Good morning, and warmly welcome to this presentation of Equinox First Quarter Results 2019. I'm Ingvildos, Investor Relations of Epiroc, our CEO, Paline Bay, who will start talking a little bit more of, around the general performance in the quarter. And after that, our CFO, Anders Linde will deep dive into the figures And after the presentation, we will have a Q And A session. And please stick to one question each. Which gives everybody a chance to ask their questions.
Sir, please go ahead.
Thank you, Ingrid. It's a pleasure to be here. And, first, I would like to say that I think that the, first quarter of this year pretty much turned out the way we expected. Orders, very much in line with the second half of last year. And actually slightly up versus quarter 4.
And, especially good to see the robust demand for aftermarket. And activity continues to be good among our customers. So especially pleasing and to see the development when it comes to service. Equipment is actually slightly down from 1st quarter of last year, not really a surprise. When it looks sequentially from quarter 4, we are actually pretty much on par or actually slightly up.
And this context is perhaps worthwhile to note that the demand for equipment this year was pretty much made up of small to medium sized orders. Whereas last year, we had plenty of large orders. Now that may not necessarily explain the all of the difference, but it's worthwhile noting that difference. But it's also, signifying the development as we see it right now. Customer seems to be slightly cautious in terms of how they would allocate their capital, cautious in terms of spending on major greenfield, spending money more on expanding, brownfield and, which means less risk, less capital deployed, perhaps slightly higher cost at the end when it comes to operation.
We think also that's why they also look for productivity improvement and also investment into equipment that can help them lower their costs. And of course, that's where we come in. Revenue is up and also we have a good development when it comes to profit. Our margin improved primarily driven by currency and also we made acquisitions. We made, we closed the acquisition of Fordia this quarter and, after the at the end of the quarter, we also closed the acquisition of new concept mining in South Africa.
We've also continued to work on our efficiency actions. As you may have note already, we do work with supply chain internally in order to improve cost efficiency and also the level of capital employed in our supply chains. That continues according to plan. We also continue to work with efficiency actions and primarily within tools and attachments. That has also given some good results in the quarter.
And we're also reviewing other options for improving efficiency, especially as we now are an independent company, and we also need to adapt our cost level accordingly. Looking into the key financials, already, mentioned organic order decline of 5% versus the very strong quarter 1 quarter 1 of last year, sorry. Quarter 1 of last year, development sequentially is slightly better, actually it's slightly up versus quarter 4 of last year. We also improved the revenues, continue to ramp up production versus last year. Actually, revenue slightly down versus sequentially, which was not surprising.
We did have a very strong quarter 4 when it comes to production and deliveries, which came down a little bit, the beginning of this year. Profit increased with 27%. And here, we have also to note is that we have a change in provision for long term incentive program of 59,000,000 and we have split costs of SEK 17,000,000. And altogether, that's an adjustment means that the adjusted margin is 20.3%. If we adjust for the long term incentive program, also taking the split cost into account, the adjustment margin is 20.5%.
And the reason I mentioned, the split cost is that we did have split costs also in the corresponding quarter of last year of SEK 95,000,000. So comparing the two quarters excluding the split costs and the provisions for LTI, it's comparing 19.6 to 20.5. When it comes to cash flow, we had $472,000,000 of operating cash flow. As compared to 666 last year. And this is actually a slight disappointment.
I think we have things to do when it comes to our cash flow. This, this year, the development was negative when it comes to primarily payables. Decrease in payables. So I'm sure Anders is going to mention that. But this is an area where we continue to focus on improvements.
Looking into the segments, And this, to the left, you see the breakdown of our key segments. Actually, the bottom part there equipment, then we have service and equipment and services, of course, one of the segments, and then we have tools and attachments. The arrows and the numbers in between as the organic development, and as you can see, service increased with 8% organically, We had a slight decline in tools and attachments and a 16% decline in equipment. All in all, now, equipment and service is 72% of the business, whereas last year was 74%. So relatively steady.
To the right, you have the breakdown of, of the aftermarket or, which seems total is 66%. And that last year was 67%. So aftermarket portion of our business is also relatively stable. Over time. Moving into equipment and service.
We do have good activity. I would say when it comes to our customers. I already mentioned that, that customers are primarily, ordering relatively small or medium sized orders at the moment. Seems to be slightly cautious on spending much capital on major expansions in greenfield primarily. This drives, aftermarket business and equipment and service case.
That means a good development when it comes to service. And a decline when it comes to equipment, but it's really worthwhile noting that equipment is is more or less flat versus second half of last year and actually slightly up versus, quarter 4. So I think we see, currently a steady situation when it comes to equipment orders. Revenue up 17% and mostly we see expansion orders. And I think we'll continue to see expansion orders being dominant in our portfolio, even though expansion has declined as a portion and we see a replacement being a slightly bigger part of orders now in the beginning of 2019, also according to expectation.
Operating margin increased to 24.2 percent versus 22.9, primarily driven by currency. One thing that is very good to know, or good to note is the development in battery. We have received a very healthy and good order of battery equipment to Canada. And we also have a cooperation with Great Care, where our technology is used for, used on railway maintenance equipment. And I think that's a very good development.
Of course, our ambition is to continue to deploy our better technology and our own equipment, but also to work with other partners in order to, to also expand the volumes to increase the economy of scale in the production of batteries. Some of the innovations that are worthwhile noting in the quarter is the automation ready smart truck D65. Not only is it automation ready, but it also decreases fuel consumption versus the, the, flex rock, the old version, and also has some other nice features for the operators in the machine. We also launched my Epiroc, which is basically a tool for digital, overview and maintenance on management. Of the fleet.
So we think both of these tools will continue to help our customers to improve the efficiency of their machines and their fleet. Twosing attachments, again, I already mentioned that the activity among our customers is quite strong. And when I so far, I've really talked about mining customers, which is now 74% of our business, infrastructure is really the rest 26%. And of course, in tools and attachments, tools is mining and infrastructure. And hydraulic attachments tools is primarily infrastructure.
Both of these looks quite healthy, even though, hydraulic attachments tools in infrastructure, slightly softer due to seasonality, But nevertheless, we think the underlying development is quite healthy. We saw an organic order decline of 1% versus last year, And we did have a very strong first quarter of last year for hydraulic attachment tools. And also in this quarter, we continued to back out of business that are not profitable enough when it comes to our consumables. If we were to adjust for that, we actually would see a slight increase in orders, but of course, we don't do that because we backed out of that business. Revenue grew with 7% and margin improved to 14.2%.
And of course, that makes me happy because that means that our our efforts to improve profitability in tools and attachments is now proving to give some effect. Already mentioned, we closed Fortia. This is a company that is active in exploration. This is going to strengthen, complement and strengthen our offering when it comes to exploration tools and competence. And beginning of April, we closed concept mining, high competence and a very, specialized in good equipment when it comes to rock reinforcement.
We think this is also very, very good complement to the product portfolio and the competence that we already had in within Epiroc. In innovation wise, we launched a bucket screener for hydraulic attachment tools, maybe not the most exciting, but a very productive tool for usage for sorting and when it comes to primarily demolition sites. So all in all, I think, as a good start, solid start for other quarter. And now I'll leave it to Anders to move into some of the details.
Thank you, Pat. I will give some, meat on the bones for for the numbers. And, starting with the, some, some on orders received and revenues as Pare mentioned, we have, 5% down organically, but sequentially up on orders. Compared to Q4 last year. As a matter of fact, the it's quite frequently, we have lower revenue in Q1 than Q4 if we go back over the years and compare.
And also, as you have seen, we We believe that, we will remain on the current level in the near term on the order intake. The impact from acquisitions, is positive from 4GAR in Q1 and new concept mining will start to gives some contribution in the second quarter for the full second quarter. The currency effect positive 4% year over year, should the, currencies remain where they are end of March? We will not see a material impact year over year in Q2. However, the the Swedish krona weakened somewhat during April, but it's a little bit early to tell whether, yes, Huawei will be obviously at the at the end of the quarter and the rest of the quarter.
The margin, the reported margin, was up 1.3 percentage points from 18 point 4% to 19.7% as you can see from the bridge and in the report. If we then adjust for the provisions for long term incentive programs, it's 20.3 and another couple of attempts, as Per mentioned, from if we also adjust for the 1 time split costs. We have we do not adjust for that going forward. They were, EUR 17,000,000 in the quarter, a little bit less than than anticipated, they will continue, likely a little bit more in Q2. We will mention them, but we will continue to report the margin the way you see it.
We had a positive net contribution from the Forger acquisition despite some integration costs as you always have in an acquisition, of course. We also had some integration costs in the ASI mining acquisition. Which we acquired last year or 34% of last year. We should also mention that we, the corporate costs, while we still believe they are now going on the level, if they will vary between the quarters, they were slightly higher this year than last year. Q1 last year, we were still not listed.
So there were obviously some costs we did not have, but for the most part, it's it's on the level that we see. So, for the 59,000,000, maybe I should also mention that it's very related to the change in the share price. So this mostly reflects, an increase of the share price from 84 to 94 between the end of December to the end of March. If we then take a little bit more, look on the costs and the P and L, marketing and admin, for example, we have the provisions of 59,000,000 for increase in provision for LTI. They are included in the admin costs, but in this graph, it's excluded.
We obviously have a currency effect also on the nominal terms. We can also see some, which we've mentioned before, some inefficiencies from being an independent separate company We also see some increases in IT costs and some volume components in the logistics costs for which we show in the admin. On the R and D, we continue to invest slightly higher now at 2.8% of revenue, which is a little bit. It's a good level. And important for us to continue, to stay as a company being such as well where we want to be.
If we take a look at the financial net, which was slightly higher than than expected. The minus 100 largely consists of evaluation or revaluation related to Zimbabwe, where the the newly introduced RTGS dollars have been allowed to float and as such, triggered evaluation and which also gives some opportunities because now they it gives a little bit of predictability and possibility to to, to handle the situation with a parallel currency, in that country. The interest net was, as expected, largely on the EUR 39,000,000 level. The tax rate we are at 24.9%. We've talked about around 25% or slightly below.
So that I, level we believe will remain. Return on capital employed, year over year, an increase, but it's also negatively affect by the fact that we have around SEK 2,000,000,000 more in capital from IFRS 16. So sequentially, as you can see in the graph, it's slightly down. And it will, over the year, adjust to the new capital employed level. But the underlying return on capital employed has not changed.
If you look at, the net debt here, we also have quite a significant impact on the IFRS 16, the SEK 2,000,000,000, which is actually the more than half of the SEK 3.6 billion of the net debt is made up of the SEK 2,000,000,000 impact from IFRS 16. But, overall, otherwise, there is, no major change. From in this context, I can also mention that we finalize the bridge facility that we implemented at the time of the listing last year, the final part SEK 1,000,000,000 was refinanced with a bilateral loan and the next maturity for that is 2022. And that is all according to plan. And so we're now fully financed according to how we actually planned it.
When we launched the company, on the stock market. On the net working capital increased sequentially and year over year. If we start with year over year, we Obviously, we have a volume impact, mainly on receivables in inventory, but also not quite a material element of currency and acquisitions. And the average net working capital is also slightly higher as we said, it's a lot is in inventory and receivables and, a parent also mentioned that is something that we have, on very much in, focus. On the sequential change in net working capital, we don't see much of a change in the a slight increase in inventory and receivables, but the main impact which we can see in the operating cash flow is made up of a reduction of payables, which is partly a timing issue, partly driven by mix and the market and also flushing through.
We will expect that to improve over the next quarter or 2. The, of course, the operating cash flow is positively have contributed from profit. We also have a small positive contribution from the IFRS 16, which doesn't change the net cash flow, but, as you likely know, it will It will have an impact in in on how the cash flow statement is composed. Tax is paid, also part of the operating cash flow, obviously over a year, largely effective tax and the taxes paid will not differ, material in any material effect However, if you look at the P and L, we have around EUR 200,000,000, almost EUR 200,000,000 more in taxes paid in Q1 than effective tax. Which obviously had a negative impact on the operating cash flow.
And as I mentioned, inventories and receivables didn't have so much small increase, small negative effect. On the CapEx, not so much, nothing exceptional. It's stays on the level where we have been, and follow very much the volume development. And, with that, I I, stop and leave it to pair for, ma'am, are you sick?
Yes. Thank you, Anders. And then most of this has already been mentioned, of course, but it's worthwhile again to remind ourselves that we compare a first quarter 2019 to 1st quarter 2018, which was very strong. And so it's important to take the comparables into the equation. When we look at the quarter Sequentially, it is flat or even slightly up when it comes to orders, and we expect that scenario to continue.
So There's no reason or no signals from the market that this, what we saw in quarter 1 will materially change looking into the short term. So when it comes to outlook, we expect to be pretty much on this level going forward in the short term. I'd like to say also that I'm quite happy with the what we've done internally in terms of, revenue and in terms of launching, innovations as well as closing the acquisitions. There are issues that we need to continue to work with. I mentioned cash flow.
There are also issues when it comes to flow through and profitability. But those are on the agenda, and we will definitely continue to work with those into quarter 4. So that's
Our first question comes from the line of Klas Bergelind from Citi. Please go ahead. Your line is now open.
Yes. Hi, Paradanda. It's Karl from Citi. A couple from me, please. First on Tools and Attachment, I noted that the hydraulic attachments had lower order intake year over year.
It's the first time I see this, not a much history, but the first time I see this. And this is a high margin business within T And A. We know that construction and infrared growth is pretty solid out there. Have you started to be selective on orders also on the attachment side, not only tools? Are there any changes on the competitive side explaining this or is it just pure demand related?
I will start there.
Well, that's a good of you to note that, but we, we're not backing away from any business in tools and attachments. It's, as you mentioned, we're quite happy with the profitability. And there are no material changes when it comes to the market. There are some seasonality effects. We saw those in 2018.
We had very strong beginning of 2018 for attachments, not as strong this year, but this, I would say, is no reason to worry. We don't see a material change in the underlying market. The seasonality will be impacted by by winters. We had a severe winter in North America and seems to be also quite a slow start in Europe. So So that's kind of where we are.
It's, we have not made any active decisions in terms of how we do business nor do we see any major change in the market
Okay, very good. A quick one for you on this, on the shared cost and the investments you make in IT and logistics, the comparison for these costs will be easier in the second half of this year, I would have thought. Can you just perhaps help us a little what the drop through in this quarter would have been without these costs. I guess, R and D will likely stay at their investments in automation and in the electrical mine, but I mean, the extra cost you now carry that can drop out. Thanks.
Yes, I don't really would like to to quantify here and now, but it has certainly an impact. I don't want to exaggerate. I just want to And that's why we mentioned it that there is a small impact of the fact that, in the beginning of 2018, we're still still sharing, let's say, benefits from, from, being part of the ATLAS CorpCO Group, and we have gradually built an organization around the world, I would say that, that has some impact of the of the flow through or the drop through, but, but not significant. I would like to add to Pat also, when we talk about attachments, actually, the Q1 was really strong. But it was compared to an all time high Q1 of last year.
So, I think sorry to add that, but I think it's, it's important to note that it certainly is, we have strong business in attachment
Got it. I just want to make sure.
Question comes from the line of Tremmel Pinal from UBS. Please go ahead. Your line is now open.
Yes, thank you. Guillermo Pena from UBS. Just a question maybe on qualitative question on how the order did progress through the months, I guess, Did you see any particular trend in demand at the beginning of the year versus the end of sorry, the end of the quarter versus the end of quarter? And in which metals do you see any particular trend that you dislike or like more, if I may? Thank you.
Well, I think, yes, we saw relatively slow January, gradually improving into February March. And especially when it comes to our service business, February March was quite strong. So that's the development in general that we saw. In terms of equipment, I can't say that we saw any particular trend over the quarter. As mentioned already, the trend that we see in equipment demand is pretty much continues from second half of twenty seen.
And again, we expect that to continue into the near future as well.
Thank you. And then when it comes to equipment, I guess, can you give any qualitative comments at which part of the equipment demand we're a bit more disappointing? Is exploration equipment still growing as we saw over the last two quarters. And when it comes to drillers and haulers, if any particular a part of a business that is lagging or more or less consistent?
Well, we saw As mentioned, we saw a decline now again versus a very strong quarter 1 of 2018. We saw a decline both in surface and underground, not very much of a difference there. But again, quarter 1 was exceptional last year. I think, right now, it's probably, makes for us more sense to look at the sequential development and there we see a flat to even a slight improvement in quarter 1 versus quarter 4. So you say disappointment, well, for us, it's more expected rather than anything else.
Thank you. Our next question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is now open.
Yes, good morning. I wanted to just square per your comment at the beginning of the release where you talk about profit having been helped by service, and then looking at the very drop through, very low drop through margin, has that actually not shown up yet because I mean, presumably, it hasn't helped very much because you would have expected to see much higher drop through margin. I'm now conscious of the higher IT R and D and costs there. But do you think that's still yet to come rather than actually making the comment right up front that it actually has helped this quarter?
Well, I, to be a little bit more specific on drop through, I mean, Anders mentioned some of the, of course, the, call it, corporate costs that we have and also the cost of being independent. That will have an overall effect on drop through. Looking at the divisions, including service, I think we see a good flow through in tools and attachments. Not so good when it comes to equipment and service. If we isolate service, the, the, contribution to absolute profit is definitely there from, from service.
When it comes to the drop through for the segment combined, Well, I think we can do we should hopefully see some improvements there going forward. And that is most not really related to services, more related to our capital equipment, divisions, where we've seen some inefficiencies in production in the first quarter. So there's definitely some improvements we need to make in production efficiency. And that should also help the overall drop through for that segment as well for the company as such.
I mean, can you expand a little bit on what these inefficiencies and production are? Are they externally caused or internal issues? How long should they take to be fixed?
Well, it's a combination of external internal, primarily I would say internal. We have had some issues in terms of actually the production rate. The number of machines actually produced in a couple of our factories. So and that's mostly internally related. Sometimes, of course, we also have issues with our suppliers, but primarily internally related.
I think for the most part of this should be fixed, going into quarter 2. That's not a guarantee. But the expectation is for the most part, that's going to be fixed into quarter 2.
Which plant is this that's causing the problem?
It's one in Sweden and one outside of Sweden.
Okay. And the other thing on foreign currency. The and again, just focusing on equipment and service, I'm always amazed at how large the if you want to call it a drop through margin that comes through on currency from revenue to profit. So obviously there's a huge sort of transaction, not just translation exposures here, which currencies specifically should we be thinking of? Because again, at some point, currency reverses, we will actually see a quite a negative swing the other way.
So which currencies should we be thinking about versus the krona that are causing that very positive drop through at the moment? And then, hence, wants to look at going forward when it swings the other way, if it does.
Yes, maybe I can elaborate a little bit on that. You're absolutely right. We we do see a transaction effect, which, absolutely also is driven by, mostly by a limited number of currencies, which we quite well explained in the, in, let's say, our annual report, but nevertheless The U. S. Dollar has is a very strong, influencer.
So we're still aussie dollar and the Canadian dollar. The rand is also, material, but between the 4 of them, euro, you said, why not euro? Well, we, we, we, obviously, is, also, buying in euro. So there is a little bit of a natural hedge, but it's it's also a currency which has some influence. So, but the details you can find in one of the notes in the annual report and how we estimate that to influence.
I would also, in this context, like to mention that there are some period end effects and there are some, let's say, mathematical calculations behind this So, it's, we will obviously see things go the other way around when currencies drop. But, on an overall basis that the Yes, those are the currencies that we, that we have to work with. And obviously, with limited impact from a couple of dust in other currencies as well.
But in the quarter itself, in the very large drop through, I think, highest it's been there wasn't any one particular currency then that, that helped?
No, I mean, I mean, we can look at the currency development. I mean, the dollar went up quite significantly, I think if we, if we, if we compare sequentially, the paired end rate that we had end of December, it was quite high. And that's why I say also that if we now go through 2019, look at the levels we have, we probably not year over year have so much impact in Q2, but then something happened towards the end of the year. So the period end rates in 2018 were quite low. So obviously, the the period end effect and the short term effects on the transaction currency effect in Q1, is larger than one would expect just looking at the, the trend that we had in 2018.
Our next question comes to the line of Marcus Almerud from Kepler Cheuvreux. Please go ahead. Your line is now open.
Hi, good morning. Marcus Almerud from Kepler Cheuvreux. My first question is exploration. Can you talk a little bit about, I think it was in Q3 last year, we saw quite a sharp uptick in exploration and which is often a leading indicator. Can you just talk a little bit about how that has developed or if it's flat?
That's my first question.
Well, actually, exploration has in the beginning of this year in quarterone has not been as strong as we expected. Expected an increase of 5% to 10% in exploration, budget spending. Has not really materialized in quarter 1. So it's been kind of on the soft side. It's, I guess, it's perhaps too early to say whether this is active decisions to hold back on exploration spend or whether it's just weather related.
But nevertheless, the exploration in quarter 1 was slightly softer than expected.
Okay. Thank you. And then my second question is on Greenfields. We're talking to some who's been saying that there has been an increased number of discussions in terms of greenfields, in the beginning of the year. Is that something that you also have experienced, or is that also kind of changed from before?
No. I think there's, there's, more discussions going on. I I think we saw that also second half of last year that the optimism that we saw in the beginning of last year, translated into several discussions and discussions around Greenfield, also second half of last year. This year, pretty much the same. Of course, it's not like there are no totally no greenfields.
There's a few, but less than a handful. So again, our interpretation is that, fair amount of discussion on Greenfield, not so much act or capital deployed on Greenfield. Most capital seem to be spent on relatively smaller expansions of brownfield, translating into smaller orders for us related to brownfield expansion, of course, So that's kind of where we are right now. So I think, I don't think we've seen so much of a difference in terms of green discussions.
And is there any difference there between staffs and then on the ground? Or is it also kind of the same, do you see a clear difference in those 2?
Seems to me that the Not so much of a difference that I can recall at the moment. The discussions are around some greenfield and vocational, greenfield surface as well as some occasional greenfield underground as well. So not that big of a difference.
Thank you. Our next question comes from the line of Matthew Slow from Exane BNP Paribas. Please go ahead. Your line is now open.
Yes, good morning. Thanks for taking the question. Just on your outlook, Ben, I realized you kept your sequential outlook unchanged at flat I suppose the difference between now and Fairby's commodity price and more supportive composite, 6500 versus closer to 6000 in Feb. I wonder if you can just comment there why you don't think you've seen a pickup in underlying activity. And then Given that service, I imagine you still expect that to show a nice sequential progression, does that mean you're expecting equipment to declined sequentially or is that not the way to look at it?
That's my first question.
Well, again, yes, to reiterate the outlook it's we expect it to be more or less unchanged, the order situation. The it's right that the prices for commodities have reached, over the last 2, 3 months, but also being quite volatile. And over the last month or so, without an clear direction. So I think lack in this direction, I think, will just keep minors, on the cautious side We expect activity to continue to be strong, so which will translate into strong demand for continued strong demand for our aftermarket. Equipment, a little bit more difficult to say, but there's no real trigger that we would see equipment orders coming down from the level that we are right now.
So the small to medium sized orders that we have I would expect to continue.
All right. And then can I have one on tools and attachments? My line out. So you may have answered it already, but have you given the impact of these rationalization actions so that they're stepping away from business, have you said what the impact was in on orders in the quarter and also where we expect to get to in terms of a headwind? And then also was there any what was the benefit to the EBIT line from stepping away from this less profitable stuff?
Well, you saw the development of the EBIT up to 14.2%. So, and part of that definitely due to our tail cutting The size of the tail cutting is actually roughly 3% from on the segment overall. So that's the sort of the magnitude of the business that we've stepped away from.
Our next question comes from the line of Andrew Wilson from JP Morgan. Please go ahead. Your line is now open.
Hi, good morning, everyone. I'm maybe just a quick follow-up to Mass question just that. Is there anything in the Tools and Attachment margin, which we should think has been a kind of 1 off benefit or is it reasonable to think that this sort of level of profitability can be the run rate for 2019 as a whole?
Well, the, there's no significant one off in the first quarter for tools and attachments, So, I expect the improvements that we've seen to continue. Mentioned already, we do the tail cutting, so that should continue to have an effect We also have our supply chain program primarily for, our spare parts as well as for consumables. That had some effect during quarter 1 that will, the level of impact will progress or increase over the course of the year. So I expect that to have an increasing positive effect over the year. So I, I'm, you know, I expect this level to be as a minimum to continue this level.
Thanks. That's very clear. And maybe if I can just have one quick follow-up just on the cash side. On working capital, has clearly been quite a lot of moving parts not least obviously the FX impact that you've seen. Can you just kind of talk about how you see that developing through the balance of the year?
I appreciate some of you're trying to do on working capital is a bit longer term in terms of the benefits and the payback, but maybe just to give us a bit of help to I guess, on expectations for the balance of the year, please?
If I understood you correctly, you were specifically referring to working capital, right? It cuts off a little bit.
Yes, that's right, please.
Yes. Okay. No, I mean, it will go a little bit up and down. It was we had a very strong finish in, in Q4. So, yeah, that doesn't, that doesn't mean that we are specifically pleased with the Q1 development, which we had expected to be higher or better, let's say, in working capital.
But I can see that there's a little bit of, let's say, seasonal effect in, in ending the year going into Q1 on the working capital where we mentioned that, on the payable side is where we have seen a reduction. Obviously, when we look at the inventory and, and receivables, there is more in the details while some parts of the business have with the growth, have increased receivables and with a little bit of, slower, there is a reduction. But, overall, We expect the working capital to improve over the next quarter in plural, and we do have, activities and, focus on, on those So you, that's my very strong expectation.
Thank you. Our next question comes from the line of Anders Eppler from ABG. Please go ahead. Your line is now open.
Good morning. Just a question on tools and attachments again. So you have in now close the innovative mining products acquisition. Just if you could update us what you plan to do with that and what kind of dilution we should expect initially, if any?
Well, First of all, what is, what is a new concept mining? And, it's, again, it's rock reinforcement. They have some unique products for primarily seismic environments, and we expect to sell those through our global network. They have been primarily active in South Africa so far. So we expect to generate some some nice synergies, and when it comes to top line development, that's the plan with the company.
So, of course, we intend to integrate it into Eperoc as a whole, but make sure that the strengths that the company has being independent, we will not certainly not destroy that. When it comes to this, this is a company with pretty decent margins. So they should not be dilutive to the margins of tours and attachments.
Okay. Thanks. And just perhaps a follow-up also on customer catchment margins. You mentioned before the sort of price pressure on consumables, etcetera. I mean, is that also part of the equation Have you been able to get some price increases or has that changed in N Way lately?
Actually, we have now the combination of stepping away from business and being slightly firmer on pricing has actually made us, you know, made it possible for us to raise prices for, for when it comes to consumables. So pricing, the pricing for consumables has been quite positive beginning of this year.
So that's up, up, it's not less erosion. It's actually up, yes.
It's up and not down, yes. Thank
you. Our next question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is now open.
Yes, thank you for taking the follow-up. Just how should we think about the orders in equipment excluding the large orders? And I apologize if you give this already, the line's actually been quite bad. Sometimes it has quite big echoes and your line drops out. What was the, orders excluding the large order?
And how should we think about, the market share here because clearly you are under forming your closest peer that we can look at here. Is there anything in terms of either the geographic or the commodity exposure, which partly explains this or other other reasons?
Well, 1st of all, let's look at the sort of the, the starting point for comparison. I think you know, we had a very strong quarter 1 of 2018. I've said that several times already, but it's very important to keep that in mind our biggest competitor did not have a very strong first quarter of 2018, quite the opposite. So if you compare quarter 1 with the starting point or the reference point, you will see a big difference in terms of the development from quarter 1 of 2018 and not surprising whatsoever. When we looked sequentially, our biggest competitor had, I think, a An order growth of 3% nominally.
We had an order growth of 6.3% nominally. So I'm not so sure that your conclusion is correct, to be honest with you.
Okay. But just again, maybe thinking about your product innovations at the you talk about the digital platforms and the new machines being launched on the drilling side. Is there anything looking forward that could actually result in, are you gaining share in particular segments? Where do you think you are leading compared to competitors and not just the main one, but other competitors as well?
Well, we have, there's always a race. I mean, and we, I guess, we have to look at the specific areas of application. Our position when it comes to, as an example, new technologies, underground. I'm thinking battery. I'm thinking automation.
Battery, where's where are under the, absolute, understanding in assumption that we are in the lead. I know that our competition is definitely aiming to catch up with both acquisitions as well as organic development Our position is still that we have a leading position that, we should enable us to to continue to grow, hopefully also market share wise. When it comes to automation, we have now complete offering when it comes to automation, products or autonomous products underground. We have, caught up with competition. So where which means that we still have some ways to go in order to, to perhaps fill that gap from a volume standpoint.
But we are catching up and we, as mentioned already, we have, we have now a complete offering. So hopefully, that's going to help us all so on the volume side and maybe also when it comes to market shares. We'll see. Surface, we do have very competitive offerings, on our surface drills. As you know, we are very specific when it comes to what we do and the applications we have on surface is really drilling equipment.
And that's it. And our market positions are very strong. No reason to believe that we should lose out, from a market share standpoint, we have. Our products are well positioned. Our, automation offering is, definitely market best, I would say.
So, that's kind of where we are.
Thanks, Per. And where else would you like to grow
into? I think we have a very competitive, you know, competitive offering.
Thank you. And where else do you want to grow in terms of M And A? Because obviously, you've done a couple, since separate listing. Is that going to continue that where else would you like to, to grow?
Well, I, as, as you know, I mean, the 2, two acquisitions that we closed, we closed so far this year of any magnitude is for the annual concept mining, Both of those are in consumables. I think what we said historically, And, what I say now is that we need to digest these 2 acquisitions and consumables before perhaps considering additional acquisitions. We also need to be cautious when it comes to adding cyclicality to our portfolio. So with those restrictions, I think we'll continue to look for acquisitions broadly and not the least in the technology space, and, of course, also when it comes to complementing our are offering in, in both, well, both underground and surface. We've taken somewhat of a look when it comes to the opportunities there, and we'll see if that can materialize into potential acquisitions.
Okay. Thanks, Peter.
Thank you. Our next question comes from the line of all of Lars Hammel from DNB Markets. Please go ahead. Your line is now open.
Yeah. Good morning, everyone, and thank you for taking my questions. Firstly, could you please elaborate a bit on lead times for equipment.
Equipment?
Yes. If you order equipment now, then you will get that delivered or new times longer than normal? Or
Yes. I mean, obviously, a little bit indicated what Haire said, we, when it comes to equipment, we have had some, some issues with, deliveries, but they are not exceptional and they are gradually improving. For the most part, what we deliver in equipment is make orders, you don't have it on the shelf. So there will always be anything from, from, in best case, there could be something, otherwise from 3 to 9 and even months and even longer. But we don't see that as a major problem right now.
We're pretty much in good shape.
Yeah. Sounds good. And finally, and sorry if this question have been answered, but it has been some problems, hearing on the conference call, but I know that, common group cost was around 160,000,000 negative in Q1. Could you please elaborate the recent study includes versus Q4?
Yeah. The the, the, the 116 includes, obviously, the 59 for LTI provisions. So that's, that's, part of it. It also includes some split costs. If we compare that to Q4, it was the other way around.
We had a positive impact from the LTI provisions change in the provisions for the LTI. So And that you can see in the report in one of the tables, the specific impact from, the one time split cost and the LTIs. So that's why, for the most part, that's why it looks high in Q1.
And just to be clear, going forward, what should we expect in terms of nosebleed cost them, no cost or LTIs, what should this, absolutely going forward?
I guess the LTIs it's very much on, on your side, what you think about the share because it's triggered by the share price. As I said, the main reason why we had 59,000,000 in Q1 is because the share price went from 84 to 94. From end of December to end of March. On the, so that we cannot really predict but there is obviously some kind of a correlation with the share price, or very much so. Then on the split cost we will have some split costs.
We will not, let's say, adjust for the margin, they will likely be higher in Q2, like they were lower than expected in Q1, but they will then later on, fade out. But, we, we still have some work to do a more specifically on the IT side, the rest is, is nothing really.
I may, maybe I should complement there also. It's important to keep in mind that the change in provisions for the ILT the long term incentive program is really an accounting effect that it's, we do have, shares in custody. So we're hedged So, so it's just an accounting effect, really.
Yes, but adjusting for the split cost and also from the long term incentive program, what should the build of going forward. If we assume that the share price will be in a stable, I guess that that will not be the case. But adjusting for all these items, and what should the underlying Clement group financing cost?
I think we have talked about around $250,000,000 in a year, and I think that more or less, what we will continue to talk about. And that's what the corporate costs.
Yes, that's great. Thank you very much.
Thank you.
Thank you. And that will be the last question for today. So I will hand the word back to the speakers for any closing comments.
Anders. And thank you all for participating and hope to speak to you soon again. Our Q2 result is published on the 18th July. So it's not sooner, at least then. Thank you and goodbye.