Welcome, everyone, to Atlas Copco Capital Markets Day 2021. The image you see in the background is Antwerp, and our intention was really to meet you all in person at our facilities. But given the circumstances, we run this as a digital event. But nevertheless, today's main focus will be on our biggest business area compressor technique. And you will meet live from Antwerp the Business Area President Wagner Rego.
During his presentation, you will learn about the market we operate in, market trends, new technology industries, and the strategy for long term profitable growth. But of course, today you will also meet our President and CEO, Mats Ramstrom and our CFO, Hans Ulla Mayer. And they will present the Atlas Copco strategy and an update on the business model. You will also hear about the trends we see and how we meet these trends. Tangible examples of how we act in a changing business climate, where and how we contribute to reduced environmental impacts.
Last but not least, you'll of course also have the opportunity to ask your questions directly to Mats, Hans Ola and Wagner. This is the agenda for today, starting with a group presentation with Madsen Hansola. After that, a 15 minutes break. Then we come when you come back, we listen to Wagner. And then we end with a Q and A session that is slightly longer this year.
The Q and A will be done in France call format only. And we will notify you about 10 minutes before the Q and A session. And the numbers to dial in will be shown in the webcast player. I would also would like to remind you that All the presentations are available for download at the webcast player and at our homepage atlascopco.com/ir. We end the day at latest quarter past 4.
And with that, I would like to hand over to you, Mats.
Thank you so much, Daniel. And I should also say welcome to everyone. I will take you to a slightly different setting here in the beginning to a living room, just to show you some of the applications that we believe that we perform well in. And we see them as some of the future segments for us as well. Starting with the mobile phone.
Excellent applications for logic and memory. So it's the semi division mainly. The screen is also manufactured under vacuum. It could also be a vision application for industrial technique. A phone normally holds 20 to 25 screws, so it's an industrial technique application as well.
And there could be dispense application also for the electronics. And that goes for many screens that you can see in the pictures or an iPad, for example. What's interesting about the phone is that we are all about to change to 5 gs technologies. So we will all over the coming years change Technologies. We believe this is a good segment to be in.
And then you can see the water bottle. We use compressor to actually make the bottle. But it's the clean water that's one of the application. I talked a number of times about low pressures. And we are really performing in this segment as well now.
So we also think this is an add on to our growth strategy. Then, of course, all the electricity. We are trying to go from fossil to electric. And it needs to be renewable, of course. And we are in a well good position for wind power, for solar, Energy stories, battery manufacturing, and also hydrogen, which is where we are exploring right now.
Light tower to the right side in this presentation could come with a diesel engine, but more and more common is also that you use battery technology as well. So we offer customer energy storage in that application as well. This family look very healthy, but also medical for us in pharmaceutical. It's very interesting. It's mainly right now within CT, but we can also see vision application here as well.
Some of the more traditional, but big segments for us in this picture as well, could be the clothing they wear. That's a compressor technique. And I'm not going to bore you more. The last one is the crisps on the table. The next time you open up the crisp, you can see that the Slight aluminum type, and that is a vacuum application.
They put it there to keep the crisps fresh for you as well. So you can see there is a number of pockets just in your living room where we have opportunities for growth. If I take you to the next slide, you can see the different segments where we have a strong presence today. And What you don't see might be the segments we don't want to be in. So we are kind of selective when we say, okay, we want to acquire something, Or we would like to start up some sort of development into projects.
We really look carefully at The standalone attractiveness for segment. We look at the value chain in that and where are the profit pools before we enter into something. So it's not by luck that we end up in many of these segments. And then we benchmarked that with what we believe that we are good at, being a leading technology company offering service, among many other things. But we know that This is also diversified in many segments.
And we believe that a constant changing world, it's really important to be diversified. And That helps us with this to have quite a stable performance. You can look at 2020 that we Pulled everything together, and we believe that we continue to deliver a good result, considering the circumstances We have to work in. And then we used a lot of the things that we were diversified in terms of segments, in products, geography. And that really gives us the resilience that we are really strategically planning for.
And of course, on top of that, we want them to have the service there. If you look at this slide, then it's around 10 years. And without currency, This is actually in line with our target on 8% growth on an annual base. And Why we perform is that we are really, really close to our customers. We have 300 customer centers around the world.
And we make sure that they understand the customer's application. This is number 1, and how we can create value for them. So it's important for us to be Closeness to customer, understanding application, and how we can take out cost through their processes. And I thought I would Show you an example from last year, then then when we had some more challenging environment, even deteriorating business. So let's meet up with John.
He is Sobe Robert. He is the GM for compressor technique in the US. And Genot is running label in China internationally for us. So when they have their Yearly planning session. We don't only talk about the business opportunities.
We also talk about the contingency. And continues for us is that, okay, what will we do if we are growing, but also what we will do if we are not growing. And if you can say it's like a pre plan, pre approved plan for them so they can act quickly in case of they need to do something differently. And the leading indicators for us is leaning forward, looking at the leads, the visits, the quotes to see, okay, how do we see this business development? And then we take the action needed in terms of cost.
To have that agility to adjust is important for us as well. But at the same time, we don't want to eat into the muscles of the organization. So when it comes to competence, digitalization And R and D, we have maintained that. And I think that is where we will benefit accelerating out of this difficult situation. But it's a very tangible way to see how they actually operate and how a decentralized organization work.
In the divisions, we asked them to look at product development, opportunity development in 3 horizons. So they are responsible for the products. We say that we want to design our strategy to be diversified, Agile and resilient. This is what we have shown you. But the other things that is very important to our strategy It's that we believe that we have leading technology, and leading is defined by customers of generating value creation for Dom.
It's not innovation just for the innovation's sake. It's really linked closely to our customers. And then we said that, okay, We can have many different products, but we would like to be in the products where we see that this, our product, might not be a big part of CapEx, But it's important for the customer in one way or the other, because then we tend to talk more about the performance of the product, what the value it It creates, and that is important to us. Leading position, meaning in principle that we can put the right resources into it to be number 1 in the world. And then to give us the resilience, we also look out for the opportunity in service to give our customer more uptime on their products.
So this is kind of the framework we work with. But number 1 is always people. And the decentralized system that we work with Kind of brings people up to take responsibility step by step. So just organizational structure actually helps people to develop into the leading positions in the group. He talked a little bit about how we can Move and look at the more interesting segments.
It might appear to be luck sometimes that we are in a specific segment. But it's quite a lot of planning, as I said before, in terms of defining what could be the profit pools in different segments. And this is just a slide to say, well, okay, so if I'm the owner of the product portfolio, and they said, okay, We were looking at this electric vehicles for many years now. And now we have a very, very strong position there. You think about industrial technique, but it's also, we will hear later, compressor technique, and it's also vacuum application in the EV cars.
So This is something we believe that we have a very strong position now that will accelerate when they roll out new programs. The other one is electronics. Could be industrial technique. It could be vision as well. Could be dispensed applications as well.
So, of course, electronic is something growing faster than GDP as well. Then this illustration is on the windmill. It could be solar. But really to be in the position now for this fossil to renewable. And I think we have lined up products and strategies also to benefit from that change in society.
The next picture illustrates a wafer within semi,
and I
think the strongest link we have is to society being more and more digital. And I for sure believe that we are quite early in this journey. And I think there's tons of potential in the coming years as well. Then I mentioned it before, clean water, low pressure is extremely important. And then, as you know, we have focused quite a lot on medical.
And that has really continued to deliver better and better, including organic initiatives, but also acquired initiatives. So this is something that we have done. And now what we're looking for forward then, and that is the global trends that we look at. And we have identified 4 that we are adjusting to right now. The digitalization It could be difficult to determine what is digitalization.
But for us, it's operational efficiency, how we run our own operations. It's how we connect with customers that has been accelerated during last year, and I think it will never go back. And then the connectivity with the business model for service. Those are the 3 legs we stand on when we talk about the digitalization. And of course, it's a tailwind for the semi division, for example.
Environmental impact. I think there are 2 ways to look at this. Either you might be see this as a threat and be a loser. And I think You might end up there if you don't act, because I'm not sure people would like to work for a company that is not focused on this. Or as we do, we do focus on it, and we see more opportunities than we see threats to this.
So we believe that with the energy efficient product and the products portfolio we have, that we will have this as an opportunity. I said from global to local. And we still believe in free trade. But we can also see that the world is changing. We see increased protectionists.
We see that the COVID situation meant that you need to shorten your supply chains. And here we say that, okay, we need to have a Strong presence in the financial hubs around the world, North America, Asia and Europe. And this is how we build it now. And we make Quite big investments in Asia to make sure that we can continue to be number 1 in our preferred segments as well. And Asianization, difficult word to say.
But we can also see statistically that the export import between the Asian countries are developing Fantastically quick. And you need to have your talent and your value chain locally to benefit from that. And then you can say, well, the organization, you say normally Atlas Copco is a decentralized organization. I'm happy about that because we can act quickly when something changes. It could be something positive or negative.
But there's an organization that's ready to pick up this. We have the 4 business areas. But then what I think is the backbone of it is the divisions, the 23 divisions that we have. In the last Capital Markets Day, we had 21. Now it's 23.
So it's a very scalable model to add on technologies Or people, or size. So I think that is good. 97% of our people works in the line. So it is really decentralized. We give them authority and the speed to act on new initiatives in the marketplace.
And one of the key responsibilities is innovation. And we believe innovation drives the value for our customer and even more so value for our shareholders. So over the last 10 years, we have increased the R and D spend from 2% to 4% of revenues. And it's essential for us to be able to go to a customer and talk about the value creation for them. So we are a close partnership with, I would say almost all leading companies in the segment.
So we listen to them. We try to understand what the problems are, And we bring real innovation to them. And real innovation can only be determined by our customers. The other thing that is important For us is, if we're going to deliver on the sustainability commitment, we need innovation or continued innovation. And we have given ourselves the target to say that we're going to reduce our CO2 footprint with 50% until 2,030.
And as you can see, in SCOOP 1, SCOOP 2, including transport, we have a reduction of 28%. So we're a little bit ahead of our plan. And of course, we're also evaluating how we can bring it to the 2,050 target. But right now, we are quite proud of what we have done over the last few years. The one thing that you might think about is that many companies, They think that they should go from fossil through electricity.
And that journey, that transformation, You can say that we have almost done that already. So it's not a solution just to go from fossil to electric. You also need to go to renewables. And then we do the footprint of our CO2. You can see that in the light blue is Arun.
It's less than 1% of our CO2 food that comes from Arun manufacturing. Then we have the suppliers and transport. That's slightly more. But the biggest piece is the user phase of our products. And this is why we need to be part of society, as well as our commitment is to have the best and the most energy efficient products.
But we also need to be part of the society to make sure that renewable energies are available. And in our own operation, we are somewhere around 45%. And it's not lack of willing in the other areas. It's more that it's not available to us either. But we're in good position.
We will continue to commit to having the best and most energy efficient products. But then we said that can we put this in easier way to understand this, what we can do, because we also need to tell our own people so That they can join this journey and feel proud about working for Atlas Cocco. And then we just listed A few products, one from each business area. The first one is VSD, an oil free range product with the variable speed. Then they have the IXL from vacuum and the battery deal from industrial technique and the portable then with VSD technology as Well, and then I said, okay, if we take this product that is the best we have out of an energy efficient point of view and say, versus a general product of the market.
How much more efficiency can we bring? So this is the savings in the life Products work from an application point of view. You can see that then the benchmark is something more tangible. So we said households, how much They need them. Just with the VSD technology there for 1 product, it's 1,600,000.
And you can see on the bottom one on VSD as well with Portable 1.5. So when our people see this, they feel very proud, and they want to be part of this journey. And we challenge ourselves to continue to deliver even better technologies going forward. We don't only measure financial results and environmental impact. We also look at products.
We look at people. Look at safety and ethics. So that's also combined in the business reviews we do with all our companies around the world. The focus today is, of course, on compressor technique. But I thought I would mention a few points also on the other business areas.
If I start with a summary, and the numbers you see are 12 months ruling here, which means that you have part, of course, of the COVID year into the numbers. And when we look at the division or the business area, It could be, though, to say that, but we need stability. We're not happy with the result. Or we say that we need better profitability. We never buy ourselves out of a problem.
We always try to fix it. And if you're past and okay on profitability, Then we say, okay, you have a growth strategy. And in the 7 divisions in compressor technique, I would say that they are all in the growth strategy. So what we're trying to challenge them with is, okay, what is the market share? What is the full potential per region and per product?
And then we say, okay, let's try to go after that. And then we also go after transformation, like we could see to VSD technology. Can we encourage customer to bring something Better in from a value perspective and from environmental perspective. And of course, we are also building new growth platforms, like chillers, like filters, which also Magne will mention later today. Vacuum technique, Same situation, very happy with the numbers.
All the divisions are performing, looking for new avenues for growth. Industrial Technique, the numbers here are impacted, of course, by the ISRA acquisition. But we're also happy here with the profit levels in all the divisions. So everyone is looking for new growth opportunities. In Power Technique, slightly different.
We have 3 divisions that we are quite happy with and looking for new opportunities. And they're one division that we're trying to find a better profitability, find our way in one of those. But as you can see then, out of the 23 division we have, the direction for them is growth, 22 out of 23. Let's take a look at vacuum then. If you look first at the different market trends, Digitalization of society.
And I said it before, but I think I will repeat myself. Yes, we can see big orders. It's swinging a little bit in semi. But if I look at the 5 gs development, industrial applications, Connected homes, connected cars. I still believe over time that we are quite early in this journey.
So I think there's tons of opportunities to come here. Miniaturization and complex manufacturing processes Drives the vacuum intensity. So that's also positive for us. And we can also see on an environmental and regulation That is more and more a question abatement system, but also very efficient pumps in their operation. Service is also a vital part.
The pump is very critical for many processes. And step by step, As you can see, quarter by quarter, we are improving our performance in service as well. And how do we go about this then? One thing is that A lot of this business is in Asia. So on a quarterly base, myself, we approve investments in the region.
It could be machinery. It could be R and D. It could be in the value chain. But we are making sure that we have more and more of the value chain very Close to the customers if they're in China, Korea, or Japan, or anywhere else in Asia. So we really believe that we need to have a very, very strong presence in Asia.
We also talk about local for local. This is linked back to the globalization versus localization. The outcome is the same. We need talented people. We need more of the value chain to be present.
Otherwise, you will not get these orders. Industrial vacuum, I think we are shared number 1 in terms of market share now. But we still believe that there's more to come. So we are focusing continuing to focus on innovation for our customers and improving the product portfolio step by step. And I can see that the numbers are going in the right direction here.
So I'm positive for that as well. And what helps us a lot is that when customers have problems or they need help, that we are close with service. And you know that we have divided in 2 divisions, then one for semi, one for industrial, to make sure that we are there also when things don't go as expected. And that is something that is very much appreciated by our customer. We have 20 technology centers around the world.
In those technology centers, they do service, they do maintenance, but they can also do assembly. And I thought we would take a look at the video summarizing a little bit what they do in these centers.
Welcome to our Service Technology Center, where we deliver world class service and maintenance solutions to customers who use our vacuum and abatement products across a range of industries. Our people form an agile and highly trained team supported by a global logistics and inventory network that moves quickly and works seamlessly anywhere. Through these globally standardized processes, Our sophisticated global network of service technology centers plays an essential part in the success of our customers. Our outstanding field service operations, intelligent products and data management software provides them with critical support All whilst adhering to the highest safety standards. Our dry pumps are designed with onboard controls That allow for data collection.
This data tells us when it's time for the pump to be serviced.
This is really, really interesting, and it's really, really part also of our competitiveness. And when we see that we can say, okay, we were
very successful in this quarter in this region, it
actually comes down to Well, in this quarter, in this region, it actually comes down the closeness we have with our customers and that we can always help them. So this is something for us to make sure that we are number 1 for them. If you look at industrial technique, One of the things that we see, of course, with shortening supply chains is that you're looking at Opportunities for automation. We will not be a machine tool builder, but we can break up the line and help customer with Station automation. And of course, this links very closely to the vision strategy that we have, that we then can control the process with vision and still operate tools, for example, then.
The other thing shift in this Trend is, of course, to the electric vehicles. And that has also accelerated quite dramatically over the last year, year and a half, I would say. And everyone has a program today to establish themselves as an EV supplier. I drive 1 myself. Excellent experience from 1 of the European manufacturers.
So I think this development will go quick. So the development went quite quick, but our efforts has actually been over the last 10 years to put us in the position to be in a winning position in Electric Vehicles. Renewable. This tool is actually specially developed for building the Towers for windmills that bring this up. It's a traceable application now where they can actually Determined, just like in a car manufacturing, if this is what we did, this is documented in a proper way.
So this is also part of the future where we see Good potential going forward. Lightweight of vehicles brings us to Adhesives, for example, self pierce riveting as well. So we have extended offer. And maybe the number one thing is the vision part, which we think have a good fit. We can see good synergies.
It's also a strong standalone business and something that development It is a tailwind, but we also can help our other divisions to develop in a positive way here. I mentioned before that the battery pack is something that is interesting for at least 3 business areas. And we need to understand the application. This is still developing. Some Acquired this package as is.
Some make them own. And we are breaking down every part of this process to make sure that we really understand how we can bring value. We see that that's the new engine for cars and many other applications going forward. Also here, we continue to focus on innovation and spend more and more on software. And the offer comes more from software Then actually mechanical or electronic designs.
I've asked Henrik to explain in a video again A little bit how we go from sustainability to the EV market and how that impacts our operation in industrial technique. Let's show this video.
The big focus on climate change is really driving this major transition In the global automotive industry, which is making itself future proof. The challenge is that things are moving so fast. So there are an enormous amount of new models that are being launched right now, and time to market is really, really critical. At the same time, the production setup needs to be scalable in order to grow with high demand, But also to be flexible and cope with new requirements that comes in the future generations. The weight of the battery is a big part of the total vehicle weight and the heavier the car, The more energy it consumes.
So engineers in future generations are really focusing Antwerp. Having more lightweight materials and more efficient production methods in order to reduce the battery and the vehicle weight. Here at Atlas Copco, we understand that We are still in the early stages of battery manufacturing, and there is so much innovation going into the future generations. The broad range of assembly technologies in combination with the innovation teams that we offer can really help Vehicle manufacturers to take the lead in this transition towards electromobility. All this combined means that we at
I must say it's Fantastic to be part of this journey from a technology point of view, this shift from combustion engine to electromobility. And just to see how we have positioned us, but also work with the customer from a technical point of view, it's actually quite fun, I must say. On Power Technique, there's 2 trends that we are talking quite a lot to our customers, construction sites, Rental companies. And I just took a portable as an example here. And they discuss more and more the CO2 neutral workplace.
Luckily enough for us, we have already developed this mobile unit, which is electric then. We're also looking at the generators, energy storage. Do we need to bring a generator? And we offer a couple of energy storage solutions today, But this is also something that we are looking at presently. The other thing is that the opportunities in digitalization and connectivity, Where is my product?
Does it need fuel? How many running hours? Is it within the frame that the customer tool that it would be since they're all mobile? So it's all developing quite fast as well. Power Technique has a very, very strong position with the compressors and also with the specialty rental division.
And I thought it would be of interest to you to see what the specialty rental is. And I should highlight, it's not a general rental company. We have no intention to be a rental company as such or compete with them. But what we do is a full solution Within compressed air steam, we are developing nitrogen and oxygen, for example. So here I thought again, we will take a look at the videos to get an insight to our specialty rental operation.
Atlas Copco Rental is a trusted partner for the manufacturing industry. We are a worldwide leader in temporary air and Antwerp. With over 1,000 Megawatt air compressors in our fleet, including diesel and electric, you can rely on us at all times. There can be many reasons to rent. For planned maintenance, for unplanned Circumstances, breakdowns and emergencies.
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This is a really interesting business. A lot about servicing the customer in a good way. It could be scheduled maintenance or it could be breakdowns. And you need to have people that are really listening to customer, really respond to customer in the right way. And I'm also happy that it's split between construction customer, but more and more also industrial customers, which I find very positive.
Now we will take a look at some of the financials, and then I will invite Hans Ogla Meyer on stage.
It's nice to be here again talking to you all. I think that Was a brilliant overview of the strategy and the business model, just like Daniel promised, I think. Let's see then if This is in some way reflected in our financial KPIs, perhaps. But first, a short recap on the latest results from the Q1. It was a record order intake.
It was in general a very strong quarter, actually better than our own expectations. Also the revenue was growing a very strong organic growth over the same period last year, which in fact Was not so much damaged, if I use that word, by the pandemic. I'm talking about the Q1 last year. So Strong organic growth on orders, 18%, but also revenues 13% up. A solid operating profit margin and a good, strong operating cash flow.
And last but not least, at the bottom of the slide, well, we can confirm that we still believe that also for the Q2, we will see the customers' activity level Remain at the high level that we saw in Q1. Taking a little bit of a step back. Mats already on from the Q1, so to speak. And Mats already commented on all our goals in terms of sustainability, etcetera. And let's look a little bit at our financial goals.
There are not so many, and you see them on the slide. On the long term target, I would say, we are in terms of revenue. In the shorter perspective, you can also see from the slide that it has been a very challenging period, particularly with the 2020 pandemic, of course, and it does affect our numbers. In the second target, where we talk about Stained high return on capital employed. We're also at a good profitability level, no doubt.
You can also, of course, appreciate that when you do recent big acquisitions like we did with ISRA and Perceptron in 2020, Yes, it does affect. You get the full load of the capital cost, but you don't yet have The growth of the operating profit and the revenues going forward. And last but not least, the stable cash Annual dividend distribution is what you can see and where we are in relation to the target. I think this slide for me is very important in trying to, in a financial way, Summarize what is strong with Atlas Copco. It shows a growth combined with the effects So an agile organization and a resilient organization.
Again, back to some of the points that Mats made just a few minutes ago. At the bottom of the graph, you see some gray bars there. This is the very moderate, in terms of number, recurring investments that the group needs to keep the machine going and produce the growing profit and the growing cash flow. The way I look at the slides then is saying that, well, we are a growth company. That's our main ambition.
But if for some reason there is not a growth in profit 1 year, at least we get the growth in cash flow. So that, I think, is the healthy combination of the 2. One recurring question we get all the time is about what about the currency effect and so on. And this slide is there to show to the right that, yes, indeed, we have dominating exposure between the U. S.
Dollar and the euro. It means that in a strong dollar environment, It's extra good for Atlas Copco, so to speak, which hasn't been the case in the last 12 months, as you know. But to the left you can also see that if you eliminate the profit impact on the operating profit margin that we talk about all the time, There is hardly any difference, as you can see. And lately, no difference, basically. So I understand that for an analyst writing quarterly updates, it's still important, of course, to understand this and see the effect of it.
But for a long term investor, I'm 1, I don't see that there is a big Need for drama in this respect. And that, I think, the history is there to provide Some comfort in that statement. We talked about dividends. And I'll return a little bit and Just repeat again that at the end of the day, if you don't have cash flow, at least over time, Yeah. Then you wonder a little bit.
And I think we have. We have also the ambition to give To the shareholders, a stable, growing and predictable cash return. In this slide, Contrary to the target, we also added the extra cash distributions, in our case through the mandatory redemption of shares. And then it produces a pretty nice cash yield, as you can see, about 5% over this period of time, which is pretty good in today's environment of interest rates, etcetera. However, cash distribution is fine, great, but for me, the best way to end the financial KPI section For a company like Atlas Copa with targets for growth and high return on capital employed is, of course, Yes, total shareholder return.
And we were, of course, extremely pleased to see this development. And you can also see that there was a sort of a hiccup when we actually dividended out Epiroc to the same shareholders. But apart from that, a pretty stable growth curve over the last 20 years with also, as you can see, a nice 18% annual total shareholder return. Before I hand it back over to you, Mats, and being my last Capital Markets Day, Yes. I thought it could be appropriate to underline, in my view, one other success factor for the Atlas Copco journey.
And what you see here It's an example of a strong and consistent strategy on the slide right now. As you can see, if you look a little bit deeper, it's a composition of slides from 19 98 Capital Markets Day till today. And even if the font differs, even if the Visual identity differs even if the words even differs. I trust that you all can agree with me that it proves a consistent and strong strategy. And with that, I leave it back to you, Mats.
Thank you, Anzola. It might be your last
It might. It is.
It might be. It will be. 4. No. But we'll do one more quarterly report with me in Q2.
So he has done 111 and will do 112 before he's finished. But after that, we will have a new CFO. And let's welcome Peter Kinnat on stage then. Thank you, Hans Werner.
Thank you, Mats.
So this is Peter. He's been with the group for more than 20 years with a wide experience from the group. So I'm very happy that he will joined me as the CFO. I was thinking, Peter, wide experience, 2 months in Sweden, what are your Expectations on this new job and what have you learned?
Thank you, Mats. Yeah, I think so far the transition From Belgium to Sweden has gone very smoothly, and I'm very happy to be here. I'm working closely together with Hans Ole, Particularly now, of course, to make sure that we do a very good handover and that I'm very well prepared. My main focus right now is to talk to a lot of people who have given me all a very warm welcome, I have to say. So thank you for that to all of those.
And I'm focusing on making sure that I Take a deep dive into the business areas that I have been less exposed to and less familiar with in order to make sure that I am very well prepared.
Okay. For Q3 then?
For Q3, indeed.
Okay. But I know also that you have a lot of financial experience, but you've also been general manager for a customer center. Tell me a little bit what you have done in Atlas Copco.
Yes. I have started a bit more than 20 years ago indeed, Mats. I started in Belgium, as I'm a Belgian national, in a product company at first as a controller. I worked in one of our very first specialty rental companies before moving abroad, when I spent 10 years approximately in different countries in our customer centers in Europe before taking on a global role in a division, service division and in an equipment division. And my last experience was being a business controller for our compressor technique business area.
Okay. Thank you very much, Peter, and really welcome to the team.
Thanks, Mats.
I believe this is my last slide, at least. I'm trying to summarize The session that we have had right now. So to invest in Atlas Cocoa, I believe that you get a diverse business model ready for change, marking leader, market leader in most of our businesses and segments where we focus. A very, very strong Commitment to innovation. It is for products, but it's also for processes and how we work in many other areas.
To give us the resilience, we have the service as a backbone. You could see from cities, 43% was 27% something on VT and similar to industrial. So it's a strong backbone we have there. Strong balance sheet ready for Acquisitions, there are the financial strength in place. We call it world class people.
And I think it's more the system that brings People to get an early responsibility, a very clear accountability. And that brings up a lot of good leaders in the group. And what you might not see, you might see it a little bit later in Wagner's presentation. We also worked quite a lot on the standardization and modularization of the Flows we have in our factories to make sure. And you also know that we have an outsourced model of non core components, and that makes us a light operation from an asset point of view.
And we also proven over and over again that we can deliver, although that we can see the market condition changes slightly. And now you can see also that we have done really well on sustainability. We will increase our ambition, And we do see that as an opportunity going forward. Thank you so much, and welcome Daniel back.
Yeah, thank you very much, Mats, for your presentation. We will now have a short break and looking forward having you back in 15 minutes. Welcome back, everyone. I hope you had a good break. Now we will connect to Belgium and listen to Wagner.
Hi, Wagner. We are now connected to you in Antwerp. It would be interesting to hear what has been your experience the last year interacting digitally with your own organizations and your customers.
Yes, indeed, Daniel. We all have been through very difficult times, But there are some positive aspects because we have learned how to communicate with our customers digitally. But also we have increased The knowledge that we have on those digital tools and now we also foresee to continue to use those digital tools to further engage with our customers.
Very interesting to hear. And I think now we are very keen on listening to your CMD presentation. So Please, Wagner.
Yeah. Thank you, Daniel. So talking about compressor technique. So as you have introduced before, Daniel, We will start to the facts in brief, look into markets and business fundamentals, go through our strategy once again and see how we foresee to continue to grow our business worldwide. So Our facts in brief talking about compressor technique and market trends.
We continue to focus on energy efficiency products and there is a good demand for that. Like Mats has said before, This demand that we have now is connected as well for CO2 reductions and our products are well suited for that And we see a good trend on that side. Also the fact that we work with Total Solutions, we not only want to sell a compressor, We want to sell our compressor, we want to sell the air treatment system for that compressors and Apart from that, we also want to have the distribution network part of that ecosystem. So there are a lot of opportunities in that area and we are present on that with our approach towards Total solution selling. Also digitalization and automation, it's a Trend where we are also benefiting from and we see more and more new applications in Compressed Air.
And all that has led us to a quite good result over the last years. Of course, we were impacted last Year with COVID, as you can see, especially on Q2. But since Q3, we have been recuperating. And in Q1 this year, we had a record Q1. It was the best quarter Ever for compressor technique, that was very good.
And then if you look where the business is coming from, You can see in our orders received, the split now we have 32% coming from Asia, with a strong contribution coming from China, of course, and India. Europe also very strong contribution because Europe is still the biggest region for compressor technique And also is presenting a good organic growth. And North America And South America now representing 25% growth, 25% contribution in our orders received And a good organic growth as well. Going forward Into some market and business fundamentals, which is always good to remember for compressor technique. We are in a quite diverse marketplace with a lot of being present in a lot of market segments.
Compressed Air is often referred to as a 40 utility in the manufacturing industries. So we have a good presence in several market segments. We have a large range of Technologies, we use several technologies to approach our customers with our total solution And we are more and more looking to new applications of compressed air to provide our total solutions. So we also see more opportunities and also present in different gases. We talk a lot about compressed There which is the majority of our business but we are also present in other gases that requires compressed air And sometimes we are also producing other gases like nitrogen and oxygen.
So and also we have a strong service organization with global presence, more than 4,000 technicians worldwide. So but we have been repeating that we are in a quite diverse marketplace, But things changes and let's see what else is happening in the market. Yeah. As you can see, a lot of changes in the market, but we also see this as opportunities. And going forward, how do we see the market developing?
I split in 2 ways Here for this presentation, we have our traditional markets that we talk a lot about. You have there food and beverage, pharmaceuticals And other medical, several market segments. How do we grow in these traditional markets? There are the way I see, there are a lot of room for improvement if you have GDP per capita growth. And there are several developing countries that still with still a lot of room to grow the GDP per capita.
And how do we benefit from that? If you have GDP per capita growth, consumption will also grow that will add to More manufacturing to be done in that country. So a lot of things to be produced and compressed air As it's utilized in several industries, we benefit from that. So but it's not only that on traditional industry. If you see now the focus on climate change and the need to reduce the CO2 footprint, The demand for higher for compressors with higher efficiency, it will all increase generating opportunities for us to upgrade the current installed base with equipment that are more efficient because they can reduce the operational cost Our customers and also support our customers in reducing their CO2 emissions.
So we benefit, but from in the traditional industries. But it's not only that. There are also new technologies coming to the market. There are the needs to there is also the need to stay more competitive. To stay more competitive, companies are automating, so implementing robots and other things.
And myself, I have an example in one of our factories where we used to have an assembler, A person assembling the compressor and now we have a module, a full automated cell where instead to have a person doing the assembly of the compressor element, I have a robot And this full automated processor, we have a lot of compressed air utilized to make the automation possible, To make the movement of the parts to pick and place and before we have we used to have a person With an electrical tool doing the automation, now we have still the electrical tool but being used by a robot And several other automated functions do done by Compressed Air. So This generate opportunities for us. Automation Industry 4.0 also We represent good opportunities for the future. So there are also new industry. We have heard quite a lot about the car industry.
I will repeat that once again, not because I believe that the car We will be the major contributor of compressor technique. But for me, It's a good example when there is a transformation in an industry, we are also able to Allies on that transformation and support our customers in that transition. Specifically on the car industry, There are quite a lot of demand for compressed air. You need now electrical we have now electrical vehicles. You have the battery production.
And during the full process of the battery production and the full supply chain, there are opportunities also for us. But let's see how we utilize compressed air or where do we see opportunities in the in this transformation for Electrical vehicles.
Within the automotive industry, the switch to electric vehicles is in full swing. Each electrical or hybrid driven vehicle requires large amounts of lithium ion battery cells. Keeping operational costs low and minimizing the carbon footprint are key in the battery manufacturing process And across the entire value chain of the electrical vehicle production as it will increase the benefits of using electric driven vehicles over Fuel vehicles and automatically creates a larger global demand. The applications within the Manufacturing process required dry contamination free compressed air, nitrogen and oxygen. A combination of All Class 0 oil free air compressors and desiccant dryers are the ideal smart air solution to ensure high product quality At lowest possible costs, up to 94% of electrical energy is converted into compression heat.
This heat can, for instance, be reused for heating the buildings or within the manufacturing process for drying and aging raw materials. Nitrogen is used to cool materials, mix raw materials, to inject electrolytes, and for the pressing of Materials by creating an inert environment. Atlas Copco's Smart Air Solutions meet the needs of the battery manufacturing process. Our complete air or gas solutions are designed to provide the lowest life cycle costs. By combining the most energy efficient air and gas compressors with the right Dryers, filters, and gas generators, we can help optimize the manufacturing process.
Our Class 0 compressors, together with our drum dryers combined with filters supply a constant high quality of dry contamination free air. Our on-site nitrogen and oxygen Generators help lower operational costs by allowing production of the exact amount and purity of gas that is required for the application. This will lower energy costs and excludes the cost of gas supply or distribution. To further reduce energy consumption And decreased the carbon footprint of the production process, we can provide energy recovery units that allow reuse of the
Yes.
The EV transformation, the car The transformation, we also offer opportunities as we have seen for compressor technique. But the most important message For me, it's not about the EV, it's about that industry transformation. And then if we look to the right In the vehicle assembly, normally, we only look to the vehicle assembly. But for us, the opportunities are there as well in the vehicle assembly. But not only you have the pack assembly, you have the module assembly and then you go to the battery cycle, You have the cell going further into the battery cycle.
You have the cell production assembly, the cell production. And even in the raw materials during the lithium extraction and processing, there are also opportunities for us. So I think the most important as we are diverse and present in several market transformation Several several market segments during this transformation, we are able to capitalize in all the steps of that transformation. And it's not only about compressed air, also industrial gases. Here like nitrogen, we see quite a lot of opportunities.
And on top of that, we can also if those machines are running at full capacity, We can also a lot of heat is generated, and we can recuperate this heat in another process In our customers. So very interesting industry, but very nice to see the opportunities In the whole supply chain. But we need to continue to grow as well, and we need to continue to find opportunities. And what is our focus to continue to grow? Well, our strategy for profitable growth Starting with the growth, with organic growth, first, we keep our focus on innovation.
I think the innovation is very important. And for us, it's very important that innovation will reduce the Total cost of ownership of our customers. We have said before 75% of the operational cost of a compressor It's energy. Therefore, it's the this is that the automated importance To reduce the total energy consumption of our compressors. We are also expanding the applications where compressed air can be used.
And of course, this will also improve our customer profitability as well. So Increasing presence is another focus area, not only on the physical presence, with the direct The salespeople or indirect salespeople, it's also important to increase the digital presence and we have Several activities in that area, we continue to invest further to increase our digital presence. Our service offering is also extremely important to improve our Brazilians. But not only that, we also see Several business opportunities on the use of our products and digitalization offers also Opportunities. But we have to do in an efficient way as well.
We have to grow, but we have to grow in an efficient way. So and for that, we believe in a modular design and we are further strengthened our organization to be able To further work with modular design, we keep the focus also with to have a lean management team And also we have our global presence. We have today factories in Asia, in Europe and North America Plus South America that can support our customers according to the needs or according to Changes in regulation as well. I think we have very well positioned. And to keep our operations very efficient, We are investing a lot in digitalization.
Later on in the presentation, I will show how we are what we are doing In our factories as well to digitalize or to improve, the efficiency through the latest technologies Available. So and that innovation comes with different types of techno in different types of technologies. So we have the core technologies of the compressors and that we believe in a portfolio of Technologies, I think that is very important for us. We don't only look into a single technology. We want to Continue to invest in different technologies because according to the customer application, A different technology can reach the highest efficiency for our customers, therefore, the lowest total cost Ownership and that varies customer by customer, application by application.
That's why We have a strong focus on the portfolio of technologies. So and then that technology could be oil lubricated, could be oil We have also introduced in our portfolio of technology industrial cooling that is also part now of our portfolio. And we also can deliver these technologies in different sizes, different flows or power And different pressures as well that can go up to 400 bar that is mostly used. But nowadays, There are new applications coming that we go even beyond that up to a 1,000 bar. So but it's not only about the compressor core technology.
After we produce compressed air, We also need to treat this compressed air because we the admission of the compressed air into the compressor comes from the atmosphere. So you have humidity. Sometimes you have dust that goes to the process, then you need to treat there. That is also important In with more automatization and also the electronic industry, The requirements to a higher standard of compressed air is really increasing. So that means we are investing quite significantly in air quality products.
So and we will show one example of a breakthrough that we have in one of our products for air treatment. Monitoring continues to increase. We continue to collect A lot of data through central controllers and also, we are increasing the number of Technologies that we have today to acquire data, very interesting what is going on there. I will come with a bit more details During the presentation and our service also extremely important. We believe that our service portfolio we treat as well as a product.
So every service that we have, every service types has a product Specification and with the same way we developed a new compressor, we developed service Product, we have the same attention. We have a master spec. There is clear requirements of what how that product should look like, And we also treat in a very professional way. But going forward, I think it's also important because we can with this product offer, we can keep on supporting society today With their challenges to increase productivity, to increase production, but also we can help society with the climate change Targets. But let's see a bit more in the details how.
Innovation turns gray into green. We don't just manufacture air and gas compressors. We design our products to be the most reliable and energy efficient units available. We produce a wide range of technologies to ensure our customers have the most efficient solutions. Turn your compressor into an energy source.
Heat recovery gets you on the road to Having a carbon neutral compressed air supply. Take care of your air. You can reuse the heat of compression to dry the air Keeping your energy efficiency on track. Keeping pressure drop and energy consumption down, Our filters are up to the task. The optimizer reduces your carbon footprint by minimizing the energy consumption In multi compressor installations.
Stay on the road to green with the AirNet pipe system, minimizing pressure drops and leakage The point of use, SmartLink monitoring of your equipment enables you to follow-up on your progress towards a more sustainable future. Supported by our global service organization, our local experts maintain the energy efficiency you signed up for. A smart air solution is good for your business and the environment. Minimize your operational costs
So This is already possible today utilizing the products that we have. But going forward, we I have Said before that the demand for compressed air will continue to increase because GDP per capita has the potential to grow. We also need to upgrade a lot of installed base with old technology because there will be more demand For compressors more efficient, so that demand will continue and that is the blue line that you can see. But also I also said and Mats has also showed that we will continue to invest in R and D and the R and D should Further decreased the energy consumption of our products. That's why we believe that the way In terms of CO2, the increase is not going to be the same as the increase of compressed air requirements because we view we continue to invest in energy efficiency and we will bring better To the market, but it does not stop there.
We also need to find ways to eliminate inefficiencies. And today during the compression process, the compressor generates heat and that heat can be recuperated. And that recuperated heat can be utilized in different forms, in different ways. And going forward, we will further invest in that area, allowing our customers to have even lower CO2 emission or going to the direction of a net 0 compressor group. But I also believe it does not stop there.
There is So the demand for hydrogen and also the need to change the energy matrix, Getting away from fossil fuels to another source of energy, hydrogen has the potential to be that source. But this has a landscape. It's not only About the hydrogen itself, we talk a lot about mobility, but there are older that there is actually A landscape that needs to be created, a new matrix. And in that landscape, in that matrix, There will be a lot of opportunities because if you produce electricity with solar or windmills, so You need to produce the solar panels. Again, a production process where we see opportunities as well when we are present In that market and in every single niche there will be production like the Shipping industry, shipyards.
We also support shipyards with our products. Electrical vehicles, we have mentioned The heavy industry, the heavy dirty industry, the trucks also a transformation there where we can support. There is also the need if you produce Energy coming from solar, you need a type of battery. Could be a lithium ion battery where I have shown That we are also present. But also there are studies ongoing in different types of battery that you could Use the electricity produced by solar and wind and you could, for instance, run a compressor That will fill up a cave for another way that where you restore that energy in form of compressed There or another gas and later on you can release that and you have a kind of expander running a generator to release to produce electricity.
So
It seems like we have a slightly technical problem with the connection to Belgium. But stay connected. Welcome back, everyone. Apologize for the technical issue. Wagner, hello again, and please continue.
Yes. Very good. We just we will adjust the slides here and we will continue. Just one second more.
So
Continue then the presentation.
So
We just talked about the hydrogen and then we're tracking after the hydrogen part. Yeah. Today it's still difficult to talk about what would be the market size in the hydrogen. But it's part of our Before this new trend, we were already selling hydrogen from customers for the industry. It's part of our OSP product portfolio.
There are even further applications ongoing that are under development. So we this will be the market size, but I mean, we will be part of our market Now changing the profit from hydrogen to low fashion, in the past Capital Markets Day, we have also informed that we were investing more There was several developments since some years. We grew the latest ones In 2018, 2019, 2020 and 2021, now this year we continue to release new products. Some products are in placement already, become more efficient versions. Like you see now that S4, DSD Plus, It's a new product that is superior efficiency, best in part efficiency.
So And it's also important to say here that we continue to grow organically, Even in 2020, we also had a pretty good organic growth. So we are also working to expand the number of technologies. I have mentioned before, We have an acquisition. We have done an acquisition of industrial
And transforming into an Atlas Copco product portfolio as well. We have released the first portfolio under the Atlas Copco brand. We are quite happy with the development. One of the benefits that we have now with this industrial cooling Portfolio is the fact that we can now have those chillers connected To the Internet, using our SmartLink platform, and we are already In data and looking to new opportunities how to improve the machines according to the application. So very interesting.
It's still too early. It's early days. It's only one company we have acquired, But I believe that that has the potential we can leverage from our global presence and also from our connectivity Then if I look then to our Innovation, what we have released because we have increased the R and D effort. We are working developing more products. And since 2016 year, we have increased the number of new products that we have released.
If you see the last Capital Markets Day, we have released 40 products. I remember that we have presented that figure. And I'm quite happy to say that last year, even with the pandemic, we managed to release 55 new products. So one of these products is a new type of dryer. I will not explain because after this slide that we have a video where you will be able to see In details what we have achieved with this new dryer.
Do you
think you know how a desiccant air dryer works? Think again. Because Atlas Copco has introduced a true revolution in desiccant dryer technology. This is the desiccant you know and use in your traditional absorption dryer. This is Cerides, a new type of desiccant developed and patented by Atlas Copco.
1 consists of loose beads. Seredesk is the 1st ever solid structured desiccant. Seredesk will make all the difference for you in at least Five ways. First, you enjoy much lower energy costs. The compressed air flows straight through the structure in Serides, Reducing the pressure drop in the dryer.
In loose desiccant, the air must overcome more resistance as it pushes and weaves through the beads. 2nd, Desiccant beads get pushed around the drying tower during cycling. This friction causes them to decay over time, which can compromise your dew point. Serendes lasts much longer to protect your air quality and extend your service intervals. 3rd, as loose desiccant decays, It releases a fine dust into your air system, which requires extra filtration and maintenance and additional service costs.
This Dust is also a health and environmental issue as it circulates in the ambient air during desiccant replacement. Cerides eliminates this dust problem To give you environmental and health protection, lower operational costs, and less downtime. 4th, Ceridesse is vibration resistant And can be mounted horizontally. This is very important for a number of applications, especially in the transportation industry, Which can now enjoy trouble free installation and continuous operation. Finally, dryers with ceramic desiccant can handle a higher airflow.
That means we can make them more compact. Just take a look at the first dryer with Ceridesse, the new Atlas Copco CD Plus 20 to 335, Which is much smaller than its previous version. Aside from the Cerides benefits, the CD Plus gives you a low pressure drop thanks to its large 2 inch distribution Valve system. The silencing system is extremely effective in reducing noise levels. In addition, it increases purge efficiency, allowing for a purge air consumption of just 16% and a lower energy use.
Whereas most dryers are Only built to work at 70% to 80%, the CD Plus is designed to operate continuously with 100% airflow Without compromising on performance. In addition, optional dew point dependent switching ensures the dryer only switches towers when the desiccant is saturated. This means cycle times are longer and your energy use is reduced even more. Finally, the CD Plus offers you advanced electronicon touch Control and monitoring to maximize your dryer performance. The controller tracks all parameters and alerts you when needed, and it can sync with your compressor.
With the electronicon touch, you can even get SmartLink remote monitoring to optimize your air system performance and maintenance intervals. The new Atlas Copco desiccant dryers with Ceridesse can make all the difference for you too. Your Atlas Copco representative will be happy to
Well, as you can see, we are quite happy with this development. This new product Is indeed a very nice introduction and it's going to be part of our air treatment product portfolio. But going forward, I will now talk about our service business and how is It developing and how we want to drive it further. So if you take our compress Our business over the years, we continue to grow. We have been growing service 7% on average per year.
So quite good development, a small hiccup last year in our growth, but We have difficulties especially in Q2 last year, but since Q3, we have more access to the sites and We are back into organic growth again. So and it's very good development. But how we will continue To drive further our service business in compressor technique, first of all, for us, it's important. Service has a dual function. We need to support our customers and we need also to develop the service business.
So but to develop the service business, we want to do it in a way that really creates value to our customers. That's why we need to develop service products that also increase our customer productivity. So how do we do that? We maximize the performance. We maximize the uptime and also the performance of the compressor.
We can also eliminate risks. Quality air or the quality of the air produced is I mean more and more important, the Ford is important to guarantee that, that quality will stay over time, not only at the beginning When you install the compressors, so we also look to reduce the operational cost of our customers also offering energy savings bundled with our contract. And also if we do the maintenance in a timely manner At the right time, we can keep the performance, of our compressors like It was when the compressors were used. And with our connectivity solutions, we can also Make it transparent that we not only do the service, but in The uptime using our connectivity solution via SmartLink. So and what is the strategy going forward as well?
We have showed that Before, our service ladder where we want to climb the service ladder selling contracts, Selling monitoring control optimization products, but we also want to have we have Our vision as well that we want to service every machine that we sell. We want to have all those machines connected, Including quality air, as you could see in the video about CERADIS. And also Another point that is very important. We want to optimize the installations we have. And that is also possible because if you have the most efficient compressor, but you have several compressor working In a discoordinated way, it's also not the most efficient way to optimize your compressor room.
So you need a central controller. If you produce and you have your compressor room fully But then in the distribution network, you have inefficiencies. That is also not good. And we want to Support customers on that, we have our optimization products, as you can see. So we have a product called AirScan that we will verify how the compressors are running, If there are leakages in the entire installation, if there are inefficiencies, we produce a very professional report with Antwerp.
The recommendations that the customer can do or sometimes we support the customers on realizing those recommendations And we can also and everything is based on savings. And also we can use our SmartLink solutions to monitor if what we have said in the report Was correct or not. I think with the SmartLink, everything is transparent now. If you say that there will be savings, So it's the customer can monitor in a daily basis if the service are there or not. And also talking about connectivity, we said before we want to have all our assets connected whenever we see It makes sense, but now to allow that we connect as well smaller ticket items or smaller compressors, We also created what we call smart clamp, which is a way to have smaller machines connected.
You get limited data, not as much as you have with the SmartBox, but You get data from my asset that in the past we didn't know how that this asset Was running. So I think it's very important step to have SmartClamp. So because now We have the traditional solution, the Smartbox sending data to the SmartLink platform. Now we have SmartClamp and we have other solutions as well through the to the compressor controllers That we also bring data to the SmartLink platform. I think that ecosystem is growing and getting better and better.
So and another point and we do that because transparency is becoming more and more Antwerp. We use the data to do recommendations for our customers and that those Recommendations are getting better and better. Our algorithms are getting better and better to predict. So it's good for our customers. And also during the pandemic was very evident what with the SmartLink because In some occasions, we could not access the site.
There was a lot of uncertainty at the beginning of the pandemic. But with the SmartLink, We could contact the customer and say, Mr. Customers, we cannot access. Good. We will keep on monitoring your machine.
We will keep on producing report. If there are something that could cause a breakdown and an interruption In your production process, we will alert you. And I think that was very important during the pandemic, our sales effort Continued and even doing do it through smart link, we managed as well to sell some contracts because of that. Because the fact that we could monitor the equipment, we could not access, but we could monitor and we could produce recommendation Report with predictions. So I think that was really a nice way to show to the customer how we could support them even during tough times.
And we also know, We communicated that in the past that SmartLink also improves our operational efficiency, Also allow us to generate sales leads and is helping us as well to increase the number of service contracts. So quite promising. We are happy with the development as well. Our diagnostic centers are also getting more experienced and stronger. Our data team are getting as well bigger and more capable to do more advanced things using the data.
Exciting, from all angles. But, to wrap up the service business, we also have Interesting video.
Information flows are everywhere. They transform your business, enabling you to keep track of anything that might impact Your top performance, energy efficiency, and a continuous airflow. Atlas Copco's SmartLink provides useful insights on machine performance, Future service needs and corrective actions. Insights that are now taken to the next level. With SmartLink Remote Diagnostics.
Your data analyzed by our diagnostic supported by artificial intelligence and smart algorithms based on decades of compressed air technology know how, Powered by analyses from compressor rooms all over the globe. This massive knowledge enables Atlas Copco to trace even the smallest anomalies And inform our local service engineers directly on preventive or corrective actions to be taken. If needed, they will contact you proactively to schedule a visit and the problem probably before you even knew it was there. SmartLink remote diagnostics keeps an eye on your compressed Antwerp.
Indeed, very interesting what we can do With our service organization, with our service solutions today. Going now to operational efficiency. Of course, I would like to have you in our factories. There are a lot of changes ongoing. We are investing to transform our It is nice in smart factories.
So a lot of automation, like I mentioned before. We will share a video that's the best way for us to show what we are doing in our factories. We are collecting data for a while from the machines in our shop floor. But now there will be new ways to connect it. You will see a video on that, but also you see some of that automations that we have realized in the last 2 years.
This is a very important site in Antwerp. This is actually the headquarters of compressor technique business area. And here we design, develop, produce actually most of the compressors that we sell through World. And we like to call this place the University of Compressed Air. Well, we, as at Las Cocco, we are and we want to stay The market leader, Tasco is known for its premium products.
That's why we have the obligation to always make our products and production processes better. We have to make our factories more productive, and we believe we can do that by making them smarter. To make them smarter, we have to use key technologies, and 5 gs is certainly one of those technologies. That's why we sat together with our partners Ericsson and Orange.
Ericsson has been in the communication business for 100 40 years. It took us 100 years to connect all the buildings on Earth, and the last 40 years has been about mobile communication. 1 g plus voice, 2 gs was SMS, 3 gs was data, and 4 gs was all the billions of apps that you have on your phone. Now 5 gs It's about industries. And that's why we're here and deploying Industry Connect as a dedicated network on-site.
So together with the partners, We rolled out a private mobile network. We brought our mobile connectivity, which means the spectrum and our expertise in devices.
We have deployed a 5 gs ready network with the smallest indoor antennas from Ericsson, connecting the shop floor, enabling wireless In a very easy way to deploy and configure devices.
This technology gives us the possibility To connect our machines wirelessly instead of the traditional way with cables, we can also connect now moving machines like AGVs, But really exciting use cases will come when we can make use of the low latency, when we will try to push our production machines to the extreme limits. And of course localization, being able to see where things are is fantastic, valuable thing. The case that wraps it all together for us also is The security, we can all do this in
a secure environment. Orange Belgium guarantees a secure mobile connectivity for the industry. Manufacturers are requiring this kind of setup. They need full availability of the system 20 fourseven. In addition, They also want to have a protection of their data.
Our network enables this.
I'm very pleased with the collaboration between Atascopco, You know, when you push technology, it's quite challenging, but we all learned a lot.
Co innovation is on our DNA. We have more than 20 years of experience in the machine to machine business. And with this project, we continue on our expertise in this domain.
We believe that this is just the first step. Imagine when everything is connected, wireless, mobile, and fully Flexible. The potential is enormous.
I think the factory of the future will be a lot more autonomous, have a lot more automation and lot more intelligence, but we will always need skilled people.
So as you can see, a lot of Changes in the production and also you were able to see What else we are going to do in that factory, but also in other Factories that we have. And with a lot of technologies required, that comes to the next The point of the last point of my presentation and perhaps the most important, our people. And while with all these new technologies that we need to add as well as in terms Of products to be released and also in our manufacturing process, we need to acquire a lot of knowledge, a lot of SKUs, And that will come from talent acquisition, but we also want to include in that talent acquisition diversity. We have a clear target to increase the diversity in our companies and a lot of activities Even for service technicians now or field service engineers, we start to recruit Some females and we are quite happy with the development in that area. We are acquiring the right skill And also with the diversity that we want to have in our company.
But does not stop there. We also Need to learn about these new technologies, even about those new products that we are adding and then these new Technologies in the manufacturing process, we need to reskill some of our employees And we have a lot of effort on going that, in that area. But also we need to prepare our leadership To lead younger generation or to lead people in a different way as well, we are we have now at this point at This right moment, a lot of people is still working from home. We had to develop a lot of the skills on that. And we managed to do it quite well with a very good training program.
And We have to keep our employees engaged and for that we also have a series of very good Activity to make sure that the people are engaged and together with the leadership To make this transformation as well and to support us to further growth our company. Without The engagement of our employees, we cannot reach what we have achieved so far. So going to the summary of my presentation regarding compressor technique. We are In a very diversified marketplace, present in several market segments that brings resilience And also opportunities. So we have a growing number of applications.
I have shown Some examples of those applications, but that is growing constantly. We have a broad product portfolio with several technologies that we continue to invest and we are Increasing as well the number of technologies where we are present and therefore increasing our Addressable market as well. The focus in our innovation process will continue. We will continue investing in engineers in new technologies and make sure that we have the most efficient compressor For each application of our customer or each type of utilization as well. We will continue the focus to sell solution and also to have the whole product portfolio to produce compressed air, To treat compressed air and to distribute compressed air in the most efficient And we also need to have our people prepared, not only our own employees, but also of our distribution network.
And we can only make it happen if we have our people with us and we have we are quite happy with the development. We managed to go through this crisis in a quite good way with a lot of engagement of our people From our people, from our managers, from all our employees, it was a Good period to learn new technologies and we will be able that new leaders to continue to be a good company, but not only that, to be an even better company than what we have today. Thank you for your time.
Thank you very much, Wagner, but please stay connected since we're now entering the Q and A session. So just a reminder, if you would like to ask a question to Matt, Hans Ole, or Wagner, please enter the phone number you see in the webcast player. And while you are in the conference, you should press 1 if you would like to ask a question. Also, we kindly ask you to respect other participants' time and only ask one question at a time and then back in line. So with that, the first question is from Daniela Costa at Goldman Sachs.
Hello, Daniela.
Hi. Hello. Hope you can hear me well. Thanks for taking my Antwerp. So I'll keep to 1 as you suggested.
And my question is actually regarding I mean, Matt mentioned in the beginning, very Strong market shares and leading positions that Atlas continue to have across all its segments. Machine Vision has A more recent segment that you have entered, and you've talked about it as a platform for growth. How do you where do you see Can you hear me?
Yes. Yes. Yes. Yes.
Yes. Oh, I'm sorry. Where do you see sort of like the ideal market position for yourselves within machine vision? How Daltz within machine vision. How representative within the group do you think that can be on your 5 year vision?
You're I guess at the moment, you have must have a relatively small market position and normally, Atlas becomes dominant in the segments That it is. And is there a different ambition here? Thank you.
No, but it's right. If you define the market as sensors or optics, Then you will say that we are a small player in that market. And but intentionally, we've said that we don't want to go head to head with Those type of manufacturers. So the Istra is actually one of the leading place when it comes to a solution. In an industry or a surface vision application, for example, then they provide the sensor optics.
They present the light and also the software that goes with that. So the common site, they install it to make sure that it's adjusted to the customer's expectation. So that type of solution is probably where we see our position. This is one of the leading companies on surface vision, and 75 Of course, we can make sure that we take advantage of these technologies now when we see the automation trend coming in manufacturing opportunities. So I think you should separate between a sensor company and a solution based company, and we intend to stay as a solution based company.
And this is where we actually already today see that we have a very strong position.
Okay? Next question is from James Moore at Redburn.
Hello, everyone. Matt, I'm turning. Daniel, can you hear me?
Yes. I can hear you loud and clear.
Great. My question is actually though from Wagner on compressor technique. I wondered if I could ask about the oil free division
And
whether you're seeing any market acceptance of high speed centrifugal turbo technology as an alternative To dry screw and what the sizes of your own business and whether that's growing faster than average?
Yes. In terms of technology, I would like to repeat what I said during the presentation. We believe that We need to have a portfolio of technology because customers with different application, we require different Technology, different types of compressors because that will maximize the efficiency. And before we Try to sell a compressor. We always make a full measurement, especially in this type of oil free installation.
And based on that, we make our recommendation. I think our oil free product range is doing quite Well, we are quite happy with that development. You have seen that the low pressure keeps on growing organically. The oil free screws keeps on growing. Our turbo compressors as well is developing very well.
And I'm quite happy to say in the markets that we decided to play with turbo compressors, we are market leader today. So including in the most competitive markets, we have a leadership position.
Thank you, Wagner. I think that answered the question. Then we have Lars Bruschow from Barclays on the line. Please go ahead, Lars.
Thank you, Daniel. Good afternoon all. Hi, Matt. I think I'll restrict my question Into maybe Power Technique, Mats. You've got 22 divisions that are performing well, so maybe it's a bit unfair to us to the 23rd division.
But I wonder whether you could elaborate a little bit on the underperforming operations in PET and the plan to get them back in growth mode. And Maybe just more generally, what does satisfactory performance in PT look like for you in terms of the KPIs that we can track from the Size, I. E, growth, margins, returns, is it realistic to expect PT to get anywhere near Sort of the low 20s margin that the other 3 BAs are operating in. And if it isn't, as I said, what is that satisfactory performance that you're looking for in PET.
That's a very insightful question, Lars. From a Peter perspective, when I look at that and with the exposure we have to the construction market And not such a strong service opportunity as we have in the other operations. Also, the customer are not as dependent on the products. If you have a portable compressor, if it doesn't work, you can bring in another one. You don't stop the line.
So I don't expect that. So I think we are a master of spare parts and logistics there to make sure that we service our customer in the best possible way. So I don't Have that high expectation at ISO doing industrial. And also, in general, I think that that segment of the market It's not as profitable, not only for us, but for many other companies. So that's why I talk about tuning it more into industrial applications as well there.
And it's no big secret. Generators is the area where we are not a market leader. And we need to find our niches with the rental companies where we can say that we have more accessibility of the products. It's more connected. It's still never going to be the high margin product.
But if I can get that up to a decent level, I'm absolutely okay with that. But I think they are touching at 15%, 16% operating margin in a decent quarter. And I think with the return on capital around between 20% And I think that's a go for growth for them as well. So specialty rental, okay. Service, okay.
We can do even better there. Portable is absolutely okay. And then we have the Challenge division there. But it's more the strategy around that. But 'fifteen, 'sixteen, I'm happy to turn on growth for them as well.
Okay. Thank you, Matt.
Thank you.
Next question goes to Klas Bergland from Citi.
Thank you, Daniel. Hi, Mats and Hans Holger, Klase at Citi. So my question is on the capital Intensity or the compressor content per unit of energy produced as we're shifting more to green In hydrogen, for example, your compressors will be used across solar in production of green hydrogen looking at electrolyzers through to shipping and so forth. So it seems like the compressor content as we're shifting can go up. Have you done any calculations on this?
And I'm just going to give you an example. Another industrial, Alfa Laval, They're saying that you need 3 heat exchangers per every megawatt of hydrogen produced, for example. So any Similar sort of reference that we can use for CT.
Sounds like a Wagner question.
Thank you, Bart. We see the contrast there. It's going to depend a lot on applications. It's To draw a number, we believe that we like I explained, there are quite a lot of Potential to grow compressor technique because the in some countries is still a lot to come in terms of GDP per capita growth and when that comes as well, there is consumption, there is The need to produce additional products and that will drive our Demand, but also for green products. When I say green products is Efficient products, we see that customers are becoming more aware about CO2 emissions And they are become they are the same way that Matt has shared today that we are working on our CO2 Emissions from our operations, what is today's Scope 3 for us is a Scope 2 to our customers and they also need to work That and we can support and we are doing as well in a proactive way.
That can create further potential definitely in terms of replacement market because we have the potential that comes from our installed base, but also the entire compressor market installed base Might need to be upgraded as well. And there will be new addressable markets Like we said before about hydrogen, it will generate new opportunities, but there will be some headwinds in other markets. We also have to say that how one will balance again the other how much growth we will have In terms of market size, it's difficult to establish exactly the figure, but I foresee that the market size
So the next question Goes to Mehdi Singh at Bank of America.
Yes, hi. Thanks very much for taking my question. Hopefully, a short question. If you could give some idea about the market opportunity In terms of how big is the market overall in the 3 major areas you talked about for growth, Low pressure compressors, hydrogen and industrial cooling side. How big do you think these markets can be?
And what could be Your own opportunity in this segment in the next 5 years, let's say.
So I think that was a question for you, Wagner, right?
Yes, indeed. If I look to the starting low pressure market, we see that there's a market around US2 $1,000,000,000 That includes as well the aftermarket. And we are working and all these R and D Development that we are doing now is to be able to address this $2,000,000,000 market that we don't have The full portfolio today, but every year we come with new products and we get part of that market. When it comes to industrial cooling, it's important to highlight, I think, the cooling market sometimes also to include climate Control is huge. We don't focus on climate control.
We focus on industrial application. And the industrial application could be a market around $8,000,000,000 So but today, are we equipped Product wise to address that market, not, but it's a huge market. It's quite a sizable market.
So then the Next question is from Max Yates at Credit Suisse. Still, please, Max. Do you hear
us?
Okay. It seems like he left. Then we have Andrew Wilson from JPMorgan. Please go ahead, Andrew.
Hi, good afternoon, everyone. Thanks for taking my question. I wanted to ask around the digital and connected side of Compressor. It sounds like you've made quite a lot of progress again In terms of that offering, I'm just interested in terms of how much of that, I guess, knowledge and setup that you now have in Compressor that you can apply to The other businesses, I kind of get the impression that compressor is very much leading the way with regards to this offering as it generally has in service. But Interested sort of how much of that will be applicable in time to the service operations across the business areas.
Maybe I can start and then hand over to Wagner. But no, but the SmartLink concept that has Developed over a number of generation. It's also applied within power technique. So they take advantage of that both from a supplier base and knowledge base. We are also looking at, of course, especially the semi part of the industry to make sure that we are connected there as well.
And I think they had The data out of silences is important. And then to read the data and read the right data so you have it At the edge or in the cloud to make sure then that you actually get the data that you can act up on. And in terms of industrial technique, Tools in the auto industry has been connected for 15 years, so this is not new to them. But they have mainly used it to save the data to secure the tightening. But now they also start to use it for process control and they are on their own journey, which is slightly From what we have seen in compressor technique.
But maybe you would like to add something, Wagner?
Oh, I think you are right. We are sharing quite a lot among the divisions. Of course, we have different projects because Our people, they have deep knowledge on how to use the data from compressors and that's How we as an OEM can make the difference because we understand the technology and then we are adding now People that understand how to deal with data. And I think that makes us quite strong to improve efficiency of our customers because We really use the knowledge we have with our compressors. I also say that we started as well to Some people are changing.
For instance, the person now that is leading This part in power technique was the program manager of compressor technique In the past, 10 years, 9 years ago, was the person supporting us to do the project of connectivity. Now she's in as a woman, she's in Power Technique, as VP Marketing in 1 of the division and is leading the way now In Power Technique, I think there are cross sharing. I think we are happy and they and we do that as well in compressor technique In a transparent way that things can be shared. Also the platform, although they is the same But we have a supplier, and we all can share the same negotiation and the same strategy on how to use the data. I think a lot is happening there.
I think we can add to that as well that we have put on our foot a number of years ago to say that no one should be able to read Our data, the better than ourselves. So we have hired people in this field. We have said that this is a core competence going forward. I know that other companies have taken a more outsourced strategy around this. We have not.
We think it's extremely important that we understand the data. And it's so much easier to understand and read the data if you have designed the asset itself. So we think we, right now, are ahead of Competition and other third party that would like to do this. So but for us, it's a core competence going forward. This was really proven important during 2020 when we did not have access to customers.
Okay?
Thank you.
Before we take the next question, I just want to remind you once again that So if you would like to ask a question in the conference, please press 1 on your telephone keypad to ask a question. So with that said, next question goes to Ben Uggau from Morgan Stanley. Please go ahead, Ben.
Thank you, Daniel. Good afternoon, Matt, Tanzalu and everyone. It was a question for Matt really from the opening remarks. Can you just elaborate a bit around the EV opportunity for Atlas? I don't know if I heard correctly, but my impression was You said that there were 3 business areas that specifically played into the battery pack.
And what I kind of wanted to know was Either which of the business areas or could you tell us exactly where your opportunity set lies? So of those 3, you know, which is the most interesting and why, I guess?
No, but you're right. And A number of years ago, we said that we would start tracking battery manufacturers. And there are several 100 of them, especially in Asia. And maybe a year ago, we said that, Okay, we need to go across business areas here to share Market intelligence and application knowledge. And I cannot claim to be an expert on making batteries.
But there are parts in the early process where you make different things than under vacuum. So that is an important part of that. When you build the factories, of course, Wagner presented, okay, the need for compressed air, which we can see quite obviously. And then, of course, on industrial technique, we can do both the assembly. The assembly is extremely critical in batteries because you don't want to have an accident there.
So it's the most advanced equipment that we can offer, at least, in terms of traceability and making sure that it's correct. Then you use the dispense technologies to lead 1st, you actually measure with laser to make sure how much of this fluid you should put out. And that used to dispense to lead away energy to make the capacity of the battery. And that's why I said then that I could not find a way for power technique to but maybe there is one there as well. But other three Business areas that find this battery development to be extremely interesting, and we are sharing competence in between BAs that meet on a regular base to share market intelligence and application knowledge.
That's great. Thank you very much.
Okay. And the next question goes to Gerd Debre from Deutsche Bank. Please go ahead.
Yes. Good afternoon, everybody. Thank you for sharing the chart showing the solid growth development For the low compressor business over the past few years. But could you now elaborate on how margins have Trended over the same period of time and how the low pressure machine margins compare to the city average Profitability today.
Yes. If I can comment on that, I think you have seen that we are doing quite a lot of designs and there are some that are redesigned versions from 5 to 7 years ago that we have released. And every time we do a redesign like that, there is Increasing in features and decreasing cost. So then in the low pressure area, we are trying To improve the margins, I think there are still room for improvement in that area And that is coming step by step. But I believe that as well that We still have a young, let's say, population there, meaning the aftermarket is not really harvesting on the full potential.
So once those installed base that is ramping up started to really get a bit more mature, The aftermarket in that area will become stronger than what it is today and that will bring margins up as well.
But sorry to push you a bit on this, but what kind of margin gap do you see at the moment Maybe on the new equipment side, if we exclude aftermarket?
We don't explore the divisional margins in that sense, But I think Wagner was clear enough, of course, to say that it's below on equipment today. You can expect to increase those margins step by step and they accelerate into service. And I'm extremely happy about the initiatives on R and D and the growth rate That we have seen right now. Okay.
Okay. Thanks very much.
Thank you. Then I repeat again. Next question goes to William Mackay from Kepler Cheuvreux. Please go ahead.
Yeah. Good afternoon, gentlemen. Thank you for taking the question. My question is related to industrial cooling. Thank you for describing the size of the market.
Can you just I noticed that you made the acquisition of Eurochilla and then you launched a new range of Products into that segment. But can you just throw a little more color on where you see the Fragmentation of the marketplace, where the opportunity is to grow, what type of available returns are in that segment And where you see your market share relative to your future ambitions.
Thank you. And that question goes to Wagner. I think we have Wagner now on the phone. Wagner, are you with us? Yes, Wagner, you're on the line.
Did you hear the question? No, no. Please, William, can you repeat the question once again? Sorry for that.
Yes. Good afternoon, Wager. The question is related to industrial cooling. You've told us you see a market size of around €8,000,000,000 You made an initial acquisition of Eurochilla in Italy and you launched a new range of products. But can you provide more color On where you see your market share or position in the marketplace and how you see the opportunities in the marketplace?
Is it very fragmented? Is there Go for a roll up strategy or is it the case that it has to be largely organic? And where are your longer term ambitions in that space?
I think that we have a very small position today. I must say, still a lot of room for growth. It's quite fragmented and will come from a roll up and also from organic. We are ramping up R and D, we are ramping up. We are developing the new products and
we are Recording in progress.
We are looking to new Acquisitions as well.
So we're obviously recorded here. Thank you, Wagner. We have another one on the line. A question from Max Yates at Credit Suisse. Please,
Max, go ahead.
Agreements and you've talked about the different styles of servicing that you have in compressor technique. I was just wondering if you could give us a feel for how many of your new compressor sales today come with service agreements And maybe how that compares to the percentage of the installed base that have service agreements attached. Just trying to understand Kind of how quickly that business might develop as you continue to sell compressors and service agreements over the next sort of 5 to 10 years? Thank you.
I would say it's still not a huge part of our new machines coming already with the service we have In some and depends and I say that from a global perspective and it's a bit different. If you take Europe, A lot of competitors that we sell, it's already coming with the service and you cannot sell without the service Combined. And in other markets, we are still not there. If you go to Asia, for instance, it's a completely different market. It's a different completely different approach.
So we don't see that today. That's why In the mix, I say that it's still low. But I do believe now with connectivity getting more and more mature, that is also 14 years because the connectivity product projects, we show Since the beginning now to the customer, the value of connectivity And the value of
It seems like we again have a technical problem and Obviously, the importance of vacuum pumps to produce good microchips is there. I think Wagner would just Come back in a minute through the phone conference.
But I understand the question And we do get the question quite frequently how many of the we have contracts. Understand, we have not shared that externally. But as you understand from Wagner, every machine, oil free or industrial, can be connected. And of course, that hopefully The digitalization can also continue to drive uptime on the compressors. It would give us more service contracts, more OEM parts.
So of course, that's part of what they are driving continuously to improve the analytics of the data as well. But we don't share Exactly, the share of the compressors that we service with service contracts.
From what Weidner already had the chance to say, The potential is still there to continue to grow handsomely on that part.
Maybe just while we wait So, Fagnum, Mats, could I ask you a question just on raw materials? Because it's something We get asked about a lot. And obviously, the moves we've seen in raw materials are fairly exceptional so far this year. So I just wanted to understand kind of whether you see any issues passing this on to customers, whether you feel kind of comfortable That this is kind of easy to manage as you've managed to do in previous periods of raw materials inflation.
I would absolutely not define it as easy. We have seen a number of suppliers, of course, with the shortages of material that would like to increase prices. If you say just the metal prices, the content on our machine is more the machining and how we do things, so It will have an impact. But then we also have long term contracts with many of our suppliers. So I believe that we will handle it in quite a good way.
But I need a couple of more months to see how this impact all these 23 divisions. But We have been prepared before, and we have handled it before. So I keep trusting my organization that they can handle in the best possible way To say that it has no impact, that would be to go way too far at this point because the situation we are going through right now with the capacity It's a little bit unique, I must say. I don't know if you have a lab. No, I think the if you could put
But on a scale, I think the physical challenges from suppliers, etcetera, that we face is probably more of a concern Then how to compensate for the price increases? This does not take away the difficulty, as you say, the challenge of that as well. But it's more the business model that we have. And the history shows that Increasing raw material inflation hasn't before had any major impact on the profitability Due to what Matt said on the long contracts, etcetera, etcetera.
But you also say that our commitment is towards our customers. Absolutely. So if we need to go and buy electronics on the spot market, then we will do that. That will not be kind of okay. We are not going to supply.
We were going to go after every opportunity to have happy customers. So
And that's challenged the profit. Yes. Yes, absolutely.
Again, can you hear me now?
Yeah, we can hear you.
Okay, good.
Okay. Then we have a next question from Alastair Leslie from Societe Generale. Please let us there.
Yes. Hi, good afternoon. So referring to your carbon savings examples you gave, We're seeing a number of capital goods companies now start to calculate and disclose what we probably call scope for savings For the entire portfolio, so doing a kind of bottom up analysis of product lines and scaling that up across the entire group. I'm Just wondering, you've given some specific product examples, but do you now also plan to map all of your offerings so you can kind of showcase The savings for the whole of your portfolio. And I was wondering if I could sort of squeeze in the second part to that question as well.
You talked earlier about higher demand and interest in Upgrading to more efficient compressors, specifically to lower carbon emissions, I think. So are customers still at the sort of discussion and discovery stage here? Or How close are we to seeing this translate into kind of meaningful growth?
If you look at our Targets, we believe that they are quite ambitious. And in Atlas Cocoa, I think when we commit to something we really would like to deliver, so we have put 20, 30 to start with. And of course, 2,050 then to be some sort of commitment to the Paris Agreement in line with the scientific targets. And this is the process we are going through this year when we do the CO2 and we measure principally Every business to see how this footprint looked like. I have not seen what you described, but maybe we can learn from that as well.
But this has In our journey at this point, and I think we can challenge ourselves at the end of the year when we have the full picture. But as you can see, it's mainly in the user phase of our products where we need to find ways to come up with Even more energy efficient product to be able to commit to scientific targets. In terms of customers, I think this has accelerated the interest and the discussions In the compressor, I said, well, we have always sold on the energy efficiency. I believe Agnes said it's around 75%, 80% of the cost of running it throughout its life. This is just an added bonus that if you have the best machine, you can also help the customer with their suit tool footprint.
I still believe that most customers are still paying for good investment, but this is stepping up day by day. I don't know if you Want to add on this, your sales strategies around sustainability?
No. We clearly see a little bit more interest. There are some customers in the Dedicated Market segment that are even inviting us on how can we help them on this transition. I think there is an increase in demand coming from that area as well because you have The compressors that are utilized in general for several things in the production process, but also compressed air can support as well, Not only compressed air, but compressors in general can support in those new energy sources as well. We have applications to in hydrogen for high demand in hydrogen where we are direct Directly involved in the change of the energy matrix.
So that has it's not really to do with the General air compressors, but moving those new energy sources in a form of a gas. And of course, if you need to move this energy around, you need to increase density. To increase density, you need to liquefy or you need to compress If it's a gas. And there we have opportunities and applications where we are also present.
Very good.
So it seems like we have some more questions. But before that, Again, I remind you press 1 if you would like to ask a question to Wagner, Mats or Hans Zohler. Next Next in line is Ben Yugloff from Morgan Stanley. Please go ahead, Ben.
Great. Thanks for taking another question. It was really a sort of broader picture question for Matt. In the sort of the opening slides, You showed one of your kind of growth objectives or pillars as Asianization. And you talked a little bit about the changes that were ongoing to supply chains and so called protectionism.
Can you just talk generally about that? Is that something that you see in your customer base? And when we're talking about Asianization, Is that sort of in Asia for Asia, I. E. Moving to Vietnam or the Philippines or whatever?
Or is it something different? And how does that is Atlas itself changing its footprint at the moment in China?
Yeah, very good question. I will try to answer it in a broad way as well. We see in our operations today that we do 2 things, due to protectionists, due to corona and That we have 2 suppliers for all critical components, which has been the strategy for a number of years, but it's continuously to do so. But what we have seen with the protection between U. S.
And China, tech, tech maybe, And, of course, then China, for example, accelerate the semi demand. I mean, they've done the same with the auto industry. And I think they're quite independent now. And then we can also see that China start exporting in I had numbers in my head before, but I don't want to commit. But we can see that the export from this country into other Asian countries is just increasing rapidly right now.
And what we are doing then is that we have compressor technique in Bushe. We can design, we can supply, we can manufacture in the country. On semi, we can do the same thing. We in industrial, we can design, we can manufacture, and we can sell products. And this is part of the success that we have had, that we can Take these orders, and there are demands from customers, not only in China.
There are many that says, well, we prefer a local Supply, and then we are perceived as more of a local player. But I think the protectionist has accelerated this type of behavior. And it's not Only U. S, China. We can see it in India.
We can see it in many places. But as I said, we'll accelerate the local community. So I think you need to be in the powers of the world Europe, America, and Asia with a focus on China to make sure if you want To be number 1 in the world and we are when we say we do local for local, it comes everything from talent management in the region to R and D, to sales and the value change. So we are looking at that. And I think the industrial technique have their main hub here.
And that's Mainly because the tools are rather small and they can easily be shipped. But otherwise, we are local. And I think this is a trend that will continue in many years to come. And we don't see a change of governance. We have not seen any change in this.
I think that will stay as we see it. So we do certain things. Yes, we do see customer expect us to be more local. And Also these tech centers I talked about in vacuum technology. And if you said service, maintenance, they can also do assemblies.
We can actually do Pumps for them on the local premises very close to where they will be used, and that's also a huge upside for our team there.
That's super interesting. So I am correct to think that you do see some change amongst the customer base Outside of semis, but at this point, Atlas Copco is not adjusting its footprint in China. Is that fair?
Well, we are adjusting our footprint to increase our investment and build a broader base in China, yes.
Thank you very much. I appreciate that.
Thank you, Ben. Ben, now we have Actually, the last question in the queue, and that is from Fredrik Argard from SEB.
Yes. Hi. Thank you very much. Thanks. Yes, Matt, I have a question on you made a comment initially on the vacuum technique division saying that Vacuum intensity increases with miniaturization.
I guess this refers to semiconductor manufacturers moving down the nodes and the more complex manufacturing. Is there any way of quantifying this and the opportunity for you? And also, is there any way of getting a comment on what this does to your aftermarket operations? Thanks.
I mean, I wish I was that expert. I had the question before to go from 7 to 5 nanometers And see how much intensity it improves. I don't have that measure. But what we what I have learned, at least, is that The more complex, the more processes, not so much dependent on the product itself, but the more processes, The smaller it is, the more vacuum intensity. I wish I could quantify it for it, and maybe we can help you with that later on.
But I don't have that measurement. I don't know if -You do.
-No, I'm not able to quantify it either. I think it's rather complicated.
-Only convinced that the correlation exists.
Yes. That's good.
Sorry, Freik. You had a follow-up.
Yes. No,
no. Is it meaningful? Or is it something insignificant? I mean, in terms of increasing the digital vaccine content as a share of total CapEx for a similar time.
Yes. I I think we have to learn and get back to you. I don't have a measure for you.
Okay.
That's fine. Thank you very much.
Thank you. I see now that we have more questions coming in, and this one goes to Lars Brochon at Barclays. Please go ahead, Lars.
Thanks. A quick one for back and thanks for taking my follow on. I was just wondering, Wagner, whether you could reflect a little bit on the competitive environment over the past 12 months, Specifically around sort of 3 areas. 1 around digital. Has the pandemic been the sort of catalyst of a broader market It's a shift away from the smaller service operators I think we talked about over the past year or so that don't have the quite Same digital capabilities as you do, 0.1.
0.2, the Garda, Denver and Sorrent merger Complete, I think, about a year ago. So I think historically, you've talked about seeing some, to say, short- to medium term opportunities around the customer base there As they went through their integration, has that sort of really come through over the past year? Is there more to go for? And then maybe just finally, in terms of your own operations and In terms of how you collaborate with the Industrial Vacuum Business in VT, has there been more progress around, should we say, more integrated solutions, particularly around the service That will be of interest. Thank you.
Well, if I started around the last 1 around the service business. We collaborate in some areas. Of course, we share all the knowledge that we have. We started before with the service business. We are a little bit more advanced in some areas, But I must say they are catching up fast as well.
We are sharing a lot of the best practice that we have And depending on the maturity level of the division because it's not only in vacuum for instance, These two divisions, they are utilizing that knowledge that we have around connectivity, around price management, Around field service force, I think that is The areas that we shared the most, when it comes to the merger you mentioned, We don't comment. It's difficult for us to comment about the competition. What I see, we will as a company together, they will have to perform Ourselves, we have our focus on R and D Development, on People Development And on channels development, I think that combination will allow us to stay competitive, having best in class products. And I think that will allow us to continue to be very competitive in the market. And I would say that In the last years, I think we managed to continue to develop to work on these three areas I think it's very important as well to work with our channels and also with our people.
So I think we will be, Let's say we will continue to development to develop our market. And when it comes to these smaller units, yes, We are we want to connect even the smaller units and I believe that we'll bring a lot of Positive insights will allow us as well to be able to see what are the operating conditions in the whole Installed base that we have and when that comes, we learn as well how to design new products for that market. That will further strengthen our position in the market. So that's what I believe and that's why we are also investing to connect the machines Even if the payback is not as clear as on the bigger machines, but I believe having the data is crucial for the future In all addressable markets that we want to be in.
Could we say because I ask you the same question As Lars did in terms of these joint ventures, if we see that as, and what I read talking to our people is that the market Dynamics hasn't really changed that much, at this point, at least. And we know how to compete with The Western companies that we've been competing with for years doesn't change very much, not in our favor and not in their favor. But what we keep our eyes out for more is more the challenge from the Asian regions. If they can, we need to stay ahead of them so that the lower price that we can show that really in and we believe that The sustainability discussion, if that accelerate in regulation, that would be to our benefit versus people that copy technologies down. So This, I think, where Wagner spends more of his time to figure out if there is someone that pops up with good technology from the Asian base.
That's helpful, Colm. Thank you.
I see we have one more question. It's William McKay from Kepler Cheuvreux. So William, Please go
ahead. Thank you for the follow-up. My question comes back to your innovation intensity As a critical driver for growth and profits, you put up that chart, Mats, at the beginning Of your presentation showing the steady increase over the last decade in the research and development expenditure and the innovation rates rising. I mean, where should we expect that to trend? Is the incorporation of increased digitization and the intensity of competitive pressures Gonna push that up to 5%, 6% as you enter new opportunities in renewable or batteries and others?
Or do you see it As about stable within your longer term planning.
When I started in 2017, One of the tasks was that we had had we were lacking organic growth for a number of years in compressor technique. And we had that discussion. Wagner was also new in his position. We said, so we need to stay ahead, and it's represent almost 50% of the company. So to really stay ahead of that, and this is one of the reasons why we invest more in this.
Then if you look at the value creation for our shareholders from a value perspective, of course, It's almost risk free if we do it efficiently and we do the right things instead of acquiring a technology. So we said, okay, we increase The heads working on acquisitions, which we have over the last 3 years, we have done 44 of them. And at the same time, we wanted to make sure that we could show organic growth in CT. And this was one of the reasons. Your other question is that the more software you get into a product range, like we see in industrial technique, for example, Then you can see in relative terms that the spend will go up.
But that should meet, if we do it rightly, with increased gross margins as well. So then the sales cost or the equipment cost will be softer and sugar down. So it should meet each other. And that is not like we are just Spending, but we thought that when I introduced this, that's like, should we spend a little bit more? We thought it was a money problem in the beginning, but it has proven it's not at all a money problem.
It's more of Source and availability problem because normally the best resources we have are working on the most interesting projects already and to add something on top of that. So you come back a little bit to talent management as well and getting the right resources into and now we have many huge efforts on data analytics, which all the divisions now have, for example, and added those resources. So I don't think that is a specific number, but more software content, Normally higher, and then the gross margin should be higher than the traditional technologies.
Thank you. Very insightful.
So I think that was the last question of today, and we are now entering the end of this Capital Markets Day. If you didn't have the opportunity to ask your questions, you're, of course, welcome to contact IR after the event. So with that, We just wanted to say thank you for participating and looking forward to meeting you, hopefully, in person next time. Thank you.