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Hedblom cites fragility in mining recovery

Epiroc CEO Helena Hedblom sees an improved but “still fragile” market for mining equipment and services provided by the Swedish manufacturer, which reported a 15% year-on-year drop in quarterly revenue (US$957 million) and 17% lower orders (US$917 million) for the June quarter.
Hedblom cites fragility in mining recovery Hedblom cites fragility in mining recovery Hedblom cites fragility in mining recovery Hedblom cites fragility in mining recovery Hedblom cites fragility in mining recovery

Epiroc CEO Helena Hedblom says mining "customers were hesitant to place equipment orders and restrictions led to lower customer activity" in the June quarter

Staff reporter

"We saw that the situation out there improved in June compared with the beginning of the quarter," Hedblom said this week. "However, the situation is still fragile. We have guided that we still believe there will be an impact on orders and revenues in the near term as well."

She said Epiroc achieved an adjusted operating margin of 18.7% - "good under the circumstances" - due to job cuts and other cost reductions. Operating profit was SEK1,418 million (US$160 million) compared with SEK2,263 million for the previous year June quarter.

"Our customers were hesitant to place equipment orders and restrictions led to lower customer activity, particularly in the beginning of the quarter, which impacted our aftermarket business negatively," Hedblom said.

"We have already achieved cost savings both from the short-term and from the long-term actions. The long-term actions are expected to save more than SEK500 million annually as from Q3 2020. Additional savings will be achieved from the end of the year, including savings related to planned layoffs."

Hedblom said Epiroc continued to see increasing mining market interest in automation, control and battery-electrification products.

"Digital tools and autonomous and teleremote machines can make a difference [as mining companies try to minimise site workforces]," she said. "We are also seeing increased interest in battery technology and during the quarter we signed the first agreement with Vale on batteries as a service, which is exciting."

Epiroc shares (STO: EPI-A) are up from SEK117.2 to SEK124.2 in the year to date after getting down to SEK78 in March. The company is capitalised at SEK149.52 billion (US$16.91 billion).

The CEO of Swedish rival Sandvik (STO: SAND), Stefan Widing, said earlier this month the June quarter was "one of the most challenging quarters in our history".

"Never before have we managed such a significant drop in orders over such a short period of time, while also having to manage both health and safety concerns as well as logistical challenges on a global scale," Widing said.

While mining was more resilient than other Sandvik business lines, group revenue (US$2,288 million) was down 20% yoy and orders (US$2,146 million) slumped 23% yoy for the period. Mining revenues (US$1,073 million) were down 12%, and orders (US$1,105 million) dropped 10%.

"Mining activity was hampered by mine closures, which had a negative impact on both equipment and aftermarket demand. In total, Sandvik Mining and Rock Technology posted a -10% decline compared with a record-high order level noted in the preceding year. Underlying sentiment remained generally robust in mining and we had a strong order intake towards the end of the quarter," Widing said.