Epiroc Posts Ninth Straight Quarter of Order Growth as Mining Demand Offsets Fading Tungsten Drag and Currency Headwinds Ease
Q2 2026 earnings call, July 17, 2026
Epiroc delivered another quarter of double-digit organic order growth, with orders received up 13% to SEK 17.3 billion, marking the ninth consecutive quarter of organic order expansion. The Swedish mining equipment maker's adjusted EBIT margin climbed to 20.1% from 19.7%, as high equipment invoicing and efficiency measures more than offset a persistent currency headwind. CEO Helena Hedblom struck an optimistic tone on the pipeline, noting exploration was "one of the strongest growing businesses," which she called encouraging because "exploration activity is an important indicator of long-term confidence in the mining industry and future project development."
Equipment Ramp-Up Accelerated Faster Than Order Timing Would Suggest
The most notable operational disclosure was how quickly Epiroc converted its Q1 order surge into revenue. Equipment orders grew 30% organically, and equipment now represents 36% of group revenue, up meaningfully from prior levels, all while lead times remained normal. Analysts pressed on why the ramp looked front-loaded given typical nine-month lead times. CFO Håkan Folin clarified that the ramp actually began in the second half of 2025, not after the Q1 order spike, telling analysts that "we didn't start the ramp-up after Q1... we started it already during second half of '25." Hedblom added that the company is now leveraging dual manufacturing capabilities across India, China, Sweden and the U.S. to scale output in parallel, saying she does not "see any challenges on the capacity side. It's more to get people on board and train them" and to manage component sourcing. Management guided that equipment revenues should remain strong into the second half of 2026.
Tungsten Headwind Has Largely Disappeared
A key swing factor in the quarter was the fading impact of tungsten input costs, which had dented the Tools & Attachments margin by more than 1 percentage point in Q1. Folin confirmed the hit is now "more or less negligible" at the business-area level, thanks to customer surcharges and a recycling program. Citi's Klas Bergelind pushed back on the underlying trend, noting that once tungsten is stripped out, the year-over-year margin improvement in Tools & Attachments actually looked weaker in Q2 than in Q1, purely a function of softer operating leverage. Folin agreed with that characterization. Separately, some of the segment's order deceleration to 4% growth from 9% in Q1 was attributed to prebuying ahead of tungsten price increases earlier in the year, an effect now normalizing.
Service Growth Decelerated on Lumpy Midlife Upgrades, Not Weaker Demand
Service orders grew 6% organically, down from 12% in Q1, prompting multiple analysts to ask whether Epiroc was losing share to competitors reporting double-digit aftermarket growth. Management was explicit that the deceleration was purely a mix issue tied to midlife equipment upgrades, which are lumpy and can span six to seven months to convert into revenue, rather than any softening in the core parts-and-service business. "It's nothing else that has slowed. So it's healthy growth in all components of service, but fewer midlife upgrades," Hedblom said. IR head Karin Larsson added color that midlife upgrades are "also a very profitable business for Epiroc," reinforcing that the mix shift, while noisy quarter to quarter, is not margin-dilutive. Management pointed to an aging installed fleet and increasing equipment sophistication as durable tailwinds for aftermarket capture over time, with parts revenue typically ramping meaningfully in year two of a machine's life and continuing for six to ten years.
Currency Headwind May Finally Turn Positive
Foreign exchange has been a drag on Equipment & Service EBIT for five consecutive quarters, but Folin signaled the comparison base is normalizing, with revenue and order impacts now within about 1 percentage point versus prior periods. He cautioned that intra-quarter FX volatility, the dollar swung from roughly SEK 9.20 to SEK 9.71 against the krona, can still create balance sheet noise, but suggested that if rates stabilize near current levels, Q3 could see meaningfully less currency drag than recent quarters.
Margin Recovery in Tools & Attachments Has a Ceiling Tied to Market, Not Structure
Morgan Stanley's Max Yates questioned whether Tools & Attachments could ever return to the 18% margins seen in 2021-2022, given the STANLEY Infrastructure acquisition has structurally diluted the mix. Folin pushed back on the structural narrative, noting that 18% was "very high" and a more normalized historical margin was closer to 17%, and that STANLEY itself was acquired at 15-20% EBITDA margins. "There's nothing structurally or fundamentally that has changed in the market. So with the markets coming back, being strong again, we see opportunities to get back to that level," he said, an important data point for investors modeling a construction and infrastructure recovery.
On incremental margins in the core Equipment & Service business, drop-through fell to roughly 30% in Q2 from 66% in Q1, though Q1's figure came against just 2% sales growth versus 13% this quarter. Hedblom declined to commit to a specific incremental margin target, reiterating that efficiency work continues alongside the capacity ramp, and management was similarly noncommittal on Gustaf Schwerin's (Handelsbanken) question about whether there is an equipment invoicing level beyond which mix stops pressuring margins, with Hedblom saying flatly "there will be a mix effect."
Eight-Year Track Record Since 2018 Listing Underscores Compounding Story
Folin used the call to frame Epiroc's longer-term compounding record since its 2018 spin-off listing: orders up 80%, revenue and adjusted EBIT both up 83%, earnings per share up 94%, and operating cash flow more than doubled. He emphasized the tight linkage between reported and adjusted EBIT, both up 8% annually, as evidence of clean execution: "basically, what you see is also what you get."
Balance sheet metrics remained solid, with net debt down to SEK 11.4 billion from SEK 13.3 billion a year earlier and net debt-to-EBITDA at 0.75 times versus 0.82 times. Return on capital employed dipped year-over-year to 19.3% from 20.2% on lower trailing profit, but improved sequentially from 18.5% in Q1, which Folin flagged as the first sequential improvement in some time.