Atlas Copco AB

welcome to the atlas copco q2 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, and a very warm welcome to all of you on the line today for this second quarter earnings call for the Atlas Copco Group. I'm very happy to be here today to give you a bit more color on our second quarter results. And together with me, I have Wagner Rega, our CEO, who will, of course, guide you through the presentation together with me today. Before we start, however, I would like, as usual, to repeat one request, and that is once we start with the Q&A to please take one question at a time so that all of the participants in the call have an opportunity to raise the most burning question they have on their mind. And then, of course, when we get through the whole list, then we can go for questions. So thank you for that already. And with that being said, I would like to hand over to Wagner Rigo, our CEO.

Thank you, Peter, and welcome to this conference call. Before I start the presentation, you can see the picture of a gas and process compressor. This type of compressor goes mostly in gas processing plants, but also has many other applications, and we have expanded quite a lot the number of applications where this type of equipment can be used. If we move then to the second slide, the Q2 had a mixed demand, as you can see, but overall solid order intake. and the mixed demand coming from, we had market segments that performed quite well, but we also had the market segments a bit on the weaker side. If I give a little bit more color, for instance, gas and process compressors within compressor technique performed very well with a significant order increase, while industrial compressors were flat. Vacuum equipment orders were unchanged, but we see slightly positive in the semi-site and negative in the industrial and scientific vacuum. Orders have declined as well for industrial assembly and vision solution, more connected to the automotive business. and a decrease as well in order intake for power and flow. On the positive note, we have seen our service business performing very well, basically in all regions and all divisions. With growth, and when it comes to the regional growth, we had growth in all regions except Asia. And we had solid revenues and operation cash flow. Then if we move to slide number three, with a little bit more details on the financials, our orders received were 43.6 billion SEC with the organic decline of 1%, while the revenues were quite solid at 44.8 billion, an organic decrease of 2%. Profitability was 21.1%, more or less at the same level of last year. And then if we adjust for one-time items, and here this quarter we have the LTIs as one-time items, plus the restructuring costs that we had in vacuum technique. That was a significant value, but I would like to anticipate already on that restructuring cost that is mostly related to industrial and scientific vacuum that we have seen a slowdown in the orders, for instance, for lithium ion battery production, for solar production. but also the general industry vacuum, we see a weaken in the orders received before we decided to adjust the organization with one-time cost. This is not affecting our semi-business that we are very well positioned for the future, and the focus is going to be mainly on the industrial and scientific vacuum. Profit was $7.6 billion, positively affected by one-time item, a $510 million tax provision. And Peter will come back with more details on that one. And basic earnings per share, $1.57. Solid operation cash flow. and solid as well return on capital employed at 29%. If we then move to slide number four with the regional approach, so we see in total orders at excluding the current impact plus 2% worldwide. Of course, this includes acquisitions. But if we go a little bit more in details, we see the US with a positive development of plus 2%. If we give a little bit more color with the business area, we see positive development in compressor technique. And ITBA as well. And they're a little bit more positive environment in aerospace business and off-highway when it comes to ITBA. And we see a negative development in vacuum and negative development in power techniques. When it comes to Europe, compressor technique performed quite well. Vacuum was a bit more flattish and power technique had a solid growth as well. And the only negative business area was industrial technique, where we had negative, especially coming from Germany, coming from the automotive business. Very solid as well, Africa and Middle East. We have seen an increase in activity there. And we scored quite some big orders there. And we saw a significant increase of 45% coming from all business areas, but mainly compressor technique that has a bigger exposure there. South America, positive in all business areas. And then Asia on the negative side, Asia performed negatively basically in all business area except from vacuum technique that had a positive development. So compressor technique was slightly negative, power technique as well as ITBA that have also a negative development. On a positive note, most of the negative development is coming from China. Other regions, we had very positive. India, quite positive as well. Korea, that is quite important for us as well. If we then move to the slide number five, So we see the development of our order growth per quarter. And now we are in a phase that we are a bit more flattish after quite solid growth, very strong growth in 2021 and 2022. If we move to slide number six, we then see our organic growth. development that was minus 1% with 2% structural growth, minus 1% currency. And the 2% structural is coming mainly from our technique. When it comes to revenues, we had, again, 2% positive on structural growth coming from power technique and 2% organic growth on revenue with the same level of impact in currency. And we end up at 44.8 billion euros. So going to slide number seven, we see now with the organic growth in compressor technique of 6%, we see now in the last 12 months the orders for technique is contributing. BUSINESS, VACUUM TECHNIQUE WITH 2% ORGANIC GROWTH 21 AND INDUSTRIAL TECHNIQUE WITH MINUS 13 WITH 17 POWER TECHNIQUE WITH MINUS 11 ORGANIC GROWTH CONTRIBUTES TO 15% OF OUR ORDERS. IF WE THEN MOVE to slide number eight to give a little bit more details for business area. Like we mentioned before, we're going to go for compressor technique at 6%. The industrial compressors were basically unchanged with the negative development in China. But basically, when we put all together, it was unchanged. And quite strong development, like I said before, in gas and process compressors. And that is coming from several market segments. It's difficult to highlight one market segment because they have been, like I said at the beginning, they have developed the technology to be able to be deployed in different types of applications, and now they are harvesting from that. Service business also very solid in compressor technique. Revenues were up 9% organically, and operating gross margin, still operating profit, sorry, is still quite solid, and quite solid at 24.8%. supported higher volume and currency and negative affected from unfavorable sales mix. Return on capital employed remains quite solid. And as you can see in the bottom left of the slide, a new innovation, a new dryer that we have released that can offer dew points of minus 40% at any conditions without using electricity, using the heat of compressor. So quite a nice development there. Then on slide number nine, vacuum technique had 2% organic growth. And here, the semi-equipment orders were up. But it's fair to say as well that from a low level, but we anyhow we are happy to see a positive development there industrial technique and scientific vacuum equipment were down of course affecting the overall growth and we had solid solid growth in service and there we have two service divisions and both are performing very well Revenues were down. And here you can see the development of vacuum technique Q1, Q during end of 2021, beginning of 2022. We have a huge spike in orders received. We delivered those orders. Q2 was quite solid last year. And now we have a very strong comparison base. So orders were down organically. Operating margin was 20.1%. And here, there is the impact of the restructuring cost. If we adjust for the restructuring cost we end up at 21.5, and negative affected by volume, of course, because we endorsed less, especially on the semi-divisions, but also in industrial vacuum, and also by the sales mix. When it comes to return on capital employed, we had 21%. and here you see an innovation a new abatement system that that to be used in the semi business also a very good innovation with a very high decrease in the carbon footprint for our customers if we then move to IPBA that we like to call internally, but industrial technique. So they had organic decline of 13%. So markedly weaker equipment demand from the automotive industry, and that we saw strong decline in Asia, especially in China, and also a decline in Europe. Equipment orders to the general industry were unchanged. and solid growth for services as well. Revenues increased 4% organic. We still have a good number of orders on hand. And operating more 20.8, negatively affected by investments in R&D, some digitalization and project business. We have been voiced some project business and that had an impact in the profitability as well. And the automotive industry is also in transformation that requires some investment for new technologies to be used there. We continue to invest there, also software. is becoming more and more important part of our business in industrial technique and there we have done quite some investments uh on that area and that had an impact as well and return on capital employed at 22 percent And here we see an innovation or a new tool that is a cordless tool that can be used in industrial and automotive, but it's a new tool that is where the main focus is to further grow our industrial business. our general industry business within industrial technique. And if we move to slide number 11 for power technique, had an organic decline of 11%. And here you see equipment orders down markedly. But here it was more in the industrial power and industrial pump And they also have some large orders, large system orders that does not repeat every quarter. There is a timing issue there. But the business remains quite solid when I look to all the other businesses like portable compressors, rental business and service are quite solid within power technique. Revenues were up 8%. Organically, it was flat, mainly driven by acquisitions. Operating profit margin at 19%, also quite solid. You should remember some years ago they were running at much lower volume. It's good to see that they have reached this level and they have sustained the profitability at this level. So the profit was supported by increasing organic revenues and sales mix and negatively affected by the acquisitions. Return on capital employed of 20%. And here another innovation, a new medium-sized energy stock system that can be utilized in combination with our electrical power, electrical portable compressors. Good. If we then move to slide number 12, we reach then the profitability. So we have been through the orders received, the revenues, and then if we look at the profit excluding the depreciation of intangibles related to acquisitions, we reach 22%. which was the same level of last year, and operating margin of 21.1, slightly down from last year, 0.1% down compared to last year. But I guess now I think we need a little bit more details on the profit, and now I will hand over to Peter. Peter, please.