Epiroc Aktie

Hello, and a warm welcome to the Epiroc Q2 results presentation. My name is Karin Larsson, Head of Investor Relations and Media here at Epiroc. And joining me today are our CEO, Helena Hedblom; and our CFO, Hakan Folin. As this is a very busy reporting day in Sweden, we aim to keep this call shorter than usual and expect to wrap up already within around 45 minutes. And as always, we will have a Q&A session after Helena and Hakan have presented the results. You know the drill.

Helena, please go ahead.

Thank you, Karin. So we delivered a strong second quarter, supported by continued high customer activity and a strong demand in mining. Orders received increased 13% organically to SEK 17.3 billion. And organic equipment orders grew 30% and service orders increased 6%. Invoicing was as anticipated, strong in the quarter and increased 11% organically to SEK 16.7 billion.

Our profitability improved further, up 17% year-on-year, translating into an EBIT margin of 19.9% adjusted, which is only the LTI program, the margin was 20.1% compared to 19.7% last year. And the improvement was driven by efficiency measures implemented over recent quarters and high invoicing. Looking more into the details on the orders were up 13%, both in total and organically to SEK 17.3 billion, and the growth was driven primarily by mining, and our equipment orders increased organically by 30%. The large orders amounted to SEK 720 million, and these are mainly brownfield and replacement orders.

Exploration was one of the strongest growing businesses, and this is encouraging as exploration activity is an important indicator of long-term confidence in the mining industry and future project development. And the investment sentiment within infrastructure and construction projects has improved, which led to stable order development. So this is the ninth consecutive quarter in which we have achieved organic order growth, and I remain optimistic also on the pipeline onwards. Business cooking looks strong, and there are many large tenders in which we are involved in. The tenders are mainly within copper and gold and within brownfield and replacement.

We also continue to see encouraging adoption of our automation and digital solutions as customers increasingly integrate these technologies into their operations, our relationships deepen and our position as a long-term productivity partner strengthens.

So let me move on to innovation, an important driver of our long-term value creation. This is why customers choose us. And what is particularly encouraging is that our innovation agenda is very closely aligned with our customers' priorities. So in June, we welcomed around 150 customers from across the world to the Epiroc World Expo, where we showcased how technology can help address some of the industry's most important challenges, deeper mining, lower ore grades, increasing safety requirements and the need for higher productivity. A common theme across many of the solutions we presented was to increase safety. And the best way to increase safety is to remove people from dangerous environments. And we showed our customers that we continue to expand the boundaries of what can be done remotely and autonomously from drilling and rock reinforcement to underground exploration and material handling.

On digitalization, our OEM agnostic digital solutions, collision avoidance, technologies, and advanced analytics help protect people while providing customers with real-time operational insights, helping them make better decisions and improve performance across their operations. Electrification is another area where we [Technical Difficulty].

We are having some technical difficult, but we hope that we will soon be back again. Thanks.

Thank you for your patience. We had some technical problems here in the studio, and now we're back. So I would like to continue on innovation.

So electrification is another area where we continue to lead. And during the Epiroc World Expo, we showcased our growing battery electric offering, including the Minetruck MT66 S eDrive as well as unique and appreciated charging and battery solutions. And finally, we continue also to focus on sustainable productivity, whether through circular solutions, smarter ground support, optimized mine design or advanced service offerings. And our ambition is to help customers produce more with fewer resources and a lower environmental footprint. The strong engagement level that we saw at Epiroc World Expo is very encouraging. So please let me share a video from the event.

[Presentation]

So let me now turn to our aftermarket business, one of Epiroc's key strengths and an important contributor to resilience and profitability.

Aftermarket accounted for 64% of revenues in the quarter with service representing 41% and Tools & Attachments 23% of group revenues. Service orders increased organically by 6%, while Tools & Attachments grew 4%. Demand for our service solutions remains solid, reflecting the value customers place in availability, reliability and operational performance. And I'm confident about confident about our leading aftermarket offering and position both in the short and in the long run. Through our strong local presence and expanding SOEs footprint, we help customers improve productivity and safety while maximizing equipment uptime.

So Hakan, would you mind presenting the financials, please?

Sure, Helena, I would be happy to do so. Our revenues increased 10% to SEK 16.7 billion, and that corresponds to 11% organic growth. We had high equipment invoicing, and it's now 36% of group revenues coming from equipment, which is meaningfully higher than we saw in the previous year. And this is due to that we have successfully ramped up our production after having a quite long period of strong equipment growth. And doing that, our lead times remain at normal levels.

Our EBIT increased 17% to SEK 3.3 billion. That corresponds to an operating margin of 19.9% compared with 18.7% a year ago. Items affecting comparability were minus SEK 33 million, and they are fully related to the share-based long-term incentive program. If we look at the adjusted EBIT, our operating profit increased 12% to SEK 3.35 billion, and the adjusted operating margin improved to 20.1% from 19.7%. And as Helena just mentioned, the organic improvement is thanks to efficiency measures that we have taken in previous quarters as well as a high level of invoicing. It's also worth noting that the impact from tariffs was lower than in the previous quarter.

In Q1, we said it was 0.5 percentage point on the margin. And the lower level now is both because we have taken mitigating actions and also that the tariffs themselves are at an absolute lower level. Currency was a headwind on EBIT, but the positive effect I just mentioned more than offset the currency. So overall, we are pleased to see that our strong execution is yielding results on the bottom line.

And with that, let me turn into Equipment & Service. This was yet another strong quarter, and the orders received increased 17%, all of this being organic to SEK 13.4 billion. Demand for exploration customers was particularly strong with high double-digit growth, while activity in Infrastructure & Construction remained rather stable equipment orders increased by 30% organically, supported by SEK 720 million in large orders. And I would say that the vast majority of orders that we win are from existing customers, that either they replace Epiroc fleet or they expand their current operations. And the mining equipment business is rather sticky and lumpiness of large orders, I would say, it depends more on replacement timing than anything else.

Service orders in the quarter continued to develop well, increasing organically by 6%, reflecting both high customer activity and also an aging fleet. And as shown in the group -- sorry, as shown in the bridge, the growth was entirely organic, and there was no material impact from currency or structure. And then on to revenues and profitability in Equipment & Service business area. Revenues increased by 12% to SEK 12.8 billion. And this corresponds to a 13% organic growth, and the development was supported by continued strong mining activity, high equipment deliveries and solid service growth.

If we look at the mix then, equipment revenues represented 46% of revenue compared to 44% in Q2 '25. So the underlying mix is negative on the profitability. Still, we were able to improve the operating margin 23.1%, which is up from 22.5% in the same quarter a year ago. On the right-hand side on the slide, if we look at it adjusted, the margin improved slightly to 23.1% from 23.0%. The key driver here for the margin improvement is high invoicing as well as efficiency measures that we have taken.

Now moving on to the other business area, Tools & Attachment. Orders received increased here with 3% to SEK 3.9 billion. Organically, the growth was 4%, while currency then had a negative impact of 1%. Demand for rock drilling tools, ground support consumables and other mining-related products remain healthy, whereas demand from construction customers was rather stable. The Tools and detachment revenues increased by 5% to SEK 3.9 billion, and this corresponds to a 7% organic growth, while currency had a negative impact of 2%. EBIT increased by 30% to SEK 488 million, resulting in an operating margin of 12.7% compared with 10.3% a year ago.

If we look at it adjusted, again, on the right-hand side of the slide, EBIT increased by 3% to SEK 488 million, while the adjusted operating margin was 12.7% compared with 12.9% in the previous year. And if we look at the bridge then, the underlying business contributed positively to EBIT, again, supported by efficiency measures that we have implemented and this more than offset then the headwind that we got from currency. The increased input costs for Tungsten, which, as you might remember, impacted the Tools & Attachment margin with more than 1 percentage point in the previous quarter has been mitigated to a large extent. The surcharges to customers as well as the recycling program are contributing positively, and the negative impact is therefore significantly less now in the second quarter.

So moving on to the next slide. Here, we look at the cost and the cost for admin, R&D and marketing, they were higher in absolute terms, but lower in relation to revenues compared to Q2 last year. So in percentage of revenues, it was 16.2% this year versus 17.0% last year. Net financial items came in at minus SEK 130 million, which was almost exactly on the same level as last year when we had SEK 131 million. On the tax side, the tax expense was SEK 760 million, and this corresponds then to an effective tax rate of 23.9%, which is in the guidance we have given of 22% to 24%.

Moving on to the cash flow. Our operating cash flow came in at SEK 1.9 billion, and you can compare that with SEK 1.1 billion in the previous year. Main explanation for the improvement is that we have higher operating profit, and we also paid lower taxes. And when we look at the cash conversion rate, which we do on a 12-month basis, it's now at 93%, which is n line with last year and an improvement from Q1.

Okay. If I then turn into net working capital. It amounted to SEK 24.9 billion at the end of the quarter, which is an increase of 10% compared with a year ago. But as a share of revenues, however, net working capital improved slightly to 37.1% from 37.5% a year ago. So why have we then increased our working capital? Well, it's mainly driven by higher inventories and higher inventories are reflecting then the high activity level that we see in the market. Inventories increased by SEK 4.6 billion compared with last year, but accounts payables increased with SEK 2.6 billion, which is then partly offsetting the inventory buildup that we have.

On the capital efficiency side, our net debt decreased to SEK 11.4 billion, down by almost SEK 2 billion from SEK 13.3 billion last year, and we do have a strong financial position. Our net debt-to-EBITDA ratio is as low as 0.75 to be compared with 0.82 last year. Our return on capital employed was 19.3% it down from 20.2%, which is explained by lower profit. And here, I would like to remind them that these figures are rolling 12 months figures. And sequentially, we actually had the first positive improvement in the return on capital employed for quite some time, and it was up from 18.5% in Q1.

And before I hand back to Helena, I would like to leave you with a bit broader and a more long-term perspective. In June 2018, Epiroc was listed. So it's now 8 years ago, we were listed as a stand-alone company. And since then, I would say that we have proven that we can successfully convert customer demand into profitable growth and strong cash flow generation. So if we look back to 2018, our orders have increased by 80%. But more importantly, we are translating that growth into an even stronger development in earnings and in cash flow. We can see that on the revenues, which have increased by 83%, same as the adjusted EBIT but the earnings per share as much as 94% and the operating cash flow has actually more than doubled since when we were listed 8 years ago.

And we do take extra pride in having an EBIT and an adjusted EBIT that over time are more or less the same, and they are up 8% per year. So basically, what you see is also what you get. And these results are created, thanks to that we have a continuous focus on ensuring we have profitable growth.

And with that, I will hand back to you, Helena on some comments on the outlook and summary.

Thank you, Hakan. And I would like to add a comment then on our success over time. When I ask our customers why they choose us, they very often say that our people at Epiroc make the difference. We are present in remote areas committed to finding a and innovating new solutions to improve their operations. And most importantly, we are there when it counts as a true partner.

So let me conclude by summarizing what has been another strong quarter for Epiroc, we continue to see high customer activity, particularly in mining, resulting in organic order growth of 13% and orders received of SEK 17.3 billion. We also delivered strong revenues, supported by high equipment invoicing and a resilient aftermarket business. Profitability the margin above 20% reflecting both solid operational execution and the benefits from efficiency measures implemented across the group. And continued to strengthen the quality of our business. And in the near term, we expect mining demand to remain high and demand from infrastructure customers to increase somewhat.

Thank you, Helena. Thank you, Hakan. So it's time for the Q&A session. And thank you for your patience earlier when we had the technical issues. We will make sure you will get your questions on please open up the line.

The next question comes from Gustaf Schwerin from Handelsbanken.

I have a few on the Equipment & Service margin. Firstly, if I can ask on the revenue mix within service. If I remember this correctly, you had a fairly high share of parts and kits in Q1 invoicing but at the same time, a pretty high share of midlife rebuilds in terms of how service mix this quarter compares to Q1? That's the first one.

On orders, we have less midlife upgrades in this quarter compared to Q1. I would say on revenue, it was not really that big difference. But on orders received, it's a difference.

Okay. And when we think about the invoicing of those midlife rebuilds you took in Q1, should we expect that to have a negative mix effect as we head into Q3?

Typically, midlife rebuilds are also planned over longer time. So you sell them do it. You don't turn them as quickly as you turn parts and service, the traditional parts and service business. And that part of the business you typically turn in 1 month. Midlife upgrades can be spread out over 6, 7 months, for example. So it's -- I would say it will come gradually. It's not that it would be like the month after we have received the orders.

Okay. And then looking at your equipment sales now, you are pretty much at historical peak levels. So we don't really know what happens on higher invoicing levels. I mean, how much would you say adding another SEK 1 billion in invoicing due to your operating leverage? Or maybe put this way, at what level of equipment sales, do you think it doesn't have a negative mix effect within Equipment & Service?

I think it's fair to say that there will, of course, be a mix effect when invoicing a lot of equipment. But at the same time, the last machines that we deliver, we have very good flow-through in that P&L. So of course, we're growing now very nicely on equipment, but that's also a timing issue because eventually, that will start to generate aftermarket, of course.

Okay. But to push you a little bit, is there a level of equipment sales where you wouldn't see this impacting your margin?

I think that we will not -- I don't think I will comment on that because it's -- that depends totally, I would say, on the type -- what type of equipment you have in that order stock, but there will always be a difference, I would say. I wouldn't say that there will be not the mix effect. There will be a mix effect.

The next question comes from Chit Sinha from JPMorgan.

I have just one question regarding the mining service growth of 6% in the quarter. How does the outlook for aftermarket growth look in the coming quarters? I mean, put another way, can we expect the growth accelerating from here? I'm just trying to contextualize it versus one of your competitors, which has reported double-digit development in this quarter.

Yes. So I think we had higher growth in -- and this can vary between the quarters. As I mentioned, we had fewer midlife upgrades in this quarter compared to last quarter. But the pipeline, of course, with an aging fleet, the potential for midlife upgrade is great out there. So I would say that I don't -- what I read in the aftermarket is that it's high activity levels everywhere now, given the commodity prices and of course, customers trying to maximize, let's say, the production levels.

And if you don't mind me adding here as well, I want to highlight that midlife upgrades are also a very profitable business for Epiroc.

The next question comes from Alex Jones from BofA.

Yes. Can I just follow up, first of all, on the service growth question. I guess, if I average the last 2 quarters, you've done 9%, which is sort of the high single-digit range. we've come to expect in the long term. But one of your peers just talked about sort of upside potential to that given an aging fleet, more advanced machines and digital as well. So should we expect high single digit going forward in service? Or do you see the potential to actually be more in the double digit potentially going forward, including strong spare parts growth, which is what your peer highlighted?

I think we have, of course, our financial target, which is 8% growth. And of course, a big portion of that needs to come from the aftermarket. But as you rightly point out here, with an aging fleet, with more technology in the equipment, our ability to capture customer share is increasing, I would say, as we -- for every quarter that we put more and more technology out in the market. So I would say that -- but high single digit is also -- it requires, of course, a lot of activity to capture that. But of course, the opportunity is there.

And I've said that, I think, many times as well, and we said it at the Capital Markets Day as well, I continue to see one of the biggest opportunity for us to continue to grow the aftermarket business.

Okay. And then just secondly, on large orders, the SEK 720 million this quarter, is that sort of disappointing in the current market environment? I recognize your comments about it being lumpy quarter-to-quarter, but should we think about this being a sort of abnormally low level given that lumpiness and potentially higher numbers ahead? Or given the activity you see in the market, is this sort of a reasonable level within normal fluctuations?

I think it's normal fluctuations. If we look -- we had higher numbers in Q1. So it varies quite a lot between the quarters. But if I look on the pipeline and the size of the tenders that are out, it's fairly big tenders. So I would say it's -- I'm more looking into, let's say, the underlying activity levels, which is also healthy in this quarter. But the lumpiness will always be there depending on when customers take their investment decisions.

The next question comes from Christian Hinderaker from Goldman Sachs.

I wanted to ask again on service orders, I'm afraid. Last quarter, obviously, you had 12% organic growth. You said that midlife was driving that and was above the service growth level. Last quarter was anything single digit? And then as we think about that 6 percentage point deceleration, is there anything else in the service mix that slowed? Or you're saying it's all just the services?

There's nothing else that has slowed. So it's healthy growth in all components of service, but fewer midlife upgrades. And the mid-life upgrades can be a sizable amount as well. So that can, of course, create swings between quarters.

And then as we think about the cost efficiencies, you talked about those being a margin boost. But if I look at your SG&A sums, they're up 5% year-on-year. Admin spend is up 7%, both year-on-year and quarter-on-quarter. Should we think about those savings efforts then as just being on the production side, there ambitions to reduce costs on SG&A? How do we think about that?

Yes. So it's a combination. But what we see in the result is it's a clear improvement in our absorption rates in our factories. Of course, we have been consolidating sites and also been, I would say, working on the efficiency in our production sites as well coverage in our workshops. But there is also, of course, a variable portion in our functional costs, which is very much related to volume, logistics, for example.

So it is a bit of gassing and braking at the same time with this strong order growth that we have, and we need to make sure that we can accommodate everything, while at the same time, we want to make sure we drive efficiency in the back office functions as well. So when we looked at it as a percentage, as we showed in the presentation, yes, it's positive. But we're obviously also looking at it just like you did in absolute terms, trying to be -- make sure we are as efficient there as well.

Maybe a quick housekeeping one, if I can. Can you help quantify the tungsten effect quarter-on-quarter?

Sorry, quantify the Tungsten. Okay. I would say when last quarter we talked about it on the BA leve, and then we said it was more than 1%. I would say, for this quarter, on BA level, it's more or less negligible.

The next question comes from John Kim from Deutsche Bank.

I wanted to see if we could get a little bit more color on what you're seeing in the cadence around exploration CapEx. I think previously, you had spoken to business cooking, healthy pipelines. Could you also comment a bit on speed to FID? Are you seeing any changes in behavior, people speeding up, slowing down, given the various things that have happened on geopolitics in the rest of this year?

So on exploration, we see good activity levels, both on equipment as well as on consumables. If I look on it from a regional perspective, there is a lot of exploration ongoing in Africa, for example, but also in the Middle East, where high activity levels, which is maybe a little bit new areas compared to the traditional mining markets. There's a lot of exploration ongoing close to existing mines, which is more than brownfield exploration or planning for expansion projects.

I do see, when I look at the business cooking map of larger investments that some new countries are establishing here as players in this industry moving forward. We see projects in Argentina for example, that has been there for a long time, but now start to materialize, et cetera. So I would say I do believe that political situation or drives the need for to, say, secure value chains from different directions, of course, in the world. But that clearly drives the need for exploration. And here, we are very well positioned with our, say, total portfolio and our solutions, we have a strong presence here, and we are capturing that opportunity as we speak.

But can you comment at all on speed to decision, FID is getting slower, faster, about the same?

I wouldn't say that -- if I say -- if it's a permitting time you're referring to, I would say that a lot of government are, of course, working towards that to shorten the time from a decision to you actually can start mine. If you can say that generally, that has an impact in the world, I'm not sure I can do that yet. But it's a lot of ambition in that direction to speed for permitting.

The next question from Max Yates from Morgan Stanley.

Could I just ask about your incremental margins in the quarter? So I understand these kind of volatile each quarter, you were at sort of 66% in equipment and services that's kind of fallen close to 30% this quarter. I guess I'm just trying to understand you've been through a period where margins have fallen kind of pretty consistently over the last couple of years. I guess, should we be expecting as you go through a period of kind of cost rationalization that we see sort of above-average incremental margins over the next kind of 6 to 8 quarters?

I'm just trying to sort of think how do we kind of visualize some of the -- or see some of these kind of internal actions, some of the efficiency savings and service, some of the factory closures in the infrastructure business. When we think about actually modeling this, that would be the logical line where I would expect to see kind of above-trend margin recovery over the next 2 to 3 years as the business is growing. So any way you can help us think about that would be helpful.

I think if I look on the Tools & Attachment business or segment, we started, of course, the activities there. And there, we have clearly seen the improvements. And of course, when you look at it from a flow-through perspective, we turned that part earlier than we turned equipment and service. But it's good to see now as a group, we are delivering profitable growth. And as our focus is to make sure that we continue to do that, and we continue to stay focused on efficiency measures.

So it's a solid quarter, but I'm still not happy with the margin. So there is more that we can do, of course. So we don't say we continue to work on our efficiencies. At the same time, as Hakan said, we, of course, need to capture the opportunities. We are growing in a very, very strong way now across the different businesses, but the focus on efficiency is still here.

And maybe just as a follow-up because I kind of appreciate you've said the equipment and service business looks a bit different from a kind of mix perspective. I guess when we think about the margin recovering and the fact that you were at kind of tools and attachment margin levels that on average were 18% in '21 and '22. Do you think as we start to get an infrastructure recovery, those kind of margins are possible again? Or would you also put this division in the category where the mix is just different because of Stanley and even with synergies with Stanley, we shouldn't really be aspiring to het back to those kind of levels. I guess just any kind of framing of how to think about midterm margins and Tools & Attachments?

We were at 18%, as you said, I would say maybe a more -- that was very high 18%. Even one quarter, we were at 19% for T&A, but I think maybe a more normalized margin for that business at that time was around 17%. And if we look then what has changed, the big change is, of course, the acquisition of STANLEY and that the market is where it is.

So -- but Stanley when we acquired them were between 15% and 20% on [ EBITA ] level. And we don't -- if the market comes back, we should be able to get back to that same level for Stanley.

And then we also need a recovery then for our other attachment business. But there's nothing structurally or fundamentally that has changed in the market. So with the market coming back being strong again, we see opportunities to get back to that level. Then, of course, need to take into account the A part then of Stanley.

The next question comes from Edward Hussey from UBS.

Just 2 from me. The first question is just on a follow-up on equipment revenue growth. Obviously, a very strong quarter, but we sort of only saw book-to-bills pick up significantly in Q1, and you usually have lead times of about 9 months in the business. I'm just interested to hear why we saw such strong acceleration in Q2 and why it wasn't a bit more sort of back-end loaded?

Yes. So it takes some time to ramp up. Of course, it's -- because operations where we need to put people in place, train them, et cetera. But we have gradually increased the pace, I would say, throughout the year. But then, of course, you also have the lead time depending on where you ship the machine. So there is also the lead times on sea. So I'm very pleased to see the output from the factories, the ramp-ups are going according to plan, and that generated the strong revenue growth here in the quarter. And we are at the new level of output in the factories. So I'm very pleased with, let's say, how the organization have ramped up and continue to then to make sure that we can safeguard the lead times because that's also crucial in an environment that we are in.

And even though you referred to the order intake in Q1, and that was exceptionally strong, but we actually had quite good order intake also in the second half of 2025. So we didn't start the ramp-up after Q1. We started it, I would say, already during second half of '25 and therefore, able then to at least get part of the strong orders out already in Q2. But like Helena said, with the order intake we've had now for a number of quarters and with the ramp-up in the factory, we expect equipment revenues to continue to be strong into the second half of 2026.

Okay. That's helpful. And then maybe just one other on equipment and service margins. Obviously, now we've seen 2 strong quarters from an organic perspective in the margin bridge. I guess the question here is just that we've also seen inventories picking up, and we've also seen a relatively low gross margin. So I'm just wondering like is one of the strong drivers behind the equipment service margin picking up the fact that factory utilization is much higher. And if that's the case, is it sustainable to keep the factory utilization where it is into the future?

Yes. So I would say that the factory utilization is the expensive part is when you ramp up when you train a lot of assemblers, that's when you take, I would say, the hit. And so I would say that we're performing well now in the factories across, I would say, both on the equipment side, but also on the consumables and on attachment. So -- and then we have this variable way of working. So we -- it's very much additional workforce that we add. which, of course, creates the flexibility and agility. But I'm expecting us to be able to say, have an efficient manufacturing performance during the coming quarters as well.

Okay. That's helpful. And maybe just a follow-up on that. I mean, if you continue to get strong orders through, are you going to have to invest more in manufacturing capacity? I mean like what kind of utilization rates are you at, at the moment in your factories?

Yes. So we're adding shifts. So -- and that's what we have been doing in several of our factories. But we also -- we have a very strong set of dual capabilities, so we can produce the same equipment in several of our manufacturing sites in the different parts. So we're leveraging that work that we have put in place in the last, I would say, 5, 6 years so that we can ramp up in parallel now, both in India, in China, in Sweden as well as in U.S. So I don't see any, I would say, any challenges on the capacity side. It's more to get people on board and train them. And of course, to get the components into the factories. But that's more of a sourcing exercise.

The next question comes from Klas Bergelind from Citi.

So first on the margin in E&S. I mean the 66% drop-through you had in the first quarter was obviously against very little sales growth of 2%. You're now doing around 30% on 13% sales growth and more equipment sales versus service, which is good to see. So it seems like the drop-through is moving in the right direction. I was just wondering on the internal service mix going forward. You obviously have the 6- to 12-month warranty period in parts and kits. So I would assume growth here should accelerate with a lag given the strong equipment orders last couple of quarters. You also talked at the CMD about that you're selling more large machines, advanced machines, so that can increase the customer share. So shouldn't parts and kits, which is the highest margin segment within service increase going forward as a percentage of service? I'll start here.

Given, I would say, the larger the fleet will be, and you are correct, the first year, the machines don't generate that much parts revenue. But when they come into the second year, that's when you start to leverage that strength. So of course, with the strong equipment quarters that we've had, that creates then the potential then for parts revenue in the coming -- and this is not -- it's for several years, of course. It could be 6 up to 10 years depending on the machines we put in the market.

Then on the T&A orders, no dip in comp, but growth is 4%, down from 9% in the first quarter. And it seems like construction didn't weaken quarter-on-quarter and mining is still strong. So what's going on there?

But mining is still strong. I would say more it's -- it can vary between quarters as well. But there is high activity levels in the consumables business, and we also start to see a more positive sentiment towards construction and infrastructure. Infrastructure has been strong, but also towards construction and on the attachment. So higher activity level even though from a low level.

But there is nothing on sort of -- if I understand it correctly, you don't take the Tungsten charge over the revenue line. So there's nothing like that explaining it?

What we said -- I think we said in the Q1 call or maybe it was at the CMD, we said that -- we had very strong tools order intake in Q1. And given that tungsten prices then were ramping up and we had customers with contracts for 3 months, we said that there might be a bit of prebuy. And I think we have seen a little bit of that now in Q2 with a little bit lower level compared to Q1.

Fair enough. My absolute final one is on the T&A margin. So it was more than 1% impact from Tungsten on the margin in the first quarter and no margin impact this quarter. That looks like a bit worse underlying margin improvement year-over-year in the second quarter versus the year-over-year ex Tungsten improvement in the first quarter and currency better quarter-on-quarter. Would you agree with that, that the margin sort of operating leverage was a bit weaker?

Yes, you can say that if you exclude the tungsten impact. But of course, when we compare Q2 to Q2, it's both are, you can say then without. But I understand what you say, and I would agree when you compare Q1 to Q1, yes.

Is that just operating leverage then?

Yes.

And now we will take the last question for today.

The next question comes from Vlad Sergievskii from Barclays.

Two questions, if I may. I'll start with the margin in Equipment & Service. First part of it would be FX rates obviously has been detrimental to margin for 5 quarters. Given assuming current FX, is it possible that Q3 will be a positive contribution to EBIT for the first time in a while? And related to that, on the organic drop-through margin in E&S, about 30% in Q2 despite the fact that mix is shifting towards equipment. Is it a reasonable number for us to target going forward?

If I start with the first one on FX. I think the good thing now with FX is that the comparables are more in line. You see that when we look at revenue and on orders, it's like 1 percentage point differences. The negative thing is that it has actually fluctuated quite a lot during the quarter. So as an example, the dollar versus SEK was down at SEK 920 something, and then it closed at SEK 971, which means we can get some hits on the balance sheet. So -- up and down. So I would argue that if it's more -- if it stays where it is right now and it's more stable, then you will see less of an impact overall in Q3 than we have seen previously.

And then Helena, you take the second one.

Yes. So on flow-through, I think we are pleased to see that we're back to profitable growth and good flow through. Then, of course, if we can vary between quarters, but we continue to focus on our efficiency, as I mentioned here. So -- but we are happy with the performance in the quarter and that we show positive flow-through now in both BAs. So -- but we continue to work on the efficiency. That's a key focus area for us at the same time ramping up then and get as much revenue out as possible.

Thank you, Helena, Hakan, everyone who asked questions. Sorry again for the technical difficulties we had before and enjoy the reporting season. Thank you, everyone. Bye.

Thank you so much.

Thank you.

We are Epiroc. A very warm welcome to the Epiroc Capital Markets Day 2026 here in Örebro. I'm very glad to see so many familiar faces in the crowd, but also many new ones. And to those of you watching the webcast, a warm welcome to you as well.

And for those of you who made a early trip this morning, we promise it will be worth it.

Yes. So if you don't know me, my name is Karin Larsson, and I work with the Investor Relations and media here at Epiroc. And by my side, I have Alexander Apell, Investor Relations Officer.

Next slide. So as you can see on this slide, Karin and myself have more than, around, 20 years in the group. And on the stage today, we have almost 120 years of experience within the group.

That's impressive. And before we go into the content, one thing we always emphasize here at Epiroc is safety. So this is not just a slide for us. This is how we operate every single day.

And today here in Örebro, we have safe emergency exits there, there and over there. And we also have health educated staff in case of emergency.

Yes. So there again, we will start with our CEO, Helena Hedblom, and she will walk you through the group strategy and how we create value, and where we are heading. Then Hakan Folin, our CFO, will take you through the financials and how our strategy translates into performance and cash flow. Then we take a short break.

And after the break, we will go deeper into the business. First Equipment & Service Jess Kindler, then Tools & Attachment with Jose Sanchez. And we will leave, of course, plenty of time for questions. You can ask online throughout the presentation. We will, however, prioritize questions in the room.

Yes. And when -- once we're done with the presentations and the Q&A, the people here tonight, we will walk to the dinner. So you can go to the hotel, leave any luggage if you need to, and then we'll walk jointly to the dinner location.

So, today we'll be repeating strategy, tomorrow will be all about creating memories.

Yes. Today is nice, but tomorrow will be much better. Tomorrow is really when you get to get to experience Epiroc really. We will pick you up at 7:30. Be on time and bring your luggage. And we will experience -- it's not about seeing tomorrow. It's about engaging and you will have opportunities for hands-on challenges where you can interact with our employees and our equipment. So you will feel the performance yourself.

So buses tomorrow, after the tour will depart at 14:45 and 16:45 taking you back either to Stockholm Arlanda or to Eskilstuna to participate in the Volvo Capital Markets Day. You can find the details in your calendar.

So it's time to welcome our first speaker on stage, our CEO, Helena Hedblom. She has more than 26 years in the group. She started out within innovation and rock drilling tools. And after have spent her whole career in the Group, she knows our customers very well.

Yes, she's been traveling the world to see customers for decades. But the thing is today, with technology customers are never far away. So during the presentations today, you will see a lot of interaction between Helena and our customers. Small films, and we really hope that you enjoy them.

Because at the end of the day, everything we will show you today comes down to one thing. How we create value for our customers and how that translates into long-term profitable growth for you shareholders.

Yes. Thank you. Helena. The stage is yours.

Thank you so much. And also from my side, a warm welcome to [indiscernible] to have you all here. I've been in this industry for 26 years and also in this company, we always start with safety. And I would like to start with this accident that happened in Canada last summer. Three miners were trapped, roughly 300 meters underground. And within 24 hours, we managed to bring our teleremote system, and we mounted it on a non-Epiroc loader. And that loader after roughly 60 hours manage to rescue these three workers.

And I think this is a story not only about us as a company. For us as a company, safety is not just a slogan. Safety is real. It also tells the value of OEM agnostic solutions when it matters the most. Because end of the day, the most important things that comes out from a mine is the miner.

So Epiroc, we are -- I usually say we are a 153-year-old startup. We are a leading productivity and sustainability partner for the mining and infrastructure industries across the globe. We have strong focus on innovation, and that has kept us in this leading position for so many years. We have a resilient, strong aftermarket business, roughly 2/3 of our revenues, and that gives recurring income over a cycle.

Customers in 150 countries will today also talk about our footprint, how we serve these customers across the globe, but it's a very diversified customer base. Stable and solid margins. And we have 19,000 passionate employees, many of us, especially in leading positions, we have 20 plus years in the company. And you will meet my colleagues later during the day.

But we have this decentralized organization model that has been supporting us over the years with the person closest to the problem solving in the fastest way.

So if we then look on our performance, we have since the listing been delivering 16.9% CAGR in total shareholder return. We have been growing 8% revenue since the listing and also 8% in adjusted EBIT, and with an industry best margin. And if we look on our financial goals, we have a goal to grow 8% over a cycle. Roughly 2/3 of that growth should come from organic growth, 1/3 roughly from acquired growth. We target to have an industry best margin. Over a resilience in that margin over the cycle to have long-term stable and rising dividends over 50% net profit, and to have an efficient capital structure. And to continuously work on improving our capital efficiency.

And when Hakan will talk more lately or later on the financial performance. But when I look at our performance the last 10 years, and especially since the listing, it's good to see that we have delivered upon our ambition and on our goals. If we then talk a bit about sustainability and our goal sustainability, both for people and planet, we have ambitious goals, both for people and for planet. And if you look on the progress, we have good progress towards the 2030 goals.

In some areas, I would say the areas that we control ourself if we take CO2 emission from operations. For example, or compliance, or building a fossil-free assortment, There, we have very strong achievements year-to-date. Also have good progress when it comes to diversity, when it comes to safety, but there's always more things we need to do, and we continue to do that where we need to push even more in the coming years is to roll out the emission-free products to our customers, and we'll talk more about that, of course, during the day.

Our strategy for profitable growth, it's simple. You have seen this picture before, the ones of you that has followed us over the years. We focus on attractive niches where we can outperform. Very strong focus on being that technology leader pushing the boundaries. Focus on growing the aftermarket, operational excellence and then the foundation being the sustainability and our strong corporate culture built on a decentralized model.

And our strategy is also our investment case. So we focus on the niches where there is a healthy underlying trend for growth. We focus on innovation in the areas where we can accelerate productivity or sustainability for our customers. The more aftermarket we have, the more recurring revenue streams we have, and the less dependent we are on where we are in the cycle of mining or infrastructure. We have a well-proven business model and that has been shown during, I would say, the last 8 years, there has not been easy years in the world. There's been several different challenges. But we have proven that we are resilient in our performance. And the ambition is then to outperform and to create value for our stakeholders.

So our mission is to drive and accelerate the productivity and sustainability transformation for our industry. And hopefully, during today, you will see that it all starts with customers. It starts with their needs, their needs for productivity, for safety, or for more sustainable solutions. And that's how we build our strategy. That's how we create our product road maps and our solutions.

And what do we mean with our industry? It's very -- it's very much hard rock formation. The harder the rock is, the more difficult it is to drill, and to excavate and that's where we are at the best. We have roughly 80% of our revenue towards mining and 20% towards infrastructure. And a big portion of the mining exposure is towards copper, gold and iron. And when it comes to infrastructure, the biggest exposure is towards tunneling, so underground tunneling, but also major civil engineering.

So let's start with deep diving into mining then. Last year, it represented 79% of our orders received. We estimate long-term underlying market growth of 3% to 5% per annum. And now we're talking long term. And our offering, I will not cover it. Hopefully, you know our offering, but we have a very strong position on surface when it comes to surface drilling applications. We have a strong position underground, complete range, underground drills, loaders, trucks, bolting equipment. We have a very strong set towards exploration. I will touch base on that a little bit later. But also then a very strong aftermarket offering towards mining.

And that's spare parts, it's maintenance, it's rock drilling tools, it's rock reinforcement. It's different type of technological solutions, formation, for electrification, for digital, and more and more also solutions than towards the infrastructure customers, but also products that we maybe got from infrastructure that now can be used in mining as well.

Mining is a fascinating industry. It's a huge industry. There are roughly -- more than 5,000 copper, gold and iron mines in the world. And this industry depends heavily on quite few mission-critical machines. If you take a small mine, that can depend on between 20 to 50 equipment. And that is important because that may -- that tells the story of how important, how mission-critical our business is. If you take the largest mine sites, they could be somewhere between 250 and 500 critical heavy mining equipment in that system developing that mine.

So we are exposed to the niches and the products where it matters the most, where performance matters. And when one of these machines down then that's a big -- that's a production loss for that customer. And that means that uptime is crucial, the service of these machines are crucial, and this is why the aftermarket is then so critical, and why we are seen as a position in a mission-critical environment.

Our demand correlates very well with the commodity prices. And here, you see the weighted -- the weighted index of our mineral exposure and our orders. And here you see we have a 83% positive correlation. Of course, short right now, the commodity prices are at a very high level, especially for copper and gold. Short term, that gives increased need for rocking tools, increased need for service because customers trying to keep the equipment up running at high productivity. Midterm, ofcourse this gives an indication of more CapEx. And long term, it also gives the initiative to do exploration drilling, but also expansion projects like greenfield.

And if we look into the fundamentals then of the commodities where we have a high exposure. So 36% of our orders from mining comes to -- or towards copper. And copper are at historical levels, we are very high prices right now. It's, of course, driven a lot by the electrification journey and sustainability journey of the world. And here, we see strong activity levels, both when it comes to expansion, but also when it comes to exploration. And copper is maybe different compared to the other commodities that we serve, since there is a clear long-term gap between demand and supply. So there is clearly not enough copper mines up running to really close this gap. And this is also why we see spend going into expansion towards copper.

Another exposure for us is gold, which is also at very high level. It's 29% of our exposure on the orders received right now. And here, of course, the demand is mainly driven by the jewelry consumption, but also investments and central bank purchases. We see a lot of exploration ongoing right now towards gold, but also expansion projects. And in Q1, we also said that a lot of the large orders we had -- we landed during Q1, they were towards gold.

Iron ore is not maybe at peak levels. It's more at historical average level. We have today 14% of our orders towards iron. But we have a very strong position towards iron. A lot of the iron ore mines, it's big open pit, where we have our surface equipment, and this is where we're very strong position from a market share standpoint, and also where we right now see a replacement happening in several of these mines.

If we talk then broadly about our customers, there are a number of challenges for our customers. We have surface deposits being depleted, customers need to go -- they need to either go deeper in a surface mine, or they need to go underground. It's also the underground mines, they also will have to go deeper. We roughly say that 30 meters deeper every year. That's the average depth of underground mines, how it's increasing. And with depth comes complexity. It comes first of all, lower grades but also more complex ore bodies.

We also see that many of the mines that will come on board in the coming decade. They are also in water stressed areas, or in conflict areas. And it is also becoming more and more difficult to attract labor towards these industries. And that is something where technology really can make a difference. So we focus on solving these challenges for our customers.

And you can see on the lower side here, the utilization, both in underground as well as surface, is still quite low utilization. That means a fantastic opportunity for us to work with produc