Epiroc AB (publ)

Hello, and a warm welcome to the Epiroc Q1 results presentation. My name is Karin Larsson.

I'm Head of IR and media here at Epiroc. And by my side, I have our CEO, Helena Hedblom; and our CFO, Hakan Folin.

As always, they will briefly present the results before we do a Q&A session. You all know the drill.

Helena, please, the stage is yours.

Thank you, Karin, and a warm welcome to all of you. So before I dive into the Q1 results, I would like to spend a few words on highlights from earlier this month in April when we announced our largest ever order contract.

So the contract size is AUD 350 million, about SEK 2.2 billion over 5 years. And this is not only a large contract.

This is the future of mining making its entry in full scale. So we will provide a fleet of more than 50 machines fully autonomous and electric to Fortescue in Australia.

. And the machines, we will provide are cable-electric Pit Vipers 271 E and battery-electric SmartROC D65 BE.

And if you joined us at MINExpo in September, you might have seen the machines. So once the fleet is fully operational, it will reduce CO2 emissions by 90,000 tonnes annually, while also boosting safety and productivity.

So well done to everyone involved, and thank you, Fortescue, for your trust in Epiroc. So coming to Q1 and highlights from the quarter.

So the mining demand was strong and equipment orders were very strong. We're up 29% organically.

We won SEK 600 million in large orders. And this can be compared to SEK 400 million in Q1 last year and SEK 820 million in Q4.

So among these orders here in Q1, we had a large one, SEK 280 million from Hindustan Zinc for underground trucks and rigs. And we had a large battery fleet order as well, SEK 100 million from Hudbay Minerals in Canada.

On the infrastructure side, the demand was more mixed. As in previous quarter, we enjoyed good demand from customers engaged in civil engineering and tunneling projects.

We also won a major contract to support the Western Harbour Tunnel project in Sydney in Australia. And for attachments, construction customers are still hesitant.

And that said, we did have a positive sequential seasonality for attachment in the quarter. In the quarter, we increased both our revenues and our operating profit.

Our revenues were up 10% to SEK 15.5 billion, of which 3% organic. Our adjusted EBIT increased by 7% to SEK 3.1 billion.

And if we look at the demand picture in Q1, orders received were strong, both year-on-year and sequentially compared to the previous year, they increased 17%, of which 10% organic. So this is the strongest organic growth in 3 years.

Very pleasing to see, and it was driven by strong mining demand. Moving on to our strategic focus areas and first out is innovation.

So during the first quarter, we spent quite some time to prepare for Bauma 2025, the world's largest construction trade show, which was held in Germany in the beginning of April. And at the fair, we showcased many exciting products for use in deconstruction, recycling, quarrying and tunneling.

So we have a strong offering and a position in the construction initiatives where we operate. Following the acquisition of AARD Mining Equipment in 2023, we have successfully integrated a new product family of reliable, durable and high-performance underground utility vehicles into our portfolio.

And we have a strong demand for these utility vehicles, which are included in our Terrah Series. And speaking of a strong offering, so let me bring you to the topic of automation.

So do you remember our collaboration on automated mixed fleet in underground operations that were announced in 2021. So let me show you a short film about the achievements.

[Presentation]

So it's great to see customers are confirming that our mixed fleet automation solutions are working well. So on the next strategic topic then, aftermarket, the high mining activity supported the demand for both service and tools, whereas the weak construction market impacted the demand for attachments compared to the previous year.

In total, the aftermarket represented 67% of our revenues in the quarter, same level as last year. But within the aftermarket, the Tools & Attachments portion is higher than in the previous year, which obviously has an impact on group margins, which Hakan will talk about later on.

So moving on to operational excellence then. So given the recent geopolitical developments and uncertainty around tariffs, I would like to emphasize that we have an agile fast-paced and global organization.

So we work on what we can control and adapt when conditions change. So we are closely monitoring market developments, and we have already started to optimize logistics and distribution flows, leveraging our global manufacturing footprint and explore alternative suppliers as well as discuss potential pricing impact with our customers.

And also, just like in previous quarters, we have efficiency actions implemented and ongoing, and they proceed according to plan. On the sustainability side, we have only positive news to share by relentlessly focusing on an improved safety culture.

We have reduced the total recordable injury frequency rate further. We have also increased the proportion of women in the group to 20%.

On the management side, we are even higher, 24.5% of our managers are women. And let me share another positive example.

In India, a few years back, the share of women employees was in the single digit. And today, we are already approaching the group level of 20%.

In fact, in our new tools and rock reinforcement manufacturing site in Hyderabad, India, we have only women employees in production. So over and over again, I see positive results from diverse teams within Epiroc by mixing employees from different parts of the world with different education, age, religion and gender, we can see firsthand that we have become more creative, more innovative and as a result, also created better results.

On the planet side, we are also making good progress. Our CO2e emissions from operations were reduced by 11%, thanks to a higher share of renewable energy purchased, installation of solar panels on our own facilities and energy efficiency activities in facilities and processes.

CO2 emissions from transport increased 3%, driven by higher volumes delivered. And with this, I leave the word to Hakan to cover the financials.

Thank you, Helena. Our revenues came in at SEK 15.5 billion, corresponding to an organic growth of 3% and our operating profit, EBIT, increased 12% to SEK 3.1 billion.

It includes SEK 11 million of provision for our long-term incentive plans. Last year, we had M&A-related costs of SEK 125 million.

And looking to the right of the slide, our adjusted operating profit increased 7%, but the margin decreased somewhat to 19.9%. The margin development, if we look at this adjusted bridge was supported by currency, and this is driven mainly by positive currency impact on internal profit elimination, while the organic contribution was negative, mainly explained by mix effect, such as lower share of service revenues, as Helena talked about before.

Last year, our service revenues represented 46% of the group revenues and in this quarter, only 43%. A few comments also on the sequential development.

We see positive profit development both organically and from acquisitions in this quarter, which is larger than explained by the efficiency actions we have taken. Dilution from acquisition this quarter was minus 1.0 percentage points, which is an improvement from Q4 when we had minus 1.4 percentage points.

If we then move into the segments, and we start with Equipment & Service. Here, orders received increased 12% year-on-year, which all was organic.

It was mainly driven by equipment, which grew by as much as 29% organically, supported by the large order in India, which Helena mentioned. And again, our large orders amounted to around SEK 600 million.

We also have growth in service, but at a somewhat lower pace. We are not worried about the somewhat lower organic growth rate on service in this quarter.

We know that the fleet is older and it's larger than ever before. The mines are producing the minerals to which we are most exposed, such as gold and copper.

So over time, we expect to see continued good growth in the service business. Also, if we look sequentially for orders received, we had a good development, 5% organic growth.

Revenues for Equipment & Service amounted to SEK 11.7 billion, which corresponds to a good organic growth of 4%, and the organic growth of Equipment & Service was 8% and 2%, respectively. The share of revenues from service within this reporting segment was lower this quarter, 57% compared to 58% this year, explained by the strong equipment growth.

Still, we managed to increase our operating profit by 9%. The adjusted operating margin improved to 23.2%, supported by currency.

And as I said before, also on group level, the positive driver was FX impact on internal profit eliminations, mainly in service. The organic contribution was slightly negative, which is explained by service mix, both a lower share but also that the strongest growth was achieved in part of the business with somewhat lower margins.

Also for the segment here, a few words on the sequential development. The profit margin was somewhat weaker, which is mainly then explained by the strong invoicing that we enjoyed in Q4.

And if we look historically, the invoicing is more or less always somewhat lower in Q1 than it was in Q4. If we then move on to Tools & Attachments, year-on-year order increased 2% organically.

Mining activity remains high and also demand from construction customers challenging. Sequentially, however, it was a positive seasonality, supported by demand for attachment driving the organic growth of 10%.

And then the big question is, does this mean then that the weak construction market has turned? Well, we would be very careful in making that conclusion yet.

It is still a challenging construction market, although we are seeing the destocking phase that we have talked about for a while now, among distributors is coming to an end. In the bridge, we see a positive 32% from structure, and this is mainly Stanley Infrastructure.

They came into our books on April 2 in 2024, which means that Q1 was the last quarter when you will see this acquisition as part of structure. And let me give you a brief update of what has gone well and what has not gone so well during the first year now with Stanley Infrastructure.

On the positive side, the strong customer relationships that we expected have been proven. We have gained an access to an indirect sales network with more than 2,700 dealers.

And we see that there's a good cultural fit with a strong focus on innovation. But then on the not-so-positive side, well, the end markets have, of course, been weaker than we first anticipated.

And this has impacted both revenues and also earnings. We have taken actions in response to the market weakness.

And for example, we consolidated 3 manufacturing sites into 1. Long term, we are still certain that this is a good fit for Epiroc.

We have a strong market position in specialty attachment with industry-leading brands. And once the market turns, we are ready to leverage our global sales efforts with a multi-brand strategy.

Back to the numbers then. Revenues and profit for Tools & Attachment.

Revenues increased 29% to SEK 3.8 billion, driven by acquisitions, both Stanley then, as mentioned before, and also [ ACB+ ]. The organic decline was 3% in the quarter.

Our EBIT increased 38%, and we had no items affecting comparability this year. But last year, we had M&A-related costs of SEK 125 million.

Our adjusted EBIT was flat and the adjusted margin declined from 15.6% to 12.1%. Currency impacted the margin positively, while lower revenues and acquisitions was negative.

And the dilution from acquisitions included in structure was minus 2.8 (sic) [ 2.7 ] percentage points on the adjusted margin and again, mainly then related to the acquisition of Stanley Infrastructure. Sequentially, we had an improvement with lower dilution.

We had minus 4.0% in Q4. We now no longer have the inventory step-up value from Stanley and again, the consolidation of sites and the other efficiency actions we have taken are now starting to show.

Okay. Getting back to group again and looking at costs, net financials and tax.

In total, our administration, marketing and R&D costs increased year-over-year. Admin costs increased, but we had some temporarily costs related to efficiency measures.

Excluding this, admin costs were actually down both year-over-year and sequentially. Marketing and R&D costs increased year-over-year, but also here, they were down sequentially.

We have net financial items of minus SEK 207 million, an increase mainly driven by higher interest net of SEK 187 million versus SEK 128 million the previous year. For tax, our tax expense was SEK 685 million, which corresponds then to a tax rate of 23.8% in the quarter.

If we turn to cash flow, our operating cash flow came in at SEK 1.6 billion compared with the SEK 1.8 billion last year, supported by the increased profit, but we had a buildup in net working capital and also currency, which impacted negatively. Still, if we look at cash conversion, which we measure as rolling 12 months, we are actually at 100%, meaning we are, as Epiroc, have almost always been very strong cash-generating company.

If we then dive into a bit more details on working capital. Compared to the previous year, net working capital decreased 3% to SEK 22.7 billion, which is 36.9% of revenues.

In absolute terms, and if we exclude currency and M&A, the working capital was roughly flat and the changes in each of them offset each other. Our inventory amounted to SEK 18.3 billion, which is the lowest level in many quarters.

As we have talked about before, we work hard on reducing the inventory and becoming more efficient in working capital management. And if we look sequentially, the average net working capital in relation to revenues decreased.

Finally then for me, a few words on capital efficiency before I hand back over to Helena. We ended the quarter with a net debt of SEK 12.3 billion and a net debt-to-EBITDA ratio of 0.76.

So we do have a very strong financial position entering into this year. Return on capital employed was 20.3%, which is down from 24.5% in the previous year and negatively impacted mainly then by increased intangible assets, such as goodwill from acquisitions.

And a small reminder, on May 8, which is next week, we will host our Annual General Meeting. The Board has proposed a dividend of SEK 3.80 to be paid in 2 installments, with the first half being paid now in May, and this corresponds to a 53% payout ratio.

So thank you, and Helena, over to you.

Thank you, Hakan. Yes, to summarize the start of the year, it has been good.

We have seen strong mining demand with organic equipment order growth being very strong at 29%. On the infrastructure side, the demand was more mixed for equipment used in larger infrastructure projects, such as tunneling, we had a stable demand, whereas the demand for attachments used in construction work remained weak.

In the quarter, we also increased both our revenues and our operating profit. So many positive things we have spoken about today happened also after the end of the first quarter.

And I'm again proud to mention that we won our largest contract ever, SEK 2.2 billion over 5 years for a fully autonomous and electric fleet in Australia. So this is really an achievement.

So with this great start in Q1 -- Q2 then, what can we then expect onwards? Well, given the demand we see now, we expect that the underlying mining demand both for equipment and aftermarket will remain at a high level or as I sometimes say the business cooking and the potential for large orders looks good also on awards.

The construction demand is, however, expected to remain weak. I think that we can all agree on that the general market uncertainty makes it harder than ever to predict the future.

So I would like to emphasize what I said before that Epiroc is an agile, fast-paced and global organization, and we are used to work hard and adapt when conditions change. So thank you and now time for some questions, right?

Thank you, Helena. Thank you, Hakan.

Before we start the Q&A session, I would also like to highlight something that makes me very proud. On April 24, we launched our sponsored ADR Level 1 program with Deutsche Bank.

And this is to facilitate for all investors globally to invest in Epiroc in a more cost-efficient way than trading the unsponsored shares that we had before. So now time for Q&A, And as always, try to keep your questions short and concise.

And operator, you may please open the line.

Two questions, if I may. First, in E&S, can you give us a bit of color on service order growth and revenues.

the underlying segment's growth rates looked really light in Q1. I understand that Q1 compared to the year ago is a bit odd, but any color there would be helpful between retrofits and things like consumables.

And the second question on Tools & Attachments. When we lap Q2, you will have owned Stanley for about a year.

I think it's fair to say given tariffs and macro uncertainty, there's probably more headwinds than you anticipated. When will you start thinking about cost and rightsizing for the asset?

Okay. So if we start with -- on the service order side.

So of course, it was quite tough comparisons compared to the previous year. But if I look on the, I would say, the underlying activities is strong, strong towards the different -- the large commodities where we're exposed to, if you take both copper and gold and iron ore.

We have seen some weakness in nickel. So some mines towards nickel or put under care and maintenance.

So that impacts a little bit, I would say, the growth there in the quarter. We also have some -- to be quite specific, some -- there are some challenging situations in the northern part of DRC which also had an impact in Q1, where some mines are under care and maintenance due to the unrest in that part of DRC.

But if I look -- generally speaking if you look on the components within service, yes, we are growing faster on service contracts and some of the service products than we do on parts in this quarter. On the other question there on Stanley, yes, it's 1 year into -- we have now have the 1 year into Epiroc.

And we are very focused on making sure that we prepare ourself for the uptick in the market. So the last, I would say, 9 months, we have been very focused on making sure that we work on the efficiency side, both when it comes to consolidating sites, of course, also leverage the full potential now with the presence and the strength of Epiroc in the rest of the world.

So I do not see the latest development related to tariffs will impact this in any particular way. I think we have a very strong manufacturing footprint and capabilities in many parts of the world for these type of products.

[indiscernible]. So my first one is on Tools & Attachments and Stanley.

It looks like good progression, high single-digit EBITDA margin in the quarter at Stanley. Just to confirm if that was a clean margin or if you had any one-offs, any write-down this quarter, just trying to understand if the underlying margin was even higher fully adjusted.

And if you could tell us what you see in terms of inventories in the channel for Stanley in the U.S. at the moment.

Others have talked about the normalization from the second quarter. And I wonder if you are seeing the same thing.

I'll start there.

It's a clean result. So there is nothing -- I would say extraordinary in Q1 in the performance of Stanley.

I think what we see is the effect of all the efficiency actions that we have taken in the last, I would say, 3 quarters. So it's trending in a good way.

We do see, as Hakan mentioned, that -- we do see that the inventory levels are coming down to a more normal level, meaning then that it's, I would say, the true demand that we start to see in our factories which helps with the absorption. So that has been one of the main challenges during the last year, I would say, for our attachment business in general, the -- say the low volume.

So that is a good development that we start to see that these inventory levels are coming down to normal levels.

Good. My second one is on the mix impact in E&S 4% organic growth, but no drop-through to EBIT.

the share of service was lower by 1 percentage point, I get that. But I'm still a bit surprised to see this quite big impact in the bridge.

You obviously talked about the internal mix in service being negative with contract modernization growing faster than parts. Your parts business is a big chunk of the service business is still facing this tough comparative as you showed at the Capital Markets Day.

But eventually, this should obviously turn around and inventory levels at the miners are sort of stabilizing. I just want to hear sort of when you look through the year, Helena, I know that there are some one-offs here, you talk about things going on in Africa, but that's clearly an upside potential with the parts business coming back?

Yes. And I think also, we are putting a lot of machines on the market.

I think the last couple of years, of course, it's also that we're putting more and more machines on the market. So the fleet continues to grow bigger for every quarter.

It's also a fact that the first 1, 1.5 years a new machine is not consuming that many new parts. It's in the later stage of an age -- of the age of an equipment where the big part consumption starts.

So the more we grow on the equipment side, that is an upside, of course, long term on parts.

And parts have the highest margin.

If I can add there also on the service mix. It's not only the traditional parts and service business that's included in service.

It's also the digital division that's included service as I'm quite sure you know, Klas. So that's also impacting.

So that's -- but of course, my point is parts highest margin should be positive mix when it comes back. Sorry.

Yes, absolutely.

The first one would be on foreign exchange. Obviously, currencies are hard to predict, but what kind of headwinds should we take into account for the rest of the year?

And then if you could, at the group level update us on cost savings, if you could comment on where we are and what's left to be done, that would be very helpful.

Okay. If I start with the FX question, and I think we actually prepared a slide for this because there's been quite a big swings during the quarter and not the least for the Swedish krona, which actually -- at the end of the year, it was SEK 11 towards USD 1.

And at the end of Q1, it was basically [ SEK 10 ]. So we saw as a 10% difference.

And for those of you who followed us for a while, you recognize this slide from our Capital Markets Day, where we show which different components are impacting the FX because we fully understand that it is quite difficult to predict. The one that is a bit more easy to understand and easy to predict, I would say, is the lower part on the transaction side.

This is very much related to revaluation of outstanding accounts receivables and payables meaning that if we sell something, for example, from Sweden in U.S. dollar and then the krona strengthened as it has during this quarter, and we have outstanding accounts receivables.

They become worth less in Swedish krona, and therefore, we get a negative impact. The one that is maybe not that obvious, is the top one then what we call translation and especially internal profit.

So again, if we sell something, let's say, a spare part from Sweden to a distribution center in another part of the world and it's sold in U.S. dollar.

We do have a profit in Sweden, but since we haven't sold it yet to the external market, we need to eliminate at the group level, of course. And then if that's a different currency in Swedish krona, we have an FX impact.

And if then the currency moves as it has done. And in this case, the Swedish krona has strengthened, there is less profit that we need to eliminate and therefore, we get the positive impact in the quarter on the balance sheet.

And in this quarter, you see it's really big swings. I have never seen these big swings for us.

So it's minus SEK 248 million on transaction and then plus SEK 516 on translation. And then in total, that gives us the positive impact of SEK 268 million.

And then the second...

On the second one on cost savings. So we continue our efforts when it comes to efficiency.

So we are -- if we look on it compared to a year ago, we are 1,000 employees less today, and we continue these initiatives. So there are more things in the pipeline when it comes to efficiency initiatives, but also some of the closure of manufacturing sites that we have announced, we have not seen yet the full effect of, for example, the closure of Essen, that is still not seen fully in the results.

I have two, please. So firstly, just on E&S, the order intake, excluding large orders, was clearly very strong at SEK 5.1 billion.

So how should we think about this going forward, especially in the context of your guidance? What are you seeing in the pipeline?

So if I start then, so yes, it's a high -- even if we exclude the large orders, it's a strong activity level out there. We see a lot of replacement orders of fewer machines in more or less all parts of the world.

And we continue to see that the pipeline looks good. It's both a strong pipeline when it comes to replacement of existing fleet, but also a strong pipeline of large orders.

And that's why we guide like we do here short term. So it looks solid.

And then just on T&A, I just wanted to check if there was any prebuy impact that you saw in the U.S.

No, I wouldn't say that we have seen anything like that.

I guess just first one on tariffs. Could you just please talk us through the direct and indirect effects you expect and maybe some degree of quantification around that?

Yes. So we are not, let's say, quantifying the effect.

But of course, there is an impact. So we are busy in -- with mitigating actions, redirecting routes of our distribution, for example, from Europe not going through U.S.

and then into Canada or Mexico or South America, we're going direct instead. We're also leveraging our global footprint when it comes to manufacturing because we have dual capabilities for many products.

So that is, of course, also something that we very quickly now can put in place. We're also then changing suppliers and using our suppliers' global footprint also to mitigate the impact from the tariffs.

So I would say, of course, it's a changing environment, but the organization is fast paced when it comes to taking very tactical decisions like this to mitigate, I would say, the impact.

Okay. And then just going to Klas' question on Stanley margins.

So I calculate that -- if I exclude the SEK 20 million inventory effect or roughly that occurred in Q4, then we saw a 7% increase in adjusted EBIT margins quarter-on-quarter. You did mention some one-offs in Q4, but the sort of implication was perhaps they were quite small.

I mean that's a massive change in margins from acquisitions. So do you mind just sort of outlining what you think the trajectory is from here?

And also, again, just digging into where that sort of massive uplift came from?

I wouldn't maybe call it a massive uplift. It was definitely a clear improvement.

And you're right about this -- the inventory step-up that we no longer have. And then we had a few one-off items also in Q4, then that we did not have again in Q1, as we said.

And on top of that, the efficiency measures we have taken, for example, and we mentioned these 3 sites we consolidated. We also looked into a lot of other areas to see -- basically to adjust our operations to a clearly lower demand level than it was when we acquired Stanley.

So all these efficiency measures have now started to show in the result during Q1. Still, we are not getting the help from the market as of yet.

That might come or it will come sooner or later. We don't know exactly when it will come.

And when that comes, then obviously, we will get an improvement in margin as well. So there was nothing specifically positively in Q1, I wouldn't say.

Rather if we could help from the market, we would definitely see -- if anything, we would expect margins to move in the right direction to put it that way.

And then just final question, just on the dynamic in the U.S. So I mean we've seen announcements from the White House that 10 mining projects have been earmarked for accelerated premising.

I mean, in the sort of midterm, I guess, can you see a sort of more positive environment in the U.S.? I mean, clearly, headwinds in the short term due to sort of an unknown NBV in the sort of mine calculation, how much CapEx is going to be.

But so how do you see this dynamic paying out in the U.S. going forward?

No. But we see these type of initiatives in actually in several parts of the world with fast tracking mining permits, et cetera.

And I think raw materials, it is becoming a very strategic thing in the geopolitical landscape to safeguard your capabilities or sourcing. So of course, for us, that is good news.

It is both in U.S., it's both expansion projects of existing mines, but also in other parts of the world, we start to see more and more than activities around greenfield. So that, all in all is, of course, positive for us.

.

Can I ask another follow-up on the T&A margin, Hakan? You mentioned that you no longer have the inventory step-up effect that was in the range of SEK 20 million.

But looking at amortizations now quarter-over-quarter, they're only down by SEK 2 million. So have I misunderstood this?

Or is there something odd in Q1?

No, nothing odd in Q1. This inventory step-up value, you would not see them as amortization because basically, what happened is that you revalue your inventory.

So if the inventory was first valued at SEK 8 million and you were expecting a selling price of SEK 12 million, you would get a margin of 4%. But then when you revalue it maybe, let's say, it was worth SEK 10 million instead.

And when you sold it, then you only got the profit of SEK 2 miillion. So you will not see it as amortization.

It was part of a higher cost of goods sold.

Just one is on inventories. How do you expect your inventories to evolve from here, perhaps through the rest of the year?

And is current uncertainty incentivizes you to actually hold a bit more inventories during this period? And second question is on adjustment to tariffs.

Helena, how long do you think it will take you to actually fully adjust the organization to the new realities? Is it a question of a quarter or 2?

Or is it long?

If I start with the inventory part, if we disregard the -- which you obviously can't, but if we disregard overall trade situation right now, we would expect us to continue to move working capital over sales ratio downwards during the year because we still think that we have improvement areas there. Now the trade situation complicates things a little bit because Helena mentioned, we are redirecting flows.

And sometimes, we are redirecting them in order to get a lower cost, but it might actually imply that we get -- we need to have some higher inventory in different parts or we get longer lead times because we want to avoid different routes. So all in all, there is still opportunity for us to do more on inventory and become more efficient.

The very fluid with the trade situation makes it a bit more complicated.

And on the, I would say, timing for all these mitigating actions, of course, it depends very much on the different -- with the type mitigate actions. If it is just rerouting flows of parts, for example, or consumables, that goes -- that happens immediately.

So that's not -- there's no, I would say, waiting for something like that to happen. If we have dual capacity possibilities to move production between sites, then I would say maybe it's a quarter to get that -- to put something like that in place.

If it's to find new suppliers as long as it is standard steel grades, it also goes fairly quick. But of course, it's more that it's a lot of workload for the organization, and that's what the organization what we are busy with right now.

But as it looks like right now, it's full activity level. I think we have over the years proven that we are agile and we are fast when the situation change.

And we are now maximizing our potential here with our global footprint and our -- was a global sourcing network as well. Several of our suppliers are also located in many different parts of the world, and we can, of course, use those suppliers in the best possible way now to mitigate the impact from the tariffs.

Yes. Could I start with equipment, please?

A strong quarter, I think the best ever or for a long time on equipment. Can you maintain this krona level in the coming quarters?

Or is it exceptional? .

And the second question is on service. The softness in nickel and DRC and parts, do you think that's temporary and will reverse quite quickly or something that's going to drag on for the next quarter or the next 2 quarters.

Maybe we could start there.

Yes. So as I said, on equipment, it's a very strong quarter, and it's both a number of large orders, but not that many large orders actually supporting this very nice demand.

So it's mostly medium-sized and small orders and many of those, which is very encouraging to see. We continue to see good opportunities in the coming quarters on equipment demand as well.

And I said it's -- I think I said it in the previous calls as well that the replacement of some of the large fleets that we put in the market there, 2011, '12, those are coming up for replacement and that's quite big ticket items for the large surface machines when we have a demand of them and leverage our very strong position in surface mining. So we continue to see that this is a positive outlook for equipment.

On parts, yes, we -- as long as nickel is where it is from a price standpoint and the turbulence in DRC, Hopefully, the turbulence in DRC, I think is coming -- it's already now looks better. I don't have to predict where nickel will move moving forward.

But there is plenty of opportunities. Of course, this is -- we have a strong position on parts and on our service.

And the more we grow our service contracts, that is also we're building then the foundation for parts growth long term. And as I said, the fleet is also -- some of the -- a portion of the fleet is also a young fleet out there because we have put a lot of equipment on the market in the last couple of years, not yet consuming so much parts.

That's really helpful. Could I just ask a bit about price?

Is the price level in orders in the quarter, similar to what you've seen in recent quarters and if there's any way you can quantify that? But how will that move in the back 9 months?

Will it move up materially with the tariffs? And is there any way you can quantify that?

Or do you anticipate it not really moving that much at all?

So I would say that the price effect we see in Q1 is similar to what we have seen in the previous quarters, is more a normalized price increase level that we normally see. We are doing everything we can to mitigate the effect from the tariffs, as I explained, but the -- if there is a part that we can't mitigate then, of course, that will end up in price increases.

But we're doing our job to mitigate the impact before we push it on to our customers.

First is on the U.S. construction exposure.

I was just wondering if you've seen any changes in ordering patterns since the tariff came on April 2 and whether you've seen [indiscernible] from James' question around pricing, but service contracts have obviously grown quite significantly over the past 3, 4 years. Can you talk about your ability to pass on price through services contracts relative to parts?

I mean my understanding of a lot of the way these service contracts work is that there's indexation, but sometimes that indexation can be capped. So I was just wondering if that's a situation that you guys will face and so it will be over a number of years that you pass on any potential price increases versus maybe on parts, you pass it on quite quickly.

Just any color there would be super helpful.

I would say on the U.S. construction, say, sentiment, we have not seen any, I would say, change in the last couple of weeks since the, I would say, the -- in regards to the tariffs.

As I mentioned, we do see that the inventory level at our distributors that is coming down to a more normalized level. So that's what we -- what I can say on the construction activities in U.S.

. On the service contracts, I would say that we have good opportunities to -- of course, to push out price increases as well in service contracts.

And long term, the service contracts also safeguard the consumption of parts. So it is a way of making sure that we get the full potential of parts into a contract.

But I wouldn't say that we have -- I will say we are -- I would say we are a similar position when it comes to working with prices because in a service contract you also -- you work with value in a different way because that's where you can prove the values and you can improve the KPIs, which is then uptime or TCO, et cetera. So you have different -- you have a better -- you have more things to work on in a service contract than you have in if it's just pure parts.

Yes. I had 2 questions on digital.

Could you help us understand the mechanics behind this dilution? How much is digital or did digital grow in this quarter?

How big proportion is it? And what's your margin ambition this year?

Do you think margins for digital stand-alone will go up or be unchanged? I understand that this is a business that will sort of just gradually ramp up to higher profitability, but any help there would be good.

So if -- we said it when we reported the Q4 that we are -- in 2024, we're up roughly 30% on orders on digital. That has yet not -- we have yet not seen it fully into the P&L which, of course, is -- this is about scaling.

We have acquired regional players, and we are now scaling. And with scaling, of course, margins will improve.

On top of that, we're also working on efficiency to make sure that we are -- let's say we say we have the organization fit for growth, but also fit for say, for long term will say, delivering the profitability that we expect.

Yes. Okay.

Secondly, so we saw this deal early in the year of Micromine in software. I think you've said previously that you're pretty happy with the platform that you have on digital.

But could you just give us some more details on what you do in those specific areas or if you need to do or want to do more bolt-ons?

I mean we are happy with the platform. So we have acquired quite many capabilities now.

And during last year, we were putting all of this together into a very, say, precise offering. And it is that full offering now and the bundling of all these solutions.

And of course, we're developing new solutions based on the capabilities that we have now received from these acquisitions. So we see that we have a good development journey now organically within the digital, and we already see it on the orders received as I said.

But there could still be, of course, gaps that we would like to close from an acquisition standpoint. But I think right now, I'm pleased with the portfolio that we have and the development of orders.

We see that we are providing our customers with the solutions that they need for the future.

So can I first ask about the costs related to the efficiency measures that increased admin costs temporarily in Q1? How large were these costs?

Will they disappear in Q2? And should I look at them as items affecting comparability?

They were not super large basically -- there's bit of an echo here, sorry. In a big company like ours, we always do something.

If we have larger cost items like when we closed the factory in Essen, then we take them as item affecting comparability. If we have smaller ones, which we have every now and then, then we treat them as normal cost because basically we will have them fairly often.

In this quarter, there were somewhere in between. They were not big enough to be treated as items affecting comparability but a bit bigger than what we normally see, and that's why we spelled them out explicitly.

You don't want to quantify it.

No. But they were not huge.

Okay. And then the second one, I know it's moving material and it's probably difficult for you to estimate as well.

But could you please give us an indication what we should expect from FX on the EBIT in Q2 either based on current rates or the rates that we saw at the end of the first quarter? .

That's a very good and quite tricky questions. To make it very simple, if the krona is a weaker krona -- if the krona continues to strengthen, like it did in Q1, then you would have a similar impact in Q2 on the balance sheet revaluation items.

You will then have a negative effect on AR. And so far, the krona has strengthened in Q2.

You would have a negative effect on AR, but you would have the positive effect, higher up in the income statement on gross margin coming from these internal profit eliminations. Over time though, those are the balance sheet implications.

Over time, though, a stronger krona when we translate back the profit that we get around the world, a stronger krona makes that profit smaller. So it then becomes negative for us.

But it's when we have this -- so if you put it like this, if the currency rates would be exactly the same as they were at the end of Q1, then you wouldn't have any of these revaluation effect, and you will then have less profit translated back into Swedish krona. But if the krona is where it is right now, when it has strengthened, it's likely then that you see the similar type of effect as you saw in Q1.

Does that make sense, Andreas?

It makes sense, but I was looking for a number, but it definitely makes sense.

I just want to come back in the outlook statement, you've talked about optimizing logistics and distribution flows in response to some of the tariff uncertainty. If I recall correctly, your logistic cost line fits in admin expenses.

And historically, maybe it's been about 2% of revenue, that would imply about SEK 310 million for the quarter. Obviously, we've talked about the step-up in admin costs, some of that being one-off, but SEK 1.2 billion is SEK 100 million up versus consensus versus last quarter versus last year.

So I guess 2 parts to the question. What are the specific actions you're taking amidst the trade environment that are affecting logistics?

And is that structural? And then second, on the one-off side, is the one-off effect more meaningful than the increase you may have seen in logistics expenses?

So we -- let's say the work we have done so far has not led to increased logistic cost, but we are rerouting so we're using different routes than we did prior to the tariffs to be very transparent and avoiding to go through U.S. for -- and then out from U.S.

for parts, for example, that we're no longer doing. But we don't -- that is not translated into an increased logistic cost.

Of course, if we would start to change our logistics footprint in any way moving forward, then, of course, that could come with the cost, but that is not the type of actions we are taking. We're using the existing footprint in a smarter way given the tariffs.

So the one-offs are not related to logistics, I would say.

I mean, if you look at the admin costs, Christian, and you compare Q1 this year with last year, you should also remember that, of course, we have added, especially Stanley Infrastructure, but also other acquisitions, which impacts the total admin cost.

Understood. Very clear.

And then maybe just a second one finally, inventory to sales, I think, about 28.1%, the lowest inventory days in 4 years, if I think back to the third quarter of last year, I was asking whether we could see pre-COVID levels in terms of inventory days, about 94. I'm getting down to similar territory, I'd say.

Just -- how do we think about -- I know you covered it a little bit, but how do we think about the evolution here? I'm just surprised by the strength of that number on the inventory carry?

No, like I answered the previous question, and it -- we still think that we have room to improve when it comes to inventory. Some of the bottlenecks that we talked about before, for example, getting the equipment out from the final modifications in certain countries that -- there we definitely have improved, and that's part of what we saw during the second half of the year when we had a very, very strong cash flow.

But going forward -- so I think, again, adjusting for then the trade situation, I think there is definitely room for us to still improve and see a better inventory in relation to COGS or sales. Given the trade situation that might differ when we redistribute flows, et cetera, and we'll need to maybe put inventory in places where we don't have them at the moment.

So it's very fluid nature right now in terms of evaluating going forward.

So that was it. Thank you very much, everyone.

Good questions and reach out, if anything, was unclear. We are, as always, happy to help you more than ever, and we wish you very successful investments.

Thank you very much. Bye.

Bye. Thank you.

Thank you. Bye-bye.