Ladies and gentlemen, welcome to the Atlas Copco Conference Call. Today, I'm pleased to present Hans Ole Meyer. For the 1st part of this call, all participants will be in a listen only mode.
Thank you very much. And also from me and my boss, Ronny Lettin, the CEO of Atlas Copco, is with me here. Very welcome to the Q1 conference call for Atlas Copco Group. We have today also the Annual General Meeting just after this call. So as we have tended to do in previous years as well, I we will try to keep it to an hour, this call.
And hence, I would very much urge everyone that has questions in the Q and A sessions to take one question only per person, and then we might be able to make a second round even. Highly unlikely, I think, but still we'll try to do that. So without further ado, I'll leave the word over to Ronny, and he gives his comments on the Q1.
Okay. Thank you. Thank you, Zola, and good morning and good afternoon to all of you. As usual, I will go through the slides and try not to lose you during the presentation. So you don't forget to refer to which slide I'm talking about.
So let's start immediately with the Q1 slide saying the Q1 in brief. We talk about the business. We have a stable order intake. I think because that is one highlight I would like to stress. And on the other hand, and that I'm sure is not a surprise for most of you following us a weak mining.
So I'm rather pleased with the stable order intake given the headwinds we have seen in mining, but it seems to be that we have found a couple other businesses which are growing. And one of them is service, which we keep going on, although we see a little bit tougher times on the mining and rock excavation part. But we see a reasonable good order income for the compressor side and a very strong one on the vacuum side. As you remember, a couple of years back, we did this acquisition, and it seems to be that we are on the right track with that one. Then when it comes to profit and profitability, given the lower revenue, we come out with a bit lower revenue, lower profit and profitability, mainly headwind from currency, as it says on the slide, hit and also partly to the lower profitability on mining, which I will elaborate a little bit later on.
During the quarter and also early April, so it's up to date, we have already announced 5 acquisitions. Most of them are smaller except maybe the acquisition of VIAAC, the compressor company in Italy. Then I'm going to the next slide, the figures where you see it says also there the top line unchanged organically when it comes to received. So I'm pleased with that. The revenue, a bit softer, a bit typical, not always, but we saw that it was a bit expected for us that Q1 would be a bit softer on output side and making an adjusted operating profit of close to SEK 4,200,000,000 and a margin of 18%.
With headwind from currency and then a softer mining part. Okay. The rest of the figures, you can see the operating cash flow we have here, but Hans Ulle will also elaborate a bit further on that where it comes from. But I think it's a solid operating cash flow, especially for the Q1. If we then look to the regions and start with Europe, we saw a very, I'd say, a solid development almost in all countries.
If we just maybe make a bit of a detailed analysis, you can say that UK was a bit softer, but that is because had a very large order last year. So the comparison was a bit tougher there. But if we take that way, I think it was rather positive development overall in Europe and especially also in Russia to name that country too. If I then go to North America, small minus 2%. Also in U.
S, we had a lower part because we still had the comparison with the oil and gas part, which make it a tougher comparison. So we still had that area, which is low. And then also on the mining, of course, that is not moving ahead and where we have a bit softer construction part. If I then go to the southern part, yes, there you see double digit, digit minus, okay, and that is not a surprise for any one of you, a very weak Brazil, which really dragged down the region. If I then move to Middle East Africa, also there, we get a tough minus 12.
I think it's a little bit easy to explain. It's the oil and gas, what you add on the Middle East part. And of course, mining, where we have yes, that sector is down and of course, Africa is a lot about mining. So that is easy to explain. If we then go to Asia, and there we see a strong plus 13, So that is nice to see.
And who is the champion? The champion is India this time. So there, we had a very solid development in all the different business areas. So it's good on the industrial side, on the construction side and even on the mining side. We see on all the different areas strong development in that country.
And it's always nice to see. And of course, then we take the other big country, China, where we also saw in our area a reasonable positive development that, of course, that is mixed because, okay, there are couple of sectors who are lower and some of them are higher, but it was a positive development. And I can maybe sure there will be a question, I can elaborate a bit more on that one. If we then go to the next slide where we see the growth on organic growth, which is flat, and that is the challenge we have in front of us. If we take then the next one, which is included structural changes or acquisitions, there you see a little bit more positive development where in Q1, the slight positive, but of course, mainly coming from the acquisitions in previous periods.
If we then go to the sales bridge, development there. Currency had been, you have already seen that how much it was. So that is changing compared to last year. And the price volume in order to see it, as I already said before, was a flat development, which I was pleased with that, especially given the headwinds in some sectors and in some countries like Brazil and sectors like mining. If we then go to the different sectors of different business areas, I jumped immediately to compressor technique.
So I skipped one slide. So strong organic growth, 7% up. So it was a long time we had set freedom to save coming from a very solid vacuum solution where we see good development in the semi, in the flat screen and in the service. So a good development in that area. On the compressor side, we see, yes, a stable order development in industrial compressors.
And maybe one can say why is Roni now so delighted about that, but you should see that a couple of regions have a tough situation, but I think we succeed to get it back on most on the positive side. So that's good. I think I'm sure we are working hard here in gaining share, which is great. But of course, unfortunately, the gas in process. So the big, big ticket is still a tough area to be in.
And service, compressor service is rock solid and developing further. The acquisition of Wiek, I elaborated on that one. Also, we have deepened further our go to market. So our feet on the street is further developing and with the acquisition also of Copa Distributors. And we are still on the filing of Leibold when it comes to the antitrust.
So we would see when that will end. Will it be like it says here, Q3, will it be a month earlier? We are doing the work, which we need to do with the authorities, and we'll see when this comes in the books. And the operating margin, a solid operating margin of 21.5%. So that was on compressor technique.
If we then go to industrial technique, There, I think it has a healthy demand level. It's at a good level. We got some headwind from currency. And second, also, when you make a comparison, one should know when we acquired Handlock, this self piercing rivets, That is a business which has sometimes when you start up a big equipment order and then for many years, it has consumables. And of course, when you make a comparison with last year, Q1, we had a big order from equipment.
So when you make a comparison, it's different. Unfortunately, you don't get this big equipment orders every month. So from that point of view, it was a tougher comparison. But on the other hand, business was robust. We had a stable order intake from general industry.
Service is doc solid and is growing at a good level. And the operating margin looks maybe a little bit weak, but if you also know that this business has a higher exposure to some currencies which were negatively affected. I think if you made that correction, I think you see that you come up more or less at the same level of profitability. So for me as the CEO, nothing to worry about that just to make sure we get more of this. Mining and Rock Excavation, another business area where we have different talks about.
And unfortunately, I should say, continue to be soft, weak demand. That also on the orders from equipment, it still stay at a tough level. So it's rather yes, I can only say weak. Service was also slightly negative. And we know, I think reading following the whole situation in the mining area, We see some mines closed.
We see some mines to slow down. What has an effect on service work, but also has an effect on the consumables. And of course, that is happening as we speak. Although we still believe that all the other initiatives which we take on the service side that over a period we can come up with good to grow possibilities and good services to the mines, which we are doing as I'm speaking. So I'm on that side, when it comes to service and consumables, not over worried that, that is a new trend that it will slide down for the next coming whatever quarters.
So the operating margin, yes, a bit weak, 15.1 percent. Of course, 1, the currency, let's blame that part this time. It is significant for them. But on the other hand, also the volume, which played against them.
But on
the other hand, if I make here the comparison, we should have had a little bit more on that part. And I'm not going to say that this is the new level. On the contrary, I think this can be at a better level. So we are taking also further efficiency measures, which we have also taken and which are also probably embedded in the 15.1%. But we take these measures as we talk, and we do it continuously to make sure our organization is fit to create sustainable profitable growth for the future.
On Construction Technique, if I'm going then to that business area, the last one, we had on equipment was softer. And if we can take it really too big areas, I think Brazil, very tough. If we take it on the road construction, it's extremely tough. If we take it on the compressors and assembly systems. It's a really tough place to be now when you are in Brazil and in construction.
But on the other hand, if you're then on the other side, in the other continent, if you're in India, then you are dancing on the table because it's really fantastic development in India and becomes one of our largest markets now in construction technique in India. And we do very well there. We have good products and good local presence. So we're also gaining share in that market. Vector business, developing fine.
As you also know, that business also has exposure to oil and gas, but we succeed to come up with good development in other areas. So I think in that division, we're doing great work. And also the service business in Construction Technik is also developing at a good level. So operating margins, solid even with negative volume effect, which we had in some equipment factories and currencies, we still are able to come up with a margin of 12%. So I think it's good work in that business area.
So they have adapted to the new level and increased where the possibilities are. If you look to the picture, I would like also to see those who have been visiting Bauma, one of the biggest exhibition on earth when it comes to construction equipment. Also there, we had a lot of new equipment shown. So and it was a very successful exhibition. Our visitors were delighted to the all the new innovative products.
I'm sure also that we would see in the quarters to come, We will see that in our growth levels and in our profitability levels. So I hope with this last statement, I'm not taken back by some of you. But then let's go then to the slide of the profitability. And then I'm handing over also to Anzula. I think you see operating profit, yes, you see the 2018, I think, is more or less the figures I have already said.
Maybe I can hand over this to Hamzula. Yes. Let's
make the usual few comments on the financials and on the tax situation before we move on. As you noticed in the report, both the interest net and financial net was lower than Q1 last year on the back of continuous interest rate reductions on the one hand and a little bit of better or less negative translation effects here and there out in the world where we unfortunately need to borrow in foreign currency loans in some places. So that was it. If we look ahead, I would estimate that we are still expecting to be close to €200,000,000 negative for interest net, up to that amount, partly due to the payments that we have in front of us of the dividends, etcetera. Then on that note, on looking forward, we also have already actually in April, we have made some repurchases of one of our outstanding bond loans, one that has a maturity in Q2 2017.
And as a way of managing the refinancing risk and seeing the low interest rate levels currently, we have repurchased about USD 300,000,000 of that USD 800,000,000 loan, which, of course, will bring a certain onetime negative effect in the second quarter to the tune of about SEK 60,000,000, we estimate. The benefit from doing that is because of the refinancing risk by then borrowing longer money already today is, of course, one main benefit. But at the same time, we will also have a little bit lower run rate of interest cost in the next couple of quarters already. If we move a little bit further down on the tax, of course, the report spends a few words on the Belgian situation. As many of you are already very well familiar with, we made a provision of €300,000,000 in already in Q4 based on the fact that the European Union has challenged Belgium for its way of handling excess profit rulings, and they claim it to be an illegal state aid.
Since we talked in January, the Belgian state has appealed, And we also say here in the report that PlusCopco is preparing its own appeal, and that will happen in a few weeks' time, we hope. So we don't know where this will end, of course. But in the meantime, we have taken the provision. And we also believe that in the course of this year, we will pay the amount in the way of an escrow account so that we are not risking that more interest cost will be put on top of what we have already provided for. That would be the only reason for doing it, but it's also what we foresee will happen during 2016.
If we then move on and sorry, if on debt tax, I would also say that going forward, you saw that due to this new situation in Belgium, our tax rate is lifted by about 3 to 3.5 percentage points. You saw that it was just about 27%, and that's also the level that we expect for the short term future going forward. If we then move on, I think it's Slide 14. You have the so called profit bridge there. I don't want to dwell too much on that first page.
You can see one element in the profit bridge is helping us, and that's on the share based long term incentive programs, which was very negative last year and more or less neutral in this quarter. So that's helping. But then, of course, if we look at the next page, Slide 15, you can see the different business areas. And I would then, apart from this options effect, which is in corporate, you can see that we have a negative effect on currencies. You can see it pretty severe on 3 out of 4 business areas if you see the effect on the sales and the profit line.
You can also see that we have, on compressor technique, handled the revenue drop pretty well in this quarter. The opposite perhaps could be said about mining and rock excavation. And when it comes to industrial technique, the numbers are so close to 0. So I don't think that you should read too much into it. And then when we come to the construction technique, they've actually improved if we strip out currency and onetime items whilst revenue has dropped.
So that is a little bit the summary of you can almost say it like this, that in the bridge versus last year, the profit is down about $350,000,000 for the group. Dollars 250,000,000 is helped by this not having the negative on the options. So the rest, dollars 600,000,000 to explain, is dollars 400,000,000 from currency and about $200,000,000 is related to mining and rock excavation, you can say. If we then move to the balance sheet, I'm trying to speed up a little bit. I don't want to say too well, there's not much to say.
We have a seasonal buildup of inventory in Q1, which we expect, and we have seen it every year. And then I'm comparing December 31 with March 31, 2016. Otherwise, pretty undramatic. We generate cash, of course. So that is increasing the balance sheet a little bit.
And finally, put it to cash flow. We have slightly lower operating cash flow, but still more than DKK 3,000,000,000 in the quarter. It would have been more or less the same as last year hadn't it been for the fact that in the Q1, we pay a little bit more of preliminary taxes than we did last year, as you can see. Otherwise, it's pretty comparable with last year. So with that, I hand it over to Ronny again for the outlook.
Yes. And that is not changed. So it's the same as last time. So we believe that looking to the market that the demand of our businesses of the mix of our businesses will remain more or less at the same level. So and by this, Hamzula, I think we can better go to the question.
Yes. Ready for the question. I repeat, and due to this with the AGM, we'd really like you to restrict yourself to one question if absolutely needed. Of course, that could be a short quick follow-up, but that's it. I will try to keep that in order.
So with that, I hand over just to the operator if you repeat the questions.
And our first question comes from the line of Klas Bergelind from Citi. Please go ahead. Your line is now open.
Yes. Hi Ron here. Hi, Anzula. It's Charles from Citi. Just on the margin in Mining and Rock, out of the decremental margin, the drop through of 44%, how much was mix of weaker aftermarketing throughout versus your factory load?
Okay. We don't have it exactly split like that, Klaus. And it's not the way we distribute. Of course, you will have a combination of both. Ronny pointed out that in the Q1, we had a little bit of softer top line development also for the service, which is the first time we've seen that for a while.
And of course, seeing the difference in profitability, of course, that gives an extra effect, so to speak, this time. But otherwise, as Ronny alluded to, we take a couple of measures that is preparing ourselves also for being sustainable, better profitability going forward. And that is weighing a little bit on top of the norm of the expected under absorption as you put out as you point out yourself.
Okay. Then just a very quick follow-up on gold. Still mining, so I'm not cheating. A big jump here in the price year to date. You talk about better underground quarter on quarter, but Africa and Middle East is showing orders down 12%.
I'm trying to understand that comment on underground a bit better. Is it outside of gold? Do you see the improvement? Yes.
I think yes, because we see some improvement on this part, but I think these are not big, big orders. It's here and there that we see. We see some activity coming in. Have also seen the price development, and there is definitely a little bit more positive talk about when it comes to quotation level, that doesn't mean that it lands. And I think we got a couple, yes, underground orders that we get.
But of course, I have not looked to the detail of all the different comparison country by country because I think if we take the sectors of the geographical area, I think, yes, you have a better Chile if you go on that one, South America, then you see more in India. Get a strong Russia when it comes to mining. So it's a bit spread everywhere. Thank you.
Thank you. Our next question comes from the line of James Moore from Redburn. Please go ahead. Your line is now open.
Yes. Good afternoon, everyone. Ronny, Hamzah. I think I'd also like to ask about mining margins. If 15% is not the new normal, can you perhaps help us with what you are thinking might be the new normal?
And in particular, I'm trying to get my head around mix as to whether that service point was particularly bad or not. Could you maybe help us when you look at the 3.8% drop in margin year on year, was it similar across equipment, consumable service? Or did one of those 3 see a materially bigger decline? I know you didn't disclose the numbers, but just in terms of the change, was there a particular story there?
Yes. Yes. I don't have all the number details with me, James, either. I think, of course, 1st and you know me, I think 'fifteen, no one will be happy with that. So that was for sure, and that's definitely not the new normal.
But as Hansula already said when he was answering the question of class, I think we are taking measures. We are taking people out. We are moving operations around. You have seen also our announcements. So these things are happening.
Mines are closing or slowing down. That means that you have to reduce your workforce in one area. And of course, you've got opportunities in other areas where you need to start up. So you get inefficiency in starting up and you've got releases of people in the other part, which you don't see because at the end of the day, you only see the balance. So this is happening as I speak.
And as Hansel has already alluded, I think, of course, we had expected a little bit better service part. And due to that, of course, you get because in service is 1st, it's one of the biggest entity in our operations. 2nd is also the most profitable one. And if that drops, yes, you can you are better in next than me. So you can easily make the calculation where it and that is also where we need to take the measures to come back to the new normal of the normal where we should be.
And that is more or less what you also hinted, which is also my expectations where we should be.
And just to follow-up on that. You talk of more efficiency. Can you help us maybe on timing and magnitude? Is this more of the same suit sizing or an even faster suit sizing? Or
Yes. You've seen that we have announced, I think was it a month ago, that we will close to or move to operations in U. S. We do that. I think we are doing a couple more, which even we didn't announce, which is going on.
So I think you need to give us a couple of months more to do that, and we need to work harder on that to get it back to where it should be. This is definitely and then another one, which just to give them a bit of yes, respect of the mining, I think we should not forget we have a bit of the currency part, which is also giving a bit of a hit. But on your I don't want to hide behind that. Think we could have done better on the profitability side.
Thank you very much.
Thank you. Our next question comes from the line of Markus Almirou from Kepler Cheuvreux.
Please go ahead.
Your line is now open.
Hi, this is Markus from Kepler Cheuvreux. I want to move on to the regions and ask a little bit about China and the U. S. And could you elaborate a little bit on China? What you I mean, which areas stuck out?
You saw positive growth year on year. The underlying demand sequentially, was it also a positive feel to it? The same thing with the U. S. You were talking about positive growth in the U.
S. What sticks out there? And what did you see sequentially?
Yes. I think on China, it's rather mixed. Of course, you one should also see the Q1 in China with Chinese New Year and partly moving here and there. So it's not always easy to read the full quarter because the first two months are, especially in our business, rather difficult to read. Of course, then you have a full March, which gives then a better view.
But of course, you have the 3 months together. I think what I see still a solid motor vehicle business in China, still a very solid flat screen development in China, still a very solid medical business in China, even also we see on brake compressors where we see still a good development in China. So the and now I'm talking all about the positive side on China because you were hinting a bit on that. So these areas are there, and they are not small. Of course, the ones who are weak stayed weak.
So in the comparison, it gets easier, let's be honest. But there is definitely activity in China. Less negative towards China today than it was 3 months ago. But we'll see if Dan was right or what's wrong on this part. So that is, of course, when it comes mining, still difficult.
But on the other hand, you also have read about all the big investments on the construction, which gives us opportunities in tunneling. It's because of opportunity in bigger compress, especially on the portable side. So these are the fractions we see. And China is all about for us, it's all about market share and to be much more dynamic and much more, yes, working harder there. When it comes to U.
S, of course, oil and gas still difficult, although within a couple of months, the comparison becomes easier. So from that point of view, maybe not the Q2, but the Q3 will be a bit easier because nothing happens. So that is still tough. Houston is still tough. Rental, I've also said that last time when he was talking in construction.
Yes, we haven't seen really strong ordering from them, although they don't say that it will come. That's okay. 1st, see the order and then we talk. What is still solid is on the motor vehicle. I think that keeps doing great.
I think we see good development in our business. And but that's more internal hard work. We see also good on the high torque tools where we do a good development. We did a proper acquisition a couple of years ago, and I think our work on that part is against the stream, but it's working fine. And that is, of course, a lot better.
And last but not least, our service business is growing in U. S.
And industrial compressors sequentially?
Yes. The small- to medium sized compressors because you should take away the oil and gas. Because if I answer it really straightforward, then I should say it's negative. Of course, if you start to make and excluding the oil and gas, and you remember the Quincy because we had a big exposure to oil and gas indirectly when it comes to the Guinsey. And I have said, I think it was 1 or 2 or 3 quarters ago.
If you take that away, I think the business is not bad. There is activity. There is activity.
Thank you. Our next question comes from the line of Guggenmo Panella from UBS. Please go ahead. Your line is now open.
Hi, good afternoon, Roni and Hans Ole. Thank you for your answers in advance. I wanted to ask about pricing trends actually. I think it's 4 out of the last 5 quarters, you have close to 0 or 0 pricing. And I was wondering whether this is kind of a message to the organization saying that never decline prices, you walk away from price decreases, prefer to lose the volumes?
Or will you be pushed at some point to enter the debate on declining prices?
You can come and work with Appa. Actually, yes. And of course, this happened because in some areas, of course, the world is again on the purchases because it becomes a total it becomes a supply market. And yes, and consultants are back in place and the purchases take the power. And this happened in certain areas, but you don't see it globally.
Of course, on the mining side, you have a couple areas, but there's not much equipment to negotiate about. So it's not the big thing. But it's getting tough. It's getting tough or it is tough in there because otherwise, we will report different. But you also know that since low inflation, which does not help us on the service side, so that's one thing, We will get so much price pressure, but on the other hand, we fight back also with innovation because that's the only way which justify you to get price compensation because you cannot just tell a customer I increased the price for the same product.
That doesn't work. So it's only buying new products. If you take as an example in the construction business, we come up with new equipment, which gives more value for the customer. These products, we will sell the value, and we will get definitely the right margin on that.
And maybe a follow-up. If I use an example on the same line, basically, I'm talking about pricing. Am I reading maybe some of the market signals correctly when I see that maybe in consumables and maybe in Europe, some of your closest competitors have been misbehaving in relative terms when you compare to history and recent pricing trends?
Yes. Yes. But what you want me to comment on that because if I listen to our salespeople, they always when they lose an order, it's always price. And I'm sure when I would be with the competitors and listen to their salespeople, they would say the same about us. I think it happens.
I think we should not be silly on this part. These things happen. And I think but I think in Europe, I think it happens maybe once here and there. I don't see that. I think when it comes to price, where it's always getting tougher is China.
I think there is where you have a less sophisticated supply chain where price is really number 1 and value selling is still less developed there. There you have that. So I don't see that and I will not hide behind that. That is big thing in Europe and the big thing in U. S, that it's much more value selling.
Thank you very much. I'll go back into line and ask questions later. Thank you.
Thank you.
Thank you. Our next question comes from the line of Jonathan Hanks from Goldman Sachs. Please go ahead. Your line is now open.
Hi there, Roni. Hi there, Hansel. Just a question of clarification really. I'm just wondering, did you see demand improve during the quarter from the U. S.
And China? I know China is harder to say given the New Year effect, but in the U. S. In particular, did demand accelerate from January to March?
I mean, if I start, Ronn, it's just I mean, first of all, we're not particularly happy to say, yes, this week was good, this month was bad and so on because we are not even capable of seeing it, whether it's a trend or not. So we'd rather refrain from spreading that as the truth, so to speak. The year started poorly, let's at least say that, and that sometimes happens. But it wasn't a very good start after the New Year's festivities, it looked like that.
Yes. If you take if we divide the quarter in 2, the 1st 6 weeks and the 2nd 6 weeks, I think the 2nd 6 weeks were better than the first 6 weeks. That is for sure, for sure. And that is what we have seen.
But that's as we said, I mean, that has happened other years as well that, that is the fact. So we're careful not to draw too many. As we say in Swedish, draw first, I don't know what to say in English on that. But anyway, let's leave it with that.
Okay. Thank you very much. But that's also when I hinted I think not hinted, but say, when it comes to the revenue, if you see the invoicing was a bit softer. And I think in some years, we see that. And that is what Hansel has said.
I think January was sometimes how come it is sometimes when does the year start.
Sorry not to give you a better answer, but that's what we can manage today. Sorry about that.
No problem at all. Thank you
very much.
Thank you. Our next question comes from the line of Sebastian Grutter from Exane. Please go ahead. Your line is now open.
Hi, good afternoon, Thore. One question on the compressor technique order intake. How do you explain the very strong order intake for vacuum given the news has been not great on semicon CapEx. Is it just phasing of order intake or market share gain? What's your take on this order intake in vacuum?
Well, I think when it comes to the semi common flat screen, I think that business there are some players, and you know the name of the 4, 5 players, especially on the semicon. They are investing. They're definitely putting their steps up. And so that is one part. Although, of course, I've also read that they reduced their CapEx here and there, but it doesn't affect that part of the business.
That's one. I think second, I think we do well it comes to our share of the market. I'm not saying that we have 100% market share. I would love to have it. But I think we do well.
I think we have invested a lot in new products. We have invested a lot in service and invested a lot in the right capabilities. So where the fabs are is also where we are. So from that point of view, we do write them. Also, I think when it comes to high vacuum, I think we are there as we promised to do that.
And we have, like, let's say, in Texas, we are whipping the right horses.
Okay. And just a follow-up. I mean, can you help us on the I mean, I think on sales, it's not far from 30% the vacuum share. In the order intake. Are we talking about the same?
Or is it much higher than 30%?
You take with total compressors, you mean then
Yes, total composite technique and the other intake.
Yes. I don't know it. I don't have that figure. So like because I'm not looking from that way to the business. But I can say that if you take compressor technique as we name it and you take out the vacuum part, the compressor part, the original one was not bad.
Of course, it was not really booming because we got a couple headwinds. But I was not disappointed in the development. What I've seen there, I think we like I hinted a little bit when I was elaborating on the business areas on the compressors. And then compressor compressor, I think we're gaining our foot back of our piece back where we should be or should have been a couple of years back. I think we're coming back, coming back.
Thank you. Our next question comes from the line of Peter Froelen from Handelsbanken. Please go ahead. Your line is now open.
Yes. Good afternoon. I have a couple of questions on the aftermarket. When you talk about rock solid growth for the service side in compressor, We're talking about high single digit growth year on year. And tied to that question on the aftermarket for both consumables and service and spares in mining, what's the magnitude of the drop into your use wording of down and slightly down?
What does that mean basically?
Yes. I think when it comes to the last one, it is slightly, slightly down. That so you should not look in the big numbers. So it's slightly dark, that couple of percentages that you can see that. When it comes to CT, there you can see that we are a couple of percentages up.
I can say that, Peter.
So roughly, it is the same thing as slightly down. I can't understand this, Ronny.
The positive on the one side and a negative on the
other side. The CT is a plus 1 and the MR is a minus 1.
Yes, okay.
Okay. So there
was a slight growth in city service, that's what you're saying?
Yes, yes. I think with a couple of percentages that you get on that one, yes.
That's great. Okay. I guess that's it for my one. Maybe you could offer FX guidance as a bonus answer on SOLA since I was so extremely quick.
Yes. Actually, I should
have said it. I actually forgot this. Thanks for reminding. We had $400,000,000 plus negative, as you saw, in the Q1, and that was actually a little bit more than what we expected 3 months ago. But now looking in the same way, Q2 versus Q2 last year, we don't expect it to be that much negative as in Q1, but still perhaps something to 250 negative if we would have to do the math today, so to speak.
But again, it is very sensitive to what happens at the end of the period, if it's suddenly a drop of the dollar like in March, for example, or these kind of things. So but that's the best estimate.
Thank you so much.
Thank you. Thank you.
Thank you. Our next question comes from the line of Ben Maser from Morgan Stanley. Please go ahead. Your line is now open.
Yes, thank you. Hi, Ronny. Hi, Hans over. Maybe if we can just come on to industrial technique and the slower demand you talked about on the auto side, large projects. How does the pipeline in that business look going forward?
And given the very elevated levels you see globally in terms of auto CapEx, Do you think you can continue to grow from here, from this base?
Yes. Ben, one thing is I'll repeat a bit what I said about Henrop, which is then the acquisition about the rivets, where we had a bit of a tougher comparison because we were selling a lot of equipment in Q1 last year, so which that order doesn't come because, okay, it takes you maybe every 4 years you do that. When you do a line build, you do that. So from that point of view and it was a big quarter. So from that, it is a comparison.
But if you then take that away and you look to the and I think the motor vehicle, you have heard me saying when I was elaborate about China, China is still strong. When I was talking about U. S, still strong. I didn't say much about Europe, but as you're asking, I will tell you, I think Europe is a bit tougher. There are a couple of European players who have a bit of a different challenge and also reviewing their models, which makes them also a little bit tougher for us.
So there, we see some less activity. So there is you can say there is a little bit negative where the other tools are positive. But I think on the other hand, if you look to Industrial Technique, you also have the Aerospace, which is still solid, where we're also coming up with a new product. You have heard me saying when I was elaborating on U. S.
About oil and gas and high torque, I think that is solid and then you have the service part. But industrial and deep care also has a bit of currency headwind, and that was also what was negative on the profitability. But the big part, the motor vehicle Europe is something to watch.
Okay. Thanks, Ronny. And if I have a follow-up, maybe just a very quick one on compressor technique. Is there a big difference in margins now between vacuum and the traditional compressor business?
Vacuum is slightly lower in the reported margin, not in cash flow because we do amortization. But if you take that the way, and I'm looking now also to Hanzula because I've not looked recently on that. But I think we are more or less I think maybe compression is maybe 1 digit higher, but that's maybe everything as it is today.
And then, of course, a good quarter is good for absorption and whatnot. So that is helping on that part of capacity.
Got it.
But it's a little bit too a bit longer, a little bit, but not much.
Thanks very much.
Thank you. Thank
you. Our next question comes from the line of Alastair Leslie from Societe Generale. Please go ahead. Your line is now open.
Yes, hi, good afternoon. Can you talk a little bit about the rate of service growth in China in Compressor Techni, whether that was negative in the quarter? And generally, whether you're seeing any directional change to utilization rates, service intensity in China that could maybe support a return to stronger growth from here?
Yes. And that is not it's not, let's say, to draw a real conclusion is not so easy on China. No, if you were to ask me that same question next quarter, I think I will be much more confident to talk. And the reason is that what Hans Zula also mentioned in the beginning. We see you have Chinese New Year, factories are closed, not started up.
So that is one reason why I'm a bit careful. But on the other hand, services in China, it's not so easy for a couple of sectors. And that is if you take shipyards, steel plants, coal, which are big compresses. And these sectors I've just said, they're all very low. So if you go to visit some shipyards, you would see maybe 10 compressors and only 3 are running.
Yes, you know what this stand and then it's less service. But on the other hand, there are other areas for growth where we have inroads, where we do better job. So that is happening in China as I'm speaking today.
Could you just have a quick follow-up question on MR? I'm kind of interested in the comments around the downsizing of mines. I mean, did you see that trend accelerate through the quarter? And when you're seeing that, is some of that equipment fungible? I guess some of it is stranded, but other pieces of equipment can be read through it elsewhere.
So are you seeing an increase in used equipment inventory cannibalization, etcetera?
No. I think when it comes to the closing acceleration, I have not I don't think so because I have not start to count when it happens and how much. I think that I cannot say. Of course, when a mine is slowing down or closing and it's part of a concern, of course, material, if equipment is moving around, that happens. But most of the time, what is that means that you need to do a midlife upgrade, they do further automation here and there.
And that is what I was hinting when we talked about service. You see on one hand, you see closing where you need to adapt, where you need to lay off the people. And on the other hand, they give you the machine and they want to upgrade that, then you need all the machine, all the people. So that is what is happening today in our business. And that gives, on one hand, opportunities, but on the other hand, it gives also challenges.
And of course, especially as an investor and as a CEO, you want to happen this in smooth, nice balance. And that is the challenge what we have faced today.
I am looking at the watch. I think we have time for one more question.
Okay. Our next question comes from the line of Lars Bronsson from Barclays.
Thanks. One minute, I'll keep it short. Just on the division outlook for Mining Services, Ronny, did I hear you I was a little late on the call, sorry about that. Did I hear you say you're not worried about that this is a new trend? And what are you seeing sequentially for mining service?
I mean, obviously, we haven't seen a down quarter in services for a very, very long time here, even in 2013. I wonder whether the difference here is that it's your copper business that's starting to hurt. It's obviously about a quarter of your business, and I presume your customer concentration here is quite a bit higher than it is elsewhere in your mining business.
Yes. And this is also a question I would like to answer within 3 months. It's also, for me, difficult, of course, where we're heading. If I do an analysis and talking to the head of service, he talks like I explained in the previous question. He said, yes, here is the list of all the mines where we are active, which are slowing down or closing.
And then, of course, I start to elaborate a bit further, and then he comes up with this initiative and that opportunity and that order. Yes, at the end of the day, you have to make the summation to see that you have a positive level. I personally, I don't see this as a new trend. But of course, I'm also asking that question, but I asked it a couple of weeks earlier because I've seen the figures a little bit earlier than you. But of course, that is what we have to prove in the next coming 3 to 6 months.
But I cannot give you a full straightforward you see, I sound cautious, but I see opportunities.
All right. Thanks. Thanks, Lars. And thank you, everybody, for participating and for posing your first questions at least. I'm sure you have more.
We'll try to deal with that in the next couple of hours, days weeks. With that, again, thank you from us and hope to see you, if not before, at least in July when Ronny will comment more on these service trends that he just spoke about. Thank you very much, everybody. Bye bye.
Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your