Atlas Copco AB

Welcome to the Atlas Copco Q1 2024 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 hash 5 on their telephone keypad. Now I will hand the conference over to CFO Peter Kinnett. Please go ahead.

Thank you, operator. Good morning, good afternoon, good evening for all of you on the call today. I'm happy to welcome you to our first quarter earnings call for 2024. Together with me is Mats Ramström. But before I hand over the word to Mats, I would like already now to ask you that once we start with the Q&A session, that you please refrain yourself to only asking one question at a time in order to make sure that all people that have a question are able to bring their question forward and we can provide them with an answer. Once we get through the queue then of course you're more than welcome to ask additional questions. So thank you for that already now and with that I hand over to Max. Thank you Peter.

We have a tradition that we honor one of the business areas with the picture and I just want to shortly describe what it is. This is a self-piercing rivet machine. you can see the aluminum panel and it's important that it's aluminum it's very difficult to weld and then many of the car customers then use the self-pressed riveting and between the rivet it could be dispense equipment and you can also use vision for this type of application so that was the training for today so we go to slide number two and i start by looking at the graph and if you can look at the Q4 orders received in dark blue and then the orange in Q1. You can see the sequential growth for orders received. It came in better than we expected when we guided you earlier. We came in at 45 billion, which was minus 4%. But it's still the second best quarter we have had. And of course, we are building a little bit on orders on hand as well. this invoicing was slightly slower than so compressor technique 21 billion minus one percent so pretty flattish vacuum technique at 9.1 and slight positive development in semi on the other side then a little bit negative development for industrial and scientific industrial technique as they were honored with the first page you can see they were plus three percent and 7.8 billion And then on power technique, there was $8 billion, down 17%, which was expected versus the very tough comps from last year. Very promising as well that we can see continued growth for service in all business areas. Looking at the revenues, $43 billion, plus 7%. Positive for compressor technique, up 8%. vacuum technique minus three industrial technique plus 19 and power technique plus nine and you can see at this stage that we are back at a normal delivery for all business areas we always have problems but i would say it's a fairly normal state and orders on hand then still strong orders on hand for compressor technique industrial technique and power technique and a very normalized situation for vacuum technique. So that we need to bring in some new orders. We go to slide number three. And the first points are just a confirmation of what I just said. And then we have the operating profit at 9.3 billion, which is a 7.5% growth versus last year. At the very healthy margin, 21.8. Still diluted a little bit by the acquisitions. Adjusted operating margin is the adjustment for the long-term incentive program option. And then it was at 9.5 billion and the margin at 22.1. Continued strong return on capital employed at 30%. You can go to slide number four. The geographic map. And if we start with North America, we can see minus 12. CT did okay. Industrial compressors were flattish. We had lower on the gas and process. Still, though, on a very high level. So the comparisons was very strong. So we still see gas and process are strong. Positive for... vacuum technique especially from some of the key accounts in semi industrial technique also positive and the big negative actually came from power technique and we could not repeat the huge orders we had last year for the rental company and maybe equipment if you go to south america class eight compressor technique very positive and power technique very positive same for african middle east Very positive for compressor technique and power technique. And the main part of those orders come from the Middle East. A positive surprise, I must say, in Europe with plus four. Slight positive for compressor technique. Vacuum a little bit flat. But then positive for industrial technique. And we can see that that's come from aerospace, energy transition. And also some that we get more scoop of the supply with the automation strategy, screw feeding, et cetera, et cetera. And then very positive on power technique where the industrial pumps continue to deliver good growth for us. Maybe the areas of concern is Asia. Of course, you know that around 20% of our business is in China. We had less demand in compressor technique on the bigger compressors. Vacuum was a little bit negative. IT, industrial technique, was flattish. And I can see China being a little bit softer on battery, EVs, and solar, compensated by business in Southeast Asia. And also India for the whole group did really, really well as well. And power technique helped up the number with the strong development on the acquisitions, but taking that away was actually a slightly more negative view that would take away the acquisitions down. So in this quarter then we have seen a softer China specific. And if we take that to slide number five, and you can see then the organic growth was negative. It might sound strange, but we saw that little negative as something fairly positive for this quarter. If you go to slide number six, you have the bridge. You can see that we have some help from the acquisition, 2%, currency negative on two. So the organic came down to minus four then, but still then 45 and a half, which was good. And Peter will continue, as he always does, on the guidance for the currency later on in the presentation. We change to slide number seven. Of course, it's important for the group that compressor technique continues to deliver, which they have had on the growth path for many years now. And now it's a little flat vacuum. You can see that it's... It's been on semi-specifically that there's a lot of interest around that. There's a number of months on a bottom-up, a little bit, and a little bit more positive signals right now. Industrial technique with a slight growth, which is also constant from the broadening the scope of supply that we have. And power technique at 15, minus 17, but 15% of the group. In short term, if this is 12-month rolling, if you just look at the... The quarter of the power technique was slightly bigger than industrial in this quarter. Then we take the specific business areas. So orders down. One of the areas that we saw softer demand was China. And it's linked to the battery and solar. We read it as an overcapacity. But we still have no concern about the long-term trend in these segments. It's really moving forward and taking the lead in EV cars, for example, which we've also seen in industrial techniques. But we also could see the gas and process compressors down, but that is on an exceptionally high level last year. So no concerns there either. Solid performance by service again. They are really developing their digital presence, how they run analytics and also take advantage of AI today, which I'm sure you're going to see on the capital markets they have to do that. Revenues continue to grow at 8% and once again a fantastic operating margin at 24.8% with 9% growth. And this is when we still go fully ahead with R&D and building up capacity. And a slight delusion from acquisitions. You can see five acquisitions in the quarter. I think the one from high comp, high pressure, is interesting for us. A little bit new competence into the group. I also see the Valves Energy helps us with energy efficiency that we stepped into two smaller companies, but interesting technology that we can really build on. And then another three distributors that we signed up and now own. I get some kind of questions that if we are taking this business more direct and maybe also as a reminder that we, yes, we buy a few distributors. On the other side, we are signing up more distributors than that. So that is not that we are changing the go to market strategy. We take slide number nine, which is vacuum technique. And if you look at the graph, then you can see sequentially that come back a little bit on the growth path again. And for SEMI specifically, we can see at our customers that there's a positive development on price. Inventories are coming down and utilization is up. and also see the confirmed by our own numbers that we get more pump returns for repair, which means that they are really utilizing the factors a little bit more. And we can also see that the chamber solution, which is a little bit early into this, had a positive development. So a few positive signs for SEMI. That does not mean that the next quarter is going to be fantastic or anything like that. But the AI starts to drive, and there's a lot of things happening in this segment. On the other side, as I said, the industrial and scientific were done for the quarter. Also confirming then that the growth for service continues for us. It also confirms the trends that we have seen. Revenues down. And as I said, the orders on HEM had normalized now, so there is no backlog to invoice from. And operating profit at 21.8. And we have not held back on next generation of products for SEMI, for abatements, we go full speed ahead. And we're also building on the local strategy in terms of capacity and agility for them. de-globalization this industry that we see. You can also see the Polycooled, a new cooler with very good data on energy efficiency. We go to slide number 10 which is an industrial technique and as we honored them with the first page they can see that they're up three percent. What we do see is that The strategy surrounding the tools with automation is paying off. We see more product orders for when we get screw feeding, we get vision, we get software. So the supply from us is greater than before. So sometimes I think we are gaining market shares in these areas. In the quarter aerospace did really well. It actually did really well in electronics as well. I don't think that market is specifically strong, but I think we gained a little bit of market share there. And also here then continued solid growth for service and in this case also then record revenues with 90% growth and an operating profit model at 21.9%. to the last business area, which is the power technique. I would not read too much into the decline that was expected, especially if you take a look at the graph. You have one quarter that really stands out, and that was the rental companies when we had longer lead times that they placed more orders. So this is the second best, even though it's down somewhat. and still this year then it's the change if you would compare those two graphs it would be the us rental companies mainly that placed less orders and acquisitions continue to do really well i mentioned the industrial counts before and they have had a solid quarter they also continue to grow in service and i always said that it's it's fairly tricky with the portable equipment to be good in service but we do a good job there We are also industrializing the pump service as we know how to do it. So I think that will continue to be a positive development for us. And the operating margin is 19.3. Maybe I should highlight the product here. You can see it's a portable compressor. It's under the Chicago Pneumatic brand and it's a strategy that we've been working for a couple of years. It's starting to get good traction now. It's a clearly differentiated product for the mainly for to start with to the US market but we can implement this strategy and it's a really good strategy for us. Premium product, Atlas Coco CP, more basic functionality and it's a good price and good quality and if you want the highest efficiency you will go with the yellow product. In the month also we closed on the Kracht external gear pump company added 750 million. They are really strong into wind power. So we are learning more about the external gear pumps as well. So adding to our portfolio industrial pumps. Then go to the profit and loss. We guide you on the EBIT A. And the A is the amortization on the intangibles on the acquisitions we have done. And then you can see that we were at the margin at 23.1. And on EBIT level, we report on 21.8. So to summarize, it was, order-to-seed-wise, the second best order for us, second best for CT, IT, and PT. And we can see that there is a strong acceptance for our new products and the concept and the services continue to grow. And by that, I hand over to you, Peter.