Epiroc: Epiroc : Annual and Sustainability Report 2024

Annual and Sustainability Report 2024 Contents ESRS references / Corporate Sustainability Reporting Content Page Directive (CSRD) Lead ing prod uctivity and sustainability partner This chapter is written with reference to SBM-1 - Strategy, business model and value chain, in ESRS 2. 2024 in brief 6 CEO comments 8 Value-creating strategy 12 This chapter with underlying sections, is written with reference to SBM-1 - Strategy, business model and value chain, in ESRS 2. Value for our stakeholders 14 Attractive niches with structural growth 16 Accelerate the productivity and 20 sustainability transformation in our industry High proportion of recurring business 32 Well-proven business model 36 Our success is based on sustainability 38 and a strong corporate culture Administration report 42 This chapter is written with reference to GOV-1 - The role of the administrative, management and supervisory bodies, in ESRS 2. The Epiroc share 54 Corporate governance report 56 This chapter, incl. Board of Directors, Group Management and Comments on the Remuneration Committee, is written with reference to GOV-3 - Integration of sustainability-related performance in incentive schemes, in ESRS 2. Internal control over financial reporting 66 Risk management 68 Sustainability Statement 74 Auditor's Limited Assurance 147 Financial information and notes 148 Signatures of the Board of Directors 205 Auditor's report 206 Multi-year summary 210 Financial definitions 211 Sustainability Report Annual Report Leading productivity and sustainability partner With ground-breaking technology, Epiroc develops and provides innovative and safe equipment, such as drill rigs, rock excavation and construction equipment as well as tools for surface and underground hard-rock applications. We also offer world-class service and other aftermarket support as well as solutions for automation, digitalization and electrification. Our role is to ensure that our customers within mining and infrastructure can work in the safest, most environmentally friendly, and efficient way possible. Global presence Employees* and revenues Europe 25% North Revenues America 14% 21% Revenues 28% Africa/ Asia/ Middle East Australia 15% 31% Revenues Revenues South 17% 29% America 8% Revenues 12% *Average Epiroc Annual and Sustainability Report 2024 3 LEADING PRODUCTIVITY AND SUSTAINABILITY PARTNER Mining Equipment Our equipment is mainly used when customers need to break, excavate and work with hard materials, such as rock and concrete. It is often business critical for our customers. We provide a wide range of battery-electric equipment and electrification solutions, as well as hardware and software for automation and digitalization. Underground and surface applications represent roughly half of equipment revenues each. 78% of orders received 2024 Surface mining A significant portion of the world's deposits of copper, gold and iron ore is found above ground in what is normally referred to as "open pits". For surface mining, we provide a complete range of rigs for blasthole drilling. Our largest drill rigs, the Pit Vipers, can drill holes up to 40 cm in diameter with up to 20 meters clean hole single pass capability. Underground mining Underground mining is becoming increasingly common. For underground applications, we provide a complete range of rigs for face- and production drilling and rock reinforcement, loaders, trucks, utility vehicles, and ventilation systems. We have the widest offering of battery-electric machines in the market as well as electric infrastructure solutions and Batteries as a Service. Exploration Exploration is performed to ensure a continuous supply of minerals and metals, both in the search for new deposits and in the expansion of existing ore bodies. We provide a wide range of exploration drill rigs, tools and digital solutions to analyze ore. Infrastructure 22% of orders received 2024 Surface infrastructure Construction work above ground often involves removing rock at urban construction sites or producing aggregates (in quarries) for roads and buildings. It could also involve drilling for water or geothermal energy. We provide drill rigs for blasthole drilling for both construction work and quarries. We also supply well-drilling equipment. Underground infrastructure Underground construction work is carried out, among other things, for road and railway tunnels and for hydropower plants. We offer rigs for face drilling and rock reinforcement, grouting systems, loaders and trucks, utility vehicles, as well as ventilation systems. Equipment 32% of orders received 2024 Epiroc Annual and Sustainability Report 2024 LEADING PRODUCTIVITY AND SUSTAINABILITY PARTNER Aftermarket Equipment requires spare parts, maintenance and consumables to achieve optimal performance. We offer a wide range of aftermarket solutions, including circular services, midlife services, diesel-to-battery conversions and remanufacturing of components. The type of service our customers want varies. Our service offering is therefore tailor made, ranging from supplying spare parts to having service technicians on site 24/7, performing all maintenance for the customer. Service Thanks to our global network of workshops and service technicians, we can support our customers anytime and anywhere. We focus on availability through strategically located distribution centers and an efficient supply chain. Examples of services and solutions: Replacement parts and kits. Service agreements and audits. Circular services, incl. midlife services and remanufacturing solutions for components. Other service solutions, incl. custom- engineered solutions, Live Work Elimination, and training. Digital solutions, open and OEM- agnostic capabilities, incl. connectivity, collision prevention systems and automation solutions. Tools We offer a wide range of efficient drilling tools that provide our customers with the best possible drilling quality, the most drilled meters per hour and the lowest production cost. Examples of tools: Rock drilling tools. Tools for rock reinforcement. Exploration drilling tools (reported in Equipment). Attachments We offer a wide range of high-quality attachments for use in, for example, rock excavation in construction and mining, for deconstruction, and for recycling. We also offer advanced ground engaging tools (GET) installed on mining buckets and loaders as well as related digital solutions, mainly for the mining industry. Examples of attachments and GETs: Hydraulic breakers. Shears and pulverizers. Concrete cutters and busters. Quick couplers and thumbs. Drum cutters. Excavator grapples. Excavator magnets. Crusher and screening buckets. Digital solutions for monitoring, optimization, loss detection and analytics Ground engaging tools, such as teeth, lip shrouds, and protective shrouds. Aftermarket 68% of orders received 2024 Epiroc Annual and Sustainability Report 2024 5 2024 IN BRIEF 2024 in brief Orders received Revenues Operating margin, EBIT, % MSEK 62 213 MSEK 63 604 +6% +5% 19.5% Return on capital employed Operating cash flow Dividend (proposed) MSEK 9 132 SEK/Share 20.6% +47% 3.80 Progress in safety Automation leadership Acquisitions (completed) TRIFR down to 4.3 (5.1) 3 450 driverless Five acquisitions machines, including Approx. MSEK 5 440 in mixed fleet annual revenues In the picture: The Minetruck MT66 S eDrive, launched during MINExpo in Las Vegas, USA, in September, is the first large-capacity mine truck with both an electric drivetrain and a powerful diesel engine ("hybrid"). It combines the cost-effectiveness of a traditional mine truck with the productivity of an electric one, without requiring change to a mine's infrastructure. Customers enjoy up to 15% boost in productivity due to higher speed (+11% up ramp) and increased payload capacity. It also reduces fuel consumption by up to 7%. Epiroc Annual and Sustainability Report 2024 2024 IN BRIEF 2024 in brief In 2024, orders received and revenues for Epiroc reached record highs, supported by acquisitions and strong demand from mining customers. Demand for solutions for automation was particularly strong. The demand from customers active within construction was however weak, which impacted profitability negatively. The adjusted operating margin was 19.8% (21.7) and several actions to improve profitability were taken. To remain the technology leader within automation, digitalization and electrification, Epiroc continued to invest in innovation. In addition, several acquisitions were completed, strengthening Epiroc's position further. In brief 2024 2023 Δ,% Example of goals Average 2015-2024 2) Orders received, MSEK 62 213 58 899 6 To achieve annual revenue growth of 8% over a business cycle Annual revenue Revenues, MSEK 63 604 60 343 5 and to grow faster than the market. Growth will be growth of 9% organic and supported by selective acquisitions. Operating profit, EBIT, MSEK 12 385 13 183 -6 Operating margin, EBIT, % 19.5 21.8 To have an industry-best operating margin, 20.3 with strong resilience over the cycle. Adjusted operating margin, EBIT, % 19.8 21.7 Operating cash flow, MSEK 9 132 6 211 47 Basic earnings per share, SEK 7.23 7.82 -8 Dividend per share, SEK 3.80 1) 3.80 0 To provide long-term stable and rising dividends. The dividend 50% pay-out ratio should correspond to 50% of net profit over the cycle. (2018-2024) Return on capital employed, % 20.6 27.0 To improve capital efficiency and resilience. Investments 25.0 and acquisitions shall create value. Net debt/EBITDA ratio 0.93 0.49 To have an efficient capital structure and the flexibility to make selective BBB+ acquisitions. The goal is to maintain an investment grade rating. Total injury frequency rate (TRIFR) 3) 4.3 5.1 -16 Target for 2024 was below 4.5. Sick leave, % 2.2 2.1 5 Target for 2024 was below 2.5. CO 2 e emissions from operations (on-site), 22.8 27.8 -18 Target for 2024 was 26.0 ktonnes 4) CO 2 e emissions from use of sold 5 709 5 653 0 Target for 20