Atlas Copco AB

Thank you, operator. And a very warm summary welcome to all of you to this second quarter earnings call for the Atlas Copco Group. Very happy to have you all on board. Before I hand over to Wagner to start giving more comments on the results, I will already now, as usual, implore you to not ask more than one question at a time when the Q&A session starts, so all of the callers have the possibility to raise their question. If there is more time available at the end, we can of course take more follow-up questions. and also that we have a tight deadline, so we will finish the call sharply at the end of the hour. But that being said, I will hand over to Wagner. So, Wagner, I guess we can say that we are overall quite happy with this second quarter report.

Yes, indeed, Peter and welcome to this conference call. We are quite happy to report our record order intake. coming from several market segments i would say of course the highlight is the semiconductor definitely a very nice growth but not only i think we saw our industrial compressor business developing well our industrial vacuum scientific vacuum our industrial assembly tools and also power equipment did very well. And I should also mention that our gas and process compressors also have a quite good growth in the quarter with a lot of decisions being taken in the quarter where they were very well positioned to get the orders. So also good to see our service business continue to grow in all divisions and in all regions. I think we are quite happy with that development as well. That is part of our strategy to capture the aftermarket potential. Our revenue as a consequence also grew organically, that we see a good development there. Our profit margin was stable year on year, and we saw a sequential improvement that we are also quite happy to see. If we look a little bit deeper in our adjusted profit, I think we see a good year on year improvement and sequential improvement as well. And while we ramp the production that has requirements for stock and a bit of receivable, we still deliver solid cash flow. And we continue to roll up our acquisition strategy, this time Five companies were acquired in the quarter. One to highlight is Laco Technologies that will enable us to supply equipment for leak detection that are important in several market segments, including space business. So then translated this level of activity, good orders. If we look to the consolidated picture for the group, we had a good improvement in our orders received year on year. So basically we have added more than 10 billion Swedish kronor in our order book. So that was really, really good development. organic growth of 26%. Our revenues grew 8% organically, Good part of the growth came from vacuum technique, but the others, all the business areas had positive development when it comes to revenue. And like I mentioned, the adjusted profit increased in absolute terms 12% with a margin of 21%. So good profit development and also earnings per share, good development, cash flow and the return on capital employed at 24%. That was a decrease year on year, but we also see a sequential improvement when it comes to capital employed. So then when you look to the orders received, we see that we basically have grown in all regions, very strong development. uh in most of the regions uh the only negative development we have is in the middle east african middle east but the driver is the middle east not too many decisions being taken there during the situation but we even in in the middle east we have a solid platform we are now supporting our customers to restore production and there are a lot of projects in the pipeline the environment does not allow our customers to take decision but even in the Middle East, we are very well positioned with good project pipeline. But then talking about Asia, very nice development, 47%, basically coming from all business areas. CT had a very nice development, vacuum technique, very strong development. a little bit lower but still positive in industrial technique and power technique also positive development basically all business areas have grown in Asia in Q2 so quite happy China as well we had positive developments in most of our product lines the highlight was mainly in the semi business but not only compressors, power and also industrial technique in some specific markets doing very well in China. So then we go all the way to the Americas. You see North America 49% growth and also they're very strong in all business areas and also very strong in industrial technique. to start with, with very good growth. We saw new projects, some projects in automotive and mainly connected to Production relocation, where we are very well positioned with the latest developments where we create new capabilities of automation and also new capability when it comes to flexible production lines. Our customers, they need more flexibility and then we manage to benefit. Power technique, solid grow inorganically and organically. So very strong growth. VT as well, we saw very nice growth in the semiconductor market, but again, not only in North America, but also some investment in metallurgy and other segments doing well. And compressor technique also did very well in North America, where the main driver was gas and process compressors connected to LNG. But not only, industrial gas is also doing quite well. South America, 16%, also doing quite well, basically, in all product lines that we have. And Europe, I would say I'm very proud about the development in Europe. It's 7%, not comparable with Asia and North America. But in the other hand, considering the situation, I think we are quite happy with that achievement. And also most of our business areas has grown organically in Europe, which we are quite happy about. that has if we add up this result is translated then in a good organic growth when it comes to orders receive eight percent in revenues organically also our acquisitions are doing quite well you see five percent we have then one acquisition in the semi market that is doing quite well, quite happy with the development. You see the orders plus five, revenues plus four. They also are building a nice other book that they can work in the coming quarters as well with an invoice. We still see currency headwinds in the quarter. And that brings us to a year-to-date orders received of 96 billion Swedish Krona orders invoice of 85. So going to the split of our organic growth, we see Now all the BAs doing quite well. It's good to see as well a bigger contribution coming from vacuum technique. Now 25% of the orders received in the last 12 months with 59% organic growth, 19% in compressor technique, but also quite happy to see 14% in power technique and also 11% in industrial technique considering their exposure to automotive is also very good now going more in details in the in the business areas starting with compressor technique quite happy to report organic growth into industrial compressors and we see good development in most of our regions when it comes to industrial compressor sharp growth in in gas and process and there the main drivers were LNG vessels and on-site LNG So those are the main market, but not only. We also got quite the major orders for industrial gases. We continue as well to create opportunities for the future. Just yesterday evening, we have announced another acquisition, Aeroclimat, that will continue to help us to deliver on our strategy when it comes to optimized utility room. we see that there are quite a lot of potential. We are very strong in the utility room, compressor room or utility room. They need cooling, they need heat and heat pump. I think that will create opportunity to upgrade utility rooms in the future. That is the main reason for the acquisition and give us R&D and production capabilities. It's important also to mention that we had quite a lot of decisions taken in GAZEN process. GAZEN process were orders received were above 15% of orders received from CT. So it was good to be well positioned with a very good quotation pipeline when customers feel more comfortable to decide. I think we were quite well positioned there. So revenues continue to grow organically, 3%. Profitability was lower than previous year, but 24.1%, it's a good level. We believe the most important for CT is to keep their focus on organic growth. We have the inorganic strategy, but organic growth is extremely important to continue. they had some effects coming from the the acquired entities when it comes to profitability but that's a good level and we will continue our focus on organic growth we continue our focus on innovation here is another example of of industrial gases, on-site generation of industrial gases, nitrogen or oxygen, and here is a new product. And this is also another segment that has helped us to continue to grow organically. And we continue the product development there. Good to see organic growth in compressor technique. now going to vacuum technique was very strong demand 59% organic growth and there we see when it comes to the semi-market basically orders came from all the markets all the major markets orders came from advanced nodes but also from mature nodes China was also very strong, quite happy to see the development there. But not only, I think it's worth mentioning that our industrial and scientific vacuum are doing very well. There we see in advanced batteries investment, battery storage systems, so that required quite a lot of vacuum. We saw good investment there. But not only metallurgy is also an important segment in some regions where they need to invest in special alloys that They don't want to depend from one country or another, or even for defense. And we were very well positioned to get orders. We also see more investments in R&D space where scientific vacuum benefits from that. research in general and that we see an increase investment that our scientific vacuum is positioned to do very well in that market. Solid growth in service in both division industrial and also semiconductor service. Happy with the with the way we start to scale up production now, 90% organic growth. We believe that is not enough for the order book we have. We will continue to scale up production. The same when it comes to operating profit, 21%. Peter will go more in details, but we will see continued gradual improvement as we improve further the volume. return also good to see now a bend in the trend when it comes to return on capital employed. And we also have a nice pipeline of projects of new of innovation in for the semiconductor that's another example on abatement systems where we come with a new product that has better efficiency extended mean time between services that's pretty much aligned with what our customers in that market segment needs requires so going to industrial technique So we're quite happy to report 11% organic growth. And I think a good part of that is because of the investments we have done in the last two years in five acquisitions that create the capability to do more automation in industrial technique for the automotive market. But not only, we also have invested in R&D to support our customers to have more flexible production line. And this time that they need to do consolidation, move production from one place to another, mix different products. I think that technology, I think is very well perceived by our customers. And I think we got quite good orders in that market segment. But not only, also general industry did quite well. I think we have also developed some dedicated products for some market segments that are doing quite well. I could mention electronics, I could mention I could mention if you need in the data centers, you have to assemble a lot of components into racks. And I think that we managed to capture part of that business as well. Revenues also went up. A good profit development driven by the 11% organic growth. Any stable return on capital employed. So as you can see, they keep on investing in innovation. And this product is specific for when you need to assemble a lot of electric components. So I think they did quite well in the quarter. PowerTechnique also notable growth for equipment, 14% organic growth. Most of product lines developed very well. main driver here is the for sure the US where we saw quite a lot of order for portable compressors and also for generators as well for rental companies and if there are investment in the infrastructure they definitely capture part of that investment we good to see specialty rental growth also in new market segment like we have invested in in the pump rental business we also see the good development there so good growth and also their service business revenues also going up and when it comes to profit also good to report a bend in the trend because over the quarters the profit was declined because of acquisitions and some investments. But now it's the second quarter now in a row that we see that improvement in the profitability, in the profit margin. And I think that's good. We are happy with that trajectory. return on capital employed lower because there we have done a major acquisition last year that is still growing to that cycle. So then they continue to invest as well in R&D. Here is an example of a dedicated product for the American market, a product that is utilizing water well drilling. So With that, perhaps I will move to you, Peter, please, that you can take over.

Thank you, Wagner. So moving from operating profit to the rest of the income statement, we have net financial items that are slightly higher, but no meaningful change, you could say, fundamentally. Profit before tax, 9.1 billion versus 8.4. and income tax expense of 2.1 billion, somewhat higher than the same quarter last year with an effective tax rate of now 22.8. We think that this tax rate will probably remain at around the same level, maybe even be slightly lower in the coming quarter, 22.8. Maybe if all stars align, we will end up at maybe 22.5. going forward. Let's say small change, this is more or less the level that we see in the near term continuing. If I then move to the next slide and talk a little bit about profit bridge for the group, then you could say nominally very flat margin, 20.6, 20.6 in the second quarter of 2026 as well. But first of all, there is the impact of the LTI programs where basically part of that profitability is eaten up. The acquisitions are also somewhat dilutive for the overall margin development. The currency, on the other hand, is slightly positive. and that has mainly to do with the fact that last year we had very negative operating exchange differences which basically this year are not there at all I would say we have very minor positive operating exchange differences so basically the fact that in the bridge the previous year negative development comes back as a positive now resulting in this net improvement of the margin thanks to currency but More importantly, I would say, is the fact that we have a good drop through for the margin, given the fact, of course, that we have quite a significant volume price improvement. The revenues have gone up quite a bit. then there are of course some elements that partly offset it but still a higher margin than we had last year resulting in basically a better adjusted margin this year as well when it comes to the foreign exchange differences or overall the currency impact on the income statement if I look a little bit forward for the moment we still have quite negative values on the top line and then a minor negative on the operating profit when it comes to the next quarter I would expect that the top line impact of exchange rates will be very very minor and also on the operating profit normally a very minor impact of course depending on how the currency is developed might be somewhat negative somewhat positive but let's say for now knowing what we know we would expect something basically like zero currency impact in absolute terms on the bottom line if I then dig into the bridges of the individual business areas then starting with compressor technique like Wagner already mentioned So I think organically, or we end up with 24.1%, somewhat lower than last year at 25. Of course, 25% is a margin that we really enjoyed for quite a while now being on an absolutely high level. acquisitions on the other hand are eating up a little bit of that very high margin they are somewhat dilutive and that of course is given by the fact that in the first year we add a lot of costs for integration for IT security other type of things and we are not able to fully mobilize all the synergies yet So it is not illogical, let's say, to have some negative traction from acquisitions in the beginning. The currency for the moment is also slightly negative on the margin. Not that much, minor impact, but still bringing the margin a little bit lower. And then when it comes to the drop through there, of course, we see a little bit lower margin, but again, 24.1% still the highest margin in the group from all the business areas. And given the fact that we have organic growth, I think we're very pleased to see that development. and realizing that volume at a margin of 24.1%, we are still quite pleased with. As we have always said, organic growth is absolutely the top priority. And then the absolute volume value development of the profitability is then what follows out of that, which is, we think, more important than sticking to this absolute 25% profit margin. Then vacuum technique. I would say, first of all, also somewhat dilutive effect from the acquisitions We have, of course, done quite a few there as well. Farin already mentioned LACO. We also have the joint venture in China, for example, developing well from a top line point of view. The margins are still a little bit lower, but also over time we expect that we are able to develop that further. Also here we have the initial integration cost. And of course, important to mention both for CT and VT that the bottom line is at least positive in absolute terms compared to the revenues. currency is quite positive for vacuum technique vacuum technique has had the biggest impact from these operating exchange differences and of course that comes from last year at least so that comes back this year as a positive but then the strong development of the vacuum technique revenues also results in a reasonable drop through I would say adding a decent percentage to the overall margin for vacuum technique we need to consider of course that the demands on vacuum technique and specifically on semi are very extraordinary, knowing that in certain locations, certain factories, we need to basically more than double the output of the company to get to the demand from the customer is not just a slight increase. It is really quite transformative to more than double the output within a short period of time. And that means that we need to invest, first of all, in direct labor to make sure that we can make the products. but also in some other costs that we initially during the restructuring phase have basically cut down to make sure that we protect the profitability now we need to catch up and that of course means we need to put some investments there which are to some extent bringing down the the very strong impact of the revenue volume development that we see in semi particularly then I will move to industrial technique starting with a margin of 17.1 percent also quite a positive impact from the currency as industrial technique had also been quite exposed to the currency development last year. But especially then when it comes to the organic development of the business, very strong performance with very solid drop through. And I would say, of course, on the one hand, we have the revenue volumes that are improving, but on the other hand, also really seeing the full impact of the old restructuring activities that the business area has gone through during the last year. And that, of course, results in very nice operational efficiency leverage in the margin there. And then last, Power Technique. Also here, as Wagner explained earlier, a nice improvement of the margin. We actually see that the acquisitions we have done in Power Technique are not only accretive from an absolute value point of view in terms of profitability, but are even accretive from a margin perspective, which is, I think, very positive to notice. Currency impact for power technique is virtually nothing. They have also had less issues with currency in the last year, I would say. And then finally, organically also here we see an improvement thanks to volume price development. On the other hand, we've had due to all the investments we have made in the rental fleet in order to push that business forward also to invest and replace some competitive products, especially on the dewatering side with some homemade products in the fleet. that results in somewhat higher depreciation costs which has a little bit of a detracting impact and other operational inefficiencies in the rental business particularly and also a little bit of an unfavorable mix so that in the end pulls down a little bit the drop through but still adding to the margin quite nicely if I then move on to the next slide I will give a few comments on the balance sheet I think the main impact I would like to highlight is first of all if we look year over year the addition of all the acquisitions that added quite a bit of volume to the balance sheet secondly the development of inventories and receivables which goes hand in hand with the business development we have seen the revenue increase and the increased production we need to push out the factories add some inventories the additional invoicing obviously creates more receivables But good to note that relatively speaking, the working capital in comparison to revenues is actually improving gradually over time now. The cash, of course, went down a little bit, given the fact that we have made the first installment of the dividend during the second quarter. And then when I moved to the equity liability side, the equity a little bit down compared to December, mostly because on the one hand, we have taken out the full dividend from the equity. on the other hand we've added of course the profitability of the last two quarters while on the other hand we see mainly the non-interest bearing liabilities moving upwards partly because of payables increasing hand in hand with inventories you could say while also the second installment of the dividend has been moved from the equity to the non-interest bearing liabilities so I think that is in a nutshell the main items on the balance sheet I would say nothing spectacular there And cash flow, as we already indicated earlier, despite the fact that we have this steep ramp up going on in semiconductor, but also all the other business areas doing well on orders and therefore also having to increase quite a bit on the production side, we see still quite solid cash flow coming out of the second quarter, mainly based on a very strong operating cash surplus, adding at least a billion to that one and it is slightly offset by somewhat higher tax payments but mainly then the say the investments we need to make in working capital high receivables higher inventories somewhat offset or partly offset by the payables that also increase hand in hand with the inventories so that leads us then to overall a cash flow of 6.8 billion which I think is given the fact that we need to put a lot of money into the operations at this moment generating quite good efficiency from a working capital perspective. So with that I've come to the end of the explanations on the different financial statements and I will hand back now to Wagner to comment a bit on our near-term outlook.

Thank you, Peter. So just to remind, our near-term outlook is a sequential guidance for the next quarter. And also it refers to our customer activity, excluding large orders and potential effects and seasonality as well. And based on the information, we saw that the activity has increased from Q1 to Q2, and we believe that the activity level will remain. the same, it has been elevated and now we believe it will stay at that level supported by a strong continued, strong semi, but also the industrial, the general industrial market remains strong, will remain strong.

OK, thank you Wagner. With that we have reached the end of our presentation and we would like to give you the rest of the time for question and answers. Of course, again repeating that please stick to a very disciplined approach, not asking more than one question at a time and we will finish the call sharply at the hour. So with that I hand over back to the operator to get all the questions.

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 Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my question. My question relates to, can you give us a little bit of color by division on how much backlog visibility do you have now that you had such strong orders versus perhaps what you had last quarter? So basically, do you see that backlog supporting these levels of organic growth you're having now in the coming quarter or for how long should this help you maintain this type of growth? Thank you.

Good, thank you, Daniela. We see that we have a strong order book now. When it comes to vacuum technique, all hands on deck to increase the output of our factories. That is what management is busy with. And I think they are doing a good job. I think the ramp up is going according to our plan. And I think, like Peter mentioned, in some of our factories, we have to more than double. There are some backlog, but I think with the increase in production in a quite short period of time, we will see good development. also in compressor technique with the good orders as well in industrial compressors we also need to do some ramp up and that is also going according to plan so I think we are managing quite well and I think the most important now for us is to keep competitively times in semi because then We can also outperform our competition when it comes to that. That's the main focus now.

And then when it comes to gas and process, of course, their lead times are much, much longer. So in terms of revenue growth, that will come, of course, at a later stage.

Clear. Thank you.

The next question comes from Klaas Bergland from Citi. Please go ahead.

Thank you. Hi, Wagner and Peter. Klasa City. So I had a question on growth and margin. First on the growth in gas and process. We knew from the data coming out from the yards that orders in LNG could be strong. But is this still a very lumpy business? Or is the order pipeline here strong enough to keep delivering orders at this level the next couple of quarters? And then on the margin in VT, I get that there are costs to ramp here. But we've heard from others in semis that price increases are now likely versus what typically is a deflationary industry. So are you hiking pricing now on the pumps and the abatement systems given the tight supply demand? Thank you.

Yeah, if I start with the Gazen process, I think it's very hard to say that, oh, we will repeat in the next quarter because it can be lumpy. We don't know if customers will decide to place order. I think this business remains quite attractive. and but Kazen Process I always like to repeat Kazen Process is not only about the LNG vessels I think there we are very well positioned if customers decide we will be able to get that opportunity we are very competitive to get these opportunities in LNG and LNG vessels when customers decide. But we also want to highlight industrial gases. The market is quite favorable for us. We have also LNG onshore. I mean, gas processing plants. We also have invested in the, let's say, large scale heat pumps. And we got the orders as well in the quarter for that. If to do things like district heating, you need large heat pumps that we supply the product. So it's several market segments, but we had this quarter, we had a concentration of decisions that allows to have this quite nice growth in gas and process is very difficult to say it's going to repeat in the next quarter if you look to to the periods where we had very large orders received in gas and process and then you could look back to q1 2023 and q1 2025 I think we didn't see that repetition in the next quarter. But then the pipeline, what I can say is the pipeline, we have a lot of projects in the pipeline, but it's very hard to say that's going to be next quarter. Then on the semi, on price in general is positive in all the BAs, I would say, including in semi. And I think that's why we mentioned about all hands on deck, when it comes to production output to increase because that also gives a bit more power when it comes to price. And I think we also have other things that give a bit of a good outlook for the future because we also have new products that are that are quite good in terms of energy consumption we have shown that in the last capital market day and that is an ideal moment as well to speed up the introduction of new products and also maybe the reason why we are not

Sorry, Klaas, but that we're not so unhappy, let's say, about the fact that the drop-through is maybe not at stellar levels, that we want to take those costs to make sure that we do the ramp-up quickly so that ultimately it will give us... if we do everything right, more competitive lead times, which means that we should be hopefully favored by our customers when they want to place an order based on the fact that they can get the product faster. And that hopefully can allow us to also have a good discussion on price development for those orders going forward.

Would you say that pricing on orders are higher than in the P&L at the moment? So should the drop through improve from here as you start to deliver the backlog?

Well, overall, I think the statement is valid that we do expect for vacuum technique an improved margin development in the coming quarter still. So this is not the end of the story, but we prefer to take some of these ramp up costs at this point in time. And then we will see with increased volumes as we go forward, the margin continuing to improve gradually, maybe more slowly than one would anticipate, but at least gradual continuous development of the margin. Thank you. You're welcome, Klaas.

The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Hi, good morning. I just want to ask about how best we should think about your growth, maybe relative to WFE spending. And I guess what I'm getting at is when I hear you say that some of your customers need to double production, that seems a lot faster than the maybe kind of 25 to 30% WFE growth that we're getting. And we've obviously come out of a period where you've undergrown WFE for a couple of years. So I guess I'm curious, as we sit here today, we look at your mix, we look at some of your large customers. I've always felt like Intel was a relatively bigger customer for you. Do you think there is the opportunity to outgrow WFE? And maybe is that what you're indicating when you talk about some of your customers asking you to double?

Yeah, I think just to clarify first on that, we have some product lines that we need to double the volume due to the demand. And I think when I see, I think in our last capital markets day, I think we have explained as well the dynamic that has changed it. in the WFE where you have much more advanced packaging. I think that is a quite good component of advanced packaging in WFE. And that occasion, we said we were in a very good position. We didn't see that we were losing our competitive position. We are there and then now with the demand coming from our customers, we managed to capture demand basically from all regions, all regions that are investing, we managed to capture that investment. But in the WFE sometimes also difficult because there is a component, even if you take the dedicated, if you exclude advanced packaging, sometimes they just build what I call the vessel, the premises and the utilities, and they populate in a later stage with machines. For us, we are very well connected when the machines arrive on sites, the machines are installed, then they require the vacuum system. And we have normally shorter lead times than the process tools. So we come into later stage. So it's always difficult to make that comparison. But I think what is important to remind, and we have said that we are in a strong position, we have several projects to keep our competitive advantage, and I think the quarter shows that we continue to be very well positioned.

And, I mean, would you say you're over-indexed to any type within WFE, whether by customer memory, logic, As we sit here today, I know you historically never said you were, but has that changed at all versus history?

I think it's a broad-based growth now. We see growth, like I mentioned before, we see growth in all the players, we see growth in all the regions, including in China.

Fantastic. Thank you very much.

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

Morning, afternoon. Just to follow up on that vacuum technique point, you've mentioned stronger growth in China a couple of times. And I think it's fair to say over the past few years that your growth there lagged some of the broader semis tool manufacturers. Do you feel you're now seeing a catch up as domestic fabs install some of the equipment they've already bought and therefore you're in a stage of sort of outperforming the overall semis market in China? And if so, does that mean that China could remain one of your stronger markets within semis for the next few quarters? Thank you.

Yeah, if they decide to install the tools and to ramp up production capacity, we are positioned to support them. We have local production, competitive lead times. But I don't want to say that we had a good quarter because of China. That's not what I say. It's a really broad base. It's China. It's all the major players where semiconductor industry is important, including the US, let's say. We also had good partners there.

Thank you. The next question comes from Phil Buller from JP Morgan. Please go ahead.

Hi there, thanks for the question. I'd like to talk a bit more about the pricing actions in the quarter and maybe even the pricing strategy for CT. I just wanted to better understand your comments really on the organic growth priority and the margin evolution. Should we infer that you are increasing price below inflation or peers to maximize the organic growth opportunity? And on the margin side, Obviously 24% margins are impressive, but would you anticipate a further decline or a potential return to that 25% level in the coming years? Thanks.

Thanks Phil for your question. I think, no, I don't think it's an intention to have low pricing improvements in order to capture volume. I think it needs to go hand in hand. It's a combination of the both. I think we see good development of the pricing also in compressor technique. And when it comes to that 24% margin or 24.1% margin, I think we have always been quite vocal about the fact that, of course, if we can take 25%, we will not leave it on the table. But we've always said that it is more important to have organic growth than to have continued margin expansion. And even to take some quarters with a lower margin. Is 24.1% the bottom margin? Okay, one can never tell exactly. There's also a lot of other aspects to it. It's the currency, it's the mix that has an impact, etc. But of course, we are not aiming to do less than 24% if we can avoid it. If we can do better, we will also not leave it on the table, as I said. But like we indicated, we are still very pleased with the 24.1 performance for the compressor technique business area. And we are using pricing. We are not, let's say, releasing the pressure on increasing the price into the market. I think the most important currency that we use in order to drive pricing is still R&D, as we have always said, and that continues to be the case. So pricing is as much a priority in order to generate better profitability over time and to protect, of course, other cost pressures that we see in the market as well as pure volume growth in the market.

Thank you. That's helpful clarification. Thanks.

The next question comes from Timothy Lee from Barclays. Please go ahead.

Hi, thanks for taking my question. I'm just trying to understand a bit more about the order momentum for VT. So are you seeing customers to be in a rush to place orders or more like placing in terms of their order for the tools or other semi-equipment according to an expansion list. I'm just trying to get a sense of how we should see the auto momentum into the third quarter or the coming quarters. Thank you.

Yeah, I would say that it's a good order book. Most of the orders we get, I think it's, let's say, firm delivery dates. We have an element of pre-ordering. But I would say that it's not huge. I mean, it's also difficult to qualify how much. That's why it's better for me not to tell you a figure. But I think it's most of the orders we have, we have a clear delivery date. But, you know, in the semi as well, it's very dynamic. The priorities can change and we are quite used to that.

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

Hi. Good afternoon. Thanks for the opportunity. Strong set of numbers, so congrats. I wanted to understand a little bit and kind of square the circle here on your comments about the order intake. From a distance, it looks like the cadence is a bit off versus, quote unquote, a normal Atlas year. I'm wondering if you can help us at a high level think about how much of the Q2 intake was perhaps catch up or late decisions that one might expect in Q1 in a normal year versus what you see as the start of just stronger demand in the relative divisions. Thanks.

I think it's difficult to say how much it was catch up, but there was a very nice, let's say, quotation pipeline. And we saw a good alignment, a lot of decisions being taken in the quarter. On the industrial compressor, I see more underlying improvement. that we believe it will continue because and also we have seen growth in all areas of our industrial let's say general industry portfolio that goes into industrial technique compressor technique in vacuum technique we saw growth basically everywhere In Gazen process, I think there was a concentration of decisions in Q2. I think that's fair to say, but not in the other areas. The general industry saw an improvement and also on the semi-market.

And vacuum technique specifically, of course, performed very strongly, but also already in Q1, we saw quite a strong growth as well. So also there, I would definitely not say that there is a catch-up effect in vacuum technique at all, I would say. Okay, helpful. Thank you.

The next question comes from Andre Kuknin from UBS. Please go ahead.

Hi, good afternoon. Thank you very much for taking my question. It's, sorry, again on VT. I wondered if you could just share with us broader level, what a level of visibility do you have in this business in terms of your order book funnel being able to predict where the orders are heading? And should we read anything into you kind of cautioning a bit about a quarter ago when we had the first jump and not cautioning now when we've had a further improvement and if I may just bolt on another sort of angle to it we saw an announcement of a facility being launched in the US I think in February in VT specifically and from what we could gather it's of meaningful size and I just wondered if this order intake that we've seen now is related to that kind of filling up and whether you could comment on where we are on this, if that's indeed the case. Thank you.

Yeah, well, what I could say we have little visibility of what can happen in the in the semi market because those are key accounts and large accounts when they decide to place order is quite significant. What we see from the market, it's a lot of interactions with our customers. We believe that the activity will remain at this high level because of the activities that we have, the interactions that we have with our customers. But they don't say exactly, oh, I'm going to come with a lot of orders in Q3 now. I think that does not happen. It's more based on the interactions in the contracts that we already have in place, and then they can take decisions or not. It's very difficult to predict, but it's more based on the level of interactions that we have with our customers.

Can you mention the factory that is coming online? I think you refer to a project that we announced quite a few years ago in Genesee, in the Buffalo area. And it's true that what we indicated is that this factory is coming online, more or less as we speak. step by step, gradually. It's not the grand opening and firing from all barrels at the same time. But we are gradually stepping into producing a bit in that factory. And of course, we will continue to ramp up the production there as well as part of our, let's say, approach to making sure that we can deliver to our customers. So, but this is a gradual ramp up or a startup, you could say, of the factory as we speak. And then over time in the coming quarters, we will be able to bring on stream the capacity of that facility step by step.

Great, thank you very much. You're welcome.

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

Yes, good morning, afternoon. Can I clarify one thing and then ask one thing? You mentioned order price. is positive in vacuum. But could I just check, do you mean just the growth price or are we actually positive on a price inflation cost spread basis? And on that number, could you get some meaningful 100, 300, 400 bit type positive this up cycle given your customers are enjoying massive two to 400% price rises? And my question, if I could, is what's the maximum speed you can grow your semi-OE revenue in vacuum? in the second scientific service, just on that unit, given your current capacity and your ramp-up plans.

On the pricing, I don't think we will give more additional information on semi-specifically or vacuum technique in general. Because I think, okay, we do measure, of course, like for like and the same product sold to same market or even same customer in some cases compared between years. But there is, of course, more than that. There is also new products being launched and there is the impact of the value that we are able to transmit there. So it is, of course, there are numbers, but in the end, it is not the full picture. So I think what for us is most important is that we continue to see positive price development across all business areas, including vacuum technique, including industrial technique. And I mentioned those two specifically because you know, as well as I do, that those two business areas are more exposed to very concentrated OEM customers. And that, of course, has an impact on how much pricing improvement you can really push through as opposed to a more diffuse market where thousands and thousands of customers are exposed to that price increase that we tried to put out so of course there is let's say a tougher battle on the OEM side but the fact that we are able to generate positive price effect I think is is very good because particularly in semi, which used to be a market where the price was expected to go down year over year for like-for-like products, I think that's at least a positive development there.

Thanks. And the maximum speed for the semi-OE revenue business? You can't comment on the kind of rough borders of magnitude?

No, because I think it's also very difficult to say. It might also be different for some of the products in some of the locations where we produce them, etc. There are so many dependencies. I think definitely I'm open to say that ramping up at this type of pace is definitely challenging. but again we've then decided that the ramp up is the absolute top priority right now within semiconductors specifically in vacuum technique more broadly and that's why we are of course also putting some extra costs there which has somewhat dilutive effect you could say compared to the even stronger drop through we would generate otherwise but at least it will help us to secure our very strong market position we have and benefit from that as we go forward in the coming quarters. Thanks, Peter. You're welcome, James.

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

Thank you for squeezing my question in. I have a follow up on the backlog situation and the lead times in gas and process. Because if I accumulate orders and sales since 2021, you should have built a total backlog of around 36 billion, of which 23 sits with compressor technique. And I think a large part of that backlog build up in CT should be related to strong gas and process orders in 2022 and 2023. And I wonder if you see that deliveries will step up in CET in the coming quarters because of the orders you received a couple of years ago related to gas and process. Thank you.

Yeah, what I could say, we continue on delivering those orders. I think we also is worth mentioning those orders. Sometimes, I mean, we had occasions where we got orders for several ships to be delivered in quite some years. So I think we don't see, I would not call a backlog because we are on time according as we build the ships. We have been increasing our capacity in Korea and in China to cope with that demand. I think we don't have capacity constraints. there. I think it's going well. It's just a matter of when our customers they need. And then we need to be precise. I don't know how much you know about that market, because if we don't deliver on price, they will on time, they will close the ship. And there will be no way to give the machine or you need, it's a big hustle if we don't deliver. I think we are quite on time, a dedicated organization. We don't see as a backlog. It's a healthy order book from what we can see. It's a healthy order book that we have in gas and process.

Understood. Okay.

Thank you. Thank you, Andreas. And with that question, we also have basically come to the end of the question list. And we would like to thank you all for listening in and joining us for this earnings call. If you have any further questions, we are, of course, very happy to help you out through our IR department. Daniel and the team will be more than happy to help you with any question you might have. Thank you very much and have a great rest of the day. Thank you. Bye-bye.