“Technologically advanced” equipment could accelerate growth in Epiroc’s service revenues, which have outpaced machine sales in the past five years and totalled circa-US$3.2 billion last year, according to CEO Helena Hedblom.
Writing in the company’s 2022 Annual and Sustainability Report, Hedblom said Epiroc was providing service and spare parts for about half of its installed equipment base.
“We can grow this share and our service revenues by expanding our offering, improving the value propositions to customers, and through internal improvements,” she said.
Stockholm-listed Epiroc’s revenues grew at a compound annual growth rate of 8% between 2015–2022. Aftermarket revenues are up an average 11% a year over the past five years and represented 69% of total sales in 2022.
Epiroc’s 2022 report said the number of Epiroc machines enabled with telematics was more than 7000 at the end of 2022.
“We capture a larger share of the service potential for more technologically advanced equipment, so the technology shifts to more automation, electrification and digitalisation are encouraging,” it said.
“We see that our relationships with our customers are strengthening; transitioning more from transactional to partnerships.”
Epiroc says the creation of a dedicated “customer-focused” digital solutions division and appointment of a chief technology officer underlined its new focus on digitalisation. However, in the absence of a dedicated technology reporting channel, its accounting for a bunch of added tech-company revenues remains ad-hoc. For example, Remote Control Technologies automation and remote-control, and Radlink wireless tech, is recorded under ‘service’ while Geoscan geological imaging software comes in under ‘equipment’.
Tech-related revenues, a big part of the US$450 million of sales added via the nine most recent acquisitions, are growing.
Epiroc says most of its machines “have the potential to be automated or remotely controlled”.
“The number of fully autonomous machines on-site, relative to the full fleet, is still rather small but demand remains strong and is ever-increasing.
“After finalising the acquisition of RCT [Remote Control Technologies] at the end of 2022, Epiroc has become a world-leading automation solution provider for increased productivity and safety.”
Epiroc’s US$300 million acquisition of Australia’s RCT was among a spate of M&A deals completed or announced in 2022, when the Swedish manufacturer was the most active buyer of tech companies among the world’s leading mining equipment makers.
It most recently wrapped up the US$310 million purchase of another Australian-based firm, CR, adding to its digital product portfolio as well a line of ground engaging tools.
“The acquired companies broaden our offering of solutions for automation, digitalisation and electrification, as well as extending our equipment and aftermarket offering,” Hedblom said.
“Today, an estimated quarter of all global copper mining takes place underground, and it is expected to grow to about a third by 2030”
Technology is expected to help mining companies and contractors improve low equipment utilisation rates, potentially boosting productivity and ultimately lifting parts wear rates and service requirements.
“It might come as a surprise that the utilisation rate of equipment in mining and infrastructure is lower than in many other industries,” Epiroc’s latest annual report says.
“In an underground mine, for example, the utilisation rate of machines can be as low as 30%.
“A higher utilisation rate leads to higher productivity and lower operating costs, which can be achieved by adding advanced solutions such as automation and connectivity, including data-driven service and monitoring.”
Underground machines and aftermarket sales account for about half of Epiroc’s current revenues.
“The share of underground mining is increasing, especially for minerals such as gold and copper,” the company says.
“Lower ore grades, deeper deposits and more regulatory pressure to conduct underground mining instead of openpit mining, contribute to the trend towards underground mining.
“Today, an estimated quarter of all global copper mining takes place underground, and it is expected to grow to about a third by 2030.
“The existing underground mines are also getting deeper; on average 30m each year.
“Deeper mines mean higher demand for enhanced safety features, automation and battery-electric equipment. Automation contributes to better utilisation of the equipment and battery operation means a lower need for ventilation, which means large cost savings and a healthier working environment.”