Strong parts and service activity and contributions from its spate of recent acquisitions have kept Epiroc’s revenues on an upward trajectory in the first quarter of 2023 despite continuing equipment delivery headwinds and the loss of its fourth biggest market, Russia.
The Swedish manufacturer said operating profit rose 20% year-on-year in the period to SEK3.16 billion (US$308 million) on 25% higher revenues of SEK13.87 billion (US$1.35 billion). Orders were up 10% yoy at SEK15.15 billion (US$1.48 billion), including the circa-$50 million automation contract at the Roy Hill iron ore mine in Western Australia.
The project to convert nearly 100 surface mine trucks to driverless operation is expected to make Roy Hill the world’s largest autonomous mine.
Newly acquired CR, Mernok Elektronik and AARD Mining Equipment have added a further $235 million of annual revenue.
Epiroc saw some Q1 margin dilution (operating margin 22.8% versus 23.7% a year ago) as it continues to integrate a dozen companies acquired in the past 18 months or so. All up, the acquisitions add about $525 million to Epiroc’s top line.
“We seldom find companies that come with the same margin as we deliver,” CEO Helena Hedblom told analysts.
“So there will be initial dilution.
“Our ambition is always to bring it up to the level we have in our normal offering.
“[That] takes different times depending on the acquisition … but the focus from us is always to lift the profitability quarter on quarter.”
Hedblom said supply-chain challenges were likely to remain a constraint into the second half of 2023.
“In certain lanes we see improvements and in others we still see challenges,” she said.
The Europe to Australia “lane”, for example, remained problematic with “very long lead times”.
“Also the predictability is not where we need it,” Hedblom said.
“And of course Australia is a big market for us.
“All OEMs [original equipment manufacturers] are facing the same types of challenges when it comes to inbound and outbound supply chain issues.
“Customers are prepared to wait for equipment even though lead times are longer than they’ve been historically.”
Hedblom said underlying mining market demand for new equipment and rebuilds remained “very healthy”, the latter partly driven by availability issues with new machines.
“I see high activity levels among the large players as well as the mid-sized players in the different regions,” she said.
“If we look in the overall pipeline there is a good share of greenfield investments as well [as brownfield spend].”