Epiroc AB (publ) (EPIA) Earnings Call Transcript & Summary

A very warm welcome to the Epiroc Capital Markets Day 2021. My name is Karin Larsson, and I'm Head of IR here at Epiroc. We host this Capital Markets Day virtually this year again, and we do it because we put safety first. The pandemic is not over, and we want all of you to remain safe. Today, we would like to show you that Epiroc is a vital part of a sustainable society and that our innovations are needed if we are going to be successful with our joint global ambition to reduce carbon emissions, while also providing for a growing population. As you know, our customers are mainly found within Mining and Infrastructure. And these industries serve an important purpose. They have built societies for centuries. Our role is to ensure that our customers can operate in the safest, most sustainable and efficient way possible. So how do we do this? Well, we believe in innovation. And at the same time, we are also humbled before the fact that we are a small player in a big world, and that we cannot do everything by ourselves. We, therefore, place great emphasis on collaboration, both internally and externally. We will share several examples and proof points today on how we drive the productivity and sustainability transformation in our industry. The agenda is built on our strategy, and you will get the pleasure to meet the majority of our management team, including all 5 division presidents. We will present the speakers as they appear, but we will also have a short break in the middle of the program. And once the presentations are done, we will end with a Q&A session over phone. You will see the dial-ins for the Q&A popping up on the screen once it's time. The first speaker today is our CEO, Helena Hedblom. With more than 20 years in the company, mainly within R&D, she's a true role model when it comes to our unique and strong corporate culture. So with this, Helena, please introduce our audience to our strong foundation, our foundation for success.

Great. Thank you, Karin, and also thank you all for taking the time to join us today. So I have the pleasure to open up the presentation today with our foundation, our foundation for success. And our foundation is, in short, defined by a strong company culture and a sustainable mindset. So why is corporate culture so important? Well, first of all, it safeguards that we are the employer of choice and that we can attract the best workforce, but it also contributes to a high-performing organization. And our governance model has made us to a fast and efficient company. And actually, I would say that we are a 148-year-old start-up. So what do I mean with this? Well, we have a strong heritage with proven expertise since 1873, while also having the benefit of being a young and a fast company. We have more than 15,000 passionate employees in a decentralized organization, which enables quick decision-making. Decentralization is part of our business model and culture since decade. And it means that our colleagues are used to take responsibility and take decisions when needed. It also means that many of our colleagues get responsibility already at an early stage in their career, including responsibility for revenues and profit. And this, we are convinced, makes our people grow, be happy and to remain loyal to the company. We have customers in more than 150 countries, and 85% of our revenues are direct. This is a strength in many ways. First, because we are close to our customers, which make us better in meeting their demands. Local presence also means that we are quick in supporting customers for reliable production. And it also means that we get customer feedback directly from the customers which help us to innovate the best solutions. We have a low customer concentration with our 10 largest customers representing only 20% of our revenues. About 74% of our employees work within the aftermarket. And of these, more than 6,100 are service technicians. And this has proven to be a strength in times of global travel restrictions. As we have seen, locally based, many times that -- we are based many times at the customer's site, access has not really been a problem for us. Our innovation focus and global aftermarket have contributed to make us a market leader in our niches. As Karin mentioned initially, we drive the productivity and sustainability transformation in our industry. And here, automation is playing an important role. So by providing automation and even full autonomous solutions, we create many benefits for our customers. It increases safety. And safety is, as you know, a main priority for our customers, working conditions improve. To work in a control room is safer and more comfortable than staying in the machine. And availability and utilization rates of equipment also improved and makes production more efficient throughout the value chain, which means more revenues and more profits for our customers. And to continue, do you know that the mining industry contribute to as much as 4% to 7% of the global CO2 emissions and that infrastructure industry contributes to at least as much. And this is, of course, a problem that needs to be solved. So if we look to the right on this slide and assume that our underground example customer has access to green electricity, then the majority of its emissions derived from the use of products, mainly within load and haul. And here, we can make a positive impact. The use of our equipment is the main contributor to CO2 emissions in our value chain, in fact, as much as 83%. We have been working with reducing the dependency of diesel already for decades. Our strong heritage underground is partly the reason for this. Fumes have never been something positive. Electric cables, increasingly efficient engines, BU diesel engines, lower weight vehicles and more has always been a focus, and we have high ambition. In 2016, we launched our first-generation battery vehicles. And today, we have a market-leading position and the broadest offering in the market. So how do we drive the transformation then? Well, we do it by working smart and agile by investing more than ever in R&D, close collaboration with customers and partners, local presence and by creating a true innovation culture. So let me elaborate a bit on the innovation culture as this is an important topic for us. So we foster creative people that dare to think new, people that are open-minded or better in developing new ideas. In recent years, we have recruited a large number of colleagues with different competencies than before. Automation and software engineers, data scientists, for example, but also technicians in the field that can support our new solutions. Our model is also such that we want people to have the ambition to grow to the next level, to take on larger responsibility, like I mentioned earlier. And in a decentralized and global organization, this is vital. And finally, we want to take advantage of the full workforce. And I'm convinced that diverse teams are stronger teams and deliver better results. And I am very proud of the wide range of nationalities in the group. But we can improve, for example, on gender diversity, where we have many initiatives ongoing. So before moving on to the next slide, I would like to mention our core values. Innovation, commitment and collaboration. And if I may, I would like to focus a bit on collaboration. So to remain the leader, we need to, beyond innovating ourselves, also collaborate with the best to leverage knowledge. So let me share a few examples. First, the Avatel, which is the first mechanized development charging system in the world. It has been created in collaboration with Orica, and it is a true game changer for increased safety. Secondly, we work with Ivanplats in South Africa to develop their greenfield mine in the most sustainable and productive manner possible by using battery electric vehicles. And thirdly, we convert diesel equipment to battery electric with, among others, our customer Evolution Mining. And this speeds up the shift to an emission-free future. And you will hear more about conversions later today from Jess. As sustainability is such an important part of our strong foundation, we also set targets to reach our goals. In a result-driven organization, this is important. What gets measured also gets done. So we have 4 focus areas in sustainability, and we follow up on our actions and the results regularly. From 2021, sustainability metrics are part of the variable compensation for group management and other key managers such as general managers in the group. And the targets are applied and measured depending on roles and areas of responsibility. In 2020, we set ambitious 2030 sustainability goals for people and for planet. And they reflect our commitment to help accelerate the implementation of Agenda 2030 and the Paris Agreement. More on that on the next slide. But before that, I would also like to highlight our code of conduct, which describes who we are as a company and what we stand for. It also outlines the appropriate business behavior and how we all must act. We also have a dedicated code for our business partners. On this slide, you can see all our 2030 sustainability goals. I will not go through all of them as I will instead share some examples of what we do and some of our achievements on the next slide. But still, I would recommend you to take a closer look at them when you have time as our goals are among the most ambitious ones in our industry. But starting with some achievements. When it comes to people, lost time injury frequency rate is down 17% year-on-year, and reasons for this are increased safety awareness and better design of products. For example, we launched the SafeStart program in 2019. And to date, about half our employees are trained, and the program will be finished in 2023. Our Live Work Elimination program is also running, which you will hear more about later. We also want to double the number of women in operational roles by 2030, and we are moving in the right direction even if it's slowly. In 2021, we have added more than 350 women to Epiroc, which means that about 1/3 of new hires are women. For example, we have a 9-week rotation program in our Garland factory, which has led to twice as many women in production. And we have also launched a successful service academy for women in India. But diversity is not all about women, it is so much more. And therefore, we have a Diversity and Inclusion Board that helps drive diversity and inclusion across the group. For our code of conduct, we have launched a mandatory e-learning. All managers are required to do the training and signed commitment to the code. And next year, our goal is to have all employees to do the training. So let me also share some achievements for the planet part. And starting with the good news that our ambitious climate goals have been validated as science based. And this means that our goals are aligned to keep global warming at a maximum 1.5 degrees Celsius, consistent with the Paris Climate Agreement as well as the Glasgow Climate Pact. So we commit to half absolute CO2 emissions in our own operations, so-called Scope 1 and Scope 2 by 2030. However, more than 99% of our total CO2 emissions are other indirect emissions, of which about 83% derived from the use of the product. So therefore, we have also committed to half absolute CO2 emissions from the use of sole products, so-called Scope 3, also this by 2030. And this is industry-leading and well above the SBTi's minimum requirements. If we then move on to our focus on attractive niches. And to us, the attractive niches are those niches within mining and infrastructure in which customers, regardless of where they are in the world, appreciate and seek best-in-class solutions, where performance and quality makes a difference. Often, our equipment -- the equipment we provide is mission-critical for our customers. So what does it mean for us? Well, it means that our customers are willing to pay for innovation, for technology, for availability and also increased sustainability. So in the end, our customers seek superior performance. And if we can help them being successful, we will also be successful. This is a quite detailed slide made to introduce Epiroc to those of you that are in the process of getting to know us. I will not go through all details today. But what I would like to highlight is that 36% of our orders are equipment orders. So we offer best-in-class equipment such as drill rigs, loaders and trucks, and they can be used both underground and on surface. And we have customers in both mining and infrastructure. And the split of underground surface is about 50-50, and we're looking at our customer split, 77% are within mining. So to us, providing reliable and local aftermarket is equally important as to offer the best equipment. And since many decades already, we have offered solutions to keep the equipment as efficient and productive as possible. And our aftermarket represents 2/3 of our revenue today. And if we dig a bit deeper into our customer exposure, you will find that infrastructure customers represents almost 1/4 of our orders, the rest, which is mainly mining exposure, can be split into different minerals with gold, copper, nickel and iron being the most important ones. And key is, however, that we cater to customers in hard rock niches. To the right, you can see the current Epiroc mineral prices weighted at an indexed level. And this is something that we monitor on a monthly basis. And what this graph illustrates is that we are at a historically high and promising levels. There is, of course, a correlation between this development and the production of minerals. And the production level and demand among customers is high. In Q3, we had record orders received. Both equipment and our aftermarket is performing well. In total, we achieved 24% organic order growth. So despite global supply chain challenges, we also managed to increase both revenues and operating profit and the latter because of hard work in the organization to find solutions. And this includes finding new ways of sourcing, alternative suppliers, remanufacture, redefining components and adjusting pricing. So the supply chain challenges in combination with a larger portion of multiyear orders as well as us ramping up after a period of strong order growth has led to longer lead times for equipment compared to the normal average of 2 to 3 quarters. But that said, to keep existing fleet up running is really the main priority for our customers. And therefore, we have prioritized our aftermarket like we always do. And this, if anything, has led to stronger customer relationships. We have also executed well on acquisitions. And many of the companies that we have acquired will enable a quicker and smoother adoption of automation, digitalization and electrification for our customers. And looking forward, we expect that demand, both for equipment and aftermarket, will remain at a high level in the near term. In the quarterly call, I also emphasized that this is a comment for the underlying demand and that large orders always can have an impact on the actual order levels as large orders are lumpy in nature. So now I think it's time to speak about long term instead. And who would be better suited than Martin Hjerpe. Martin is our Senior Vice President, M&A and Strategy and a dedicated and appreciated colleague here at Epiroc. He has a strong passion for diving deep into numbers, strategies and, not the least, the ocean. He is a great diver. So please, Martin.

Thank you, Helena, for that kind introduction. I would like to go into the attractive market dynamics that we are exposed to. At the core, there's a structural underlying growth in demand for mining and construction in the world. At the same time, our customers are exposed to increasing challenges to meet that demand. We also see a strong customer focus on safety and sustainability. And today, you will have the pleasure to hear about many of our innovations. Over half of the world's population live in urban areas, and that will increase to over 2/3 by 2050. And urbanization does not only bring economic growth and increased demand for minerals but also new construction of housing, well-connected transport systems such as tunnels, bridges and other infrastructure. And to those of you who have followed Epiroc during the years, this slide has no new information. It is, however, important information worth repeating. Our customers are facing several challenges, which are supporting demand. A mine is a complex environment, and as a consequence, the actual utilization of the equipment is often low. Customers are, therefore, constantly looking for new solutions that can increase productivity and production. Approximately 25% of the global copper production today is done underground, and the trend towards underground mining continues. By 2040, some 35% of the copper mining operations can be done underground. And to make this even more challenging, the underground mines also go deeper, about 30 meters deeper every year, which means that the mining operations, again, becomes increasingly complex. Finally, the depletion of ore grades means that more rock needs to be drilled, blasted and excavated to get the same amount of minerals. This is true across minerals as the richest and most economical deposits are being depleted over time. And within mining, our largest exposure, as mentioned before, is the copper and gold. The strong demand and growth in both these metals support our own growth. Copper is key to the decarbonization of the economy. And even with increasing recycling, the underlying growth will be strong. We, therefore, also see high activity in exploration for copper at present. The outlook for gold is also strong. There's a meaningful ore grade decline in gold and of course, an almost insatiable demand. With current gold prices, the activity for both exploration and mining is indeed high. Finally, safety and sustainability continues to be of utmost importance for us and our customers. We normally say that our innovation agenda goes hand-in-hand with our customers' sustainability agenda, and this is really true. Starting with safety, which is the #1 priority in mining and construction since decades already. This focus has made mining a much safer industry than before, but there's still much more to do. And neither we nor the industry can rest until every worker comes home safe and sound after every shift. Also, our customers are increasingly focused on reducing their greenhouse gas emissions. Some customers have had this agenda for many years, but I would say that the ambition levels have increased and the sustainability is now a topic in every conversation with customers today. And of course, we are more than happy to provide solutions to our customers to help them with this transformation in sustainability. Another relevant environmental topic for us is water scarcity. A lot of the world's mines are situated in water-stressed areas. And even if our equipment isn't the largest users of water in the mine, we still constantly innovate to make up -- to help in our part with equipment and solutions that require less water in the production. So when we then conclude this session of attractive market dynamics, what does it all mean when it comes to our financial goals? Combining organic growth with selective acquisitions, we have a goal to grow by 8% annually over a cycle. Since 2015, our growth has been about 5% per year, mostly organically and less than 1% coming from acquisitions. In the last year, we've accelerated the inorganic growth and add companies with an annualized revenue equivalent to approximately 3%. We thus stick confidently to our target of growing with 8% over the cycle, combining organic growth with selective acquisitions, and I will speak more about those later today. When it comes to profitability, our target is to have an industry-best operating margin with strong resilience over the cycle. So far, we have managed well. It is, however, not very easy. It's hard work and commitment from the whole organization that's behind this development. Key is, of course, to offer the best possible solutions to our customers, which then brings me to the topic of innovation. You've already [Technical Difficulty] he's also a great chef and an avid cyclist. So please, Jonas.

So thank you, Martin, for your kind introduction. It's always a pleasure to work with you. So as Martin explained, we are expanding our offering along the value chain, but we are also continuously developing our existing solutions and adding new products and features. Actually, Epiroc are investing more than ever in R&D. Innovation is key to our success. To stay in a leading position, we need to sustain investments in R&D, even in tough times like in this pandemic. However, maybe at first, it does not look much, but considering that aftermarket represents such a large portion of our revenues and the majority of the spending goes into our core components, equipment and solutions for automation, digitalization and electrification. It is actually a substantial level of spending. We have R&D engineers in many parts of the world, which help us to develop close to our customers. The major R&D hubs are in Sweden, U.S., South Africa and India. In addition to our 1,400 engineers, we have developed partnerships and ecosystems with customers, suppliers and academia. The use of existing solutions and technology is a good way to reduce time to revenue. In R&D, we use agile methodology to embrace innovation and creativity. To reduce time to revenue, we are using the latest digital tools like virtual testing, simulation and rapid prototyping. A recent development is a safety feature that we developed together with a Tier 1 miner to use sensors to take their technicians away from the dangerous areas of the machine. The solution was developed in only 7 weeks, which is really quick, this thanks to agile methods and collaboration. We really collaborate across divisional to develop value, creating solutions for our customers based on the interaction we have with them. And as mentioned, our customers need safe and sustainable solutions. Automation, digitalization and electrification are focus areas for them as well. Today, I will cover all 3 of these areas. Some collaboration I would like to mention are these. We are leading an EU-sponsored product called NEXGEN SIMS. In this, we collaborate with customers, universities, other companies with the ambition to develop autonomous carbon-neutral mining processes. This includes the use of battery electric mining equipment, full utilization of 5G for optimal connectivity and positioning, autonomous material handling, artificial intelligence and more. The project is also going beyond technological solutions. It also focused on the mine worker of the future, putting people in the center. SUM is another project led by LKAB. Our goal is to develop carbon dioxide-free, digitalize and autonomous sustainable mining at a great depth. To help our customers embrace all exciting solutions, we use our strong footprint. We have local competence in key technologies and regional application center in all parts of the world. What this means in reality is that we can support customers wherever they are to deploy automation and digitalization solutions. To be close to customers, makes it possible also in the pandemic to deploy new advanced solutions, even if cross-border traveling was closed. We also have control towers across the world to demonstrate the capabilities of our solutions, allow customers to test the solutions and serve as inspiration for common innovation. To improve our ability to both test and demonstrate the results of our R&D, we have built a test mine in virtual reality that customers can visit. So let me share a marketing video on how Epiroc technology can support to improve our customers' operations. [Presentation]

So let's take a deep dive into digitalization. Why is this critical for customers? First, to increase safety. Digitalization can help customers to have a full control of the equipment fleet, assets and people. A great example is Mobilaris, which provides transparency of status and activity of all assets in the work site. With this solution, you not only find your way in the mine, know where your things are, but also reduce evaluation time in case of an accident down to half. Today, about 40 underground sites use Mobilaris. So the system is well proven in production. Another example is Mining Tag that we recently acquired. It is a similar solution, but with a slightly different value proposition, which makes it possible for us to help even more customers to take this step. Another goal is to increase productivity. Our telematics system, Certiq, provides detailed information about machines in real time, which enables fast and correct decision making. For example, it reduces unnecessary downtime and support a good maintenance planning. This, in combination with higher utilization rate, means higher productivity. Customer testimony from the construction company, EPC Group, operating 40 surface crawlers. And by the use of MyEpiroc, improved utilization and uptime by digitizing daily machine inspections. Another great example that was mentioned also in the video is MineRP. We acquired the company this year. And by having them in the team, we provide a leading software integration platform that integrates all mining data such as machine data and ERP systems. This creates fantastic opportunities to improve productivity, efficiency and latest environmental impact in real time. I also want to mention Kinetic Logging, another acquisition that we have made. The flagship product, OreSight, is a highly advanced solution that provides information about the borehole and the ore grade. This information allows our customers to make better decisions on production and exploration. José will tell you more on Kinetic later on. So let's move on to automation, why this extreme focus on automation from our customers. First and foremost, it's to protect people and move them away from hazards. Our machines are often working in dangerous environments, to offer people to control or monitor our equipment remotely is a huge benefit from a safety point of view. Then it's also about increasing productivity and reduce operational costs. Automation enables more consistency in operations and high utilization rates. With the help of automation, the equipment produced over shift changes and during breaks. An example is our electric large surface drill, Pit Viper351, that runs in our Boliden mine, Aitik in northern part of Sweden. It achieved some 30% higher productivity working autonomously compared to manned equipment. Automation also means lower operating cost for the customers, lower fuel consumption, for example. But also the cost that derived from operator errors are eliminated or at least reduced. When we successfully help our customer to increase productivity and lower their cost, it leads to higher revenues and profit for them on top of the safety benefit. And to us, it means higher service penetration and new revenue streams. The main revenues come from added solutions such as hardware, software and installations, but we also get subscription fees. The illustration to the right aims to show that automation is the customer journey, an exciting one. Epiroc provides market-leading solutions at all levels. We aim to help customers who take the next step regardless where they are today and lead them towards more and more sophisticated solutions. At the higher end, we have commercially proven solutions for mixed fleet automation, OEM-agnostic solutions. No doubt, we see increasing customer demand and uptake. Both Sami and José will tell you more about mixed fleet solutions and status on this within shortly. If I then move on to the electrification. So why do customers want to go electric with Epiroc? Well, with our solutions, people get a better work environment with less emissions, noise and heat. The strongest argument today is lowering the CO2 emissions. Our equipment helps customer to meet their ambitious targets. Of course, battery electric vehicles reduce emissions. But maybe you recall Helena's example earlier today, it stated that ventilation represents 35% of CO2 emissions in an underground mine. So if less ventilation is needed, emissions related to running the ventilation goes down too. You would be surprised to hear how much of a mine's OpEx that is related to ventilation cost. One example by using electric equipment, the ventilation capacity can be lowered. This, in turn, saves energy and money already from the first battery machine. A simple calculation suggests that the battery machine can cut ventilation requirement with 50%, everything else equal. As mine continuously expand, it is evidently so that at some point in time, new ventilation shafts are needed. With battery electric vehicles, these investments are reduced to a large degree. For us, electrification comes with benefits as well. We create new revenue streams, and it also means higher service penetration. Jess will tell you more on this later today. But first, we will hear Sami from the underground division tell us more about the solutions available for underground applications. Sami and I have been working closely together for more than 10 years, and I really appreciate his great drive, high-energy, besides his deep knowledge of our industry.

Thank you, Jonas, for the kind presentation. So yes, my name is Sami Niiranen and I've been with the group since 2004. I'm very proud to provide you with some further innovation highlights and our progress within automation, electrification and digitalization. Starting with innovations underground. Last year at the Capital Markets Day, we briefly gave you some snapshots of what was to come. And well, now most of them are reality. The Boomer M20, for example, it's the world's first hostless boom design, which provides maximized productivity and machine utilization. Also, it improves safety. Another innovation I would like to highlight is the Avatel, which Helena briefly mentioned as well. It's a mechanized development charging unit. The key benefit is to remove people from the dangerous areas. Typically, explosive charging is done manually, and Avatel makes it possible to do it from a safe cabin. It's a game changer in the industry. Here, we collaborate with Orica, who is a global leader in charging systems for blasting. I would like to emphasize though that not all innovations have to be game changers to be smart and well appreciated by our customers. Continuous improvement is also relevant to stay in the lead. Let's take the COP MD20 rock drill as one example, it's a robust and efficient rock drill with a drastically improved service interval, providing a very competitive total cost of ownership when used together with our drill rigs and rock drilling tools. In underground automation, we have strengthened our position, and I would argue that we are a market leader as we speak. This year, we have won several large automation orders. For example, one of the largest iron ore producers in the world, LKAB in Sweden, awarded us a major order for drilling equipment that includes some of our most advanced solutions. LKAB is also running our 18-tonne automated loaders without any operators on board in Kiruna, Sweden. Then the Mexican contractor, CoMinVi, and Dazhong Mining in China, have both placed large orders for equipment with telematics and automation features. Then we have also received another very exciting order with a lot of automation features in quarter 3, quarter 4 this year. It's for a major greenfield gold project, but we are not allowed to mention the customer at this stage. But actually, it's not all about mining, we also have our solutions deployed in infrastructure projects. For example, in the creation of the new highway around Stockholm, one of the most advanced infrastructure projects in Sweden ever done, we have had close to 20 highly automated drill rigs running in this project. So the demand for automation is high, and the number of machines and projects is increasing. As an example, the number of automated production drill rigs is up 36% year-on-year. And the drill rigs with full automation capability is up 12%. Then maybe you have heard about our collaboration with Newcrest in Australia with whom we developed the first autonomous mixed fleet underground in the world. Let me show you an update on this project. [Presentation]

Okay. And now a few words on digitalization. For our automation and digitalization solutions, we talk about 6th Sense. It's our way to optimize the customers' value chain through automation, system integration and information management. And this is developing well. Machines delivered with connectivity through our Certiq solution are up 26% year-on-year, equaling up to 1,700 installations today. Next, I have a couple of very interesting highlights on our latest 6th Sense development. Firstly, we have implemented the Rapid Mine Development project in Chile. It's a method for drilling higher-quality tunnels faster. What previously depended largely on the skill of the operators is now computer-supported, ensuring a standardized and optimized drilling quality. Number 2 is our Collision Avoidance System, which, in sort, is a system which detect objects, evaluate the collision risk and take proper action to avoid collision. It's a groundbreaking solution to improve safety. And the third one is our Dynamic Tunneling Package, in which the drill rig sets its own drilling plans directly at the face of the tunnel, meaning that no manual work is needed. Jonas mentioned our acquisitions of Mobilaris and Mining Tag earlier. They provide solutions for situational awareness, tracking of people and assets, which is high in demand from customers in underground applications. Next, I would like to share some insights on electrification. Electrification is nothing new to us, but it's definitely the future. The drilling with using electric cable has been reality for decades. In 2016, we launched our first battery electric equipment. Two years after, in 2018, we started to offer our current battery technology. And in 2020, we launched batteries as a service. The same year, we had expanded our footprint by having customers on all continents for our battery machines. When it comes to underground, our goal is to be a full range electrification partner. We focus on battery solutions and have also acquired businesses that supports our ambition to be an enabler for our customers to go electric. We also keep a very close eye on other solutions, such as trolley systems and fuel cells and take necessary steps when technology matures. So how far have we come today? We have the largest battery electric product portfolio in the market, high-performance battery technology and a market-leading position with a solid footprint in all major markets. Our battery modules are delivered by Northvolt, and our collaboration with them includes full circularity. We have also successfully launched the batteries as a service and offer battery conversions. We see a strong demand in this, and Jess will tell you more later. And where are we heading then? We want to be the true enabler within electrification as mentioned, and drive the change to emission-free operations. As you know, our goal is to have a full range of emission-free underground equipment by 2025, and this will help us to reach our goal to halve CO2 emissions from machines sold in 2030. Our customers are embracing the battery technology at an increasing speed. For instance, we won a major SEK 90 million greenfield order from Ivanhoe Mines to their Ivanplats mine in South Africa for battery electric mining equipment. We have also successfully developed the first battery conversions. And one customer that we have collaborated with on this is Evolution Mining in Canada. We started the development with the conversion kits for the ST1030, which is our most sold loader. Up next in the development plans is our 33-tonne truck and 14-tonne loader. And we're also collaborating with the Swedish mining company, Boliden, and with ABB to develop an electric trolley truck system. The project is expected to reduce CO2 emissions by approximately 3,000 tonnes per year, the concept builds on Epiroc's proven MT42 battery which will be connected to a contract power line. As Jonas mentioned earlier, we also work in other projects such as the NEXGEN SIMS. We have also made a couple of acquisitions related to electrification. FVT Research, a specialist in battery conversions, and Meglab that provides electric infrastructure. So now it's time for me to wrap up and introduce the next speaker. You will soon meet with Jess, our passionate President for the Parts & Services Division, who will present the Service Division next. But before moving -- before I hand over, I would like to show a short customer video on electrification. Thank you very much. [Presentation]

Thank you, Sami, for your presentation and ola to all of you. I'm Jess, President of the Parts and Services division, but I also spend a lot of time or a long time in the surface division. So because of some technical difficulties, it's my pleasure to present our achievements on the Surface division to you today. So first, let's deep dive into some world-class innovation. Let's start with the automatic bit changer, which we just presented at MINExpo in September. This is a groundbreaking innovation and it's a collaboration between Epiroc's customers, our R&D groups and our service teams. It's about live works elimination, which is a process of identifying live work test and eliminating their risk by utilizing technology. Our live work elimination program contributes to our efforts to reach our goal of no work-related injuries. So let me show you a video on this exciting new product. [Presentation]

The automatic bit changer enables hands-free bit changes on both our Pit Viper 270 and Pit Viper 290 Series. And speaking about Pit Viper drills, our legacy and surface drilling. There, we also have some news. The Pit Viper 291, which is a powerful, large diameter, single pass drill rig with full automation features was launched this fall, again, at MinExpo in September. The large diameter, single pass drill delivers productivity, application flexibility and enhanced operator safety. With Epiroc's rig control system, it can be configured with scalable automation features, including fully autonomous drilling. Another surface innovation is the SmartROC D65 with extra long feed. It's perfect for quarries and selective mining and it offers automated drilling and broad handling while offering the customers up to 20% to 25% increased productivity at 20% less fuel consumption. In fact, it is so good that I'd like to show a short video on this one, too. Our friends at Kaunis Iron in Sweden have some insights to share. [Presentation]

José, go ahead.

All right. Hola to everyone. We have problems with the connectivity. And -- but now it seems like I'm live. And I appreciate very much this collaboration from, Jess, just stepping in and covering the -- just this virtual problem. That is always a challenge. And I'd love to have that. [Technical Difficulty]

José, sorry. So just for your information, came to the automation highlights on the surface, and we just saw the video on the D65. So you can start about speaking out on the Slide 56, I think it is.

With the graph?

Exactly. Automation highlights and market leadership.

Okay. You can tell me when.

Perfect. Yes, you can start now. We are live. So yes, please go ahead. Thank you.

All right, thank you. All right. Okay. So then let's move to some automation highlights. We have a market-leading position in automation. I mean we -- our fully automated [Audio Gap] and remote control of the fleet has been growing more than 50% per year between 2017 and 2020. And if anything, I see customers more eager to go for automation [Audio Gap] we have won several large orders that includes advanced automation this year. For instance, we have won a gold [indiscernible] project with [indiscernible] Canada and also Rko Tinto has [indiscernible] Of course, we have many more in our books, but we don't always send a press release on them. In [ surface mining automation ], I mean we have a [indiscernible] and strong offering, we collaborate with customers [ in all continents ]. We are also going to commission the first fully automated [indiscernible] in 1 of the world's largest untapped single porphyry copper deposit that has now served [1.2 billion] [indiscernible] to. By the way, this customer [indiscernible] important drilling fleet in a -- 4,500 meters of sea level, comfortable room at Santiago Center Head Office about the 700 [ meters ] altitude fully autonomous [indiscernible]. Next is about [Indiscernible] highlights. And our collaboration with [indiscernible] this from last year, Epiroc and [indiscernible] mining has post a safe [indiscernible] fleet. And with an ability to expand to other mining vehicles of any type and [indiscernible]. The capability to integrate with existing [indiscernible] system for the [indiscernible] the global announcement of the [indiscernible], world's largest autonomous mix. [Indiscernible] . However, [indiscernible] in South [indiscernible] [Presentation]

Positive impacts. If we take 1 of our diesel-driven Pit Viper drills as an example, by adding more and more levels of automation, the savings are increasing while the environmental impact is reduced. This case illustrated in the graph shows that even small add-ons in the form of automation make a difference. If you go fully autonomous, you can reduce the cost per meter drilled by up to 40% and the CO2 emissions by up to 30%. If I then spend a few minutes on digitalization. We've increased the surface machines delivered with connectivity by 20% year-over-year to 3,500 units, and that is quite a number. We have also done some interesting acquisitions. Such as our recent acquisition of 3D-P that offers wireless connectivity solutions for the surface mining companies. It's a perfect example of an enabling acquisition, which helps the customer move into digital and automation. We've also acquired Kinetic Logging Services. This is 1 fascinating acquisition that can help customers to make the whole drill-to-mill process more efficient, by providing real-time borehole assay data and grade information, the customers can design the mine better and in short, drill and blast less rock. As they have better insights on the ore grades and their exact locations, they put their efforts in removing that specific rock and also reduce the level of waste rock. This in turn means less rock to load, haul, crush and process, and it can mean a lot of savings for the customers and make the whole mining process more efficient and sustainable. And then the last slide for me this time is electrification highlights. Already in 1990, we offered surface drill rigs with electric cable and today, all production hole sizes can be drilled by either a diesel or an electric drill. The reason why diesel is so popular is that cables come with challenges. It requires electrical infrastructure as well as well-working logistics to move the cables around the mine. Something that is improving over time, but there's still a way to go. To avoid the constraints of handling cables for long distances, while tramming or in other words, moving the machine from 1 place to another, we've developed support options such as our motivator. It pushes the drill rig into position without risking damaging the cable. By 2030, we will offer a full range of emission-free surface equipment. We innovate and examine all options to reduce emissions for our customers because this is what we strive to achieve. We, therefore, look into many different types of solutions. Onwards, I can assure you we will continue to see amazing things from us in the Service division. For now, thank you for your attention. And Karin, will you please tell us what more to expect.

Yes. Well, thank you both. Jess and Jose online. So sorry that we had Jose breaking up, but I'm more happy -- more than happy to share that we are actually market-leading in automation, and I will be more than happy to tell you all about these things in investor meetings onwards as well. But now we are at the break. So it's 5 past 4 on my watch, and I will give you 10 minutes all of you. So quarter past, we will meet again, and then you have had a short leg stretcher and maybe potentially some coffee. And then you will see, Jess, again, presenting aftermarket. So see you in 10 minutes. Thank you. [Break]

So I hope you all had a good break. And sorry for the technical problems we had. But I think also, we demonstrated the team spirit that we have, we can step in and help out. Now we'll move over to the aftermarket, which is key to our success. And this is where we can make a difference and prove our technical solutions, 24/7 at our customers' site. So we have a broad aftermarket offering, ranging from agreements, parts, midlife services, tools and attachments. And when we speak about aftermarket, we combine the revenue streams from both service and tools and attachments. And the aftermarket serves us well. Historically, we have had a strong organic growth in the aftermarket and the exception is found in 2020 when COVID-related restrictions made many mines stop or reduce their production. Globally, the output in 2020 was estimated to be impacted by 5% lower than it should have been. However, in the aftermarket, we noted a quick recovery supported by our local presence. And as aftermarket is so important to us, I have asked Jess, President for the Parts and Service division to tell us more about what we do within service to make our customer offer even stronger. I had known Jess for 14 years, and he has been vital in broadening our offering and developing the partner service business. He has a good eye to new trends and is quick to take on new opportunities. In short, he keeps developing our aftermarket. So please, Jess.

Great. Thank you, Helena. So let's start with the why. It's all about customer centricity when we want to create value for our customers. Example is good service means improve safety for our customers. It also means higher productivity. It is natural in harsh environments that the machine loses productivity and availability when it gets older and good service and maintenance can mitigate this. Many times, our equipment is absolutely mission-critical to the customer and needs to be reliable. So good service and maintenance also means peace of mind. Good service also means lower total cost of ownership and a higher output. How? Well. A well-maintained machine is more efficient and has fewer costly breakdowns. Better performance and higher availability also means that our customers can produce more and get more revenues and profits. And finally, service has a circular approach to it. It's good for the environment to make existing equipment last longer. We also have solutions that are, without a doubt, circular. For example, our midlife services, remanufacturing and battery as a service. To us at Epiroc, service means stronger customer relationships, recurring revenues and potential to create new revenue streams. We have a really broad offering, as Helena said. But today, I'll focus just on the ones that are marked on this slide. So if we first start by taking a quick look at the equipment life cycle. The average fleet age is about 7.8 years and more than 50% of our fleet was commissioned before 2015. Underground, we normally say that equipment lasts 4 to 7 years and on the surface around 12 years. Of course, this varies a lot depending on where and how the equipment is used and also how well maintained it is. Our oldest Pit Viper is older than 20 years and still runs with good capacity. So the actual average age may be taken with a pinch of salt, but the machines are getting older for sure and older machines need more maintenance. When we sell equipment, we have some service revenues coming in right at the start, for example, connectivity already discussed by Sami and Jose and the required hardware, software, training and custom engineered solutions and electrical infrastructure. Then the machine is good to go and during its life, it will require parts, labor hours, troubleshooting, audits and batteries as a service. The older the machine is, the more maintenance it needs. So when needed, we offer midlife services, remand solutions. And as of this year, battery conversions. Okay. This next slide is 1 of my favorites. It's all about presence and that it is a competitive advantage. We said it before and now in times of COVID, local presence has really proved to be a success factor. With the coverage of our service network and local presence, we are always close to the customer. And also in times of these restrictions by being close to the customer, we make them more productive. In the Parts and Services division, we have 7,470 employees covering more than 300 customer sites globally. So looking into some figures. Service represents 43% of revenues. And looking back, we've been growing well. Onwards, I'm not going to give you an exact figure, but I can assure you that we are always looking for other options to continue to grow this business. We work hard on maximizing the full potential in service. We use connectivity to enable real-time data of activity levels, emissions and the need for service. Knowledge is power to make those right decisions. We also take advantage of the increasing technological height of our capital equipment. The more advanced the equipment, the more likely it is that we get a service agreement. And we offer tailored service products to the different customer segments. Or in other words, we provide customers with a better value proposition, more matched to their individual needs. By working with a systematic customer-by-customer approach, we've mapped opportunities and we have set strategies and actions to grab those opportunities. Also, to develop service products helps us expand the scope and size of our revenues. And as I said before, presence is, of course, vital and it is not only about having feet on the ground, but it's about having the right feet on the ground. And finally, we increased service excellence and strengthen the aftermarket footprint continuously. I will cover most of these topics on the following slides. In order to be successful and to be the true partner of choice for our customers, we need competent and capable service technicians with diverse competencies. Therefore, we focus a lot on training, lots of training. Our service technicians need to do a minimum of 40 hours of training per year and in most years, 80 hours or more. We focus on important service areas such as efficiency, standardization, sales, quality, customer satisfaction and loyalty. We also certify our technicians. And today, 75% of all of our technicians have our Level 1 certificate, which includes an in-depth understanding of hydraulics, pneumatics and electrical circuits. Level 2 which is more technical and software-driven is now held by around 40% of our technicians. More technicians are trained every year as you can see. To educate existing employees is good, but we also need to make sure that we have a strong pipeline of new service technicians to meet the growth in this space. During the break, you might have seen our video on our premises. Currently, we have more than 300 of them around the world, which safeguards that we have a good pipeline of service technicians now and in the future. If we then move from people to software and deep dive into Certiq, which is our machine monitoring system. It provides real-time data, which helps equipment owners and operators to safeguard that their machines always perform to the best of their ability. The number of machines that are enabled with telematics is constantly increasing. In September, we had more than 5,700 machines connected out there. The LKAB order in Sweden, that Sami mentioned is an example of a customer that's buying and using our telematics solutions. But what does connectivity bring us at Epiroc? Well, we can monitor equipment performance, we can provide feedback to R&D and production to improve the models or our specifications. We can also use the large volume of data and becoming even better at our service. Performing prescriptive and preventive maintenance, which also helps us in planning the required resources. If we are more efficient internally, we can also provide an even better value proposition to our customers and thereby increase the number of customers that are willing to work with us. To know the fleet and its usage to be more data-driven makes us even better. Another solution worth mentioning when it comes to connectivity is My Epiroc. It is a platform-independent solution working on any computer or mobile device. It provides instant access for all machine data such as operational status, performance and location. It identifies replacement needs and the customer can order spare parts and tools directly through My Epiroc. My Epiroc customers and the number of connected machines are growing strongly. One customer that was very pleased with the solution was Whatley Quarry in the U.K. By using the app, they went from 17 lost production days to 5.5%, and that is an impressive improvement. The technological height is constantly increasing, every year, the machines leaving our factories are more advanced than the year before. And good for us is that, that increases the aftermarket demand. There's a clear positive correlation between technical height of the equipment and the share of installed base that we cater to. Today, we are north of 50%, and it is continuously increasing. If we start with automation, if we take a production drill rig, say, for instance, our Simba E7C with automation, it will provide customers with a 15% increase in productivity, mainly due to higher utilization compared with non-automation, which will generate an increase in parts sales with 10%. Reduced operator damage is also taken into consideration in the calculation, which is reducing the need of parts. We have done this analysis on several machine models and concluded that automation always contributes to the increased utilization and productivity. And that the sales of spare parts increases at least 10% measured over 5 years accumulated. Depending on the application usage and model. On the battery side, the technical height also drives aftermarket demand. I know that the car industry speaks of less aftermarket on battery electric vehicles. Well, for us, it's the opposite. We have calculated and come to the conclusion that a battery electric machine has at least 12% more aftermarket revenues measured over 5 years. It varies between the type of battery equipment, but again, at least 12% more aftermarket than the diesel equipment. Why? Electrical Infrastructure and batteries as a service are 2 parts of that, that contribute to this. While maintenance of the diesel engine will go away. But our revenues related to diesel engine service and maintenance today is quite limited. So net, we have more aftermarket revenues. At the same time, and this I would like to emphasize, the customer actually has lower operational costs. So it is truly a win-win solution. When on the topic of electrification, offering our batteries as a service is actually a type of service agreement. We provide all the benefits of electrical power while eliminating the customer's risk of owning batteries. All this with a full guarantee. We take full responsibility for the batteries from certification to maintenance plus technology upgrades using a truly circular business model. We also include battery conversions in our service offering. It's part of our midlife service, where we remove the diesel engine and powertrain and replace it with an electric drivetrain and battery. We see great demand for conversions right now, and I believe that we have a truly special window of opportunity here for the next few years. As I briefly mentioned, the average life span for an underground piece of equipment is about 4 to 7 years, give or take. And by offering conversions, we can increase the speed of our customers to take on battery technology, and we can also speed up the rollout of our batteries to the market. We have started to do conversions for our most sold loader, the Scooptram, ST1030. Next in line are the Scooptram ST14 and the Minetruck MT436. But you know what, it doesn't stay there. We'll roll out more and more models. And to be honest, there's nothing standing in the way of us doing conversions on other OEMs equipment as well. We have the knowledge to do it. So let me share a video with you on the conversion. [Presentation]

So coming into the midlife services where we extend the equipment life for our customers. What we do is return the equipment to maximum productivity and operational efficiency by replacing the old components and upgrading them with new ones. The customers only pay a fraction of the cost of a new machine. The revenues are, as you can see, growing well, and we see a high demand for this service. We also include battery conversions, engine repowering and emission upgrades in this offering. To keep existing equipment alive longer, while at maximum productivity is really benefiting the environment as well. Another exciting thing we offer is our reman solution. So let me share a short video on that 1 as well. [Presentation]

So extending the life of existing parts. I guess the video said it all when it comes to customer benefit. So we can instead focus on something some results instead, some figures instead. We have a reman program running in the U.S., Canada, Chile and Mexico. And this year alone, we will remanufacture about 2,000 components. This number grows every year as do the revenues. We've had more than 70% revenue growth per year since we started with this offering. It's a small business today, but we are optimistic as we see that the benefits, customers' productivity and profitability as well as Epiroc and the environment. So to conclude the service presentation today, we move from a parts provider to a partner at an increasing speed. We've done it because of our strong local presence, our improved value proposition, different agreements for different demands, life cycle management and data-driven services and subscriptions. The service agreements revenue has grown close to 10% a year and today represents the most important portion of our revenue stream. I hope that I gave you some good insights into our progress and service, and I hope that you share my optimistic view on the future. One person that I collaborate well with and have known since 9 years back, that also sees a lot of aftermarket potential and also is a great water skier is Mr. Goran Popovski, our President in Tools & Attachments.

Thanks, Jess. It's a pleasure to be here. And as it's my first time presenting at the Epiroc CMD, I would like to share a few words about me. I have been in the group for the last 17 years since 2005, and the time flies when you have fun, and you love your job. I consider myself as a citizen of the world, as I spent my last 3 years leading internationally in Australia, Czech Republic and Sweden as well as visited customers and business partners in more than 70 countries around the world. I'm originally from Republic of Macedonia, but also Swedish National. And I have been divisional president since 2017. Tools & Attachments, the division I run is also reporting segment. It represents 26% of the group revenues. At Epiroc, when we speak about aftermarket, this division is included as is the Service and Parts division that Jess presented. And together, we represent around 2/3 of the group revenues. Rock Drilling and Tools division and the Hydraulic Attachment division merged in March 2020. So far, it's been a great journey, great challenge, brilliant opportunity and a lot of and I can tell you that. Our positive development so far is based on hard work, lots of dedication, passion and interaction align aligning towards the common ambition to prosper and deliver and of course, creating an open collaborative and stimulative working atmosphere for all employees in our division. In Tools & Attachment, we offer extensive range of high-end rock drilling, exploration drilling and rock reinforcement and ground support tools as well as a wide range of hydraulic attachments. The drilling tools are primarily used as essential working tool for drilling on drill rigs, both Epiroc and other manufacturers. Our applications in hydraulic attachments include rock-breaking escalation, demolition of building, asphalt, concrete and steel structures, separation of material and recycling. They're mounted on various types of carriers, mostly escalators though, and it's mainly sold to our customers active in construction, demolition, recycling and mining. To improve the customers and our own productivity and offer better utilization of our equipment, we can equip our equipment with connectivity, which offers our customers real-time knowledge where our tools and attachments are and how they perform. And in some cases, even help the police to find teams on construction material like we had a case in Germany, not so a long time ago. Delivering great customer experience and growing our business sustainability and profitability has been and will be our prime focus. We have made some very good improvements since the division was created. It has not been a walk in the park, but the systematic hard work, pragmatism and customer centricity mindset we have in order to have. In short, we have innovated to stay ahead of competition and work on customer centricity towards fine-tuning the value proposition for different customers in different segments. One division, 1 mission, 1 team mindset has helped us reduce the complexity strengthen ownership and speed up the execution so we can more dynamic and faster in making decisions and acting. This has helped us improve also our internal efficiencies. Coming to the topic of the day, innovation. It's not only related to the products, but innovation and there to think new is embedded in everything we do. Here comes some examples of what we have done to stay ahead of the competition. We improved customer centricity increased our understanding of customers' needs and ambitions. This to make sure that we offer the right product to the different customer. We improved the service life and implementation rate of our product, for example, the new well system on our DTH hammers, making a good big positive difference in the market. We also innovate to be mindful of water consumption. Our example is a water treatment system for the exploration that enables a reuse of 70% of the dual water. And on the attachments, we offer the HatCon, which is connectivity tool for creating additional value and better utilization of our attachments. CPIs or continuous product improvement to assure that portfolio health and superior product performance and robustness. And finally, 6th Sense to provide the optimal setting and synchronization between the rig and rock drilling tools to deliver the best performance, longer service life safety and continuous improvements. Optimal utilization of Epiroc rig by teaming up with the best drilling tools for the specific application and rock conditions. And one might think that the rock drilling tools are just a piece of very durable material, right? Think again, with our 6th Sense, you get information so you know precisely how your rock drilling tools perform. This allows you to drill at the right speed, and you know exactly when it's time to change the tools. Customers in different segments has different products and support needs as well as different sourcing patterns. As our customers are found in various industries. We have a lot of work we have done a lot of work into improving customer reach and satisfaction. We have also utilized and broadened sales channels to reach more customers in different but yet attractive segments. To reach more customers beside direct sales channels, we work in a structured way to expand our sales channels and service footprint with partners and dealers all around the world. Additionally, we work on establishing e-commerce as additional sales channel for specific customer types. The smart inventory management system is another example designed to offer 24/7 self-service storage of our products at the customer side. It's much appreciated by customers and has been launched in more countries this year. It help customers save time, reduce cost per dual meter and have a full control of consumption per machine and operator. We have referenced customers in 7 countries and 13 sites, and yes, more to come in 2022. Widening our value proposition has helped us gain traction with certain customer types. For example, the essential line working tools for hydraulic breakers that are suitable for most general contracts in construction. In Europe, for example, this stage we are selling is with drop shipment, which means lower transportation costs, lower emissions and less packaging material. The acquisition of DandA is another example. The company manufactures and sells hydraulic breakers and extends our offering to new customer groups that we're not reaching before. Throughout innovation, we have provided a higher value to our customers in terms of extended life extend our overall cost reduction and energy recovery. For example, we have also broadened the offering in our popular breakage. Let's take a quick visit to our friends in Kaunis Iron, again. [Presentation]

As everybody has a favorite slide, most probably, this is my favorite slide. So before wrapping up, I would like to mention a few things that we have done to improve our internal efficiency. Number 1 is focus on performance. Our highly focused and mission-driven organization has been encouraged to bring sense of pragmatism privatization and simplicity in the ways we're addressing the challenges. In a way, creating internal efficiencies this way to reduce complexity, improve speed and unleash and utilize the employees' potentials and finally make us more customer-centric and easy to deal with. Furthermore, -- This is improving the focus, alignment and motivation, which is fundamental for creating sustainable improvements, creating a stimulating and supporting working environment empowered with open-minded culture makes us also having great fun, while addressing the complex challenges and opportunities out there in the market. For example, our Rockstar award in which employees nominate other employees in areas such as people matter innovation score, customer in focus and best performance. In the picture to the right, you have very glad and well-deserved winners of this award. Another thing we have done to become more efficient is to improve the utilization of our production facilities. For example, we have reallocated our production of exploration drilling tools from Norway to Montreal and also initiated various efficiency initiatives in each of our factories, example, core versus no core processes. We have done also portfolio improvements. for example, post-production hand held rock drilling tools and also cut some tail. And finally, we have improved our transport and logistics routines, which has also led to better customer availability. For example, for shank adapters, which is 1 of our most popular products in our range. So to conclude the aftermarket presentation today, we move from tools provider to essential partner. And just as in the Service division, we do it in increased speed. We have more than 240 rock drilling tools contracts, and the number is growing double digit. We have customers everywhere in the surface, underground within mining and construction. The right side, on the photo, you can see our long-term customer, JCHX in Zambia. But using our drill bits, they have increased the drilling rate by 66% while enjoying increased service life of components by 50%, and they are a happy customer. Out of 240 contracts more than 150 or cost per meter contracts, which reflects our confidence in our products that the customer pays a fixed price for -- benefits for the customer is predictability of cost, stable production and reliable supply and service. Benefits for us, a stronger partnership, recurring business, better planning, production and economies of scale. Thank you all for taking the time today, and I'm more than happy to help you with any questions in the Q&A session later on. Now I would like to show a short video from yet another happy customer before Helena takes over again. Thank you. [Presentation]

Second to none. Well, that's quite a comment. Another focus area for us is operational excellence. And to us at Epiroc, it means that we want to do the right things, and we want to do these things even better. And we have a great trust that our strategy, which has been presented today can provide us with good profitable growth onwards. But as in many other areas, we also strive to be industry-leading in operational excellence. And we have many initiatives ongoing continuously in our organization. First, the supply chain. And since a few years back, we have had a supply chain improvement program going in which we integrate the supply chain organization and redesign our regional distribution network. The main goals are to improve customer availability and efficiency and to reduce environmental footprint. And so far, the actions have yielded results. The customer availability is clearly up, both in tools and attachments and in service, while we also have reduced our environmental footprint from transports. Since Q3 2019, the CO2 emissions from transports are down 28%. To create a stronger and more agile Epiroc within administration, we collaborate and learn from each other to define the best way of working and thereby increasing process effectiveness. We have, for example, created regional centers of excellence where we gather finance and HR processes to improve quality and become more efficient. And thus far, we have successfully created centers in sub-Sahara and in the Nordics, and we aim to implement these centers in more locations in the coming years. So these actions and many more makes us more efficient. And all in all, we maintain a good cost control throughout the organization. So with this, I conclude the part on operational excellence. But before I move on to the outperformance part, which is very much a numbers proof point part, I would also like to present our new CFO, HÃ¥kan Folin. So HÃ¥kan, please join me on the stage.

Thank you very much, Helena.

So I'm pleased to welcome HÃ¥kan to Epiroc. He has a strong industrial background and experience for many years as CFO for SSAB. And I'm convinced that he has the right experience, skills and approach to drive financial and operational excellence and actively contribute to Epiroc's continued profitable growth journey. So HÃ¥kan, may I ask what are you most excited about when it comes to take on this challenge?

Many things actually. I'm very happy and glad to be able to join Epiroc, such a successful company built by many loyal and competent employees. I'm also very happy -- excited about being part of this profitable growth that we talked about today and all these acquisitions that have been done to see how to write the best benefit out of those. And then finally, if I may add then, to see the implementation of the sustainability targets, not the least the science-based targets you mentioned initially to see how Epiroc can actually reach those targets over time. So quite a lot, actually.

Thank you. Thank you, Håkan, and welcome on board. I would also like to express my sincere appreciation to Anders Lindén, our previous CFO, for his instrumental part in creating Epiroc to a successful stand-alone company. Anders, you have really made a positive difference to Epiroc during all these years, you have been with us. So thank you so much. As Håkan joined Epiroc actually today, I felt that it might be a bit early to do the outperformance presentation. And therefore, I've asked another appreciated team member in Epiroc Group management, Mattias Olsson, to present the outperformance part. So Mattias, please.

Thank you, Helena. A brief introduction of me, I am Mattias Olsson. I'm responsible for Corporate Communications here at Epiroc. I've been with the group for more than 20 years in total. And under my responsibility is also sustainability, corporate responsibility and investor relations. So Karin is in my team. And I met many of you previously in my Investor Relations career. I'm really happy to be here. Today, we have heard a lot of good things when it comes to performance, and I will talk specifically about financial performance. We reconfirm our financial goals that you can see on this slide, and I will go through all of them in my presentation. A couple of goals have already been mentioned today, including growth. As you know, our goal is to grow 8% annually. And as Martin mentioned earlier, growth is mainly organic, and the contribution from acquisition is less than 1% per year. And currency has had a minor impact in the period from 2015. So we stick to our growth ambition going forward. And of course, we have made more acquisitions recently, and this is part of our growth story, clearly. To repeat, on acquisitions that we made and finalized this year, they add about 3% to our 12-month revenues. And on profitability, here, I would say that we have achieved our goal to be industry best with strong resilience but we'll continue. We have managed to improve our profitability recently, and that is much thanks to the efficiency initiatives that we have taken. Goran mentioned a lot about this for Tools & Attachments, but we have taken actions and see positive effects in the whole group. If we look now at the profitability, there is a dilution from acquisitions, which is to be expected, at least initially when we successfully execute on M&A. And perhaps a comment also on resilience, both when we saw lower volumes during COVID-19 and now when we have seen demand improve, we have adapted quickly and continuously, which means reducing costs with lower volumes. Selectively, of course, as you know, we have continued to invest in R&D, for example. But we also see increasing costs as required when we grow. This is the way we work and is part of our model. And this year, we've been able to ramp up very efficiently despite the issues that we have with component supply and transport. Here you see the details of our 2 segments. If I then start with Tools & Attachments to the right, you can see the very strong development on profitability. Equipment & Service has also improved. Remember, though, that we have some support from a better revenue mix with a high share of Service, which has a higher operating margin compared to Equipment. And when we eventually invoice our Equipment orders on hand, the share of Equipment will be higher, and this will affect the mix negatively. On capital efficiency, we have the goal to improve capital efficiency and resilience, as you know. And here, I would like to highlight a couple of things. First, we have a large and stable aftermarket. And second, we have a flexible manufacturing philosophy. We support our customers with spare parts and consumables, as you know, and this has an impact on working capital. But this is really a very resilient business. Equipment manufacturing also ties up working capital. Still the dynamics are the same for these both revenue streams. When the demand increases, we need to increase our inventories and receivables grow. And the same for payables, they also grow. The net effect of this is that working capital goes up in good times and the opposite is also true. Note that our flexible manufacturing enables quick adjustments of capacity to change in demand. We have longer lead times currently due to large orders, supply chain and transport issues, and this also impacts the inventory levels. A good thing with being a niche player with advanced low-volume products is that we can often get hold of components from our suppliers or even from purchasing from third parties on the spot markets. That doesn't mean that it's not challenging, but it's still a possibility for us. In total, 75% of our product cost for equipment is purchased, and we manufacture the core component, the core equipment. We manufacture the rock drill here on the Boomer for example, and the brain. The rest is really assembly. We also manufacture the rock drilling tools, but this is off the market with relatively stable demand. Back to the capital efficiency and then net working capital. Underlying, we have improved working capital, and we still have some potential to improve further, mainly on inventories. On return on capital employed, this has been negatively impacted by our strong cash generation in 2019 and 2020, as you can see. This year, we've seen an improved profitability compared to 2020 and we have distributed more cash to shareholders. On top of that, we also made acquisitions. The net effect of all of this is improved return on capital employed this year. If we look into the cash generation, we have a solid cash generation, as you can see. Also this is impacted by higher requirements of working capital in periods of growth and by the release of working capital when volumes are softer. And as you also know, we have some limited CapEx requirements when it comes to operations, so a limited impact on cash there. If we then look to the capital structure, we have a solid financial position. We are net cash. And the strong cash generation in the past few years have contributed to this. We have made acquisitions, paid dividends in line with our financial goals and also paid a redemption this year, and we still have financial strength and flexibility to invest in growth going forward. It's good to see. Our dividend policy, it remains. And our priorities for use of cash are to invest in our organic growth, we talked a lot about that. An example is the investments in service workshops and remanufacturing centers to support our customers. We also invest in M&A. So we will continue to prioritize these in the future to grow. We do have the flexibility to distribute extra to shareholders if we have cash that we don't need like the redemption we did this year. But the main priority is to invest in growth. So with that, I welcome Martin back to talk about creating options for the future. Please, Martin.

Thank you, Mattias. So now we've heard about our financial performance and how it comes as an outcome of our foundations for success, an outcome of our focus on attractive niches, on innovation and on aftermarket growth. And I will just add a few words on another way for us to grow and create options for the future, M&A and partnerships. Acquisitions are indeed a way for us to accelerate growth and build leadership positions in niches where it would take too long to do it organically. And in the years since the split was announced, we have done 19 acquisitions with the main focus on technology, aftermarket and consumables. 8 of these have been done over the past 12 months actually on all 6 continents, and we are very happy to welcome all the employees from these companies into the Epiroc family. I think that's maybe one of the best parts of my job, welcoming all these capable and engaged people into our family. Combined, these add important strategic capabilities to our offering and contribute to our ability to drive productivity and sustainability in mining and construction. So what is it then that we are looking for when we evaluate acquisition opportunities. First, we want to make sure that the target is attractive stand-alone, that it is a well run company, that it has products and solutions that are valuable for our customers, and that really helps the customers to improve. Its business needs to be supported by long-term favorable trends and have people and a culture that makes it prone to success. Secondly, we see -- we want to see that there's a strategic fit and constructive synergies with Epiroc. Together, we should be better than the sum of parts. Otherwise, it isn't a good target for us. And thirdly, we need to see a path to leadership. Is the company already a leader in its segment? Or is there a clear path to leadership that we could help accelerate? These 3 dimensions are our guiding stars when it comes to evaluating potential acquisitions. And the ideal acquisition candidate is thus a well run innovative company that has products or solutions that truly support the productivity of our customers and where we see that the capabilities and strengths of Epiroc would help accelerate the growth journey that, that company has already embarked on. And that is also what we see with the recent acquisitions that we have made. And with that, I will give the word back to Karin, who will conclude today's session.

Thank you. Thank you very much, Martin, and thank you to everyone listening in today and to everyone presenting today. To those of you that want to ask a question, please see the dial-ins on the screen below the webcast. But before taking the first question, I would like to try to summarize what we have heard today in what I would refer to as the Epiroc investment case. So Helena started with the foundation. And basically, our success is based on sustainability and a very strong corporate culture. And Martin spoke about attractive niches. We focus on those performance-critical niches where we see structural growth. On innovation, we heard several presidents speaking today, and conclusion is that we drive the productivity and sustainability transformation in our industry. In the aftermarket, I can kind of summarize it like that we have a very high share of recurring and also profitable business. And operational excellence, we do things good, and we try to do these things better and better. I think that's a very good mindset. And on outperformance, Mattias said that we create value for our stakeholders and not the least, customers, employees but also for you, our dear shareholders. So in a way, I would say thank you for investing in Epiroc and having faith in our strategy and our ability to execute in it. The achievements are really a team effort. So also a big thank you to all the Epiroc employees around the world for all the great things you do and all the hard work you, yes, achieve, I would say. You make this world a better place, and I feel very proud to be in your team. So thank you, everyone. And operator, please open up the telephone conference.

[Operator Instructions] Our first question comes from Mattias Holmberg with DNB.

Can you hear me? Can you hear me?

Yes, we hear you.

Perfect. So I have 2 questions. I take them one by one, if I may. The first one is on the slide where you show the depletion of ore grades over time. It showed a quite noticeable uptick in the ore grades over the next few years in underground mines. And it seems like it will take until 2040 for it to fall back to the levels that we are at now. So I'm wondering if you expect this near-term increase in ore grade having negative impact on demand? And also, how should we think of the impact from declining ore grades when it looks like it's going to be basically flat in underground mines over the next 20 years?

So it's very different for the different minerals. And maybe, Martin, you can explain that graph.

No, exactly. And when you look at different minerals and different type of lines, you always get impact of individual mines that open up that might have higher ore grades than before. But then that's a new mine, and you actually go into a step-by-step decline across different minerals. So this is a little bit of a mix shift effect as well.

Understood. My second question on Battery-as-a-Service. what advantages would it be for your customers to buy the battery as a service rather than to buy the actual battery? And can you quantify or explain in any way how much additional potential you see in the aftermarket from this opportunity?

I think as we -- as just described, the machines are becoming more and more advanced. And of course, with that you need more skilled technicians also to do the service. So this is a way for our customers to -- we released that pressure from our customers, and we take on that piece ourself. Then, of course, it's also a way to lower the threshold, the technological threshold. Since cell density will, say, evolve over the coming years as well. So by us taking on the responsibility for the battery packs, we can secure that we have the latest cell technology going into all the existing machines out there in existing batteries. So it is both a way to lower the threshold to embark on the electrification journey. But of course, also for us a way to get even closer to our customers when it comes to implementing these new technologies.

Our next question comes from Klas Bergelind with Citi.

So a couple of questions, please. First, I had a question on the revenue model in Battery as a Service and thanks a lot for providing that revenue opportunity on Slide 74. So the 12% higher aftermarket sales over 5 years. How much of that is the higher ASP spread as an operating lease versus higher services such as battery management and charging. I guess the ASP, the price of the machine must be higher as well. Or is the 12% only linked to the higher service revenues, not the price being spread as a lead?

So we invite Jess to give you some more details there, Klas.

Yes. So I don't want to give you the exact breakdown, not because I don't want to, but I'm not going to. Let me say it like this that partially, today, we don't see a lot of revenues off of the diesel engine maintenance ourselves because, of course, we're buying those diesel engines from another partner. So part of that raise in revenues is, of course, because then we have the revenues off the battery and the drivetrain ourselves instead of through a partner. The other part, of course, is that Batteries as a Service revenue and the electrical infrastructure. Remember that all these mines as they switch from diesel to electrification, they have to install charging stations and substations and different infrastructure-type things at the mine itself. So part of that revenue is also coming from that.

And just to follow up, is ASP higher or similar?

Yes. I guess it's a little bit higher. So right now, we see it a little bit higher. And I think we're just seeing this shift right now. So it could be that it goes a lot higher, actually. But as they dip their toes into the water, it's going to be an evolving process how we develop that pricing.

And then my second one, Helena. Maybe I'm thinking about this in a too simplistic way. But if you look at those 12% higher aftermarket revenues against your [ 50% ] percent of sales, that's green sales by 2030, are you effectively saying that the aftermarket can be at least 6% higher of group sales by 2030, all else equal? Or is there something else within the 60% of sales other than just [ battery-driven ] machines?

So the 50% is the penetration of the customer share we have today. So what we're saying is that with the transformation towards battery as well as automation, we will be able to capture a larger share. So of course, that will also support the growth in the coming years.

And that leads me to my very final one on the growth target and listening to Mattias. The majority of the 8% is organic that we know, but Mattias referred to 1% from M&A historically. That has been higher, around 3% recently. So are we saying that we perhaps are shifting to the 8% as almost purely organic and then M&A on top? It used to be 5% plus 3%, if I remember correctly from the spin from Atlas, obviously, clearly increased focus on retrofit, Battery as a Service automation. It feels like the organic is shifting higher?

I think it will, of course, vary over time. But I think we stick with the guidance there. But we believe 5% to 6% will be organic and then on top of that M&A. But of course, it will always vary between different years and different initiatives. I think we have had a very, very good pace now on M&A, which I'm really happy to see. And there is more opportunities out there.

Our next question comes from Max Yates with Crédit Suisse.

Just my first question was around the service contracts. And I wondered if you could give maybe some examples of how much more the service revenue opportunity is when you have a piece of equipment under contract versus, say, doing ad hoc services? And just also to understand how much of your installed base is actually under service contracts now?

Do you want to take that?

Sure. Sure, I'll take that. So we have about 40% of the installed base under some form of service agreement. And of course, we offer, let's say, different levels of sophistication on that service agreement. So it's really varied. I can't give you an exact percentage on how much more it means to have that service agreement because, of course, starting from just audit contract all the way up to a full maintenance and repair contract, there is a big variation in how much more aftermarket we can have. But I can say that any time that we were responsible for any part of that parts flow into the maintenance then it is significantly higher, let me say it like that.

And I think where we have full -- where we have full Service contracts, that's, of course, also when we really can prove the value to our customers. So if anything, that is what we strive towards.

Okay. And just my second question is just around the sort of the figures that you presented around Certiq on Page 72. You -- I mean, you showed obviously the number of units enabled. There's now 5,700, which feels like a now also meaningful part of the fleet. So I just wanted to understand kind of how do you actually sort of bill for that. Is that rolled into -- is that rolled into a Service offering? Do you bill for that sort of stand-alone software? Just wondering how the sort of revenue actually feeds in from those units that are connected.

Yes. Again, there's some variation there, but the standard model is a subscription model. So a cost upfront with an option on the machine as you buy it and then a monthly subscription fee. But depending on how the service agreement is structured, it could be wrapped into that service agreement where it's not a separate charge. It's just part of the overall offering. So a little bit of variation there, but standard is monthly subscription.

And would it be fair -- sorry.

Maybe I add on as well. I mean the subscription fee of Certiq is not big money. That's just to clarify that. It's really the enabler for Service revenues, getting the parts, helping the customer to improve on their aftermarket, on their service availability of the machine.

Our next question comes from Andreas Koski with Exane BNP Paribas.

Thank you very much, and thanks to the top team for a very interesting presentation. It feels like if you get your electrification and automation offering rights, you could take an important step ahead of competition in the coming years. And I just have a couple of questions on battery electric vehicles. Maybe if you could talk a bit more about the advantages of sourcing batteries from Northvolt instead of buying batteries South and some of the batteries you will sell. On battery conversions, which you are focusing on right now, is the total cost of ownership attractive enough for customers to go for this solution? Because I understand that some miners at least think that it's not worth doing the conversion, it's better to buy the battery machine instead. And how you view your strength of your battery swap solution and if you think that will be an important feature for customers to go in for your solution instead of any competitor solution. And lastly, you are saying that you are the market leader, approximately how many battery electric machines have you delivered today?

Okay. So maybe I'll start with the partnership with the Northvolt. So we entered into this partnership several years ago with the long-term ambition then to be able to source green battery cells from Northvolt from their factory up in the northern part of Sweden. But also as part of this is, of course, to be able to offer a circular alternative so that we can bring back batteries to Northvolt and have a full circular economy. So I think we have partnered up with one of the best players in this space. But I think also the reason why we engaged with a partner like Northvolt is that we don't believe that we can develop everything ourselves. I think we have said it several times that we really believe in partnership and bringing technologies that has been developed already in other industries and bringing that into mining. We believe that, that will be the fastest way to revenue. So I think that is on Northvolt. On the battery swap solution, we will develop this solution to make sure that we would help our customers not to invest a lot of money in changing their infrastructure underground. So of course, to swap a battery and then you can slow charge it, it saves life of the battery. And it also saves investments for our customers. And we have seen that this solution is a very efficient solution. We can swap a battery less than 10 minutes at the moment. So that swapping is not really a problem and you use the life of the battery in a more sustainable way by doing it. We will not share, let's say, the exact numbers of units. But as you have seen, we have done a couple of press releases in the last couple of quarters with greenfield order in South Africa as well as several conversion kits. And we can see that this is taking off. So eventually, we will share those numbers, but not today. Maybe you can talk about the conversions in detail.

Yes. So conversions, I think it's a similar process that the customer goes through when it considers midlife rebuild versus buying new as well. So I think we're priced competitively. And again, it depends on factors like when can we get delivery of new machines versus when can we have the midlife or the converted machine available. So there is cost consideration, but there's also timing consideration. And there's also, of course, the mining company's own desire to move forward towards a more emission free or emission neutral future.

Yes. Very helpful. I have one other question, if it's okay. Jonas Albertson talked about your collaboration with other players and the sustainable underground mining project. And you were saying that you are trying to create a new world standard for sustainable mining, focusing on digitalization and automation. Maybe in just a few words, what would this new world standard look like compared to today's standards? Are there any major changes that we should expect in the mining industry going forward?

So if I summarize that project is very much that how can you create a mine that is 1,000 meter deeper and still make it safe? How can you make it 50% more productive at that depth? And then of course, how can you make it CO2, carbon-free? So I think these are the 3 dimensions. And of course, all of this comes together that we are creating a new standard. It's about how do you digitalize the mine, how can you use autonomous solutions? And also how can you say, electrify the mine in a way to actually create that new standard. So these are some of the elements. I think I also flavored it, it's also a lot about the people. So I think this is a very important aspect of this mine that how can we actually make things collaborate between machines, robots and humans. So that is, say, the main ingredients in that project.

Our next question comes from Gael de-Bray with Deutsche Bank.

Apart from the obvious general CO2 emissions reduction targets, is there any specific regulation in any market, in any geography, which could accelerate the customers' decision to move towards battery equipment rather than diesel?

I don't think we can generalize and say that it's regulations. But of course, if we look on how many of our larger customers that has announced goals and targets now to reduce CO2 emission, I think that will be the main driver for this. I think the industry will not wait for regulations to be honest.

Okay. Understood. And the second question I have is -- well, it's a follow-up to Andreas' earlier question. When customers decide between retrofitting equipment with a battery versus buying new battery equipment, what's the average cost differential here?

I think when customers do retrofit, it's more because they want to try the technology -- they want to embark on this journey without then needing to wait for a new machine because maybe their fleet is already -- they have more life on the fleet. So I think it's more that wind of opportunity that we see that customers now are really eager to embark on this journey, but maybe they have enough machines at the moment, so they want to do conversions. And of course, for us, this is the electrification journey is quite a lot of value that we create for our customers. And I think in everything we do when creating value for our customers that through innovation or creative solutions in the aftermarket like this retrofit solution, this is how we can also defend our price levels. So I would say this is -- will be a very good service product for us. As Jess mentioned, it will be part of our mid-life offering and a Service product. And I think more and more products like that you will see in the coming years.

Okay. Okay. Can I ask about, by 2030, how much of your installed base do you expect to be electrified?

So what we have said is that by 2025, we will offer our full range of underground portfolio with battery electric solutions. And by 2030, we will offer the full assortment, including all the surface rigs. We have also committed that by 2030, the absolute CO2 emission from machines sold will be cut in half. And there, of course, these technologies play a vital role in that for us to achieve those targets. So we are very confident that this will happen. And that's also why we're investing so much in product development in this space, is also why we are also acquiring companies in this space to really work hand-in-hand with our customers on this journey.

Of course, it will -- by 2030, of course, it will be a relatively big share of the installed fleet or of the sales at least in 2030.

Our next question comes from Lars Brorson with Barclays.

I'm going to try my luck, Helena. And maybe, Jess, on the economics of the shift to electric aftermarket. Interestingly, you're calling your aftermarket revenue up 12% or a 5-year revenue, but that's, of course, less service consumables and more Batteries as a Service and electric infrastructure. Three questions really from my side. Number one, on margins, how to think about, so say, the change in margin profile, both in the near term as you ramp up your Battery-as-a-Service capability? But also in the longer term, when we think about battery as a service in steady state, any structural differences to your traditional service business from a margin standpoint. That's number one. If I can maybe give a go at all 3 because I think they link together. On the second point, returns profile, can you talk a little bit about the capital intensity and your ambition to reduce capital intensity for battery as a service. What are the options you're thinking about for bringing battery ownership off balance sheet? And then maybe thirdly, how to think about the growth curve in Battery-as-a-Service. Obviously, we see sort of a traditional S-curve for your traditional Service model where the aftermarket accelerates in year 2 and 3 post an equipment sale. Obviously, it's a more linear development for your Battery as a Service. How should we think about or should we brace ourselves at some point in the medium term for a slowdown as you transition more aggressively to Battery as a Service away from a traditional service aftermarket?

Do you want to take a stab?

Yes, I'll take a stab at a few of these. So I would say, of course, with the margin question that we're always looking for ways to safeguard our margin and making things as efficient and cost effective as possible, while at the same time recognizing that the battery market versus the diesel market is constantly evolving. So I would say, yes, we're going to try everything we can to protect our margin going forward. Longer term, I don't expect major structural changes then to the way it looks. You are correct that the S-curve doesn't flatten, but it goes more linearly when you can charge that Batteries as a Service contract right away from the start of the contract, where today, when it's a traditional machine, you have less revenue at the start and more at the end. And then maybe the last part about moving the batteries off the balance sheet. I think we're still early stages of that and looking at how do we structure that.

[Operator Instructions] For our next question, we have [ Christian Inderaca with Liberance ].

I have 3 questions, which I'll take in turn, if I may. Firstly, in your R&D slides, you talked to about 29% of your engineers working in software. Just mention how that's developed over time, given the shift in digitalization strategy. I don't know if you want to take the spin-off from Atlas as a comparator year, but any insight would be helpful. And I'll come on to questions 2 and 3.

I can say that a lot of that shift has happened in the last 4 years. I think for the last 4 years, more or less, all recruitments within R&D has been software engineers. And of course, the acquisitions has also added teams in South Africa, in Australia, in Canada as well. So I expect this -- the portion of software engineers to continue to increase.

Secondly then, just on electrification. You talked about monitoring other fuel capabilities, possibly hydrogen in the market. Just interested in the developments that you're seeing there in terms of margin capability and possible route to commercialization, whether we could see that as an M&A opportunity for you or if it's something you're developing in-house?

Yes. So we are looking into all available options, especially when it comes to our largest surface machines. And we always look to do, of course, majority of the work we do, we always do organic and with our own R&D. But I think we have seen what we do in our M&A strategy as well. Of course, if we find capabilities out there that we see that we need, then that is also an option. But time to revenue is really what we're after, to be the fastest one bringing these technologies to the market.

Yes. Of course, collaboration is, of course, also an alternative to do it themselves or buying something.

Sure. So just to be clear, you are actively exploring organic opportunities in hydrogen?

We have a very open mindset as always, when we address technical challenges. So we don't, say, close any door when it comes to technical solution.

Okay. And then thirdly, you talked about supply chain improvement program, integrating your procurement capabilities. I just wondered if you could add little bit of color there in terms of some of the actions that have been taken against the backdrop.

Yes. So we have been on this journey now for a number of years, and we see really good progress. We have been able to shift majority of the tonnage we shipped by air over to sea, which has helped to reduce the CO2 emission from transport. But we've also revamped our distribution network. So we have created regional distribution centers in the different regions. We're sourcing more of the component more locally so that we transport shorter distance. And we have also built up 1 common supply chain organization, which Jess is responsible for, but it manages all the supply chain for the aftermarket. So it's a combined organization, which I think also has helped really. And I would say that, of course, it has been very challenging last 18 months in light of the pandemic, but this team has really made a difference throughout these challenging times. And I think we -- step by step, -- of course, we have a lot of operational issues that we're managing on a daily basis, but we have continued to roll out the more long-term plan for our supply chain -- in our supply chain change management, which I think we will be very well positioned with our supply chain when the situation is more back to normal.

Next up, we have Anders Idborg with ABG.

So just wanted a bit more on the Tools & Attachments, maybe from Goran there. I mean we've been used to seeing this doing 12%, 13% margins for a number of years. And now all of a sudden, we're up to sort of 17% and even 19%. And I appreciate all of what you're saying about making the supply chain more efficient, taking out a few underperformers, et cetera. But can you give us some more comfort about what is really sustainable here? And what has made this step change come about?

Yes. So if we -- I think this has been a journey over many years. And of course, we started by addressing the portfolio. So we have divested some of the product lines, like Goran mentioned, the handheld, geotechnical drilling, for example, we have also exited some nonprofitable contracts. So we have done quite a work when it comes to addressing the portfolio. So the portfolio we have today is very well suited to drive innovation, and it goes -- really it goes well together with equipment. So we have a full offering. I think what Goran has been doing extremely well during the last 18 months is really focused on the internal efficiencies. And there's many components going into this. But Goran, maybe you want to describe it?

No, there is an old saying if you want to go fast, you go alone. If you want to go far, you go together. So I think that, first of all, we are very pleased with the results that we are performing. And I would like to use this opportunity to say congratulations and thanks to every single member of the RD division. It's a brilliant achievement. And yes, in long run, definitely, the ambition is going to be higher. However, this year and the coming period, most of the focus is in ensuring that we have the robust sustainability of our performance and that this level is sustainable. So this is basically the current focus on our organization.

And maybe if I might also, I think we have been working over many years now about our very structured work, how to grow the parts and service business with our mapping of the fleet and understanding the customer share and addressing that. That opportunity is also there within Tools & Attachments. And for me, it was very important to see stability in the margin at a new level because then we can also embark on a profitable growth journey in the coming years within Tools & Attachments. So that's very much the focus to stay and it's, of course, a lot of hard work to deliver this type of margins quarter-by-quarter but also to do that over time and together with growing this business, both organically as well as inorganic.

Yes. Well done so far. Just perhaps if I could pop a final one as well, just on the mixed fleet automation. I think this is a slightly -- it takes you into a slightly different landscape in terms of competition. And there are some other players who want to do this. Can you say anything about what kind of consolidation goes on out there? If you see other players also stepping in and if this potentially becomes a more fragmented market.

I think historically, it has been software players that offered OEM-agnostic solutions. I think today, it's more the OEMs that also talk about OEM-agnostic solutions. But it's not that simple to do something like this. And I'm really happy that we have really demonstrated these capabilities both on surface and underground now. And we are, I would say, half way through that rollout of the largest mix fleet that will be automated for surface like the movie you saw there from Roy Hill. I think that will really set a new industry standard. But of course, it's much more complex because the machines need to be to interact with each other, the very advanced traffic management solutions that is needed. And of course, everything needs to be done also to make sure that it's safe and as productive as if you have people in the machines. So -- but we are convinced that, that is the future. That is when I listen to our customers, all customers, they have mixed fleets, so they want to have that fleet automated. I think that is the future. And the one that will solve that challenge for the mining industry will be in the forefront.

Excellent -- exactly. Excellent ending here. The one that will solve these challenges will be in the forefront. And we think we have a good position. So thank you, everyone. I know we have still people on the line that are eager to ask questions, but as always, reach out, call us, send us e-mails. For now, it's time to wrap up. Thank you, everyone. And above all, stay safe. The pandemic is far from over. So stay safe and also successful investments as always. Thank you.