Ladies and gentlemen, welcome to the Atlas Copco Q1 2019. Today, I am pleased to present CEO Mats Rahmström and CFO Hans Ola Meyer. Afterwards, for the first part of the call, all participants will be in listen-only mode, and there will be a question-and-answer session. Speakers, please begin your meeting.
Thank you very much. A warm welcome to everybody on the call for this first quarter report conference call for Atlas Copco Group. We will stay with a very known, usual format. As someone wise said, "Why fix something that ain't broken?" We'll do it like we normally do, which means that Mats will take his intro and his personal comments to the quarter, then we follow up with the Q&A after that. Let me get this straight from the beginning. We have today also an annual general meeting, we will have to be very sharp on the time this time. I need to stress again that each one of you that poses a question restrict yourself to one question, we will have to break after one hour sharp.
We'll try to do our bit. Let's work together, then we'll fix this, I'm sure. With that, I leave it over to you, Mats.
Okay. Thank you, Hans Ola. I will start on page number two, which is Q1 in brief. I think the heading there was the strong order intake despite mixed end markets. As you know, Q1 2018 was one of our best quarters. Although, then on top of that, we managed then to reach almost SEK 27 billion in this quarter. Strong support from currency, 6%. You can see then that the organic growth rate was at 1%. Auto and Semi that we discussed previously, you can see that year-on-year that auto is down, that's quite clear for us. Semi as well, year-on-year is down. Sequentially, though, that we can see that Semi was strong and in better position. That's mainly still linked to project business that we see where the customer investing in technology.
Above expectation for us was the performance from Power Technique, where they were close to 20% organic growth, also on Compressor Technique with 5%, which we think was really, really strong considering the comparison they had. Second point on service, you can see solid growth in the service divisions, I think this is really building on our resilience. Good to see also CT so strong on service, of course, with the balance in Vacuum it's good to see that both Industrial and Semi service is growing. If you look at the geographical part, it was principally all green. Asia was a little bit in red, that's linked to the performance in Vacuum. We take slide three, let me summarize intrinsically the same thing that I already comment.
We can go down to point three, which is the margin, you can see that we reported then 20.9%, the adjusted margin of 21.8%. Simply, we had a restructuring cost in Industrial Technique around SEK 20 million. That was linked to the performance in Auto. Then we had the reevaluation of the option plans, which was close to SEK 200. On the other side, previous year, we had the divestment of Light Compaction, which was a positive, just above SEK 100. Then we had the split cost, thereby we end up at 21.8% versus then the 21.8%, in par with last year. We had support on currency to bring the margin to where we are, we have also gone ahead with the strategic initiatives that we discussed over the last couple of years. One being the extra efforts we do in R&D.
We see that we have a really strong product portfolio that we can extend with something that is similar then, we go ahead with those programs now, which is, I think, very positive for us. We also invest in connectivity that we see in our service division, also in digitalization and customer engagement. Of course, these initiatives don't pay off immediately, for us, we feel these are the right things to go ahead with. On the graph, of course, you can see that the orders received level was on a record level by far then, although it was 1% organically. Good performance in operations, SEK 24 billion something on invoicing, 4% up versus last year, happy with that. I must say that delivery situation is very much normalized with normal lead times, that is not a major issue for us.
Slide number four is the development geographically. If we start with North America, what stands out a little bit there is Vacuum, where we can see strong investments in technology. We can also see very strong Power Technique linked to construction and rental business. South America, positive effect. Our business is mainly down in Brazil and Chile. Strong from CT. Vacuum is very small in the region. Slight negative on Industrial, that's also linked to the strong Auto industry in Brazil, a very strong Power Technique. Europe, a little bit mixed picture, strong CT, the remaining part pretty much flat, very strong from CT. Africa, this time CT was strong in the region. Power Technique was also strong, with great support from increased rental activity in the Middle East.
If you look at Asia, and a big portion of that is, of course, Korea and China for us. Strong CT, positive on IC, positive on Power Technique. I think that's all good. The negative part is on Vacuum Technique, linked to key accounts. I was very pleased to see that we continue to increase our business in Asia, considering the trade discussions that they've had in the past. Take slide number five. This is the order growth per quarter, and the organic part, and now we have them two positive quarters. It's only 1%. Looking at breaking it out a little bit by Business Area, CT, positive of 5%, Vacuum Technique down 13%, and Industrial Technique down 4%, and Power Technique, which was a very strong performance with 19%.
Of course, you know that Q1 is the strongest quarter along with the Power Technique considering the seasonality that we have in that business. On slide six, you have the sales bridge, and you can see the currency impact on our business for the quarter. Hans Ola , we will remind you to guide us a little bit on the currency going forward as well.
Okay.
If you take slide number seven, it shows a little bit the split. I must say that with the return on capital employed on Compressor Technique on 105%, 5% organic growth, it is 47% of business. That makes us very pleased. The other thing I wanted to highlight was a little bit Power Technique. They've been through, you can call it restructuring, a little bit looking at the strategic growth of the business a couple of years ago, and now their sales up 19%, operating profit at 16.5%, and return on capital 30%. I think they've done a very good job to restructure it and make it to a very solid business.
Industrial Technique, you can see that the general industry business there was pretty flat, and then we had a negative impact from auto, and I think it was somewhat weaker in North America versus Asia and Europe. We go to the individual presentations per Business Area. Slide eight. Looking at the graph, you can see it stand out as a record orders received for them. In the report, they say bigger compressors flat on medium size. Maybe I should highlight that it's both gas and process and industrial compressors, and it's the bigger sizes of those compressors with greater capacity that is sold many times in projects that has developed really well. On the other side, when we say that in Industrial Technique, medium-size and smaller is flat, you should have in mind that is compared to a very strong quarter last year.
You can see revenues up 10%, also one of the best quarters that we have had, and strong operating margin at 23%. Of course, an extremely impressive return on capital employed. One thing that you can see that they have listed the acquisitions. I think they found a really good way of handling this as a concept. I must say, when we look at this acquisition from a synergy perspective, it's an easy case for us, and they knew how to integrate them. The success rate of this that you will see now and maybe in the future, I would say they have a very solid plan, and they knew how to do it. I think they have a good concept here to handle small and medium-sized distributors for one reason rather than for selling their business.
Good concept that they have really developed, I must say. Vacuum, a little bit as we talked and guided, they are negative a little bit down on 13%. On the other side, on the positive note, we can see that there is a strong momentum, I would say, to invest in technology. Some of the customers here see the opportunity and look to protect their business and take this to the next generation. Those investments are going ahead. We also see that China seems to be very determined to be playing a significant part in Semi going forward, they continue to invest as well. You logically say, well, capacity in terms of CapEx, well, it is still a little bit less, and we don't really have a projection if that will come.
We try to handle the business as is with the volumes that we have, if again, there are more CapEx investments in capacity over time, that would be the cream on the cake, so to say. Try to handle the business as is, I think they've done a remarkable job here. Operating margin also down at 24.6%. Of course, you can also then follow a little bit on the level where we have the revenue right now, that was -8%, and we still managed operating margin there, which helped us. They also had support from currency, of course. Industrial Technique on slide 10. The order decline, I think I mentioned, is mainly linked to the auto sector. The other business was more or less flat. What we see here is also a little bit what we guided, but also the electrification of the business.
Those products are going ahead, that is valuable for the OEMs, but also for the battery manufacturers. We are in a very strong position for the battery manufacturers that actually use all our three technologies here. That's assembly, it's the dispense equipment and also the riveting equipment. It's a good opportunity to grasp that right now around the availability of capacity around the world. You can still see the hesitation to take decisions. It's not as quick as it was in the past. Service, they developed the product over the years, and one of the unique concepts, I think, is the on-site tool kits that they have. I think there are more than 100 out there today.
It's a good brick walling, and normally when you get one of these on-site, the scope of supply over time normally increases, and you get really close to customer to understand applications and projects. This is something that they really focused on, and that's part of the growth rate they have had over the last five months. The adjusted operating margin was related to the restructuring that I mentioned earlier. Power Technique. Internally, I called them the superstar this morning. I think it was a very strong performance. They were up 19%, and if you look at the graph, it looks like they have acquired some companies, but that's not the case. Very strong performance.
Have though in mind that this is the best quarter for us, and this is the demand from rental companies around the world, and I would say a little bit of market share in U.S. as well. Especially the rental business is very strong in U.S. We are developing that business in Europe, and Asia, I would say that we are taking our first step to see if we can get them to rent this type of equipment as well. In that line, I would say the priority for rent is U.S., Europe, and then Asia. This is one of the areas where we have not had such strong growth in service. Now we have had a couple of good initiatives, and I can see a little bit of service growth there as well, and record revenues up 8% as well. Operating margin now then is at 16.5%.
The one thing that drives this in a very good way is the product portfolio. They had this Bauma show. I think they said that they introduced close to 16 products, different variants. Sometimes we are filling ranges, sometimes really innovative products, I think, in terms of energy efficiency, environmentally friendly product, quiet products. We're also putting a lot of efforts on the battery, for example, battery-light towers, battery compressors. They have the variable speed generators. A lot of new things then to drive the differentiation from competition. You can see the return on capital up 4.3% as well, so solid and strong performance from our Power Technique team. In slide 12, you have the profit and loss, and you can see what we reported, then 20.9% versus the 22.1%. I took that all the way on the first page.
All in all, on the graph, of course, this stands out, the orders received, but I also think very solid invoicing. Should I hand over to you, Hans, now?
Yeah, why don't we do that? If we stay on that slide 12 for a while, I just won't go through everything that you've already read in the quarterly report. Perhaps just guide a little bit on going forward when it comes to the interest net or the financial net. The best guide we can say, this is always difficult because there is always some impact from currencies also on the financial items. Somewhere a little bit north of SEK 100 million negative is where we expect to be for the next quarter or roundabout there. Further down in the income statement on the tax, better than last year, but we also know that also the general corporate income tax rate in our countries is gradually edging down. We believe that 24% will be a good proxy for the remainder of the year or thereabout.
Let's turn to the next page 13 instead, which probably is more interesting this time. What you see here is the normal. We start to the right from last year's first quarter. We end to the left with this year, and you can immediately see that there are certain extras, like the long-term incentive program effect of valuations. Fortunately, it's a minus there because it means that the share price of Atlas Copco has done very well in the first quarter. Then we have to book that. It's accounting, and it's not cash flow, but still. Then you can also see that in the bridge from last year, we are losing a capital gain from last year. I think Mats alluded to, we had that in the numbers in Q1 last year. Then there are some other things in there of restructuring and small acquisition impact.
You see the hefty impact of currency, which I remind again is a bridge number. What does that mean? If you have a negative last year and the positive effect this year, the combined effect of that is what we put here as a bridge. It doesn't mean that we suddenly lose SEK 660 million when we go to Q2, for example. That's important to remember. The numbers are big, and it indicates that we had a healthy support of the margin in the first quarter. Then we move to the really interesting column, the volume price mix and other, which is the real operational. Of course, it looks a bit worrying with the positive revenue growth and the negative operating profit growth.
In short, I think Mats has alluded a little bit to it, but we have specifically in Compressor Technique, a pretty strong negative mix. We have differences in the growth picture this quarter. It means that the lower than average divisions, average profitability have grown much more than the others. That's what we have talked about a lot. We can also say that the strategic initiatives on R&D, innovation, the connectivity, all these kind of things, that we don't care whether we have a stronger growth quarter or not. We just continue to do them. They have then, of course, increased cost, compared to where we were on the cost side last year.
I should also say that in parts of the group, we had a very strong absorption of fixed costs last year, which has turned a little bit this year, I will comment that more on the next page. Before I leave this one, number 13, on the currency for Q2 compared to Q2 in 2018, we expect about half of this impact that you see for Q1 if we compare Q2 to Q2. Half of the SEK 660 is at least some kind of an estimate for Q2. We move to the next slide and go through the Business Areas. I think with my comments already, you can understand that the relatively low impact on the flow-through on CT is really related to that the mix was not at all favorable, that, of course, was then compensated by the positive currency impact on the margin.
On the Vacuum Technique level, it's a solid profitability level. In generalizing it a little bit, you can say they had a very strong absorption. You remember Q1 last year, they pushed out a lot of goods, now they have the opposite. We have lost revenue, you could call it like an overabsorption last year has turned into an under absorption this year. That, fortunately, has been matched by the fact that we have a very negative currency impact Q1 last year and a positive one this year. You can see that more or less sums it up for Vacuum Technique. Industrial Technique, Mats had pointed out the relatively big R&D and marketing investments along the strategic lines that he mentioned is the main reason for that. There is also there a negative product mix, you can say.
On Power Technique, I rest my case. It's all positive. I think we can move on to the next page and say on the balance sheet, not much to add. I think we tried to help by giving the impact of the IFRS 16 leasing impact between December 31 and January 1, 2019, of SEK 3.4 billion roughly. Well, the rest you can see what has happened, accumulating some working capital and paying back some debt. That's basically the long and short of that. Of course, from last year, Epiroc is completely out of the balance sheet now. I move to page 16, on cash flow, not much to dwell on. Of course, you have to remember that on cash flow, we're not allowed to show continuing operations. The format dictates that it should be all-inclusive.
If we, as we wrote in the report, adjust for the Epiroc impact last year, we come to roughly SEK 2.4 billion, compared to the SEK 2.5 billion today. The reason we don't increase the cash flow more than that is that we tie up relatively more in working capital in the Q1. In fact, the comparative number there is about SEK 1.1 billion last year negative, and now it's almost SEK 1.5 billion. That takes away the bigger profit improvement that we do have. If I then just end with that, we come to the near-term outlook, and it's a good point to leave it over to Mats again.
Yeah. What we have seen, there is a high activity level among our customers still. Maybe the structure has changed somewhat. We see the bigger decisions, the bigger compressors, the bigger output investment, electrification, those go ahead. They take this decision and move on. Of course that helps us and of course it was very positive for us with the CT and the Power Technique and performance of the quarter. On the more the bread and butter, then we can see a little bit more flattish trend. We don't really see looking forward that this will change very much in the coming quarter.
On the other side, we don't see that it would be significantly better or significantly worse, and that's what we have stayed on with, that it's expected to stay on the current level, and that's kind of more the sequential thinking. Year-on-year, when we discuss it, we are still up against one of our best quarters 2018, and of course we have some seasonality between Q4 and then Q1 that you are aware of. Of course there is also a little bit of seasonality between Q1 and Q2, specifically within Power Technique of course.
Thank you, Mats. We end there, and we leave it open for the Q&A. Could you just kick it off, operator, please?
Of course. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad now. The first question is from Graham Phillips from Jefferies. Please go ahead, your line is open.
Yes, good afternoon. Thanks, Mats, Hans Ola. My question is on Vacuum Technique. Yes, the large drop through, perhaps not entirely unexpected, but the comment around service being strong, and I guess that must be around a quarter of the business now and being higher margin. Should we not expect to see some sort of contribution from that? Also the comment around new product development for customers and just reflecting back to last year and the EUV products for ASML, I guess they would have been higher margins and starting to help. Any comments around that, please?
The first is, we start with the service. I think, already from the beginning, we had strong service concepts within Semi, you know that there was a bulk of pumps out there 2017 and 2018. We still think that has great potential to continue to build on that. The industrial service, I believe that we are building a little bit more from the ground. There was a little bit there, but now I think they really structure the business in a good way to get better coverage. We are not on the same level in terms of profitability as we are in some of the other VAs at this point. I'm saying increase it a bit, make sure they have happy customers. We work a little bit on the profitability. We work on the volume down.
Now this comes a little bit hand in hand with the happy customers and volume. Over time, there is opportunities of course to continue to build on the profitability, but it's not overnight. We're still building, especially the industrial part. Did you want to add to it?
No. Just summarizing to your question, Graham, that the mix is not as favorable when it turns like this as in the others. You remember we talked last year that there was a very healthy profitability on the Semi equipment side as well, which of course is one of the reasons that we dropped in this, in spite of revenue from service growing.
Mm-hmm. Just to follow up then, the new product innovations that you mentioned at customers, this presumably alludes to things like the EUV equipment for ASML. Is those deliveries happening as expected this year compared to last year, which we're looking for quite sizable increases?
More or less. It alludes to what Mats said about the technology investments going on. We don't have any numbers on exactly compared to last year and so on, or plans, no.
If this account is successful, of course, we are also successful.
Yes.
Okay, thanks very much.
Thank you.
Next question is from Klas Bergelind from Citi. Please go ahead. Your line is open.
Hi, Mats and Hans Ola. It's Klas from Citi. Also on Semi and flat panel, if I could. The memory side still seems to be weak when we listen to the OEMs and other suppliers. You obviously gained from a couple of important orders in the quarter on the technology side. I'm just thinking about the order development here into the second quarter. What is an underlying order level now going forward, do you think, you strip out those larger orders? Or is this the new normal? It feels like we could weaken a bit further before the market turns.
I mean, looking at the utilization in the factories, Atlas still, it's still on a high level. They continue to build the demand for both logic and memory with time. Of course, at the end of the day, they will run into a capacity issue. We don't really predict when that's going to happen. We know we're going to be wrong about that anyway. What we do know is that, with the volumes that we have now, the traction we have on the business right now, I think we really pushed the organization to have the agility and the profitability where we are right now. When that investment comes in capacity or if it's memory or any other product, then we take that on top. I think we are trying really to make the case as is right now.
That's what we see in Semi, and we see a very, as I mentioned before, we see a very determined Chinese OEMs really stepping into this. We'll say that we are very successful with those orders in China. Then we can see, yes, I mentioned as well about the technology, but it is more technology. I mean, the capacity one, that can really ramp up and those decisions can come pretty quick. That's what we see right now.
Okay. Can I just ask a quick follow-up to you, Hans Ola, on the drop-through, following on from Graham's question. It came in at 58%, which is similar to the drop-through in the up cycle. In the up cycle, the drop-through benefited from the synergies between Semi and industrial vacuum, and as you were integrating M&A and you were utilizing new capacity. I think you said that we shouldn't expect that kind of drop-through on the way down, or was this just one quarter where you maybe didn't utilize the flexible side of the cost base as you saw demand relatively stable?
I think I also said a couple of times that the quarter is a relatively short period. It's difficult to read too much into 50% or 40% or 30%. I think the important comment is really that they did push through a lot of equipment at the cost rate that they had a year ago, and now they don't have the same output, as you can see in the volume. Of course, on Semi, it's more negative than the whole Business Area. The bridge effect gives that, to be honest, and that's the main explanation. 50, I know for experience that when you go down on the short perspective, you lose more per lost revenue SEK than what you gain when you go up quickly. That at least is in line with what we expected.
Thank you.
Thank you.
Next question is from Guillermo Peigneux. Please go ahead. Your line is now open.
Hi, Guillermo Peña from UBS. Just follow-ups, really. You commented enough on the drop-throughs, both for VT and Compressor Technique. I just wonder, given the current visibility you have in the backlog for CT and VT, when would you expect these drop-throughs to normalize, both for VT and Compressor Technique? When would you expect that the business will start to return the same amount or the normal amount to the growth you report? Thank you.
Mats is pointing to me over here. You can't see that, but it's a flow-through question. Yeah. Joking apart, it's impossible to give you a guidance on when, because I don't think any quarter can be seen as a perfectly normal quarter, to be perfectly honest. I'd rather not give more meat on the bone on that one, if you excuse me, Guillermo.
No, no problem. Let me rephrase the question. If I see basically that large gas and process orders and large industrial compressor orders have been basically dominating your order intake the last 2 quarters in terms of growth, I would say that it's fair to assume that the relatively low drop-through is here to stay for at least a couple of quarters. Similarly, if I look at VT, obviously at the moment, you're just matching against the best-performing quarters, as we already discussed. Towards the end of the year, it will be much more normal. Am I just talking the right picture, or would you agree with my statements or disagree rather than guide me? Yeah. Thank you.
No, I think that the answer always becomes that on a 12-month rolling basis, I think we will be, if we grow
You should expect something around a 30% flow through, 30%, 35%, depending on what pricing is doing in that period. That's as close as an answer I can get to that. The main thing with this one is to be able to comment what has actually happened in the quarter, so to speak. I cannot give you more on that for the future. Sorry.
No worries. Thank you very much.
Thank you.
Next question is from Max Yates from Credit Suisse. Please go ahead. Your line is open.
Hi. Thank you. Just the first question is on the gas and process compressors. Could you give us an idea as a percentage of total orders in Q1 in compressors, how much they accounted for? My understanding was they were 10%-15%, but seem to have, obviously, a fairly significant effect on the overall growth rate. I just wanted to understand a little bit proportionally where they sit now as a percentage.
Without being caught in the trap of every quarter having to disclose every number, so to speak, let me say it like this, that yes, you're right, that both on, primarily on orders, of course, but also to a certain extent on revenue, they have been doing very well. Gas and process can go up in those periods to about 15%, and in other periods, it will fall down in this span that you said yourself, between 10% and 15%.
Okay.
You can expect it to be in the upper end of that range, yes.
Maybe just to follow up on compressors and on the industrial compressors, I think you're a little bit more unusual, I guess, relative to many of the other short cycle competitors that we've heard, where you've talked a little bit more constructively about Europe and talked about Asia and North America slightly down. I guess North America is maybe slightly surprising within that. Did that regional development surprise you at all? Or was there anything specifically you would call out regionally, timing-wise, comp-wise in North America that may have driven that?
I don't think we have any statistics really that confirm any trends. It is correct then that we've seen a little bit weaker business in North America, and that is also valid for Industrial Technique. If those are linked or not, I dare not to say. On the other side, as you know the 5% organic growth for the quarter was above our own expectation for CT. To see the continued growth in Asia, is of course extremely important for our continued performance. Then they stand out in Europe. I have not checked the benchmark versus last year, but that was also very promising. Those are the three main markets, of course. After one quarter, I cannot really say that it's up or down, even though we, of course, follow it.
Okay, there's no clear trend that's making you concerned in North America as it stands?
No, except for what I said, that you can see that some of the big OEMs in auto have flagged a little bit for quite big reduction of employees. I think they take the opportunity to restructure a little bit, and that was a little bit of hesitation, of course, on investment at this point. We see the main drive for electrification that's been coming out of Asia, but also we can see more and more activity in Europe on that side.
Okay. Thank you very much.
Next question is from Matthew Akers from Exane BNP Paribas. Please go ahead. Your line is now open.
Hi. Thanks for taking a question. Power. You said about the growth coming from equipment rental companies. Is there anything exceptional about the order intake? If I look at the chart on slide 11, I can see that your point about seasonality you made, but the growth in orders this quarter looks way above that. I just wondered whether or not that we have a reset after this, or do you expect, like we had the question with Vacuum, is this sort of a new normal? Could you comment there, please?
There is a normal trend that the investment period is normally in Q1, which is normally the strongest. Q2 follow them a little bit weaker, of course. This is exceptional, of course. As you said, rental was one area that was very strong. Also the pump and the generator business was clearly above our expectation. That is a little bit linked to a handful of accounts. There, of course, you can see a setback, depending on the investment cycles. That is a little bit what builds that, the graph for us at this time, and the portables is stable on a good level. What stands out this quarter, I must say, rental that continue to perform very strong. If something that is different from the other quarter was the huge increase of pumps and generators.
Okay. Could I have one quick follow-up on Industrial Technique? I think you said you were going to give a comment on the under-absorption of the overheads. I don't think you ever gave it. You had 3% organic sales growth. Could you just explain the under-absorption of overheads that you mentioned in the report?
Sorry, which?
In-
On the general, on the Industrial Technique.
Yeah. In the report it says there's factory, I think it's Industrial Technique. Yeah, under-absorption in factories, you still had 3% organic growth. Would you be able to explain where the difference?
Well, I mean, yeah.
The organic growth is down, right?
Exactly.
In the quarter.
Exactly. Well, on revenues, it's up compared to last year, but it's also a fact that it's 12 months later, so to speak. The absorption effect, again, I think is also relevant, relative to how much we utilized our fixed cost and factory utilization last year. It looks a little bit strange, I grant you that. It's clearly so that if you look in the quarter as such, the comment here is valid. That's what we wanted to point out, and that was not the case last year. The effect is there. If there was a bridge here, you would have seen it on Industrial Technique, if I say so.
Okay, thanks.
I can't give you that we are at 84% or 78% or something. We struggle like everybody else to find the perfect KPI to measure that, to be honest.
Yeah, sure
in relative terms, it's much, much less positive than it was last year.
Okay.
Thank you.
Next question is from Ben Uglow, Morgan Stanley. Go ahead, your line is now open.
Good afternoon, and thank you for taking the question. I guess, maybe I'll get away with a follow-up. My first question is around China. What are you guys seeing on the ground in China at the moment between Compressor Technique, Industrial Technique? Was there anything new or different on the vacuum side? You seem to be alluding to some type of activity. Could you say a little bit just about how things progressed during the quarter? Obviously, there's quite a lot of expectation there about stimulus measures. Are you seeing any benefit at all from China stimulus at this point?
If I start with Industrial in China, Industrial Technique. It's clearly so that our positioning in the Chinese manufacturers, that we established many years ago, is really paying dividends right now. They are gaining market shares in, for example, smaller SUVs. We also have a lot of, it might sound stupid to call a startup company, but new finance electrical projects, where they clearly, of course, they come to us now to look at different assembly technologies. If they want to do something in steel, we have, of course, assembly technology with some bolts. If they want to do something in composite or high strength steel or aluminum, we can help them to guide them a little bit on dispense equipment, structure dispense equipment, and also on riveting if it's, for example, aluminum to aluminum.
This becomes, of course, a reality when you want the most capacity out of your batteries, and you need to work on the weight on your car, but still want all the traditional functionalities in your car. You need to pay for this, and it's normally the material in the body-in-white. The position is you have strong to come to us and talk to us about this, and I don't know if you have seen it, but if you're in China and visit one of our technology centers, you can actually come in as a supplier. For example, we have a complete battery pack where they can take it step by step by step using different technology and then talk about the benefits of different technology, different designs.
I think that's a unique position that we have, and just to split around the world, I would say that China is probably the area where in relative terms we get more business on electrification compared to other areas, even though other areas start to pick up a little bit. On the compressor side, I think it is the bigger compressor, still big capacity, a new factory, or if it's just where they have a need for a huge capacity. That's what we see there. We are not super strong. This is one of the area for Power Technique. It's probably 20% of our sales is in the split of Power Technique. That we have a market share gain race. Mainly, we are strong on the water pumps, on the capital brands.
We can do significantly more on the other product ranges, and as I said before, it's not the traditional onramp selling in China.
Okay. Thank you for that. If I can, one quick follow-up, and I apologize for laboring the point around vacuum and orders, et cetera.
No worries.
When we look at the order book, if I look at the intake, it's ballpark SEK 600 million for the quarter. Can you give us any frame of reference, Hans Ola, maybe for how to think about large orders in that mix versus smaller, let's call it more underlying activity? Is this an unusual quarter? Is it a much higher % of the intake this quarter? Can you quantify that? Is it 20%? Is it 30%, 50%? Any help here would be much appreciated.
Yeah, I understand that, I can't give you very much help, I'm afraid, because it's not so much that it's specifically very large orders. If you have big key accounts, every order tends to be big in one respect. It's more about the fact that sometimes they fall in this quarter and sometimes they don't fall in the quarter. That is the difficult part with this. We could have had the same view on the underlying performance with a SEK 570 million quarter, if you like. It's not so much that. I think Mats has already commented more on that new technology projects that look into, let's say, the not capacity, but the other part, and then China having their strategic agenda, so to speak. That's what I can say. It's tough also for us.
All right. Thank you. Thank you very much. I appreciate it.
Thanks, Sam. Thank you.
Next question is from Alexander Jones from Bank of America Merrill Lynch. Please go ahead. Your line is open.
Thanks very much. Good afternoon, everybody. Maybe I'll just keep it to the one and ask you, Mats, I think in the past you've said that you would be surprised not to see weakness in automotive markets spill over into industrial. I wonder if you could make a comment on to what extent you're seeing that or not, because it certainly doesn't feel like we're seeing it. I'll maybe leave it there as an open-ended question.
I think you're right. From my experience in the past is that when we have seen weaker auto, that would time the general industry, which is linking up to the tier 1s and tier 2s and tier 3s, which is defined in many companies as general industry, and that will probably follow. I do agree with you, though, that the general industry is still performing on the high level, although that we said year-on-year that it's flat. There is a good time correlation between auto and GI. That at least my experience from Industrial Technique over the years I've been there.
Yet you're still comfortable with the fact that the outlook is relatively unchanged. Your commentary on demand is relatively unchanged.
I think we're still seeing that there is still a high activity level, breaking it down a little bit, we see more favorable positions in electronics. This quarter. Then in off-road was a little bit more flattish, which is one of the biggest segments. Will that come back or not? We will see. Overall, it's a little bit flattish, and it depends a little bit on the segment that I look at. Aerospace is also this bigger CapEx investment, and then it can be quiet for almost a year, and then they do something big again. Aerospace have been a little bit less active right now, but that can change quite rapidly as well. We don't see a trend where we can point to say that GI is on the way down, but it's more of a flattish as indicated in the report as well.
Okay. Thank you.
Next question is from Gael de-Bray from Deutsche Bank. Please go ahead. Your line is open.
Yes, thanks very much. Good afternoon, everybody. I just have a question on the R&D initiatives you're talking about so much. Maybe could you talk a bit more about the innovation pipeline in the Compressor Technique division? Fundamentally, what will drive growth going forward? Are there specific applications or new technologies you're working on at the moment and that could possibly be game changers for the business? Thank you.
I mean, first of all, we have a strong position, of course, in many of the compressor segments, but we don't have 100% market share, so we're still working with the market penetrations. When it comes to R&D, I think there is two things, both what we do on technology, and normally the technology drives energy efficient for customers. Of course, if we have something that is a good payback for customer, we can activate those accounts somewhat earlier and build a little bit on the market. We also have areas where we think that we can do better. Low pressure is one of those areas where we have now invested quite heavily in the product portfolio, and we believe now that we have a very strong product portfolio.
The outstanding product that we introduced last year was the new generation of oil-free machines, so much more efficient than what you see out there and also better than our present machine, of course. It's both technology linked to energy efficiency, and with the customer, that's one of the bigger costs for them to drive a compressor, but we're also expanding into areas close to what we do today, and one example could be, for example, then low pressure.
Okay. Thank you. Sorry if I missed that, but did you say anything about the pricing trends in Vacuum Technique? Have you seen any changes lately in the pricing pattern, maybe over the past couple of quarters?
No, I would say that it's really driven by value in that segment. They cannot afford to have any downtime. Pricing is, of course, extremely important for them as well. We continue to introduce a new generation of products that is beneficial to them, that is also the way we work with pricing, that always bring in something new and more efficient. There is nothing that has changed in that climate in Vacuum Technique.
Okay. Thank you very much.
Thank you. We are approaching the full hour, I'll thank everybody for participating, just remind people that next time when we have the similar call will be on the 15th of July. It's a summer month, we try to be quicker in those months so we can go on vacation afterwards. The 15th of July is where we will report on the second quarter. Thanks everybody for participating.
This now concludes your conference call. Thank you all for attending. You may now disconnect your your lines.