Atlas Copco AB

Thank you, operator, and thank you, everybody. Welcome, everybody, to this quarterly earnings call for the second quarter for the Atlas Copco Group. Together with me is Wagner Rego, and we will together join, drive you through this presentation. We will try to be crisp and sharp, so we leave enough time for you to raise your questions based on the published results. But before I hand over to Wagner, I would like to restate, as usual, that I would like to ask you to only raise one question at a time, so we give everybody the opportunity to at least raise their most important question. And if we, of course, get through all of people online with their questions, then, of course, we can come back for a second follow-up question, should you have it. But with that, no further ado, I will hand over to Wagner Rigo.

Thank you, Peter, and welcome to this conference call. Before we continue with our presentation, first you can see two vacuum pumps that we utilize in our scientific vacuum division. They are used in mass spectrometry and has been a good development also in the quarter for this type of products. Going further then into the Q2 summary, You can see that in terms of equipment sales, we have seen a quite mixed demand with the divisions performing quite differently. If I look then to compressor technique, we had a negative development in orders driven mainly, but not only by gas and process compressors. I was happy to see that the equipment vacuum was flat, not a positive growth in semi, but positive growth in industrial and scientific vacuum. But it was good to see the overall business area good development. Orders for industrial assembly and vision solutions were basically unchanged. And there we still see a quite difficult environment in automotive. So, and when it comes to power, power technique products, starting with power, air products and pro products, there we had quite positive orders received, good development when it comes to orders. If we then look to the service business, there we had a very good development. Our service business within the business areas plus our rental business is developing very well. We are quite happy to see that we continue to grow our service business. As you know, as you have seen, we had quite a strong currency headwind that impact the absolute value. And then revenues have been impacted as well, negatively. Three business areas had negative organic growth when it comes to revenue, while compressor technique had a positive development. As a consequence, operating profit was also impacted by currency in one hand. In the other hand, we had a positive contribution coming from the combined volume, price and mixed effect. Cash flow is healthy and that allows us to continue to do investments in our own facilities, in our own company, but also in acquisitions that we managed to add another five companies in our portfolio. So going then into the Q2 financials. So the decline, we had around 40 billion SEC in orders received, decline of 1% organic. We go more in detail on the distribution, but it continues this quite mixed demand in the market. Revenues, as you can see as well, minus two decline. and operating profit of 8.4 billion SEC. That represents a margin of 20.6%. So solid cash flow and also quite a good return on capital employed, although it's going down, but 26% is a solid level. If we then go to... the development around the regions i think if i start with asia we had the flat development zero growth in asia if i give you a little bit more color we see a positive development in industrial technique mainly driven by orders in the electronic area so within our industrial part of the business. So positive development in industrial technique. Also vacuum is developing quite positively in Asia for us. And while PT was flat, NCT was negative. Compressor technique was negative, mainly driven by lower orders in equipment, specifically in China. So when it comes to, if we then go to Europe, we see minus 2%. And there we saw negative development in compressor technique, vacuum technique and industrial technique. And a bright spot in Europe was power technique, where we had quite a good development in orders received. When it comes to North America, We had quite a flatish month, positive in power technique, but vacuum technique was negative, mainly driven by the semiconductor market, where a couple of key accounts were not investing as before. And then you see the development in South America and Africa and Middle East continues to be very good. So with that, if we then look into our sales breach, we see that we still have positive contribution coming from our acquisitions of 2% in both in orders received and revenues. We see also the currency developing negatively, minus nine in our orders received, minus eight in our revenues, and then the organic, like we mentioned before, minus one in orders, minus two in revenues. So it was a mixed, clear picture of a mixed demand for us. If we then see the contribution by business area, we saw that in the last, we can see in the last 12 months, compressor technique has a contribution of 46% in our orders, with minus seven now organic orders. vacuum technique very good to see positive organic development of three percent also positive development in uh power technique plus ten percent and flat development in industrial technique so if we then Go more in details and talking about compressor techniques. We had an organic development of minus 7%. If we start then with industrial compressors, it was down, overall down. but mainly driven by larger compressor. If we look to smaller compressors, more getting close to be flat and larger compressors, it was more negative. And most of the large compressor projects are in China. And I think there you see the main driver for a lower development in an industrial compressor but not only i think europe was slightly negative there as well good development in the us so i think i would say that china had an important impact When it comes to gas and process compressor, we saw a significant decrease, but then we need also to remember that we talk about large orders, not too many orders. Sometimes when we get an order can go up to 200 million Swedish kronor in one order. And we have a tough comparison last year and last quarter. And we didn't see too many projects being decided in Q2 2024. There are a lot of hesitation in the market and customers did not decide as we usually were seeing. So positive note, service continue to grow in all the regions. I think we are quite happy with the development of the service business in compressor technique. Also, we had organic revenue, solid profitability supported by the increase that we had in volumes and also affected by the currency and acquisition. Return on capital employed remains at a solid value at 82%. And here, as an example of innovation, we share a different application. We are investing in filtration products. And here is one example of a product that utilizes filtration for liquids. So quite a good development on revenue and profitability and headwinds when it comes to orders in compressor technique. Vacuum technique, like I said before, we are happy to see a positive development. driven mainly by industrial compressors, industrial vacuum and scientific vacuum, together with service. We still see slightly negative development in the semiconductor equipment business. So although we see solid development in Asia, I have mentioned as well before, we see negative development in Europe and North America. Revenues down 5% organic and the profitability was around 18.9%. supported by the activities that we are doing to improve the cost base. So we have announced in January a restructuring plan that is still ongoing, and we started to see the benefit in the bottom line. Of course, we had the currency headwind that also played a role in Vacuum Technique, where Peter will explain more in details. but we are happy to see the positive effects from our sourcing and restructuring activities. Then as an example of innovation, we have our new GHS pump, VSD+. This product was released at the beginning of the journey when we started with vacuum, when it was still within compressor technique and now we came with the new range of products to further drive innovation and efficiency. That is vacuum technique. If we then go to industrial technique, we saw um a decline of one percent and the equipment for the demand for equipment in automotive was flat and here and here we have some some parts of the business that are doing really well with the if you take for instance everything connected to automation quality assurance and flexible production line upgrades to have a more flexible production line that is going quite well I would say even with organic growth and everything connected to new production line like dispensing equipment and vision equipment i think that is a bit more difficult because we don't see too many projects like we we used to see So overall demand for the general industry was stable. So and that includes that we got a quite important order for electronic industry and the service business remained basically unchanged. Revenues, there we have quite a lot of headwinds when it comes to revenues, down 12%, with the operating margin of 17.1%, that had a quite significant impact coming from currency as well, and a positive organic development. Also there, we have implementing some measures that we see good results. As an example of innovation, and there we continue to do our efforts to innovate our products, this is a manual torque range that has received the Red Dot Award in 2025. We are quite happy with the award as well. If we go then to power technique, We had a solid order development of 10%. I think it was quite encouraging to see. Perhaps the level previous year was not so strong, but I think very nice development. Basically, several product lines in power, in industrial flow, in portable flow, they all developed quite well. Specialty rental as well had quite a good development. Unfortunately, we haven't seen good revenues. It was down 1%. But of course, we had quite tough comparison. We were last year catching up with our backlog. So we had quite solid stronger revenues and with the orders we get now, revenues should come in the future. Operating profit margin 17.1, that was also negatively affected by currency, but not only, also there we are investing in this industrial flow division, Like we mentioned in the previous quarter, we decided to separate the portable flow from the industrial flow. There is a new division we are investing. We still don't fully harvest on that. We start to see the first signals, especially in the US, that we are moving in the right direction. So as an innovation, we have this new dryer that is focused for portable application portable and Rush applications to be used with our portable compressors So, and then if we look then to our profitability, we have reached in the quarter 22% EBITDA. With that, I would transfer to you, Peter, then you can continue. on other lines of our profit margin.

Thank you, Wagner. Net financial items were negative, but slightly lower than last year. Interests were basically on the same level, but the financial exchange differences were more positive compared to last year we also had a small additional positive impact from the bond we bought back from the market as a kind of one-time small effect there then the profit before tax at 8.4 billion and the tax expense at 1.9 which is 22.4 percent effective tax rate You see that last year we had this very unusual low effective tax rate of 17.6. That was mainly due to the fact that we then released a provision of 510 million Swedish Krone related to a high tech tax incentive that we have in China. So this is not the normal. So the 22.4 is actually much more close to what we expect to see. And in fact, for the third quarter, we expect an effective tax rate of around 22.5% going forward. If I then move on to slide number 12, I would like to dig in a little bit deeper into the profit bridge. because there's quite a lot of different impacts here. First of all, we have the LTI programs that we exclude, which is 258 million Swedish Krone, a little bit positive for this year and 176 million Krone negative for last year. Then we have had last year restructuring costs. uh in vacuum technique which where we started basically the first leg of our restructuring activities in that case mostly around the industrial and scientific vacuum space which is added back the acquisitions are slightly dilutive as you can see but then the the headline i would say of the of the bridge here is then on the one hand quite a strong negative currency impact uh as Wagner already explained as well but then I would say on a positive note a positive drop through for the overall group performance with despite let's say a negative top line volume price mix effect here on the top line So where does it come from? Well, basically, the price volume mix effect in total is the main reason for this improvement, plus a lot of smaller other items that together add up to this amount and this margin improvement. On the currency side, there is a mixed bag of different things. Considering the height of the amount, I would like to specify a little bit more in detail. First of all, the translation impact was, well, all the currency impacts were basically negative in absolute terms. The translation impact, however, in relative terms was accretive to the margin. the normal transaction effect excluding the operating exchange differences was on the other hand negative and they basically compensated each other and the whole remaining part was then related to balance sheet evaluations so basically payables and receivables that we evaluate at the period end rate um for uh and for the majority i would say roughly half of that is related to intercompany uh payables and receivables and then the other half is kind of related to the external exposure we have and and we as a group are basically long in us dollar and we are short in euro and given the the strong development of the dollar over the quarter starting with a very deep drop in april and then followed by a continued decline in in june led to this very significant currency impact reducing the margin quite significantly. But again, once we were able to identify that, I think the positive that we take out of it is that we see a positive drop through. And if we look in more detail on each of the business areas, then I think you can see that three out of the four business areas have actually a positive drop through and all of the business areas are basically struggling a bit with the currency development. across the board some more than others in compressor technique it was a negative impact but relatively mild and then the positive drop through was driven by increased organic revenue volumes which which I think was quite positive here resulting in a fantastic margin of 25 percent On vacuum technique, the currency impact was quite significant. But also here, very pleased to see that the impact of all the efforts that the division and the business area is doing are really starting to kick in and starting to pay off, resulting in a better underlying margin than the previous quarter. And it's related to the restructuring activities, of course, on the one hand. on the one hand, excuse me, but also related to initiatives around product cost reduction to sourcing initiatives and many other things that are ongoing at the same time within the PA. On industrial technique, also here quite a significant currency impact, mostly linked to the fact that it's largely Europe based manufacturing environment with exposure to all of the areas in the world, of course, and then quite a big impact. But also here a positive drop through for the business area, improving the margin somewhat, but then of course completely compensated by the negative impacts from the currency. So despite the negative volume development, volume price mix development, still a better margin ultimately than if you exclude the currency, of course. power technique here we also saw a negative currency effect but much softer as well here than for the others and that has to do with how the business is basically spread out across the globe and where the manufacturing is taking place so they are a little bit less exposed than some of the others but here we saw a negative impact on the margin from the volume price mix and other items Partly, as Wagner indicated, mix was a negative item, but also the investment in the division where we are trying to put in the right resources in place to really leverage the capabilities of the industrial flow business, for example, which are pulling down the margin for the time being a little bit. How do we see the currency for the near term? To be honest, it's probably the most difficult question to ask at this point in time, looking at how the currencies have developed over the last quarter. But all things being equal. And then, of course, comparing the currency rates against last year, we still continue to expect a negative effect. But this quarter was heavily affected by the revaluations. And if the currencies would stay exactly where they are today, then that revaluation impact would be significantly lower. So still a negative impact, but significantly more moderate, we expect than we have seen this quarter. Then on the balance sheet, I think it can be fairly short. If I compare balance sheet of last year, June to this year, June, then we have had more, of course, acquisitions that have added to the equation, which on the other hand has been offset or more than offset even by the currency development of the balance sheet items. And then on the other hand, also some organic growth. of the balance sheet items which was mainly linked into the cash development which was quite healthy as well throughout the quarter of course also here to take into account that we paid the first installment of the dividend of 2024 into 2025. On the equity side, also here, no major things to comment on besides the fact that it's mainly the equity that changes as a result of the profitability and the payout of the dividend and the revaluation of the equity as a result of the currency development. Then on slide number 15, we have the cash flow. this cash flow as you can see is not a record cash flow it was actually even a little bit less strong than last year which is also why we felt that to qualify it as healthy was good because the level is still quite reasonable with 6.1 billion operating cash flow and the decline is mainly coming in this case from the operating cash surplus basically let's say the lower operating profit that we have seen in the quarter. There are, of course, other movements in there, like the working capital that was a little bit up in view of certain deliveries of projects that need to happen in the third quarter. But that was also offset partly by increase of liabilities. So those are, I think, the main items when it comes to the cash flow. And with that, I would like to hand over again to Wagner, who will comment on the near-term outlook.

Very good. Thank you, Peter. And here, once again, this is our forward-looking statement. It's a sequential guidance between Q2 and Q3, this time, and is not a straight projection of our orders received we try to do our best estimation about what is going to happen with our customer activity level in the coming quarter. So we also need to consider that the uncertainties in the geopolitical scenario remains in place. I don't see any change. I think we all follow the news and what is happening in the global economy. I think we don't see light at the end of the tunnel that the environment is going to be better. So that's still very difficult to predict. And then to give you guidance, of course, we look into our business. I must say that this quarter we went even deeper to understand what was going on in terms of the activity level and then based on the information we get from our divisions in their engagement with our customers and everything that we see in the market and based in the in the expectations as well of our divisions we come up with uh with this guidance that while the outlook for the global economy continues to be uncertain. And I think that we all agree with that. We expect that the customer activity will remain at the same level.

Okay, thank you, Wagner. We are almost ready for the Q&A, but just I would like to still steal one minute of your attention referring to our Capital Markets Day, which will take place on November 26. So if you haven't done already and have not been informed so far, please try to save the date. I think it will be definitely worthwhile to take part. This time it will take place in Stuttgart and in Breton. In Stuttgart we will start with the general presentation of the group, but we will focus also on industrial technique and vacuum technique this time. And in the afternoon we will go to Breton, where we have our innovation center, which is focused around all kinds of fastening and joining technologies where we will then showcase different products and different solutions we can offer to our customers within the industrial technique business area but also innovations that we are bringing to the market from our vacuum technique business area so i think definitely a worthwhile to spend your time uh to to join us there and the registration link will be sent out after the summer but november 26 can already be highlighted in your agendas as an exciting day to look forward to in the latter part of the year but with that enough talking i will give the word back to all of you to shoot your questions at us and we will try to do the best we can to answer them satisfactorily

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Michael Harlow from Morgan Stanley. Please go ahead.

Hello, good afternoon and thank you very much for the presentation and for taking questions. Just one, if you could give us some color on the underlying drivers of the weakness of the demand for the large gas and process category, that would be very helpful.

Thank you. thank you for the question michael yeah what we see now it's quite a lot of hesitation from our customers to place order so and then like i mentioned during the presentation we do have some large orders and then if you have two or three customers hesitating or further analyzing asking more questions. So then you can have a quarter where orders can be quite weak. So on the other hand, what I can say, the activity level in this type of the products remains quite healthy. We see quite a lot of projects, but I think the main question is the hesitation. Now we see customers taking longer to decide to place the orders. A lot of discussions, but we know orders. But it's also fair to say I don't see signals we lose more orders as well. I think that's a clear signal. The projects are there, are alive. It's a matter of time now for the customers to decide.

Thank you. That was very helpful.

The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good afternoon. Thank you for taking my question. I just wanted to follow up on some of the comments you had on the margin, and maybe if you could dig a bit further, especially on vacuum technique, which was sequentially done from 1Q, and in industrial technique where you mentioned functional costs. even the contribution margin FX is a bit lower. So is there anything else more of an exceptional nature, restructuring costs, tariffs, and how should we think about those evolving in the coming quarters? Thank you.

Thank you for your question, Daniela. Maybe a good point that you raise is, of course, the burning question of the tariffs, which I didn't even address during the call. And I think the comment we can make with regard to the tariffs is that where we are today, We haven't really seen significant impact at all of the tariffs on our bottom line. We've been able to increase prices a little bit. We've worked with surcharges with certain customers, etc. But on the other hand, we've also worked a little bit on certain logistic flows without really moving production structurally from one location to the other. and that has helped us to mitigate basically the impact so if we talk about tariffs we talk about anything between zero minus 0.1 percent maybe impact but really really minor at the moment of course taking into consideration that maybe there is still an impact of stock that is already available that is not exposed to tariffs Etc so remains to be seen how things play out we don't really know exactly what kind of tariff will be in place to begin with but At least no major impact so far. And I think the actions we've taken have helped us to mitigate. When it comes to VT, then specifically your question about the margin. Well, I think the currency impact is, as I said, very significant for vacuum technique. Also, the revenue volumes are down, as you can see from the bridge on the top line. But despite a drop in revenues, which we have already seen also in previous occasions, we are able to reduce the impact from a cost point of view. And as a result, get actually a better margin, better drop through for vacuum technique. And that signal today in second quarter is stronger than it was in the first quarter. and that at least gives us let's say a positive feeling about how the future will look and we expect that we will continue to see the impact of those efforts we have done with restructuring and so forth into the the the margin and the production cost as well as in the functional cost of the of the business business area okay thank you you're welcome

The next question comes from Claes Berglund from Citi. Please go ahead.

Hi, Wagner and Peter, Claes at Citi. So back to compressed technique. Obviously, investment positions pushed to the right given the hesitation out there looking at larger orders. And that shouldn't improve anytime soon. But no further declines quarter on quarter here at least if we read your outlook right. But on gas and process, could you help us, Wagner, with the order pipeline there at the moment? This is obviously a lumpy business. We know that vessel contracting looking at LNG is down a lot and carbon capture and other sort of B-carb areas are fading from the peaks. But what are you seeing in terms of pipeline customer negotiations? Are there still interest to place orders, do you think, once the hesitation eventually abates? Thank you.

Yeah, of course, always difficult to predict, but I think we see a lot of activity. I don't see cancellation in projects. Of course, nothing above the usual. You always have new projects coming in, projects dropping out. but I think the activity level is quite healthy. On the gas processing side, I think it's quite healthy. If you take some particular specific region, if I look to North America, for instance, i see increasing the activity level there other areas might have decreased but there we see increase we are quite active coating but of course customers are not deciding but i think the activity level has increased even in some specific areas but of course we still need to see it like you rightly said customers need to decide to go to final investment decision which we have not seen and sometimes they have decided but we still haven't seen the order even if we know that we have good chances there are LOI in places but those are not firm orders so I think there are quite a lot of activities You are right when you pointed out carbon capture. To be very specific, Q2 last year, we had a huge order for carbon capture in the gas processing plants. And now we need to see if this market will continue to evolve. But there are many other opportunities that are ongoing indeed. For LNG, it's another market segment that's important. We are also doubling down. I think it's important to communicate on larger compressors for air separation. We have come with new technologies that we have invested a bit in AI that allow us to even come with more efficient product. I think it's exciting what we have for the future, but we need to have a better environment and that will allow us to the customers to decide with a bit more comfort, let's say.

Got it. Super quick follow-up. What is the share of gas and process today? It used to be 10% of CT. It went up to 20%, I think, maybe even more at the peak. Where are we now in the quarter?

Yeah, we normally say that it's around the 10% class. It varies. Sometimes can be slightly higher when we get some LNG orders, but I think we have been communicating around 10%.

And then super quick, just balance sheet revaluation out of the currency drag. Obviously, like the quarter on quarter effect, Peter, given that we had this massive move in the dollar. I wonder whether that also played a role to the currency or if this is only sort of transaction and translation on the average rates. Thank you.

Absolutely, because the revaluation effect on the balance sheet was really very significant. uh the normal translation and transaction effects that we normally see they were kind of imbalanced one was positive from the margin the other one was dilutive to the margin they basically kind of compensated each other so what remained from a margin development perspective was mostly linked to uh to those evaluations which is also why we believe that if we look to the next quarter the impact of that currency effect should normally be uh even even though it will still be there of course because our revenues will still continue to be affected based on average exchange rates by the currency development given the current state of the dollar etc and also transaction effect will continue to play But I would assume that all things being equal, and that I of course say with a lot of caution, all things being equal, that revaluation effect should normally be significantly lower if the currency rate remains where it is. And so we think potentially maybe 600 million SEK could be maybe an amount that we would still see negative on the bottom line. But as I said... Exactly.

It's very important because Yeah, because the quarter on quarter effect is obviously what matters here. And unless the dollar is moving a lot quarter on quarter, then yeah, that's your debate. So that's good to hear. Thank you, Peter.

Thank you, Klaus. We need to move on to the next one.

The next question comes from Rory Smith from Rory. Please go ahead.

Hi, good afternoon. It's Rory Smith from Oxcap. Thanks for taking... My questions, actually, Michael and Daniel in class did a good job of asking my first few questions. So I'll try something else. Wagner, your comments around not seeing the light at the end of the tunnel, no improvement in the near-term outlook, obviously mixed demand in the quarter just been in FX, big, big headwinds there, and then some mix in investment headwinds in several of the business areas maybe going forward still. Would you consider at this point expanding the restructuring program in vacuum technique to the other business areas? And what can you say today about your expectations for margins across the group in 2026?

Oh, first of all, I think what we did in vacuum technique was really necessary. You see the drop in the orders now, and I think we had to take actions with it. I think it doesn't mean that the other business areas, they are not doing. They are doing smaller programs that you definitely We don't highlight too much, but a lot is happening. And depending on the business area, you can act at a divisional level. For instance, if you have a division that is in a certain market segment that has a little bit more headwinds now, they are already adjusting. But regarding to demand, one thing that I want to highlight, I think the main point here, the demand is mixed. meaning we have business line or product lines that are doing very, very well. And there are product lines that are not doing so well. Like I mentioned, in industrial technique is a good example. You see, if you take the product lines, connected to automation connected to quality assurance so and and flexibilization of the production line they are doing quite well so and then you take the ones more focused on on projects that is connected to new production line then there is a bit more difficult because you see lower capex in that area So in a lot of investments or some investment, let's say going to have a more flexible automation, more flexible production. That's one example. The same can be applied for compressor technique. If you take now the new division that we have created, the air and gas application. division there we we are investing in the organization and you see now the quotation level going up or the received is improving so of course it's not big enough to make a huge difference in compressor technique but the direction is very good so there are several examples like that and that's why I think our main header is that the demand is mixed

And if I may add maybe a comment to that, we also announced in the previous quarter restructuring costs within industrial technique. So there are multiple activities ongoing, but that is in a way kind of the beauty of the decentralized model that we run is that we have 24 divisions and they all are in different phases in different parts of the cycle. Some are, as Vagnes explains, are doing really well. Service can be developing very strongly, so you don't want to go out with a general marching order to say you know hold all uh investments because there are still things that we need to continue to do while on the other hand the ones that are of course in a little bit more stormy waters need to make the adjustments that are necessary great thank you and any guide rails on 2026 margins we normally don't guide on margins

Okay, thank you very much.

The next question comes from Alex Jones from BOFA. Please go ahead.

Thanks for taking my question. If I can go on VT, you talked about industrial activity having increased in terms of orders. Can you give us a sense of whether that's actually sort of underlying improvement or whether there's just a comp effect there and generally what the sentiment is from customers? Thank you.

yeah good i think there um if we go back last year we we had quite a lot of headwinds coming from the solar and lithium ion battery in the the uh in the industrial vacuum um that is not really uh what is bringing now the orders i think what we have done as well because we were nicely positioned to benefit from solar from lithium ion battery from steel degassing some major market segments that are not as strong as before so then we concentrate to go more into a diffused market and now we start to harvest on that i think these activities are now paying off together with the scientific vacuum that is more OEMs and last year we had a little bit of this talking on the OEM side. Now they come to a normal pace and then they started to place orders as well. So and therefore we had a positive development.

Thank you. Thank you, Alex.

The next question comes from John Kim from Deutsche Bank. Please go ahead.

Hi. If we could stay on the topic of VT, I think you mentioned in the early part of the presentation that you saw less activity from key accounts and semi-cap. Can you give us a bit of color there, whether this is a timing issue or is it a situation where you're seeing a significant delay in investment around chip sacks and subsidies? Any color here would be helpful.

Yeah, what I can say, maybe a bit repeating what we have mentioned, Asia continues to be strong. I mean, all the major countries we see positive development. And of course, all those key accounts, there is one year they place nice orders, the next year they need to, let's say, implement what they have ordered, get their production. at the right yield and so on so forth and then you might have changes in the key account, but overall in Asia, it's very good. Europe has been weak, especially because it's connected to automotive and that the market is not doing so well. And then US, I think there is a major account there that doesn't have a capex budget as before. And I think the U.S. is the main headwind we have when it comes to SEMI.

Great. Thank you.

The next question comes from Andreas Koski from BNP Paribas Exane. Please go ahead.

Thank you and good afternoon. I want to come back to the compressor technique and the organic order decline of 7%. I understand that you've seen a significant decrease for gas and process compressors, but as you mentioned earlier, it accounts for a fairly small part of the business area. So I just want to better understand to what extent the weakness that you saw in industrial compressors contributed to the minus 7%. Did also industrial compressors decrease in absolute numbers similar to what you saw in gas and process compressors? Thank you.

You should consider gas and process was half of the decline. And then the other half was industrial compressor. Industrial compressors in size is much bigger than the gas and process compressor. So in relative terms, it is smaller.

Thank you very much, Wagner. And Peter, if I may, did you indicate that the revaluation impact in the quarter amounted to roughly 700, 800 million SEK? Or did I misunderstand it?

No, that is approximately right. I think that's around about the amount that we had in operating exchange differences for the quarter. Revaluation of balance. Thank you very much. Not the regular translation and transaction effect. Exactly. Thank you very much. You're welcome, Andreas.

The next question comes from Sebastian Cohen from RBC. Please go ahead.

Yeah, thank you for taking my question. I would like to dig again a bit deeper into the currency or earnings bridge with currency impact. So if I run the calculation, you lost about 200 basis points on margin from currency. and if you say translation effect was uh was the majority here so um 700 million finnish kroner would be translation and the remaining 740 million would be transaction and balance sheet i just tried to figure out how big the transaction impact was how big the band sheet impact was you mentioned earlier uh 600 million you will see a rough number for the for the third quarter, but 600 million would then mean no negative margin impact, right? Because you have maybe 3 billion on revenues and 600 million on earnings. That's 20% drop through. That's basically no margin impact. So can you just clarify how big balance sheet rehabilitation was and whether you really see no headwind from currency in Q3? Thank you so much.

Yeah, so what I indicated earlier and I think also what I just mentioned on Sebastian's previous question, sorry, is that we talked about 700 to 800 million roughly on operating exchange differences and that the remainder of the transaction effect, the normal transaction effect, let's say excluding operating exchange difference and translation, were from a margin perspective offsetting each other both amounts were negative but the translation effect was not as high as you as you indicated was a bit lower and again i cannot predict the exchange rates period and exchange rates for the next quarter so i can only assume that if the if the exchange rate doesn't move that there would be absence of an operating exchange difference more or less and so therefore the currency effect would be significantly lower than the 1.5 billion we've we've taken this quarter and so that's how we end up based on some of our calculations that they would still be a negative effect considering that last year's average rates were better as well as the transaction effect was based on different rates at the time so therefore we still think a negative currency effect looking forward in the third quarter but excluding operating exchange differences you would end up in the in the range of maybe five six hundred potentially seven hundred it's hard to really nail it down hundred percent but that's i think about the range which we think could be the currency impact then of course the reality will be different because things will start moving as the quarter progresses

Understood. And as a follow-up, I saw that volume price mix contributed 75 bps in this quarter, but the main support came from one-offs and from reduced share incentives.

How much of these share incentive support do we get for the rest of the year? And how much can you raise prices?

That's something we cannot predict at all. It depends purely on the share price development. It's linked to the LTI program. So we cannot give any forecast of that. It's like the period end exchange rates. We don't know how they will plan out in the next quarter.

It's not distributed shares. It's based on the share price, actually. Understood.

Yeah. Okay. Thank you, Sebastian. Thank you so much.

Thank you.

Next question comes from Gustav Schwerin from Handelsbanken. Please go ahead.

Yes. Hello. Thank you. Can I ask on the deliveries in industrial technique, which is quite low? I'm wondering if there's an element of timing on larger projects or if this is more a reflection of order books getting depleted now. Thank you.

Can you repeat the question? We missed the beginning of the question.

Yeah, sorry. So it's on the deliveries and industrial technique. I think the strike is quite low in the quarter. So I'm wondering if there's an element here of... timing of larger projects or if it's more ordered books starting to get depleted?

No, I think the point we got orders indeed, but those are projects. It takes a bit more time. to be able to deliver. So I think that is the main effect. You also should consider that the automotive business is quite in a changing environment. Sometimes they change priorities. It does not help with our planning. so but but fundamentally is the project together with this element of constant change that we we have now i think changing priorities what needs to ramp up or run down i think that has an influence of that our acquisitions that we did in the us dedicated for industrial technique are performing very well and of course the invoicing level is not as good by far is not as good as the orders so they still need to catch up to further ramp up production okay but sorry to push on this but just to be very clear could there be an element here of delayed deliveries especially on the automotive side impacting Q2 deliveries yeah there is a constant change but the the lead times of the orders are also higher because it's project based based you get the order you need to organize the project it's not the items that we have in our inventory some we do but depending on project especially automation we have got quite a lot of orders for automation And then you need to work with the cells, with the line builders as well. It takes more time. The lead times are longer. I think that's the main issue.

Okay, perfect. Thank you. Thank you. Now we have time for one last question. James Moore will be the one who will be asking that one.

The next question comes from James Moore from Rothschild and Company Redburn. Please go ahead.

Thanks, everybody. Thanks for squeezing me in, Peter. I've got two, one on China first, if I could. So the drop in large compressors, largely China, How is that? Is that lumpy or do you see any indication that that continues at the end of June and into July? Do you think that is the new normal or just a function of the normal degree of lumpiness that we see? That's the first one, if I could.

I think there is more about large industrial compressors. It's still not as big as the gas and process compressor. Large industrial compressors. The biggest part of the market is China. We see less activity level there.

Yes, you said that earlier. My question was whether you think that that was something that will persist into... the third quarter and the second half or whether you think it's just a function of temporary volatility

Of course, the overall uncertainty definitely plays a role, but it's very difficult to see what is going to happen with the Chinese economy. If there is signal that the economy will be strengthened with local consumption, of course, we could have some positive environment. I don't see, I just believe it's difficult to predict if it will go further up.

Great, thanks. And my last one, if I could, is just on the the competitive dynamics given the weaker dollar and your Belgian compressor footprint and given what we may be heading into on the 1st of August with a 30% European reciprocal tariffs unless a deal is reached. Are you seeing any competitive dynamics at the moment with your potential cost disadvantage against your North American competitor. And do you think that with a step up to 30, you've got to do something different in terms of production and shifting to Quincy or the likes?

Of course, there could be a quite steep increase. We don't know what is going to happen, but then we might have to have a deeper look at what we are going to produce where. I think with the 10%, I think Peter explained, we managed to to maneuver that quite well. I think it was a combination of things, changing flows, and I think we didn't see a big impact. If that goes up, we will look into what is needed to be done, but it's always a combination of things. It's not only we stop producing in Belgium, we produce as a combination. That's what we have seen. Maybe we do more kits here and do some final packaging in the US. Then we will have a deeper look if that comes. But of course, we are not hating that there is always a lot of activity ongoing on that area. So, good.

Great, Sama.

Okay, thank you, James, for those last questions. And with that, we conclude the earnings call for the second quarter of 2025. Thanks for all your questions and your patience listening to us today. And we wish you all a very nice summer and look forward to meeting you again once we are back from the holidays.