Epiroc's Efficiency-Led Margin Expansion: Riding the Mining Capex Upcycle
Strong organic order growth, tariff mitigation, and an aftermarket anchor underpin a quarter of profitable execution.
EPRO-B.ST · Earnings Call · 2026-07-22
A Strong Quarter Rooted in Efficiency
Epiroc delivered a robust second quarter, with “we delivered a strong second quarter supported by continued high customer activity and strong demand in mining.” — Helena Hetblom, CEO · 2026-07-22 Organic orders rose 13%, with equipment orders surging 30% and service orders up 6%. The adjusted operating margin improved to 20.1%, driven by efficiency measures and high invoicing. The company noted that tariff headwinds were significantly lower than in the prior quarter, contributing to the margin gain. This marks the ninth consecutive quarter of organic order growth, and the pipeline remains strong with large orders of $720 million, mostly brownfield and replacement.The Aftermarket Engine and Service Growth
Aftermarket now accounts for 64% of revenue, with service at 41% and Tools & Attachments at 23%. “Aftermarket accounted for 64% of revenues in the quarter with service 41% and Tools and Attachments 23% of group revenues.” — Helena Hetblom, CEO · 2026-07-22 Service order growth of 6% was soft relative to the 12% in Q1, but management emphasized that this was due to fewer midlife upgrades, not a deterioration in underlying demand. The aftermarket business remains an important driver of resilience and profitability, and with an aging fleet and more advanced machines, the potential for higher-margin parts revenue is growing.Costs, Tariffs, and Currency: Managing the Headwinds
Management highlighted that the tariff impact on margins fell to near negligible, thanks to mitigating actions and lower absolute tariff levels. Currency remained a headwind, but efficiency gains more than offset it. The CFO noted, “On the tax side, the tax expense was $760 million, and this corresponds then to an effective tax rate of 23.9%, which is in the guidance we have given of 22% to 24%.” — Joakian Folin, CFO · 2026-07-22 This echoes a recurring theme from prior quarters where the company was tackling tariff and FX pressures. As Alberto Zanata, CEO of Electrolux Professional (the prior context) said on pricing: “The price have been already announced, they will take effect January 1 in some -- for some product categories.” — Alberto Zanata, Chief Executive Officer (CEO) · 2025-10-29 While that was from a different company, the parallel here is that Epiroc's pricing actions are also gradually offsetting cost inflation.The Margin Debate: Can It Continue?
Despite the strong margin, CEO Helena Hetblom offered a candid perspective during Q&A:This reflects a management team that sees further efficiency gains ahead, particularly in Tools & Attachments, where tungsten costs are being offset by surcharges and recycling. The company is also ramping up production capacity across multiple sites, which should support sustained margin improvement as volumes flow through. The mining demand outlook remains strong, and with exploration activity picking up, especially in Africa and the Middle East, the long-term growth narrative remains intact. In contrast to the market's focus on AI data centers and high-bandwidth memory, Epiroc is riding a different wave: the global mining capex cycle. Its themes are industrial and commodity-driven, yet the company's execution—particularly in cost control and aftermarket resilience—makes it a standout in the broader industrial rally. As profitability improves and cash conversion hits 93%, Epiroc is well-positioned to reward shareholders even if the commodity cycle cools.I'm still not happy with the margin. So there is more that we can do, of course.