Epiroc upbeat on outlook after profit jump

Swedish mining equipment maker Epiroc expects to benefit from continuing high demand in the near term, it said on Tuesday as it posted better than forecast quarterly profit.

Epiroc, its customers and rivals have had to contend with rising raw material prices and other cost inflation pressures for several quarters, though raw material prices have eased slightly of late.

Shares in the company were up 3.2% at 206.6 Swedish crowns by 1228 GMT after earlier hitting a two-month high of 211.1 crowns.

“In the near term, we expect that the underlying demand, both for equipment and aftermarket (services), will remain at a high level,” it said in a statement accompanying second-quarter earnings.

Order intake was at 15.4 billion crowns for a net gain of 15% but was down 1% excluding acquisitions.

Epiroc is heavily reliant on sea freight to transport its large, heavy pieces of equipment to customers, but has had high inventory levels as capacity at harbours have been reduced.

CEO Helena Hedblom told Reuters that outbound shipping capacity at Gothenburg harbour remained a challenge early in the second quarter but had eased somewhat at the end of the quarter.

Chief financial officer Håkan Folin said on a call to analysts that the bulk of its current inventory was finished products already on ships on its way to customers, or waiting to be sent, and the company was hoping for its inventories to decrease as freight capacity improved.

Martin Persson, a manager at an equity fund that invests in Swedish large-cap companies at Swedish insurer Lansforsakringar, said overall Epiroc was a “great company where expectations are high,” with the results coming in line with his expectations.

“There were a few questions about its margins and inventory levels but I felt like they answered them well in the call,” Persson said.

Second-quarter operating profit before items jumped to 3.43 billion crowns ($337 million) from 2.8 billion a year earlier, beating the average forecast of 3.31 billion in a Refinitiv poll of analysts.

($1 = 10.1912 Swedish crowns)

(By Marie Mannes; Editing by David Goodman and David Holmes)