Ladies and gentlemen, welcome to the Atlas Copco Q3 twenty seventeen Report. Today, I am pleased to present CEO, Matt Ramstrom and CFO, Hans Olomayer. For the first part of the call, all participants will be in listen only mode and afterwards, there will be a question and answer session.
Welcome. Good morning, good afternoon, good evening to everyone participating on the call regarding our Atlas Copco Third Quarter Report 2017. We will start, by the way, by me handing over the word to Mats Ramstrom, our CEO, and then we will, in short time, go over to Q and A. So please, Max. Thank you,
Antoine and hi, everyone. I will start with slide number 2, called Q3 in brief, stating on strong order growth at 17%. And as you know, we focus a lot on innovation and product development, and it's good to see for us that we really get traction for the new product now and that we deliver clear values to our customers. So we really appreciate to see that trend. Let me say that specifically then, vacuum with strong growth and also mining.
But I would also highlight the CET performance with 14% organic, which I think is a very good performance as well. And then when we look geographically, we can see that we have double digit growth in principally one regions, and it's quite a unique situation for us and a very good performance. Record profit as you have seen, business with and without the onetime cost that we have And I would also recognize the cash flow and the hard work that is done in the networking capital. Then we have the split project. And I think congratulations, it's been working here.
Very well done and they are still on target to make sure that this happens in a good way if we get back to the next stage next year. You can also see that we have finalized the reconstruction, which we're happy about. And now the Power Technique business, I can put this more on the core business that we've developed. Page 2, Slide 3, when we have the figures, I will not take you through every figure. But you can see, of course, the gap between overseas and revenues.
I will cover a little bit the supply chain for business that I have later on. But in case that we can see that marketing is making the noise in a very good way and that is also valid between that shift between power techniques. PMR, we did a very good increment of 15%, but we would like to get even more out of the mining business area. And CET1, the 2%, This is why we are struggling a little bit to get the margin charge according to our investment pressure. Profit, 6.2% or then the adjusted one at 6.1%.
You can see it's the one time cost, which I assume that we will cover a little bit later on, but these numbers are record numbers. And then highlighting again the SEK 5,000,000,000 in cash flow, which I think is the 3rd best quarter that we have had. Let's change to Slide number 4, which we see the geographical split for our business. Double digit growth, as you can see in green, which is strong for us. But the other thing that I recognize in this picture and that is the strategy that we have to be equally strong in the 3 weekends.
You can see if you have after Americas, it's 29% of our business. Europe is 29% and now Asia being Turkey, which gives us good sustainability over time. Slide number 5. And I can confirm that the recovery with the last 12 months have been very solid, and you can see then 5 consecutive months of organic growth. Slide number 6 is the sales pitch.
And in the structured part, you still have the labels, which will go out for the next quarter, which will come into organic. And then you see that we have a little bit of headwind and currency. And obviously, our debt would remain in Q4 in Q1 as well and a very positive volume on 'seventeen. On Slide 7, you have the split in between the different business areas and the mining part, which is 25%, which is then suggested to become the epilogue split. And the other change, I think you can see is the back end is growing in the group and now at 17%.
Now we get into the application of the business areas, starting with compressor technique. And if you look at the graph and the OIBIS we see, it's 40% for the quarter, up 3 very solid quarters on quite a new level for us. And you can see this is spread out through the different divisions. And this month, we also see a new chief activity in the gas and frusals business. The downside here a little bit is the invoicing where we like them to give our customers good service in terms of deliveries.
And I think they're doing a fantastic work. And what we have right now increased lead times for some older competitors. And if we stay at least at the end of this level for the coming 2 quarters, we have to expect it will be back on ordinary lead times during Q1 next year. Also like to highlight that they put a lot of new products in the market, which I think gives clear benefits to our customer. And I think that product portfolio from Seat in general looks very interesting.
We change to back end technique on Slide 9. Very strong, obviously, seed. It is led by semi, but I would say industrial and high vacuum and also services developing in a very good way. And the speed is still approximately 60% is 70% and the other 40% is the other businesses. So they keep up well and that's getting market shares and industrial for sure.
And we look at operating margins, which is on a record level, and we are very happy about that. With the currency and the mix and the volume we have at this point, this is a good result. Overall, you should have in mind that we continue to invest in the business, manufacturing for intrinsically all the divisions. We also increased our sales coverage, mainly in industrial and high and also then same thing for service. So the statement we have done in the past is still valid.
We believe that the vacuum technique should be in par with CT over a busy cycle, although the service spot might be slightly lower in the vacuum pump. We also discussed a little bit of volatility in this business. As you can see, since we have acquired Air Log, we haven't seen much volatility, but it's still there. It could come. And what you see, the macro demand for these type of products, you see the big report out there.
We still believe this is a very strong business and we're business to be in. That doesn't mean that every quarter it's stable and probably be a little bit up and down. You also see the China investments where they're funding money to make sure that they are part of this industry, that's the sanding industry. What we do to get more sustainability as benefit investment in industrial and scientific, also called time and also the service. That's our contribution to make it more sustainable over time.
Both the SKU K and the Laybald acquisition have delivered in core and above expectation. And I think if you look at with the exception of the Q1, we can see a bit sequential review for the back end technique is designed. We're also working in a lot with the product portfolio, very interesting product for semi but there will be even more rapid expansion behind the product portfolio for industrial. Industrial Technique, 910, 11%. Here we can see a little bit of indications from the U.
S. Where we see a little bit less production and less sales. That's not a direct correlation with our activities since they are more product based and new models. And I would say that there is an increased activity around assembly technologies related to aluminum, high strength, steel, composites. I think it's some recipes that mix material, which over time will be we are then positioned with the clean sheet equipment and also self-service liquidating equipment.
On the general industry side, in the past, what we have called off road has been the biggest segment, but that's been a smooth segment for a number of years, But now you can also see the change activity in this area. And the adjusted margin then is RMB 23.2. Mining, Slide 11, 22% growth. And we have stated it before, but we still see an adjacent business. We see adjacent businesses that will be the main driver for us.
We have not seen that many greenfields at this point. Also saying that the choices on net count stand in favor for us, especially when we are positioned. And I would say that also that the mining has the relook for productivity, which is beneficial. But you can also see that in the grades they are looking for to expand different projects. Over the last year, we have noted down basically 70 mines that have been closed or have been in the care maintenance.
Care maintenance means that we still have the equipment there. But there are very few of those mines and actually a big impact. So that we haven't seen. I think it's around 3 or something that we had indicated that has opened. On the delivery side, this is driven by underground in Q3, KCP.
But others are coming along good as well. And on the delivery side, I would say it's mainly then sub supply. We have the capacity to do the final assembly. We have the capacity to do quality checks and logistics. So it's mainly working together with some suppliers and some opportunity to be a little bit structured to see if you can have the resource or anything like that.
But it takes a little bit of time to adjust to such a big move in terms of orders you're seeing. But same here that if the volume stays approximate on its level, we will be back to at normal lead times during Q1. And there could still be surprises, of course, but that is our best estimate today. Last is power technique, the organic growth of 9%. I think this is the biggest as where you see a little bit of seasonality in the numbers.
And one of the most competitive market is China and Asia, and we can also see a group in this area. So we're not convinced about that. And then of course, now with the reconstruction out, I think we can get back and really focus on this business as well. By that, I think I hand over to Hans Ulijn.
Thank you, Mats. Just continuing on the next page, group total. It's in Slide 13. A few things since it was a couple of extra ordinary
things in
the quarter, just commenting briefly on those. In the operating profit, we have an extra help of €81,000,000,000 as we wrote, consists of 3.80 positive industrial technique, mainly consisting of a contingent payment for the purchase for the acquisition of ENDRAB, which is not unusual that we have part of the purchase price agreed conditioned upon certain factors as big projects coming through or revenue growth or something like that. And all of them that was in the plan initially from the seller did not materialize. In conjunction with that, there is also then in the same number, there is a small correction of the intangible values for that specific acquisition, and that's embedded in this €380,000,000 We also have on the common group functions, we have in total €299,000,000 negative impact. And the big part there comes from split related costs.
One is a clear one time thing. Again, it's an impairment or a write down of a capitalized IT cost. And the reason is that Epiroc or MR, the future Epiroc, have already decided upon certain things for their strategy, one of them being that they go for an integration of IT systems with what they have in the production facilities, which means that they will not follow what the rest of Atlas Copco does in the implementation of an SAP ERP system in customer centers. So hence, since that decision is already taken, we have impaired, we have written down there for a proportion of that investment, and that is SEK170 1,000,000. On top of that, we also have SEK70 1,000,000 of other split related costs, the same amount as in Q2.
And finally, we have the usual change or revaluation of the liability we have for long term incentive programs, and that was a negative €59,000,000 this quarter. All in all, plus €81,000,000 percent in that. If we adjust the operating margin, I think Mats already mentioned that it corresponds to 21.7% instead of 22% as reported. If we look a little bit ahead on the matter of the split costs, it was very high this quarter, as I just explained. But going forward, we think that in the next quarter, we will have all the normal split costs a little bit more than what we have seen so far in the last two quarters.
And then we will continue to update you how it will look until the actual split in the middle of next year. But we expect it to be gradually a little bit higher in these quarters to come. On this page, we also have the income tax expense. And there, we actually managed to have slightly less than 27% this quarter compared to 28% the last time. I think somewhere between those numbers is the best guess I can say.
27% ish is something that we count with going forward in the next few months as well. And finally, in the numbers is, of course, also impacts from currencies. And we have written in the report already that if you compare these two periods on the slide, Q3 this year with Q3 last year, in the way that what would have happened if we had the same currency rates as last year, then we would have had €270,000,000 better result. That's how you should read that number. But it's also important to say that we if we move forward to Q4, this type of bridge analysis will increase in negativity.
So we will have more than double the negative bridge in Q4. But that relates, of course, only to the fact that we know what happened last year. It's important to stress that the currency situation in Q3, we expect it to be pretty similar to Q4 this year. So it's only the comparison with last year Q4 that is more negative than this quarter, of course. If we move to slide, we have the same as revenue bridge, our revenue and profit bridge.
And as you can see, it's another quarter of pretty good profit generation considering the adjusted revenue growth if we take out currency impacts and other things as acquisitions. So but if we then look a little bit more where does it come to, move to Page number 15, you see again that we have a good contribution from the revenue growth in all areas. But of course, it's higher than the average in both CT and back end technique. Reasons are not very different from what we have commented before in Q2 that we are in a phase where the revenue growth is yielding good flow through. But we also know that we are investing, we are adding capacity in costs as well as in investments.
So it's still not a reasonable figure to count with as sustainable flow through going forward. But again, it's the type of phase where we are right now that has yielded good results. If we then move on to Page 16, balance sheet. I have nothing much to add really, just pointing out. But of course, the increase in the balance sheet is entirely due to that we generate a very healthy cash generation, as you can see.
Instead, we move to Page 17, which is the cash flow. Indeed, a similar operating cash flow in this quarter as last year, Q3. And you can in a very summarized way, you can say that the better profit generation is compensated by that we don't release as much working capital as Q3 last year because of the growth environment that we are seeing right now. So that's the very quick summary of the operating cash flow. So with that, I we will so we'll be clear with our comments.
I'll hand over again to Mats for a final word. But I wanted to highlight on Page 18 that we are coming close to the yearly Capital Markets Day. It will be held here in Stockholm on November 14. It's as you can see, you can register on the web. We're almost getting sold out.
So I just urge you to hurry up before we have to start charging for the seats, which I would think unnecessary. I'm just kidding. But hurry up. I think it's an excellent opportunity to understand really the innovations that Mats talked about from those that really know. And that doesn't mean myself in that respect, many others.
So and on top of that, we will, of course, update on 3 of the business areas. It's MR, it's vacuum technique again, which was also there last year, but I'm sure that you understand that we received quite a lot of questions on that. And then we have also industrial technique presenting that. So with that, Page 19, over to you, Mats.
It's a little bit about the near term outlook. And as you can see, we have stayed with BHP next quarter. The overall demand is expected to remain at the current time level. And our thinking about that is that between 2016 to 2017, you can see quite a significant change in orders received. And you can also look at the 3 quarters that we have had been on a completely new level for us, and we don't foresee in the near future that activity will rise a lot or go down a lot.
And that's the reason why we have stayed on to this statement.
Thanks, Max. That concludes the presentation. So I hand over the word to the operator, and then we'll go into the Q and A session.
Thank
you.
And our first question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is
A couple of questions. First of all, on vacuum, can talk a little bit about the split in organic order growth between industrial vacuums and semiconductors and how the margins vary between the 2? And you keep citing, of course, I understand that, obviously, semiconductor can be quite lumpy. Are you particularly overdependent on one customer versus the other? And what is your exposure to China, again, which you're citing is obviously building up capacity in semiconductors?
Thank you.
On the back intercooled growth, the strongest growth is for the semiconductor industry still, which has been the case for quite some time. But what is important to note is that both high vacuum and industrial vacuum, the other 2 equipment divisions, are growing very nicely in this quarter as are the service business, particularly the one related directly to the semi industry. So that's on the how does it split the growth basically. And when it comes to China, is it China? Yes, China.
And basically, I think, of course, we have seen a lot of quite an unchanged fee, the diameter from the Chinese would like to step into this business in principle. That's what you see.
And is there any margin difference sorry, just between the industrial and semiconductor? And again, how proportionate is coming from China specifically?
Asia is the biggest area for vacuum, and China is one of the biggest countries for them. And when it comes to profitability, we have one business area, and hence, I refrain from commenting on the margin differences between the 2. But as you have understood from previous calls and from previous presentations, with this type of strong growth in semi, we are having a very strong profitability in this phase. We have absorbed the Nabold acquisition, for example, in the industrial and high vacuum segments and not on the semiconductor. So hence, I think the calculations I see from you guys is pretty well on the right track, I think.
Okay. The other question is around cash flow. The net debt position is coming considerably better than I had expected.
And I'd run through it.
I mean, I can see the intangible figures in the cash flow statement about double from the previous quarter. The interest income, well, there's actually an interest inflow in cash flow, but there's an interest expense in the P and L. Obviously, very good working capital control, very good low CapEx and R and D budget, which obviously you're saying is potentially going to be increasing or you are increasing in terms of investment. I don't know if you there's a lot of sort of weeds in there about whether you can give any specific help on the cash flow statement. You are obviously generating good cash flow, but I guess the final question is what is the capital allocation policy because it looks like you could well have net cash by the year end.
We're approaching with some speed. I agree with that. Of course, as we have always said, we will have a look we always have a look together with the Board on how is the balance sheet composition. And you saw the numbers on the balance sheet. And of course, every year, these discussions, which are ongoing, lead to a certain capital allocation decision.
But let's not preempt that, but rather come back to that than we are in the Q4 report when those decisions are actually taken. I can only repeat that, as we have said so many times before that we have no intentions of becoming a bank, but we are also using the cash in what we hope to be in a clever way, I. E, investing in the right objects rather than just investing because we generate cash. So the capital allocation is an issue that comes up continuously in the discussions. But here and now, it's not the time to give any specific comments more than what I just did.
Okay. And if I could just pick
2 things out of the cash flow statement. We're seeing interest inflow when, of course, the P and L has got an expense. And we're also seeing intangibles doubled from a year ago. Is there any guidance you can give on that?
This year, when you mentioned the depreciation that is an add back to the operating profit, we've already touched upon that we have 2 specific items in this quarter that will not be repeated. So the high add back on depreciation is a one off, you can say. We will go back to a more normalized level in the next couple of quarters unless there are other things that we have to amortize or whatever. So that's on that one. When it comes to the financial net, as you can see further down in the cash flow statement, we always reconcile towards what we call the operating cash flow.
And the big swing versus last year is really because we had some equity hedge impacts on the cash flow, which we then eliminate further down in the cash flow statement, if you follow me, Graham. And that's why that line seems to be indicating a much stronger cash flow than last year. But if you really look at the bottom of the same page in the handout, you will see there is a big swing, almost SEK1 1,000,000,000 on that, which we don't consider operating cash
flow.
Before we take the next question, I was too slow when we started. I hope we Graeme managed to sneak in. But please restrain to one question because we have many on the line have been warned. So please do that. Thanks.
And the next question comes from the line of Klas Bergelind from Citi. Please go ahead. Your line is open.
Yes. Matt Senna and Sola, it's Klas from Citi. The first one is on vacuum. I want to come back to the margin here. This year, we see very strong growth in semis.
This is creating a positive mix for the margin. Looking into next year, however, it looks like semis will slow when we look at the CapEx out there and now industrial vacuum is picking up. That, to me, suggests that the mix will turn negative next year, I. E. High margin semis slowing versus lower margin industrial vacuum growing.
So could you talk a little bit about how you look at the margin in this context, whether the self help on services and in legal can compensate? Or should the margin trend down and by how much?
Okay. So I'll give you a little bit. On the market outlook then, First, what we see is this CapEx index a little bit from quarter to quarter and month by month, quite some big swings in that. So we don't need much into that actually.
But we've had a very strong CapEx year in 'seventeen with NAND and DRAM up and then you had the China push, etcetera. And when we look at sort of the overall CapEx picture, it seems like it's slowing considerably. So even if you have the technology shift, there should be slower growth, I would have thought.
Out? I think you get depending on what source of information. We have said many times that if you go by quarter and quarter, it is almost impossible to predict anything. But if we look in the next coming year, we actually see a lot of interest, a lot of activity level that points in a relatively good even though we are at the high level, that's a good demand level going forward.
And you also mean that even if we have a high activity, when that materialized in new aggressive deliveries, it's unpredictable the end for us.
On the margin, I refer back to the answer to Graham. Of course, we cannot there is a reason we report the business area and not the divisions. But you in your analysis, I think, as well as the others, come to that, well, semiconductor business does not make a higher margin than the rest considering that they have swallowed the label acquisition. And you're quite right. The only thing about the negative mix, first of all, we have to see what the future brings on the top line, of course.
But if that would happen today, it's a game of mathematics. Yes, it would have an impact. But when and how quickly does it happen? And if we want to expand the industrial service business, for example, which we do, And if we want to grow further on high vacuum and particularly on the industrial vacuum even more, which we think is the potential to do. Obviously, that will not match the current profitability of the semi business.
That goes without saying. But we're pleased again that if we look forward without going into details on quarters, etcetera, we believe that there is nothing preventing the Action Technologies business area to have a similar profitability pattern as compressor technique has over a business cycle.
Maybe just a quick follow-up, Azula. I just want to ask you on CT, final one, I promise, is on the revenue recognition. It was a bit slower than I thought, and you guys highlighted bottlenecks there in compressors. Is that helping pricing? Or is pricing on new orders just up because of innovation, new products that you launched last year that is now showing up in the bridge?
Or is that connected? Or is it just that we get that price push in the bridge from innovation?
Well, I mean sorry, if I start, I mean just on the technical aspect of the sales bridge because that's where you started to us on the 1%. It is the same way as we have always done that, right or wrong, is that we look at exactly the same offer a year ago with the same offer this year and we compare what the net price we get out of that, and that is pretty similar to last year. So whether sometimes it's rounded to 1% and last quarter it was rounded to 0, don't read too much into it in terms of new development. We're happy to see that if anything, it moves in the right direction. But that is on the when you think it to innovation, I think Mats can take it further from there.
Yes. And that line for line products, of course, the inflation rate as we have today, it's more challenging than in the past. So I think innovation is the one that drives productivity for our customers and the value for them. And that is the opportunity for us to gain a little bit on price and margins. On the other side, you also have bigger projects right now where you normally bundle a little bit of different products.
So then you can have little margins on those things. So that innovation is the driver for pricing.
So just to conclude, but if there is a project sale, we cannot have exactly the same configuration next year in a project sale. So then we don't include it even in this price bridge because we can't. So just like a new product is not included, these type of comparisons are not included in that price bridge either. Yes. And we're very happy to see that margin expansion on the gross profit level.
Thank you. Thank you.
Next question comes from the line of Peter Frohnlein from Handelsbanken. Please go ahead. Your line is open.
Thank you. Hi, Mats. Hi, Hans Sola. Okay. One question.
If you look at aftermarket in the entire company, if we call it service, the entire aftermarket business, How much is that growing compared to your sort of group order intake of 70%? Is it I mean, at the Capital Markets Day a couple of years ago, you had sort of 8% the last bunch of years, which is on service growth. Is that too high a number? Currently, 8% now. And could you help us to understand the numbers on VT and R and C in relation to the group?
Well, the service business, as you say, if we bundle it and we call it the recurring revenue streams and so on, it's growing roughly at what you just indicated, the long term average. It's very seldom that we see that service growth can match equipment growth when we are in an upturn like we are now or falls anywhere near as quickly as equipment sales falls when we go down, that you know. And as I said, so it's in the high single digit growth. That's where you define it, if you compare it with the overall 70.
And is it fair to assume that VT is above that number and maybe MR is in line and slightly lower. Is that fair?
It was a nice try at least, Theodor. I don't see it as too different. There's not a big difference. So you start to get into very detailed analysis. So they are, of course, not exactly at the same level, all of them, but there is not a big difference.
They actually are growing all of them in this quarter.
Okay. Follow-up, sorry, but another try. Installed base, vacuum pumps, semi industry market share, 50%, 75%. Any figure to give us ahead of the C and D? Come on, guys.
You said it yourself. Nice try, but let's defer that question, right?
Okay. It was worth the try. Thank you. Yes,
thank you, Dylan. Thank you.
The next question comes from the line of Lars Borton from Barclays. Please go ahead. Your line is open.
Hi, thanks, Hamed, Hans Ola. A quick follow-up on previous questions and then a question on compressor technique. I was hoping, Hans Ola, you might be able to help us understand what exactly you're doing to address the supply chain bottlenecks in vacuum and also CT and how we should think about the scale or the cost headwinds that may come from that? And ideally, the timing of this, I mean, is this a 1 to 2 quarter effort and a drag? Or is this more of a 1 to 2 year drag in terms of particularly BT margins?
If I start with vaccine then. Intensively, we would like always to have a little bit of free capacity since this business is a little bit unpredictable when we engage in spot manufacturing. So we continuously, intrinsically, I think, have done a couple of awards now. And intrinsically, every quarter, we do some new investments. And right now, we are building up the capacity in both South Korea and also trying to match on the integrated new capacity in China.
This is the main key focus for vacuum technique on the manufacturing side. Richard Stein? Yes.
I think CT was also a question on the ramp and the drag.
The CT one is intrinsically only sub suppliers. We have the capacity both in China and in Antwerp, and we have the main hubs to manufacture more. And we make sure that we are high on our sub suppliers agenda. And we play daily to make sure that then, as I said, a little bit earlier, if we see that we can continue to catch up a little bit and nothing changes, and we think that we will bring back on ordinary 8 times during Q1 next year to let the customer escalate a bit longer.
So on BT, this sounds more incremental rather than a meaningful step up in the near term in terms of cost. Is that fair that you continue to add capacity and will so over the next few quarters and possibly years?
Yes. That is correct. And I think the delivery times in business seems that they will reach between 6 to 8 months. So we need to be able to do the hard work time to make sure that we have the capacity to do and we get the orders.
Thank you. If I just can on compressor technique, you sounded maybe a little less excited about 14% organic growth than I would have thought. We haven't seen that since, well, I think 2011. Three things specifically for me. Can you help me understand what the order growth was in gas and process?
Was there anything unusual then in terms of very large gas and process orders that swung it for you? And secondly, why was CT services flagged in North America? I thought that was one of the key growth areas for you. And then thirdly, could you give us a little bit of flavor for your outlook into Q4 for CT? Is it flat outlook for the group or true also for that division or for business area?
How many questions have you got now?
3, 4, I found it. I think you asked if I start and then we catch up with all of your questions about at least one of them. I think it was CET. Was it something on gas and process?
Yes. I think that well, I think actually, even if you do inside of the right thing, I think I have the C2 performance in 14% as a strong one, especially if you look back a little bit in I think that's very good. And that's also the indicator that we see good traction from the products and applications into the market. So that's good. Then on gas and process, I mean, it's not the major part of our business.
And even if they have a good month, you would not see a significant impact on the complete business. But yes,
And sorry, the service in the North America was flat and outlook into Q4. If you could help me with that, that would be helpful.
The outlook in general or No, BT specifically. No, we don't comment specifically. But I mean, there is nothing in the new trend. Sometimes, of course, in the report, you see that there is a mentioning of the service that was slightly lower sequentially or that it was down in one region but strongly in the world. And it's not that we try to sneak in the sort of a warning of a new trend.
If that was the case, we would be more explicit than that for our own sake, if I say so. So it's more a transparent way of saying that it's not a continuous straight line development over every quarter everywhere, even in service divisions. It's not like that. So don't read too much into it as a projection going forward.
And next question comes from the line of Markus Alnud from Kepler Cheuvreux. Please go ahead. Your line is open.
Hi, Markus Anruth from Kepler Cheuvreux. If I can just move to Mining for a bit, a lot of questions on vacuum. Starting with I would assume that your order rates are pretty much pretty close to historical highs, but that there is just replacement and brownfields. Can you just help us out with how the split between replacement and brownfields have progressed throughout the year? And then if I can ask on greenfields, if you have had any increase in discussions regarding greenfields.
And when if you have a greenfield project, when would your equipment normally be ordered? So which would be the first project the first type of equipment that your customers would order? Yes, that would be helpful.
Yes, where do we start? In at the end, perhaps. The as you know, depending on the type of project, obviously, the there is a lot of investments going into a new greenfield. But it's impossible to say how long time in advance we would be approached from an order point of view. It depends very much on the specific project, on the specific situation.
So I can't really say give you any good guidance on that. I could also say from where you started, yes, we had certain product categories that are already at levels which are pretty close to where we have been before, but not the whole MR business area is at that level. It looks extremely high compared to a year or 2 ago, but it's not really up to the very high levels we saw in 2012 and so on.
And you got the copper order from Kazakniv. So and copper seems to be picking up and copper prices are going up. Do you think that the current levels or the levels that you see is fairly stable going forward as well?
We don't see any change. It's not only that it's an average of someone going down from this level and another business area going dramatically up when we say the flattish for the group. It also relates to this business area.
Okay. Thank you.
Thank you.
Next question comes from the line of Magnus Kruber from UBS. Please go ahead. Your line is open.
Hi, Mats. Hi, Antoine. Magnus here from UBS on behalf of Guillermo. I just have a question also on mining. You say you had a sequential decline in service
and spare parts now in Q3. Is there any seasonality in that? And if you could help us explain how that looks
on the consumable side, that would be very
helpful. Yes. I think I'll just repeat what I said before that, of course, if you have a world situation that is growing, that will, from time to time, be a region that is not growing. But to go into all the details, whether it was a particularly successful last year quarter or whether the Q2 this year was particularly strong or whatever is the specific reason for is difficult to go into, if you say. So it's more an indication from a transparency point of view that while the total is growing very nicely on service, as I just said, it is not happening on a very straight line basis all over the place.
So again, it might well be that, that particular region does not have the same situation next quarter, I cannot say. Okay. But consumer was up year over year at least, I guess. Yes, yes, yes. We don't have any area specifically there that is not up in a very, in some way compared to last year.
Thank you.
Next question comes from James Moore from Redburn. Please go ahead. Your line is open.
Yes. Hi, everyone. That's Hans Werner. It's James here. My question also surrounds the strong order growth.
Are there any large one off in any of the big divisions, particularly thinking vacuum, compressor, mining? And it looks like industrial compressor equipment, ex service and gas and process, you call out the U. S. And Asia as being strong. It must be sort of mid-20s single digits.
Is that a year on year effect only? Or have you seen, specifically in the U. S. And in Asia, I guess, China, seen a sequential daily uptick in equipment levels against the previous quarter's daily rate? And if so, what's driving that?
I think let me start with the back end question at least. And in your capital to account list, we might look at 25 to 30 customers. And depending on the level where they are in the investment cycle, and so there are big orders.
But I'm not thinking of competitive It doesn't sorry, it doesn't stick out specifically in Q3 compared to either Q1 or Q2 on the other hand.
I was thinking on the compressor business, whether there was anything large or lumpy in the compressor business in the quarter? And coming back to the compressor, U. S. And Asian trends, could you maybe provide some color on that?
We can repeat a little bit that when you look at the gas and process, which we comment after quite some time of always referring it to not recovering and so on. They have started to see activities and it's doing well. And of course, they come from a much lower level of comparisons compared to the other businesses in CT. So it is helping in the quarter from a growth perspective. But it's not that we see that it's reflecting bad on any of the other all the industrial businesses are growing nicely as well as service.
So it's not a huge one off. But again, like Matt said, in gas and process, even more so than vacuum as a
Sorry. To re explain it, think of your Yellow Canaries in U. S. And China. It looks on the statement as if the rate of growth in industrial compressors, U.
S. And China, has accelerated. And I just wondered if that is due to a weaker quarter last year or whether if you look at it sequentially on a daily basis, whether you've noticed a new sequential acceleration in the U. S. And in Chinese industrial markets?
It is the reference is to year on year growth, as you say. So that was good. From a sequential point of view or judging week by week, if it's accelerating or not, it's impossible to say. But we are doing very well on the industrial segment in both regions.
And the next question is from Max Yates from Credit Suisse. Please go ahead. Your line is open.
Hi, thank you. Just a sort of fairly simple question. Are there any areas, particularly out of your order growth that you call out where you think you've taken market share? Or do you think pretty much the majority of your growth rates are in line with the underlying market trends?
I don't know if you can say anything in particular, but we believe that the industrial performance in vacuum is one of the areas where it's impacted by our gaining market share. And that is mainly due to the synergies that we have between the brands where we are launching new products. You can also see in the industrial technique. I think that they're very strong in developing the market maybe I should say more that they bring new technologies to the market to the car manufacturing, to our truck manufacturers. Doesn't need to be end to end competition.
It's more of a change in the way you manufacture cars to help them develop. And by doing that, I think that's maybe the way for us to grow as well is that we have to change technology by increasing the market size in those areas.
And a little bit the same goes for compressor certainly not hurting the market share development.
And the energy efficiency that is inevitable for the customer, we can see what we can increase. Yes.
Okay. Just maybe one follow-up. Just on the MRET margin. If we go back to kind of 20 12 when you were doing kind of 24% margins, if you try and back out what the aftermarket has done within MRAT to get to kind of today's margins, it does look like it would have had to come down a little bit. So I'm just trying to wonder whether as we start to see sort of volumes, metal prices recover, do you structurally think with your kind of conversations with miners, you will be able to price up the aftermarket going forward?
Or do you think that fundamentally kind of their attitude and the way they run their businesses has changed sufficiently that it will be difficult to ever get back to those margins and particularly on the aftermarket side?
I think the profitability on the service side of the business is very good. And the reason for the whole business area, I should say, is very good, and it was very good at that time as well. On the equipment side, we still face more challenges to ramp up in the way that we have discussed compared to where we were in 20 12 and beginning of 2013, reaching those levels that you referred to. So that's basically the rationale. It's not that we tailor our business from how can we price our products to reach 33% 23% year, 24% margin.
It more comes from the whole organization, the whole structural setup should be more and more efficient. And then, of course, the margin should come from there. But we don't make any forward looking statements on if we can be at those levels or how long it will take and how big the demand would have to be to reach that. Now I can't help you on that one, unfortunately.
It might not even be the number one foot beside. I think and Julian and I have the same discussion how to develop the business. It's more on the top line thinking. How do we accelerate that innovation? How do we bring new products to the market?
How do we make sure we have the right coverage in the right regions? I think that's more of a focus from our side to develop the business. And of course, if their customer then appreciates the value we bring, we will see that in the morning in the morning. Yes. And not the least in
the business that has 41% return on capital employed. That's a very good ending comment, that's a signal. We I say ending because time is running fast when we have fun. I hate to defer best way they can. I just leave the word to Mats for a final comment.
Yes. And I was just trying to commit to capital markets a little bit when I met you, summary, at least. We were listening to your questions and the same deal for this call. So in the Capital Markets Day, you would see we will say industrial. So I see that there's a lot of question about mining and vacuums.
So I think you can have the opportunity to answer your question back to management as well.
Great. Hope to see as many of you as possible in Stockholm on November 14.
And with that, thank you
very much for participating, and see you later, as we said, in the back. Thank you. Bye bye.
And this now concludes the conference call. Thank you all for attending, and you may now disconnect your lines.