Atlas Copco AB

welcome to the atlas copco q2 2023 report presentation for the first part of the presentation participants will be in listen only mode during the questions and answers session participants are able to ask questions by dialing star 5 on their telephone keypad now i will hand the conference over to cfo peter kinnett please go ahead

Thank you operator and good afternoon everybody for this second quarterly earnings call for the Atlas Copco Group. Together with me is our CEO Mats Ramström and together we will guide you through the presentation and the questions and answers. But before I hand over the word to Mats, I would like to already now indicate to you that during the Q&A sessions, I would really like to insist that you only ask one question at a time in order to make sure that all of the participants have an opportunity to raise their most important question first. And then, of course, if there is more time left, everybody can get back in the queue to ask more questions subsequently. So thank you for that. And now with that, I hand over to Mats to start the presentation on the quarterly results.

Okay, thank you so much, Peter. I thought I would stay on this picture before we start talking about the numbers because it explains, firstly, I should say it's in industrial technique business area. And they were the only them to have the picture because they have the highest growth in the quarter. But you can also see how we are combining now in the automation strategy in industrial technique. So everything you see in aluminum there or in steel is different from the different acquisition. You can see it's a K-FLU, so that's the FLU drill application. And then we use the ISRA to guide the robot, and we also use screw feeding. So it's three different technologies that we combine, and in this case it's on the KUKA robot, but it can be applied to any robot out there, of course. So this is how we combine it. Of course, it is lined with the macro trend as we see to on-shoring and automation in Europe and also in Asia, of course, but also the US. So I think it's a nice picture that describes a little bit the strategy. And of course, we can do the same thing with assembly tools or if it's riveting or dispensing. So that's easy to understand how we use the ISRA application on this type of application. Then we go to That's slide number two. You look at what is received for the quarter, 43.5 billion. So I think if you look at the graph, you can see it's the second best. I think we already said in Q1 that that was exceptional. So I'm very pleased to see the 43.5. Compressor technique organically up 4%. We see the decline on vacuum mainly in semi at minus 28. Industrial technique, as I said, plus 10. Very strong and power technique and minus 12. So all in all, organically down 5%. But then we have help from acquisitions on 7% and currency on 4% all in all. Or this is up 6%. Then on orders invoiced, record is not only for the group, but fantastically for all business areas. You can see compressor technique, they were up 21%, VT5 and IT28 and TT26, which leads to 18% overall. And on top of that, you had 6% on acquisition and also positive than from currencies and 31% growth as well. So if we then go to the profit on slide number three, you can see the record profit at 9.2 billion and at the margin at 21.2%. versus year-on-year than a 26 percent growth on operating profit. And then if we adjust then only for the option program it would have been at a margin of 21.9 and Peter will break that down a little bit later. You can also see the return on capital employed at 30 percent. We go to slide number four. You can see there's slightly red in North America on the quarter, but if I use some sort of traffic light system here, compressor technique, they are green in all regions, flat in North America, but otherwise green everywhere else. Industrial technique in all these five regions, positive development. The other way around for vacuum, they are then red in all regions, with the exception of South America. And power technique, they are positive in two regions and negative in three regions. And so we can see a little bit of a shift there, I would say. Extraordinary, it stands really out on the power technique business in Asia, actually linked to our new pump business. They've done really, really well, actually. Go to slide number five, and you just confirmed the organic decline of 5%. Let me go to slide number six. And there you can see the buildup on orders received. As you might recall, we did 30 acquisitions last year, and so far this year we've done 10 in the first two quarters, and now it's 11. So 7% help from that currency helped us with four. and then organically, then five, and totally six. And revenues, you can see, all the way down to the 31%. Slide number seven. Given then the development, of course, the share of vacuum is declining somewhat and compressor technique normally around 46, 47 percent and continue to grow. So that's the split of the group. Then if you go to each business area on slide eight, you have compressor technique. We think it's a very solid level. You can also look at the graph still on the second best they have accomplished. We do an organic group of four, which is already 20 billion. Two divisions that stand out, continue to be gas and process, really strong, and then service continues to develop well as well. Record revenues, 21% organic growth, 18.6 billion. And that leads them to the record operating profit of 24%. And diluted, you still have currency and acquisition. So 37% increase versus last year on operating profits. Then I wanted to highlight this product. It's very small in the picture, but I think it says something about our leaning forward strategy. This is like a container then, and it's for hydrogen applications, for filling stations. So even if the tum is fairly small for this type of product right now, you can see that we are ready when we can have more accessibility to green hydrogen. So very strong performance from compressor techniques. We go to slide number nine, that's the vacuum technique. And of course, it looks dramatic with a decline of twenty eight percent, but it's still nine point two billion. And if you look at the graph in twenty twenty one, we did better and took part of twenty twenty two. But if you look at that graph compared to what we've done in the past, it's still fairly strong, I would say. And it's still mainly in semi, but the change that we have seen was that we did not have organic growth in the industrial and scientific. This solid growth for our two service divisions that gives us the resilience over time. And revenue was up down 5% to 10.9 billion. Very good. And also had a record operating profit at the margin at 22.9, so 2.5 billion. and an 18% growth year-on-year. On the bottom there, you can see sensors that we used to source, and we had an older range. And now we are building step by step our own range. So you can say it's a new platform for growth. I also wanted to highlight in vacuum that they did what I think a very interesting acquisition on Trillium in the US and service business. This is for the bigger nodes. It gives us access to new customers as well. And also the Shadong one in China, which gives us a good manufacturing base for liquid ring pumps. So good development there. Then I think it's fair to say when business is down a little bit, what do we do? Well, I think every indication that we have is that CapEx will come back very strong. We don't know exactly when, but it will. What we are working on right, what we learned from the last peak on this business, we are working on the product portfolio. And we think energy efficiency will be more important than ever before, but also the footprint of our products. So we're working on new generations there. And you have seen the announcement and operational structure. So we need to be present in the US. We're investing in that more local for local. We're also investing in China and also in Korea. So I think the for capacity will be there. And one other challenge has been the sourcing, same thing there. We are preparing more dual sourcing and also being more local to be able to act quicker and more local. So there's a lot of ongoing work right now to prepare for the next turn in vacuum and specifically the semi industry. Industrial technique on slide 10. uh very strong uh orders received 10 7.9 billion um and it was automotive that was really really strong uh no surprise this is linked to the ev and battery manufacturing around the world so we're happy that to see that we have products and the application knowledge to really get our market share in this new market General industry, a little bit mixed. Some segments were a little bit flat and some downs. I think it was rather flat. And service also here continued to perform really well. Record revenues, 28% organic growth, 7.3 billion. And then you might think that, well, do they have delivery issues still? Yes, we still have challenges on some components. So we are really fighting harder to get these kind of volumes out of all our business areas, but I think it's been slightly more challenging industrial technique on power electronics. Record operating profit here as well at 21%, 0.8% margin. And they actually had the growth from last year with 47%. PowerTechnik, remarkable journey the last two years. An organic decline this time, 12%. And what we've seen is that we have had a little bit less interest from the rental company in the US and some smaller cancellations also. That's mainly driven by shorter lead times from our own products. cancel something, and they rebook something. So it's not orders lost in any way. But six and a half billion done, and it's still the second best, even if it's negative 12%. So it's interesting to follow the recent acquisitions of our pump companies. They are performing well ahead of our plan. So better volume, better profit. And of course, over time, they will give us reduced seasonality in this business. And of course, also better service opportunities. So we will continue on this route. It started out really well for us. Record revenues, 26 percent up, 6.8 billion. And also here the record operating profits. at the marginal 19%, although that the acquisition are slightly dilutive, but not so much at this point. And here you can see a new range actually of dosing pumps from leva. So I'm happy to see that. We're also going to continue to push innovation in these segments as well. And an interesting acquisition team in Australia. And we're learning more and more about wastewater treatment, which we also think is one of the mega trends that someone needs to take care of. And we would like to do our part. On slide 12, you have the profit and loss. And as information on EBIT-A. It's 22.4 and what report has been done operating profit EBIT at 21.2. Peter, would you like to?