Hello, and a warm welcome to Eperock Q2 Results Presentation. In Stockholm today, we have our CEO, Helian Mahe Blum, our CFO, I'm Dashlindian, and myself, Colin Lachong, Head of IR. We're all trying to keep a safe distance from each other throughout the day. We have 1 hour for this call today, and we will allocate the time as we always do, which means Heliana will start with an introduction. Anders will take you through the financials, and we will end with a Q and A session.
In the Q and A session, we would like you to keep it short, if possible. One question with one follow-up, please. And thank you in advance for helping us with this. So without further ado, Heliana, please The stage is yours. Thank you.
Thank you so much, Colin. And also from my side, then welcome to the April Q2 presentation. As we expected, it has been a challenging quarter. And we will cover the development in detail later in the presentation. But also in times like this, it is important with clear priorities.
And in the quarter, as always, we have had a strong focus on the health and well-being of our employees and our business partners. We have also prioritized the aftermarket to help our customers to stay up running and we have focused on lowering our cost. But 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 And we have also continued to invest in the activities that will take us to our sustainability goals for 2030. If we then move to the highlights of the quarter, but it is clear that the pandemic had an impact on us. As an organization, we are experienced, we have been through challenging situations before.
And 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. But 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.
And a large number of customers, both within mining and within infrastructure had to temporarily closed. So it had an impact on our orders and on our revenues. But the situation improved towards the end of the quarter June was clearly better than April May, but still lower activities than what we saw in Q1. So 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 but 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, but we managed to save costs throughout the organization but there was still a negative impact on the operating margin in the quarter. Still, I think even 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 SEK2 billion. I will now try to take you through the different in the different regions in the world because 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 has been in complete lockdown like Peru and Argentina, there we saw a significant drop in activity.
But 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 has come back since restrictions has 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 then 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.
And then moving over to Australia, Australia has been very strong throughout the quarter. So all in all, it is fewer customers today that are temporarily closed then 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. So 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.
So there's no doubt that we still are impacted by the pandemic Yeah. Operational Excellence is one of my key priorities for the coming years for ebrock and this is of course more important than ever given the situation So we have taken a number of long term actions. And from these, we expect savings of SEK 500,000,000 annually as from Q3, twenty twenty, we still have some actions to go and we expect more savings to kick in in the later part of this year And 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, and 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. And here we have good progress. For us, it means a more efficient supply chain. And here we also have good progress when it comes to the ratio of sea and air shipment.
So we're shipping more and more by sea. And that can also be seen in shortly in the quarter. So we don't really see the effect on the transport cost. Another priority for myself is the aftermarket, of course. So this is key now and always and this is where we can make the difference for our customers.
And the positive trend continues, the number of customers that want us to service their fleet is increasing. And 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. But of course, the aftermarket is driven by the activity levels. And as mentioned, this was impacted in Q2. Still, a service held up very well it's -3 percent organic on orders compared to last year compared to to Q1.
However, it's down 6% organic. As you can see on Tuzan Attachment, we had a larger drop And this is mainly related to country mix, some countries that has been heavily impacted by lockdowns and restrictions. But our aftermarket business is expected to be resilient and to grow over time. And then over to my favorite topic innovation. So as I said, we continue to invest more than we have ever done in innovation to safeguard our leadership position for the future So we want to be the enabler for safe, sustainable and productive mining and infrastructure.
And this is why we keep investing in R&D also in times like this. So we're up 6% in investment in R&D year over year. And as I said in the beginning, there is a clear interest for our automation and digital solutions So we have received in the quarter multiple orders for automation both for underground as well as for surface. And 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.
And here we will also provide a charging stations. We have also launched a new cord drilling rig for exploration, which is safer and mobile. And we have extended our range for silent demolition tools with concrete busters. Then over to sustainability, So 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. So we will further advance the group's ambition related to climate change safety, ethics, and diversity. So with that, I conclude this very brief introduction and I leave it over to you, and just to take us through the numbers.
Thank you, Helena. The COVID 19 impact had 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 Heliana'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 1,418,000,000, of which SEK 165,000,000 related to items affecting comparability, which we can divide into 2 different parts.
First, the changing long term incentive programs of SEK91 1,000,000. Again, I would like to point out that this is, this is a good thing for the shareholders and increasing share price leads to a higher costs and for the long term incentive program, and vice versa. Eperogate share was around 98 at the end of quarter 1 and around 116 at the end of June. And we will, mind you, see this change and impact in our income state every quarter going forward. The second part, the $74,000,000 restructuring costs mainly planned activities and not so much COVID-nineteen in these numbers.
And before you ask, I would like to mention that government grants around the world have not had any material impact on EPI Rock. And we have not utilized If we look at the bridge, I would like to mention 4 things on this slide. The profit, obviously negatively impacted by the lower volume and also by currency, closing the adjusted operating profit at 18.7 for the quarter. Secondly, of the total drop of 4.5 percentage points versus last year around 3.5 percentage points came from organic The reporting margin of 16.8 percent, but if we add back the restructuring costs and the LTIs, we arrive at the adjusted margin of 18.7% as mentioned before. Thirdly, on the flow through, it was negatively of about 40% driven by, 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. Finally, on currency in the quarter, it had a negative impact on the P and L but on the margin, it was neutral. But if we look forward here, I think it would be good to mention that with the currency or exchange rates by theendofJune, we will have a quite an impact, negative impact on the bridge in Q3 compared to last year. If we then go into the segment and start with equipment and service.
Orders received 15% down organically service orders -3 percent organically. As mentioned, service is activity based and that was, of course, impacted by restrictions and the lockdowns. And remember that we saw both complete and partial lockdowns in many of the countries where 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 twenty nineteen.
Also mentioned, we did a large we did get a large order, from Codelco in Chile. Sequentially, we did about minus 10 percent organically compared to the first quarter of this year. On the revenue side, minus 13 percent organically, operating profit for the segment of 1,441,000,000 sec, including the restructuring costs of 'seventeen, 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 3 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 from these challenges, with a sharp demand drop and and rapid change. If we then move over to tools and attachments, orders received minus 22 percent organically the decline relatively larger for hydraulic attachments where the share of distributor sales is larger. And also here, we saw a large variation among the countries, depending on how restrictions were implemented. Also, revenue were minus 22 percent organic and I will take the profit details 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 factors have been closed partly or, or, for a longer or shorter period of times due to the restrictions. And the majority of the restructuring costs in the segment are related to the moving of the production in Canada from Bay to Montreal as we announced earlier, and 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 Saliana 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. And it is the administration and marketing costs coming down and being reduced while the R and D investments have been increased somewhat. Tax expenses are on a normal level and for the quarter and that 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 1,400,000,000 in Q2 in May as dividend in accordance with the revised proposal from the board.
Yes, we have a strong financial position and this has not changed. So what about the second part of the dividend? That is ultimately a question for the board and the shareholders. And 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 SEK2 billion in response to the COVID-nineteen uncertainty and also the uncertainty, going forward for the future.
Networking 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-nineteen challenges. Return on capital employed at 22.7 percent, a 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, forecast in 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 network is no exception. During the challenging situation, we had a strong cash flow in the quarter. So what do we see here? The operating cash flow improved with 500,000,000 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.
So also to summarize Q2, a strong cash flow during very challenging times. And with that, I conclude the financial part and hand over to Heliana again.
Thank you, Anders. So if I then take a moment to summarize what we just have present I would like to highlight the following. So the COVID-nineteen pandemic, it had a big impact on us, but I'm proud how fast we manage to adapt to the new situation. Service is proving its resilience even if it is impacted by closed We advance in regards to sustainability and we have a strong cash flow. So all in all, great job done by the organization.
So then looking forward, what to expect onwards. When we still see that the situation is fragile in many countries, So we expect that the demand both for equipment and for aftermarket will continue to be negatively impacted by the pandemic in the near term. And with that, we can start the Q And A session. So operator If you would mind open up the line for questions.
Dial with 1 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. And as previously mentioned, please limit yourself to one question and one follow-up question per term.
Our
first question comes from the line of Class Bergland of Citi.
So it's Closom City. So the first one is on exit rates in services and in P And A in June. So looking at T and A, it takes a big hit from construction and all the, all the shutdowns, which we are seeing from others, and that should be temporary. But how did we and the quarter, was that down 5% to 10% versus the 22% down for the quarter perhaps? And then on services, obviously good to see that you're only down 3%.
Does that mean that June grew, Heliana, for you and by how much I will start here?
So if we start, I can start on the comment on the activity level. So as I said, we saw a sharp drop in both April and May and activity levels improved in June. So there is clearly more and that is this mainly activity related more and more mines and construction sites were opening up during May. But May was still a quite large impact and we saw activities coming back. We have not, would say, shared, would say, you know, 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.
And that is both both for infrastructure as well as for mining. And as I described, it's very much, I will say, a big difference between the different countries in the world.
Okay. Thank you. So the the the second one is on is on the outlook. It sounds pretty cautious, but I just want to confirm if this is more a prudent message from you rather than seeing equipment orders fall further sequentially from the SEK 2,400,000,000 because we are at the quite low level currently. And obviously, the mining drop seems pretty solid when we look at commodity prices out there.
So I'm just thinking, I mean, almost whether orders could improve at least for mining around the 2.4 1,000,000,000. I appreciate that you want to be prudent, but I just want to understand that better whether you're guiding for lower demand versus the 2.4 or if it's going
to be stable to up correct levels?
So we're guiding, we're guiding, let's say, of course, we, as we said, when we guided for Q2, we, we guided a significant 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. So we don't see we do not see that the situation. From what we see right now, we don't see that the situation will deteriorate from what we where we are right now, what we saw in June. But as I said, it is a fragile environment in many countries, and it all depends on how the pandemic will develop and what restriction governance will put in place.
Okay. And that's clear. Then my final one is, is the question that we all get. And that is a relative position versus Sandvik. And we have talked about this before, but I just want to 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, you're relatively bigger exposure to tunneling in in price hurting you at least right now versus peers?
No. I wouldn't. I wouldn't say that is, you know, as you say, you know, we we are, you know, a tradition stronger in drilling, but I wouldn't say that there has been any change in the quarter. I think on equipment side, this is very much. It comes in in batches or in larger orders.
So in orders, when a mine decide to do a replacement or to expand. So that will always goes up and down in the quarter. I, you know, so, so, you know, I wouldn't say that it's an exposure. It's, you know, of course, it's different, you know, 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, I wouldn't say that. I don't think you should do it. We'll say through a lot of conclusions on a quarter like this. And we also, of course, you always compare with what happened last quarter.
Thank you. Our next question comes from the line of Max Yates at Credit Suisse. Please go ahead. Your line is open.
Thank you. Just my first question is around the, the comments that you made on the impact from factory shutdowns and the under utilization. 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 kind of 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.
So it is clear that that we see more and more interest around digitalization 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 and L in the quarter. If you look on the flow through, as we said, we had it was a very sharp drop in in revenue. And it was not possible to fully compensate for that in many parts of the world.
And as we said, when we entered into Q2, we also had 6 or 7 factories that were temporarily closed because they were in the countries that were in lockdown. So of course, that had an impact on our flow through. But on the other hand, then we, as I said, we managed to save cost and mainly then on the functional cost on administration and marketing. But it has been, of course, the activity level have had an impact in the quarter that there's no doubt about that.
Okay. And just my second question is for Anders on FX. Would you be able to help us with kind of how you think about the impact on EBIT for Q3 at current FX rates? Because I was slightly surprised this quarter that we saw, obviously, last year, favorable FX rates at an actual benefit for margin. This quarter, we saw negative FX rates on the top line, but actually no corresponding margin impact, which doesn't really make sense given your transaction flows.
So am I missing something with hedging, and 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. And it is true that the if we just look at the exchange rates development, and 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 and L But when we speak about a bridge, then of course, the, we need to understand what happened last year.
And 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 have can have a quite a large impact either, either, let's say, reinforcing or or balancing out. We have, we don't do hedging, operational hedging at all. It's 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, let's say, 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 quarter 3, I think given given the exchange rate that we see now or what we compare with at the end of June, the the top line currency effect will likely be, stronger towards last year on the top line And as such, we will see a negative impact versus last year, a little bit depending on a period end effect.
But We typically don't quantify due to this with the swings and the period end effects. We typically don't like to 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, I mean, 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 in?
Okay. Thank you.
Thank you. Our next question comes from the line of Madison of Van America. Please go ahead. Your line is open.
Couple of questions. Firstly, just want to understand the demand trends you saw in second quarter a bit more. Especially, you know, as compared with, you know, what, Sandvik reported, you know, they had around 10% organic decline in orders, and compared to yours around 17%. So what explains the, this, you know, significant difference. And the second question, is, just on the, demand drop again, but how much of the drop you saw in second quarter, you think is temporary or rather, you know, if, in other words, how much of this revenues or orders you lost in the second quarter, we'll actually come back to you, let's say, in 3rd quarter or 4th quarter this year.
So as I tried to explain there, the demand, it was a big, it was a very turbulent quarter. With the biggest drop in April and May and then activity levels came back in June. But what I but it's still, as I said, you know, it's still not to the level we saw in Q1. And that is, of course, because there is still, you know, there if you look on the production output in mining in the world in Q2 and also in June, it is still impacted. So, so, you know, it's, it has improved the, the, let's say, activity level, but it's still lower than Q1.
Of course, on the aftermarket side, mines that are temporary put under care and maintenance and then opening up then of course when activities comes back, then that that aftermarket comes back. And that is true for both tools and attachments as as for parts and service. So I would say that the bigger part of the drop is, of course, relate did to temporary closed mine sites and temporary closed construction sites. If you look on the total If you look on the on the normal circumstances with the level we see on the mineral prices right now, I think a lot of the minds that are not, let's say, limited by restrictions, they are producing a steady high levels. So I think that also tells something about, let's say, the overall dynamics in the market.
But of course, in many places in the world still, there is restrictions.
And fair to say maybe that, you know, this is also changing. The the situation mentioned by Eleana is fragile, and we see in in in countries now in South America, South Africa, India. That it can change, from, if not day to day, from 1 week to another.
But specifically compared to Sandvik because in a sandwich probably is also facing similar lockdowns and shutdowns. Would 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, which are closed compared to you. Is that what you think is the driver behind, the delta on, organic decline?
If you look on, if you look on our service, it's down 3%. So that, of was, we have been in the markets that has been up running. We have also had a good activities on the service side. But as I said on tools and attachments, that's mainly where the activities have been impacted. And if you look on attachment, we have a strong position in the, you know, in North America and U.
S, in Southern Europe, in India, for example, that has been impacted. So it is very much a country mix, you know, where we, you know, and I think we, of course, we, you know, we have our strength and, and, our competitors have another another in other strengths. So that, you know, could have an impact, but, but, I can't comment on their their performance.
Yes. Okay. Thank you.
Thank you. And our next question comes from the line of Andreas Ciela of Nordea. Please go ahead. Your line is open.
Yes. Yes.
Perfect. So I have some questions on your savings, and I'm sorry if you commented on this during your presentation. But of the SEK 500,000,000 long term savings that you expect from Q3, how much of that impacted Q2 already?
Yeah. We have it's not fully implemented, but it's partially implemented. And we have don't really quantify exactly how much. But it will be expect to be fully, let's say, annualized, during the second half of this year.
Okay. But there is still a small part to come incrementally from Q2 into Q3.
There's still a material part coming.
But not of the 500. So they will say that the activities related to the 500, we have more or less, you know, done everything. It's a smaller part remaining. But then, of course, on top of this, we have the layoff plan in Sweden for the later part of this
year. My follow-up question. So then you had short term savings in Q2. How much was that and how much of that will impact Q3?
So we have, we have not so much. Of course, we have done, you know, we have reduced the travel and different type of spends. We have so we had 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. So our focus is clearly on the long term permanent savings.
Know if you if you picked that up, but, we have not utilized any of the support for short term work in Sweden and and, you know, government grants around the world, even though they they have been not been material in the P and L.
Yes, I picked that up and
I think that is very impressive. But then 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 500,000,000 or how much do you expect to save?
We have not quantified that, but, it is, of course, a couple of 100,000,000 at least. It's a and I think it's too would say 2 different things here is both one thing that 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 the in Q4, we will have tax according to that.
Thank you. Our next question comes from the line of Robert Davies at Morgan Stanley. Please go ahead. Your line is open.
Yes, thanks for taking my question. My question was, some 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 step down, I think it was from plus 12 to minus 3. I just wondered if you could sort of split out how big an influence for that has, and once the sort of site access, issues sort of get behind you and you move into the third quarter, is that something you think we'll come back, how much sort of pent up demand?
Just a little bit more color on that would be helpful. Thank you.
Also, so we we continue with a good activity levels when it comes to midlife and overhauls with larger overhauls and replacing more larger components. So of course, you know, what they're also doing in a quarter like this, we have landed a new service contract for example. So I would say, of course, we managed to offset part of the drop in activities with our own activities, you know, growing the customer share and then developing the service products that we have developed for a couple of years now and since a couple of years ago, and we continue with good progress on so that has of course also supported us and will continue to support us in the coming quarters as well.
Thank you. And then maybe my follow-up, is just to really around what your customers are telling you in terms of CapEx decisions. I mean, we've seen CapEx push outs and delays, of those projects that have been pushed out or kind of sort of delay. What are the customers telling you in terms of their sort of planned timelines? Are those push outs done indefinitely?
Are they done on a sort of we'll review them in in sort of a 3 month basis, what, what, you know, 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 needs to kind of come back in 2021. Is it just not not known yet? Any any more color there would be helpful. Thank you.
There are there couple of customers that has just pushed out everything into 2021. And of course, that is the ones that are struggling the most right now, maybe from lower metal prices or lower efficiency. But I would say majority of the customers are the plants are still there. It's more that the decisions are being pushed out in time. And I think in Q2 now, all the focus has really been on on handling the the the health crisis.
So so I think it all, you know, that is that is what what I hear and what I see. I I I as I said, you know, the strong, it was an interest still around what's or maybe an increased interest around automation and digitization because that will really help or say 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 So so I would say, you know, what, you know, if we we always have this business, cooking map on the on the large projects and they are there, it's just that it takes longer time for the customers to make the decision.
Follow-up on that was just around the automation spend. Is that something that customers, are sort of looking at regardless? Do they, do they sort of replace the current spending with that? Do you do you see it kind of tick up, I guess, because the other part of the, you know, the business has gone down? How is the automation and digitalization bit sort of trended specifically in the in this quarter say this is, 12 months ago.
But there is a clear interest. So there is more and more more and more, let's say, interest around and also we see that that was that is picking up more and more customers want that that won't be solutions and that support. So I think if anything, I think that investment will continue as planned. 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.
We have one further question in the queue so far. And our next question comes from the line of Melissa Bismarck of Deutsche Bank.
Most of my questions have been answered, but just like, could you comment a little bit of how you would expect pricing to develop and especially given that one of your peer and you yourself say demand has come a stay a little bit longer. In mind, how does pricing normally react these scenarios?
Yes. So we, we, of course, you know, pricing for us is all about adding more value and that is what we continue to do with better features more value for our customers around productivity and safety. So we have also in this quarter managed to increase prices slightly. And we will continue with that.
And one quick question. You keep stressing that you didn't make use of short term work schemes. May I ask why? Why not?
No, so we have been focused on adjusting the organization permanently instead. And that is to create, let's say, to position EPYC, you know, from an efficiency standpoint long term. So we took that decision quite early in April.
And we've had one further question come through so far. From the line of Max Yates Credit Suisse. Just a quick follow-up. I want to
to ask a little bit about consolidation in the industry and acquisitions and M and A. So Obviously, we've seen kind of share prices for some companies come under sort of quite substantial pressure. So is how much of a priority right now is M And 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 and A a priority, or do you think about that as something kind of further down the line as the business gets back on sort of more stable footing or even more stable footing, I should say.
So M and A is always a high priority for us. And all the divisions are always working with different segments and different targets. So there is no difference. If anything, I think, you know, we we have, of course, put a lot of efforts now. Now we haven't we we can't travel, etcetera.
So So we have spent quite a lot of time. But 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. So we do our homework and then when we are ready, we will act
And do you have a sort of preference towards, I guess, smaller technology driven acquisitions? Or is are you also considering sort of larger M and A where you see synergies opportunities and create value via that avenue?
So I believe that that there's a lot to do within core and close to core. And a lot of that has to do with the technology SSA. Position network as a technology leader, but also related to the aftermarket, there is good potential. So I'd rather see built on smaller ones.
Thank
So, no further questions coming through at this time. I'll hand back to our speakers for the quotes and comments.
Okay, thank you very much. Good questions as always. And was a good message. Thank you, Liana Nandes. We wish you a safe summer, successful investments.
Any questions outstanding or you read something and wants to know more, Anaandesh and also Matias Wilson, of course, we're happy to help you. Just reach out. Thank you very much. And thank you.