Good morning, good afternoon, and good evening to everybody to this conference call and presentation on Atlas Copco's second quarter results 2015. We are here in the Atlas Copco mine in Nacka, Sweden, but I know also that we have a lot of participants on the conference call over the line. We will follow a very traditional continuous improvement we're trying to do, but in this case, we do quite a lot the same. I realize we will have a presentation first by my boss, our CEO, Ronnie Leten. He gives his comments on the results, then we will take a questions and answer session right after that. We'll be back on that one. Right away, I'll leave it to you, Ronnie.
Should I start? Okay.
Go ahead.
Okay. Thank you, Hans Ola, good afternoon all here, and the ones on the call, wherever you are, good morning, good evening. As usual, I will flip through the presentations. I will not make it too long, you have plenty of time to ask questions. In brief, a very solid, good service business. The reason why I say it like that is because we see in all the different business areas, as also in all geographical areas, a good, solid development of our service business. Again, our strategy, our drive to create value for our customers is well received by them. An increased order intake in Europe, that's maybe the takeaway from this presentation. It's definitely a very good, solid development in Europe, almost in all countries.
Unfortunately, we see a decrease in Asia. When we talk Asia, the biggest country, especially for us, is China, and that has gone down in the quarter. Sequential, the equipment is a little bit better than Q1 this year. That's maybe also a takeaway. I think it's always nice to have records. We don't have only records in the Tour de France, but also here. I think a very good record, especially in the operating profit, because I think it's very important that what you sell is also yielding bottom line. Of course, we know, if we are a little bit modest, I think it's also from a strong impact of currency. Last but not least, that's always, I think, where the proof is, the cash flow.
I think we can say also that this quarter we had a very solid cash flow. All in all, a reasonable, solid quarter. If we now go to sell a little bit more, then it will be even a good one. Unfortunately, that is not yet. This is maybe what can help on that. You know that since many, many years, Atlas Copco has focused on innovation. We said, okay, let's also talk about that and let's see what does it mean. Here is one example, is a Compaction Tool, is the best Compaction Tool on Earth. I think also, besides that it is friendly to use, it also has been well received by the customers.
That is, I think is really what made me saying it's the best one, because also we see since we launched it in 2014, a good sales increase. Unfortunately, it does not mean 10% or 20% of our business. Anyhow, we have many of these initiatives, what made us doing a little bit better every time. In figures, you can read it. Maybe I go a little bit on the operating profit, where we came out of 19.4. If we then see two things, the restructuring cost, but on the other hand, the provision of long-term incentives because the share dropped during the quarter, which is then the positive side. If we take all these plus and minus together, we are close to almost to a 20% EBIT margin. Which I think is also a very solid one.
I think the rest of the figures, I think you can really read by yourself. Let's now go to the different regions. Europe, I have already commented on that. I think we see in almost all countries, we have seen a good development. Even France, which, maybe remember last quarter or the two quarters ago, said, yeah, Europe, okay, but I had a couple countries. In this day, I can say almost all countries are doing a very solid development. Also Germany, which of course, is the biggest economy, is doing well. Otherwise, you cannot make this +10%. Also, U.S. is doing plus. Of course, we have in a couple segments, a couple headwinds. Okay, it's not a surprise when I say oil and gas. I think you see it, and you feel it also when you are in Texas.
You see that, I think, is also when we come to North America. We also have Mexico, which is a bit softer compared to the year before. Also that made the figure not so big as we have in Europe. South America, tough place to be now, especially the biggest economy, Brazil. I think also that's not a surprise for most of you. That's also where we feel the headwind. It's an area where we need to have to adapt. Maybe one country which is still at the reasonable positive side is the copper country, and that's meaning in Chile, that they're okay, but all the rest is a minus. Africa, Middle East. Middle East, okay. Saudi, we all know, you read also the press, and you see also the oil and gas investments they keep doing. Of course, that also gives tailwind for us.
On the other hand, when it comes to the mining side, it's still tough with maybe then a bit of a negative figure. Asia, -2. China down, India up, take it very in summary. That is an area, again, since a couple quarters that we see the big tickets in China is not really coming. If we take the normal business, the day-by-day business is still okay, but it's the big ticket is what makes it negative. We have the Pacific, so Australia, New Zealand, where, of course, again, Australia, synonym for mining. It's a minus there. New Zealand is a plus because of, due to our acquisition. All by all, you see a bit of a mixed picture. If we would have that five years ago, I think the black will be maybe red, and the red will be black.
It's turning. Luckily, we are everywhere in the world, I think it helps us to compensate our business. Organic. You may be thinking that we have not updated the graph. Yes, it was almost zero, that means you don't see it. You see, it's all the last four, five quarters is always going plus, minus, plus, minus. That is the big challenge for many businesses like ours when you are in CapEx. We look the sales bridge. I don't think I need to say much more structural changes here. That is the acquisitions we did primarily in Industrial Technique with the Henrob, which is going fine. I think the investment currency significant, price volume, more or less zero. Where we see price, again, is our innovation, which help us to create value for customers.
Of course, we also get a share of that part. Let me go to the different business areas. Compressor Technique. For me, pretty the same picture than before. Although last time, we got a bit more tougher comparison because we had that in Q1, that big order in the vacuum year before. If we look now, we still see good solid development in service. I think it's a real solid development there. The yellow canaries, the small to medium-sized businesses, the day-by-day business. The smaller tickets, they do okay. Of course, what made us really suffering when it comes to organic growth is the larger tickets. That I think is, of course, a local synonym with China. On the other hand, the good news is also that our vacuum business is still doing well.
We have now six quarters our Edwards company, they're still doing great. It's nothing to worry about. Operating profit, rock solid 22.7. The traditional business, traditional business I mean everything without the vacuum, is doing as it should be, is on the level where I believe we should be now after one and a half year. That's good to see. That is working fine. Industrial Technique. Motor vehicle business, the model changes, the aerospace is there, the place to be today. That is also where we have our offer, our innovative offer. Also that we see in good development, in good demand. We know the off-road part is tough. That is where we get the headwind for this business. Growth in service, like I said, I repeat myself.
Operating margin, rock solid, doing great, I think in all the different areas. We come to Mining and Rock Excavation Technique. Like I said, equipment a little bit higher, unfortunately equipment is not much anymore. We're really talking here about a couple of orders, which makes it sometimes higher and sometimes lower. I think you should not forget, because I think in this business area, when we take the service and the consumables all together, we are between 70% and 80% of the business. Equipment is rather thin these days, unfortunately. Luckily, we have a very solid service business which does well and is also getting more and more efficient. That is good to see.
Unfortunately, we have to take some further measures, which we do in consolidation, some operations, in our field operations, we felt we can do better, that's part of the costs you see on this slide. Adjusted margin in this business area, as we had the SEK 65 million in the quarter, bringing it to 19.3. I think step by step we are coming there where we would like to be in this business area. I'm very confident that even with this level of business, that we will improve on the operating margin. Construction Technique. When Australia, when Brazil, when China, when Russia has headwind, these are really construction markets, especially for our portfolio. You get a bit of headwind, that makes us also saying that portable compressors and road construction compared to the previous year, is tough. That is some work to do.
On the other hand, we see some growth in Europe. I repeat myself here, in other regions it was softer. Here we have done restructuring, mainly consolidation of manufacturing, some in U.S. in Germany. That lead to extra restructuring costs. On the operating margin, again, if we exclude this restructuring, we are 13% round. Still more to come there. The organization knows that we expecting a higher contribution there. For the group total, I hand over to Hans Ola Meyer. You can see here it is what it is. I think a good revenue, 12% up compared to last year, also operating profit.
You see also that we gaining, okay, we should not forget currency is bringing something, but also I think when it comes to certain efficiency improvements, especially on the Construction Technique side, where we have done a slightly improvement compared to last year, bring us to 19.4%, everything included, and 19.8% if we exclude these one-time items. Hans Ola , I suggest you take it from here.
Yes. A few short comments before we go into Q&A. Below operating profit, we have done a rather uneventful quarter, I would say, with the financial net, specifically the interest net, perfectly in line with last year. No change, basically. We have a little bit better amount situation, and we even borrow a little bit more this year, but you know where the interest rates are, so it doesn't make much change. Very low, in other words. The negative change this year compared to last year on financial net was purely financial exchange differences and valuation changes of derivatives, et cetera. That is, of course, difficult to predict. This quarter, there is an extra devaluation in Venezuela, for example, and a few things. This is very difficult to predict again.
When we come to the interest net in the financial items, it's somewhat more calculable, and we expect it to be more or less in line with what we have seen also for the coming quarters, somewhat lower than SEK 200 million, I would say is a fair guess. If we go to the bottom, the profit for the period, we have also deducted taxes, of course, and the taxes represented 24.7% in the quarter. A percentage point 1.5 higher than last year for various reasons, but I think it's a good representation of the run rate. Somewhere 24%-25% is what one should expect also going forward there, I would say. If we move over and talk about the bridge, we always measure bridges, whatever we talk about internally in Atlas Copco, but here also for you.
You recognize the format, but I repeat for those that haven't seen it so many times, that the second column from the left is called volume price mix and other. That's really the organic development of the result from Q2 last year to Q2 this year, i.e., we have tried to isolate the organic from currency changes, from one-time items, effects of acquisitions, and effects of valuation of our long-term incentive program. When we do that, we come to a result effect of 38% compared to how much we have lost in volume on revenue. That's the famous flow-through in the quarter. It doesn't look very dramatic. I think it's somewhere what we expect when we have that type of development on revenue. If we look at next slide, which is the business areas, very quick comments in the same column. Compressor Technique, I would say very good.
They have lost revenue when it comes to volume a little bit, but the loss of operating profit is very marginal. That's good. Industrial Technique is perfectly in line with what one should expect, I would say. Mining and Rock Excavation is the one where we still fight with a little bit too high cost level in certain parts of the business. We cannot really adjust the cost quick enough to compensate for the drop of the top line, the SEK 216. Construction Technique, again, something that I would have expected if you lose SEK 272 on revenue. It's a fairly normal reaction of the operating profit. Not so dramatic there. On the balance sheet, I would only highlight that on equity, you can see that from December, we have dividended out some SEK 7 billion, but we have also-- Sorry, SEK 3.5 billion, roughly.
We have also given some extra capital distribution to shareholders. Compensating that is, of course, the profit that we have generated in the meantime. You can see the development there that we book the dividend that we are going to pay also in October. It's already deducted in the equity, and it's booked SEK 3.7 billion, is booked in non-interest bearing liabilities. That's why that item is actually somewhat high in the second quarter or at the end of June. Cash flow, Ronnie talked about it in his first slide. I would only say that, again, it's not a very difficult quarter to analyze. You can see two lines, one called net financial items, and the other one further down called adjustment currency hedges of loans.
If you take the adjustment there, the reason why we adjust the operating cash flow is because in the financial item, sometimes we have non-income statement related transactions that do affect our cash flow, in this case, hedges of loans. That's why you have a plus on net financial items, and you have an adjustment negative, totally the opposite from last year, as you can see. All in all, SEK 3.5 billion in operating cash flow in line with Q1, and also somewhat better, but by and large in line with last year. Nice, strong, stable, solid cash flow generation from the business. I leave it back to you, Ronnie.
Yeah. You give me the future. You see the outlook, it's not changed. Why have we not changed it? We still see a good solid development from service, which is almost 45% of our business. Small to medium-sized tickets, I think we would say, okay, that is positive flat, where, of course, when you have the big tickets, and you have me hearing talking many times about that, of course, there is where we suffer. If you take them all together, we believe that the demand for our products, I think for the next coming quarter is to increase somewhat. That in very short, and I'm sure there will be more questions about that. Then I think, Hans, you'll agree that we move to the questions.
Thank you, Ronnie. Can I ask the operator please to repeat the procedures for the telephone conference questions, please?
As a reminder, it's zero one on your telephone keypad if you have a question, zero one.
Excellent. In order to get that prepared, we start here in Stockholm. One question. We have two hands here. We start with Guillermo.
Good afternoon, everyone. Guillermo Peigneux-Lojo from UBS. I was trying to maybe gather your sentiment around the yellow canaries. You said just okay, and I think that was a bit more, let's say, cautious than, "Oh, it's good," compared to last quarter. I was wondering whether you could give some clarity around that, and then I have a follow-up.
No, of course, just okay. In my position, you want to see this thing moving, really to get really strong growth. I think when it comes to this yellow canary, you get a little bit of a mixed view on that. I think Europe, okay, North America, okay. Of course, you can say a little bit on oil and gas is affected. That is one segment which there is a reason for that. I think you see it's tougher in China. If you take that all together, it is just flat positive. Okay, if you then read a bit my body language, I say you want to get it more. That is the point.
Thank you. Then regarding pricing, which obviously reached on your reported line zero last quarter, now seems to be improving. I wonder whether it's just the underlying pricing improving or actually, I know that it's not mixed, but just the divisions mix improving. I just wanted to gather what's going on.
I think the last time, when we looked on the pricing, it was on the mining side, we had a couple negative influences. Okay, you can say big orders, a bit of struggle of couple quotes, what's going on. I think if I see in the different business areas, it's still, yeah, slight positive. One should know, I think I've explained it several times, if you take on the service side, of course, when you don't have strong inflation, it's a little bit more difficult, then you need to work through to efficiency because you need to have good arguments to a customer to go and renegotiate the contract. That is an area where it's not so easy as before. If you're living in a society where, say two, three, even more % inflation, makes that part easier.
I think we still are, even if it's tough and customers are negotiating because they feel also the CapEx is thin and competition is tougher. I feel that, I think in our equipment side, due to our new products, the innovation side, that we are getting paid for our value.
Last, I promise, and I have to ask on the currency. Obviously, you face tougher comps and a bit weaker krona, so a bit stronger krona compared to last quarter. I wonder whether you could give any guidance on contribution to EBIT.
Going forward. Like we normally report, we compare the impact of currencies in second quarter versus how it was in the second quarter last year. It was short of SEK 1 billion and a little bit more than SEK 1 billion in Q1. We look at today for Q3, Q4, it will go down, that impact will not be as big. It will continue to be less than that. It will shift between the first and the second half of the year quite noticeably, due to what happened last year, basically.
Quite noticeably, 40%?
I don't know. Somewhere in SEK half a billion, it will probably be at least in the third quarter.
Thank you.
Good. We had another question here before we go to the telephone. Yes.
Thank you. Andreas Brock from Coeli Asset Management. Europe is turning. I think that your order book is consistent with the PMIs and the consumer confidence, all the factors of that. Where are we in the level of compressor sales? I mean, on cars and trucks, I can say, we're here, but we should be there in a normal cycle. Where are we on compressors, and are there any anecdotes that you can give, like the customers haven't invested in Spain for the last three years, et cetera? That's my first question. We're turning, but where are we on the level? What's the upside to a more normalized environment? On China's tough, but you also wrote in your report that service is doing very well in China.
Also there, can you actually grow that much in service that you can offset the equipment weakness in China for the next six to 12 months?
On the compressors that you talked about Europe? Yeah. How long I'm working now in compressors? Since 1985, trying to find the predictability and tell Hans Ola next month it will be that. I don't have that, but I will try to talk you a little bit through the different segments. If you take the very small ones, the medium, small, you see that that volume is going fine. I think the recips up to 22 kW, which, okay, tickets of less than EUR 10,000. That volume is doing fine. You can say, is that coming because we take share? With our GA VSD+ and all that? Yeah, partly maybe, but also partly that there is a good demand. People are not holding back. You see that in Spain. You see that in Italy. You see that in France. You see that in Benelux.
I see it more or less everywhere. Let's forget Greece now. When it comes to the bigger tickets, I'm not talking the very big ones, but the bigger tickets, yeah, I think also there I saw activity. I see quote levels fine. Are we ready there where I think we could be that people are confident to buy and taking really EUR 20,000, EUR 30,000 or EUR 40,000 investment? Yeah, that cycle is a bit longer, and that is a little bit more tougher. When it comes to the very big ones, yeah, that's still tough, that one.
If we look at the level of small or mid-size compressors, where are we today compared to what we could be in a good year?
If you take, of course, I don't have that, but if you take Spain, it's half of the size it was between 2009. Half. Half the level. Same in Italy. It's very low if you compare to this peak levels 2000, whatever, 2008. We see in the Benelux, in U.K., it's already coming close to where it was before. The southern part is still a while to go there at the moment. Service China. I still believe that, and I'm still confident that there will be still some growth. Why I'm so confident? First, we definitely don't service everything what we should service. How come? Okay, it's selling, it's convincing the customer to do it. This is our famous one-to-one ratio. Still a lot to do in China.
Second, also our value creation, our offer, we get things better and better in creating value to you and also better and better mean competitive, more better in that area. How do we get more competitive? I think our logistics get better, our service engineers get better, so we can do the work much better than you owning it. It's a matter of convincing you. The more industries are under pressure, the more they're open to listen to your offer. Then it's a matter, of course, how competitive we are. That is what we have learned also in Europe and during, let's call it the crisis we had. We have learned to do that and see that we get better and better in that part. That's also in China. It's still profitable.
We don't grow, we grow with profit, yeah.
You said that if we just add to that, you talked about can it compensate really for the, of course, if you have Asia and China particularly so strong for us on large compressors, this gives a lot of value. There is a limit, so to speak, how fast you can grow service year by year. It's not done in a fortnight to compensate for the low level that we see today on the large compressors, at least. Just to make that very clear.
Maybe on the profit level, yes.
Yeah.
On the top line, no.
Sorry, I should qualify that. You are right.
You should now start to look on the bottom line, not on the top line.
True. Okay, thank you. We turn to the telephone conference. Two questions, please.
The first question comes from Mr. Klas Bergelind at Citi. Please go ahead.
Yes. Hi, guys. It's Klas from Citi. I have a few questions, please. Firstly, on the aftermarket in mining, Ronnie. Consumables are still relatively weak. Could we try and break out the exploration part here versus the core business? The reason why I'm asking is that we've seen some quite big production cuts coming out from the miners recently, particularly in iron ore. My question is really, is your relatively big gold and copper exposure still protecting you, or have you started to see any weakness outside of exploration?
Yeah. You see the consumables. Of course, exploration is soft and I think there is not much happening with makes the really happening. When it comes to the volumes, beside maybe iron ore, the rest I think same copper, these volumes are still okay. When you look to our consumables, what made it tough for us, it's primarily China and I think also Australia. Of course, there is a couple others here and there, but I think now 2 bigger ones, which made it us tougher to compete with last year. If you think sequentially, it's more or less the same level. I think, like I said iron ore is now a little bit under pressure.
Of course there is not much, I think when we talk about the consumables, it's also, if there is not much exploration done, not much more even underground exploration drilling taking place, then it's not so easy to expand that business.
My second question or follow-up is on OE in mining. I appreciate that we can see this quarter-on-quarter volatility at these low levels. I'm curious about the outlook here the next couple of quarters. When we speak to the miners, they say that they will now increase spend in gold, surprise, that there is replacement need. Is that something you have seen yet looking at tender activity?
I'm praying every day for that I will see it. I think if we can keep this level, I will already be happy. Not satisfied, but happy. Let's see if it really comes. Of course, although the quarter was a bit better than Q1, but okay, we're talking very small figures here. Of course, if you have a one or two orders more, you say it's a great quarter because it's up. If that order falls in the other quarter, you say, it's a weak quarter. Don't read too much in this. I'm still careful in really believing that the mining equipment demand is coming back. I think I'm still careful at that.
We're very happy that we have other businesses that keep delivering.
Although, of course, we still don't have 100% market share. We can still take more.
Yeah.
I think we believe we have the best equipment. It's just a matter to convince our customers to buy it.
My thank you. Promise my final question is on Gas and Process. Shift here from seeing declines in all major markets in the last quarter. Now it's only Asia declining. Was this just a tough comp last quarter, or have we seen these indirect effects from oil and gas going away?
I think it's a bit the same remark what I made on equipment. If April would then be March, then okay, you would have not asked the question. You sometimes get tickets of 5, 6 million EUR. I'm talking, what made the quarter in Gas and Process look a little better. I think what we see, and that is something I think I have to share with you, where in Q4 last year, I think when we all oil and gas, I think it was difficult to get the people talking about their orders. There is activities, people talking. There are definitely also orders even for fuel gas boosters, which came and then they're coming, they land in U.S.
I think there is still good activity in Saudi Arabia, which makes it okay. Of course, Asia, which is, I think for us, was a lot to do with air separation and that is not really strong now. That made us saying that still Asia is weak.
Thank you.
Thank you. We take the other question from telephone, but I have to say that please try to restrict yourself to possibly one follow-up, because there are many people wanting to put questions on the telephone conference. Next one, please.
Next question comes from Mr. Andreas Willi at JP Morgan. Please go ahead.
Good afternoon, everybody. My first question is on your service business overall, which you called out as being a positive highlight for the quarter. Maybe you could give us some indication what the organic service and aftermarket growth was at the group level. My follow-up question then will be on the mining and margin where you have the more negative flow-through. Is this just purely an issue in the equipment business in terms of the flow-through being weak, or are you seeing underlying pressure on the mining service business as well in terms of having no pricing power or flat pricing, but still having some inflation on your salaries?
I think it is a solid single-digit figure that we do and that also was my starting sentence when I opened this conversation that I said it's solid, and it can only be that figure when it's solid in all business areas and in all continents. If you have one continent is minus and the other plus, I think you don't have that. I think it's very solid, if I can say my buzzwords. On the mining side, I think that is good that we have seen, what is it now? Three quarters mid last year. I think we saw a bit of a turning. That I think is really also giving good result. I think it's a lot to do with our own internal hard work.
Our logistics ready, getting the people also focused on it, trying to convince the customer with the right value offer. That is where we are working. When it comes to the mining and the margin, there is a lot of under absorption on the equipment side. Hans Ola alluded a little bit when we were talking about the flow-through bridge. It's definitely not on the service side. The service side. It can always be better, of course, but I think it's well under control. It's under absorption. You have the installations, you have your engineering work, which you don't activate, but you take it over the P&L and that's in. Of course you can say, "Yeah, but Ronnie, stop all the engineering work." Stop it and take a short term.
That we have chosen not to do, and to really keep investing in new equipment, in innovative equipment. Of course, you would like to see the orders. That's where the proof is. That's the main reason. Under absorption, volume, factories also in the sales, keeping investing in, hopefully in the right products.
Thank you very much.
Thank you. I'm looking around here in Stockholm if we have anything. Otherwise, we continue on the telephone conference with the next couple of questions. Yep, please.
The next question comes from Mr. Andre Kukhnin at Credit Suisse. Please go ahead.
Good afternoon. Yes, thanks for taking my question. I just want to double check on the dynamics between the quarters on orders. It looks like there was an element of catch up in Q2 from Q1 from what you say on Compressor Technique and on mining. Is that the case? If it is, are you guiding for sequential improvement of that sort of caught up level, or should we think about sequential improvement of a more underlying run rate level?
Yeah.
I think you alluded to it in your
Yeah
initial comment about lumpiness and so on.
Yeah. Of course, if you compare Q1 with Q1 and Q2 with that, I do not think it's a catch-up. I would not say that. I think, again, it's the small tickets. I think it's okay, and I will not look now negatives as nothing to allude to another body language. I think the bigger tickets, and that's also difficult for us to estimate. There are definitely quotes going on for orders for 10, 15 million EUR. Yeah. They are hanging on already quarter one, quarter two, quarter three, and of course they can fall, and that makes it very difficult also for us to read that. You see, if there is no real trust in the market, people holding back these investments. That thing you do in your own private life, you also do in business. That's also what I do.
If I am confident about the future, I invest. If I am not, I hold back. That's the big difference between small tickets and big tickets.
You could also say that if you, now that we have Q2, you put them two together, I do not think anyone would see that it was a very dramatic first half compared to the first half previously or the second half of 2014. This is, again, just to underline what Ronnie says, that sometimes you get a few orders on the bigger equipment and sometimes you do not. Put them both together, I think the drama of stock market reactions might have been a little bit more modest, both up and down, to be honest.
Yeah. That was also, I think, when we talked about Q1, because we are now commenting Q2 here, but I think if you look to Q1, of course, if you compare that with last year Q1, because that was the difficulties. Again, this was primarily on the vacuum side.
Yeah. Okay. Yes.
Yeah, absolutely. If I could just ask a follow-up to a previous question where you commented on where some segments of the market are versus previous peak. Could you tell us where China large ticket items are versus the peak level right now?
Oof. A peak level which was already, this is many years ago.
2012.
2012, mid-2012. I've not have it just in front of me now. If you take the peak level on mining, peak level on big tickets, compressors-
I was thinking about compressors more
It may be, now I'm going to maybe to lie, I think if it's -20, -25, I don't think I'm overdoing it.
Oh, no.
On large compressors in China?
Yeah.
Correct.
Also the market, if you look to the statistics, which you also have access to, you can see that that market has really, in total, has cranked down.
Yeah.
Got it. Thank you. Appreciate it.
Good. Thank you. Next question, please. We can take one more. I said one more on the car, I come to Anders, yes. Telephone conference, please.
Next question comes from Mr. Sebastian Kuenne at Exane. Please go ahead.
Hi, good morning. Just to follow up on the yellow canaries in China. You mentioned a tough China, tougher China in Q2. Could you help us understand if demand has weakened through the quarter or it was weak in April, May, June? Second question is on Industrial Technique. If I look at the order intake and the contribution from acquisition, it looks quite weak compared to the contribution to revenues. I think it's mostly driven by Henrob. I calculate a book-to-bill of 0.7 times. Is there anything we should worry about or is it just exceptionally low for Q2? Thank you.
On the yellow canaries and China. Look, China with Chinese New Year and less working days, and it's not always following in the same month, and then you have a bit of shifts. It's always a bit difficult to compare, but we can say that I think over the last, just three months in the quarter, I think May, June were normal months, but they were softer compared to last year. That is what I've seen from the yellow canaries part of it.
You.
When it comes to-
You would say it has improved through the quarter?
Yeah.
Okay.
I think June is also a longer month. In May you have a couple of holiday breaks in China. Yeah.
At the end of the quarter. Yeah.
It's not easy to get, if you try to be clever in seasonality and then on the yellow canaries, I've never done that, actually, so.
Okay.
When it comes to IT, I'm a bit surprised.
I was a bit surprised you just talked about the book-to-bill of 70%. Did I hear you right there?
Yeah. If you look at the contribution on order intake, it's 12% from acquisition and on top on the sales it's 17%.
I'm talking about the profit contribution now.
No, I'm talking about the order intake. Order intake versus sales contribution.
I don't-
But I-
Here then. Yeah. I think it talks here then maybe.
You mean between. I see now. It's really related to the fluctuations within the big acquired business. I think you alluded to it. Sorry. I didn't really understand the connection. I thought it was the book-to-bill. You're right. It's a movement, if you like, when you have some big equipment orders compared to the more normal flow of consumables, the rivets in the business. That can, for this particular period, it has given this impact. I don't think that one could take any pattern from that for the future or anything. It's certainly a little bit lumpy when you, if you remember how we described the Henrob business as they secure business for certain new models. Then after that, there comes a long period of production.
Of course, the mix between equipment and rivet sales will be quite different from one quarter to another.
Okay. There was no consolidation?
No, there is no fundamental.
No, it's not.
You should be happy when the equipment is installed. That's great, because then the rivets will come.
Okay.
Yeah.
Good. Thank you. We have a question here in Stockholm. Anders, please.
Yes. Anders Idborg, Swedbank. I'm interested to see the long-term pattern in organic growth in Compressor Technique. For three years now it has been around 0-2% and maybe 0% this year. While in Industrial Technique, you had some 6-8% organic growth, and it's even up 9% now in the second quarter. What about the long-term trends there? It's a deviation between two divisions, which are both CapEx related.
Yeah. I think when you take IT, you dig into where they have headwind, let us start with the negative part, is the off-road. Where they have really tailwind is the model change in the motor vehicle.
Aerospace
Aerospace, that's also self-help because suddenly, it's also our innovative offer, which made us to gain significant share in the aerospace. That helped. It self-helped. I think it's good work, really focusing on the part, of course, also helped by model changes, to have the right offer. That's one part. I think when it comes to CT and equipment and the negative part, one should know China is the single largest compressor market on Earth. As I said, June 2012 was top. That has gone down. What may be, that is an area also what I have said a couple times when I was commenting on CT, less recently, but before, we can do better in this area.
Better, meaning gaining a significant share, also coming up with expanding our offer, nitrogen, working harder on Air Treatment, doing more penetration on the multi-brand partner. That's an area where we have to accelerate that again, and there we maybe lost a little bit, yeah, momentum. Not to hide anything, that's the comparison. The big part is if you compare CT, which you don't have in IT, because in Industrial Technique, China is one of the fastest-growing markets. Why? Model changes. Cars is really booming, that we don't have in the same cycle, we don't have that for CT. That's one of the big examples. You have the self-help, where IT is doing great and CT could have done better. That is also where we take measures now. You are spot on.
Thank you. We go back to the telephone conference. Another question, please.
The next question comes from Mr. James Moore at Redburn. Please go ahead.
Good afternoon, everyone. Ronnie, Hans Ola. On your excellent 10% growth in Europe, you mentioned mining in the report, can you help us understand the range of end market growth that you've got across your various end market, where you have what's 20%+ what's negative? It's a great number, it'd be helpful to understand what's behind it and what's real and sustainable versus comparative or temporary.
I think when it comes to mining and Europe, of course, that means, also main construction, because there is not so much mining in Europe, I think it's on the construction, also that part is not big, that made not the figure really boosting. I think when it comes to Europe and the growth, you see that in Industrial Technique. You see that also in Construction. Our Construction business area, when it comes to portables, when it comes to portable compressors, generators Even our construction tools that I think is doing fine.
In Europe
getting in Europe, I think. I think the same is what I already commented on our compressor side is helping. We should not forget in the 10%, although we don't grow 10% on the service side, but it's also helping. The question, James, and that's for me also all the time, is this sustainable? One thing I can say, it's not that there is one or two big orders that made the 10%. It's really many several orders. It's also spread. You also have heard me saying when I was commenting on Europe, it's almost every country that is growing from Sweden up to Portugal. They are growing. You see it more or less. I feel also when I talk to our guys that when it comes to the service and the small tickets, that they're more positive.
If I can use a follow-up as a euphemism for a completely different question. On your vacuum business, you were right last quarter to say you didn't see any semi pressure in Edwards coming through, but maybe some growing signs of some CapEx cuts. Are you seeing anything in the forward-looking tenders or discussions that make you a little more cautious about vacuum orders in the second half?
No, we had an internal meeting, I think it's two or three weeks ago with the guys because I'm following it up myself, this. That question, I put forward. Of course, the forward-looking is not six months or nine months. I think I'm really talking a month, two months, I think they didn't see any negative trend. They still see quotation levels on, they still see projects going on. You saw also yesterday, you better than I, the Dutch company-
which also brought up good results. We see that, I think when it comes to the semicon, what I see today is still okay, but we are all looking for the next drop. Today, I'm still confident that, I think if I take now and we are a couple weeks in the quarter, I haven't seen any sign, what made me changing my mind on the semicon.
Very good. Thanks.
Thank you, James. We continue with the next question, please. I have to say just before, we still have a number of questions, and we will not be able to take all of them. We have some other commitments to go to afterwards. Say as I always say, that we have an excellent investor relations department, and I will try to answer the phone as much as I can, even if you don't have the chance now on the call. We will have time for two more questions. Please.
Next for us, Mr. Lars Brorson at Barclays. Please go ahead.
Thanks. I'll keep it short. Just on the consolidation of your manufacturing footprint in mining and construction divisions, were actions here more of a one-off in the quarter, or do you see a need for further actions here given the current order run rate of these businesses?
Of course, this quarter is one. I think we will continue to do some activities on the mining side. This will, I think, happening in the next coming one or two years that, there's activities we will do.
Thanks.
They will not be huge tickets. You see these are tickets. Okay, now we made them public because otherwise you don't understand fully the flow-through and the result. You see these are tickets of SEK 30 million, SEK 40 million.
I think we can repeat again what we have said before, that the reason we even mentioned these relatively small restructuring plans and so on is because they do have an impact on the specific business area margin in that quarter. Even if you go for a 12-month period, it's not very big. It's very seldom that it has a big impact over a 12-month period. That's exactly what you mean.
Yeah. We don't want to make a big one either because then.
No, that's not our way to operate.
We want to keep ourselves honest.
Absolutely. Good. Thanks, Lars. Another question, and the last one, unfortunately.
The last question comes from Mr. Alastair Bentley at Societe Generale. Please go ahead.
Yeah. Hi, good afternoon. Just on Compressor Technique, looking at your sequential comments on large industrial compressors. Looks like we've had four quarters now of improvement. Quoting activity in Europe, as you said, seems to be getting better. Is it reasonable to expect a return to growth on a year-on-year basis, maybe next quarter in large compressors so that stops being a drag?
Yeah. I think, in business normally you don't hope. You see activities, that there is activity, there is quotation level, like say, geothermal quotation levels are there. There is a quotation level for Turboexpanders. There is even quotation levels for Air Separation, from a couple companies. They are there, and yeah. Of course, again, if I see how I behave myself in taking big investments, I only do it when I trust the future. I'm not so sure that when it comes to the big tickets, that we are already there, that we trust the future.
Customers.
Yeah.
Yeah
That, but of course, we are working. It's not dead. I think there is. It's a little bit better than on the mining side, but it's still also soft.
Okay. Thank you very much, everybody that participated. I wish those of you that are in the northern hemisphere, at least, a very nice summer, and the rest might have a very nice winter, I don't know. I also take the opportunity to remind people that we have pinpointed the 17th of November as the date for our next capital markets day here in Stockholm. Of course, I hope to see as many of you as possible on the 20th of October when we release our third quarter report. Thank you for today. Bye-bye.