Epiroc Earnings Call: Automation, Mining Strength and Headwinds

Epiroc ((EPOAY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Epiroc Earnings Call Highlights Robust Mining Cycle, Automation Wins and Managed Headwinds

Epiroc’s latest earnings call painted a picture of a company riding a strong mining upcycle while carefully navigating currency, tariff and materials cost headwinds. Organic equipment and service demand remained robust, profitability held near last year’s high levels and cash generation strengthened, all supported by standout contract wins in automation and electrification. While construction and nickel‑exposed activities remain soft and cost pressures are real, management’s mitigation measures and balance sheet strength suggest challenges are manageable.

Resilient Organic Growth Through 2025

For the full year 2025, Epiroc delivered 7% organic order growth to SEK 63.0 billion and a 2% increase in revenues to SEK 62.0 billion. This growth was achieved despite notable currency and tariff headwinds that weighed on reported figures. The numbers indicate that underlying demand from mining customers remains healthy, with miners continuing to invest in equipment, services and technology upgrades. The modest revenue growth versus stronger orders also points to a growing backlog and a supportive setup for the near term, provided execution and supply chains remain stable.

Q4 Confirms Strong Mining Equipment Momentum

The fourth quarter underscored the strength of the mining cycle, with total orders up 11% organically to nearly SEK 16 billion. Equipment orders grew 22% organically, a powerful signal that mining customers are still deploying capital into new machines and expanding or modernizing fleets. Management highlighted robust exploration activity as another driver, suggesting that customers are not just maintaining existing production but actively searching for new resources, which supports a multi‑year investment outlook for Epiroc’s equipment business.

Margins Hold Firm Near 20% Despite Pressure

Epiroc’s profitability remained a key highlight. The adjusted operating margin came in at 19.6% for both the full year and Q4, only marginally below last year’s levels (19.8% and 19.7% respectively), while reported operating margin reached 19.9% in Q4. This resilience is noteworthy given the drag from tariffs, adverse currency movements and rising materials costs. The results indicate that pricing discipline, efficiency programs and a favorable mix of high‑value equipment and services are largely offsetting these pressures, even as some individual business areas show modest margin compression.

Record Automation and Electrification Contract with Fortescue

A standout highlight was Epiroc’s largest contract in company history: a SEK 2.2 billion, five‑year agreement to deliver around 50 fully autonomous, electric surface blasthole rigs to Fortescue. The deal underscores Epiroc’s positioning at the intersection of automation and electrification, two of the most important themes in modern mining. Beyond the headline size, the contract is strategically important because it validates the company’s technology at scale, strengthens its relationship with a major global miner and sets a benchmark for future fleet‑wide autonomous and electric deployments.

Expanding Automation Footprint and Battery-Electric Vehicle Uptake

Epiroc continued to broaden its automation and battery‑electric footprint across the mining industry. The company completed the Roy Hill project, converting the mine to an OEM‑agnostic autonomous operation spanning 78 haul trucks and roughly 250 ancillary vehicles. In total, Epiroc now has more than 3,900 driverless machines in the field, up 13% versus 2024, reflecting growing customer trust in its autonomous solutions. Electrification also gained traction: 40 mines have now ordered battery‑electric vehicles, and electrification revenues accounted for 3.8% of group revenues, indicating an emerging but fast‑growing revenue stream aligned with decarbonization trends.

Tools & Attachments: Profitability Rebound Despite Soft Construction

The Tools & Attachment segment showed a marked profitability improvement even as construction‑related demand remained weak. Revenues reached SEK 3.7 billion, up 4% organically, but operating profit jumped 65% to SEK 537 million. The adjusted margin rose to 12.3% from 8.4% a year earlier, driven mainly by efficiency gains and footprint consolidation. That margin recovery is encouraging given ongoing softness in attachments used in construction, where seasonal and cyclical weakness limited top‑line progress. Management noted that distributor destocking has largely ended, suggesting that the worst of the volume drag may be behind the segment.

Strengthened Balance Sheet and Strong Cash Generation

Epiroc’s balance sheet strengthened further, creating ample strategic flexibility. Net debt declined to SEK 11.0 billion from SEK 14.8 billion, bringing net debt/EBITDA down to 0.73 from 0.93. Operating cash flow in Q4 reached SEK 2.6 billion, and 12‑month cash conversion remained high at 90%. The company’s cash position stood at SEK 9.6 billion. Net working capital fell in reported terms to SEK 22 billion (36.9% of revenues versus 37.4% a year earlier), with management acknowledging that, excluding currency effects, inventories have increased somewhat and will need to be converted to cash as demand continues. Overall, the improved leverage and liquidity underpin Epiroc’s ability to invest, pursue M&A and return capital to shareholders.

Operational and Safety Improvements Support Execution

Operational metrics, including safety and working capital efficiency, moved in the right direction. The total recordable injury frequency rate improved to 3.9 from 4.3 year‑over‑year, signaling progress in safety culture and risk management. Meanwhile, net working capital as a percentage of revenues edged down to 36.9% from 37.4%, reflecting incremental improvements in managing inventories, receivables and payables. These changes, while modest, support margin resilience and cash generation, helping the company absorb external shocks such as tariffs and material cost inflation.

Customer Productivity Gains from Trolley and BEV Solutions

Management emphasized tangible productivity and cost benefits delivered to customers through electrification and trolley solutions, reinforcing the commercial case for these technologies. At Boliden’s Rävliden 5 km battery trolley project, Epiroc’s solutions helped lift productivity by 23%, increase ramp speed by 50%, cut maintenance costs by 25% and reduce diesel consumption by 80%. Similarly, Assmang’s battery‑electric vehicle fleet achieved an 11% increase in tonnes per hour and an 18% reduction in energy costs. These real‑world results strengthen the value proposition for Epiroc’s electrification offerings and could accelerate adoption as miners pursue both efficiency and sustainability targets.

Currency Headwinds Mask Underlying Growth

Foreign exchange movements had a substantial negative impact on reported results, obscuring the underlying organic growth. Q4 group revenues fell 7% to SEK 16.1 billion, but the company flagged an approximately 11% negative currency effect on revenues. Orders in some areas saw similarly significant currency drag, with Equipment & Service orders showing about a 12% negative impact from exchange rates. The strong organic order and revenue growth numbers indicate that demand is firmer than reported figures suggest, but also highlight the ongoing earnings volatility that currency swings can create for globally exposed industrials like Epiroc.

Tariffs and Tungsten Costs: Persistent Margin Headwinds

Tariffs and raw material costs are a meaningful and continuing source of margin pressure. In Q4, tariffs reduced the operating margin by just under 0.5 percentage points, and management expects this headwind to persist into 2026, though it should ease gradually quarter by quarter as mitigation actions take effect. On materials, tungsten prices more than doubled in 2025, posing a particular challenge for the Tools & Attachment business, where tungsten carbide is a key input. Without full offsetting measures, management sees a margin headwind in 2026 equivalent to “a few tens of percentage points” for that segment. In response, Epiroc is accelerating recycling initiatives and working closely with suppliers and customers on pricing and cost sharing, but investors should expect continued pressure until markets normalize or mitigations fully catch up.

Soft Spots in Construction and Nickel-Related Activities

Despite the strong mining equipment cycle, certain end‑markets remain clear weak points. Attachments used in construction continue to suffer from low activity levels, with Q4 seasonally weak and the broader construction cycle still subdued in many regions. While there are early signs of recovery and destocking appears to be ending, this part of the portfolio remains a drag on growth. In addition, nickel‑exposed mining operations were soft through Q4, with many mines in care and maintenance, reducing aftermarket and service demand. A meaningful recovery in these areas hinges on sustained higher nickel prices and the reactivation of idled operations, meaning Epiroc’s aftermarket growth in certain segments could lag the broader mining cycle.

Return on Capital and Business-Area Margins Under Pressure

While overall margins remain strong, profitability metrics have eased slightly from their peaks. Return on capital employed slipped to 18.9% from 20.6% on a rolling 12‑month basis, reflecting somewhat lower profit and higher intangible assets on the balance sheet, likely linked to investments and past acquisitions. Some business areas also saw margin compression, notably Equipment & Service, where the adjusted EBIT margin fell to 22.1% from 23.6% a year earlier. The declining but still high returns suggest Epiroc is investing into future growth and technology but needs to continue offsetting external headwinds through efficiency and pricing to protect its value creation profile.

Forward-Looking Guidance Points to Sustained Mining Strength

Management’s guidance suggests the current mining upcycle remains intact while recognizing ongoing cost headwinds. Epiroc expects mining demand to stay high and construction demand to increase somewhat from today’s low levels. Tariff headwinds that shaved just under 0.5 percentage points off Q4 operating margin are expected to persist into 2026 but diminish gradually each quarter as mitigation measures ramp up. The company’s adjusted operating margin of 19.6% in 2025 is seen as a base from which to improve through ongoing efficiency actions, with more detail promised at its upcoming capital markets event in June. On the service side, which represented 41% of revenues and 63% of aftermarket in Q4, organic growth was 4%; management aims to move back toward its historical growth pace of around 8% per year. Tax guidance stands at an effective rate of 22–24%. Capital allocation priorities for 2026 focus on continued organic investment and bolt‑on acquisitions, supported by a solid balance sheet with SEK 11 billion of net debt, SEK 9.6 billion in cash, net debt/EBITDA of 0.73 and a net working capital base of SEK 22 billion that still offers room for further optimization.

Epiroc’s earnings call showcased a company that is capitalizing on strong mining demand, rapidly scaling its automation and electrification offerings and defending margins in the face of currency, tariff and raw material headwinds. While construction and nickel‑exposed segments remain soft and cost pressures are set to linger, robust orders, high cash conversion and a strengthened balance sheet position Epiroc to keep investing in growth and technology. For investors, the story is one of solid operational execution, visible structural growth drivers in automation and electrification, and manageable – though not trivial – external challenges that management appears determined to offset over time.