Epiroc : Annual and Sustainability Report 2023

Annual and Sustainabil ity Report 2023

150Celebrating

years of innovation

Our roots date back to 1873 as part of Atlas Copco and in 2018 we became an independent listed company. We see ourselves as a 150-year-old startup company, which enables quick decision making and speed in the launch of innovative solutions.

We have the advantage of being a young company with passionate employees in a decentralized organization, while also having long and strong customer relationships built on a legacy

of reliability and productivity.

1873		1898
AB Atlas was founded in	AB Diesels Motorer was
Stockholm, Sweden. The	founded in Sickla, Sweden. It
company offered all types of	was a technically prominent
equipment used in the building	company that made several
and maintenance of railways.	important improvements on
		the diesel engine, such as
		enabling a quick switch from
		forward to reverse, which
		opened up the market for
		marine engines.

1915

AB Atlas expanded internationally. Within a few years, there are operations in Russia, England and Norway.

1925

The newly formed company moved to Sickla, Sweden, where the headquarters have been ever since. The engines produced, mainly stationary and marine diesels, could be loaded onto railcars inside the factory, which was connected to the entire European railway network.

"AB Växlar & Signaler" i Örebro, Sweden, (AVOS) was acquired. Today, this is Epiroc's largest production site with almost

3 000 employees.

1874

Best wishes from His Majesty King Oscar II. "I wish this company, so beneficial to the fatherland, all happiness and success".

1905

	1917
The first rock drill was	AB Diesels Motorer merged
produced. The Cyklop and	with AB Atlas, creating AB
Rex light rock drills were	Atlas Diesel.
hand-powered, light, and
hard-hitting, making drilling
much more efficient for
customers.

1936 1951

	1953
The ground-breaking Swedish	Dr. Peter Wallenberg began his
Method was introduced. "One	life-long career at Atlas Copco,
man - one machine". Key	lasting 62 years. By giving
innovations in the solution	employees a large degree of
were the combination of a	personal responsibility as well
"pusher leg" and hard-metal	as accountability, he established
drill bits.	a customer-­oriented and
	decentralized culture.

...and cel ebrating 5 years as a stand-al one company

2018 Epiroc was listed on Nasdaq Stockholm with Ronnie Leten as Chair of the Board and Per Lindberg as President & CEO.

2020 Helena Hedblom was appointed President & CEO. "Helena has a strong business focus, an in-depth knowledge of the business and is an appreciated leader who is living and breathing the Epiroc values," said Ronnie Leten, Chair of Epiroc's Board of Directors.

Epiroc in 2023

2021 Epiroc's ambitious climate targets were validated as science based.

2023 Epiroc partners with ispace for Moon missions. The long-term collaboration agreement means that Epiroc will contribute with both technology and solutions for future commercial Moon missions.

1956

A leading productivity and sustainability partner serving mining and construction customers around the globe with innovative equipment and solutions.

■�Presence• in around 150 countries.

■�• More than 18 000 employees, +41% since 2017 (12 948). ■�• Revenues of MSEK 60 343, +92% since 2017 (31 364).

■�• Industry-leading EBIT margin of 21.8%, +2.9 ppt since 2017(18.9%).

1984		1991		2005

After the acquisition of Arpic	The legendary face drilling
Engineering NV in Belgium, the	rig Boomer was introduced.
company's name was changed	It was, and still is, a robust
to Atlas Copco. Copco came	face drilling rig for tunneling
from the French words	and mining applications.
Compagnie Pneumatique	Today, customers can have
Commerciale.	the Boomer with either
		diesel or battery driveline.

1970s

For a period of ten years at Dinosaur Cove in Australia, the company's products were used for historical excavations. A new dinosaur species was discovered, and in appreciation of the help received, it got the name Atlascopcosaurus Loadsi.

1988

Marianne Hamilton became the	An almost silent surface drill
first woman in Group	rig was launched, perfect for
Management and successfully	use around the clock at
transformed the internal job	construction sites in densely
market. It enforced a	populated areas.
decentralized organization with
high job mobility.

2004

1962		1973
The rig-mounted hydraulic	The first 100 years were
breaker helped create the 11.6	celebrated with an
km long Mont Blanc tunnel,	exhibition with royal
which at the time, was the	presence in Sickla.
world's longest. It reduced the
distance between Paris and
Rome by 150 kilometers.

				2011
Through the acquisition of	Ingersoll-Rand Drilling	R&D center opened in Nanjing,
Secoroc in Fagersta, Sweden,	Solutions, a manufacturer	China. The engineering is
Atlas Copco became the	of large blasthole drilling	focused on the needs of
world's largest supplier of	rigs in the USA, was	Chinese customers and leads
complete rock drilling	acquired. The strategic	to shorter time-to-market.
equipment.	acquisition makes Atlas
		Copco a leading supplier
		in surface drilling.

Leading productivity

and sustainabil ity partner

With ground-breaking technology, Epiroc develops and provides innovative and safe equipment, such as drill rigs, rock excavation and construction equipment and 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.

Europe

26%

North	Revenues
America
14%
18%
Revenues
	26%

Africa/	Asia/
Middle East	Australia
16%	31%
Revenues	Revenues
16%	30%

South

America

9%

Revenues

14%

Gl obal presence

Average employees and share of revenues in 2023

Contents

Cel ebrating 150 years of innovation	2
Leading productivity and
sustainability partner	4
2023 in brief	8
CEO comments	10
Val ue-creating strategy	14
Attractive niches with structural growth	16
Drive the productivity and sustainability
transformation in our industry	20
High proportion of recurring business	34
Well-proven business model	38
Value for our stakeholders	40
Our success is based on sustainabil ity
and a strong corporate cul ture	42
We use resources responsibly
and efficiently	46
We invest in safety and health	51
We grow together with passionate
people and courageous leaders	54
We live by the highest ethical standards	58
Administration report	62
The Epiroc share	74
Corporate governance report	76
Internal control over financial reporting	86
Risk management	88
Financial information and notes	94
Signatures of the Board of Directors	151
Auditor's report	152
Notes on sustainability performance	156
Auditor's Limited Assurance	171
Sustainability performance	172
Mul ti-year summary	174
Financial definitions	175

Sustainability report

Annual Report

The audited annual accounts and consolidated accounts can be found on pages 62-93 and 94-151. The corporate governance report examined by the auditors can be found on pages 76-93. Epiroc reports its sustainability work for 2023 according to the Global Reporting Initiative (GRI) Standards. The sustainability report has been prepared in accordance with disclosure requirements set out in the Swedish Annual Accounts Act, chapter 6, paragraph 11. The sustainability information that has been reviewed by the auditors, excluding information related to the EU Taxonomy, can be found on pages 42-61 and 156-173. The assurance report issued by the auditors can be found on page 171 and a detailed GRI and other sustainability reporting standards index can be found at www.epirocgroup.com.

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 equipment and solutions represent each roughly half of equipment revenues.

83%

of orders

received 2023

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 406 mm in diameter with up to 19.8 meters clean hole single pass capability.

Underground mining

Underground mining is becoming increasingly common. For underground applications, we provide drilling rigs for blasthole drilling and rock reinforcement, loaders and trucks, equipment for mechanical rock excavation, 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.

Expl oration

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 drilling rigs and digital solutions to analyze ore and ore grades. We also provide exploration drilling tools.

Infrastructure

17%

of orders

received 2023

Surface infrastructure

Construction work above ground often involves removing unwanted rock from an area or producing aggregate for construction. 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 provide drill rigs for blasthole drilling and rock reinforcement, grouting systems, loaders and trucks, as well as ventilation systems.

Equipment

32%

of orders received 2023

• Epiroc Annual and Sustainability Report 2023

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 new circular services, such as productivity-enhancingtechnology-agnostic digital solutions, mid-life upgrades, 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.
• Midlife services, including diesel-to- battery conversions.
• Remanufacturing solutions for components.
• Digitalization solutions, including enablers such as wireless connectivity.
• Custom-engineeredsolutions, including mixed-fleet automation solutions.
• Training and other service.

Rock Drilll ing Tool s and Ground Engaging Tool s (GET)

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. We offer advanced ground engaging tools, such as cast lips, teeth, and protective shrouds installed on mining buckets and loaders as well as related digital solutions, mainly for the mining industry.

Examples of tools:

• Rock drilling tools - underground and on surface.
• Advanced ground engaging tools and related digital solutions.
• Tools for rock reinforcement
• Exploration drilling tools (reported in the Surface Division).

Attachments

We offer a wide range of high- quality hydraulic attachments. The attachments are used, for example, for rock excavation in construction and mining, for deconstruction, and for recycling.

Examples of attachments:

• Hydraulic breakers, shears and pulverizers.
• Concrete cutters and busters.
• Drum cutters.
• Excavator grapples.
• Excavator magnets.
• Hydraulic compactors.
• Crusher and screening buckets
• Auger drive units.
• Couplers and thumbs.
• HATCON - Hydraulic Attachment Tools Connectivity.

Aftermarket

68%

of orders received 2023

Epiroc Annual and Sustainability Report 2023

7

2023 IN BRIEF

2023 in brief

Orders received	Revenues	Operating margin, EBIT, %
MSEK 59 332	MSEK 60 343	down from 22.4% in 2022
+11%	+21%	21.8%
Return on capital employed	Share price development	Dividend (proposed)
down from 28.0% in 2022	(A share)	SEK/Share
27.0%	+6.5%	3.80
Safety on top of the agenda	Automation leadership	Acquisitions (completed)
KPIs improving, but	2 850 driverl ess	Three acquisitions
we can do better.	machines, incl uding	Approx. MSEK 2 400 in
	mixed fleet.	annual revenues

In the picture

In February 2023, Epiroc finalized the acquisition of CR which provides advanced ground engaging tools (GET) and related digital solutions mainly for the mining industry. With approximately BSEK 1.7 in annual revenues and 400 employees, the company expands Epiroc's first-rate offering of essential consumables and digital solutions. Revenues from the acquisition are reported in "Tools & Attachments".

• Epiroc Annual and Sustainability Report 2023

2023 IN BRIEF

2023 in brief

In 2023, the order intake increased 11% to MSEK 59 332, supported by a strong mining business, while demand from construction customers decreased. We had record-high revenues and operating profit and ended the year with a solid financial position. Our financial strength enables us to invest in innovation and acquisitions. Our investments in R&D were at all-time high and we announced our largest acquisition ever, the acquisition of STANLEY Infrastructure, in December.

In brief

	2023	2022	Δ,%	Financial goals	Average 2015-20232)
Orders received, MSEK	59 332	53 222	11
				To achieve annual revenue growth of 8% over a business cycle	Annual revenue
Revenues, MSEK	60 343	49 694	21	and to grow faster than the market. Growth will be
growth of 10%
				organic and supported by selective acquisitions.
Operating profit, EBIT, MSEK	13 183	11 147	18
Operating margin, EBIT, %	21.8	22.4		To have an industry-best operating margin,	20.4
	with strong resilience over the cycle.
Adjusted operating margin, EBIT, %	21.7	23.7			21.0
Operating cash flow, MSEK	6 211	5 662	10
Basic earnings per share, SEK	7.82	6.96	12
Dividend per share, SEK	3.80 1)	3.40	12	To provide long-term stable and rising dividends. The dividend	50% pay-out ratio
should correspond to 50% of net profit over the cycle.	(2018-2023)
Return on capital employed, %	27.0	28.0		To improve capital efficiency and resilience. Investments	25.9
	and acquisitions shall create value.
Net debt/EBITDA ratio	0.49	0.28		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)	5.1	5.7	-11
Sick leave, %	2.1	2.4
Total energy use 4), GWh	169	175	-3
Transport CO2e, tonnes/COS, MSEK 4&5)	2.7	3.2	-15

1. Proposed by the Board. 2) See pages 62-69 and 172-174.3) Number of recordable injuries per million hours worked. 4) Comparable units, excluding new reporting units in 2023. 5) Carbon dioxide equivalent, CO2e, is a unit that standardizes the climate effects of various greenhouse gases. COS = Cost of Sales.

				Total recordable injury		Energy consumption and
Revenues and book-to-bill	Operating profit and margin	frequency rate and sick leave		transport CO2e emissions

				60 343			22.9	23.7									177	175
						21.2		21.8								169
					21.0
												161
			49 694				22.7	22.4	21.7
												146
						20.4
40 849					19.9				6.0
	39 645									5.7
36 122										5.1
										4.8		5.1
		115	107
97	101		98					13 183						4.5
					11 147						4.1
															3.6
							8 995										3.2
					8 136	7 382											2.7
										2.4	2.4
									2.1	2.1	2.1
2019	2020	2021	2022	2023	2019	2020	2021	2022	2023	2019	2020	2021	2022	2023	2019	2020	2021	2022	2023

		Revenues, MSEK		Operating profit, MSEK		TRIFR 3)		Total energy use in GWh 4)
		Book-to-bill, %		Operating margin, %		Sick leave, %		Transport CO2e, tonnes/COS, MSEK 4&5)

• Adjusted operating margin, %

Epiroc Annual and Sustainability Report 2023

9

CEO-COMMENTS

Colll aboration and partnerships drive our l eadership

2023 was an exceptional year defined by major achievements and we ended the year with record revenues and record operating profit. In March, we announced a major order for mixed fleet automation for an iron-ore mine in Australia and we started an exciting collaboration with ispace to send equipment to the Moon. Another collaboration that enhanced was with SSAB, which will supply us with fossil-free steel. In September, a long-standing customer placed Epiroc's largest- ever order for equipment to be used in a copper mine in the Democratic Republic of the Congo. In the fourth quarter, we won three large orders, one of which is a digitalization order for a customer in Chile. We finalized the year by announcing the acquisition of STANLEY Infrastructure, which will make us a stronger supplier of excavator attachments and handheld hydraulic tools. If anything, the year has proven that collaboration and partnerships drive leadership.

Mixed demand and strong acquisition growth Our order intake in 2023 increased 11% to MSEK 59 332

(53 222). The activity level was high within mining, as well as for infrastructure projects, such as tunnels. The demand, however, declined sharply for hydraulic attachments and equipment used in quarries and in the construction of residential and non-residential areas.

We won several large orders, indicating a continued high willingness to invest among our customers. For example, we won our largest automation order ever, MSEK 500, to convert Roy Hill's mixed fleet of almost a hundred mining trucks to driverless operation in Australia.

Demand for automation and digitalization solutions was at a high level during the year, and in the fourth quarter, we won a multi-year digitalization order of MSEK 250 from Codelco in Chile. It is gratifying to see that we have further strengthened our leading position within digitalization and automation.

The aftermarket demand from mining customers remained high, supported by mid-life upgrades and service of customers' equipment. Our broad and attractive offering combined with the work of our dedicated service technicians contributed to the strong development.

Record-high revenues

For many years, we have been proud of our profitable growth and 2023 is no exception. In total, our revenues increased 21% during the year to a record-high MSEK 60 343 (49 694), driven by both acquisitions and strong organic development.

We completed three acquisitions and announced another two. Together, these five will add annual revenues of approximately SEK 7.2 billion.

It is pleasing to see that the completed acquisitions are growing well and contribute to increased revenues. In total, our completed acquisitions contributed to 9% of the revenue growth in 2023.

The acquisitions within automation and digitalization

are growing particularly well, which supports our view that customers benefit from our digital solutions that improve both safety and productivity.

Profitabil ity in focus

The operating profit, EBIT, also reached record levels, and increased 18% to MSEK 13 183 (11 147). This corresponds to an operating margin of 21.8%, down from 22.4% the previous year. There are several explanations for the weaker margin. One reason is the weakening construction market during the year, which reduced demand for our hydraulic attachments business. We have both lost volumes and suffer from a negative mix effect. Another margin headwind is that our acquisitions are growing rapidly, but with lower margins, i.e. they are dilutive.

Our costs were higher, which is partly explained by us investing in presence, such as more service technicians, salespeople and staff serving customers.

We have several activities ongoing to improve efficiency. For example, we announced the closure of our factory in Essen, Germany, in November.

10 Epiroc Annual and Sustainability Report 2023