Hello everyone, and a warm welcome to the Epiroc Q3 2026 results presentation. My name is Karin Larsson, Head of IR and Media. Joining me today are our CEO, Helena Hedblom, and our CFO, Håkan Folin. We will take you through the highlights of the quarter, followed by a Q&A session, and you all know the drill. Helena, please go ahead.
Thank you, Karin. Also from me, a warm welcome to this call. Let me start with safety. This quarter, we have a very tangible example of how our technology can make a real difference. During a fire at a mining operation in the Fresnillo district in Mexico, around 350 people were evacuated, and our Situational Awareness technology supported the operation and evacuation was completed safely in only 35 minutes, which is significantly quicker than without this solution. For me, this demonstrates what innovation at Epiroc is really about, creating real customer value, making operations safer, more productive, and ultimately better. Q3 was another strong quarter for Epiroc with particularly strong mining demand. Group orders increased 12% organically to SEK 17.5 billion. Large equipment orders amounted to SEK 790 million, including a SEK 610 million order for an underground mine in Botswana, our second-largest order ever.
Revenues increased 7% organically to SEK 16.8 billion, and more importantly, we combined this growth with improved profitability. The adjusted operating margin increased to 20.4%, supported by high volumes and the efficiency measures we have implemented. While delivering today, we are also investing in initiatives that strengthen our long-term competitiveness and support future growth. During the quarter, we inaugurated our modernized Kalmar facility in Sweden, a world-leading manufacturing site for hydraulic attachments. We are also making good progress with the expansion of our manufacturing capabilities in Nashik in India and our new distribution center in Örebro in Sweden. The transfer of tools production from Langley in Canada to Matehuala in Mexico is also proceeding according to plan. Let us look a little bit closer at the demand. Orders increased 15% reported and 12% organically with mining clearly driving the growth. Infrastructure demand remained stable.
What I particularly like in this quarter is the wide span of the mining demand. We saw strong demand for exploration and for underground equipment as well as for digital solutions and organic service growth was 13%. Large orders contributed, of course, but the demand picture is broader than individual large projects, which gives us confidence in the underlying health of our mining business. The business quoting is good and the pipeline of possible orders remains strong. Our ambition is to be the leading productivity and sustainability partner to the mining and infrastructure industries, and we continue to strengthen that position. Through the acquisition of Eventspec, we have further strengthened our service capability and presence in South Africa. Our innovations are made for mining and infrastructure applications, but in the quarter, we have news on where our solutions are used to safeguard a UNESCO World Heritage site as well.
Our digital monitoring solution, YieldPoint, that detects rock movement at micrometer scale and provides insights into rock stability, has been deployed in a 3,000-year-old tomb in Egypt. Our solution safeguards that the site is safe and that it can be protected if rock movements occur. Another exciting development is our technology for seamless, autonomous underground to surface haulage. Trucks often operate over long distances and many times from an underground production area to a surface dumping location. By using a common system for automated underground and surface hauling with advanced obstacle detection, customers can now enjoy real and meaningful productivity gains. Let me show you a short film on the haulage solution from a successful customer event we held this summer.
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Aftermarket represented 67% of revenues in the quarter. Service orders grew 13% organically. Mid-life rebuilds and digital solutions for automation and safety were among the strongest growing parts of the service offering. Tools & Attachments orders increased 4% organically, driven by mining. As our installed base becomes more advanced, the opportunity to support customers throughout the equipment life cycle also grows, and that strengthens the recurring nature of our business while increasing the value we can create for customers over time. With that, I hand over to Håkan to take us through the financial performance in more details.
Thank you, Helena. Revenue in the quarter increased 10% to SEK 16.8 billion, and this corresponds to an organic growth of 7%. Our adjusted EBIT increased 18% to SEK 3.4 billion, and the adjusted operating margin improved significantly to 20.4% from 19.0% last year. The organic EBIT contribution was 1.5 percentage points to the margin, and this was supported by the higher invoicing, but also efficiency measures that we have taken in previous quarters. While revenue growth has not yet fully caught up with the strong order development we have seen in the last three quarters, the revenues we are converting are coming through with good profitability. That is of course important, and I would like to highlight that our lead times remain at normal levels, and we have been able to ramp up our production according to plan. We produce on orders. We don't produce in anticipation of orders.
Looking at Equipment & Service, demand was as anticipated at the high level. Our orders increased 15% organically and 19% in total. To repeat what Helena just mentioned, we saw particular strong demand for exploration and underground equipment as well as for digital solutions. Within digital solutions, the automation and safety solutions, like the one we showed an example of in the beginning, were the strongest growing areas. Large order, close to SEK 800 million, SEK 790 million, and this can be compared then with SEK 470 million last year. If we look at equipment specifically, there we had order growth of 16% organically, while service orders grew 13% organically. Overall, we have a broad and healthy demand picture. Equipment & Service revenues increased 8% organically. Service revenues grew 10%, while equipment revenues grew 5% organically. Most importantly, we were able to improve the profitability for this business area.
Our adjusted EBIT increased 20% to just above SEK 3 billion, and the adjusted margin increased to 23.8%, compared with 21.9% last year. In the quarter, the flow-through was more than 50%, and this should be seen as exceptionally strong. Also here, the higher volumes contributed, but we also operate with a higher efficiency. If we then turn to Tools & Attachments, here orders increased 4% organically to SEK 3.9 billion. Note that this then does not include the effect of the tungsten prices as this has been booked as surcharges and don't impact the top line. The development continues here to be driven by good mining activity, while demand for attachment remains stable. Revenues in the Tools & Attachments business area grew by 6% organically to SEK 4.0 billion. Here too, we saw a clear improvement in profitability.
Adjusted EBIT increased by 23% to SEK 531 million, and the adjusted margin reached 13.2%, which can be compared with 11.6% last year. This is actually the best margin for the business area since the beginning of 2024. The improvement really reflects the increased efficiency that we are now running the underlying business with. Moving on then to a different topic, cost, net financials, and tax. We are continuing to ramp up the organization to support a higher level of activity. Number of employees, including additional workforce, increased by 5% in the quarter and corresponding to 1,100 people. These are primarily in production, in service, and in logistic. We are adding resources where they are needed to basically cater to our growth.
On the cost side, our administration, marketing, and R&D expenses increased by SEK 2.7 billion, representing approximately 16.1% of revenues, which is the same level as in Q3 2025. Net financial items were SEK 225 million, which include a net interest of SEK 172, both lower than last year. We had an effective tax rate in the quarter of 24.0%, which is in the upper range of our guidance, which is 22%-24%. Moving on to cash flow. Operating cash flow came in at SEK 1.4 billion, and we can compare that with SEK 2.5 billion last year. The lower cash flow primarily reflects higher working capital, especially on the inventory side, but also that we are paying higher taxes. Rolling 12-month, the cash conversion rate was now 78%. Following a period of high equipment orders, we are up year-to-date more than 30% organically for equipment orders.
We are carrying more inventory to safeguard customer deliveries of equipment, but also aftermarket availability. I would say we should view our cash conversion in the context of the growth and particularly then on the equipment growth. We mainly produce equipment to orders, so when we grow, we need to invest in inventory, which then temporarily weighs on our cash conversion. As growth normalizes, our asset light setup, the flexible cost base that we have, and the strong aftermarket will support working capital release and improved cash conversion. At the same time, we work all the time actively to become more efficient. Helena mentioned investments in India, in Mexico, and in Örebro in the beginning of this call, and this will over time then make us leaner and more efficient.
Net working capital was SEK 27.5 billion, or 37.7% of revenues. As mentioned, inventories have increased significantly year-over-year, while higher payables partly offset this increase. Two messages here. First of all, inventory then should be seen in the context of the stronger equipment orders that we are supporting. Secondly, with the inventory, we now have a clear opportunity to convert this into revenues and also then into cash over time. We have the demand, and now it is up to us to execute. On the next slide then, capital efficiency. Our financial position, it remains strong.
Our net debt is now SEK 11.2 billion, and net debt to EBITDA has decreased to 0.70. Return on capital employed has increased. It is now at 19.8%, especially then supported by the higher operating profit. We have the financial capacity to invest in growth while maintaining a strong balance sheet. From a CapEx point of view, we have guided, I did this at the CMD, guided to around 2%-3% and that is still what we stick to. With that, I hand back to you, Helena.
Thank you, Håkan. Before we go to Q&A, let me then summarize the quarter. We delivered another quarter of strong orders driven by mining. Orders increased 12% organically supported by exploration and underground equipment, service, and digital solutions. At the same time, we improved profitability. Both business areas contributed with good organic flow through, and the benefits of our efficiency work are increasingly visible. I am particularly proud that innovation continues to translate into tangible values for our customers.
The example from Mexico shows that our technology can make a real difference when it matters the most. The strong order development needs to translate into revenues and cash, and we are focused on improving that conversion while continuing to serve our customers well. Looking ahead, we expect mining demand to remain high and demand from infrastructure customers to remain stable. We remain committed to profitable growth. Thank you.
Thank you, Helena. Thank you, Håkan. Well presented. Operator, you may now open the line for questions, please.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Chit Sinha from JPMorgan. Please go ahead.
Yeah. Hi, good afternoon. Thank you for taking my questions. I have three, please. First question please, on equipment order growth this quarter. The 16% order growth is a slowdown versus the Q2 print, and it seems as though we should maybe be expecting more activity at this stage. Perhaps you could shed a bit of color on the sequential change and then maybe a bit on the mix between replacement brownfield and greenfield this quarter.
I would say that it's the same mix. We continue to see roughly half of the demand being replacement and half being expansion. I would say, of course, also this quarter, we did not have that much of large equipment deals, so that could also swing between the quarters. But I would say when I look at the underlying activity level, it's very healthy. When I look at the pipeline, it's also very healthy. Of course, this could also be, it's very often a timing effect when orders come in. I think overall I see the same activity level I have seen the previous quarter when I look at the total activity out there in the pipeline.
Okay, thank you. You've also called out underground being strong this quarter, but maybe you could touch on development and pipeline you're seeing on the surface side.
Yeah. So in this quarter, we had really good demand on underground equipment, which is very good to see. When I look at the pipeline, there is a lot of tenders in the pipeline on surface. They did not materialize in this quarter into orders, but the pipeline looks equally strong, I would say, on surface as well as underground in the coming quarters.
Very clear. Thank you. My final question, just on the service side. So 13% this quarter is a nice acceleration from the H1 run rate. Is there any lumpiness in this growth, especially on the mid-life upgrade side, that maybe we shouldn't expect to repeat in Q4? Just trying to understand if we should expect double-digit growth for a period, or will there be some quarterly volatility?
There are some lumpiness in the service orders as well, which is related to mid-life upgrade, as you mentioned. So when it comes to, we'll say, the underlying activity level, when it comes to contracts, which is more tied to, we'll say, engine hours of the fleet, that is improving and going, I would say, steady. But when I look at the lumpiness, it is very much the mid-life upgrades and when those orders come. Because that could be fairly big in size as well, when a customer decides that a fleet should be upgraded.
Thank you very much.
The next question comes from John Kim from Deutsche Bank. Please go ahead.
Hi, good afternoon. Two questions, if I may. Staying on the topic of service growth, I understand that mid-life upgrades do create a bit of a tough compare sequentially. But if you just think about the overall activity levels or normalizing that, would you argue that Q2 or Q3 is more representative of what you are seeing in the base load demand growth in this part of your business? Then the second question I will wait on.
I think the base load activity out there is strong. We see customers are pushing the tonnage out. I will say it is very high activity levels across, I would say, on service. I think when you look at this, of course, sequentially as well, there has been earlier this year, we had the event in DRC. That is also now coming back into activity. That supports the growth. On the other hand, we do not see really the nickel activities picking up yet. There is always this could be difference between mine sites and commodities. But I think when I speak generally, the activity level is high and we are also capturing a fair share of this. And 13%, of course, it is a strong number.
Indeed. I'm hoping you can help me a little bit on what you're seeing in the copper end markets. I'm trying to connect the dots or square the circle on what looks like volume declines in major countries versus very strong supportive pricing and how that connects to ore grades and your ability to price up. How are the major mines, mine managers behaving? Do you expect better activity, better orders for 2027 at this point, or is it still unclear?
No, but if we look on copper, when I look at the pipeline, there is a lot towards copper in the pipeline expansion plans, both greenfields and expansion of existing mines and replacement of fleet. There is a high share towards copper. When we look at the actual output of copper, especially in Q3, of course, there's been challenges in Chile, weather, fatalities, strikes, different challenges in several of the mines, which has put a pressure on the output from that country. I think overall, when I look at the pipeline moving forward, there is a very strong pipeline towards copper.
Sorry, one follow on, if I may. Cheeky one. Are you seeing any better activity on Cobre Panamá for your remit?
There are some activities ongoing to, we'll say, bring the machines up to, let's say, a stage where they can start operate again. But it's not, let's say, and you cannot compare it at all with the level we had prior to that mine going into care and maintenance.
Okay. Thank you.
The next question comes from Alex Jones from BofA. Please go ahead.
Great. Thank you. Maybe the first one just on the efficiency measures segments helping margins this quarter. Could you just give us an update on where we are in the efficiency measures in both divisions and whether there are still further savings, material savings to come in either of them from here? Thank you.
We continue to continue our work on efficiency. As I mentioned, if we take Tools & Attachments, for example, we are coming soon to the closure of the facility in Langley and the ramp up in Matehuala has already started. That's, of course, one efficiency measures that we yet don't see in our numbers. I would say when it comes to consolidation side, I think after that we have done a big chunk of what is needed. Then there is always improvement areas that we, yes, we have discussed over in many of the calls when it comes to service operations, working on the efficiency in the supply chain, et cetera, as well as in admin efficiency. We continue to stay focused on efficiency always and to safeguard profitable growth.
Great. Maybe just on the project pipeline, I guess several of your mining customers are talking about potentially some pretty large FIDs of copper projects before the end of this year. Can you just talk about whether you're seeing that in your pipeline, and typically how long you would expect for such large projects between the mining companies taking and you being able to book an order? Thank you.
Yeah. There is a very strong pipeline towards copper, I would say for Q4 and Q1. Of course, when decision has been taken, there is still quite a lot of negotiations that needs to happen, because there is quite often quite long contracts, et cetera. That can take some months, I would say. It's not so that when a decision is taken that it translates. We book an order when we have the PO. That's when we put it in our books. A firm PO.
Thanks.
The next question comes from Klas Bergelind from Citi. Please go ahead.
Thank you. Hi, Helena and Håkan. Klas at Citi. I have three questions, please. The first one is on the equipment revenues. It seems like this was more linked to product mix with more surface moving through the backlog, i.e., longer lead times rather than any supply issues. I just want to confirm that. How should we think about this mix ahead? Will you get more underground through the backlog next couple of quarters? If you could remind us of the current backlog split between surface and underground, and the lead times from orders to deliveries in each. Thank you.
Yeah. I would say to your first statement that that's very much correct. We have longer lead times on, and when we talk really big platform rigs on surface, there you have longer lead times compared to underground equipment. It's clearly longer lead times. That in combination with also it all depends on which country we have been selling to. If we're selling to Australia, for example, the lead time on sea of course plays a role here as well in how quickly we can translate. When we say that when we're ramping up according to plan, that's a fact. Of course also in line with what we have committed to our customers. We don't have any bottlenecks in the supply chain as we speak. If I look on the mix, it will be clearly more underground coming through here.
As I mentioned as well, we have seen strong order intake for underground now for quite some quarters. That will, of course, translate into revenue here in the coming quarters.
On your first part of the revenue--
Okay, that is good to hear.
On your first part of the question on the revenue for equipment, I think you can also mention that we had 5% organic growth on equipment in the quarter, revenue-wise. in Q3 last year, we invoiced a quite substantial amount, more than SEK 300 million for this Roy Hill project of mixed-fleet automation, which was part of equipment invoicing. We did not have that level of invoicing for mixed-fleet automation in this quarter. So 5% is what you see, and that is the organic revenue growth. If you adjust for that specific project and you actually think about the pure equipment growth, it was actually then larger than those 5% that you see.
Yeah. I did adjust for that, Håkan, but it was still weaker than I thought. But all good. My second one is on the drop-through looking to E&S. Solid. Some of that is because your service growth is faster than your equipment growth, but it seems like there is an underlying margin improvement as well. Can we talk about the mix within service? I am talking about revenues, not orders. Your parts and kits business and your rebuilds have typically the highest margin. Were these verticals growing faster than agreement, digital? Also on the drop-through, looking at price cost, a theme this reporting season is that we see companies struggling to compensate for the sharp cost inflation. Your drop-through is good, so I assume that you are fully compensating for the inflation through price. Sorry, that was a lot of questions in one, but maybe you got it.
If I start with the service mix, we have a similar mix, and good growth on all components. There is no, let us say, mix effect, say, supporting the drop-through. It is pure efficiency gains in that segment as such, if we look on Equipment & Service. When it comes to price cost, I would say that we are pleased to see how we compensate for the cost increases. Of course, there are still some cost when it comes to tariffs, et cetera, but we are compensating in a good way. That is also what you can see there on the drop-through.
Great. My final third question is on your outlook. In construction infra, you went from increase somewhat to remain at current levels. It looks like the outcome versus the guide was more stable, i.e. we did not increase somewhat. I just want to confirm that. Your guide is adjusting for seasonality, so it should not be linked to the seasonal lower volumes you always have in attachments this quarter. What regions underlying slowed in infra and construction? Did it impact the equipment orders in Equipment & Service, or only in attachments in T&A? Thank you.
I would say only in attachments, and it is mainly related to where we see it is not taking off, it is more related to housing. That is what we see. When it comes to recycling or deconstruction, there we have seen some improvement. There is a mix also, if you look into the product itself. But when we say that it is stable, we should remember it is still on a low level. Demand is somewhat better than some quarters ago, but it is not taking off in any, let us say, material way. We believe it will continue to be on the level we are at moving forward.
Thank you.
The next question comes from Christian Hinderaker from Goldman Sachs. Please go ahead.
Hi, Helena, Håkan, Karin. Thanks for the time. I want to start on the backlog conversion timeframes. Obviously, equipment revenues missed again, as they did in Q1. I appreciate the comment on Roy Hill. But if we look at the average order rate for equipment in Q4 last year and Q1 this year, you are at SEK 6.5 billion. We are a bit light on that. Also, your backlog has grown in the first half by SEK 3.4 billion. I guess, should we be taking towards the nine-month range in your six to nine months sort of convert rates now. When we think about that backlog expansion, can some of that come in 2026 or is it a next year story?
I would say, lead times are somewhere between, I would say, six and 12 months. So it is more on the six, seven months when it comes to underground, and it could be up to 12 months on surface if you take the real big platform rig. So that is also why the mix can vary and give, let us say, an impact here on what type of equipment we are delivering. When I look at the ramp-up in the factories, as Håkan mentioned here, I think for the last three, four quarters now, we have been steadily ramping up. So when we look at the output from our factory, it is going up every month. That is also, if you look on the inventory buildup that we have seen, this is equipment on its way out to customers. Of course, this will translate to revenue in the coming quarters.
We are confident that the ramp-up is proceeding according to plan.
Thank you, Helena. I am then interested in your admin expenses, effectively flat quarter-on-quarter, despite the meaningful freight cost inflation. Are you seeing meaningful increases in freight cost or is it just that you are able to pass them on? You mentioned in the release that you are also freight more. I guess underlying cost action seemingly taking hold now.
For freight cost, the actual freight cost is in the COGS, so it is not in the admin line. Then in the admin line, we have people working on this, but obviously, if shipping cost goes up, that does not have an impact on the people. So the freight cost you would see in the cost of goods sold.
Maybe just a final one. Have you shipped orders now for Fortescue in the quarter?
No.
Thank you.
The next question comes from James Moore from Rothschild & Co Redburn. Please go ahead.
Yeah, thanks for the time. Hey, Håkan, Helena. I wondered if I could start with efficiency. Your drop-through in Equipment & Service is very good, over 50% improvement. I am just trying to understand how much is volume mix versus structural efficiency. Not really to understand the quarter, but more to see the duration or durability of it. Because we have had lots of kind of one-off effects with issues in the past couple of years and challenges, and lots of actions and activities to drive savings. It is quite to net that all out. But whatever the impact from efficiency is that something that is going to stay high now for a period, or is this just a one-off and lumpy and volatile?
No, I would not say. One should remember as well that for us it is an extremely strong drop-through. But Q3 last year was, on the other hand, a weak quarter for Equipment & Service. So I would not say there are any specific one-offs that is lifting the result positively. You could maybe argue the other way around, where there was no big negative one-offs in this quarter. But no, it was fairly for Equipment and Service, I would say, nothing that really stands out positively or negatively in any specific way. From a mix point of view, because I guess that was part of your question as well, James. Yeah, we had slightly higher aftermarket mix versus equipment, but that did not really have a big impact. The biggest impact were higher revenues, and then also that we were being overall more efficient in what we were doing.
That is very helpful. Just on currency, the negative translation on the top line and then the EBIT all made sense to me. The SEK 135 million positive transaction effect was a surprise, and I continue to struggle with your currency, which has got some complexity to it. But what really drove that? More importantly, is that repeatable going forward? Is that something that is a one-off? I wonder if you could just help me understand that.
They can be one-offs because it is revaluation that can have an impact, that can hit big in a quarter up or down. If we would assume where we are right now, especially then if we simplify it to dollar versus krona at around 10. If that is more stable in the fourth quarter, then we have less of these impacts at the Q end or in this case, at year-end.
Okay, thanks. Lastly, if I could, just on equipment orders. We had really strong copper gold prices, but they have come off a bit this year. Often in the last 20 years, your equipment orders have moved in line with commodity prices, and we have seen that at yourselves and Sandvik. I am surprised somewhat in the sense that the planning rates of the gold miners are such a positive spread versus spot prices. One might have imagined that orders did not come off somewhat aligned to copper and gold spot prices fading somewhat. Do you think that is all just coincidence? How do you see the kind of planning rates behind the CapEx intentions for the next couple of years? Do you think there is still a very attractive, favorable gap between planning rates and the current spot rates?
When we look at, let us say, the expansion plans with the big mining houses it is typically based on a much longer time horizon where the prices will be. Of course, for them as well to keep up existing production levels. I think we should remember that as well, that it could very much be so that they are running out of ore otherwise. I do not see any change in pipeline given, we will say, a somewhat softer gold here in the last quarter. The pipeline remains the same as six months ago.
Yeah. Okay. That is helpful. Thank you.
No more questions today. Thank you very much, everyone, for asking questions. Thanks, Helena and Håkan. Well presented. If you have follow-ups, the IR team here at Epiroc are happy to assist you. Thank you very much.
Thank you.
Thank you very much.