Hello everyone, welcome to Epiroc's Capital Markets Day 2019. My name is Mattias Olsson. I'm heading up the corporate communications here at Epiroc, and it's great to have so many of you here. We are about 100 participants here in Stockholm and much more on the webcast. It's great to be here at the Technical Museum. It's a venue fit for purpose. There is a mine here, and we also have an exhibition of robots here. That fits very well. We have a number of Epiroc people here as well. The whole management team is here, and we have a lot of colleagues helping out with the event. Before we kick off with the program, some issues about safety. Always safety first. We have a number of emergency exits marked with green signs, as you are aware of.
The gathering point is outside this venue, in front of the entrance towards the next museum on the other side of the yard. A few practicalities as well. Mobile phones, I assume you have, most of you. Please put them on mute or turn them off. We have on the purpose of a capital markets day, why do we have it? It gives us an opportunity to present a little bit more in depth our strategies, our strengths, what we are trying to do as a company. It also gives an opportunity to meet management and bring a bit more insight into our business. Very good. Today's presenters. After me, Per Lindberg will kick off. He will describe our key strengths, our business model, give some insights about drivers and so on, and how we create value for our stakeholders.
Helena Hedblom will then talk about the after-market in more details. Martin Hjerpe, our Senior Vice President of M&A and business development, will then comment a few words on M&A. We will have focus presentations on underground and surface equipment on the latest development when it comes to automation, digitalization, electrification, and so on. Here we have two division Presidents joining. First, we have Sami Niiranen, President of the Underground Rock Excavation division, and he will focus on the underground solutions. José Sánchez is also with us from Drilling Solutions divisions in the U.S. As we are in the forefront of technology, he will be with us digitally from Texas and present the solutions from surface applications. A few words. We will have this event sent over webcast, as you understand. The presentation material is available in the webcast, so you can download it there.
We will also have an on-demand version after the event available, and the presentation material will also be available on our website. We have a photographer here as well, Ola Kinnander. He will be photographing here as well, and he will also take care of the journalists. We have a journalist interviewing Per in the break. Ola, if you stand up. Here he is. The journalists, welcome to all of you. When we have the break, please join Ola. Very good. After the break, Anders, our CFO, will present our business model and connect it to the financials. At the end, we will have some time for Q&A. Now it's time to start. Please, Per, welcome up on stage.
Yeah. All right. I like that intro, actually. It didn't show that well on the screen, but I think it's very good. Powerful. It really signifies Epiroc, hard rock, and tough. This is actually the second Capital Markets Day that we have as a company. Last year, we were in Örebro. This year in Stockholm. Last year, we had fantastic weather. This year, well, we have what you already know. It's different, but also it's a slightly different company. We were not listed last year at the Capital Markets Day. We made a promise that we were ready to go public at the time, and I think after that, we actually demonstrated that was true. I think we've had good progress since the listing, which was June 18th last year. Certainly not without its challenges, but overall, I'm quite happy.
We're not going to dwell on history today. We will look at where we are right now and certainly look at what we expect going forward in terms of technologies and markets. Question to you guys, how many were at the Capital Markets Day last year? I would say between 30% and 40%. If you were at the Capital Markets Day, I hope you remember this. These are the key strengths of the company, and that's still the case. We talked about that last year, and we're going to talk about it this year. For those of you that are new, remember this, because this is essentially trying to capture exactly what Epiroc is all about.
We'll talk about this, and we'll try to essentially convey the message that, yes, we are a leading productivity partner in attractive niches, and we do have a strong and proven operating model. We'll talk about that. That we have high and resilient aftermarket exposure, and Helena will specifically talk about that. We'll also convey the message that we are driving the future in intelligent mining and infrastructure. Now, this is certainly a hot topic. Based on that, we also hope to convey the message that, yes, we will continue to deliver value. We've done that over the history for quite some time to our customers and many other stakeholders to the capital market, while we're relatively new. So far, so good, I would say. We certainly have a long future ahead of us, and the intention is to continue to deliver value.
Some basic information about Epiroc. I'm sure you know this, nevertheless, for the record, what do we do actually? We provide equipment and tools, service and solutions, we want to be innovative, and we are very close to our customers. We are essentially a 146-year-old startup with a little more than 14,000 employees. We have about 1,500 temporary workers as well. All in all, almost 16,000. Nevertheless, we're in 150 countries. The thing with being 146-year-old startup is actually fantastic because we have the history from Atlas Copco, we have the opportunity to do things our way. That's essentially what we're doing. It's not a revolution. There's no reason for us to create a very distinct break with our history.
We're not going to do that because there is so many great things that we bring from the history. It's rather an evolution, I think that also signifies what we've done over the last year and a half, that's what we will continue to do. We've had revenues slightly above SEK 40 billion over the last 12 months, a reported margin, including everything, of 20.1%, return on capital employed of a little less than 30%. I'm sure you know these numbers, nevertheless. We talked about attractive niches, yes, we believe we are in attractive niches. First of all, in mining, about three quarters of our business is towards mining, the other quarter is in infrastructure. Actually, now in Q3, we had less than that in the infrastructure, only 21%, roughly that this is the distribution between these customer segments.
Mining, underground, surface, very specialized underground. We have a relatively comprehensive offering in terms of machines. On surface, we offer drill rigs, different sizes, different applications, but that's what we do. Very specific. Mining customers, very different from infrastructure. Mining, of course, large customers, high CapEx. They are where they are. Mine is where it is. It doesn't move. That creates some specific type of opportunity for us when it comes to delivering both machines, but also service and aftermarket revenue. Infrastructure, different, typically smaller customers, they move from site to site, more difficult for us to follow with service. We have to apply a slightly different business model when we sell, but also when we do aftermarket business with our customers. Infrastructure, typically underground civil engineering, tunneling. Surface civil engineering, where we basically use our machines.
Well, we don't use them, but our customers use them for drilling, for various building sites, for example. We have a business, Hydraulic Attachment Tools, that is applied essentially for deconstruction and recycling. We have a strong and proven operating model, this is very much in the DNA from Atlas Copco, but now this is Epiroc. We have a focus on decentralized business for quick and efficient decision making, I think that's true. My own experience from my previous career and industry was a slightly different model, I have to say that this is true. This decentralized business is quick, is very efficient. It's not perfect by any means, it's a very solid and good model, works really well for us. We have a high degree of direct sales.
About 85% of sales is direct. This is something that we definitely will continue to nurture. This direct contact with our customers gives benefits, gives a presence, and also barriers of entry actually for our competitors. These two dimensions, decentralization, the direct sales, I think is vital for our agility, i.e., being in contact with customers and also having a decentralized business means that we can be agile and quick. It's not the only things, it's vital. Strong service business, 65% of revenues and very flexible manufacturing philosophy. We add 25% of product costs. We buy 75%. These two things are crucial for resilience, i.e., that we're stable over cycle because as we all know, mining and infrastructure are relatively cyclical in demand. These two dimensions create resilience over time.
Pushing growth is our focus on innovation going forward, and I think that's something that you will hear a lot about today, and that's the purpose. We have a focused and decentralized business as mentioned. Some details. We have seven divisions, two segments. It's Drilling Solutions. This is based out of Garland in Texas. Surface and Exploration Drilling, also smaller crawlers for surface applications. Underground Rock Excavation. Sami is here to represent that. We have Rocktec, which is our technology division, supplying internally with R&D and various technical services. We have the Mining and Rock Excavation Service, which is big and very successful. Then we have the other segment, tools and attachments, Rock Drilling Tools, and Hydraulic Attachment Tools. This is essentially how the business is structured. I think it's a very good team that we have in place.
We have in Drilling Solutions in Garland, we have José Sánchez. He's going to be via table here today. He's Spanish. Surface and Exploration Drilling is Brian Doffing. He used to live in Sweden. He's American citizen, now back in the U.S. Underground Rock Excavation is Sami Niiranen here from Finland, now lives also in Sweden. Rocktec, Jonas Albertson, Swedish, lives also in Sweden. Mining and Rock Excavation Service is Jess Kindler, is American citizen, living in Sweden now. Rock Drilling Tools is Arunkumar Govindarajan. He's Indian, he lives here. Hydraulic Attachment Tools is Goran Popovski. He's Macedonian. We have a very diverse team. It's a good team. Really, controlling all of this and doing a great job is Helena Hedblom, also Swedish. You will see more of her later on.
We're close to our customers. As you can see, we have yellow dots and blue dots. The yellow dots are the equipment and service production facilities. The blue ones are tools and attachments. Equipment and service facilities have been relatively stable over the last period and expected to continue to be stable. Whereas tools and attachment, not that stable. The reason is pretty straightforward. We do M&A. We've acquired businesses and production, we've also discontinued, sold, or we're closing some other facilities. That's more of a constant pruning when it comes to tools and attachment production. As you can see, we're well spread out. We're relatively close to our customers when it comes to production.
This is a network that we will continue to leverage going forward in production strategy terms to be closer to customers and also to adapt our products to local needs. Bottom left-hand side, you see our top markets. I'm not going to go through that, the typical markets. Revenues by region also to the right. That's just basically a compilation of the different markets. We're close to our customers, and that's the key point here. High proportion of recurrent business. Aftermarket is essentially recurrent. 65% of our business is recurring business. 39% is service. In Q3, it was 41%. This is a growing part of the business, again, vital for resilience because it's very stable over time. The backdrop is, of course, what it says on the right-hand picture there. It's a harsh environment. Mining is tough.
It's tough on equipment, it's tough on components, we need service, we need spare parts and lots of consumables. I think this boils down to, it gives us an attractive mix of revenues. The yellow part here is aftermarket revenues. You can see that there's a steady growth. Actually, also the green-grayish part on top is equipment revenues, also demonstrating quite healthy growth over the last years. As I'm sure you're aware, that equipment is a little less predictable than aftermarket. The aftermarket has been more or less around 65%, 70% as proportion of the business, we expect it to be there as a minimum going forward as well.
This is, again, something that we essentially strive to maintain or increase the portion of aftermarket because of its stability. Now, here's a topic that has been very much on the agenda of investors like you guys and many others as well. That's what's going on in automation. There's a big discussion in who's in the lead. Various numbers have been generated and produced in terms of demonstrating a leading position or not a leading position. I can tell you we're quite comfortable in terms of our position when it comes to automation. We know that we have solutions that solve our customers' problems, and that's what it's all about. We'll give you some numbers as well. We'll give you a flavor of what we do, but essentially that's our position for the time being.
We feel that yes, we do have market leading offerings when it comes to automation. Again, just to give you some flavor, yes, we do have very strong interest for our 6th Sense, which is essentially a packaging or a compilation of different services for information management around mining or digital mining. 60% of our equipment is equipped with Rig Control System. This is absolutely a necessary feature for future automation. 3,400 machines delivered with connectivity. We actually gave a number after Q2, which was 2,500. Here things are improving quite significantly. We have 43 projects for automation underground. We have 600 drill rigs equipped for complete automation. 30% increase of the utilization rates, typical. Again, you'll see more of this in later presentations, but that's a typical number that we see in efficiency improvement.
We have autonomous and tele-remote surface drilling in 16 countries on five continents. José will talk about that as well. We are definitely the leader in battery electric underground equipment. Now to the right, you see essentially a picture that depicts the different levels of automation. I'm not going to go through that, but very often we get a question asking, "So where are you on automation?" Well, the answer is really a question, "What do you mean with automation?" Here to be a little bit more specific, various levels of automation. It's not that easy to answer that question in one go. Just as a kind of a food for thought going forward. When it comes to value creation, we've seen a 9% annual growth since 2015 and 12% improvement or increase in profits.
Profitability has gone from 18.1% to 20.1%, actually 20.7% if we also back out the LTIP or the long-term incentive programs, as well as the split costs and also some of the provisions made for structured changes we made in Q3 here. Things are improving, and we expect, of course, to continue to improve. Sustainability. Well, we essentially had a discussion internally whether we should have a specific picture on sustainability. Does that really make sense? Well, essentially, sustainability is an integral part of our business. Why would we have a specific picture on sustainability? We said, "Well, let's have that because we just want to say that we know that this is important, and this is the framework that we essentially use for following and tracking our sustainability." I'm not going to go in much detail around this, but that's essentially the purpose of this.
Sustainability is vital, it is close to our hearts, and it is an integral part of the business. All in all, with that background, we are reconfirming the financial targets and goals that we set last year in conjunction with the split. What is that growth? 8% of the business cycle. We have achieved the last 12 months, 14%, 8% organically. Profitability industry best. We are industry best at 20.1%, non-adjusted. Capital efficiency should improve over time, and this is more of a struggle for us. I think we are at a good level, but here is an area where we can improve. Return on capital employed has increased or improved over the last 12 months over the last three years. We are at 29.5%, but here is something where we definitely need to continue to focus. Capital structure.
We want to have an efficient capital structure with investment grade rating. We're at BBB+. Stable outlook and dividend policy, 50% last year. We dividended 47%, or actually this year. I think we're fulfilling our targets. That's Epiroc today, and this is what we have so far and built so far and of course together, this company will unitedly grow it. The question, of course, is how are we going to grow this? To put the elephant right on the table, because this is a question, what happens? What's going on short term? Well, this is essentially trying to describe what's going on demand-wise short term. Essentially we do have very much uncertainty because that's really what's weighing in terms of the orders and the demand from our customers. That's our perception.
We have robust production, as you can see on the graph to the left. Production continues well, very well displayed by aftermarket revenues. We have mineral prices still at a good level, so that continues to look good. This is an index for our exposure, the metals that we are exposed to. We still have, which is a plus to the right, which is a strong customer focus and demand for productivity solutions and automation. We do have the uncertainty, and which weighs on orders, especially when it comes to equipment. What are we doing? Essentially what we're doing is that we're adapting the organization. This is where the agility comes in. We're adapting the organization. We are trimming costs and bringing it down to defend bottom line. That's what we're doing.
We are looking, of course, at what's going on from a market perspective, how much should we actually adapt? This is just a breakdown of the three different components that we actually, of course, disclose to the market. To the left, orders received, equipment. You can see the high variability in equipment and, more specifically, you see the two fantastic quarters, Q1 and Q2 in 2018. We took a step down to around 3,500 for the coming four quarters. We're at Q3 this year, again, a step down. Where this is going to go, not easy to predict, but we do not expect it to necessarily bounce back up to last four quarters, but be at a slightly lower level. That's our expectation. Not easy to predict. Service in the middle, easy to predict.
As you can see, a very good trend there. Orders received for tools and attachments, you can see it's a relatively stable trend. The slightly higher revenues or orders received that we saw the last three quarters are function of acquisitions made, essentially. Based on that, we say that, well, in the near term, we expect demand to remain largely at the level seen in the third quarter. That being said, the economic environment continues to be uncertain. I'm sure you understand that. Medium term, always a discussion point, what about replacement? Well, I'm afraid we can't give you all that specific. Of course, we have a lot of good data, but we can't be all that specific for different reasons. Just to give you a flavor, 24% of the equipment is older than 10 years. Average age is about seven years.
Typical guidance that we give is that the average lifetime for an underground machine is six to seven years, surface machine between 10 and 15 years. Utilization, running hours, maintenance, et cetera, will have an impact on the lifetime beyond the actual calendar days. That's obvious. Here's an uncertainty exactly when replacement is going to happen. This is some data at least. It's also, I can say that when we look at our fleet in the field, we can see that underground machines typically have more hours and longer calendar time versus expectancy than surface machines. If there's going to be a replacement, perhaps, and most likely, it's going to be more in underground than in surface, medium term. Long term, we very much believe in this market, for sure, and very many good trends are pointing in our direction.
Growing world, challenges to meet the demand by and through the growing world, a focus on safety and sustainability. All of this means that we are adapting our solutions to fulfill this demand. What are we talking about more specifically here? Growing world, you know these numbers. I think it's the OECD that predicts that the economy will grow with 3% per annum up to 2050. Well, if that's going to be the case, who knows? Certainly that's going to be a big drive for commodity consumption. Population growth as well. Not the least, urbanization. Because of construction and all the metals needed for that and the electrification of the world. All of this is a big driver, certainly not only for us, but for most industries. More specifically, this has an impact on construction market. This is data from McKinsey.
Also for the mining market. The belief now is global construction will grow at roughly 4% going forward globally. Mining CapEx built to mill will be roughly 6% going forward. For those of you that have a really good and clear memory, we said last year 7% for mining. This is now being reduced to 6%. Slightly more cautious, but still fantastic numbers. Of course, any individual year may deviate from this, but on the average, this is what we expect going forward. We also believe that we have a favorable exposure in terms of minerals and metals. Gold 21%, copper 17%, nickel and lead 9%, and platinum as well as infrastructure, we believe are favorable given what we just talked about. More typical commodities that we have exposure to, iron, coal, zinc, and also some other metals we think a little bit more questionable.
At least 2/3 of our exposure today we believe has a favorable outlook. I think that's a good position to be in. Just as an example, this is data from the International Energy Agency, they have two different scenarios in terms of electric vehicles. One saying that if you just apply the policies that have been adopted politically throughout the world, this is going to lead to 23 million electric vehicles being sold in 2030. If we apply another scenario, which is 30% of vehicles sold in 2030, which is in line with sustainable development goals, it would mean 43 million. Who knows what it's going to be. If you look in the middle, the metals used per car, huge difference between battery electric, hybrid, and combustion.
Just make the assumption that 30%, if we now go as a unified population in the world, goes for sustainable growth, 30% of all cars in 2030 are electric. Demand for copper would increase with 10% and nickel with 40%. That's just for the cars. The charging network and everything else not included. That would drive certainly a lot more, especially copper need going forward. Looking at the challenges that the industry faces, the equipment effectiveness or efficiency, mining is lagging most other industries. As you can see by the yellow bars, this is the equipment efficiency in underground mining as well as in open pit mining, 30% and 40% respectively, more or less. You compare that to pretty much any other industry, very much lagging.
Of course, this is something that all miners are talking about trying to target, and this is also what we are targeting when it comes to our solutions. Productivity has dropped from 2004 to 2017 with 27% in mining. Increased from 2010, yes, because there's been cleaning up of various assets, but still a drop, and there's a gap of 27% just to go back to the productivity we had 15 years ago. Looking at the further challenges and the reason why the drive for efficiency and productivity in mining is so important is the depletion of ore grades. This is copper, underground at the top and surface at the bottom, the black and yellow graph. The dotted line is the projection going forward. As you can see, there's a huge drop in the grade quality. 40% for underground and 30% for surface copper grades.
The expectancy when it comes to how much will be excavated underground is going from 23% this year to 36% in 2040. This again is pointing our direction. Safety and sustainability, again, something that is close to our hearts. To the left is a list of things and areas that our customers are focusing when it comes to safety and sustainability. It's a comprehensive list. Where we can make a difference is essentially health and safety, number of fatalities, as well as injuries. We can do a lot there because of the safety of our equipment and solutions to improve safety. We can also work with quality of life in terms of vibration and noise, and also when it comes to air emissions. Those are the areas that we target. We can make a difference in most of these, but specifically, that's what we target.
To the right, you see one of the reasons why safety is so important. This is a dangerous industry. Still, it is a dangerous industry. Whatever we can do to help our customers to become more safe, highly welcome and highly valuable. We believe we have the solutions to meet tomorrow's challenges in service, maintenance, productivity, and automation and digitalization and electrification. Now I believe there is a movie. Am I right? All right. We'll take a little flavor of our safe and smart and seamless technologies.
[Presentation]
All right. My time is up, but I actually do have a final slide here. The foundation and strategy for Epiroc, I think we have a mixture and starting point for continued success. We do focus on attractive niches. These niches, we believe, will be attractive for us going forward because of the underlying trends. We have strategy to outperform our competitors. Innovation and expertise, you will hear more of that. Safety, sustainability, as mentioned, ingrained in our business. Presence and penetration, we are where the customers are. Operational and service excellence, again, you'll hear more about that, but clearly that's part of the business. People and leadership, we should not, and will not, and we do not forget about that. That's the foundation, that's the strategy. Speaking of fantastic leaders, Helena, here's one great leader. Helena is Senior Executive Vice President of Mining and Infrastructure.
It's one of the more complicated titles in the company. The task is very straightforward, to take care of business.
Yes.
Right?
Thank you, Per, thank you all for joining us here today. I will take the opportunity to talk about our aftermarket. As you know, this is a big portion of our company, and it's also a focus area for us to grow the aftermarket, both organic and inorganic. If we look on, as Per said, it's two-third of our revenue, 2019, and of course, it comes because the equipment are mission critical for our customers. Our equipment also work on really harsh conditions, and this drives the need for service as well as spare parts. Harsh conditions could be extreme corrosive environments, could be high temperature, low temperature. The equipment is really under high pressure. We have had a solid growth in the aftermarket. If we look at this in a 10-year perspective, most of this growth is organic.
The last year, we added the acquisition in tools and attachment, the Fordia and New Concept Mining, that added SEK 750 million in additional revenue. 2015, you see the addition of the Hydraulic Attachment Tools division. As you can see, a solid growth, and this is, of course, a result of our very focused efforts to grow, step by step, the aftermarket business. Just to play with the numbers, if we look at the Epiroc revenue 2016, and we compare it with the revenue we have in the aftermarket now, today, we have an aftermarket with the same size as the full company of Epiroc 2016. That's quite impressive, and we will continue on this journey. Also during Q3, we landed the largest service contract so far, $68 million to Codelco in Chile.
It will be booked during the seven years that this contract will run. It's not part of the numbers for Q3, but still it tells the size of this type of contract. A really good, nice contract. I will go through the key success factors for a successful aftermarket. The first one is presence. This is workshops, it's warehouses. Now, this is an investment that we do upfront, and it takes time before this starts to generate business. An efficient supply chain is a must. The worst thing that can happen is that the equipment is down, and we don't have spares or consumables available. Technical knowhow is extremely important, and we are step by step certifying our technicians to make sure that they have the highest possible technical knowhow, so that they can do the service in a safe and an efficient manner.
I would also say that the fact that we have focused organizations, we have three divisions working in our aftermarket, that's also key to success. In the end, it's the people that makes the difference. Passionate people, really working hard in harsh environments out at the mining sites. There are a number of trends in the aftermarket. The first one is safety and sustainability. Here we are working hard now with live work elimination, as well as standard operating procedures to make sure that the service of the equipment can be done in a safe and an efficient manner. For all large customers, productivity, efficiency, and total cost of ownership is extremely important. Here we are every year bringing better and better solutions to our customers.
Connectivity, I will come back to connectivity, but connectivity is really an enabler now for us to perform service in a much more proactive way than we have done before. As you know, we have a very broad aftermarket offering. Today, I will drill down more into the service part and share with you how we have productified our service. I will also touch base on tools and attachment. We start then with service. Here you see the growth of our service business over the last five years. Majority of this growth is organic, a small piece from acquisitions. There's, of course, some currency effect in this, but a healthy growth.
This year to date, it is 9% growth. What is also interesting to see here is, of course, if you compare 2015, 2016, when the market was still quite difficult for the mining houses, with a lot of equipment parked and reduced activities, you still see that the aftermarket keeps up in a good way. This really gives us resilience. I said that presence is vital, and this is the footprint that we have today. In total, we have more than 6,000 service technicians working on sites. We have more than 280 sites with service contracts where we have labor on site, and many more contracts when it comes to sending technicians and do specific work. Could be around rock drills, for example. We have more than 100 service workshop globally with our own people, where we do overhauls and repairs.
We have three remanufacturing centers, two in North America and one in Indonesia. We have three regional distribution centers for an efficient supply chain. During the life of an equipment, there are different ways for us to sell service and to help our customers. Of course, in the beginning, when the machine is new, it's very much around connectivity, could be training of operators, custom-engineered solutions for productivity and for safety. As the machine starts to be used, it starts to consume parts as well as different types of service agreements. Here we have many different types of service agreements, depending on what the customers want. When the equipment comes to its midlife or to the later part of the life, we're also offering different type of reman solutions, as well as midlife rebuilds.
Here we can actually prolong the life of the equipment quite a lot, and this is very well-received by many of our customers. This is some examples of our broad service offering. Of course, majority of what we sell is parts, is different kind of kits, as well as service agreements, as I said, 280 service agreements with people on site. During the last years, we have also productified several of our offerings with reman solutions, midlife services, custom-engineered solutions, training products, as well as connectivity. I will share some insights to see how we have been able to grow our service business based on these new products. When it comes to service agreements, this is now an index in relative term, the revenue growth in service agreements. Of course, we want to become a productivity partner. We don't want to sell only parts.
When we are a partner, that's when we really can add value. We, as I said, have different levels on service agreements, and we customize this depending on what the customer wants. Here you see nice growth, 27% growth over the last two years. Reman solutions, that is where we take an old component, and we remanufacture it back to the original spec. This we have set up, as I said, we have three remanufacturing centers in the world, one in Canada, one in U.S., and one in Indonesia. So far, very good progress, 80% growth of the reman solutions. Here I see a great potential to continue to grow, especially, of course, in all the other markets. We have midlife services. This is where we bring in a machine which is coming to the later part of its life.
We strip it down, as the picture shows here. We replace the worn components. We put in new components, and we bring the machine back to the same productivity as it had originally. As you see here, very nice growth, 56% growth the last two years. We have custom-engineered solution. This is where we do specific upgrades, the configuration of a specific machine. Here we can incorporate the latest version of a component. It could be an upgrade of the software, et cetera. It could also be where a customer want an existing machine to be upgraded to do something more from a safety standpoint or from a productivity standpoint. Also, this is a smaller part of a small product for us so far. As you can see, we have doubled the revenue in two years' time. Training product.
A lot of technology shifts is happening with equipment. Now, in parallel, we have electrification, we have automation, and of course, this gives us a great opportunity also to sell training, and that is what we're doing. We're helping our customers to make sure that they will get the best out from our equipment. We have classroom trainings, we have full cabin simulators that we put on the different sites for our customers. Also here you see quite good growth, 64% over the last two years. Connectivity is an enabler, as I see it, for us to be proactive when it comes to service.
As Per said, we are putting connectivity devices with a high pace now on all equipment leaving our factories, as well as retrofitting existing fleet out there. We have built up regional centers to analyze the data and to be close to the different customers in the different markets to drive data-driven services. This is the future when it comes to service, to become proactive. I do believe that in the future, it will be a seamless interaction with the equipment and the aftermarket. The connected machines will tell us in advance what services is needed, what parts is needed, what consumables is needed. This gives us, of course, great opportunity to develop the supply chain, to plan a better way, as well plan our service contracts. If we then move over into tools and attachment, I will spend a little bit less time on tools and attachment.
Here you see good growth over the last five years. Here we have, as I said, an acquisition effect this year of SEK 750 million. Worth mentioning is that we have exited non-profitable businesses within tools, that of course has an impact on the total number. Some words about Rock Drilling Tools. It is also a key part of the TCO for drilling. It could be up to 20% of the total cost of ownership for a drilling machine. It is really the product that do the job. It's actually the ones that are actually crushing the rock. Here, presence is key, as well as the supply chain. If there's no consumables available, the machine is down, that's not okay in any way. We are developing our consumables together with the equipment. We see this as a system.
Machines, Rock Drilling Tools, as well as consumables, and then optimizing that system. We have several unique systems like the COPROD system, where we have built a fully complete offering for our customer. This is also a very resilient business over a cycle, typically can vary ±5%. Also very much related to the production level in mining. We have 70% of the sales through some type of agreement, could be cost per meter agreement, as well as some type of consignment agreement with the major customers. As a division, this is where we produce. We start with raw material and we actually manufacture, so it differs compared to the cap divisions. As I said, we have redefined our offering in Rock Drilling Tools during this year. We have divested oil and gas and geotechnical consumables.
We were not the leader in these segments, and we decided to exit. We have also done a selective exit of handheld. Handheld is a shrinking market. Of course, with the mechanization, handheld volume in total in the world is going down. We're keeping the profitable part of this business, and then we have announced a number of both divesting manufacturing units as well as closing down some manufacturing units now during Q3. The handheld exit will happen now during Q4. At the same time during this year, we have also focused on growing the core, which is then top hammer, rotary boring, and down-the-hole. We have strengthened our position with acquisition of Fordia which was the leader in exploration, as well as New Concept Mining, which was a leading player in deep mines with seismic activities from a ground support perspective.
We have a strong foundation to build on from this product line now. Also here, we work in the same systematic way that we do within parts and service. We map the fleet, we know how much consumables is being used, then step by step, we grow our customer share of consumables. Also when it comes to consumables, digitalization plays a vital role. We are right now connecting the consumables with the machines to have real-time understanding of the performance of the consumables. We are implementing smart consignment management as well as tracking our cost per meter contracts in a digital way. Here, of course, we are using the capital equipment, the performance of the consumables in a closed loop so that the machine can optimize the performance of the consumable. We also do other type of innovations within consumables.
We have just launched a complete new range of underground drill bits. We launched the surface assortment last year, which has been successful, and now we have launched a new assortment for underground. It gives much faster penetration rate than any other bit in the market and 37% longer service life. This has a huge impact on the TCO for our mining customers. We have also launched the new hammer platform, with a unique piston setup, will give us much higher frequency rate. That gives higher penetration as well as lower fuel consumption. We continue to drive innovation in consumables on the core product lines. Some words on hydraulic attachment. We are a big player in the premium segment of hydraulic breakers. The majority of this revenue is towards infrastructure, so it's a little bit different compared to the rest of the divisions.
Here we also play a vital role when it comes to customer productivity. It's a little bit different as well because here we go indirect. We have a big set of distributors that are taking this product to the market. Of course, we use the synergies with our footprint. Could also say that the sale so far for Hydraulic Attachment Tools is mainly coming from Europe as well as North America. There's still quite a lot of growth opportunities in Hydraulic Attachment Tools. We have over the years developed organically a broad portfolio, also adding silent demolition tools, into our offering. We also did an acquisition of Erkat in 2017. That acquisition added drum cutters for trenching. That acquisition has added close to SEK 100 million in revenue to our Hydraulic Attachment Tools division.
The broadening of the portfolio is with the reasoning to try to grasp opportunity and market share in silent demolition tools. This is the progress so far. We have been growing with 31% in silent demolition tools over the last two years. Good to see, but still much more possibilities here in the coming years. There is also potential when it comes to aftermarket of hydraulic attachment, and that relates to the consumable that is actually doing the work. This is an opportunity that's an untapped potential that we have not been really focused on historically, and you can see now with the focus, we have managed to grow this business with 21% the last two years. Still opportunities within silent demolition tools as well as aftermarket for hydraulic attachment, and also I would say the value segment of hydraulic breakers.
To sum it up, a very strong, healthy growth in the aftermarket. We are very focused on continue to grow this part of the business, both organic and via acquisition. There are a number of key success factors. Presence is vital. We do upfront investments. It's competence. It's an efficient supply chain. In the end, it's our service technicians that do the job. By that, I would like to say thank you, and I will leave the word to Martin Hjerpe to talk about M&A.
Indeed. Thank you very much, Helena. My name is Martin Hjerpe. I lead the group function for M&A and strategy, and I'll spend just a few minutes to talk about how we look at acquisitions as a part of our strategy. First of all, as you all know, I think, we have done a lot of acquisitions over the years. M&A has been, and continues to be a very important part of our growth journey. In the past two, three years, we've done 12 different acquisitions, spanning the area of technology, service, and tools and attachments. Together, these 12 companies have added between SEK 1.5 billion And SEK 2 billion in annualized revenues right now. It's an important part of our growth story, more important, even more important than just the growth is the strategic sort of footprint that this gives us.
Many of these acquisitions are important to create opportunities for us for future profitable growth. What is then our sort of philosophy around M&A, and how do we think about it? Well, Per mentioned the foundations for our success as Epiroc. We focus on attractive niches where we can make a difference for our customers, where the customer's products are mission critical, and where what we sell and provide to them actually helps them improve their productivity and improve their profitability. The second thing is that we strive for outperformance in those niches. We want to be the leader in those niches. We don't want to be number five or six in a highly competitive niche. That is difficult for us then to help our customers to actually improve.
That means, in terms of M&A, that we look for additional niches where we either might not have a strong position as we wish to have today, or where the niche provides an opportunity for us to help our customers to improve. Those niches we will target through M&A, unless we do it organically, in those cases where that is more beneficial. When we do acquisitions, what do we look for? This is something that we have integrated in our M&A process. We look first to make sure that the segment and the target has a standalone attractiveness. Is it performing well? Is it attractive in itself? Does it have a value creation potential even if we were not the owner? Second, does it offer a strategic fit and good synergies with us? Is it something that we can grow? Can we become a better owner?
Can the sum of the parts be bigger than the individual parts? Thirdly, do we have a plan to either remain or become number one in that particular niche or that particular market? As I mentioned, we do integrate this in all of our analytical work for the different targets that we look at, and unless you sort of pass this hurdle, we're not going to approve or go forward with an acquisition. Where do we then look? What are the kind of areas that we sort of seek acquisitions within? Well, if you look at where we are today, our core markets, we obviously keep looking for acquisitions that strengthens and solidifies our core. This is consolidation, gaining scale, creating synergies out of this. Several of the old acquisitions that we've done has been in this space. RDSA might be a good example.
Of course, we also look outside this core, adjacent to core, where we can broaden our offering to our existing customers with new products and services. I think ASI Mining, New Concept Mining is also sort of good examples of acquisitions we've done in this area. Finally, we of course, also look outside core, which will take us into completely new areas. We are also very much more cautious there. As I mentioned, we need to make sure that we have good strategic fit and synergies, not only that the segment is attractive in itself. Therefore, you can expect that the frequent acquisitions will be within the core and adjacent to core.
That's also in the core where we have dedicated resources in the different divisions that continue to look for opportunities and evaluate opportunities, and adjacent to core to expand our niches within our current sort of customer space. We will keep a door open for the outside core acquisitions as well, but they will be a bit more infrequent than the core and adjacent to core. With that, to sum it up, M&A continues to be a very important focus for us, not just to add the top line, but more importantly, to add strategic niches for further profitable growth. With that, I will conclude and leave to Sami, who will talk more about digitalization, automation, and electrification of the mine.
Thank you, Martin. Good afternoon, everybody. My name is Sami Niiranen. I'm a President of our Underground Rock Excavation division. I'm 47 years old, Finnish citizen, mining engineer from Helsinki University of Technology in Finland. I have over 20 years experience in the global mining industry, and I've been working for Epiroc since 2004. I've been living in five different countries, Finland, Sweden, Ghana, Australia, as well as Ireland. Held positions, I would say operational positions such as marketing manager for our underground equipment, as well as general manager positions in our customer centers in Finland as well as in Ghana. My current position as a president, I started in December last year, exactly actually one year ago. I must say that, I've been enjoying every single moment to work in this fantastic company, Epiroc. I'm passionate about leadership. We mentioned people and leadership.
I'm passionate about leadership as well as developing people. Today, I'm not maybe developing people that much, but I'm going to talk about our leadership in new technology, automation, digitalization, and electrification. Here was my CV. Automatic solutions, they have been around for around 25 years in underground. It all started with the single machine automation. The first automatic Boomer was in operation already in 1993. Our CAN bus based RCS system, Rig Control System, was launched in 1998, and that is the chosen platform for all of our machines, enabling a common platform and surface for automation and interoperability. Since 2010, we have witnessed a quick development as well as increased demand for automation. Connectivity with telematics solutions called Certiq. Multi machine automation, that was introduced in 2012. Battery electric vehicles are really taking off during this decade.
Partnerships and collaborations are driving the speed. From now on, from today onwards 2020, we will see automation to continue as a trend. We will see more multi machine installations, more interoperability, meaning basically that machines are communicating with each other. The development of new business models, because the business models, they will change as there will be more software and more solutions. How will they change? They will probably change more towards recurring revenues as well as paying for performance. We see increased levels of automation continuously. As of today, we have more than 600 underground rock drilling equipment equipped with ABC Total, enabling a fully autonomous drilling. Multi machine automation and fleet automation is coming on stream as we speak. We have a number of these solutions already in operations. Mixed fleet automation is also something that we foresee.
Because many of our customers, they have a mixed fleet, and they want to reap the benefits out of their total operation and the total fleet. Here we are working with open and OEM agnostic solutions, so we have a good position here. As of today, we have 43 underground automation projects. Since this morning, actually, we announced a very important strategic partnership together with Orica to automate the explosives charging as well, basically completing the whole drill and blast cycle. It is going to be a very interesting project to follow. As Per mentioned, in Epiroc, we have a 6th Sense that is combining our automation and digitalization solutions. Under the 6th Sense umbrella and looking at optimizing the combination of technology, processes, and people.
Here we have an example of 6th Sense production solution, and this is from Russia, where we are automating the production drilling. In Apatit, 2018, we installed three tele-remote solutions on Simba production drill rigs, as well as ABC Total and Certiq telematics systems for remote control and monitoring of the fleet. As of today, our customer, Apatit, they are able to operate automatic drilling without any operator intervention, reaching an improved safety as well as a 20% increase in productivity. Let's watch a movie about Apatit.
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Okay. The second example, that is about 6th Sense transport solution. It's about loader automation. We have a state-of-the-art solution to automate multiple loaders. Where we increase safety and operational awareness by removing the operator harm's way. We also reach machine utilization when operating during breaks and shift changes.
With our customer case, we have been able to prove four-six hours added operational time per working day. Then we have a third example. This is about 6th Sense and information management, where we are digitalizing our customer, Pucobre's mining operation in Chile. This new solution is already visible at Pucobre's newly established control tower. The implementation of the 6th Sense solution is expected to continue to improve safety and increase productivity. It can be connected to the customer's existing machine fleet, regardless of make or model. Epiroc fleet at Pucobre includes Simba production drill rigs, Boomer face drilling rigs, as well as Scooptram and Minetruck loading and hauling equipment. We also provide Pucobre with consumables and service. Let's watch a video about our collaboration at Pucobre. Then my last part will be about battery electric vehicles, electrification.
An important point to mention is that electrification is already present to a large extent in underground operations. When it comes to drilling equipment, all drilling is performed, basically, machines connected to electricity already as of today. Here, electrification is already a standard. First battery loader was introduced already in 1985, during that time, the technology was not ready for that. The real development began 2010, in three years after 2013, we started testing our battery Scooptram ST7, which was introduced three years later. The development of the new generation equipment, that started in 2017, which was launched one year after in November 2018. There is a large interest, huge interest for the battery electric vehicles all around the globe. So far, as of today, we have sold them to four different countries at the same time as we are rolling them out selectively.
You can see here on the slide that the benefits, they include improved health and safety, reduced emissions, lower total cost of operation, and higher productivity. We have 100,000 operating hours accumulated to date. We have seen a more than 70% reduction on energy consumption, mainly related to reduced ventilation demand. Also, we have seen a 10% increase in productivity for Minetruck MT42 because of faster ramp cycle times. With battery electric vehicles, we also open up for new revenue stream generated by batteries. We are looking to sell battery as a service. For the customer, there's a lot of benefits. We can provide a state-of-the-art solution and the availability of the latest batteries all the time. We will also take full responsibility for the batteries, maintenance, technology upgrade, as well as recycling. We have the ambition to go green all the way.
To produce the world's greenest machines by using the world's greenest battery cells. Producing the world's greenest metals. Doing our best for our planet. The future is electric. To summarize it, future looks bright underground. We are a leader in automation, digitalization, and electrification. Our customers are moving this way, and we have a large number of collaborations ongoing with our customers and to support our customers to be leaders in this field. Going forward, we see this trend to continue, and this will be beneficial for our customers as well as for us. Thank you. Okay. The next, José. Yeah, I will hand over to José via video link.
Good afternoon. First of all, my apologies for not being there. Some customer commitments kept me in this part of the ocean. As an introduction of myself, I started my career in the group in 1988 in Spain as a sales representative, just after graduation from the Madrid School of Mines, where I obtained my master's degree in mining engineering. Since then, I have had a wide range of assignments within the company. Seven countries in three continents. My foreign adventure started in China, then Sweden, France, back to Sweden, Mexico, Chile, and finally U.S.A. That allowed me to work both at the product company as well as a customer center in areas such as sales, marketing, production, R&D, and management. Very exciting for a mining engineer to have lived and worked in so strong mining countries.
Since late 2014, I hold the position as President of the Drilling Solutions Division based in Garland, Texas, U.S.A. Since my studies and talking to professors, consultants, or mining professionals, when people talk and dream about the future mine, they ask to envision opportunities such as fully autonomous missions. Those intelligent rigs running seamlessly together, making decisions on the ground to optimize performance without direct human intervention. Also global control rooms. Having our operators safe in a remote control room on site or several thousand kilometers away, where they can manage the fleets and not the individual units. Besides that, they envision information on demand. Having the data at your fingertips no matter where you are. Let me share something with you. This is not a dream, it's not a future.
This is the world that we have been building for our customers and are continuing at a very rapid pace. Let's, for instance, start with information on demand. Perhaps we could just have a live look at one of our autonomous sites. Per, would you help me with this? How are they performing?
Yeah, just a second. I have an app on my phone, and it's right here.
I can see. What can I see? Well, I don't have my glasses. Here. Drill usage, top delays, production, and we have bottom right-hand corner, we have numbers in green. Looks like we're hitting, please for me, the target, right?
That's right. It's awesome. Yes, the customer has been running those autonomous drills for six months, and now they are consistently hitting their targets as we predicted. They can make decisions based on the dashboard with the information that you have in front. We have supported their learning, and now they are excelling. Perhaps it's time for them to adjust to new targets. Those were too easy.
Well, it looks like it. There is more information here. Is there anything else we can help them to improve to make their production even more efficient?
In the early days, they didn't hit the targets, but now they are hitting. With the information we have, we can also suggest new improvements. This is how we use the 6th Sense that you were mentioning before. After we hit the KPIs on our control step, we move to the optimizer step. If we look, for instance, in the bar in the middle, in the lower bottom side, you see rather low total utilization. Perhaps, I can ask my data engineers to help them to improve the data, the utilization, to drill more meters, so they will be more productive. In fact, this is the name of the game, having the information on your fingertips. You have information in real-time, and you can make decisions to influence the operations at once. Thank you, Per.
Sure.
Then, of course, the second main topic was the fully autonomous missions. With that, what we mean is that we have many autonomous drills running all over the globe with new installs coming frequently. They are not trials. The customers relying on our drills and on us, for the normal production. We are primary contributors to their production goals and have been increasing their reliance on Epiroc fully autonomous systems for the past five years. Instead of me talking about it, let them talk for themselves. Recently, our partners at Boliden in Sweden challenged us to run the first electric drill autonomously in Arctic conditions. Let's see what came out of it.
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In fact, automation is not only for the big drills. Autonomous and remote operations are also growing in our smaller range of surface drill rigs. Our trusted partner at Newmont Goldcorp, Hollinger Open Pit Mine in Canada, are reaching their goals through an autonomous SmartROC D65 surface drill rig. Let's see a short clip from this milestone.
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There is another project I will allow you to showcase. A project also in partnership with Newmont Goldcorp, this time at the Peñasquito Mine in Mexico, and how they reach their autonomous goals through our production unit, the Pit Viper 351, the largest model we have in our assortment.
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There is the third big topic, that it was the global control rooms. We are continuously implementing control rooms all over the world. For example, besides the control rooms in Canada, U.S., Chile, or Australia, well-known big mining markets, we have also opened in Morocco, Papua New Guinea or Chile or Peru, just to name a few. The control rooms not only keep operators safe from the high-risk environment but also allow mines to have new cross-functional strategies in their operation, bringing the manufacturing mindset into mining. This is the future that we are providing for customers like Los Bronces in Chile. Let's have a look.
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How did this start? Briefly, our history has built us to become the automation leader in open pit mining. Everything has started with a vision. We wanted to automate drilling in open pit mine. Obviously, as simple as that, as also as complicated as such. We made our strategic decisions to set ourselves and also our customers for success. Everything has started in year 2000 when we launched the first Pit Viper during install runtime. Just after the acquisition by Atlas Copco in 2004, we decided to take all the PVs, all the Pit Vipers, ready to become robots by installing the RCS system, the Rig Control System that Per mentioned just a few minutes ago, previously used in our underground drilling rigs. By the year 2007, we had already built 100 units.
From the clear strategy set early on to the continuous execution of it today, automation is a new norm. It's quickly been adopted by our customers, and you see the rapid succession of many firsts, as shown in the largest circles on the map. What started with an early bench remote, tele remote, or autonomous site in Canada and Australia, we moved rapidly to multiple sites and full fleet, running this way across 16 countries in five continents. There are many more projects coming up. Our customers achieve record-breaking productivity numbers, and we are very proud to be part of their success. To keep our customers in the forefront of safety and sustainable productivity through those technological advancements, we had to revolutionize our way of working. We, in Epiroc, switched to agile methodology for faster time to market.
This agile methodology was used in software development commonly. The development time is broken down into small periods. A small focused team working conditionally with each other, what is more important, directly with our customers in continuous interactions, managed to reduce drastically the time of implementing upgrades in delivered technology. To ensure successful project deployment, we built a specialized team, Epiroc's Field Automation Service Team, FAST for short, who lead and assist with installation, testing, and commissioning the rig into operation. The first group not only trains our local teams to become experts in servicing, but most critically, assists the customers with proper and safe change management to ensure achievement as promised. Automation requires a mind shift to evolve the current processes to the new standards in the operation. Last but not least, the global competence.
The mastermind behind this transformation lies on our surface automation center based here in Garland, Texas, an integral part of our division, where our drilling experts and design engineers provide direct and focused automation solutions for all type of drilling challenges. For instance, several times a year, we provide a non-traditional training session called boot camps to grow our internal experts and customer team members into specialized automation roles, utilizing a specially equipped classroom with a full-scale automated drill. All these three ingredients play a critical role in our recipe for successful deployment. Finally, to conclude, let me make a strong statement.
By focusing and excelling in the three critical areas of our foundation of the 6th Sense, machine automation, process automation, and systems integration, we will continue to complete new great projects together with our partners and maintain our leadership position in the automation in open pit mining. Thank you very much for your attention for today.
Thank you, José, for joining us from Garland, Texas. This concludes, let's say, the first part of the presentation sessions. A lot of information, one and a half hours. I think we all need a break. We kick off again with breakout sessions where you find out even more about this very interesting parts of automation, digitalization, and so on. We will do that around 2:50 P.M., 2:55 P.M. You will find your guides outside. You have your group numbers on your badges. The coffee will be served where we had the lunch earlier. Please join us out there for the break and then the breakout sessions. We will meet back here after the breakout sessions. The guides will bring you back here. Thank you. Welcome back, everyone, to the auditorium. Welcome back, everyone, on the webcast. Without further ado, I introduce our CFO, Anders Lindén.
Thank you, Mattias. I hope you enjoyed the breakout sessions. I have the pleasure, the honor of concluding the presentations. I will talk about the strong and proven operating model. Some of this will be a repetition. I feel I will probably just rub in a little bit of what my colleagues have so well presented to you. We have a strong and proven operating model. It's a key success factor for Epiroc. The five cornerstones that you've seen the slide earlier today, the focus on decentralized business, the high degree of direct sales, the strong service business, flexible manufacturing philosophy, and a sharp focus on innovation. I hope you in particular enjoyed the innovation part now that what you've seen walking around. I will guide you a little bit deeper into this. This you've also seen before today. We run our business in seven divisions.
This is our way of governing the company. We follow the divisions, each of them with a P&L and a balance sheet, of course, cash flow. We report them back to you externally in two segments. Without deep diving into that more, I want to mention also one of the other factors that makes us strong, and that is obviously the decentralized way of running the business. Decentralization is in our DNA, and it's been so for many years. It has many advantages. It has some challenges. You need to know what you're doing. If you do it well, you get a very strong organization with an entrepreneurial focus, quick decision-making, and strong ownership and commitment. Obviously, you also need to have a strong governance model in place, which I believe we have, and you need clear communication and so on.
This is something I think we do well. Of course, with a decentralized organization, you will always have to watch your efficiency. We talked about this a couple of weeks ago during the Q3 presentation, that we have now a program. We still have some inefficiencies from the split, which we are still working on, and we have started another program, which we expect that should give us some annual savings of around SEK 300 million with some restructuring costs to it, and that we should see benefit us during the first half of next year. We have, let's say, second, you could say, cornerstone, the flexible manufacturing philosophy. It takes us well, up and down in the different swings of the demand. For example, we have around 1,300 of suppliers, which helps us to build up 75% of the product cost to the equipment that we have to purchase.
We focus on the core. We produce the core, and then obviously we purchase and assemble. It means, for example, on a drill rig like this, that the rock drill is something that is core to us, and that we spend a lot of effort on. The drill bit, the other red circle, is another of the core components, which we manufacture. Sometimes there is a misunderstanding what we mean with manufacturing or production. If we say we manufacture, and the third red circle here represents the brain behind all this, and that's also our core activity. There are many tangible benefits of flexible manufacturing philosophy.
Of course, we have, let's say, a capital efficient way of running the business, which is represented by high return on capital employed, even though this particular year, we have, let's say, had an impact of the newly introduced IFRS 16. I'm not going to dwell into that. You know that. When it comes to investments in property and plant and equipment, fairly limited. As you can see, the development here. We should say we don't have any, let's say, mega investments planned that would take this into a different direction. This is what we're doing. This is what we mean with another benefit of the flexible manufacturing philosophy. When it comes to our manufacturing footprint, it's a little bit similar, but different slide that Per showed. We have our main manufacturing plants in Sweden, in Örebro and Fagersta.
Another one is in Garland, where we connected earlier in Dallas, in Texas, where we do surface blast hole drill rigs. We have another one in Nanjing in China, and yet another one in Nashik in India. Obviously some other ones, smaller ones that you can see from the map. Is this good or bad? Are we happy? Well, yes and no. We are always constantly looking into ways to improve and how we can do this even better to be more efficient, which is what you can see here represented by a press release that we distributed in August, where we talked about how we will actually expand our production facility in Örebro to add another 10,000 sq m of production facility for the Surface and Exploration Drilling division. Mind you, we have in Örebro as a footprint around 2,000 people of our 14,000 people working.
It's an important site for us. Of course, manufacturing footprint is important, but presence is even more important, which Helena, I think, well presented how important it is to interact with our customers. We see our customers every day, need to prove our excellence every day, which is actually a good segue into the third cornerstone, where we talk about direct sales. 85% of the business is direct sales. I'm sure you recognize the numbers. This is something that gives us the opportunity to get immediate feedback from the customers, to develop products for the customers, to instead of anticipate orders, actually basically produce on orders rather than forecasts. It also gives us a possibility to differentiate our products to the customer needs and to respond to the customer demands. Direct sales has some challenges. It typically drives higher working capital.
This is an area where we acknowledge that we have not been, let's say, industry best. We know our weaknesses and pros and cons of our operating model. For that reason, last year we launched our supply chain program that we have talked about for a while, and we should see gradual improvements for the next year and a half, to two years, all the way into 2021. Already we see improvements in utilization, sorry, availability, that four percentage points in selected and typical targeted parts of the business. This is, I should say, definitely parts and consumables in this program. We also see lower transportation costs, and with that, also reduced transport emissions, and very tangible such. This is something that we will constantly work on, net working capital in general and our, let's say, inventories in particular. Just a few words about the CO₂ emission.
We've discussed sustainability. We have, despite the growth that we have seen with combined efforts and making our operations more efficient, we have actually been able to reduce CO₂ emissions. How is that with the growth? Of course, we have put a significantly higher share of our transportations on sea and reduced the air freight. That makes a big difference in terms of absolute CO₂ emissions represented by some of the facts that you can see on this slide. We will continue, obviously, to work on that. It actually, in my opinion, also fits well into the battery strategy that you've seen during the breakout sessions and also heard Sami talk about. Direct sales also means long-lasting customer relationships. This is obviously a good thing for us, interacting with the customers. It means that we're always close to the customers. We aim to solve the challenges.
We can do that. We do that on responding to the customer needs. We do innovate on the customer's demands and on their need for productivity and increased productivity and the productivity solutions that we have also shown and demonstrated today. We produce rather on order than on forecasts, which is also something that the interaction with the customer gives us a better possibility to do. Last but not least on this one, we have a small but professional team that work with financing, where we see there is a need that we can add value to the customer. That has actually helped the business many times. To nurture the customer relationship with direct sales is obviously a key success factor for us. The fourth, we talked about, Helena has also mentioned about the strong aftermarket business, the service.
65% is the aftermarket business. We continue to develop this, and we have more initiatives ongoing to work and to improve the revenue streams and profitability. This is something that you have heard and you have seen, and also in the growth that we have been able to report during the last quarters. Innovation, the fifth cornerstone that we have talked about, and this is what we have tried to demonstrate today. I think some of you may have been on the Morgan Stanley event earlier this fall when I was interviewed, and I said on some questions that we will show you what we're doing on the Capital Markets Day. For those of you who remember, I hope we've been able to convince you that we are actually a leading player when it comes to innovation.
This is a key success factor for Epiroc, and we're doing so in a responsible and ethical way. If we look a little bit on the numbers, we talk about 2.6% in R&D. Doesn't sound like a lot of money, right? If we think about 2.6%, it turns out to more than SEK 1 billion. Remember now that we have 65% in aftermarket, and obviously most of the R&D efforts go into equipment. If you think about it that way, it becomes a lot of money, probably more than any other similar company puts into, or any peer puts into the R&D. In addition to call it internal R&D, we obviously work with suppliers. Again, remember that 75% of the equipment product cost comes from suppliers. They also put in a lot of efforts making their products better and better. That helps us.
We also work with associates which we saw during the breakout session in terms of Mobilaris, ASI Mining. We have several associates and a joint venture and not the least, partnerships. Partnerships like Ericsson, quite interesting. I hope you found it interesting, at least. Another partnership that we talked about or released this morning is with Orica for automated charging machines. Another very interesting partnership. We also have other partners. I would like to show you a short movie.
[Presentation]
Partnering with these companies helps us leverage for the future. The abbreviation for this, as you can imagine, is called SUM. We have something called SIM, we have something called SUM, and different types of partnerships. This is a very exciting partnership for us, of course, if you see also the other companies involved. We're proud to be part of it. I have described sort of a crash course or repetition, or what you would say, the strong operating model that we have in Epiroc, which have been a success. I would also like to talk a little bit about resilience. Resilience for us is, of course, our ability to work during in a successful way and during the business cycles.
If we look a little bit on the numbers here, what we visualize is that we have been able to work for quite some time over the years here without any major restructuring programs. That makes us proud. I could say that we work with the daily grind to improve our efficiencies every day. On the chart, you can see there are a couple of peaks or valleys, maybe more than peaks. The one in 2014 was a divestment of power crushers. More recently this fall, we announced also that we are exiting part of the handheld business, handheld rock drills. Without any major programs, and we don't have that planned either for the time being. That's what we call resilience. I want also to touch upon cash.
A successful company should be able to generate cash and turn profit into cash over a business cycle. It will obviously vary. As you can see from the graph, it's been up and down, even though historically not being an independent company, it's a little bit different. It's obviously something that's very important for us to generate cash flow in a predictable way going forward. I can guarantee you there is a strong cash flow focus in our company, even though we will see a little bit up and down as we go through a year and a cycle. This strong financial performance and generating a lot of cash flow obviously puts us in a strong financial position.
Currently we are end of Q3 at 0.24 when it comes to net debt EBITDA, which is despite the IFRS 16 impact, which is shown with a little bit of a lighter yellow, the impact on net debt here. We also, as a financial target, we want to maintain an investment grade. We have one BBB+ with a stable outlook, which we obtained roughly a year ago following the listing, and that I think is a solid measurement for our financial position. Now you ask, "What are you going to do with the money?" Right? I get that question often when I meet investors and analysts. First of all, we want to grow the company, and Per talked about it. We have a target of 8% growth over a business cycle. A lot of cash will obviously be invested in our organic growth.
We think that we can maintain a similar growth rate, and that is certainly our ambition. We will also acquire some growth. Martin talked about it. There will be core businesses that we are looking at, close to core or adjacent to core. Exactly how quickly that will go, that we can't say. It takes some time. Obviously it's not sometimes happening the way you want. We're certainly looking at many targets. Finally, part of our responsibility to the shareholders and the investors is to give dividend. It's also part of our financial goals that over a cycle, 50% of the profit should be returned as dividend. Exactly how much, or if there should be extra, is in the end a decision by the board and the shareholders.
With that, I think I have been able to confirm or show you that we have the strengths that Per started with. I trust you agree with me that we are a leading productivity partner in attractive niches. We have a strong and proven operating model. We have high and resilient aftermarket exposure or business. We drive the future in intelligent mining and infrastructure. Not the least, we have a history of creating value for all stakeholders. With that, I would like to kick off the Q&A session. What, Mattias?
Yes. Thank you, Anders. That is the case. We will now heard all the presentations. We've had all the breakout sessions that we are going to have today, and we will give you all a chance of asking questions to the management team. We are all here that have presented, even not physically here. José is also available in Garland. Please, and we have some people running here showing mics, and just for reference, please state your name before you ask a question. Thank you.
Yes. Hi, Klas from Citi. My first one is on the service growth and mainly for you, Helena. One of the key reasons in the quarter was the self-help, i.e. climbing the service ladder where you had this strong growth. I'm just trying to understand a little bit how much further we can climb, i.e. if you can give a little bit more numbers in terms of how much have you mapped the equipment fleet, the presence. When we speak to your competitor, Sandvik, they're saying that the reason for the higher service margin has been the ability to price better, but that obviously follows the mapping that they've done since 2013. Are we still looking ahead for better pricing, or is that already in the P&L? Thank you.
If you look, as you say, we have also been busy during many years mapping the fleet, and we have a very systematic approach to secure that we gain share on the fleet. I think a year ago, we said that we were in around 50%. Today, we are gradually, more or less every month, gaining more and more. This is, of course, strategic work. It is not one size fits all. We have a higher share within some segments, like the big mining houses. There are also segments where we do not really have the reach yet or the coverage, where we are exploring other alternatives. Of course, we always strive to increase prices, but it must come with a value.
It is, of course, through the service, through the different products that I shared, that's how we can create value, and that's also how we can, say, grow the margin in the service business.
Okay, that's good. My second one is on M&A. This is for Martin and for Anders, linked to your question, Anders, on the balance sheet and thinking about whether we will see an extra dividend. Before, Ronnie Leten always told us that we will not leave the niche, we will stay within upstream. If you look at the consolidation right now happening in mining, it's really in the midstream segments. Obviously you have very strict requirements in terms of if a company is going to belong to Epiroc, they're really going to stand on its own feet, and it's going to be profitable and add to the group niche segments. Is that to say that upstream is still the focus or that we shouldn't accept or expect any larger M&A? I just want to have a comment on that. Thank you.
Maybe I can start a little bit. Coming back to what I presented earlier, we really want to understand that there's a standalone attractiveness, there's a synergetic fit and strategic fit with us and the path to leadership, right? If those criteria are there, we can make the case that this particular target or this particular niche makes sense. We look at it, and we evaluate it. What does that mean in terms of how far? Upstream, midstream, downstream is also a little bit of a gray line in the sand here, right? Where does one start and when does the other one stop? I don't want to give any clear answer to that because it's going to depend.
If we get the attractiveness, if we get the strategic fit and the synergies, and we can make the case, then we will evaluate it, and then we will see where that land.
Thank you.
Can I just complement the answer? I think it's important to understand that when valuations are at the level that they are at the moment or have been for quite some time, any major transaction relies heavily on synergies. If we are looking outside core, which essentially would be midstream or downstream, it would be difficult to generate these synergies. That's kind of a limiting factor. One has to realize that, because in that case, it really does make sense for us to participate in any downstream consolidation. Maybe or potentially that could change if the valuations change as well.
Makes sense.
Olof.
Okay.
Can you hear me?
Yeah.
Perfect.
Olof.
Olof from DNB Markets. I have one question regarding a slide that you showed, a transition to underground mining. I think that you said that roughly 21% as of today is underground, and that number is set to increase to roughly 26% in 2025. Given that roughly 50% of your business is related to underground, that is quite a nice secular growth. Could you please elaborate a bit on those numbers? Is it already announced mining projects that has taken the decision go from surface to underground? A bit on that, please.
Well, as far as I understand, these are projection based on the expected demand, the current mines, i.e., the current capacity, surface and underground, as well as the announced project. Where are the projects going? Well, they're going underground. Essentially just making projections out of these essentially three observation, I think that's how you end up with these numbers. Martin, Correct me if I'm wrong.
Yeah, absolutely.
Yeah.
Also to add to that, many of these, we also rely on some of the industry data providers like Wood Mackenzie and others.
Exactly
who do this. I think this particular case was copper, if I recall correctly. It, of course, is different on the different commodities. We do see it as a trend. We do see that as something that provides tailwind to us.
I also think, again, complementing the answer, obviously, for sustainability reasons, I think it's going to be more and more difficult to open up surface mines, open pit mines. We see that across different geographies and also, interestingly enough, also in China. I think that's also going to push mines underground rather than surface.
Okay.
It's Lars from Barclays. Sorry.
Okay. Lars first. Go ahead, Lars.
All right. Thank you. I have three, if I can squeeze them in. One on replacement demand, one on electrification and the aftermarket associated with that, and one on continuous mining, if we could, because we haven't heard about that today. On replacement demand, Per, you had an interesting slide, and which I don't think we've seen before, age of the installed base or age of the fleet. Thanks for showing us. I guess the devil is in the detail here. A third or a quarter of that is, I think, pre-2004, if I recall the slide correctly. Is that even operational? There's a huge difference between what you see overground versus underground. I think the year you're taking is the year of commissioning, and of course, there's a lead time in the business. That swings around, particularly when we're talking about six, seven year lifetime.
Anyway, I think where I was left with looking at that slide and your comment was you think there is a big replacement cycle ahead of us, particularly in underground load and haul and rigs. I just want to confirm that and how that squares with the numbers we saw on the slide.
Well, I don't think if I said it, I didn't really mean to say that here's a big replacement cycle or wave coming. I'm saying here's a potential for replacement because the fleet is aging. If you look at the fleet, we see that a portion of the fleet is older than it should be. From a calendar days as well as the operational hours. Which means that, yeah, it should be replaced, in theory. This is more true for underground than it is for surface. Given that observation, it is not a prediction that all of a sudden all this is going to be replaced soon. We don't know.
A subset of the data that we have, maybe it's probably not enough to make all that much sense, I guess, but at least a flavor in terms of what we're looking at.
Maybe we can say also that from the slides I showed, that there is, of course, a clear trend as well that the customers try to prolong the life of the equipment. That's where we then came in with mid-life service rebuilds, for example. We're trying to capture it. The older the machines become, then we try to capture it. If it's not replacement, then it's more service.
Secondly, if I can, on the electrification aftermarket, I think I've been pestering Helena all through the breakout sessions to try and understand a little bit better what this business model and the economics look like for you in an electrified world as opposed to a diesel world. The numbers I think I've heard from you before is, roughly speaking, the OE piece, probably 2x the price, but the aftermarket probably cut by a third. If we look at the total aftermarket opportunity on the battery versus diesel, now new aftermarket revenue opportunities are emerging, particularly around the battery. Can you give us some sense of what does that total monetary value look like for a battery machine versus a diesel machine?
Is that you or me?
Sami.
Sami.
I would-
Sami
point it out to you.
There he is.
I wouldn't like to disclose any numbers at this stage when it comes to aftermarket of electrification. For sure, we are working on them, and as presented in my presentation as well, we are working on battery as a service type of new business models. No numbers to be thrown right now.
Right. Okay. Fine. Finally, if I just can on continuous. It was a big theme last year at your capital markets day. We heard nothing today. We've heard about this new trial, the rollout, I think in Hecla Mine. Can you talk a little about, it seems a bit muted maybe around that sort of theme. Can you talk a little about the pipeline, the quotation activity? Are miners engaged? Are we going to see more of that as we get into 2020? Thanks.
We have talked during many years on the mobile miner concept, to have a constant continuous method. We are developing this type equipment together, partnering up with customers. As I explained before, I do see compared to electrification and automation that, I will say, the mobile miner will take longer time before it really, I will say, starts to take off. There's still a lot of interest, I would say, in the world. We have a big focus on the machine we're delivering to Hecla. I think a lot of people in the mining industries are watching that order and watching that machine to actually deliver the performance. There is a large interest, and we just had, was it in August, we had an event with customers from all over the globe, fully focused on this methodology. Maybe you can comment, Sami, on the mobile.
No, I would say all over the world, there is a big interest. Referring to the event that we had in Örebro, Sweden in August, we had close to 100 customers, actually, from all, I would say, organizational levels. There is a big interest.
It's Anders from ABG. Just a question on tools and attachments. When can we expect to see growth coming back there? We've seen about a year, basically, of flattish numbers, and I know you've been repositioning the portfolio, exiting some areas, et cetera, and infrastructure's been a little bit weak, but are we done there? You've talked previously about opportunities in recycling, et cetera. When are we back in growth mode?
I would say that we have spent, this year has been a lot of shuffling around the portfolio, divesting and also obviously focusing more on profitability. We have exited also non-profitable contracts, for example. We have focused on the profitability. Of course, as I said, also we have the same systematic approach when it comes to both tools and attachment, mapping the fleet. We know the consumption of consumables in each and every market on each and every type of machine. The systematic approach that we have been using within service, parts and service for many years, we are doing exactly the same work within tools and attachment. I expect it to come back to, we'll say, a normal organic systematic approach and growth soon. This year has been a lot of cleaning up and refocus.
Yes, Klas from Citi. A follow-up on interoperability when you look at automation. This has been a hurdle for many years, that the machines can't talk with each other between CAT, Komatsu, yourself and Sandvik. We heard Sandvik early this year, more opening up their systems. You're already open. Are you seeing more and more of this that you can now sit from a control tower and monitor an existing fleet? Because that can be quite a game changer in increasing the level of automation.
I think there is, we'll say, the only way forward is to open up because the customers around the globe, they have a mixed fleet, and of course, they want also to have a mixed fleet. They want to optimize and pick the equipment that has the best performance. I really see that to go away agnostic and to have open, we'll say, protocols to make sure that the APIs are there so that the machines can talk to each other as well as all the other, we'll say, interoperability solutions that we provide. That is the way forward, and we're participating in a lot of forums as well to set these standards for the mining industry.
A follow-up to that is retrofit versus new machines. Obviously, as you say, Helena, you're retrofitting a lot right now, equipment is weaker. When you do the retrofit, is that also part of upgrading the automation kit, i.e., or can we see a new ordering cycle with more automation? Do you see what I mean? Will it come mainly on retrofits?
Not necessarily. Retrofitting for connectivity is a much simpler thing than retrofitting, for say, to bring something into autonomous mode. When we retrofit, that could be done in just a couple of hours to deploy a new autonomous machine. Even if we retrofit an existing machine, that's a couple of weeks. It's a completely different type of competence also needed from our side to do that work.
Got it. Thank you.
Some more questions? There.
Thank you, sir. Robert from Morgan Stanley. Just a couple of questions. First one was just on the current dynamics you're seeing on the mining original equipment order side. Maybe you could just give us a little bit more color on what your customers are saying. You've obviously seen, not just you, but across the board, a number of mining equipment companies calling out delays, pushouts on the original equipment orders. What are the customers telling you in terms of, is this three months, six months waiting to see how the macro plays out? Is it that they've got enough production capacity at their current mine sites that they can wait for a year before doing anything? What are customers saying to you?
You take it.
Okay. I think they're saying, not necessarily giving a specific date in terms of we're going to make a decision not in November, but in January. That's not really what happens. It says we're not ready to make a decision. It's pushed out in time and without a clearly defined decision path. That's the way I perceive it. It could be delayed several times. If you look at some of the packages that we have been discussing this quarter, and in quarter three, we also talked about in quarter two, and it's been constantly delayed, and we have been expecting to see it, but it doesn't happen. That's the way it's been more or less done.
It's not that it's, we'll say, off the radar for the customers. They still have it in their plan. It's more that there is more delays, the decision has been delayed or being pushed out in time.
Can I add? I also think we see in that some of these, which could have been placed a year or two ago as a big package, are chopped into smaller pieces and placed as separate orders.
Yeah.
Right?
Yep.
Yeah.
That's also true.
Thank you. Maybe one follow-up just around the aftermarket side of things.
You mentioned metal prices are still favorable, but a number of them have obviously been coming down. Do you see any reluctance around the aftermarket side, or is that actually mopping up the extra activity and people shifting CapEx spend into more OpEx for the aftermarket to mop up a little bit of that OE push out and focus on what they've currently got? Just maybe flesh out some of the dynamics you're seeing on the aftermarket side of things.
I think we see, of course, the customers are sweating their efforts, which is good for us because that's a big aftermarket. We'll say the longer the decisions are being delayed when it comes to capital expenditures, of course, that requires then more aftermarket business to keep the machines up running. Production levels are still high. We have not seen any, we'll say, reduction in fleet utilization or parked machines or mine closures. It's still, I would say, full speed ahead when it comes to production.
Thank you.
Okay. Any more questions? All right. Should we then close?
Yeah.
Yep. Good.
Absolutely.
We do that. We've reached the end of the formal part of the Capital Markets Day. We will have a little bit less formal part following this, where we will invite you all to a bit of snacks outside, and we can continue the discussion. The ones that did not dare to ask a question here in the auditorium may come forward. Of course, José, who's joining us from Garland, will not be able to join for obvious reasons. When you leave now, some of you might also have questions when you come back home. Tomorrow and coming weeks, feel free to reach out to us, ir@epiroc.com. Myself, Karin Larsson, is here as well. If you have any further questions. We will also send out a SurveyMonkey following this event, asking for your feedback. Please respond to that. That will make us even better for the future.
We hope to see you then the next time we have a Capital Markets Day. Thank you