This is one of our latest top product in the mining business. So our top 2 largest truck, underground truck, which is a very successful product. And you see we are committed to the mining business with those who maybe have a doubt about that. Q4 in brief, and I will try to make this presentation short. So I'm sure there will be a lot of questions around the results, but also around a couple of events announced recently.
I'm very pleased with the results. It's you can say record orders, record revenue, record operating profit and record cash flow, what you wish more as a CEO. And that's also in all business areas and in all regions. So I think everything more or less all can say, all stars were very well lined up this quarter. So a very good work from all the people in the organization.
We had a couple of events of announcements, and I will just do that very briefly to make sure you don't forget. You see Mats Remsgaard will take over from me from the 27th April. And you see it's like a bit like the sales. The CEOs becomes also taller. So we have a great future in front of us.
Is there a high correlation between the promise of the CEOs and the growth, of course, of our company? So I'm really looking forward to the future. The proposal also, what we will do and that we announced the 16th January that we will do a split of proposal split in the AGM 2018. Just to remind you, it is a while. It will take a bit of time for us to do that.
So before it happens, this will be mid-twenty 18. And then last but not least, we also announced that we divest the road construction equipment division, which we also announced and That will take place within a couple of months in reality. But just for your sake of understanding, all figures which we will talk about is without road construction. So for those who get confused about a couple of figures, just look first that we have taken out road construction. If you go to the figures quick, I will not go through all of them.
One figure I would like to highlight organic growth 7% and the last one here operating cash flow €6,500,000,000 So it's a real, real strong figure. And you see also the small asterisk. It's included discontinued operation, but I can say there was not a big contribution from the divested business. So it's more or less a clean, strong cash flow. If we then take a quick brief on 2016.
2016 was a mixed year. It started tough. If you remember, Q1 was a tough quarter for us. But the test, the latter part of the year had been, yes, doing well. And you see also the last quarter was a strong quarter.
But all in all, if we take the year and compare it with all previous years, it was a record profit, record orders and cash flow. So that we can say. And what is also good to see is that our commitment to service and the whole transformation we go through with our business that, that is also still keeping on. So we keep developing our most profitable business, which is our service business. We got strong growth in vacuum.
You have seen that. And also we have decided since we were able to expand that business with a couple of acquisitions, labeled in CSK, to be more specific, We also decided to make it a dedicated business area, so it can really run for its own future. And also, it makes it much more transparent for those who are following the company. We did 13 acquisitions during the year, so we have been busy. And then also the Board of Directors also will propose to the annual meeting a dividend of 6.80 dollars which is around 8% increase when we compare with last year.
To address, okay, the figures here, you I talked a little bit about the increase, the organic growth, the 6%. And then the structural, 4% organic, 3% structural and a little bit negative currency because in the year, we still have a negative currency on the top line. The rest, I think, good development on service. I mentioned that already. And we had also a strong compressor technique as well as an industrial technique.
And the total operating cash flow, which I'm really proud of, to see more than SEK 80,000,000,000 in the year. So that was a very nice achievement, of course, from a good profitability. We missed just the EUR 20,000,000,000. And then, of course, you know that our conversion is high, making this EUR 18 more than EUR 18,000,000,000. If you then go quick to the geographical split, it was a long time if I was able to talk that everything is positive.
And you see it here. It started North America, a +8. So but still good continuation of that continent. So all countries in that continent did well. Europe, 14%.
I should make a remark, of course, you know, there is partly a big part of labeled in. But even if we exclude labeled, the acquisition, it was a strong quarter in Europe. And then we see the +29 in Asia, very strong China, very strong Korea and then okay India make it also a +29%. So if you take these 2 together or these 3 together, which is more or less, what is it, almost more than 75% of the business, we had very strong development. Where is the weak?
See South America. I think it's not a surprise for any one of you. It is Brazil, which is the biggest, which still is suffering and make it, yes, not such a good quarter in that. But even with the We Brazil, we were able to come up with a +1% growth in that one. The rest of the conference, you can see what it is.
We then go to organic growth graph. I'm very pleased to see 2 quarters in a row. We have a good development. So there is growth in the air. So that's good.
We also see if you take for the total company, excluding currency, also that we have now 4 quarters in a row where we have growth. Okay, I admit, the first two were a little bit on the soft side, but still positive, if you take it really literally. But now we have the last two quarters plus 10%, which is, I think, a good development, giving the business value we are in. If you take the sales bridge, I won't go much on that. You see structural orders received in the quarter, plus 7 percent, volume, plus 7 percent, currency, plus 5 percent, yes?
We all know strong dollar, weaker pound, but that helps, of course. And then, of course, a little bit weaker Swedish kron compared to the dollar. If you look to the year where we have a minus, which I already mentioned, so you see the shifts during the year on the currency. We then go to the different business area, but We also put in here on the pie chart before I go to the different business areas, you see also vacuum, which will start reporting from the 1st January. You see also that we put that in so that you get a little bit used to our 5 legs that we have.
Compressor Technique. Record orders in the total and revenue and profit. So it was a real strong development there. Of course, we got strong development from the vacuum solutions. But if you take even excluding that, we saw a good organic growth also for, say, the traditional CT business.
So that is good to see also. Positive development on service and industrial compressors. Where it's still a bit tough is on the gas and process, although we can say that the quarter compared to last year quarter was positive, but it's still on the low level. So still a business where it's tough to be in now. And operating margin, yes, solid 22.7%.
Industrial Technique, what can we say more than it keeps developing, good motor vehicle business, which was strong, Asia. It also makes us good that we are in the future areas for development and also a steady growth on the service side. And last but not least, a solid operating margin. We even can use another word, a very good operating margin of 24% plus 1%. Mining and Rock Excavation.
Ladies and gentlemen, an order growth of 9%. So it was a long time that we could say that. So we saw good development for underground equipment. So I'm pleased to see that and a solid development in the service code. So from that point of view, we are back in the black figures.
So that was great. Hard work from all our collaborators. But what makes me most proud is that we are back on track on the operating profit. Remember that, yes, the profitability in the beginning of the year, hard work, really taking measures where we need to take measures. It's done.
I would say congratulations to the team. That is the way I believe we should be. And I'm sure also more to come in that area. Construction Technique, also there, solid growth. Of course, we should know it was a bit of a softer quarter last year.
So okay, the plus 16 will say maybe makes you drifting away. It was a good order income. But if you look also to the graph, you see that Q4 last year was a bit weaker. So the comparison was a bit easier to do. A solid portable compressor business, so that's good.
A little bit tougher rental business. And why is that? We all know the oil and gas, which is a part of their end market, is still tough. We know about the Middle East. We know the Houston area.
So that is areas where they normally do very well, and that was a bit tougher. And that is also the reason why the profit is 13.9%. And remember, this is excluding So that means also that the profitability is a bit higher here or should be higher. And of course, the reason why it is only on that part is mainly from the rental business. So but we write here the sales mix, which makes it softer.
Then I'm coming to the overview of the figures, and Hans Ulla will, from now on, take over. Yes, I think I have mentioned the figures you see also here, the operating profit going from EUR 4.8 to EUR 5.almost EUR 5.8 billion, so EUR 1,000,000,000 more profit in the quarter. I'm very pleased to see that happen. So from this, Anzula? Thank you.
So just a few slides onwards, then look a little bit at the numbers. As usual, we have seen the operating profit. We also had some financial costs and expenses, and that was EUR 167,000,000, a little bit less than last year. The most important thing is normally what is to be expected. And I think that roughly 200, 200 plus is what we think is normal run rate going forward on the financial items.
And you find them not on this slide as a number, but the difference between operating profit and profit before tax, of course. So somewhere a little bit north of 200,000,000 going forward is what we think is the run rate right now. Then we also have a tax expense. It's correlated to a little bit less than 25% in the 4th quarter. We had some positives compared to the recent quarters.
Here, I would say and of course, you see immediately that something was very strange last year. Some of you will also remember, as it said in the footnote, that we had a very large tax provision, noncash at that time, a tax provision last year at this in Q4. And you can also see that if we would adjust for that, the tax expense was just short of €900,000,000 So it was actually a relatively low number last year. We I could say right away that I know that you have struggled to understand the reports this time because we have had that tax provision in last year. We have the discontinued operations this year.
So there are lots of numbers that is not easily seen comparable with last year. But we've tried to help you in this slide to show continuing operations, and then we have the separation of the discontinued. On earnings per share, you see SEK 3.49 is what is the quarter earnings per share, but that if we include the impairment for the sale of Dynapack, it will go down to 201, but that you can find back in the quarterly report, and that makes it somewhat easier. What I'll leave you with is that on the tax expense, I mentioned a little bit short of 25% in Q4. What we expect going forward is somewhere in the region of 27%, again, seen as sort of a normalized run rate right now.
The other thing that has affected these numbers in this quarter is a favorable currency development in the market. Ronny alluded to it already, stronger dollar, a relatively weak Swedish krona, and that has helped the profit in this quarter by about DKK 500,000,000 compared to the same situation a year ago. So currency in itself has helped with about DKK 500,000,000. If we look in the same way for next quarter, for Q1, in comparison with Q1 last year, we believe that, that will again be somewhat of a similar positive bridge purely from currencies when you compare Q1 last year with Q1 this year. So these are the things on that.
I think we'll go over and we look at what we call profit bridge is just a way to try to separate the one time items and acquisitions effects and currency effects to the rest. And there, of course, you see that the group for every revenue krona, excluding currency and other things, was generating almost half of that in operating profit, so a very strong flow through. If we go to the next page, you can see it by business area, and the same thing is shown here. It's basically the similar situation in 3 business areas. And the 4th one has very low numbers in it, so you can't make out a very good percentage of it.
But that construction technique that has suffered quite a lot from a negative sales mix between last year and this year. But the others all represent a strong flow through so that the revenue growth have really turned into profit in quarter. One of the main reasons is that we have seen orders start to come in better at the end of the year, and then you get the better absorption in the factories. So without adding much cost, you get higher revenue, and that turns into a good profit development in the Q4. On the balance sheet, yes, it starts to become big numbers, SEK 115,000,000,000 in total assets.
The only thing to mention really is that you see that we have made some acquisitions, and that has turned into higher intangible assets at the top. In other words, goodwill. But you also can see that the businesses have done very well when it comes to inventory management. So in spite of the growth, there is a almost a flat development on the inventory. I'll talk a little bit more about that when we come to the next page, which is the cash flow.
And here again, Ronny mentioned, SEK 18,000,000,000 for the full year and SEK 6,500,000,000 in what we call operating cash flow. It includes everything but acquisitions and dividends and these kind of things. So it's really a strong cash generation quarter. I think that sums up some of the operational or financial comments that I have. So
I'll hand over this together.
So we can do this together. Yes. Earnings and dividend.
Yes. I think you see what Anzal already said. If you take it fully included with the impairment, we come up to 11.32 for the year.
If we adjust. It.
If we adjust, yes. That included them, what I say. And then I think what I said before, the proposal is $6.80 per share for the dividend. So that's
And I think that's the proposal. So of course, it's not decided yet, but we have it as from today as the board's.
It is what
it is. It is what it is, yes.
So then we come to the most important sentence of this presentation, where you see that we changed it somewhat. So we said it's expected to improve somewhat. And what is a bit the thinking behind that? What I see or what we see is that there is good development in China. If I take it back a year ago, I was, yes, maybe a bit more careful, I was, yes, maybe a bit more careful, but we see good development in China for semi flat screen.
You see also demand for energy products. That area is coming. Of course, there is still headwind when we go to shipyards or steel plants go back, but it really is an area which is turning and that's turning in favor for our products, for our demand. Europe, I'm slightly positive on Europe and the same is on U. S.
I'm not going to say that we're jumping on the tables. But if we take these three together, China, Europe and U. S, which is more or less 70% of wholesale, had a slightly positive approach. Of course, we get a bit of headwind. Like I mentioned already, there is for large investments, the oil and gas, it's still tough.
And we have not seen really the core is coming on that part. So it's still, yes, difficult shipyards, as I mentioned, that is also is a bit difficult. If you take it from the segments, semicon is flat screen, the demand for more energy efficient products is positive. Mining, yes, okay. You see our figures.
Is it getting a little bit more positive? Okay. That's at least what we think. Of course, then we're talking about booming, so don't drift away. And then what I said, okay, on the oil and gas, we don't see big orders.
But on the other hand, you see the oil price a bit better. If you see the statistics in Houston, the rigs used, yes, it gets a little bit more positive. And that's also what we see in our business. And by this, Anzula, I suggest we go for the questions.
We continue.
So please, can you the operator please repeat the procedure for the questions on the conference call, please? As usual, I look around the room. There seems to be very few hands in the air for the moment in Naka. Case. So we go straight to the first question on the conference call now.
Our first question comes from the line of Klas Balian from Citi. Please go ahead. Your line is
open. Yes. Hi, Ronny. Hi, Anzou. It's Klas from Citi.
A couple of questions, please. Firstly, looking ahead and thinking about where the margin can go in Mining and Rock. Some suppliers in Mining seem to be of the view that the margin can go back to previous peak levels even if volumes don't return as the cost cutting has been structural. But then we have higher raw materials, pricing is still weak. I think Caterpillar yesterday talked about the need to increase incentive compensation.
The drop through for you is good right now, but shouldn't the incrementals fade when growth returns as costs go back up? I mean, I struggle to see for you why the margin should return to the 24%, 25%.
So what was only one question? Okay. Yes. Okay. How much Of course, what is maybe we can first say what was the reason why the margin was so low.
To start with that, I think, first, I think we got in the equipment, a series under absorption because we know that in some businesses, the equipment sales dropped by 60%, 70%. So and then you have to make yes, to take decisions, what do you do with your engineers, what do you do with your facilities. And we kept on that. So of course, once you get a little bit better absorption on your equipment, of course, the flow through, yes, will be positive again. That whereas today, we talk.
On the other hand, when you sell more equipment, their profitability is not so high as you have that in your service business. So you get another mix effect. But I think if volume develops like this and currencies, because you should not forget currencies in certain countries like Australia, South Africa, Brazil, which can also hit a little bit. I think when currencies are developing kiriti spite of us and
we get a
little bit more volume, I think we should get a reasonable improvement on our margin. Will it be 2024, 2025? I will take that question, and I will put it forward next week to the business of mining. So it said they expect from you 'twenty four, 'twenty five. So next time, Claus, you should ask me that question again.
But he didn't. So that's what he said. If I just add on a little bit, Claus, to your observation about the flow through, That's also our view that if you have an improvement in the beginning, as we have said many times now, you get the good absorption of the costs. And then when it starts to become quarter after quarter of a somewhat sequential and continuous growth, our business model will show, I. E, we don't have a lot of fixed costs.
So we cannot have we cannot expect to have a tremendous high flow through percentage in the normalized or over a period. So that I agree with you. Then the volume in the next couple of years will decide how high the margin can come. That is, of course, impossible to say. But I recognize what you say about the flow through that cannot be seen as a normal one going forward, Nous?
Of course, we get the R and D and all that part of that. But okay, I'm you heard me saying I'm pleased with the 20%. So the 2% should be always be there.
Yes. That's it. I mean, you're thinking that higher raw materials pricing is still weak when we serve with the miners. And you obviously need to pay your salespeople. You haven't paid them for a while, I suppose.
I mean, to the same extent, you did at the peak. So
But just of course, now I'm shooting maybe myself in the foot. But I think when you go higher raw material prices, I think also normally that's also a good argument to increase prices for products. So one is most of the time compensating from that part because also that means also our customers make more profit. A lot of things go a little bit easier.
Yes. My second question is on pricing. So Cat has announced price increases as cost inflation is higher, and we can see it in their numbers. We can't see pricing moving higher up for you yet. Are you moving prices in the market?
Or do you think that your Asset Light business model can cope with the cost pressures?
Yes. Of course, we prices is always a better one. And with the low inflation environment, it's even more difficult. But we work on that. There is a slight positive price increase.
It's not as we used to have because, okay, you see also the inflation is much less than before. But we all see the statistics on inflation, the wages. So there is definitely more and more argumentation and justification for getting better prices. So I'm not so negative on that part.
My final one, very brief, on VT and the impact from currency. Hansel, out of the EUR 270,000,000 in the bridge in VT, how much was VT and how much was the impact from the weakly pound, if you could?
Well, there is a good positive effect on BT, but let's come back to specific numbers when we have them reported as a separate business area. We will do that in Q1, Klas. And but of course, you know that the pound has developed in a certain way. They are strong in sales in Asia and also North America. So of course, they have benefited.
So sorry. Korean won. Yes, and the Korean won is also an important factor for them, not so much for CT and So of course, they have benefited more on that, but without going into details.
Thank you, guys.
Thank you. Our next question comes from Peter Friedan from Handelsbanken Capital Markets. Please go ahead. Your line is open.
Thank you. Could I please continue with the CT and vacuum sort of bridge to sort of open up that box a bit. The compressor pure margin was at least likely weaker than I expect. On the other hand, the vacuum one was very strong. So could you help us maybe, Hans Holger, with the profit bridge for vacuum to begin with?
And also explain a bit on the pure compressor side, what sort of diluted profitability if it was mix or simply that the leverage there were weaker?
Yes, I understood. But I repeat again, let's I cannot go into details of the profit bridge since we don't have reported numbers per VT and CP. Let's come back to that. But as I said to class before, they have a stronger positive help from currency in the numbers. And it's also important to make that, perhaps I should have made it immediately, that the compressor technique business area in this quarter reported a DKK 50,000,000 positive from a release of pension provisions and some negatives from restructuring.
Both these two items were in vacuum technique. So of course, the report the numbers you see on the website for vacuum technique are somewhat inflated by that, and you can make out how much. So it's not that CT has the positive and vacuum, the negative effect and so on. It was both in vacuum technique. I think on the qualification of what you said, a little bit lower margin than expected on CT, I'll let Ronny explain a little bit and comment on that.
Yes. Of course, Peter, when you look at the figures and the figures, when I look them by business line or divisions, as we call them, I think they are the service business is at a good solid profit. If I take the industrial compressors, good profitability. Our medical business at the same level. Where we get a little bit headwind, it's mainly on the gas and process business.
And there, we have low volume and we're also taking some costs, which we have not reported separately as restructuring, but we are cleaning. At the same time as we do restructuring, we're also cleaning certain areas because, okay, that makes it again stronger for the future. And that is what if you and it's fantastic that you guys just pop it, that is one of the reasons. And then we had a bit of transaction cost from here and there that from certain small acquisitions, which maybe brought it down. But if I really look to it, I am not at all disappointed with the profitability level of CP.
There is nothing to worry about. Okay.
That's great clarification. That's what I expected. You mentioned service growth sort of across the board. Could you help us a bit about the growth level of service for the entire company on organic level? And also to Hans Ola, if I may, inventory to sales continue to come down.
Inventory is flat. We have seen that sort of development for some time now after the inflation in sort of the emerging markets expansion after 2,000 and What would you say would be a correct inventory to sales ratio for the new Atlas Copco?
Yes. And that last one, I will also take Peter because you take that because that's a management question that you ask. No, but on service, it is safe to say a single digit, mid single digit development. Maybe on that part, you should put yourself, I think I don't have the figures by the comma in my head, but it was that level you should really take into account.
Not 5%.
No, no, no. A bit lower a bit on the say, the thin mid-five. Then on inventory, what we really have been doing over the last 2, 3 years, as you see our net working capital, of course, it's not always easy when you get the acquisitions, but we have really and you see it in the cash flow. There you can see it. See that we have been able to reduce our net working capital, I think.
And that is mainly on the inventory side where we have done good development. So in most of the business areas, also in MR, So I'm very pleased. I believe there is still more to take, and that's the reason I want to say that. And then I think we have the payables where we also have worked hard the last 2, 3 years and with a good success. On receivables, it's more or less at the same level.
And okay, the quality of receivables is also a little bit improved. So from that total, the net working capital is a better quality and is a bit lower than if we take it over the 2, 3 years. But I believe, now to summarize 'seventeen, that we still can do more. So there still can come cash out of the net working capital. That's my
belief. I'll get back in line with more questions. Thank you.
Thank you. Next question please.
Thank you. Our next question comes from the line of Ben Muslin from Morgan Stanley. Please go ahead. Your line is open.
Yes, thank you. Hi, Ronny. Hi, Hanzola. Just coming back to the vacuum margin, which I think a lot of people are focused on. Can you just say how much labeled contribution in the quarter in terms of EBIT or the EBIT margin that it's currently running at, I guess, pre and post PPA, if that makes a difference?
Thank you.
You remember, since the acquisition, we have indicated that including the PPA, which is actually what is affecting the numbers you see, we are running at the sort of a mid single digit type of profitability. And that because it can be slightly different between 1 quarter and another, I'm not referring exactly to the 4th quarter then, but something of that nature. And then we have ambitions, of course, gradually as the business grows, but also the profitability comes up to the levels that we have indicated before. But whatever way you count, whatever numbers you make without having them from me, you come to a very strong Edwards, let's call it, or vacuum technique without labels and CSK acquisitions was is very strong. And that comes back to what we said before.
This very strong top line development has given quite a lot of flow through of profitability in this space where the growth is there. We're sometimes surprised how you can ramp up capacities in that short period of time as they have been able to do. So you have the numbers on the website for VT margins, and you see that they are, at this point in time, higher than CT, even though we report them here as one business area for the time being. But again, it's a, it's a little bit helped by this net items affecting. And then in spite of the dilution from labeled, they are at that high level.
So that's an impressive number in the 4th quarter.
Yes. And on label, Ben, I think you should you heard what Hans Ole said on the margin. And of course, we have the plan which is in place to at a strategic plan to bring it to a good profitability level.
Which are the restructuring? Yes, which
is the work, the restructuring, but Hanzula hinting to. And that will take us 2 to 3 years. That because it's moving of operations, it's reducing yield, it's investing there. That is taking place now as I'm speaking now.
And then maybe just following up on vacuum. I mean, there is very strong momentum in those markets at the moment. Industry peers have said it looks good going forward. But what do you see in terms of you've got a very high base coming into 2017 in terms of orders. What scope do you see to still grow off that base this year?
Thank you.
Yes. Good question. If we take the horizon we have, which is 3 to 6 months more or less, and that is talking to the TCMCs, the Intels and the Samsung of this world. The guys who really have the day by day contact are still positive. So the high space, like you said, that I think they don't talk it down.
They don't talk it up in the same magnitude as we had it, but they continue to be positive. Also the flat screen investments is also what there is momentum. So that's mainly also in China, as you know. So that's good investment. So yes, we you have not heard me, and I've said it even in my outlook, when I said to expect to be somewhat higher, it's taken into account that we expect that semi, flat screen and everything around that keeps that level.
And that's as always, of course, in the near term outlook. When it comes to your question on full 2017, we don't have that visibility yet, and we will have to come back down on that one.
And maybe you should wonder how can they accelerate on this vacuum basically so quickly because they didn't hint to that. And that was for me also a lesson I learned this quarter, how many of how the agility is working in our organization. And if you take like in Korea, I learned that you had Monday, Tuesday, Wednesday, Thursday, Friday, Friday, Friday. So And then Monday. And then Monday.
So they go on. And that means that suddenly you can increase your capacity with 40%. And that's the way it works in that country. And that's also the way Samsung and TCMC expect you to be. So that is really top of agility, which, I must say, I learned last quarter.
Got it. Thanks very much. Have a nice weekend.
Thank you. It's not in London. Friday, Friday, Friday.
And we have another question from the telephone line.
Our next question comes from the line of Andreas Willi from JPMorgan. Please go ahead. Your line is open.
Yes. Good afternoon, Roni and Han Tol. Some of my questions have been answered. Maybe just a follow-up on your capacity question and answer on the vacuum business and particularly on the semi side. Is there further room to go?
Are you thinking about proper capacity expansion in that business? And if you look back, Edvard seems to be above 30% EBIT margins now. How does that compare to where it was historically at times when we had kind of this boom in sales growth? And how much of the improvement may be structural also in terms of the downside cyclicality? Because historically, adverts can go could go from a very high margin to a very low margin very quickly.
What have you changed in the way that it's run-in terms of making those very high margins more sustainable?
I think when you look to Edwards and I think also that process was already started before Atlas Copco acquired. They have done really revamping or start revamping of the whole supply chain and made it much more agile, much more fit for this agility, which is required in this world. And that's what we have done is even we took on that and we even, yes, improve that. Like I said, there is always a better way. That was my saying.
And there is the Friday, Friday, Friday, Monday, what you see. And also to set up, to organize like that, also make sure your supply chain is ready for that, that you can boost your capacity up and down also so that you have cost agility and capacity agility. And that, I think, we have improved. Another part what we have gradually improved is also to work further on the resilience. Are we there yet where I feel confident or feel satisfied?
No. I think there is definitely more what we can do on the resilient part. So when you look then to the profitability, what you said 30%, of course, there is some extras in that you maybe should take out to make it. It is a I think it can compete from a profitability point of view with a traditional CT. So that is also where we position it.
Now today, semi is a bit higher capacity, but we also get the Leibold. But as we go, we will always get some good summers and bad winters in the business. So I think it we can and that's what I think I position myself. I think, is a look alike of the CT business.
And in that resilience strategy is, of course, growing the service business, which is happening as we speak. So hopefully, that is also something that will help us in the
next cycle. But you cannot compare, Bres, I think, say, the Edwards of 6, 7 years ago is not the same Edwards as we have today. So you should take the Edwards over the last 3, 4 years.
Good.
And a follow-up question quickly on U. S. Import exports. Is there any mismatch from your side that you see in terms of local production versus imports and exports? And how you could benefit from a potential tax reform?
Do you pay a relatively high tax rate there in the U. S. And could get a benefit there?
I think I did for myself also because we are today the Board meeting, and I felt that I'm for sure that question I've got also in the Board. I think for me, when something happens, there were 2 entrants I took. Is it changing our competitive landscape? So in other words, are the competitors in compressors, in vacuum, in the tools, in the mining, do they have a more favorable American content? No, almost nothing.
It more or less we play more or less same. So if something happen, every competitor has the same pain or the same favorites. Then the second one, of course, when you get import duties or whatever, barriers or walls or whatever, and you have to pay for it, yes, you get a higher cost. And it's always a bit of, yes, lagging time before you can increase your prices. So that could hit the profitability in that case.
So that's the way I came to the conclusion when I made an analysis with a couple of my collaborators around that. So competitiveness, I don't see a big difference because we also produce in U. S. We have several factories. Price, yes, if you get a higher cost.
But again, that's also the same for everybody.
No big drama,
by the way.
No big drama. Let's hope it doesn't happen.
Thank you. Next question, please.
Thank you. Our next question comes from the line of Guillermo Peigneux from UBS. Please go ahead. Your line is open.
Thank you. Good afternoon, Roni. Good afternoon, Hans Ola. Just a couple of follow ups really. One is regarding under absorption and underutilization debate.
I guess, now you are a bit busier before on especially on mining. And I was wondering whether you could share with us the utilization levels utilization rate levels of your plants, if you could. And then I have a follow-up later on.
I would love to do that, but I don't have debt like that because we don't measure. I don't follow it up indeed, because the factory managers followed it up, but I don't have any aggregate level on that one. I can tell you that we still have capacity to increase. So the orders can come. So especially on the mining side, although we look, we said, okay, it's positive, we have good increase now relative on the mining side, but still the magnitude of the equipment is not from that level that the capacity certainly becomes under there is still under absorption.
You can take it. And that goes back to the question, I think it was Klas who asked about the margin. There is still, yes, room for
Yes, I understood. I wanted to ask how much room. But I guess
I guess I don't know. I don't calculate it like that whenever. Of course, what we do, Anzula and I, we look to the profitability on the equipment side and the profitability on the service side, and that is what we track.
Yes. And then the follow-up is maybe it's also a follow-up on glass, but it's pricing sequentially rather than year over year. Can you share with us whether you are trying to or you have seen an improvement on the pricing trends sequentially rather than year over year? Have you seen any willingness to from your customers to accept maybe higher tickets on some of your new products?
Yes. There is first, when you come to price, you should make this difference between service pricing and equipment pricing. Service pricing is caused a bit with the inflation, which helps you and then, of course, with new contracts where you have to position you and see, okay, where is the competitiveness. So there, okay, you have to say every year a bit of a negotiation to see what is the labor content, how much labor increase you have, labor cost increase you have. That has never been a big one, especially when there is no big inflation.
When it comes to products, I think you know our products and our customers are not buying every day. So these products which you bought in 2012 and you buy a new one in 2017, yes, they are not comparable. So it's again a new offer. And what we try is when we have a new design is always to create more value for the customer, what we call boost the benefits for your customer. And on the other hand, yes, you try to get a part of that benefit, you try to get that.
So that is the way it works and then you come into competitiveness. Is it really going strong? No. You see it because we reported even 0, but it's not negative. And that is what we watch.
We had several discussions internally. It's maybe now the time to work a bit on that part. But it feels again different in every I need maybe 20 minutes to explain you which business is doing great, which is a bit less. And maybe next time when we meet, ask the question again, then I will explain to you a bit.
Thank you very much. Have a good weekend as well.
Thank you. Thank you. More questions. We have, I know.
Thank you. Our next question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is open.
Yes, good afternoon. Thanks for taking my questions. Firstly, Hans Ul, if you could just come back to us maybe if you haven't got the figure now, but the PPA charge, I think, was €924,000,000 in 2015. If you could give us an idea of what it was in 2016 and what perhaps the run rate going forward will be? The second question is around the plus 4% organic orders in compressor technique on its own excluding vacuum And the comments you made around gas and process in the text, it's quite positive actually in terms of improvements.
I think it's first half over a year or so that it's been positive. And you're citing the Middle East as well, which is surprising. But given that that's perhaps a swing in the profitability of the underlying compressor technique margin, perhaps you could give us an idea of what that may mean in terms of improvement into next year. And just finally, around the vacuum technique margin, so was it right then, if I understood what you're saying, is the restructuring and the net of the provision, that's the pension change or positive number there was plus 50,000,000 and that's all in the vacuum technique EBIT number, which was 1131 on the web site. So that means it was only 1081?
That's correct. It was all in VT.
Okay. But there were some more charges separately in compressor technique, I think, you indicated as well.
Yes. Well, there is always in every quarter, as Ronnie has commented many, many times that we do things on a continuous basis, right, to prepare for whatever downturn in the future or better efficiency or anything. So these type of things are always more or less in the numbers. And it's true also this quarter, let's
put it in.
Yes. And sometimes a little bit more than others.
Sometimes a little bit more than others,
yes. Yes. And that is a bit what I was alluding in the previous question when it was CT when I said, yes, I think most divisions are okay, except Cars and Process, which is tough. On volume level, so lower absorption. But on top of that, we're doing a bit more of cleaning up to do that.
And to answer your orders, yes, you it right. I think quarter on quarter, it has improved, but it's still at a low level. And that is what I was hinting. And of course, you see that then because sometimes these orders are in China, some disorders are in U. S.
Because they're so low, if you get one, yes, it makes a difference in that quarter, in that region. And this time, it was in the Middle East.
But is there anything specifically around the immediate end markets for that, that could make us feel that things have improved from this low level?
Or I'm not at all on that camp that this has improved. Of course, you because there are of course, there are always some business. But in specific, that business where we are, I don't see yet really light. You see the it's the oil and gas. And if you talk to the Shell guys and the step oil people, you would see, okay, they're still in their shrinking mode and really very careful.
That means also, of course, there is not much money for the contractors. Of course, on the other hand, oil price is more positive. The utilization of the rigs is a little bit higher. Yes, will something coming? Of course, we'll never know because there are good indicators, but I have not seen that yet.
And if you see the comparison, because you say, yes, but it's positive, yes, I think last year, it was even worse.
Okay. Industrial Compressors was down in the U. S. And again, with everything that's going on there, do you feel that the mood has changed in that particular area at all?
Yes. I'm on the industrial compressors. I'm, say, cautious positive. I don't want to blow it up here. I think it's good development in China, it's good development in Europe and it's good development in U.
S. Even with the things that is happening, I think it's a good development there.
Okay. And then just finally, so the PPA.
Yes. I you were absolutely right in your assumption that I don't have it in my head, Graham. So I take note, and I will give you whatever I can say. Otherwise, it will be in the annual report, of course. But I we can come back to you on that.
Okay. Thank you.
Yes. We can still have a few more questions. Let's say take 2 more questions, and then we will have to wrap it up.
Thank you. Our next question comes from the line of Markus
Almert here. Just a couple of quick ones. First of all, you're right that the African Middle East did not see an increase in binding equipment. Is that a sign that both copper and gold, which is made a lot in Africa, is weak? And are there any commodities where you see stronger growth than others?
Or is it just a question here of orders being very low and just a couple of more orders just swing slot?
That's my first question, please.
Yes. I think you're already giving the answer. Yes, I think that is for Middle East, Africa. I think we had a very year on year soft development in May, primarily in South Africa because that's the biggest part. Of course, you can see a bit on Tanzania side, but it was soft there.
I think what makes the difference and why is it around copper, copper, zinc, that's where you see investments going on now. That is and then we talk about the plus on the mining side, these are the 2 commodities which drive this.
Okay. And then I just wanted to ask you about follow on to the previous question about industrial compressors. Just talk about industrial products in general. Do you see the same kind of trends? And if you could talk a little bit what you saw sequentially in North America, in particular, throughout the quarter, was any increasing strength for industrial products in general?
Or is it flattish, but there's better mood? Is it more talk? Or do you actually see it in numbers and did it accelerate throughout the quarter? Thanks.
Definitely, the mood is positive. If I talk to our guys from a business point of view, the mood is there is slight positive on that area. I think that there is good yes, I think it's of course, you cannot expect in that business that it goes more than double digit, but it is positive. I am like I said also when I was elaborating on the outlook, when I mentioned really U. S, And I mentioned U.
S. I didn't talk about North America, say U. S. That is what I hear from our people, say the feet in the street, they are positive.
Okay. Thank you.
Thanks a lot. And then we have a final question or we have to stop.
Yes. Our final question comes from the line of Lars Bralson from Barclays. Please go ahead. Your line is open.
Hi, Roni and Zola, thanks. I'll keep it to 1 and then maybe it's the quick follow-up. Just on mining, I mean, you've given us year over year order trends for your mining segments for the last 5 years. And now for consumables, you've taken it out and replaced it with a revenue trend. I wasn't too pleased about that.
Can you help me with the year over year order trend in consumables in Q4? And more generally on consumables, how is gold price volatility impacting that part of your business? And taken from your somewhat more cautious outlook, it sounded like, Ronny, on mining, how should we think about the shorter cycle business here going into 2017?
Yes. On your it's more that when it comes to recurring revenues like consumables and service, normally, there is not a big difference between orders and revenue. It's not where we have large orders on hand that distorts between 1 quarter and another. So don't read too much into it. It's perhaps just a slip of the pen almost.
So it's been, as we have said for the last two quarters, I think that consumables have come back, and we've done better than in the previous years. Then in a single quarter like Q4, yes, it doesn't necessarily have to match that trend every quarter. But we have seen a slightly positive trend in the last half year or something like that.
You can count on that last quarter and Zula said it's a positive trend on the consumables.
I guess the point is if I exclude FX sorry, Ronen, but if I exclude FX, the order intake was down sequentially. And I'm trying to understand what it is sequentially that is not improving for you outside of civil.
But I think you take you need to take them seasonality in and here and there. So if I see our factories, the utilization of our factories, if I just take that one, it's significant good of higher, I was going to say. It is a positive trend, Lars, that for me, that is also what made me saying because it's a bit of a quality check for me. When I see ore is coming in mining and I see the service doing well, what is my next question is always what is our consumables doing? And that is that has a positive trend.
Okay. Thanks, guys.
Good. So with that, I thank everybody for participating and wish you a very nice weekend. I hope to hear and see you back after the Q1 release, which will be on the 26th April, if I'm not completely wrong. So thanks for attending today. Bye bye.