Hello, a warm welcome to Epiroc Q2 results presentation. In Stockholm today, we have our CEO, Helena Hedblom, our CFO, Anders Lindén, and myself, Karin Larsson, head of IR. We're all trying to keep a safe distance from each other throughout the day. We have one hour for this call today, and we will allocate the time as we always do, which means Helena will start with an introduction, Anders will take you through the financials, and we will end with a Q&A session. In the Q&A session, we would like you to keep it short, if possible. One question with one follow-up, please. Thank you in advance for helping us with this. Without further ado, Helena, please, the stage is yours. Thank you.
Thank you so much, Karin. Also from my side, welcome to the Epiroc Q2 presentation. As we expected, it has been a challenging quarter. We will cover the development in detail later in the presentation. Also in times like this, it is important with clear priorities. In the quarter, as always, we have had a strong focus on the health and wellbeing of our employees and our business partners. We have also prioritized the aftermarket to help our customers to stay up running. We have focused on lowering our cost. At the same time, we have also invested more than we have ever done in innovation to enable future growth and to secure that we will be in the lead of technology moving forward. We have also continued to invest in the activities that will take us to our sustainability goals for 2030.
If we move to the highlights of the quarter. Well, it is clear that the pandemic had an impact on us. As an organization, we are experienced. We have been through challenging situations before, also this time we have demonstrated our agility. I'm happy to see how fast the organization has responded to the situation across the organization. It was a rapid change. In the early part of April, it was clear that this was going to be tough. Countries in lockdown, mobility restrictions, it impacted our customer activities. A large number of customers, both within mining and within infrastructure, had to temporarily close. It had an impact on our orders and on our revenues. The situation improved towards the end of the quarter. June was clearly better than April and May, still lower activities than what we saw in Q1.
We have, throughout the quarter, focused on lowering our cost structure, and this has given us resilience in our profitability. We also managed to deliver a strong cash flow in the quarter, and we saw an increased interest in our automation and digital solutions, and I will come back to that later on. Mindful of time, Anders will take you through the financials in details, our orders dropped 17% organic and revenue dropped 15% organic. The drop in revenue impacted our profit. The profit is also impacted by low capacity utilization in our factories as some were closed during part of the quarter. We managed to save cost throughout the organization, there was still a negative impact on the operating margin in the quarter. I think given the drop in revenue, we show resilience in our profitability. Adjusted margin at 18.7%.
I think given the situation, a good level. We also managed to reduce our working capital and the operating cash flow was better this quarter compared to last year, close to SEK 2 billion. I will now try to take you through the different developments in the different regions in the world. There's been a large difference in activities in the different countries, and this is still the case. If we start with North America, clearly we saw a drop in activities, both related to mining as well as infrastructure. The activity has recovered somewhat, but it's not yet back to the level we saw in Q1. If we move to South America, it is a mixed picture. Countries that have been in complete lockdown, like Peru and Argentina, there we saw a significant drop in activity.
On the other hand, mining in Chile as well as in Brazil have kept steady high throughout the quarter. In Europe, we saw a drop in activities, mainly within infrastructure in the southern part of Europe, and activities have come back since restrictions have been eased in Europe. If we move over to Africa, we could also clearly see there a significant drop in activities, mainly in South Africa, that has been under lockdown, but that situation has also improved in June. If we move over to Asia, it is a mixed picture with China has recovered well, activities are back on a good level, while India is still impacted both by the lockdown when it comes to infrastructure as well as mining. Moving over to Australia. Australia has been very strong throughout the quarter.
All in all, it is fewer customers today that are temporarily closed than we saw in April and May. If we then move over to our operation, all our manufacturing sites and all our distribution centers are fully operational today, and the supply chain is up running in a stable way. To summarize the status, the situation is clearly better now compared to when we entered into Q2, but the situation is still fragile in many parts of the world. There is no doubt that we still are impacted by the pandemic. Operational excellence is one of my key priorities for the coming years for Epiroc, and this is, of course, more important than ever given the situation. We have taken a number of long-term actions, and from these we expect savings of SEK 500 million annually as from Q3 2020.
We still have some actions to go. We expect more savings to kick in in the later part of this year. That is related to the planned layoffs that we have announced in Sweden. We have given notice to 425 employees in Sweden. We have, of course, also made a number of short-term actions in the quarter. That has supported the operating margin. We continue the work developing our supply chain. For our customers, this means better availability of parts and on tools. Here we have good progress. For us, it means a more efficient supply chain. Here we also have good progress when it comes to the ratio of sea and air shipment. We're shipping more and more by sea. That can also be seen in our CO2 emission from transports.
Unfortunately, freight costs have risen sharply in the quarter, we don't really see the effect on the transport cost. Another priority for myself is the aftermarket, of course. This is key now and always, and this is where we can make the difference for our customers. The positive trend continues. The number of customers that want us to service their fleet is increasing. For us, it is about supporting our customers and create long-term relationship potential for future growth, and it, of course, gives resilience over a cycle. Of course, the aftermarket is driven by the activity levels. As mentioned, this was impacted in Q2. Still, service held up very well. It's - 3% organic on orders compared to last year. Compared to Q1, however, it's down 6% organic.
As you can see on tools and attachment, we had a larger drop, and this is mainly related to country mix. Some countries that have been heavily impacted by lockdowns and restrictions. Our aftermarket business is expected to be resilient and to grow over time. Over to my favorite topic, innovation. As I said, we continue to invest more than we have ever done in innovation to safeguard our leadership position for the future. We want to be the enabler for safe, sustainable, and productive mining and infrastructure. This is why we keep investing in R&D also in times like this. We're up 6% in investment in R&D year-over-year. As I said in the beginning, there is a clear interest for our automation and digital solutions.
We have received in the quarter multiple orders for automation, both for underground as well as for surface. One example is the order that we also did a press release on to Codelco in Chile. Here it's multiple underground units with all our automation and connectivity features embedded in the deal. We also continue to see strong interest in our battery offering, and we recently signed an agreement with Vale in Canada and offer batteries as a service. Here we will also provide charging stations. We have also launched a new core drilling rig for exploration, which is safer and mobile, and we have extended our range for silent demolition tools with Concrete Busters. Over to sustainability. We have high ambitions, and it is encouraging to see the positive development of many of our non-financial KPIs. For example, on safety and on CO2 from transports.
In the quarter, we also announced the details of the goals for 2030. We will further advance the group's ambition related to climate change, safety, ethics, and diversity. With that, I conclude this very brief introduction, and I leave it over to you, Anders, to take us through the numbers.
Thank you, Helena. The COVID-19 impact was indeed large for us during the quarter. I've been in finance for 35 years, and I've never experienced such a quarter. As a CFO, of course, this was hard to foresee and to plan for, but I fully share Helena's view that our managers and leaders, in fact, the entire organization, has managed well to quickly adapt to this situation. Our reported operating profit was SEK 1.418 billion, of which SEK 165 million related to items affecting comparability, which we can divide into two different parts. First, the change in Long-Term Incentive programs of SEK 91 million. Again, I would like to point out that this is a good thing for the shareholders. An increase in share price leads to a higher cost and for the Long-Term Incentive program, and vice versa.
Epiroc A share was around SEK 98 at the end of quarter one and around SEK 116 at the end of June. We will, mind you, see this change and impact in our income statement every quarter going forward. The second part, SEK 74 million restructuring costs, mainly planned activities and not so much COVID-19 in these numbers. Before you ask, I would like to mention that government grants around the world have not had any material impact on Epiroc. We have not utilized any support related to short-term work in Sweden. If we look at the bridge, I would like to mention four things on this slide. The profit, obviously negatively impacted by the lower volume and also by currency. Closing the adjusted operating profit at SEK 18.7 for the quarter.
Of the total drop of 4.5 percentage points versus last year, around three and a half percentage points came from organic. The reported margin of 16.8%, but if we add back the restructuring costs and the LTIs, we arrive at the adjusted margin of 18.7%, as mentioned before. On the flow-through, it was negatively of about 40%, driven largely by the volume drop, of course, but the under absorption in both the production and in service was difficult to manage. We adapt where we can, but in COVID-19 times, normal adjustments are not always doable. The sharp volume drop was very difficult to manage. On currency in the quarter, it had a negative impact on the P&L, but on the margin, it was neutral.
If we look forward here, I think it would be good to mention that with the currency or exchange rates by the end of June, we will have quite a negative impact on the bridge in Q3 compared to last year. If we then go into the segments and start with equipment and service. Orders received, 15% down organically. Service orders, -3% organically, as mentioned. Service is activity based, and that was of course impacted by restrictions and the lockdowns. Remember that we saw both complete and partial lockdowns in many of the countries where Epiroc operates. Equipment orders down 29%. Also here, remember last year at this time, we were quite on a good level while we saw a softening demand already during the second half of 2019. Also mentioned, we did get a large order from Codelco in Chile.
Sequentially, we did about -10% organically compared to the first quarter of this year. On the revenue side, -13% organically. Operating profit for the segment of SEK 1.441 million, including the restructuring costs of SEK 17, which leads to an adjusted margin of 22.7%, which then compare to 25.5% last year. If we then look at the bridge for equipment and service, it looks similar as for the group. The organic decline of 13% in revenue led to a margin effect of about three percentage points. The main reason for the lower margin here compared to last year is the lower volume. Part of this under absorption in production and in service operations in the lockdown countries.
This was worse in the beginning of the quarter and improved towards the end of the quarter. As a consequence, the flow through was negative of about 40% from these challenges with a sharp demand drop and rapid change. If we then move over to tools and attachments, orders received a -22% organically. The decline relatively larger for hydraulic attachments where the share of distributor sales is larger. Also here we saw a large variation among the countries, depending on how restrictions were implemented. Also, revenue were -22% organic, and I will take the profit details on the next slide. The large decline in revenue under absorption and the temporarily closed manufacturing facilities and the restrictions around the world had an impact, a large negative impact on tools and attachments.
A reported margin of 7%, volume and organic had the largest impact and during the quarter, several factories have been closed, partly or for longer or shorter period of times due to the restrictions. The majority of the restructuring costs in the segment are related to the moving of the production in Canada from North Bay to Montreal as we announced earlier. This leads to the adjusted margin of 9.8%. As mentioned, we are lowering the costs and to see the costs going down is of course a good thing. This allows us to prioritize and as Helena mentioned, for example, in innovation. The graph here includes a minor currency effect, also taking it down, but the majority year-over-year as well as sequentially are on organic savings and that is clearly showing a downward trend.
It is the administration and marketing costs coming down and being reduced while the R&D investments have been increased somewhat. Tax expenses are on a normal level for the quarter, we keep our guidance here to stay below the 25%. Looking at the capital structure, we have continued a strong financial position. We have a net cash position still, strong cash flow for the quarter, even if we paid SEK 1.4 billion in Q2 in May as dividend in accordance with the revised proposal from the board. Yes, we have a strong financial position, this has not changed. What about the second part of the dividend? That is ultimately a question for the board and shareholders. As we are now just through half the year, if the situation allows, we will come back on that later during the fall.
We did also increase our borrowing, our funding with SEK 2 billion in response to the COVID-19 uncertainty and also the uncertainty going forward for the future. Net working capital and capital in general, we decreased nominal terms 18% versus last year, of which 6% was currency. The main reason is lower receivables, and as such, we did see good collections during the quarter, and we also managed to lower the inventory organically somewhat, despite all the COVID-19 challenges. Return on capital employed at 22.7%, quite a drop from 30.8% of last year, mainly from the lower profit and increased capital, where cash had a large impact. There is also still a small impact year-over-year from the IFRS 16, but that is minor and fading out during this year. In total, for cash and IFRS 16, the impact on return on capital employed was approximately 5%.
On cash flow. Over time, every company has to turn profit into cash, and Epiroc is no exception. During the challenging situation, we had a strong cash flow in the quarter. What do we see here? The operating cash flow improved with half a billion SEK compared to last year. The lower profit obviously had a negative impact, but we managed to release working capital to compensate, mainly as the receivables decreased, but also some from lower inventory and naturally the lower payables had a negative effect. Taxes paid were also lower, but in line with the tax cost in the income statement. If we look at the development over time, the net profit has turned into cash flow. In the recent quarters, the cash flow has been strong operating cash generation. To summarize Q2, a strong cash flow during very challenging times.
With that, I conclude the financial part and hand over to Helena again.
Thank you, Anders. If I then take a moment to summarize what we just have presented, I would like to highlight the following. The COVID-19 pandemic, it had a big impact on us, but I'm proud how fast we managed to adapt to the new situation. Service is proving its resilience, even if it is impacted by closed markets in the short run. We do our best to remain the innovation leader. We advance in regards to sustainability, and we have a strong cash flow. All in all, a great job done by the organization. Looking forward, what to expect onwards. Well, we still see that the situation is fragile in many countries. We expect that the demand both for equipment and for aftermarket will continue to be negatively impacted by the pandemic in the near term.
With that, we can start the Q&A session. Operator, if you would mind, open up the line for questions.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name's announced, you can ask your question. As previously mentioned, please limit yourself to one question and one follow-up question per turn. If you find your question is answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask the question, or zero two if you need to cancel. Our first question comes from the line of Klas Bergelind of Citi. Please go ahead. Your line is open.
Yes. Hi, Helena and Anders. It's Klas from Citi. The first one is on exit rates in services and in P&A in June. Looking at P&A, it takes a big hit from construction and all the shutdowns, which we have seen from others, and that should be temporary. How did we end the quarter? Was that down 5% -1 0% versus the 22% down for the quarter, perhaps? On services, it's obviously good to see that you're only down 3%. Does that mean that June grew, Helena, for you, and by how much? I will start there.
I can start on the comment on the activity level. As I said, we saw a sharp drop in both April and May, and the activity levels improved in June. There is clearly more, and this is mainly activity-related. More and more mines and construction sites were opening up during May. May was still quite large impact and we saw activities coming back. We have not shared the numbers on how much, but I can say that it's much better in June compared to April, May, but it's still lower than the activity levels we saw in Q1. Now, that is both for infrastructure as well as for mining. As I described, it's very much, I will say, a big difference between the different countries in the world.
Thank you. The second one is on the outlook, it sounds pretty cautious, I just want to confirm if this is more a prudent message, Helena, from you, rather than seeing equipment orders falling further sequentially from the SEK 2.4 billion, we are at a quite low level currently, obviously, the mining backdrop seems pretty solid when we look at commodity prices out there. I'm just thinking, I mean, almost whether orders could improve at least for mining from the SEK 2.4 billion. I appreciate that you want to be prudent, I just want to understand that better, whether you're guiding for lower demand versus the SEK 2.4 billion or if it's going to be stable to up from current levels.
We're guiding, of course, as we said, when we guided for Q2, we guided a significant drop compared to Q1. When we guide now for the near term, we still compare it with, let's say, what we saw before the pandemic. From what we see right now, we don't see that the situation will deteriorate from where we are right now, what we saw in June. As I said, it is a fragile environment in many countries, and it all depends on how the pandemic will develop and what restrictions governments will put in place.
Okay. Now that's clear. My final one is a question that we all get, and that is your relative position versus Sandvik. We have talked about this before, but I just want to discuss this with you. You are more exposed to drilling where equipment is less mobile and perhaps don't follow the same automation trend always with automatic dispatching and so forth. Do you think the drilling exposure in this quarter, in particular, your relatively bigger exposure to tunneling in infra is hurting you a bit right now versus peers?
No, I wouldn't say that. As you say, we are traditionally stronger in drilling, but I wouldn't say that there has been any change in the quarter. I think on the equipment side, this is very much, it comes in batches or in larger orders or in orders when a mine decide to do a replacement or to expand. That will always goes up and down in the quarter. I wouldn't say that it's an exposure. Of course, it's different customers, but more depending on when they take the decision to actually make the investment.
The question is obviously whether there are any market share shifts between the two of you?
No, I wouldn't say that. I don't think you should, let's say, draw a lot of conclusions on a quarter like this. Also, of course, you always compare with what happened last quarter. Mm-hmm.
Thank you, Helena.
Thank you. Our next question comes from the line of Max Yates at Credit Suisse. Please go ahead. Your line is open.
Thank you. My first question is around the comments that you made on the impact from factory shutdowns and the underutilization. Is there any way that you could quantify what impact that had in the quarter? Maybe thinking then about the flow-through that you mentioned in the quarter of 40%, does that mean that as we get into more normal production, we should see potentially better than that flow-through as we go into the second half? That's my first question.
It is clear that we see more and more interest around digitalization and automation, as I said. This is, of course, quite long lead times on projects like that, so I wouldn't say that it had impact. It has not impacted the P&L in the quarter. If you look on the flow-through, as we said, it was a very sharp drop in revenue, and it was not possible to fully compensate for that in many parts of the world. As we said, when we entered into Q2, we also had six or seven factories that were temporarily closed because they were in countries that were in lockdown. Of course, that had an impact on our flow-through. On the other hand, as I said, we managed to save cost and mainly then on the functional cost on administration and marketing.
It has been, of course, the activity level have had an impact in the quarter. There's no doubt about that.
Okay. Just my second question is for Anders on FX. Would you be able to help us with how you think about the impact on EBIT for Q3 at current FX rates? I was slightly surprised this quarter that we saw, obviously last year, favorable FX rates and an actual benefit for margin. This quarter, we saw - FX rates on the top line, but actually no corresponding margin impact, which doesn't really make sense given your transaction flows. Am I missing something with hedging? If you could help us kind of thinking about what the margin or what the absolute EBIT impact could be in Q3 at current rates. Thank you.
Yes, I can help you with some, but not everything. It is true that if we just look at the exchange rates development, I will start there. We had about 5% on the top line, and of course you would expect that with no other, let's say, things influencing, that that would be more clearly shown as a negative impact on the P&L. When we speak about a bridge, of course, we need to understand what happened last year. When you have, let's say, swings in the currencies, and we had last year and even more so this year, the revaluation or what we typically refer to as period end effects can have a quite a large impact either, let's say, reinforcing or balancing out. We don't do operational hedging at all.
It's a policy that we have unless something extremely extraordinary, but we don't do it as a principle. We do have some, let's say, we do hedge our loans in the financial net, and that can also result in a swing in the financial net, but not on the operating profit level. Going into Q3, I think given the exchange rate that we see now or what we compare with at the end of June, the top line currency effect will likely be stronger towards last year on the top line. As such, we will see a negative impact versus last year, a little bit depending on period end effects, but we typically don't quantify due to this with the swings and the period end effects. We typically don't like to give a clear quantified guidance on the effect.
Okay, maybe you could then break out the revaluation effect on this quarter because it looks like it was favorable as a result of there being no margin impact. Would you be able to break that out of what that contributed?
Yeah, that's typically we don't disclose.
Okay, thank you.
Thank you. Our next question comes from the line of Maddy Singh of Bank of America. Please go ahead. Your line is open.
Yes, hi. Thanks for the call. Couple of questions. Firstly, just want to understand the demand trends you saw in second quarter a bit more, especially if you compare with what Sandvik reported. They had around 10% organic decline in orders. Compared to yours, around 17%. What explains this significant difference? Second question is just on the
Demand drop again, how much of the drop you saw in second quarter, you think is temporary? Rather, in other words, how much of these revenues or orders you lost in second quarter will actually come back to you, let's say in third quarter or fourth quarter this year or later?
As I try to explain there, the demand, it was a very turbulent quarter, with the biggest drop in April and May, and then activity levels came back in June. It's still, as I said, it's still not to the level we saw in Q1. That is, of course, because there is still, if you look on the production output in mining in the world in Q2 and also in June, it is still impacted. It has improved the, I would say, the activity level, but it's still lower than Q1. On the aftermarket side, mines that are temporarily put under care and maintenance and then opening up, then of course, when activities comes back, then that aftermarket comes back. That is true for both tools and attachments as well as for parts and service.
I would say that the bigger part of the drop is, of course, related to temporary closed mine sites and temporary closed construction sites. If you look on the total, under normal circumstances with the level we see on the mineral prices right now, I think a lot of the mines that are not, let's say, limited by restrictions, they are producing steady high levels. I think that also tells something about, let's say, the overall dynamics in the market. Of course, in many places in the world, still there is restrictions.
Fair to say maybe that this is also changing.
The situation mentioned by Helena is fragile, and we see in countries now in South America, South Africa, India, that it can change from, if not day- to- day, from one week to another.
Specifically compared to Sandvik, because Sandvik probably is also facing similar lockdowns and shutdowns. What differentiates your exposure compared to Sandvik here? Is it just the regional differences where maybe they have less exposure to the markets which are closed compared to you? Is that what you think is the driver behind the delta on organic decline?
If you look on our service, it's down 3%. That, of course, in the markets that has been up running, we have also had good activities on the service side. As I said, on tools and attachments, that's mainly where the activities have been impacted. If you look on attachment, we have a strong position in North America, in U.S., in Southern Europe, in India, for example, that has been impacted. It is very much a country mix, and I think of course, we have our strengths and our competitors have other strengths. That could have an impact. I can't comment on their performance.
Yeah. Okay. Thank you.
Thank you. Our next question comes from the line of Andreas Koski of Nordea. Please go ahead. Your line is open.
Yes. Thank you. Good morning. Can you hear me?
Yes.
Yes.
Perfect. I have some questions on your savings, and I'm sorry if you commented on this during your presentation, but of the SEK 500 million long-term savings that you expect from Q3, how much of that impacted Q2 already?
Yeah, it's not fully implemented, but it's partially implemented, and we don't really quantify exactly how much. It will be expected to be fully, let's say, annualized, during the second half of this year.
Okay. There is still a small part to come incrementally from Q2 into Q3.
There's still a material part coming.
Not of the SEK 500 million.
Okay.
They will say the activities related to the SEK 500 million, we have more or less done everything. It's a smaller part remaining. Of course, on top of this, we have the layoff plan in Sweden for the later part of this year.
Yes. That's my follow-up question. You had short-term savings in Q2. How much was that, and how much of that will impact Q3?
We have not so much. Of course, we have reduced travel and different type of spends. We have done a number of temporary things in the quarter, but I wouldn't say that that has made a big impact on the savings. We are more focused on the permanent long-term efficiency savings, and that is what we have focused on executing. Our focus is clearly on the long-term permanent savings.
Yes.
Maybe Andreas, I don't know if you picked that up. We have not utilized any of the support for short-term work in Sweden and government grants around the world, even though they have not been material in the P&L.
Yeah, I picked that up, and I think that is very impressive. Lastly, the additional savings that you expect from the end of the year, partly relating to the layoffs, what kind of amount should we expect from that? Is that another SEK 500 million, or how much do you expect to save?
We have not quantified that, but it is, of course, a couple of SEK 100 million at least. I think it's two different things here. It's both one part that is volume driven, and it's one part that is pure efficiency driven, long-term efficiency. Of course, depending on where the volume will be when we are in Q4, we will have to act according to that.
Yeah. Understood. Thank you very much.
Thank you. Our next question comes from the line of Robert Davies at Morgan Stanley. Please go ahead. Your line is open.
Yes. Thank you for taking my question. My question was something you'd highlighted, particularly in the sort of first quarter, the midlife refurbishment and upgrade activity. Obviously, you're at the market quarter-on-quarter. The growth stepped down, I think, it was from +12 to -3. I just wondered if you could sort of split out how big an influence that has. Once the sort of site access issues sort of get behind you and you move into the third quarter, is that something you think will come back? How much sort of pent-up demand? Just a little bit more color on that would be helpful. Thank you.
We continue with the good activity levels when it comes to midlife and overhauls with larger overhauls and replacing larger components. Of course, also during a quarter like this, we have landed new service contracts, for example. I would say, of course, we managed to offset part of the drop in activities with our own activities, growing the customer share and then developing these service products that we have developed for a couple of years now, since a couple of years ago. We continue with good progress on. That has, of course, also supported us and will continue to support us in the coming quarters as well.
Thank you. Maybe my follow-up is just really around what your customers are telling you in terms of their CapEx decisions. I mean, we've seen CapEx pushouts and delays. Of those projects that have been pushed out or kind of delayed, what are the customers telling you in terms of their sort of planned timelines? Are those pushouts done indefinitely? Are they done on a sort of we'll review them in sort of a three-month basis? Can you throw any color or any light on the sort of timeline of the trajectory of the delays they're looking about? Are we expecting these to kind of come back in 2021? Is it just not known yet? Any more color there would be helpful. Thank you.
There are a couple of customers that has just pushed out everything into 2021. Of course, that is the ones that are struggling the most right now, maybe from lower metal prices or low efficiency. I would say majority of the customers are, the plans are still there. It's more that the decisions are being pushed out in time. I think in Q2 now, all the focus has really been on handling the health crisis. I think that is what I hear and what I see. As I said, strong interest still around, or maybe an increased interest around automation, digitalization, because that will really help, the mining industry to handle a pandemic like this long term in a way so that you don't need as many people on site.
I would say, we always have this business cooking map on the large projects, and they are still there. It's just that it takes longer time for the customers to make the decision.
Thank you. Just maybe to follow- up on that was just around the automation spend. Is that something that customers are sort of looking at regardless? Do they sort of replace the current spending with that? Do you see a kind of tick up, I guess, because the other part of the business has gone down? How has the automation and digitalization bit sort of trended specifically in this quarter, say, versus 12 months ago?
There is a clear interest. There is more and more, I would say, interest around, and also we see that is picking up. More and more customers want these solutions and that support. I think if anything, I think that investment will continue as planned, and that is what I hear from all the larger mining houses. The technology piece is that because the mining industry needs it from a productivity standpoint and safety standpoint.
Great. Thank you for the color. Thank you.
Thank you. We have one further question in the queue so far. Just as a reminder to participants, if you do wish to ask a question, please dial zero one on your telephone keypads now. Our next question comes from the line of Felicitas Bismarck of Deutsche Bank. Please go ahead. Your line is open.
Yes. Thank you very much. Most of my questions have been answered, just could you comment a little bit of how you would expect pricing to develop, especially given that one of your peer and you yourself say demand is going to stay a little bit longer lower? With the currency in mind, how does pricing normally react to these scenarios?
Yeah. Of course, pricing for us is all about adding more value. That is what we continue to do with better features, more value for our customers around productivity and safety. We have also in this quarter managed to increase prices slightly. We will continue with that.
Okay. One quick question. You keep stressing that you didn't make use of short-term work schemes. May I ask why? Why not?
We have been focused on adjusting the organization permanently instead. That is to position Epiroc from an efficiency standpoint long-term. We took that decision quite early in April.
Okay. Thank you.
Thank you. We've had one further question come through so far. That's from the line of Max Yates at Credit Suisse. Please go ahead, your line is open.
Thank you. Just a quick follow-up. I wanted to ask a little bit about consolidation in the industry and acquisitions and M&A. Obviously we've seen share prices for some companies come under quite substantial pressure. How much of a priority right now is M&A and how do you think about the balance between trying to get an attractive valuation, attractive deal versus obviously trying to protect margins in your own business and manage what is quite a challenging environment? I guess what I'm asking is, in this current environment, is M&A a priority, or do you think about that as something further down the line as the business gets back on more stable footing or even more stable footing, I should say?
M&A is always, I would say, a high priority for us, and all the divisions are always working with different segments and different targets. There is no difference. If anything, I think, we have of course, put a lot of efforts now, and now we can't travel, et cetera, so we have spent quite a lot of time. For us, it's very much understanding the segments, understanding the strategic fit, and not jump on something just because it's low valuation right now. We do our homework, and then when we are ready, we will act.
Do you have a preference towards, I guess, smaller technology-driven acquisitions, or are you also considering larger M&A where you see synergies, opportunities, and create value by that avenue?
I believe that there is a lot to do within core and close to core, and a lot of that has to do with technology, as to say, position Epiroc as a technology leader. Also, related to the aftermarket, there is good potential. I'd rather see built on smaller ones.
Okay, understood. Thank you very much.
Thank you. Once again, if there are any final questions, please dial zero one on your telephone keypads now. As there are no further questions coming through at this time, I'll hand back to our speakers for the closing comments.
Okay, thank you very much. Good questions as always, and it was a good message. Thank you, Helena and Anders. We wish you a safe summer, successful investments, and in case you have any questions outstanding or you read something and want to know more, Helena, Anders, and also Mattias Olsson, of course, we're happy to help you. Just reach out. Thank you very much, and thank you