Ladies and gentlemen, welcome to the Atlas Copco Q1 2019. Today, I am pleased to present CEO, Mads Ramstrom and CFO, Jens Ola Maier. Speakers, please begin your meeting.
Thank you very much, and a warm welcome to everybody on the call for this Q1 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? So we'll do it like we normally do, which means that Mats will take his intro and his personal comments to the quarter, and then we follow-up with a Q and A after that. Let me get this straight from the beginning.
We have today also an Annual General Meeting, so 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, and we will have to break after 1 hour sharp. We'll try to do our bit, and let's work together, and then we'll fix this, I'm sure. So with that, I leave it over to you, Mats.
Okay. Thank you, Arthur Ola. I will start on Page number 2, which is Q1 in brief. And I think the heading there was the strong order intake despite mixed end markets. And as you know then, Q1 2018 was one of our best quarters.
Although then on top of that, we managed then to reach almost SEK 20 7,000,000,000 in this quarter. Strong support from currency, 6%, and you can see then that the organic growth rate was 1%. Auto and semi that we discussed previously, you can see that year on year that auto is down. So 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 product business that we see where the customer invest in technology. The above expectation for us was the performance from PowerTechie, where they were close to 20% organic growth, but also on compressor technique with 5%, which we think was really, really strong considering the comparison they had. And second point on service, we can see solid growth in the service divisions, and I think this is really building on our resilience. Good to see also that CT is so strong on service.
And of course, with the balancing in vacuum, it's good to see that both the industrial and semi service is growing. If you look at geographical parts, it wasn't principally all green. Asia was a little bit in red, and that's linked to the performance in vacuum. We take Slide 3. Then we summarize intrinsically the same thing that I already comment.
We can go down to 0.3%, which is the margin, and you can see that we reported on 20.9%. And the adjusted margin of 21.8%. Percent. And simply, we had the restructuring cost in Industrial Technique around $20,000,000 that was linked to the performance in Aalto. And then we had the reevaluation of the option plans, which was close to $200,000,000 On the other side, in previous years previous year, we had the divestment of light compaction, which was a positive, just $1200,000,000 and then we had the split costal.
And thereby, we end up at $21,800,000 versus the middle $21,800,000 so in par with last year. And we had support on currency to bring the margin to where we are, But we have also gone ahead with the strategic initiatives that we've discussed over the last couple of years, one being the extra efforts we do in R and D. Obviously, we have a really strong product portfolio that we can extend with something that is similar than we do have with those programs now, which is, I think, very positive for us. We also invest in connectivity that is in our service division and also in digitalization and customer engagement. So of course, these initiatives don't pay off immediately.
But 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. And good performance in operations, dollars 24,000,000,000 something on invoicing, 4% up versus last year. So happy with that. And I must say that delivery situation is very much normalized with normal lead times.
So that is not a major issue for us. Slide number 4 is development geographically. If we start with North America, what stands out a little bit is vacuum, but we can see strong investments in technology. And we can also see very strong power technique that's 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 and a very strong power technique.
Europe, a little bit mixed picture, strong CT and the remaining part pretty much flat, but very strong from CT. Africa, this time, CP 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 NIC, positive on Power Technique. So I think that's all good.
The negative part is on vacuum linked to key accounts. And I was very pleased to see that we continue to increase our business in Asia, considering the trade discussions that we've had in the past. Next Slide number 5. This is the order growth per quarter and organic part, and now we have done 2 positive quarters. It's only 1%.
Looking at breaking it out a little bit by business side, NCT positive of 5%, vacuum down 13% and industrial down down 4% and Power Technique, which was a very strong performance in 19%. And of course, you knew that Q1 is the strongest quarter long liquid power technique considering the seasonality that we have in that business. On Slide 6, you have the sales bridge, and you can see the currency impact on our business for the quarter. And Hans Ulla, he will remind you to guide a little bit on the currency going forward as well. Okay.
If you take Slide 7 then, it shows a little bit the split. I must say that with return on capital employed on compressor, significant 105%, so 5% organic growth and then this is 47% of our 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 the 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 slightly flat, and then we had a negative impact from how to. And I think that it was somewhat weakly in North America versus Asia and Europe. Then we go to the individual presentations per business area to Slide 8.
Looking at the graph, you can see it stands out as a record orders received for them. And in the report, then they say bigger compressors, flat on medium size. And maybe I should highlight that it's both gas and process and industrial compressors, and it's the biggest sizes of those compressors with greater capacity that is sold many times in projects that has developed really well. On the other side, then when we say that the industrial, medium sized and smaller is flat, And you should have in mind that we then compare 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 percent, and of course, an extremely impressive return on capital employed.
One thing that you can see that they have listed 3 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. So the success rate of this that you will see now and maybe in the future, I would say it's they have a very solid plan, the menu after the. So I think they have a good concept here to handle smaller and medium sized distributors for one reason or other than for selling their business.
So 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 around 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 opportunity and look to protect their business and take this to the next generation. So those investments are going ahead.
And then we also see that China seems to be very determined to be playing a significant part in semi going forward, so they continue to invest as well. And then you'll know if you 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. And if we again have more CapEx investments in capacity over time, that would be between the cream and the cake, so to say. So, try to handle the business as is, and I think they've done a remarkable job here.
Operating margin also down at 24.6%. And of course, you can also then follow a little bit on the level where we have the revenue right now that was minus 8 percent and the steel managed standard operating margin there, which were fixed. And 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 outdoor 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, and that is valuable for the OEMs but also for the battery manufacturers. And we are in a very strong position for the battery manufacturers that actually use all our 3 technologies here that's assembly and it's defense equipment and also the riveting equipment. So it's a good opportunity to grasp that right now around the Gildot capacity around the world. You can see 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. So this is something that they're really focused on, and that's part of the growth rate they've had over the last 12 months. The adjusted operating margin was related to the restructuring that I mentioned earlier. And then Power Technique internally, I called them the superstar this morning.
So I think there 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. So very strong performance. And I have no 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. The specialty 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 ramp this type of recruitment as well. But in that line, I would say the priority for them is U. S, Europe and then Asia. This is one of the areas where we have not had such strong growth in service, but 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.
And operating margin now then is at 16.5%. And the one thing that drives this in a very good way is the product portfolio. They have this BioMarcel. I think they said that they introduced close to 16 new products, different variants. Sometimes we are feeling ranges.
Some of them really innovate the 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. So a lot of new things tend to drive percent, 5% as well. So solid and strong performance, strong of Power Technology.
And on Slide 12, you have the profit and loss. You can see what we reported on 20.9% versus the 22.1%. I took that all there on the first page. But 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, Hamzah Ola?
Yes. Why don't we do that?
If we stay on that slide, that number 12 for a while, I just won't go through everything that you've already read in the quarterly report, but 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. But somewhere a little bit north of EUR 100,000,000 negative is where we expect to be for the next quarter or around about 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 percent will be a good proxy for the remainder of the year or thereabouts. 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 Q1, and 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 Q1. And then we have to book that.
It's accounting, and it's not cash flow, but still. And 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. And then there are some other things in there of restructuring and small acquisition impact. Then 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. So it doesn't mean that we suddenly lose $660,000,000 when we go to Q2, for example. So that's important to remember. But the numbers are big, and it indicates that we had a healthy support of the margin in the Q1.
And then we move to the really interesting column, the volume, price, mix and other, which is real operational. And 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, and that's what we have talked about a lot.
We can also say that the strategic initiatives on R and D, innovation, the connectivity, all these kind of things, but we don't care whether we have a stronger growth quarter or not. We just continue to do them, and 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, and I will comment that more on the next page. But 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. So half of the $660,000,000 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 flow through on CT is really related to that the mix was not at all favorable. And 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. But in generalizing it a little bit, you can say they had a very strong absorption.
And you remember Q1 last year, they pushed out a lot of goods. And now they have the opposite. We have lost revenue. So this you could call it like an over absorption last year has turned into an under absorption this year. And that fortunately has been matched by the fact that we had a very negative currency impact Q1 last year and a positive one this year.
So you can see that more or less sums it up for vacuum technique. Industrial technique, Mats had pointed out the relatively big R and 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. And then 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.
And we tried to help by giving the impact of the IFRS 16 leasing impact between December 31 January 1, 2019, of SEK 3,400,000,000 roughly. And 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. And of course, from last year, Epiroc is completely out of the balance sheet now. I move to Page 16.
And 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. So if we, as we wrote in the report, adjust for the Epiroc impact last year and we come to roughly 2,400,000,000 dollars compared to the 2,500,000,000 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 $1,100,000,000 last year negative, and now it's almost $1,500,000,000 So 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.
Yes. What we have seen down, and maybe when we summarize it a little bit, that there is a high activity level among our customers still. Maybe the structure has changed somewhat, but this is the bigger decisions, the bigger compressors, the bigger how to investment electrification, those goes ahead. They take this decision and move on. And of course, that helps us.
And of course, it was very positive for us with the CT and the Power Technique performance of the quarter. But then on more the bread and butter, then you can see a little bit more flattish trend. But 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 reverse, and that's what we have stated on with that is expected to stay on the current level. And that's more the sequential thinking.
And 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. But of course, there is also a little bit of seasonality between Q1 and Q2 and specifically within Power Techneet, of course.
So thank you, Mats. We end there, and we'll leave it open for the Q and A. Could you just kick it off, operator, please?
The first question is from Graham Phillips from Jefferies. Please go ahead. Your line is open.
Yes. Good afternoon. Thanks, Matt, Sanddala. 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 it 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? And also the comment around new product development for customers and just reflecting back to last year in the EUV products for ASML, I guess they would have been higher margins and starting to help. Any comments around that, please?
And the first is to start with the service. I think, already from the beginning, we had strong service concepts within semi. And you knew that there was a bulk of pumps up by 2017 2018. So we still think that has a great potential to continue to build on that. The industrial service, I believe that we are building a little bit more from the ground.
I was a little bit there, but now I think they really structure the business in a good way to get better coverage. But we are not on the same level in terms of profitability as we are in some of the other BAs at this point. So I'm actually I'm saying it principally, make sure to have happy customers, then we work a little bit on the profitability, and then we work on the volume. Now this comes a little bit hand in hand with the happy customers and volume. But over time, there is opportunity, of course, to continue to build on the profitability, but it's not overnight, the steel building, especially the industrial part.
Do you want to add?
No, no. So 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, 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.
But just a follow-up then, so the new product innovations that you mentioned that customers, I mean, this presumably alludes to things like the EUV equipment for ASML, which I mean, is that deliveries those deliveries happening as expected this year compared to last year, which we're looking for quite sizable increases?
More or less. I mean, it alludes to what Matt said about the technology investments going on, but 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, yes.
Okay. Thanks very much.
Thank you.
Next question is from Claus Bergler from Citi. Please go ahead. Your line is open.
Yes. Hi, Madsen Hansolder, Claus from Citi. Also on semis 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, Alpe Steel, it's still on a high level. They continue to build the demand for both logic and memory over time. So 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.
But what we do know is that with the volumes that we have now, with the structure 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. So 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. And that's what we see in 18/70. And we see a very as I mentioned before, we see a very good German Chinese OEMs really stepping into this.
And we'll say that we are very successful with those orders in China. And then we can see, as I mentioned as well, all the technology. But it is more technology. And the capacity one, they can really ramp up, up and those positions can come pretty quick. So that's what we see right now.
Okay. Can I just ask
a quick follow-up to Johan Sohla on the drop through following on from Graham's question? It came in at 58 percent, which is similar to the drop through in the up cycle. But in the up cycle, the drop through benefited from the synergies between semicon and industrial vacuum. And you were as you were integrating M and 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 1 quarter where you maybe didn't utilize the flexible side of the cost base as you saw demand relatively stable?
I think I also have said a couple of times that the quarter is a relatively short period, and it's difficult to read too much into 50% or 40% or 30%. But 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. And of course, on semi, it's more negative than the whole business area. So the bridge effect gives that, to be honest, and that's the main explanation.
50,000,000 I know for experience that when you go down on the short perspective, you lose more per lost revenue krona than what you gain when you go up quickly. So that at least is in line with what we expect. Thank you. Thank you.
Next question is from Guillermo Peigneux from UBS. Please go ahead. Your line is now open.
Guillermo Oppenjer from UBS. Just follow ups really. You commented enough on the drop throughs both for VT and Compressa Technik. I just wonder, given the current visibility you have in the backlog for CTA and VT, when would you expect these drop throughs to normalize both for VT and Compressed Technic? 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.
Mads is pointing to me over here. You can't see that, but it's a flow through question. And then yes, no, 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. So I'd rather not give more meat on the bone on that one, if you excuse me, Guillermo.
No problem. But then 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 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 BT, obviously, at the moment, you're just matching against the best performing quarters as we already discussed.
But then 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? Yes. 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 will should expect something around 30% flow through 30%, 35%, depending on what pricing is doing in that period. And that's as close as an answer I can get to that. But the main thing with this one is to be able to comment what has actually happened in the quarter, so to speak. So 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.
Just the first question is on the gas and process compressors. Could you sort of give us an idea as a percentage of total orders in Q1 in compressors, how much they accounted for? And my understanding was they were sort of 10% to 15% that seemed to have, obviously, a fairly significant effect on the overall growth rate. So I just wanted to understand a little bit proportionally where they sit now as a percentage.
As 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. And then 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% 15%. So you can expect it to be in the upper end of that range, yes.
And maybe just a 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 competitors or shorter 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. I mean, did that sort of 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. But it is correct that we've seen a little bit weaker business in North America, and that is also valid then for industrial If those are linked or not, I can't then not to say. On the other side then to as you know, the 5% organic growth for the quarter was above our expectation for CT. And to see the continued growth in Asia is, of course, extremely important for our continued performance. And then they stand out in Europe.
I have not checked the benchmark versus last year, but that was also very promising. So those are the 3 main markets, of course. But after 1 quarter, I cannot really say that it's up or down even though we, of course, followed.
Okay. So 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. And I think you take the opportunity to restructure a little bit. And that puts a little bit of hesitation, of course, on the investment at this point. And then we see the main drive for electrification that's still 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 Spur from Exane BNP Paribas. Please go ahead. Your line is now open.
Hi. Thanks for taking the question. Power, the 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?
I mean, there is a normal trend that the investment period is normally in Q1, which is normally the strongest. I think Q2 followed them a little bit weaker, of course. This is exceptional, of course. And as we said, rental was one area that was very strong. But then also the pump and the generator business was clearly above our expectation.
And that is a little bit linked to a hand furlough of accounts. So there, of course, you can see a setback depending on the investment cycles. So that's a little bit what builds that the graph for us at this time. And the portables is stable on a good level. But what stands out this quarter, and let's say, Drentel that continued to perform very strong.
And if it's something that is different from the other quarter, it 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, but I don't think you ever gave it. You had 3% organic sales growth. So could you just explain the under absorption of overheads that you mentioned in the report?
Sorry, which in industrial? On industrial. On industrial technique?
Yes. In the report, it says there's factory, I think it's Industrial Technique. Yes, under absorption in factories, but you still had 3% organic growth. So would you have to explain where the difference? I mean,
yes. The organic growth is down, right?
Exactly, exactly. So the 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. So the absorption effect, again, I think, is also relevant to how much we utilized our fixed cost and factory utilization last year. So it looks a little bit strange, I grant you that.
But it's clearly so that if you look in the quarter as such, then the comment here is valid. That's what we wanted to point out, and that was not the case last year. So 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. But in relative terms, it's much, much less positive than it was last year.
Okay.
Thank you.
Next question is from Ben Uplow from 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, but 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? Because 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's stimulus at this point?
I'll start with industrial in China, industrial techniques. It clearly shows that our positioning in the Chinese manufacturers that we established many years ago is really paying dividend right now. They are gaining market shares in, for example, smaller SUVs. But then we also have a lot of it might sound stupid to call a startup company, but new finance electrical projects where they principally, of course, in contrast now to look at different assembly technologies. If they want to do something in steel, then we have, of course, assembly technology with nuts and bolts.
If they want to do something in composite or high strength aluminum, then we can help them to guide them a little bit on the dispense equipment, the structural dispense equipment and also then on riveting. If it's, for example, aluminum to alumina, this becomes, of course, a reality when you want to know the capacity out of your batteries. And then you need to work on the weight on your car, but you still want all the traditional functionalities in your car. So you need to pay for this, and it's normally the material in the bottom line. So the position is just 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 this is one of our technology centers, you can actually come in as a supplier. And 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 if you see the split around the world, I would say that Chinese probably the area where in relative terms, you get more business on electrification in 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. It's in the split of Power Technique.
So that means we have a market share gain raise. Mainly, we are strong on the water bills, other couple of brands. We can do significantly more on the other product ranges. And as I said before, it's not the tradition of rental in China.
Okay. Thank you for that. One, if I can, one quick follow-up. And I apologize for laboring the point around vacuum and orders, etcetera.
When we look at
the order book, if I look at the intake, it's ballpark $600,000,000 for the quarter. Can you give us any frame of reference, hands on or 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 percentage of the intake this quarter? Can you quantify that?
Is it 20%, is it 30%, 50%? Any help here would be much appreciated.
Yes, yes, I understand that. But 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 tend to be big in one respect. But so it's more about the fact that sometimes they fall in this quarter and sometimes they don't fall in the quarter. And so that is the difficult part with this.
And we could have had the same view on the underlying performance with a $570,000,000 quarter, if you like. So 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. So it's tough also for us.
All right. Thank you. Thank you very much. I appreciate it.
Thanks, Adam. Thank you.
Next question is from Alexander Rook 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 spillover into industrial. And 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.
And I'll maybe leave it there as an open ended question.
No, I think you're right. And from my experience in the past is that when we have seen weak auto that we're trying the general industry, which is linking up to that 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. But there is, over time, a correlation between Alto and EI that that at least my experience from Industrial Technic over the years I've been there.
And yet you're still comfortable with the fact that the outlook is relatively unchanged? Your commentary on demand is relatively unchanged.
Yes. I think we're still seeing that. That is still a high activity level. And breaking it down a little bit, we see more favorable positions in electronics this quarter. And then you know 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. But overall, it's a little bit flattish, and it depends a little bit on the segment that they 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 has been a little bit less active right now, but that can change quite rapidly as well. So we don't see a trend where we can point to say that GAs are way down, but it's more of a flattish as we indicated in the report as well.
Okay. Thank you.
Next question is from Gail DeBray from Deutsche Bank. Please go ahead. Your line is open.
Yes. Thanks very much and good afternoon everybody. I just had a question on the R and D initiatives you're talking about so much. Maybe could you talk a bit more about the innovation pipeline in the compressor Technek 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 changes 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 and D, I think there is 2 things, both what we do on technology. And normally, the technology drives energy efficient for customers. And of course, if we have something that needs a good payback for customer, we can activate those accounts somewhat earlier and build a little bit on the market.
But then we also have areas where we think that we can do better. Lube 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 new product portfolio. The outstanding product that we introduced last year was the new generation of oil free machines. It's too much more efficient than what you see out there and also rather than our present machine, of course. So it's both technology linked to energy efficiency.
And we grew to 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 lube pressure.
Okay. Okay. And 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. But we continue to introduce new generation of products that is beneficial to them, And that is also the way we work with pricing that always bring in something new and more efficient. So there is nothing that has changed in that recliner in vacuum.
Okay. Thank you very much.
Thank you. We are then approaching the full hour. I will thank everybody for participating and just remind people that next time when we have the similar call will be on the 15th July. It's a summer month, so we try to be quicker in those months, so we can go on vacation afterwards. But the 15th July is where we will report on the Q2.
Thanks, everybody, for participating.
This now concludes your conference call. Thank you all for attending. You may now disconnect your lines.