Mine fast-tracking in the USA and other parts of the world is “good news” for major equipment manufacturer Epiroc, but trade volatility could definitely flip the sector’s otherwise favourable supply landscape, CEO Helena Hedblom says.
Speaking on the company’s first-quarter results call, Hedblom said mining order and sales activity remained strong, reflected in Epiroc’s 10% higher (year-on-year) Q1 revenues of SEK15.53 billion (US$1.62b) and 17% higher orders of SEK16.6b (US$1.72b) and the company’s outlook remained favourable. Mining accounted for 78% of orders.
The addition of 10 new mining and metals projects to America’s FAST41 (Title 41 of the Fixing America’s Surface Transportation Act) program was good news.
“We see these types of initiatives actually in several parts of the world, with fast-tracking of mining permits, etc,” Hedblom said.
“It is becoming a strategic thing in this geopolitical landscape to safeguard your [raw materials] capabilities or sourcing. For us that is good news – the expansions for existing mines – but we are also seeing around the world more activities around greenfields, so that all in all is positive for us.
“We see lots of orders for replacement machines in more or less all parts of the world and we continue to see the pipeline looks good. The replacement of some of the large fleets that we put into the market in 2011-12 are coming up for replacement and those are quite big-ticket items. So it’s both a strong pipeline when it comes to replacement of existing fleet but it’s also a strong pipeline of large [new] orders.”
Hedblom said while it was too early to quantify the impact of the US-China led tariff war, there was, “of course, an impact”.
“We are busy with mitigating actions; redirecting routes of our distribution, for example, from Europe, not going through the US and then from Canada or Mexico or South America we are going direct instead. We are also leveraging our global footprint when it comes to manufacturing because we have dual capabilities for many products. So that is something that we can very quickly now put in place.
“It’s a changing environment but the organisation is fast-paced when it comes to making very tactical decisions when it comes to situations like this to mitigate the impact.”
Epiroc’s Q1 revenue split was 67% aftermarket and 33% equipment sales.
Hedblom said aftermarket service and parts business was expanding on the back of a growing global machine population.
“We have a strong position on parts and service and the more we grow our service contracts the more we are building then the foundation for our parts growth long term,” she said.
“[A significant] portion of the fleet is a young fleet out there because we have put a lot of equipment on the market in the last couple of years. It is not yet consuming so much parts.”
Asked again about further technology acquisitions in the wake of Weir’s US$800 million purchase of Australian mining software firm Micromine, Hedblom said, “we see that we have a good development journey now organically in digital and you will see it on the orders received”.
“We said in our Q4 reporting we were up roughly 30% on orders for digital.
“We have not as yet seen that fully in the P&L. This is about scaling. We have acquired regional players and we are now scaling and with scaling margins will improve.
“We are happy with the platform. We have acquired many capabilities and during last year we were putting all of this together into a very precise offering and it is that full offering now and the bundling of all of these solutions … that we see providing our customers with the solutions that they need for the future.
“Of course we are also developing new solutions based on the capabilities that we now have.
“There could still be of course gaps that we would like to close from an acquisition standpoint.
“But I think right now I am pleased with the portfolio that we have and the development of orders.”
