Welcome to the Atlas Copco Q1 Report 2018. For the first part of this call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. I will now hand you over to Hans Ola Meyer. Please begin.
Thank you very much, and a very warm welcome to this first quarter 2018 conference call for Atlas Copco. My name is Hans Ola Meyer. As you heard, I'm the CFO of the company. This time, it's a little bit of a special call, because yesterday at the annual general meeting, the decision by our shareholders to split the company in two, Atlas Copco and Epiroc, was taken, and that as you have seen from another press release. As an effect of that, we are now, and I'm sure you have noticed already, we are reporting the continuing operations for Atlas Copco. Epiroc is then reported as a discontinued operation.
This has some implications on some historic numbers where the exact quarterly data between Atlas and Epiroc is not exactly 100% reconciled. Somewhere in the material you will see that there may be some gaps in some numbers or numbers left out and so on. This is for the reason that the Epiroc prospectus with all the details is not ready, as you know, and will be ready at the end of May. Also as a consequence of the decision, we thought it's a good idea to not only have Mats Rahmström, our CEO, as usual in the call, but also Per Lindberg, the CEO of Epiroc, and Anders Lindén, the CFO of Epiroc, participating in this call. We will come back to that later, of course.
Today, we have an hour, as usual, and I would already now ask for the Q&A session that we stick to one question each, because it allows more people to have their possibility to ask questions. I'll come back to that. First, I hand it over to Mats.
Thank you, Hans Ola. I will start on slide number two. We call this slide Strategy in Action. We wanted to share a little bit a story with you. This is really what drives our organic growth. This vacuum pump, the white box might not look much to you, but it's a very important part of making semiconductors. This is a success working together with the cooperation with one of our big clients. They developed this product over 18 months on-site. It's a pump now that is recognized being more quiet, has a smaller footprint, and higher energy efficiency. It's also easier to service. When we had the AGM last night, we recognized this with the John Munck Award, which is the award for best innovation in Atlas Copco. This is a very important product and a big, safe success for us.
On slide number three, we'll start to comment. Hans Ola already comment on the Epiroc Atlas Copco decision. I'll start with the records order intake SEK 25 billion for us. Almost, it's a fantastic result, recognizing down 9% organic growth versus last year Q1, which was the record for us. We're very pleased with that. You can also see that it's still a big drive for equipment, but also service is tagging along in a very good way. You can also see that we are growing all our main markets. I would especially like to highlight the penetration over the last one and a half year in Asia. In this quarterly report, you see it's 37% of our sales. It is very important to be number one in the world.
It's the number one semi market, it's the number one auto market, it's the number one compressor market, and of course, also the construction market. We really drive our presence and competency in these regions. Profit margin, the adjusted one was 21.8%, and the reported one was 22.1%. On the positive side, you had the divestment on light and concrete for SEK 109 million. You had the split cost on the Atlas Copco side being negative on SEK 39 million. You need also to look if you want the complete split cost on Epiroc, where I think it's minus SEK 95 million, and you also have reevaluation of options for minus SEK 16 million. That is the gap between the adjusted and the reported numbers. Hans Ola guided you a little bit on last call on the currency. It came in as minus SEK 4,450 million.
Hans Ola will share a little bit looking forward into Q4 later on in the presentation. On Epiroc, fantastic orders received. Very proud of the organization. Per will cover Epiroc's presentation later on. Slide number four. It repeats a little bit what I just mentioned. If I go to revenues, you can see it's almost SEK 22 billion there, and organic growth of 9%. It's quite a good achievement. We are proud of the team that's been pushing on deliveries. As you can see, there is still a gap, of course, between the orders received and the revenues. If you go to the graph, I think I mentioned in the previous call that we are trying to be on the level, on the run rate now that could match up with Q2 and Q3 in terms of deliveries.
You can see that principally, we are almost there now. I think they have done a great job, but of course, with the fantastic orders received now, there are new challenges in the supply chain for us, and we'll cover that little bit later. Operating cash flow, the bottom line there. We are building up inventories, order on hand to be able to deliver for the future orders in principle. Hans Ola will cover that a little bit further as well later on. Slide five shows you the split of our sales. You can read very strong Europe, 13% up, very solid now also in this, in Brazil, mainly then for the Atlas Copco part, very solid 17%. You can also then continue growth in Asia.
As I said earlier then, of the complete split here, 37% being in Asia, which is very good for our future opportunities. The negative part is principally Africa, the biggest BA there is CT. They were principally flat, but we also include Middle East here, and there was one order in semi that we did not repeat, so it's principally from comparison there. Slide six, first highlight that we have then tried to exclude mining and rock excavation in this slide. You can see now seven strong quarters. We continue to invest, and I encourage them to look at new opportunities, both in coverage, but specifically in R&D. We continue to invest money into that.
I think this is a very interesting company today to work for a young engineer that would like to have a big challenge that could be hardware, software, or into the new digital area. I think this is very interesting. We have a very fruitful company. Slide seven, there I would highlight on the currency, SEK 450 million. You can see that now we have combined the volume and price into one that we call organic. It might look to someone that we are trying to hide away from a problem. That is not our intention, but we have realized that our guidance, when we cannot include new products or projects, don't give you good guidance. Price for comparable products this quarter was approximately 0.5%.
Slide eight, there you can see the new structure, Compressors being a big part, but you can also see then Vacuum being in principle number 2 in size, and then Industrial Technique and Power Technique. Slide nine, we get into the compressor performance. Considering the number of industries that we are in today, I think the organic growth number on 30%, I would say it's very strong. You can also see that in the graph, that it really sticks out as an amazing performance. It's a big demand for the larger compressors that move oil-free and gas compressors with a strong drive in Asia, as we highlighted as well. On the operating margin, we report on 23.1%, and I think they have a negative currency, just about 1% and 1.2%, something like that. It's a very strong operating margin for Compressor Technique.
On the innovation side, you can see in the left corner, it is in medical gases, providing the compressor equipment for hospitals mainly. We have a very strong performance in U.S., but we are leading also in the U.K., but we have more work to do in some other regions, and we continuously now introduce new products. The Walker Filtration acquisition is something that we wanted to do for a number of years, and it's a key component for performance in Compressors, but also in Vacuum Technique. You can now say that we are in the filter business for real for Compressors and Vacuum Technique. Vacuum Technique, slide number 10. We didn't highlight it, but it was also record revenues. They consolidate in dollars, so if you would have looked at this graph in dollars, you would see that they also have the record orders received.
Principally, semi was a little bit more flat, but we continue there on that, which was a fantastic quarter last year, I should say. We continue to grow our business both in industrial and high vacuum, and the numbers I see, I cannot read anything else than that we are gaining market shares in these areas. Operating margin was highly impacted. If you look at the market, we still see chip pricing down. We said it was increasing. Now I think it's been more flat. Sales is still high, although I think some of you might have followed some of the reports last week, where you can see some foundry companies reported that they had less demand for the high-end phone chips, for example, but it is a smaller piece of the market.
We still believe that the main drivers of this industry is still there, more memories in use, more data computing. We will see more IoT in the auto industry, more AI and VR as well. That doesn't mean that every quarter is strong. It's still a lot of key accounts in this business, but the demand for this type of product is increasing over time. On the new products there, the variable speed, we recognize that from Compressor Technique, this is how we help our customer, to drive down cost in terms of efficient use of the energy. It's also good for the environment. Now we have this type of technology, both in Compressor Technique, we have it in Power Technique, but also now then in Vacuum Technique, it's a very interesting product on sale.
Industrial Technique, solid organic growth on 9%, continue to develop very interesting products to the market, shifting more and more into battery-connected tools as well, as you can see in the left corner. The trend shift we have seen a little bit, this month, I would say quarter, will be that the general industry starts to take off with better and better market from what we call off-road, as I can see a clear shift there as well. Continue strong car market in Asia, as well as general industry developing there as well. Overall, I think I talked a little bit about the general demand from the auto manufacturers. We say that in the past few years, we had a 4% growth over a number of years, and the projection going forward is that it's still growth, but on a lower level, around 2%.
That was also confirmed in Q1. We should know that our business is not directly correlated to the manufacturing output, more to the number of projects in the market. We still see, even in the car industry, a big demand for different projects, and a lot in material in body shops, but also in transmission and powertrain. Driven of course by some of the electrification as well. Completed a very interesting, small one, but an interesting acquisition for Klingel. It completes in principle, one more assembly technologies. If a customer trusts, we can handle the nuts and the bolts and the screws, of course, also then for mixed materials or the adhesive solutions, also the self-piercing riveting, and this flow drill then is a one-sided operation, and you can use it for steel or aluminum. It's a very good and complementary technology to the SRs.
If you look at the graph, it was an outstanding orders received on Industrial Technique as well. Power Technique, just to look at the graph, I think you have a proud team there with strong orders received, up 16%. This is portable compressors, but also rental is doing okay. The adjusted margin was 15.1. They also had a negative currency impact of -1.3. You can see on the capital gain, that is from the divestment of concrete and compaction business, so they reported at 18.1 then. We look at the corner there with the container. It's actually quite an interesting product where we have then combined two engines into one big generator, which makes it significantly more efficient, and we can utilize the engines in a very smart way. I really believe this will be a winning product moving forward.
What's another interesting for the rental business that we then have the, obviously air that we rent, and in the same depots now we will also put in steam, and steam is one of the best ways, of course, to transport heat in different processes in the industry. One more step there in the specialty rental business. By that, I will hand over to Per, who will give you an update on the Epiroc quarter.
Thank you, Mats, and you have another proud team in Epiroc. We had a very strong quarter, I think, organic growth of 21% landing above SEK 10 billion, which clearly is a benchmark for the group. Double-digit growth in all regions with Americas and Africa, Middle East being the strongest. Equipment and service growing 22%, with equipment being the stronger of the two. We still see the majority of orders coming from brownfield expansion projects, which is quite interesting to see. Tools and attachments at 13% also very healthy. Revenue is up 14%, which is, in comparison, a very good number. Of course, given the orders received, we're still under pressure when it comes to supply chain. We're managing, and I expect our ramp up to continue or to accelerate during quarter two.
Margin is at 18.4%. Of course, we do have a one-time listing cost of SEK 95 million, which corresponds to 1.2%. We also have corporate costs now building up the Epiroc Group corporate functions of roughly SEK 45 million. That, as an indication, is roughly three-quarters of the run rate that we expect during 2019. As also at the end of this slide, as you can see, there is a reminder of our capital markets day on May 30th, and there is obviously a link to a website where you can register, and I encourage you to do that. Thank you.
Thank you, Per. This is Ola here again. I think we now move over to the income statement on slide number 14. Mats and Per have taken you, well, in this case, it is back to continuing operations, I should say. Mats have taken you through some of the numbers in the income statement. If we look down, you recognize the 22.1% on operating profit and adjusted 21.8%, as Mats said, you remember as well. We go to profit before taxes. It means that we have about SEK 320 million in negative financial net. It is above what we feel is the run rate. The main reason, I would say, is because we decided to prepay one of the EUR loans that matures next year. We will have, so to speak, a payback of that one-time cost before this loan matures next year.
That was a good idea. It is a one-time cost included in that. That is why it is big. Going forward, I would say you should expect perhaps a little bit more than SEK 200 million in that range, of course, depending on what the SEK does to the EUR and the USD and translation differences, somewhere in that region, I would expect for the next quarter or two. Further down, you have the income tax expense. You can see with your own immediately that we have about the same tax expense as last year, higher profit. The tax rate was 26%. It was quite much higher, 28.6% in 2017. Of course, as I said in the beginning, now we have a combination of new numbers for Epiroc and new numbers for continuing Atlas Copco.
We should perhaps be a little bit careful in over-analyzing the ratios and the numbers for last year. It will take a couple of quarters and reports. Then you will be quite comfortable with understanding what is a run rate for Epiroc and what is a run rate for Atlas Copco. In this particular moment when we are still splitting, it is a little bit difficult to be exact. 26% for continuing operations is also a pretty good indication of what one could expect for the next couple of quarters. What we have seen that helps from last year is, of course, the reduction of corporate income tax in the U.S. and the first steps of reduction in Belgium, and so on and so forth.
There will continue to be some changes further down the road, but for the near-term future, this is a pretty good indication of what you should expect. The basic earnings per share you have there, then we can turn to the next page on page 15. This is where we turn the revenue bridge and the orders bridge into profit bridge. You can see that the currency impact on profit is pretty big compared to the impact on revenues, and hence, of course, the negative margin effect that it gives for the group, about 1.3% negative. The other ones are, as we have commented, the one-time items on the share base. I don't go through them in detail. Instead, I go to page 16. We can look at the different parts of the group.
With a flow-through for the group of more than 40%, of course, we have a couple of Business Areas that stand out. Compressor Technique has, as Mats alluded to, just like the group, a negative impact from currency on the profit margin, and hence, if you allow for that, so to speak, the 23.1 is a very good number. The flow-through is, of course, a combination of what was costs that have disappeared from last year and a very good leverage on the increased revenues and volume increases. As I've said many times before, it's not so easy to say now we are exactly what we believe you will see going forward.
Just to conclude that over a period of time, I think for Atlas Copco, with the profile we have, that 30%-35% drop-through to EBIT from a revenue increase is probably more long-term achievable than these numbers. You can see another example of a very high leverage effect on profit in Vacuum Technique. You can also, if you make the numbers, Mats already did it for you, about 3.5% negative from currency, which is, of course, a burden. Then repeating last year's good profit margin with that burden, so to speak, from currency is quite amazing achievement. Industrial Technique is more Swedish related than euro dollar perhaps than the other two, so the impact on currency was mildly positive actually from a margin perspective. Power Technique, again, negative from a currency impact.
The 28.6 on flow-through in volume price mix and other is more or less a normal indication, I would say. I move on to the balance sheet here. Of course, it's a very messy picture. If you look at December 31st to the right and compare it with March 31st, you can immediately see that in all lines, there has been an exclusion of the Epiroc business, and that has basically then moved from each of the lines to the right to assets classified as held for sale in March. The increase in total is, of course, both an increase in Epiroc and in Atlas Copco from working capital needs and also, of course, the profit generation in the assets it's accumulating in cash. There is the short summary, I would say, on the liability side.
The equity is increasing for Atlas Copco, of course, whereas the interest-bearing liability, again, is a combination of Atlas Copco continuing, and then in liabilities classified as held for sale, you will find the similar effects as on assets. It's grouped in one line for Epiroc. I move over to cash flow here and start by saying, as we've done now, this is including discontinued operations so that we make no mistake in that. The next comment I would like to say is that you have followed us, those of you that have followed us a long time, you know that we talk about operating cash flow. The reason we do that is because we want to guide to what we think is an underlying operational cash generation capability.
That's why the numbers on certain things like currency hedges of loans, we eliminate for that in one of the lines. You can immediately see that the big shift from last year is the working capital that is now accumulating because of the orders on hand development that you saw from orders received. If we would then try to see through this number from what is Epiroc and what is Atlas Copco, you can roughly say that about SEK 600 million positive would be a round number for Epiroc, the rest would then be for Atlas Copco. In a similar way, you would find about SEK 1 billion in cash flow for Epiroc last year and about SEK 2.5 billion for Atlas Copco continuing operations. Just to get the feel for that both of us are accumulating working capital right now, of course.
We move on to next slide. Just a repeat, a summary of what was decided yesterday, an ordinary dividend of SEK 7, a mandatory share redemption of SEK 8 per share. In total, we're talking about SEK 18+ billion to be distributed in cash to shareholders in the next couple of weeks. Of course, the big decision to dividend the dividend out of the shares in Epiroc AB. Here is the update on the split. There is no exact date on the first day of listing. We still talk about mid-June. That part is roughly indicating, but we have to, of course, wait for the final NASDAQ listing committee meeting at the end of May.
The decision yesterday was, of course, from the shareholders that they decide to go there, we still have to wait to know exactly the timing of the listing per se. With that, I think I just leave it to the two short words for Mats.
We said that we're going to stay with the overall demand for the group is expected to remain on the current high level. The reasoning we have had in the management team is that we see record orders, and it's a global picture in both all Business Areas and in all regions. Rate's going to come down a little bit, but we still see a lot of very active customers in the marketplace, and that is also valid for North America. In semi, there is a capital organization looking at the CapEx going forward. I think both these organizations that I looked at, they took investment back a little bit for CapEx for the year, but still positive like 9% and 11%, something like that.
The overall demand on the industry is still there, even though you might have seen some smaller correction. We continue to launch more and more new products, and I think that will help us. The demand, as we see it, will not change much for the coming quarter.
Excellent. Thank you, Mats. Thank you, Per. We continue with the Q&A. Operator, please, can you give some instructions?
Thank you. If you do have an audio question for the speakers, please press 01 on your telephone keypad and you will enter the queue. After you are announced, please ask your question. Our first question comes from the line of Peder Frölén from Handelsbanken Capital Markets. Please go ahead. Your line is open.
Yes, thank you for taking my question. You mentioned, Mats, the delivery capacity. You almost reached the Q2, Q3 level. Given the book-to-bill now, if you also include Epiroc of 1.16, how should we look upon this delivery capacity? What will that affect the leverage in the short term? Will you be able to increase deliveries from this Q1 level significantly? If so, in what area, and what would that implicate in terms of the leverage? I know it's a big question, and I think hopefully you can answer in both Epiroc and Atlas Copco manners.
I think it's an excellent question, it's of course, one of the questions that we debate a lot in our own management team. I think we talked in the beginning of this cycle that it was foundry goods that was one of the bottlenecks. I think that has been addressed from those suppliers in a very good way, which is healthy, because it's very difficult to change that type of suppliers. We go more and more to use dual suppliers to handle the demand, as we see it. We have ramped up in a fairly good way, I would say, I think that Industrial Technique, I don't have a concern. Vacuum Technique, we continue that we invest actually on a quarterly basis just to upgrade the capacity in machining. They handle it in a good way, I can see they're doing a fantastic job as well.
I think the biggest challenge is still in Compressor Technique and in Epiroc. Now it's still so that intrinsically, our own capacity and competence is in place to assemble more machines and deliver. That's not really the issue. I think each of the 27 divisions, they have a short list of suppliers that they're working with on a daily basis. It's a little bit difficult to predict exactly what will pop up in the coming week. Now we put, of course, a little bit extra demand on this value chain towards them. Yes, it will be step-by-step better. There are very detailed plans from each Business Area, with this is what we need to do. I'm quite confident that it will be better and better, it is a challenge on a daily basis.
What I would like to say, though, is that if you look at our lead times work in competition, you can see that on the orders, I think that we are very competitive even with the situation as we have it today.
That's very clear, and that doesn't sound like you need to increase your staffing or cost that much. At least in the short term, we could expect maybe abnormally high leverage, or is that correctly interpreted?
I think it's going a little bit ahead of oneself to draw that conclusion. We believe that we will be able to eat into the orders on hand situation. That's basically what is the conclusion. The exact leverage we've talked about before is very difficult. There are so many factors that affect the similar year last year and this one. I would not confirm anything of unusually high leverage. That's not what I would expect to see, to be honest, Peder.
Okay. I get back in line. Thank you.
Okay. Thank you.
Thank you. Our next question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is open.
Yes, good morning. My question is around the operational gearing, the drop-through margin, which obviously has been very good in the past. There has been a lot of focus on that. You say it could normalize to 30%-35%. Could you just contrast Vacuum, the Compressor, and the Industrial? Because obviously Industrial is below that at the moment. Where there may be an impact from PPA creeping into here from previous periods, and also the impact to service and OE as that mix changes within the businesses I start, and then see if Mats would like to add something. I think one of the reasons, if you compare Industrial Technique with Vacuum Technique, for example, is that there has been a good, steady increase of business volume in Industrial Technique. Sorry, if someone is open, perhaps muting temporarily could be good.
There is some noise in the background. Anyway. I think it is more that effect that is visible in Vacuum Technique, that it has been an extraordinary ramp-up in a short period of time, and then it is almost like the costs are not having time to catch up. We are investing, and we are investing, and we are investing. I do not think that the quarter, and certainly not predicting Q2, is the right way to look at that normalized 30%/35%. I just do not know where it will come next quarter, to be honest. It is too many factors that play in. When I say normalized, I am talking perhaps over a 12-18 months time, and seeing that that can be a sustainable level, perhaps. It is very difficult, Graham, to be more precise about that.
When it comes to the purchase price amortization effects, of course, if you buy companies, and then you get the purchase price amortization on the intangibles, and then suddenly two years later, the business is double the size, of course, the impact is not so big anymore from a percentage point of view. I do not think that that is exactly giving you any good guidance for the flow-through, per se, for the drop. Was price and volume significant in any of those drop-through margins in any of the divisions? Not very different across the board. Mats indicated half a percent positive for the group, and there is no big deviations in that between the Business Areas, no. Okay. All right. Thank you very much, and maybe just as a Thank you. Thank you. Thank you.
Thank you. Our next question comes from the line of Alexander Virgo from Bank of America Merrill Lynch. Please go ahead, your line is open.
Thanks very much. Good morning, gentlemen. I wondered if you could talk a little bit about compressor order growth and the demand trends that you're seeing there. 13%, clearly very strong. I just wondered if you can break down some of the regions for us, maybe quantify Asia and China in particular, and just give us a view on the different end market developments within that 13%. Thank you.
If I start in general then on the demand curve, we were just at a big event at CT beginning last week. [Mathew Chase Beholder] sales manager around the world. I think you can see in the industrial compressors, I think it was called the Yellow Plant before. You can see a big demand for the industrial compressors. It's a global picture. On the bigger compressors, which you have then in oil-free and in Gas and Process, there you can see it's a big drive in Asia, specifically in China. As you know, we actually manufacture these in that country, so they're very good at meeting up with the demand there. On the absolutely smallest compressors, the simple technology, the pistons, I think it's a little bit more flat, and that's also global. That, I think, I'm not sure that reads the market.
It's a little bit our competitiveness as well. In general, I think it looks good for many of the divisions. I think the biggest change we see in Gas and Process compressors, even though that it's not really oil and gas that drives everything, it's a bigger interest, more probes. It's not that many orders. It's in the gas side. It's a general demand for compressors, both industrial and the bigger ones. You want to add?
Yeah, no. If I just follow what exactly you touched upon, that for quite some time, we've had a decent development on the small to medium-sized industrial compressors, actually. We have lacked what we had three, four years ago, good, strong demand for the bigger compressors, and that is what I see is the main explanation for the last quarter or two ramp-up of the order growth, the organic growth.
I would complement that information by saying that in Power Technique, the portable compressors, that we see more and more requests for the four-wheel machines there as well, which are the bigger machines. In that 16% orders, you see more and more bigger machines as well for us. It's a clear demand for that as well.
Yeah. In Power Technique then, in the latter example.
Yeah, of course.
Yeah.
Thank you.
Thank you.
Thank you. Our next question comes from the line of Andrew Wilson from JPMorgan. Please go ahead, your line is open.
Hi. Good morning, everyone. Just a quick one from me, I guess following on from the previous question, actually. Can you talk a little bit about how the demand developed through the quarter? Thinking particularly in compressors, but also, I guess a general comment on the group as a whole, please.
I'm not really sure what you're after, you want me to comment on the other BAs then or?
Over the quarter.
Yeah, please, just in terms of did you see demand accelerate through the quarter? It was much stronger in January, February, just trying to get an understanding of the run rate there.
No, I understand the question, I think we refrain from those comments for many years, because we do sell investment machines to a large extent. It's not a very straight line type of growth or decline that we see month by month. It can be just as misleading as a good leading indicator to look at monthly numbers, to be honest. I think that even a quarter sometimes can be difficult to judge whether we see a good or a new trend or a remaining trend from before. No, we don't like to comment on specific months. It becomes just not very informative, to be honest, you have to just trust me on that one. Sorry for that.
Okay, not a problem. Thank you, guys.
Thank you.
Thank you. Our next question comes from the line of Lars Brorsson from Barclays. Please go ahead. Your line is open.
Hi. Thanks. Good morning, gentlemen. Maybe I could turn to Per first. Obviously, a fantastic first quarter for you, Per. Can you talk a little bit about the outlook into Q2 relative to the SEK 10 billion order level you saw in Q1? That's obviously a very strong number. You mentioned expansion project, maybe more so than replacement. Can you help us maybe with a bit of color around what commodities, if there are any pronounced trends that's driving that? I'm particularly keen to learn what some of your copper miners might be doing. That'll be my first question. Thanks.
In general, we cannot see a slowdown in mining nor in construction. The basic outlook is, we expect demand to be more or less on the same level going forward, at least in the short term. When it comes to the types of orders that we get, it tends to vary, as Ola said, by month, and there is also a variety of projects. What ends up in our order books is not exactly indicative of what happens in the industry as such. We did receive a fair amount of good orders across the commodities in copper and gold as well. The activity seems to be high there. We also saw a high portion of orders coming in on surface equipment, surface drilling, primarily. Quite a lot stronger than underground during the quarter.
I wouldn't say that that's necessarily a trend, but that's what we saw during Q1.
That's helpful. Can I be allowed maybe just one follow-up on the outlook for Vacuum Technique, Mats, and just try to understand what you see in the semi side versus the industrial vacuum side. Industrial vacuum has been very strong for you over the past year. You've outgrown the underlying market considerably. Can you help me a little bit with what you see, particularly on the industrial vacuum side, both into Q2, but also maybe some thoughts further into 2018? Thank you.
I think I speak more in general then, what we are doing with the Edwards and the Leybold brand and also with the Atlas Copco brand and in industrial is that intrinsically, we're broadening the product portfolio, and we're doing that in a rapid way by using synergies within our own company. As we're launching quite a number of interesting products to the market, which strengthen each sales rep's portfolio when they go to market, they have a more complementary product range. We also add coverage globally, and competence. The success is based on very traditional strategies, closing gaps in the product portfolio, making sure that we actually go out and meet the customer with the right competence, and I conclude that that is what we're doing. That is exactly what we're doing, and we're going to continue to do that.
I agree with you, I think that we are gaining market share here, and actually to start adding these brands up now, I think we're getting close to number 1 or number 2 position in the industrial market. We can also see with the extension of the product portfolios in high vacuum, also taking market share and being very successful, also driven by product development, I would say, and launching new products. That's what I see in these two markets. In semi, it's been such a rapid development. We're a couple of years now, and it's easy to get used to this level. We see that, and you can see that from some of the reports in the U.S. last week as well, there was a little bit of a correction. We try to follow these two organizations that follow CapEx.
It doesn't give much guidance for us, actually. It tends to change a little bit from quarter to quarter. This quarter, they both adjusted it down a little bit. At the same time, you can see some of the foundry manufacturers saying that they have a little bit weak High-end chips for the iPhones and Samsungs. At the same time, they also announced that they will increase the CapEx. I think everyone is ready. One of the shifts that we have seen in our order book is that this quarter can see more and more of the Chinese establish themselves in this market. A number of the accounts on our top list for the quarter is Chinese, and it's very clear that they are moving very quick into the memory business.
How big, sorry, just one final one. How big is EUV for you today?
Klas, I'm sorry. We can definitely take the questions afterwards, we need to move on.
Sure.
There are still a few questions.
I'm sorry for that. Thanks, guys. Thank you.
Yeah. Thank you.
Thank you. Our next question comes from the line of Ben Uglow from Morgan Stanley. Please go ahead. Your line is open.
Good morning, thank you for taking the question. It was really following on, Mats, from your remarks about the semi-foundry's CapEx commentary. Can you just give us a sense, is there any change in terms of your own conversations with your customers? In terms of the dialogue that you're having and the kind of sentiment on spending, which frankly changes pretty rapidly in this industry, can you detect any change in your own conversations? That's the first question. The second sort of follow-up is just price conditions in vacuum. Is there any change in what you're seeing on pricing?
On the first one, not even ourselves can read a clear pattern when it comes to the investments. Quarter by quarter, you can see some of the big American accounts being leading. You can have some of the South Korean leading. This quarter, as I just commented on, you see a lot of big orders coming in from China. It's investment cycles, and luckily enough, we have had a couple of big ones every quarter so far. There could still be quarters where they don't place these major orders for us. It is a key account business. On pricing, if you're in the semi market, the customer expects you to reduce your pricing every year on your pumps.
The way we work with that is trying to come with innovations all the time to bring more, and that is the story I brought for the iXM pump in the beginning of the presentation, where we bring more efficiency, easier to service and help out. We work very closely with these customers to develop the next generation of pumps, and that is the opportunity for us also, that they can value our product in a better way. There is, in general, no price increases on an older pump to that industry.
Thank you. That's helpful.
Thank you. Our next question comes from the line of Erik Karlsson from Industrial Equity Partners. Please go ahead. Your line is open.
Thanks for taking my question, gents. Would love to hear what you're doing on pricing across your different BAs this year.
I think that we are doing a lot of activities, of course. Some of the customers that we work with, as I mentioned in semi, it's more on the innovation side, but actually can bring higher gross margins and bring interesting products to the market. It's up to each and every of the 27 divisions really to work with the pricing on each market to say that we are competitive. You can see that we had the price for this quarter down, it was half a percent positive on price development, and this is for like products from 2017 versus 2018. You do not get the projects in there, of course, in Epiroc, there is many of these big projects that they deliver, and then we cannot measure it.
You see the same in the car industry, those big projects, and you see the same in gas compressors. It's big projects. It's getting more and more difficult for you to give good guidance. For like products, it was up half a percent for the quarter.
I think we mentioned also that it was no big differences between the Business Areas in that pattern, actually. There were small differences only.
Very good. Thank you so much.
Thank you.
Thank you. Our next question comes from the line of Marcus Almerud from Kepler Cheuvreux. Please go ahead. Your line is open.
Hi. Good morning. First, a question for Per. I think you said that equipment was growing faster than services. Is that the case for orders as well, or just for sales? If there are any big orders in those numbers? Hans Ola, if you could help us with the FX expectations for Q2, would be helpful. Thank you.
Equipment is clearly growing faster right now than service. That's true both in terms of revenue as well as in terms of orders received. When it comes to FX-
I think that was directed to me.
It is.
Yeah. I think it was Marcus.
Yes. It was. The FX impact that you expect for.
Thanks for reminding me. I actually forgot to mention it when I was on the income statement there, on the profit bridge. Thanks for that. No, we see, as we have said many times, when you look at this impact on operating profit, it's a bridge impact. It is, of course
A reflection of what happened in the second quarter last year and what happens sequentially this quarter, obviously. If we look at the picture today on FX, we would expect that it's mildly negative, much less than what it was in Q1, the comparison, and I'm talking for Atlas Copco continuing operations, but I would be surprised if there would be a big difference also in Epiroc. The trend would work in the same way. That's primarily because there was a further weakening of the U.S. dollar gradually during Q1 last year that had that impact. Now we see it's the Swedish krona also that is very weak right now. It's difficult. Mildly negative, and if something happens at the end of the quarter, of course, you know since before that that will also affect this number.
If it's almost zero or if it's 100 negative, well, I really don't have a good better projection than that. Much less than in Q1.
Okay. That's helpful. Then large orders in Epiroc. Any large orders that impacted those numbers?
Yeah, we had some large orders, no doubt. I think we've actually sent out some press releases, but to be honest, on top of my head, I cannot remember exactly. We have some in Chile from the copper mines. That's the one I can recall at the moment.
Yeah, exactly. If I fill in what we have, let's say, historically commented as big orders, so to speak, I wouldn't say that there was something like that in explaining 5% or 10% growth in itself, so to speak. Not at all.
No.
It was a good variety of big important orders, but that doesn't mean that it's something that you should sort of take away and show an adjusted growth without one or two big orders. No, that would not be correct, I think.
That's absolutely correct.
Yeah.
Okay, perfect. Thank you very much.
Thank you. I think we are at the end of the hour, and I think at least there might be some of you that want to have another go at the question, but I think mindful of time here and other meetings. Thank you for participating. I know that the next event on the calendar is quite near in time this time, and it's about a month from now when there will be a capital markets day specifically for Epiroc. You have seen that before, and I'm looking at Per and Anders, I think it's the 30th of May.
Absolutely.
Okay.
Correct.
Very good.
You're very welcome.
With that, I thank you for participating again and for Atlas Copco continuing operations, the next opportunity will be the 20th of July for the second quarter report. Thank you very much and goodbye.