Annual and Sustainability Report 2018

Annual and Sustainability Report 2018

A strong start for Epiroc

Content

Epiroc at a glance 1 This is Epiroc 2 2018 in brief

4 CEO's statement

6 About Epiroc 6 Market characteristics and

competitive landscape 8 Our strategies and goals 12 Our business 14 Our business model 16 Our offering 22 Value creation

24 Administration report 32 Equipment & Service 34 Tools & Attachments 36 Parent Company 37 Four-year summary

38 Sustainability 38 Our approach to sustainability 40 Ethical standards 43 Safety and well-being 45 Responsible and efficient

use of resources 47 People and leaders 49 Water for all

50 Case studies 50 Fossil-free mining 52 Automation 54 Digital solutions

56 Corporate Governance report 60 Board of Directors 62 Group Management 63 Internal control and risk

management for financial reporting

65 Risk management

69 Financial information 70 Group

financial statements and notes 111 Parent Company

financial statements and notes 122 Signatures of the

Board of Directors 123 Auditor's report

126 Notes to the sustainability performance

136 Auditor's limited assurance report on Epiroc AB's Sustainability Report

137 Financial definitions

138 The Epiroc share

140 Our history ? 145 years of innovation

2018 in brief p.2 2018 was the first year for Epiroc as an independent company following the split from Atlas Copco and the listing of Epiroc on Nasdaq Stockholm on June 18, 2018. The year was characterized by high customer demand in both mining and infrastructure and strong growth in orders, revenues and operating profit.

CEO's statement p.4 In our first year, we achieved strong revenue and profit growth. Our customers are ready for a major shift in technology towards more automa tion, digitalization, and battery power. We will continue to invest in more intelligent and sustainable methods in mining and infrastructure.

Automation p.20, 52 Our customers want safety, efficiency, increased productivity, cost reductions and improved quality of life for their workers. Automation is making this possible and is changing the way mining is done.

Sustainability and corporate responsibility p.38 Sustainability and corporate responsibility means to live by the highest ethical standards, invest in safety and wellbeing, use resources responsibly and efficiently and grow together with passionate people and courageous leaders.

About this report The audited annual accounts and consolidated accounts can be found on pages 24?37 and 65?122. The corporate governance report examined by the auditors can be found on pages 56?64.

Epiroc reports its sustainability work for 2018 according to Global Reporting Initiative (GRI) Standards version 2016, "Core" option. 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 can be found on pages 38?49 and 126?135. The assurance report issued by the auditors can be found on page 136. More information and a detailed GRI Index can be found at .

Forward-looking statements Some statements in this report are forward-looking, and the actual outcomes could be materially different. In addition to the factors explicitly discussed, other factors could have a material effect on the actual outcomes. Such factors include, but are not limited to, general business conditions, fluctuations in exchange rates and interest rates, political developments, the impact of competing products and their pricing, product development, commercialization and technological difficulties, interruptions in supply, and major customer credit losses.

Epiroc AB is a public company. Epiroc AB and its subsidiaries are sometimes referred to as the Epiroc Group, the Group, or Epiroc. Epiroc AB is also sometimes referred to as Epiroc. Any mention of the Board of Directors or the Board refers to the Board of Directors of Epiroc AB.

This is Epiroc

Epiroc is a leading global productivity partner for the mining and infrastructure industries. With cutting-edge technology, we develop and produce innovative, safe and sustainable drill rigs, rock excavation and construction equipment, and tools. We also provide worldclass service and solutions for automation and interoperability.

Sales in

150

Countries

Revenues

38,285

We have a strong operating model characterized by focus on innovation, a strong and resilient services business, and an agile and decentralized operational setup. Our world is changing and our ambition is to be the leader in automation, interoperability and fossil-free operations.

SEK million

Operating margin

19.3%

We are a 145-year old start-up ? a dynamic new company, but with proven expertise and

13,847

experience. Epiroc means at or on rock, com-

employees, Dec. 31

ing from Greek and Latin roots. It reflects our This is Epiroc ? Aftermarket and Equipment

core business, our proximity to customers

Equipment and aftermarket

and the strength of our partnerships.

? share of revenues

37% 63%

Aftermarket E quipment

Epiroc was part of the Atlas Copco Group, founded in 1873, until June 18, 2018, when Epiroc was distributed to the shareholders of Atlas Copco and listed on Nasdaq Stockholm.

Epiroc Annual and Sustainability Report 2018

1

Innovation, commitment and collaboration

Our core values build the competitive advantages that help us maintain our leadership position, even in a changing environment.

Innovation is a significant attribute of Epiroc. We are

creative and entrepreneurial and constantly seek to improve in everything we do. Our innovative spirit is part of who we are and a key method to achieve our goals.

We are committed to meeting and exceeding our

customers' expectations on partnership and productivity. We always work hard to understand customers' needs and to earn their trust through industry-leading quality and reliability.

We believe in close collaboration with customers,

business partners, colleagues and other stakeholders. Our working culture is service minded and action oriented, with a strong devotion to customers.

As a leading supplier of rock drilling and excavation equipment with a long history, we have gained considerable experience and knowledge of the applications and techniques that are practiced across the globe.

We back up our equipment sales with a broad range of services and consumables that deliver safety and high productivity. We focus on supply of spare parts and consumables, professional service, support solutions and training.

Our strategic priorities for sustainable profitable growth and responsible business are implemented in the daily operations. It is important for us to safeguard our reputation as a reliable and trustworthy company.

United in Performance Inspired by Innovation

With Epiroc as a dedicated partner, our customers gain a passionate team that supports them in a sustainable, efficient and safe way. No challenge is too big for our curiosity and our persistence to increase our customers' productivity. We can lift our customers' competitive advantage with our continuous drive to make good things better, from high-performance equipment and service excellence to building the mine of tomorrow. We deliver the performance our customers need to maximize their productivity every day -- as well as the technology they need to compete in the future.

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