Good afternoon, good morning, or good evening to everybody on the conference call. 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 answers session, where we will take intermediate questions from the audience here and the telephone conference. We will definitely come back to that. I will say, as I normally do, I 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.
With that, I think we can just kick it off, and I invite our CEO, Mats Rahmström, to the podium.
Thank you, Hans-Ola. If I start then with quarter four. On revenues, proud in my organization that we reached that SEK 25 billion, 7% organic growth. Actually proves a little bit that operations was really delivering in both Q3 but also in Q4. I would say that if you talk about deliveries as such, I would say that in principle, over the year now we are caught up and back on normal delivery time. With the new setups a little bit with some new suppliers, we also claim that we are a little bit more agile to ups and downs in the economy. Operating profit, SEK 5.6 billion, up 17%, also a record for us. Hans-Ola will give you a little bit more detail later on the adjusted result, 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 CT has always taken the lead and developed service and service programs in a good way. I think where I came from, Industrial Technique, have followed and also generate good growth and helping out 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. That's good to see. Also in PT. In principle, we have growth for service in all the business areas, in 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. Auto 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, then down on Vacuum. This confirms a little bit the numbers, but maybe to one highlight I thought was the orders received. 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. If you benchmark, of course, it's not as strong as the Q1, Q2, but in par then with Q3, also if you go back one year, you can see it's still on a very high level. We were actually quite pleased with the orders received for the quarter. On the cash flow here, you can see almost SEK 5 billion, and the comparable number is around SEK 4 billion for last year from the industrial partner, and we exclude them, the Epiroc part.
Looking at the full-year, it was the best year ever for Atlas Copco, 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, I can see that the value generation in the way we define and develop and the way we train the sales force, it's more and more a consultancy role when we actually quote things today, that's something that I think is very much appreciated when we talk real value to our customers. Product and innovation is something that really drives our business. I already mentioned service.
I think in principle, all the divisions now is up and running, some are already taking the digital step to the full connectivity and the data analytics, some a little bit behind. I think we have taken huge steps when it comes to connectivity and the service business as well. We did five acquisitions. Same thing here. We have 20 divisions that is stable, is profitable, of course, they can take the route a little bit for organic growth. We talked about innovation and what we put into R&D, but also looking at different acquisitions now. It's a little bit more the timing, we never give in on the value creation, it's really important to us. We will never pay too much from our point of view, so to say.
It will come when it will come, but the plans are in place, and people have very good strategies for what they like to do. We did actually the split of Epiroc as well. It's almost like we forgot it now, but it was a fantastic job done by the team. 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, it's a very dedicated team working on developing the industrial business. From my part, it was a success to split, which I think Hans Ola led that work in a successful way, also after when I can see that we actually put all our resources and thinking into industrial development. The proposed dividend from the board is SEK 630, I think it's up around 20% versus last year.
It's quite a strong increase, and this is of course when we calculate the industrial part and split that. That's what we have there as well. Full- year numbers, I'm not going to take you through this. It's in the material. Orders received up 5%, revenues 8%. Comparing to where we have been in the past, I think it's quite a good ambition. We are very close now, SEK 97 billion 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 we see it. Actually here we have, in all business areas, we can see positive development and also strong service development.
That complete region was very positive for the quarter. If I go down to South America, 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 digits there, 11%. The view from our teams on the election there is rather positive, I must say. They look forward to the business environment in 2019. We have expectations that also there we have positive on the service as I said. 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. 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. That's more key account orders, I would say.
It's not that we are losing market shares or anything like that. If we take Europe, up 3%, I think it's the third strongest quarter we have had. A little bit more mix there. CT is positive. We can see Vacuum Technique is down, even though that 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. Power Technique also positive. Also there, service positive. The one area 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. 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 auto sector with the new expectations on diesel versus petrol, for example. It can also be the possible tariffs with the U.S. Europe is a little bit soft 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 down 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. South Korea down a little bit. China kept up on a good level, but we still see that there is a hesitation in the decisions in China as well for the bigger projects. A little bit the same here then. 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%, both orders received and revenues. Maybe you need glasses in the back. Industrial Technique, of course, 4%. Power Technique have had two very strong quarters. It's a good mix in Power Technique right now as well. A lot of rental business, a lot of portables, as that you see in the profit. 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 is more to come there.
I think that's the only way for us to stay ahead of competition, it's good to see that they're up 7% for the last quarter of the year. 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. A 23.1% operating profit. I think the only discussion me and the management have is, where do we develop more top line? Where can we find more business in the world? That's an important task for them. North America, Africa, positive, slightly down, more soft or flat in Asia and Europe. Also the biggest compressor that we have, also very positive for the quarter.
Even here, when we have the one-to-one ratio with service of our equipment, we see strong continued growth with the service. They are furthest ahead with the digitalization. Every one of the standard compressors is connected today, in principle, if the customers allow it, and we can, in principle, make service calls to the customer when we assume something happened with it, especially if they sign up with a service contract. It's very much appreciated. I think we start to see how we can create real value with digitalization. Vacuum Technique, 17% decline, it's mainly in semi, of course, looking at the sequential orders received, you can see it's slightly positive. The way we look at it, industrial was rather flat, but they also had quite a tough comparison with big orders from last year.
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. 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. The service is extremely important here for us to get that resilience. I think it's 60%, we normally say, semi, or if it's 50%. To get the industrial growth in equipment, of course, also the high and the service division to grow, it's very important for us.
Normally we say around 20% is service, that is, of course, increasing by the quarter when this is developing. 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, 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 we said that we would close it in Q1, most likely, due to the government shutdowns that handled the regulations, we believe it's more pushed into Q2 right now. When we have more news, then we have to get back to you.
I wanted to mention that. Industrial, look at the gray bar on the right. They really picked up on deliveries and record revenues, very strong. 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 auto market. There's a couple of things that I find interesting when we talk about auto, and one is, of course, the footprint discussion. Where do I need to manufacture my cars due to different tariffs? To put that in a little bit perspective, if someone moves the factory, that's really good news to us, actually. It's very unlikely that they would bring tools and systems with them, that makes a little bit hesitant, could be good for us.
If they change powertrain, if they go from diesel to petrol, that's positive. If it goes to hybrid, if it goes to electric, those changes, of course, it's also retooling and changing technology. In the long run, we are not directly correlated as new to the production output or sales. It's more the product base than running new programs in the pipeline. The product portfolio now is, of course, with the assembly equipment, we have the dispense equipment, we have the self-pierce riveting, and also the flow drill. A customer is saying, "Well, I want to use more mixed material in my design," which basically everyone does, then we have a lot of the technologies for them to help them out with the next generation of cars. This is also part, the product launch that we do here. It's also part of the digital journey.
This is a QAT, quality assurance systems. Now we kind of connect that in a good way, get more analytics into it as well. Also on the product side, we're developing more and more digital solutions. If Andrew were here, he would say that he's the star performer because we have very strong development and orders received for a couple of quarters. 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. You can see that we made a lot of changes here before. Light construction is out, Dynapac is out. You can also see that, if you look at the last four quarters, a little bit on another level compared to where we've been in the past.
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. The margin now, 16.5% almost, adjusted on 15.4%. I think it's an okay margin, working a lot with rental company and construction market. Return on capital employed is also good. 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 service? 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. It's an oil-free machine, and it's also now designed with the latest emission standards available, which is also very good.
If I summarize down, I think you've seen all these numbers. It's of course 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. Hans Ola, are you going to help me out a little bit?
For a while, yeah. I'll invite you back for the tricky parts. Exactly. We have talked about the operating profit performance, as you can see on the slide there. 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. The provision for long-term incentives that we always carry, we could release some profit from that or some provisions from that. Adjusted, the margin was 21.9%, and if we look at last year, we had the opposite effect. That was a negative in the reported results. The adjusted profit last year was 22.2%. We're hovering around that level, as you can 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 between operating profit and profit before tax. We had an extra gain, you can say, of SEK 360 million, which is related to currency effects and tax effects that comes from an internal restructuring inside Atlas Copco. We reorganized the structure, and hence, we had to do certain transactions at market fair value, which is exactly according to the rules. 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. 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 SEK 98 million, which I would also think is pretty close to what we expect going forward for the near couple of quarters. Around SEK 100 million negative. Of course it's a one-off and we will comment on that. That's how you should read, let's say, the financial net. If we look at below profit before tax, we have the income tax expense, another positive one-off. A couple of them actually, that sums up to SEK 600 million 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.
Those of you that remember a couple of years ago, we had a big negative from the European Commission challenging the way that Belgian state taxes companies, and we were one of the affected. 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 SEK 600 million positive. Again, we mentioned the SEK 600 because we don't consider it run rate. If I adjust for it, we had a tax of about 22.5%, and 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. 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 there. Effect on basic earnings per share is of course also including these one-offs, and it's roughly somewhere like SEK 0.80 or in that neighborhood that you could say is too good to be a run rate of the earnings per share in the fourth quarter. If we move further and look at the famous profit bridge, 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, we get to a relatively meager flow-through of about 6% in the quarter. In other words, the extra revenue hasn't yielded too much.
There are basically two effects explaining that. I'll turn to the next, and 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 SEK 5.7 billion that they have in turnover. 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. 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 have not forced a reduction of investments.
Mats has not forced a reduction of R&D expense in spite of the fact that they have faced a little bit of a tougher market environment. Hence that relationship here in Vacuum Technique is of course also affecting the previous slide. 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. 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 a way. You could say that it's below 30% that I've guided for before in those cases. Again, over time, I think 30% is still something that one can look at.
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. It's difficult to read these comparisons. I think it's easier if we look here. 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 fourth quarter this year is unaffected by the discontinued operations, of course. We just, as Mats said, we have about SEK 5 billion in operating cash flow before we make acquisitions and before we make dividends, et cetera.
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 SEK 4 billion that would be comparable to the SEK 5 billion this year. These three columns here, the last year December, the full-year 2018, and the full-year 2017 has that included. Earnings and dividends, I talked about the effect of these one times, and of course, that helped us to come almost at the earnings per share of last year when we were including the discontinued operations. The proposal SEK 6.30 is looking like that. If we try to put it in perspective of the continuing operations, and again, I stress that these are estimated, the dividend number here is not audited to be SEK 5.20. It's just to give a fair representation of what the continuing operations had last year.
With that, I hand it back to Mats for some final comments before the Q&A.
Thank you, Hans Ola. You flipped it here already. 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. In principle, 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. We said 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. What we have done is we went back to the organization. In principle, you can think about yourself as R&D manager, one of the 21 divisions, and said, "Well, if we could fund more R&D projects, what would you do? How can we do that?" There are some criteria that comes with the package.
That is one, it's not more of the same, because we already financed the next generation of what we already have. 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. What we're doing in principle is trying to see if we can finance a little bit more of the industrial ideas that we talk so much about, and innovation. We see, of course, less risky than acquisitions and also generating very good value creation for our shareholders. The challenge is out there right now with the 21 divisions.
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." We think it's something that internally and with our board at least, have been seen as something very positive to see if we can really find new ideas that can drive our top line. At my first meeting when the BA came, they presented me and Hans Ola, he said he had three projects that he wanted to do. We learned, okay, if we invest in this, will we actually get the real product?
They said, "Well, we don't know because we haven't tried yet." I said, "Argh, we need to try something different." We have pushed this a little bit and changed a little bit how we finance this, and we said, "Okay, Mr. R&D manager, you say that this is an idea that you have. Can you build the prototype in three months or six months?" We only finance that period. 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 the next generation of tools to compressor, it's programs that last maybe between two to five years, that's not what we're talking about this. This is new things that is adjacent to the products that we sell today.
How much we are going to spend depends on the ideas. Probably not crazy money, but it is something that we think that we can, over time, continue then to drive the organic growth in the group. I think this is the final slide. Hans Ola 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 or ready for any scenario, but we also like to guide you the best we can. We have been in between and what we say here, somewhat lower, or should we say remain on the current level? We already indicated a little bit what's happening in some segments. That's been going on a little bit between us.
After a couple of questions, we said, "If we look forward a little bit for the coming three months, what do we see as changing to something more positive?" The two things we said that would maybe turn things to more positive, one would actually the Brazilian market, where we think that there is a positive environment right now. The other thing was that if they can 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. Then we said, 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.
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 a positive if we find solutions to it, on the other side, if they then say that to 25% tariff to some of the products for, it's very little influence on us, but it could have very big influence on some of our customers' positions. That I don't think if that will take. Brexit, clearly negative. U.S. and U.K. business is significantly slower. Yellow vests 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 either.
Germany, I mentioned, the finances in Italy, and the issues in Turkey. We have said that, well, looking at this both sides, we cannot say anything else than that somewhat lower than current level. That's where we in principle ended up as a guidance for the coming quarter. Hans Ola?
Thank you very much. Into the fun part, as I said, the questions and answers. We will do it the same way. I think first of all, for the conference call participants, can you please repeat the instructions, operator?
Yes. If you want to ask a question, please press zero one on your telephone keypad.
Great. 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? I got the cue, Mats, 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. Sorry for that. It was something I forgot there again. First question.
Thank you. Andreas Brock at Kepler Cheuvreux. The Starline portfolio this quarter was Power Technique, and Mats, you mentioned there about the margins and saying coming up now to 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, et cetera, 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 hear.
It's consolidating in the U.S.
Yeah.
Over time, that should give them bargaining power, and that should push your margin down. To the contrary, your margins are doing very well and going up.
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 is that if we're going to sell to a rental house, we need to differentiate something with the product. It's actually more than price, otherwise, you're absolutely dead on. If it's just a portable that you don't take full advantage of. They're working on the product portfolio. The electric, you have seen already, they're working on more environmentally friendly. They're trying to add a little bit to that, like we do in all parts of the world. I think innovation brings it forward. I also say that the brand recognition gives us a little bit of a price premium in many of the discussions. Also, our delivery capacity making the product.
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 Roslund from ABG. 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. What are the big moving parts there? I assume you have some pieces within equipment that starts dropping off for semis, et cetera. Particularly then when we move into 2019, I assume we have a much lower billings of semi equipment. How will that affect basically mix in the first half of 2019, please?
I think that, as you know, we don't go into details exactly how we break it down. If you followed us, you can see that a scenario, of course, with less invoicing could possibly then challenge it a little bit. We are building the service business, we are building the industrial business, the new product. Even on the orders received levels that we are today, I believe it has a healthy profit. I don't know, Hans Ola, if you'd like to add something there.
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. It gave a very good profit impact, and that's the reason we talk about the slightly different sales mix, perhaps. 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 a downturn, for example.
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 Vacuum Technique and Compressor Technique over a period of time. There we have not changed our opinion really.
I think for the complete level for the BA, I think it's enough that we're actually back to 2017 to versus where we are right now, it could be a little bit of mix differences. 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. We should be able to adjust quicker than any other area in that spot.
Yes, thank you. It's Andreas Koski from Nordea. Maybe I could follow up on that, because as you just mentioned, you expect a 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? 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 basically what we resort to, yes, because of the key account structure and the sensitivity to not having the same diversity as the other businesses that I refer to. You can also say that the level of service business is significantly lower still. It's around 25%, perhaps right now in Vacuum Technique, but it's close to or above 40% in Compressor Technique, as you know.
You do not expect that drop-through will be closer to 50%, 60%, as we saw during the growth period in 2017 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.
Are we having some questions in the call?
No.
Yeah. No? 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 industrial high-end decreased in terms of activity. I think it's the first time you've mentioned that. Can you contrast a little bit 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? 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, I can confirm that when they have service revenue, it's the same period as the service order, basically. If that was one question that you had.
Yeah.
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, why don't we see the same relative growth as we have seen in the past? That's a little bit back to the industrial. 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. You have a little bit of that, but not much. The big thing is in principle right now, at least, is that we have seen that the market is still good out there, but the benchmark we have now for this quarter was really tough for them.
We still expect them, and we are pushing them to continue to push out the new product, and we'd like to see continued market share gains in the industrial and high vacuum, in principle.
Okay, if you think about 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. It does seem there's a dichotomy there. One is looking much better than the other.
Hans Ola, do you want to take that one?
Yeah, 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.
Then, of course, what you saw some Compressor Technique, but it was slanting towards the biggest increases we saw there were in the large and gas and process compressors. I wouldn't refer to it as a tremendous world of difference between the two. 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. Secondly, there are in the electronics industry, or whatever we should call it, mobile phones as 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 a semiconductor perspective. 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 ahead. Your line is now open.
Hi, Mats and Hans Ola. It's Klas from Citi. My question is on the guidance and thinking about sales volumes for the year. You're guiding for somewhat lower into the first quarter. I know that this is perhaps tricky to answer, but I get this to maybe down 4%-5% from current levels to SEK 22.5 billion-SEK 23 billion. The first quarter is typically the largest, at least over the last few years. If I then annualize that considering lead times, this means that sales for the year, if we stay at this level, should come down mid-single digits. I know you don't guide for the year, but given the importance of the first quarter, I'm curious to understand what you mean by somewhat lower. Then also had a question within this.
In your conclusions, Mats, you didn't mention on the uncertainty side semis or automotive.
Are you effectively saying that the uncertainty is more on the industrial side? Just to confirm that. First, what is somewhat lower, roughly, and on semi automotive, please?
I always take it to follow you, Klas, because there's so many questions. 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. There 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 then all the way to electric, or if it's a diesel discussion, to more of a petrol solution. There is a lot of business out there. It's not by any means that we are not working or anything like that.
It takes time today to get to a decision point that they say, "This is actually what we're going to do." That's why I also said in my positive view on Q1, if we get a solution on the disagreements on trade, I think a lot of those decisions could be significantly easier for our customers. That's a little bit where we are at right now. If you do China, it's the biggest part that they're actually quoting pure electric. It's significantly higher than sales today. They are really on top of their strategies when it comes to electric. That's part of our sales in Asia, that also keeps that up a little bit. They're taking away a little bit of the subsidies for some of the cars. That's what we see there.
In semi, I comment anyway, since I brought it up before, I think that's fair. Semi was busy. Even if you read anything about semi, they say CapEx is probably down in 2019 versus 2018. Okay, we take that. That might be between the guidance might be between -5% to -15%. When I have my discussion, my team is like, well, the Q1 and Q2 2020 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. I'm not saying it's turned around, 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.
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 where I stand on semi and auto. I'm sure Klas had more questions, but I didn't take them.
No, I think you summarized in those two at the end.
Yeah. Okay.
What is somewhat and semi and auto. I think you covered it well.
Yeah.
Can we take one more question from the conference call? We took three here, we take three there, and then we go back here in Stockholm.
Thank you. Our next question comes to the line of Guillermo Peigneux-Lojo from UBS. Please go ahead, your line is now open.
Hi, good afternoon, everyone. Guillermo Peigneux-Lojo from UBS. Question regarding semis, and it's more informational for me. Can you point us as to how much is China as we stand in Vacuum Technique? 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-
The China part oscillates, of course, just like the Korea part oscillates. It is a little bit tricky, and I don't want to go in to make too many comments about specific quarters even, let alone months, because there is variation. 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.
Sure
and hence it's difficult. China is definitely one of the biggest countries. The three big ones are always U.S., Korea, and China.
You don't mention China as being weak in your press release today.
We include the display market as well in that comment, as you could see. The flat panel display equipment.
Okay. Thank you.
I think China have made quite a lot of investments in new greenfield plants in principally. With the ambition that they have to be a leader, I think the teams that are now invested in these companies expect results. 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. That might be far in the future. I think they need to deliver memories or logic to the customer in a good way right now. That's the position where they are. I welcome you to ask.
Okay.
Thanks for it.
Yeah. Thank you very much. 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? Thank you.
Primarily it was gas-related, I would say, that stood out. Not only as one single application, but that was some significant orders in that, yes.
Was it only on CT?
On CT, specifically if we talk about the gas and process compressor comment, yeah.
They had a strong quarter.
Yeah. Thank you.
I think we.
Thank you, Guiller. One more question here in Stockholm. Anders, please go ahead.
Yes, Anders, 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 the assembly business with the auto sector, but you also have the dispense business, which in principle is also only auto, maybe 90%, 95%. As I said, the auto, they have their challenges. 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. You need some sort of glue, and we have the dispense system to do that. You can go to flow drill or self-pierce riveting if it's aluminum to aluminum. We can help them out with that as well. Those changes are very interesting.
What we are going after right now in auto is a lot of the battery manufacturers around the world. That we have done for quite some time now. The battery manufacturers, they actually use all our technologies that they have available. There's a lot of safety applications because you want it to be very stable, and they actually use the dispense equipment as well. There is a lot of that. There's a strategy between different OEMs if they're actually going to build the packs themselves and put them in the car, or if they want to source the complete package. 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 not mentioned as well.
Some of the bigger customers there, like Volvo and I think Caterpillar reported today as well. Those are some of the customers that are very interesting for the general industry market. Let's see what happens. I have never seen, over time, economy that if auto's a little bit slower, that general industry will keep up. Maybe it will happen this time. That's a little bit was in our statement as well, that we expect these economies to move a little bit to a slower pace.
Great. I look around here. We take another question from the conference call, please.
Our next question comes to the line of Alexander Virgo 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. The Power Technique, 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 one in renting equipment. Number two 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. In Asia, I still think there's limited, at least for us, success in rental, and I think they rent significantly less. When we talk today about construction, we still say, looking forward, that at least the groups will 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, it's really North America and U.S. Of course, then to sell equipment, China is one of the biggest markets for portables and the light towers and so on.
If we stay on the Power Technique 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 that related to construction, of course, but it's part of it. Mats mentioned North American 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 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, then we need to wrap up, I think.
Thank you. Our next question comes to the line of Andrew Wilson from JP Morgan. Please go ahead, your line is now open.
Hi. Good afternoon, everyone. Hopefully, it's a quick one, which I guess will fit the timeline. It's really a follow-up to Klas' comment. 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. 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, therefore there's nothing, I guess, weaker to assume in those two markets than what you're saying at a group level?
I think you need to start there.
I try to listen. Sometimes it's tricky on the conference call, sorry about that, Andrew. The way I understood you is that is the outlook compared to Q3 to be understood as semi and auto are two areas among others, and they are hence embedded in the general outlook statement, and I think yeah, 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.