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Investing.com -- Swedish mining equipment manufacturer Epiroc on Tuesday delivered a mixed third-quarter performance with strong equipment orders offset by weaker service growth and margin pressure.
The company reported 10% year-over-year organic growth in equipment orders during Q3, driven by healthy mining demand. Small and medium-sized equipment orders showed particular strength, increasing over 20% compared to the same period last year.
Free cash flow reached SEK2.5 billion in the quarter, representing a 16.2% margin and 126% conversion rate. Year-to-date free cash flow conversion stands at 99%, up from 82% in the first nine months of 2024, putting the company on track for its best performance on this metric since 2020.
However, Epiroc’s service business showed signs of weakness with organic order growth of just 2%, significantly below levels reported by competitors this earnings season. During the earnings call, the CEO acknowledged that Epiroc has been struggling to maintain market share in this crucial segment.
The adjusted EBIT margin fell 70 basis points year-over-year to 19.0%, missing the 19.8% consensus expectation. This profitability level is now nearly 500 basis points lower than the highs seen in 2022.
Epiroc’s return on capital employed has declined from over 30% pre-pandemic to approximately 20% in 2025, partly due to significant merger and acquisition activity that some analysts have questioned.
There are positive signs for future improvement, including a pause in acquisitions this year, improving cash conversion, and the lowest net debt since acquiring Stanley in early 2024. Management has also implemented multiple restructuring initiatives expected to yield results in 2026.
These factors, combined with strong mining industry tailwinds and an anticipated recovery in construction, could drive substantial improvement in Epiroc’s results going forward.
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