Lagging machine deliveries not curbing Epiroc growth


Richard Roberts

Top image :
Epiroc’s “World Expo” in Orebro, Sweden, in May attracted about 200 customers from 25 countries.
‘We landed many acquisitions last year and that is now contributing very nicely’

Epiroc CEO Helena Hedblom says global scaling of former regionally focused mining technology and other acquired businesses is paying handsome sales dividends for the Swedish equipment manufacturer as it continues to grapple with constraints on its ability to get heavy machinery from its factories into customers’ hands.

The company booked SEK15,436 million (US$1505 million) of orders in the June quarter, up 15% year-on-year, “supported by acquisitions”. Revenues jumped 34% yoy in the period to SEK15,910 million (US$1550 million), and operating profit, or EBIT, was up 43% yoy at SEK3413m (US$333m).

Hedblom said on a results call a “strong contribution from acquisitions” helped push quarterly revenue to a record high.

“I’m pleased to see our recent acquisitions have performed even better than anticipated,” she said.

“Several of the players have had a strong presence in certain regions and we have been successful in scaling them globally now.”

Analysts and media heard at Epiroc’s recent Capital Markets Day nearly two dozen acquisitions made by the company in five years had added about US$650 million of annual revenues. The global mining and construction machines and parts business of Atlas Copco, formed in 1873, became Epiroc in 2018.

Hedblom said this week the new company’s rolling 12-month revenues had expanded by 65% – an average 11% a year – to circa-US$5.56 billion, since Epiroc’s formation. Adjusted EBIT had meanwhile almost doubled to US$1.27 billion.

“That is a strong achievement that we can be proud of,” she said.

While acquisitions continue to be dilutionary to EBIT, Epiroc remains confident it can maintain its track record of margin adjustment to match its plus-21% group operating margin.

“We need to secure growth as well and I think when we do the inorganic piece we very seldom find companies with the same margin as ours,” Hedblom said.

“We landed many acquisitions last year and that is now contributing very nicely when it comes to the growth this year.

“[But] profitable growth is the name of the game and that’s what we’re looking at.”

The briefing this week heard Epiroc continues to expect outbound logistics to “normalise” towards the end of this year. Container freight rates and lead times had improved considerably, but sea shipment of large equipment remained problematic.

“Step by step it is improving … We have seen improvement during the [June] quarter,” Hedblom said.

“We are still working to get equipment delivery lead times to more normal levels.

“For a number of quarters we have seen improved output from our factories but have not been able to translate it into [a commensurate] increase in revenues.”

Hedblom said while a basket of key commodity prices was about 20% lower than a year ago, they remained at historically strong levels.

“I don’t see a shift in [customer] behaviour due to the weakening of commodity prices,” she said.

“[Our orders are] roughly 50-50 for replacement versus expansion [equipment] … which speaks to a continuing willingness to prepare for higher production output.

“When it comes to the aftermarket it is clear many customers are seeing the benefit when it comes to rebuilding machines. And I think that is both [because they] can see it is a faster way to get higher productivity and also to incorporate new technologies.”

 

Leave a Reply

Latest News
AtricoAdvertOct2021

Not registered? Register Now

Powered By MemberPress WooCommerce Plus Integration