -17 596

Gross profit 11 263 13 968 15 236 3 727 3 556 11 399 10 131

Gross margin, % 35.9% 36.5% 37.0% 36.7% 36.8% 37.3% 36.5%

Marketing expenses -2 280 -2 574 -2 775 -734 -630 -2 107 -1 906

Administrative expenses -2 121 -2 589 -3 034 -826 -691 -2 413 -1 968

Research and development expenses -795 -977 -1 054 -227 -217 -773 -696

Other operating income and expenses -136 -443 -71 -11 -120 25 -339

Share of profits of associates -1 -8 -20 -2 -2 -11 1

Operating profit 5 930 7 385 8 282 1 927 1 898 6 120 5 223

Operating profit margin, % 18.9% 19.3% 20.1% 19.0% 19.7% 20.0% 18.8%

Net financial items -137 -184 -245 -61 -37 -199 -138

of which interest net -132 -137 -187 -54 -34 -150 -100

Profit before tax 5 793 7 201 8 037 1 866 1 861 5 921 5 085

Proft margin, % 18.5% 18.8% 19.5% 18.4% 19.3% 19.4% 18.3%

Income tax expense -1 495 -1 271 -2 019 -525 -449 -1 526 -1 271

Tax rate, % -25.8% -24.5% -25.1% -28.1% -24.1% -25.8% -25.0%

Profit for the period 4 298 5 437 6 018 1 341 1 341 4 395 3 814

Items affecting comparability in operating profit -394 -323 -233 -126 -331 -402

Equipment & Service

Tools & Attachments -179 -179 - -179

Corporate items: -394 -144 -54 -126 -152 -402

Costs for split from Atlas Copco -328 -59 - -70 -269

Change in provision for share-based long-term incentive programs -66 -85 -54 -56 -152 -133

Adj. operating profit margin, Epiroc Group, % 20.3% 19.4% 21.3% 21.0% 21.1% 20.3%

Balance sheet

Q3 2019

28

2017 2018 2018 2019 2017 2018 2018 2019

MSEK Dec. 31 Dec. 31 Sep. 30 Sep. 30 % of BS MSEK Dec. 31 Dec. 31 Sep. 30 Sep. 30 % of BS

Intangible assets 3 121 3 620 3 532 4 242 10% Share capital 21 500 500 500 1%

Rental equipment 1 215 1 233 1 277 1 309 3% Retained earnings 12 020 18 297 16 859 21 282 51%

Other property, plant and equipment 2 271 2 473 2 421 4 775 11% Equity attributable to owners of the parent 12 041 18 797 17 359 21 782 52%

Investments in associates and joint ventures 94 208 91 209 1% Non-contolling interest 6 50 47 52 0%

Financial assets and other receivables 1 101 1 119 1 199 1 135 3% Total equity 12 047 18 847 17 406 21 834 53%

Deferred tax assets 425 543 526 717 2% Interest bearing liabilities 2 250 5 095 1 097 7 877 19%

Total non-current assets 8 227 9 196 9 046 12 387 30% Post-employment benefits 181 283 212 640 2%

Inventories 8 440 10 516 10 789 11 392 27% Other liabilities and provisions 289 412 418 399 1%

Trade receivables 6 271 8 005 7 821 8 068 19% Total non-current liabilities 2 720 5 790 1 727 8 916 21%

Other receivables 1 362 1 289 1 277 1 340 3% Interest bearing liabilities 4 808 1 702 5 786 750 2%

Income tax receivables 287 333 576 472 1% Trade payables 3 966 4 711 4 421 3 701 9%

Financial assets 1 152 944 1 029 1 052 3% Income tax liabilities 436 605 683 510 1%

Cash and cash equivalents 1 808 5 872 3 949 6 814 16% Other liabilities and provisions 3 570 4 500 4 464 5 814 14%

Total current assets 19 320 26 959 25 441 29 138 70% Total current liabilities 12 780 11 518 15 354 10 775 26%

Total assets 27 547 36 155 34 487 41 525 100% Total equities and liabilities 27 547 36 155 34 487 41 525 100%

Cash flow

Q3 2019

29

2017 2018 2019 2018 2019

MSEK Full year Full year 12M Q3 Q3

Operating cash flow

Net cash flow from operating activities 5 176 4 324 6 538 920 1 852

Net cash from investing activities 5 543 -1 337 -1 903 62 -71

Acquisition and divestments of subsidiaries 137 546 1 058 - -33

Other adjustments -6 246 351 410 -205 135

Operating cash flow 4 610 3 884 6 103 777 1 883

2017 2018 2019 2018 2019

MSEK Full year Full year 12M Sep Q3 Q3

Cash flow from operating activities

Operating profit 5 930 7 385 8 282 1 898 1 927

Depreciation, amortization and impairment 1 254 1 369 1 846 362 556

Capital gain/loss and other non-cash items -134 101 -305 199 -104

Net financial items received/paid -344 -483 -409 -88 -113

Taxes paid -666 -1 747 -2 226 -741 -559

Pension funding and payment of pension to employees -90 -52 -39 -10 -13

Change in working capital -403 -1 875 -310 -599 126

Increase in rental equipment -793 -896 -964 -215 -181

Sale of rental equipment 422 522 663 114 213

Net cash from operating activities 5 176 4 324 6 538 920 1 852

Cash flows from investing activities

Investments in other property, plant and equipment -424 -577 -537 -136 -111

Sale of other property, plant and equipment 70 26 45 8 18

Investments in intangible assets -289 -459 -504 -102 -90

Sale of intangible assets - - 1 - 1

Acquisition of subsidiaries -137 -546 -1 198 - -107

Divestment of subsidiaries - - 140 - 140

Proceeds to/from other financial assets, net 6 323 219 150 292 78

Net cash from investing activities 5 543 -1 337 -1 903 62 -71

Cash flows from financing activities

Dividends paid - - -1 260 - -

Dividends paid to non-controlling interest - - -8 - -1

Dividends paid to Atlas Copco -5 178 - - - -

Acquisition of non-controlling interest 6 - - - -

Sale/ Repurchase of own shares - -1 307 88 -1 100 248

Change in interest-bearing liabilities -889 2 367 -749 -92 -152

Net cash from financing activities -6 061 1 060 -1 929 -1 192 95

Net cash flow for the period 4 658 4 047 2 706 -210 1 876

Cash and cash equivalents, beginning of the period 481 1 808 3 949 4 205 4 883

Exchange differences in cash and cash equivalents -39 17 159 -46 55

Other cash flow from transactions with shareholders -3 292 - 0 0 0

Cash and cash equivalents, end of the period 1 808 5 872 6 814 3 949 6 814

Key ratios

Q3 2019

30

2017 2018 2019

MSEK Full year Full year Q3

Basic earnings per share, SEK 3.55 4.50 1.11

Diluted earnings per share, SEK - 4.49 1.11

Basic number of shares outstanding, millions 1 212 1 206 1 202

Diluted number of shares outstanding, millions - 1 206 1 202

Equity per share, period end, SEK 9.94 15.63 18.19

Operating cash flow per share, SEK 3.80 0.30 1.57

EBITDA, MSEK 7 183 8 753 2 416

EBITDA margin, % 22.9% 22.9% 23.8%

Adjusted EBIT, MSEK 6 093 7 779 2 160

Adjusted EBIT margin, % 19.4% 20.3% 21.3%

Net working capital, end of period, MSEK 10 173 12 897 15 120

Average net working capital 9 991 12 158 14 124

Average net working capital/revenues, % 31.9 31.8 34.3

Average capital employed, MSEK 21 674 23 086 28 050

Return on capital employed, 12 month % 27.4 32.0 29.5

Capital employed turnover ratio 1.4 1.7 1.5

Return on equity, 12 month % 29.1 33.2 30.6

Net debt, MSEK 5 424 1 208 2 416

Net debt/EBITDA ratio 0.75 0.14 0.24

Debt/equity ratio, period end, % 45.0 6.4 11.1

Equity/assets ratio, period end, % 43.7 52.1 52.6

Number of workrelated accidents per million working hours 4.3 3.4 2.5

Sick leave, % 2.2 2.2 2.2

MWh energy from operations/Cost of sales (MSEK); 12M 8.5 7.6 7.1

Transport CO2 (tonnes)/Cost of sales (MSEK); 12M 6.2 5.6 4.7

Number of employees, period end 12 948 13 847 14 670

Additional workforce, period end 1 397 1 610 1 485

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