Good afternoon, good morning or good evening to everybody on the conference call. And of course, first of all, welcome everybody here in Stockholm to the conference call on the interim report for the year 2018 or the Q4 report, as we normally call it. We will follow a known traditional format. We will try to end within the hour. And at least half of the time or preferably a little bit more will be dedicated to questions and answer session, where we will take intermediate questions ask all the people that have lined up for questions during that session to restrain to one question in order to allow as many people as possible to ask their direct questions to management.
So with that, I think we can just kick it off. And I invite our CEO, Mats Randstrom, to the podium. Thank you, Anssuba.
If I start then with quarter 4, on revenues, proud in my organization that we reached that $25,000,000,000 7 percent organic growth. Actually proves a little bit that operations was really delivering in both Q3, but also in Q4. So I would say that if you talk about deliveries as such, I would say that in principally over the year now, we are catched up and back on normal delivery time. And with the new setups a little bit with some new suppliers, we also claim that they are a little bit more agile to ups and downs in the economy. Operating profit, dollars 5,600,000,000 up 17%, also a record for us.
Hansula will give you a little bit more detail later on the adjusted results, but the long term incentive is the main part of the difference. Service, fantastic growth in service. Really good to see that getting traction in the organization. You know that SITI has always taken the lead and developed service and service programs in a good way. And I think where I came from, industrial technique, I followed and also generate good growth on helping our customers in a good way.
Now we also see vacuum technique, good in semi, but also on the industrial side, we see relative growth month from month. So that's good to see. And also in PT, it's intrinsically we had growth for servicing all the business areas and all regions, which gives us that resilience that we really like. As we flagged a little bit earlier, there is slower activities in some areas. Alto is one sector where we see that we get a lot of requests, but it takes a little bit more time to get decisions.
Equipment still up on CT, IT and PT and then down on vacuum. This confirms a little bit the numbers, but maybe to one highlight I thought was the orders received. And if you look at the graph, you can see that even though that organic growth was 1%, you can see it was actually quite a strong quarter anyway. And if you benchmark, of course, it's not as strong as Q1, Q2, but in par then with Q3. And also, if you go back 1 year, you can see it's still on a very high level.
So we were actually quite pleased with the orders received for the quarter. On the cash flow here, you can see almost SEK 5,000,000,000 and the comparable number is around SEK 4,000,000,000 for last year from the industrial part when we exclude them and the Epiroc part. Looking at the full year, it was the best year ever for Atlas Copco. And I think we had records on orders received revenues and profit. It was a fantastic year for the teams around the world.
The one thing that I'm actually proud of is that we have launched a lot of new products, and I can see that the value generation and the way we define and develop and the way we train the sales force, it's more and more a consultancy role where we actually quote things today, and that's something that I think is very much appreciated and we talk real value to our customers. So product and innovation is something that really drives our business. I already mentioned service. I think, intrinsically, all the divisions now is up and running, and some are already taking the digital step to the full connectivity and the data analytics and some a little bit behind. But I think we have taken huge steps when it comes to connectivity and the service business as well.
We did 5 acquisitions. Same thing here. We have 20 divisions that is stable, is profitable. And of course, they can take the route a little bit for organic growth. We talked about innovation and what we put into R and D, but also looking at different acquisitions then.
And it's a little bit more the timing, and we never give in on the value creation. So it's really important to us. We will never pay too much from our point of view, so to say. So it will come and it will come, but the plans are in place and people have very good strategy for what we like to do. We did actually did the split of Epiroc as well.
It's almost like we forgot it now, but it was a fantastic job done by the team. And the thing I see, of course, is now with industrial focus, complete industrial focus. It actually frees up a little bit of time for us and it's a very dedicated team working on developing the industrial business. So from my part, it was to suspect to split, which Afrin Konsoola led that work in a successful way. But also also, and I can see that we actually put all our resources and thinking into industrial development.
The proposed dividend from the Board is 6.30 percent, and I think it's up around 20% versus last year. So it's quite a strong increase. And this is, of course, when we calculate industrial part and split that. And that's what we have there as well. Full year's numbers, I'm not going to take you through this.
It's in the material. Orders received up 5, revenues 8. And comparing to where we have been in the past, I think it's quite a good ambition. We are very close to $97,000,000,000 in orders received. I think it's an amazing result actually.
I will spend a little bit more time on this. It's also linked a little bit to the statement we make later. North America, up 5% for the quarter, strong drive in the organization and in the economy. As you see it, actually, here we have in all business areas, we can see positive development and also strong service development. So that complete region was very positive for the quarter.
If I go down to South America then, we can see it's 0%. But for the year, actually, Brazil is the main country for us being industrial. We're up some double digit there, 11%. The view from our teams on the election day is rather positive, I must say. They look forward to the business environment in 2019.
So we have expectations that also there we had positive on the service as I said. So that's good. Africa, you can see in Africa, it's power technique with the portables and the compressor technique. They're actually doing quite okay there. And in the Middle East, it's more of a mix, but there you also have vacuum technique, and that's the part that is actually down a little bit.
But that's more key account orders, I would say. So it's not that we are losing market share or anything like that. Then if we take Europe, up 3%, I think it's like the 3rd strongest quarter we have had. A little bit more mix there. Seat is positive.
We can see vacuum is down even though it's not the biggest region. IT, down a little bit. And that's probably related a little bit to the auto sector as we see it. And power technique, also positive and also bad and service positive. The one where we see a little bit of issues is, of course, U.
K. I don't think I need to mention the reason for that, but the investment climate is not what it has been. But the engine of Europe is Germany, and there we see a little bit of a softness now. I think it's related a lot to the outer sector with the new expectations on leases versus Petro, for example. It can also be the possible tariffs with the U.
S. But Europe is a little bit softer there. We also see Italy and Turkey, of course, being a little bit more turbulent. Let's take Asia. It's 1% down, but it's mainly then linked to South Korea, which we also mentioned in the report.
It's actually quite positive still for compressor technique and industrial technique. Power technique is rather small. It's mainly portables that we sell. And South Korea down a little bit. China kept up on a good level, but we still see that there is a hesitation in decisions in China as well for the bigger projects.
Yes, a little bit the same here, Dan. Of course, the 1% is then related to the vacuum technique. The other ones have positive development on equipment. Currency is still with us, 5% move for orders received revenues. Maybe you need glasses in the back.
What I'm happy about, Industrial Technique, of course, 4%. Power Technique have had 2 very strong quarters. It's a good mix in Power Technique right now as well, a lot of rental business, a lot of portables buzz that you see in the profit. But the big engine for our operation is, of course, to make sure that we have strong growth and organic growth in compressor technique, launching a lot of new products. I think you've seen it on Capital Markets Day, but also in this presentation there, and there is more to come there.
And I think that's the only way for us to stay ahead of competition, and it's good to see that they're up 7% for the last quarter of the year. And then we start with compressor technique. As I mentioned, 7%, which is good. Record revenues, I think you can see that on the bar there, very strong for them as well. And 23.1 percent operating profit.
So I think the only discussion me and the management have is like, where do we develop more top line, where can we find more business in the world. So that's an important task for them. North America, Africa, positive, slightly down, more softer, flat in Asia and Europe. And also the biggest compressor that we have also very, very positive for the quarter. And even here then, when we have the one to 1 ratio with service of our equipment, we see strong continued growth with service.
And they are furthest ahead with the digitalization. Every of the standard compressor is connected today, intrinsically if the customers allow it. And we can, in principle, make service calls to the customer when we assume something happen, especially if they sign up with their service contract then. And it's very much appreciated. I think we start to see how we can create real value with digitalization.
Back end technique, 17% decline, and it's mainly in semi. And of course, looking at the sequential and orders received, you can see it's slightly positive. And the way we looked at it, industrial was rather flat, but they also had quite a tough comparison with big orders from last year. And actually, the sequential boost is from semi, But I need to highlight, it's more of a key account approach. This could have been in Q3 or in Q1.
We don't see a shift there in any way, but still positive that we are on this level. And if you look at the level where we are now, and you can compare it with 2017, I think we are on a high and a good level, and we should be able to deliver good profit on this level. Margin, 25%, still a top performance, I think, from the vacuum team. And the service is extremely important here for us to get that resilience that I think it's 60% in normal sales, 70% or is it 50% and to get the industrial growth in equipment and of course also the high and the service division to grow, it's very, very important for us. Normally, we say around 20% is service, but that is, of course, increasing by the quarter when this is developing.
So very happy about that. Underlying demand, still, we very much believe in this market of memory and logic. You can see different reports coming out, but the way we operate and the way we connect ourselves, So we still believe the market is developing in a very good way. We just need to be a little bit patient and see when it comes with the bigger orders as well. I should mention also, you know that we intend to buy Brooks Automation in the U.
S. When they said that we would close it in Q1 most likely Due to the government shutdowns that handles the regulations, we believe it's more pushed into Q2 right now. And when we have more news, then we have to get back to you, but I wanted to mention that. Industrial, look at the gray bar on the right, we will pick up on deliveries and record revenues, very strong. But also, you can see 4% organic growth, even though that we see more activity on the general industry market and somewhat softer than on the MDI market or outer market.
But there is a couple of things that I find interesting when we talk about auto. And one is, of course, that the footprint discussions of where do I need to manufacture my cars due to different tariffs. And it put that in a little bit perspective, if someone moves the factory, that's really good news to us actually because it's very unlikely that they would bring tools and systems with them. So that kind of that makes a little bit of a test for 10 flight could be good for us. If they change powertrain, if it goes from diesel to petrol, that's positive.
If it goes to hybrid, so if it goes to electric, and that could do changes, of course, it's also retooling and changing technology. So in the long run, we are not directly correlated, as you know, to the production output or sales. It's more the product based and running new programs in the pipeline. And then the product portfolio now is, of course, with assembly equipment, we have the dispense equipment, we have the self test riveting and also the flow drill. So a customer is saying, well, I'm going to use more mixed material in my design, which principally everyone does.
Then we have a load of the technologies for them to help them out with the next generation of cars. This is also part of the product launch that we do here. It's also part of the digital journey. This is QAT, call it Assurance Systems. And now we kind of connect that in good way, get more analytics in group as well.
So also on the product side, we're developing more and more digital solutions. If Andrew would hear, he would say that he is the star performer because he had very strong development in received for a couple of quarters. I'm pleased to see that. I mentioned it earlier, I can do it again. It's rental doing very well, specialty rental for us and also portables, which is very positive for our mix.
And you can see that we made a lot of changes here before. Light construction is out, Dynapack is out. But you can also see that on the if you look at the last 4 quarters, it's a little bit on another level compared to where we've been in the past. So I think that focus on a number of products and customers and the restructuring we did of the sales team around the world is actually paying off in a good way. And the margin now then, 16.5 percent almost adjusted at 64%.
I think it's an okay margin in working a lot with rental company and construction market. So return on capital employed is also good. So I think we start to look more and more at, okay, what can we do more? Can we help our customers with more products or more sales? Asia is a little bit untapped.
I think for portables, we are there, but other products, it's a little bit less. The new machine here on the picture, part of our rental fleet, so it's an oil free machine, And it's also now designed with the latest emission standards available. It's also very, very good. So if I summarize down, I think you've seen all these numbers. It's, of course, then the record revenues that we're happy with, record profit.
And I want to highlight the strong orders received, service growth in all business areas and, of course, the strong cash flow. So, Hanse, are you going to help me out a little bit?
For a while,
yes. And I'll invite you back for the tricky part. Exactly. So we have talked about the operating profit performance, as you can see on the slide there. And of course, as you have read the reports, you know that we had some help in there this time, in this quarter.
The stock market was going down and so did the Atlas Copco shares. So the provision for long term incentives that we always carry, we could release some profit from that or some provisions from that. So adjusted, the margin was 21.9 percent. And if we look at last year, we have the opposite effect. That was a negative in the reported results.
So the adjusted profit last year was $22,200,000 We're hovering around that level as you can then see. Further down, there were more special items this quarter than we normally have. We had in the financial net, which of course is the difference then between operating profit and profit before tax, we had an extra gain, you can say, of EUR 360,000,000, dollars which is related to currency effects and tax effects that comes from an internal at market fair value, which is exactly according to the rules. But that means that we can have these type of effects as a one off from time to time. We don't do these internal restructurings of ownership within the group all the time.
But this time, we have it, and it was quite significantly positive. And that's why we mentioned it specifically. What you also saw is we gave an information that the interest net, which is more of a normal run rate, minus €98,000,000 which I would also think is pretty close to what we expect going forward for the near couple of quarters, so around €100,000,000 dollars negative. The other effects like we saw a big positive this quarter might come, but then of course, it's a one off and then we will comment on that. So that's how you should read, let's say, the financial net.
If we then look at below profit before tax, we have the income tax expense, another positive one off that sums a couple of them actually, that sums up to a €600,000,000 positive roughly. The biggest one is related to a refiling of tax declarations in Belgium, which we have been allowed to do by the Belgian tax authorities. And those of you that remember a couple of years ago, we had a big negative from the EU Commission challenging the way that Belgian state taxes companies, and we were one of the affected. But the Belgian state also recognized that had you known this, you would have filed in a different way. And we got the positive of that, which was more than half of those $600,000,000 positive.
Again, we mentioned the $600,000,000 because we don't consider it run rate. So if I adjust for it, we had a tax of about 22.5%, and that even that was slightly below run rate. I expect it to be somewhere above 24% going forward as a best guess for the next couple of quarters going forward. And last year, to be fair, it was also an extra negative on the tax rate. Otherwise, it would have been around 26% instead of the 30% you see here.
Effect on basic earnings per share is, of course, also including these one offs. And it's roughly somewhere like SEK 80 or in that neighborhood that you could say is too good to be a run rate of the earnings per share in the Q4. If we move further and look at the famous profit bridge then where we try to eliminate the non comparable effects of the long term incentive program that I mentioned, the acquisitions and other items affecting comparability and the currency effect. Then we get to a relatively meager flow through of about 6% in the quarter. So in other words, the extra revenue hasn't yielded too much.
There are basically 2 effects explaining that, and I'll turn to the next. And then we can see that one of the reasons when we looked at the different business areas on this slide, you can see that vacuum technique, which has grown in revenue but very small in relation to the EUR 5,700,000,000 that they have in turnover. And the reason why there is no profit leverage, so to speak, from that small revenue increase is basically that this is not an exact science between each quarter. And I would still argue that we see a similar type of normal flow through, normal leverage in vacuum technique as we see in the other business areas over a period of time. In this case, of course, it's a reflection that Mats had not forced a reduction of investments.
Mats has not forced the reduction of R and D expense in spite of the fact that they had faced a little bit of a tougher market environment. So hence, that relationship here in vacuum technique is, of course, also affecting the previous slide. And the other effect was on the corporate side, where there were some effects in the quarter that was bigger negative effects than in the previous quarters. But otherwise, if we look at compressor technique, we look at industrial technique and power technique, they are all showing a sort of a healthy leverage in the way. You could say that it's below 30% that I have guided for before in those cases.
But again, over time, I think 30% is still something that one can look at. But for each quarter, there will be variations. In a similar way, that Power Technique had the opposite, a much stronger than normal. Balance sheet, I won't dwell too much. You can see the dramatic impact of us having split out Epiroc as a separate company.
So it's difficult to read these comparisons. I think it's easier if we look here. Well, not so much easier in this slide, but I can guide a little bit better here if we look at the cash flow. Specifically, the Q4 this year is unaffected by the discontinued operations, of course. So we just as Matt said, we have about SEK 5,000,000,000 in operating cash flow before we make acquisitions and before we make dividends, etcetera.
And if we eliminate in an estimated way, we don't have audited statements for continuing operations on cash flow. Hence, we just say that it's around $4,000,000,000 that would be comparable to the $5,000,000,000 this year. But these three columns here, the last year December, the full year 2019 2018 and the full year 2017 has that included. Earnings and dividends, I talked about the effect of these one times. And of course, the that helped us to come almost at the earnings per share of last year when we were including the discontinued operations.
The proposal, 630,000,000 is looking like that. But if we try to put it in perspective of the continuing operations, and again, I'd state I stress that these are estimated non specific the dividend number here is not audited to be $5.20 It's just to give a fair representation of what the continuing operations had last year. So with that, I hand it back to Mats for some final comments before the Q
and A. Thank you, Ursula. You flipped it here already. So this is something that it's a little bit of a new initiative in the group, and I think it can be very valuable for our shareholders and our customers. And principally, what we see is that, as you know, we generate good cash.
And from time to time, you can even say that we are cash rich. And we say that, well, with the return on capital that we see, could we generate more organic growth? We have good acquisition plans. We can finance that. But what we have done is we went back to the organization.
And principally, you can think about yourself as R and D manager 121 division and said, well, if we could fund more R and D projects, what would you do? How can we do that? But there are some criteria that comes with the package. And that is 1, it's not more of the same because we already financed the next generation of what we already have. So it needs to be something new.
It needs to be adjacent. It needs to end with the same customers, and it should be a real product. It's not a lab or a core development. It's something that has a marketing plan, something that we can see market potential for. And what we're doing in principally is trying to see if we can finance a little bit more of the industrial ideas that we talk so much about and innovation.
And this is, of course, less risky than acquisitions and also generating very good value creation for our shareholders. So the challenge is out there right now with the 21 divisions. And in principle, when they have their business reviews, which they have quarterly, they can come and say, okay, I have this, which is part of my core, but my customers also would like to have this. This is the potential market for this. This is how we can get there.
A program would look like this. So we think it's something that's internally and with our board at least have been seeing something very positive to see if we can really see if we can find new ideas that can drive our top line. But then at my first meeting when the BA come and they presented me in Rasoula, And then he said he had 3 projects that he wanted to do. And then we learned, okay, so if we invest in this, we'll actually get the real product. And they said, well, we don't know because we haven't tried yet.
And then we need to try something different. So we have pushed this a little bit and changed a little bit how we finance this. And we said, okay, Mr. R and D Manager, you say that this is an idea that you have. Can you build the prototype in 3 months or 6 months?
And then we only finance that period. And then we come back with it and we look at it again and say, okay, you are here, so we finance the rest. Normally, when we finance, you give the next generation of tools, the compressor, it's programs that last maybe between 2 to 5 years. And that's not what we're talking about. This is new things that is adjacent to the products that we sell today.
How much we're going to spend depends on the ideas. Probably not crazy money, but it's something that we think that we can, over time, continue then to drive organic growth in the group. I think this is the final slide. Han Solo and I have been debating over the last week this sentence. We don't use it so much internally.
We work more with the continuous plans already for any scenario, but we also like to guide you the best we can. And we have been in between and what we say here, somewhat lower. Or should we say remain on the current level because we already indicated a little bit what's happening in some segments. And that's been going on a little bit between us. But after a couple of questions, we said so.
If we look forward a little bit for the coming 3 months, what do we see as changing to something more positive? And the 2 things we said that would maybe turn things to more positive, one would actually the Brazilian market, where we're seeing things that there is a positive environment right now. And the other thing was that if they can't resolve the trade barrier discussions, Europe, U. S, China, if that happens, we also think that the decision for some of the investment could actually turn this to something positive. But then as I said, so what's out there that's not so positive for our business, we can see a little bit softer business in Germany, as I said.
We can see a little bit more time in Asia, specifically China. And then we also said that, well, all the global indicators that we see is actually taking down growth. And as diversified as we are in all industries around the world, it really influence us as well over time. The tariffs, which could be positive if we find solutions to it, on the other side, if they're then, say, that's a 25% tariff to some of the product score. It's very little influence on us, but it could have very big influence on some of our customers' decision.
So that I don't think is that, I don't think so. Brexit, clearly negative. U. S. And U.
K. Business is significantly slower. Yellow West in France, very little impact financially on us. But still, the GDP growth rate in France is already low, and I think they expect this to be not positive going forward, Adil. Germany, I mentioned.
The finances in Italy and the issues in Turkey. So we have said that, well, looking at this both side, we cannot say anything else than that somewhat lower than current level, and that's where we intrinsically ended up as the guidance for the coming quarter. Hans Ola? Thank you
very much. Then into the fun part. As I said, the questions and answers, We will do it the same way. I think, 1st of all, for the conference call participants, can you please repeat the instructions? Operator?
Great. So I'll take the one second silence before we take the first questions to say what I forgot. Sorry, before we let you in, I forgot to say what I normally do. I say what is the currency impact going forward. And I got the cue mark from the team here.
We believe if the rates stay as they are, the dollar, euro, krona and everything, about the same bridge effect between Q1 and Q1 last year as we had between Q4 and Q4 2017, roughly the same in that respect. So sorry for that. It was something I forgot earlier. First question.
Thank you. Andreas Brock at Coeli. So the store and e portfolio this quarter was Power Technique. And Mats, you mentioned there about the margins, you're saying coming up now to a reasonably very good level. On the flip side, I would say that the consolidation in the rental business in the U.
S, the likes of United Rentals, etcetera, that should, over time, give them economies of scale and start pushing down your margin.
What are your thoughts about that? Sorry, the rental business is doing what? It was difficult to get on
the It is consolidating in the U. S. Yes. So over time, that should give them bargaining power and that should push your margin down. But to the contrary, your margins are doing very well.
And
I actually believe that on those type of products, you can already today see that the price is one factor, of course. What I say to my team, Asthika, is that if we're going to sell to a rental house, we need to differentiate something with the product that's actually more than price. Otherwise, we're absolutely dead on. If it's just a quarter that you don't take full advantage of, but they're working on the product portfolio. The electric, you have seen already, They're working on more environmentally friendly.
So they're trying to add a little bit to that, like we do in all parts of the world. So I think innovation brings it forward. And I also say that the brand recognition gives us a little bit of price premium in many of the discussions, also our delivery capacity making the product. So I'm not saying that you're wrong. I'm just trying to say what is our counter to a scenario like that.
Fair enough. Thank you. Yes. Here in front, we have one more.
Thank you. It's Anders Seidlgaard from ABG. So on the margin mix in vacuum, you still have sales growth in vacuum, albeit very low now. You still talk about and you have services growing, but you already now talk about a deteriorating mix. So what are the big moving parts there?
I assume you have some pieces within equipment that starts dropping off for semis, etcetera. And particularly then when we move into 2019, I assume we have a much lower billings of semi equipment. So how will that affect basically mix in the first half of twenty nineteen, please?
No. But I think that, as you know, we don't go into details exactly how we break it down. But if you followed us, you can see that a scenario, of course, with less invoicing could possibly then challenge it a little bit. On the other side, we are building the service business. We are building the industrial business, the new product.
So even on the orders received levels that we are today, I believe it helps the profit. I don't know, Arzull, if
you'd like to add something there. No. We are, of course, comparing with the periods where the semi equipment part or that division within semi was extraordinarily successful in both the high level and the output they got through the factories was extraordinary. So it gave a very good profit impact. And that's the reason we talk about the slightly different sales mix perhaps, but that's the main reason comparing backwards.
We believe that we are very resilient in relation also to the other businesses of Atlas Copco. On the other hand, when you have the effects of last year with 25% and even 26% operating profit, what we do believe is that also on the flip side, when revenues fall, you will also have to expect that we are affected in a similar way on the downside, I. E, a little bit more than what compressor technique can show in the downturn, for example. So the oscillations are slightly bigger in that sense. Still, we believe that the operating profit margin performance is really something that we can be fully compared between their lacking technique and compressor technique over a period of time.
There, we have not changed our opinion.
And I think for the complete level for the BA, I think it's enough that you were actually back to 2017 to it's where we are right now, and then it could be a little bit of mix differences. But that's why I say I'm quite comfortable with the volume that we have right now. On top of that, in the semi division, since it's a little bit more up and down, we also have significantly more temporary employees than in the other divisions. So we should be able to adjust quickly than in any other area.
Yes. Thank you. It's Andreas Koski from Nordea. So maybe I could follow-up on that because as you just mentioned, you expect somewhat bigger oscillation in the EBIT margin for vacuum technique than for compressor technique. Is that based on bigger moves in volumes?
Or is it also that you expect a higher drop through during those times? Because during your presentation, you said that the drop through will be around 30% also for vacuum technique. But is that what you expect also when revenues drop significantly?
That's normally that's basically what we refer to, yes, because of the key account structure and the sensitivity to not having the same diversity as the other businesses that I referred to. But you can also say that the level of vacuum the level of service business is significantly lower still. It's around 25% perhaps right now in vacuum, but it's about close to or about 40% in compressor technique as you know.
So you do not expect that drop through will be closer to 50%, 60% as we saw during the growth period in 2018 and beginning of 2018?
I think that was extraordinary on the positive side because we were catching up with investments, and we still managed the output, and that was extraordinary, I think, for that period, yes.
Thank you very much.
We have been some questions in the call.
Fine. Yes.
Operator, do we have any questions from the call?
Yes. Our first question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is now open.
Yes, good afternoon. My one question is on vacuum technique. You mentioned about the decline in orders we've seen for a couple of quarters now? How quickly will that result in a decline in sales given that there is some incremental sales coming from, I think, the EUV ASML work that you were talking about last year? And does the service and the orders, are they comparable when you think about sorry, are orders and sales comparable when you think about the impact of service, growing service element?
Are all the service orders booked in orders?
On the last part, Jackie, confirm that when they have service revenue, it's the same period as this service order basically. That was one question that you
When we look at the industrial, it's actually a couple of divisions in that. When we see the numbers, we also said in principle, it's okay. So why don't we see the same relative growth as we have seen in the past? And that's a little bit back to the industrial. And there are a couple of applications that touch a little bit on mobile phones as well.
They might not do the screens, but they might do the back side of a phone, for example. So you have a little bit of that, but not much. But the big thing is in principle right now at least is that we have seen that the market is still good up there, but the benchmark we had now for this quarter was really tough for them. So we still expect them and we are pushing them to continue to push out the new product, and we'd like to see a continued market share gains in the industrial and high vacuum intensity.
Okay. But if you think about the sort of the markets there, the industrial markets in vacuum, let's say, compared to the industrial markets in compressor, you have got presumably exposure to, I don't know, more process industries, oil and gas, infrastructure, China? I mean, it does seem there's a dichotomy there. 1 is looking much better than the other.
Hans Ulrich, do you want to take that one?
Yes. I think I understand what you mean that the comments about small and medium sized industrial compressors looks healthier than the comments in the industrial vacuum equipment. Is that what you mean?
Yes.
And then, of course, what you saw also on compressor technique that it was slanting towards the biggest increases we saw there were in the large and gas and process compressors. So I wouldn't refer to it as a tremendous world of difference between the 2. And then if you couple it with the two comments that Mats made, that on the one hand, we had a couple of very significant orders to this sector in vacuum equipment last year. It made the comparison very, very difficult. And secondly, there are in the electronics industry or whatever we should call it, mobile phones is an example of it, There are applications where they have seen a clear impact of the downtrend in Asia that we have talked about also from the semiconductor perspective.
So there is some overlap in that, like Mats mentioned.
Okay. Thank you.
Thank you. Our next question comes from the line of Klas Bergelind from Citi. Please go go ahead. Your line is now open.
Yes, hi, Mats and Hans Ole, it's Klas from Citi. So my question is on the guidance and thinking about sales volumes for the year. You're guiding for somewhat lower into the Q1. I know that this is perhaps tricky to answer, but I get this to maybe down 4% to 5 percent from current levels to SEK 22,500,000,000, SEK 23,000,000,000. And the Q1 is typically the largest, at least, over the last few years.
So if I don't annualize that, consider your lead times, this means that sales for the year, if we stay at this level, should come down mid single digit. So I know you don't guide for the year, but given the importance of the Q1, I'm curious to understand what you mean by somewhat lower. And then also had a sort of question within this. In your conclusions, Mats, you didn't mention on the uncertainty side, semis or automotive. So are you effectively saying that the uncertainty is more on the industrial side, just to confirm that?
So first, what is somewhat lower roughly? And on semi automotive, please.
I can start I always tricky to follow you, Klas, We got so many questions. But if you could take Q4 versus Q1, that is correct that Q1 is orders received normally an average somewhat higher. We normally don't see seasonality, but if you actually measure it, you will see that there is a little bit of a change there. On the auto sector, there's still concerns among many of the manufacturers, and that is actually quite a lot of projects in the pipeline because everyone knows that they need to make the change. If that is for powertrain reasons, that could be done all the way to electric or if it's a diesel petrol solution.
So there's a lot of business out there. So it's not by any means that we're not working or anything like that. But it takes time today to get to a decision point that is this is actually what we're going to do. And that's why I also said in my positive view on Q1, if we get a solution on the disagreements of trade, I think a lot of those decisions could be significantly easier for our customers. So that's a little bit where we are right now.
If you do China, it's the biggest part that we're actually quoting pure electric, and it's significant higher than sales today. So they are really on top of their strategies when it comes to electric. So that's part of our strategy in Asia. It also keeps that up a little bit. Then they take in a very little bit for the subsidies for some of the cars.
So that's what we see there. In semi, I comment anyway that since I brought it up before, I think that's fair. Semi was this easy. Even if then if you read anything about semi, let's say CapEx is probably down in 2019 versus 2018. Okay.
So you take that. And that might be between the guidance might be between minus 5% to minus 15%. But when I have my discussion, my team is like, well, the Q1 and Q2 'twenty was so fantastic in semi. So even if you get a running business on that level, it's still on a very high level for even for semi. So I'm not saying it's turnaround, we're going to see something like that.
I'm just saying that semi, with the drive that they have towards technology and the technology investments, there is no one of the bigger players that they get away from. Otherwise, the Chinese will catch them. So for sure, over time, the investments will be there exactly when we don't know, and we have to live with that. That's a little bit to our extent on semi and auto. And so I'm sure Karl had more questions, but I've been thinking.
No, I think you summarized in those 2 at the end. So what is somewhat and semi and auto? So I think you covered it well. Can we take one more question from the conference call? Because we took 3 here, we take 3 there and then we go back here in Stockholm.
Thank you. Our next question comes from the line of Guillermo Peigneux from UBS. Please go ahead. Your line is now open.
Hi, good afternoon, everyone. Guillermo Peigneux from UBS. Question regarding Chemist, and it's more informational for me. Can you point us as to how much is China as we stand in vacuum technique? And how much of that actually will be semis?
How much of that will be industrial? If you can share that with us.
I don't have.
Well, the China part oscillates, of course, just like the Korea part oscillates. So it is a little bit tricky, and I don't want to go into make too many comments about specific quarters, even let alone months, because there is variation. And this again comes back to the comment we have done many times now that it's a key account business when it comes to semi equipment, and hence, it's difficult. But China is definitely one of the biggest countries. I mean, whether it's the 3 big ones are always U.
S, Korea and China.
But you don't mention China as being weak in your press release today?
We include the high the display market as well in that comment, as you could see, yes, the flat panel display equipment.
Okay.
I think China has made quite a lot of investments in new greenfield plants principally with the ambition that they have to be a leader. I think the teams that are now invested in these companies expect results. But if they're going to go all the way, I think they probably need to double the investments over time from where they have been. So but that's that might be so far in the future. I think they need to deliver memories or logic to the customer in a good way right now.
So that's the position where they are. So Alberto, can you tell us? Thanks for it.
Yes. Thank you very much. And regarding gas and process, obviously, this typically goes to process industries. But could you mention which industries were, for you, more positive during the quarter?
Primarily, it was gas related, I would say, that stood out, but not only as one single application, but that was some significant orders in that, yes.
Was it doing on CTE? On CTE, specifically if we talk about
the gas and processing and compressive comment, yes.
And they have a strong quarter.
Yes. Thank you.
Fantastic. Thank
you. Thank you, Jernur. And one more question here in Stockholm. Anders, please go ahead.
Yes. Anders Schulz in Pareto. I had one question regarding industrial technique. That's normally your early cyclical business. It was holding up relatively well.
What do you see there in terms of automotive and general engineering versus the longer term trend of automation and robotics?
Good question. I think, first, it's more than half of our business because you have a family business with the auto sector, but you also have the dispense business, which includes the fleets also only auto, maybe 90%, 95%. As I said, the auto, they have their challenges, but number of these projects going on is actually to our benefit over time. That's what we see. If you want to build a lighter car, you need to go to some other materials.
Spot welding will most likely not be possible in composites or aluminum. So then you need some sort of glue, and we have the dispense system to do that. You can go to flue drilling or self test rebirring if it's aluminum to aluminum, so we can help them out with that as well. So those changes are very interesting. What we are going after right now in Aalto is a lot of battery manufacturers around the world, and that we have around for quite some time now.
And the battery manufacturers, they actually use all our technologies that they have available. There's a lot of safety applications because we want it to be very stable and actually you should dispense equipment as well. So there's a lot of that. And then there's a strategy between different OEMs if they actually want to build the packs themselves and put them in the car or expect them to source the complete package. But that's one of the new interesting tiers in the outdoor industry, I must say.
General industry, I think we saw in the report that they continue to be fairly strong. You have the aerospace was mentioned, the off road was most mentioned as well. And some of the bigger customers there like Volvo and I think Caterpillar delivered reported today as well. So those are some of the customers that are very interesting for the general industry market. So let's see what happens.
I have never seen over time economy that if auto is a little bit fluid, that general industry will keep up. But maybe it will happen this time, but that's a little bit fuzzy in our statement as well that we expect these economies to move a little bit to a slower pace.
Great. I look around here, and then we take another question from the conference call, please.
Our next question comes from the line of Alexander Virgil from Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Thanks very much. Good afternoon, gentlemen. Perhaps just picking up, Mats, on your last comment there with respect to other results happening today. Could you comment a little bit more regionally on construction market development with a little bit of color, particularly on China and perhaps the U. S?
Construction, then I would refer to a little bit the Power Technique development. And the Power Technique is I mean, it's a little bit of the setup of the business as well. If you look at the way they go to market with renting equipment, clearly, the U. S, North American market is number 1 in renting equipment. Number 2 is Europe.
I think we have developed well in Europe. We also made a little steam acquisition on rental, which is developing in a good way for us. Then in Asia, I still think there's limited, at least for us, success in rental, and I think the rent significantly less. When we talk today about construction, we still say looking forward then that at least the growth we follow GDP. We don't expect much more.
But those are the regions as well where we see that if you want to be really strong, really North America and U. S. And of course, then to sell equipment, China is one of the biggest markets for the quarter, both in the light towers and so on.
But if we stay on the Power Techniques side, you could say that Asia was not, and that is, of course, affected by China, was not the strongest part of the world. So the relative performance of the other regions was actually better in Power Technique, Not always related to construction, of course, but it's part of it. Mats mentioned North America and rental companies before and India as an exception from the trend in Asia in general was very positive. But we also know that it has certain specific segments that either are very strong or in some cases, the weaker. So it's perhaps not the general construction indicator market for us so much.
Okay. That's very helpful. Thank you.
Thank you. One more or yes,
I think we can take one last question from the conference call, and then we need to wrap up, I think.
Thank you. Our next question comes from the line of Andrew Wilson from JPMorgan. Please go ahead. Your line is now open.
Hi, good afternoon, everyone. Hopefully, it's a quick one, which I guess will fit the time line. It's really a follow-up to Claus' comments. You kind of reverted back to outlook commentary on a group level and didn't call out specifically either semi or automotive, which we obviously did in the Q3. I mean just the thinking behind that, is it fair to assume that we can assume a similar outlook for semi and auto as covered by that somewhat weaker commentary that you talked to.
And therefore, there's nothing, I guess, weaker to assume in those two markets than what you're seeing at a group level.
I think you need to start.
Well, I try to listen. Sometimes it's tricky on the conference call. Sorry about that, Andrew. But the way I understood you is that is the outlook compared to Q3 to be understood as semi and outer are 2 areas among others, and they are hence embedded in the general outlook statement. And I think, yes, that's pretty correct interpretation, I would say.
That is exactly the question. Thank you very much.
Thank you. With that, this concludes our session for today. Thank you very much for coming here in Stockholm and also for participating on the conference call. Thank you very much and bye bye. Thank you.