Atlas Copco AB

Welcome to the Atlas Copco Group Q3 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. First of all, a very warm welcome to all of you attending this quarter three earnings call for the Atlas Copco Group. Together with me is Wagner Rego, and I will, together with Wagner, guide you through the presentation in the coming minutes. But before we start, I would first already now like to remind you, as usual, that once we open up, I would like to ask you just to ask one question at a time. in order to make sure that all of the participants have an opportunity to raise their most burning question. And of course, we have time left and there's always the opportunity to come back with second and follow up questions. So thank you already for that before we start. But with that, I would like to hand over now to Wagner Rigo, our CEO, who will guide you through the presentation.

Thank you, Peter, and welcome to this conference call. This time we have decided to start with the service picture. The service is an important part of our business, has performed quite well, and for sure people is a very important part of that business. Going to page number two, Q3, overall stable orders received coming from mixed and market demand. If we look more in details on our different market segments, industrial compressors, for instance, had flat orders received, and gas and process compressors had lower orders received than what we have had before. Good growth in vacuum coming from the semi-market. while industrial assembly and vision solutions were down, driven by the automotive industry. We also had the weaker demand and power and flow equipment compensated by acquisitions. And like I said at the beginning, the service business continued to perform very well, and we had growth in all service in all business areas. So, and we end up with a health operating profit followed by solid operating cash flow. And it's also important to highlight this quarter we have completed 10 acquisitions. Then if we go further into the information, we see that orders received were around 42 billion. So with organic growth of 1%, while revenues were 43.1 billion with organic decline of 1%. The operating margin, the operating profit was 21.7 compared to 22.7 last year. But we also had some items affecting comparability. This case, this quarter, we had some restructuring costs coming from VT and ITBA, and Peter will come with more details later on. The profit for the period was 7.1 billion, and basic earnings per share were 1.47. And like I mentioned, a solid operating cash flow at 7.5 million and good return on capital employed around 28%. If you look to the chart on your right, you see our profit level has been quite stable. And with the adjustments we have had, we were at 21.9, which is a solid level. Then if we look how we have performed over the regions, if I start with China, not with China, but with Asia, we see stable orders in compressor technique. Vacuum technique performed quite well in Asia, coming from the semiconductor market, and we had weaker IT industrial technique and power technique in Asia. If I look then to Europe with minus 4%, Here, also positive vacuum development. We had very good orders received for the semiconductor in Europe, but not only. Also, the industrial vacuum or general vacuum was quite positive. Compressor technique was down, mainly due to gas and process compressors. while we see a flat development in industrial compressors in Europe. And industrial technique went down, mainly driven by the automotive segment. When we look into Europe, we saw a positive development in power technique with a quite nice increase in orders received. But of course, with the low comparison base in Q3 last year, a flat industrial technique, and opposite to Asia, vacuum technique had a negative month, negative development in orders received, followed also by a negative development in orders received by compressor technique. And then, again, mainly driven by gas and process compressors. Solid Africa and Middle East, mainly due to the Middle East, and also solid South America with plus 10% development. If we then move to the organic order growth per quarter, we see a flat development in the last two quarters, but we stay in a good level. If we then move to slide number six, we can then see that the structural change has a 2% impact in our orders received. in the quarter, mainly coming from acquisitions. Currency, we have suffered. We had quite a lot of headwind with 4% negative impact, 1% positive impact in the organic, like I mentioned before, while in the revenues, it's the same trend, but with minus 1% on the organic side when it comes to revenues. and we ended up at 43.1 billion CEC. If we look to the year-to-date development, we then have a positive organic development in the revenues, plus 2%, and we are now on minus 2% organic development for our orders received. Then if we see the contribution from the different business areas, Compressor technique has a solid contribution for the overall group with 47% of all the orders with plus one organic growth. And like I mentioned before, it was flat in Asia, a bit negative in Europe and North America, and quite positive in South America and Middle East and African Middle East. Vacuum technique had a positive organic growth of 10%, coming mainly from a positive Asia and Europe, but a negative North America. Industrial technique had a minus 7% development, mainly driven by automotive, and is now 16% of the group orders received. And while power technique continues as well, 16% of the group revenue and a flat development in terms of orders received. If we then go a little bit more in details, in compressor technique, like we said, 1% organic development. Industrial compressors were flat. with gas and process compressors going down in orders received. Solid growth in service. We continue capitalized on the base that we have and the latest invoice that we have done in equipment that we continue to capitalize on that. I think it's very important. Revenues increased 2% organically. and a quite solid operating margin of 26.1%, supported by currency and combined with volume price and mixed effect. Return on capital employed went up to 85%. And in the quarter, we have released a new product range for compressing biogas. and also to allow upgrading into biomethane for natural gas refueling and gas grid application when you need to do the grid injection after the upgrading of the gas. So continue a good journey and profit went slightly up. If we then move to the next business area, Vacuum technique had a solid organic growth of 10%, but here we had a lower comparison base. But still, we are quite happy to see a positive development coming mainly from the semiconductor market and mainly coming from Asia, like I mentioned before. Industrial and scientific vacuum equipment is still in a negative trend. while the service business continues to develop quite well. Operating margin at 19%, and we did have some items affecting comparability. At this time, we had restructuring costs booked in the month. We saw that we still have a negative trend in the industrial and scientific vacuum, and we have decided to further adapt the organization to cope with that negative trend. So we also had a quite relatively big impact coming, negative impact coming from currency that brought the margin to 19.3%. But again, Peter will come back with more details. Return on capital employed around 20%. We also here released a new integrated vacuum and abatement system for the semiconductor market, specially designed for safe handling in high-results production processes. Then, if we move to the next page, number 10, we have industrial technique with the organic decline of 7%. mainly coming from the automotive industry, and I think it's quite visible. I think quite, we are all aware about the negative trends, in the automotive, they slowed down in the EV adoption. So then we have seen less decision being taken when it comes to new projects. And that had an impact in our orders recently. Equipment orders for the general industry were basically flat and continued growth in the service business. Revenues were also down 3% organically. And our operating margin end up at 20%, and also here affected by restructuring cost, without restructuring cost at 20.6. So margins were negatively affected by lower revenues, lower revenues volumes, and currency as well. Return on capital employed is likely up. And we also come up with a new range of robot guide vision sensor for quality assurance, supporting improved inline inspections of painting surface for the automotive industry. It's a quite interesting product. We keep on extending our vision solutions as well to support automation. So, When we go to the power, to the next slide, power technique had a flat organic development, weaker demand for equipment, and the order growth was basically driven by acquisitions. So, and also stable demand for specialty rental. Solid growth for service here as well. So we capitalized on the installed base, and revenues were down by 5%. Operating margin at 18%. Of course, with a very high comparison base, 20% of Q3 2023 was the best quarter when it comes to profit margin for power technique. And the margin was negatively affected by the lower revenue volumes. Also investments that we have done in our fleet that we will turn in revenue in the coming quarters as well, and negatively affected by the acquisitions. Return on capital employed at 18%. And we have released a new range of surface dewatering pump. Now with connectivity includes, and those are the high head, what we call high head brands for high pressure and high flow to perform in very tough environments. So if we go to the next slide, we can see that then we had, you have seen already our orders received and revenues. And if I can comment then, if we exclude the amortization of intangibles related to acquisitions, our margins were at 23%. So, and of course, including it was in one-time items was 21.7. So, we have some items affecting comparability. Perhaps it's now that you take over, Peter. to further explain our profitability.