We have some people here in the mine, our presentation mine and test mine here in Nacka, but we also have a lot of people attending the telephone conference, of course. We will do the same format as we normally do. I will hand over in a minute to Ronnie, who will take us through his comments on the quarterly results, then we'll open up for questions and answers. I say already right now that if we can restrict it to one question per person, it would be very good. The fourth quarter release is always a little bit more lengthy than the other ones. If you can respect that, I'll be most grateful. Thank you very much, and again, very welcome. Ronnie?
Thank you, Hans Ola. Let's go immediately to slide number two, where we see Q4 in brief. As I said, I'm very proud to see record orders received and revenue. We all know partly also helped by currency, but on the other hand, I think it's also good to see that we have some organic growth but also good acquisition growth. You see here the organic growth, 2%, strong, solid service development. It's good to see that that strategy keeps working. I'm always very pleased to see that. The industrial part of our business does good. Industrial tools, the MVI, aerospace doing great. Then we had the small to medium-size compressors, which had a robust development. The lower ones was in the larger part of the business. Not a big change.
I can say no big change at all compared to Q3, where we also see Mining and Construction equipment orders still at a lower level and unchanged. North America keeps going. I see also some good development in Europe. You will see later on when we look to the map, that's always good to see that we see some development there. One could say, of course, you compare with a softer previous year, but anyhow, it's a positive effect. On the other hand, we see for our products, a negative overall development in Asia. Record cash flow, more than SEK 5 billion, it's great. It seems that our system works. As we said, when we don't have much organic growth, we should deliver you cash. If we have really growth, we deliver you value.
Here is a proof again that our agility and resilience is working, great to see that. Of course, that leads me then to tell you about our distribution of cash, where we propose to do a dividend of SEK 6, coming from five and a half SEK last year. Also, we will go to an extra distribution of cash through a redemption of SEK 6 per share. In total, we will hand out SEK 12. Does that mean that we stop acquiring companies? Does that mean that we are not dynamic anymore on that part? No, we still keep on with the same strategy. If we can really hit the right acquisition which fits in our business, we will definitely do that. We still believe, even after this SEK 12 distribution, that we have the gunpowder in the balance sheet to do a big one.
Let me go to the figures. I will not read them more than you can see on the slide. One thing is on the fourth bullet, adjusted operating margin, it's more or less at the same level as last year. Of course, if you make a more in-depth analysis, you will see that the robustness is a bit better than last year. Hans Ola will also, when he goes to the flow-through bridge, elaborate a bit more on that. Profit before tax, of course, it's higher, and the earnings you can read yourself. Of course, cash flow, I've already mentioned that. If we go quick over the summary in 2014. Orders increased of 15%, hitting the 93 level. Like I said, a record. Organic growth is only a 1%, a bit more than one.
Not really a very strong one. At least I'm happy that we kick in again with organic growth, because the beginning of the year, it was definitely not the case. Of course, this is also supported by a good service business. Of course, one should not forget that the service business is part of our business. Higher orders on industrial tools. For sure, 2014 was the year of Industrial Technique. That organization has done great. Also, the small-to-medium-size compressors keeps growing. Also there, our new technology, our VSD+, the same as in industrial tools. With new products, it really boosts the order income. Of course, mining and construction, and the larger part is then the negative part. If we take the full year, Asia was not a star. There was a time that Asia was the star.
This time it's North America is the star. One should not forget, I think as such, for a company like Atlas Copco, I don't mind which continent is growing as long as the total world is growing, because we are as strong in North America as in Asia and vice versa. I think for us it's important that we grab the total market. Cash flow a bit less than SEK 14 billion. You see it here, leading to an operating margin for the year of 18.2%. Last one, I think, we are very happy. It's now a year that we have Edwards Vacuum in Atlas Copco. We can say that it was a very successful acquisition, first from an integration point of view, culture match, also from a performance point of view. We are very pleased to see this development.
Let me go quick through the regions. Let me talk about the two positive ones. You could say the three positive, I think the main positive ones is Europe and North America. That is an area where we see that almost all markets in Europe show a positive development. The same accounts for North America, where we also see that, of course, U.S. is the biggest one that keeps growing. What is getting negative, I have already mentioned several times, is Asia. China and India for our business, it's really not the go market. We have to work harder there and going after more share. That's the only one. As the market is less, we have to take more share.
When it comes to South America, we see a reasonable Brazil, where Chile was a bit lower and that made it a softer quarter for South America. When it comes to Australia, slight improvement on the mining side compared to last year for Australia. One should not forget that we had done a significant acquisition in relative terms for New Zealand where we did that, but also made the figures positive. Organic, what I mentioned already, we see slight organic growth, 2%-3%. Compared with history, of course it's low, but at least it's positive. We go to the sales bridge, you see a significant currency effect in the quarter 8%-9%. Price volume in the orders received each other 1%. That works fine.
Of course, the structural part, which is Henrob and Edwards mainly, which made it a quarter with +24%. We go to the different business areas, I jump immediately to Compressor Technique. Stable equipment in total, we see that, but a very solid growth in service. Again, same message as I've been giving the last maybe two or three quarters now. We see small to medium size compressors doing okay. Of course, stronger in North America than in Asia. But also here we are helped by the innovation. The VSD is a better success. That helps, of course, the sales. The larger part is softer. That the larger part, those who follow Atlas Copco know that, but that's mainly also Asia. Again, a strong quarter for Edwards, that keeps going. That's also mainly semicon, that works great.
Adjusted, we come to a margin of 22.2% and the adjustments are a couple small topics here and there. But if you take it in total, it was around SEK 120 million. A reasonable quarter for Compressor Technique. We go to Industrial Technique. Keeps rock solid. Of course, the real part which we are looking to is to make sure that Henrob is well integrated because that's significant acquisition for this business area. We had a good start, that's always good to see. Solid service division outcome, that's great. The Swiss clock, although maybe I should not use that word anymore now these days with this volatility and currency, but the operating margin keeps going on 22.6%. A bit dilution of acquisition at the other end, a bit on that, but it helped on the currency side.
A very solid, good development for Industrial Technique. We come to the ROCE, MR, the Mining and Rock Excavation Technique, as it says here. A bit lower order intake for equipment, and again, the larger equipment. The service part is tough. The underground is a bit better, where we see some replacement orders. Good. You have seen that when I was explaining you about the geographical spread. Australia, we see a bit more positive side there. We got some good orders. Again, lower Asia. One thing is, that's maybe something to remember, what we see, that is the last 6 months, we see a good development on service in the Mining and Rock Excavation Technique business area.
That's good, because we know also where we can make good customer intimacy, where we also can do a good job and also are paid for that job. I'm very pleased to see that happening. Of course, one knows that we still have some work to do on the inventory. We are really working further on that part. I'm very happy also to see that the effort, what we do in the organization, is also yielding results. Inventory in MR went really down. Of course, that also contributed to the cash flow. Operating margin, an 18.5%. A solid margin given with all the activities that they are doing. Construction Technique, a lower income for larger portable compressors. That is also not a change. Road construction equipment, of course, is a bit seasonal. We get that always around this time, a bit softer.
On the other hand, we had a stable income for demolishing tools. All in all, a little bit negative organic. I think, if you really look under it was more or less a flat development. Good Europe and North America, where Brazil and China were tougher. A margin around just below 11%. If we take the group, I will hand over to Hans Ola. Here we see the figures for the quarter. Profit, 15% up. Profit before taxes, 13%. Of course, the earnings per share, SEK 2.74. Making a year, having an earnings per share a bit more than SEK 10. In total revenue, 12% up.
Profit looks like it's flat, but you will see also when Hans Ola explain you the bridge, that is partly done due to acquisitions, that we have a bit of a dilution in margin, and the other part is mainly allocatable to the Mining and Rock Excavation Technique business area. Hans Ola, can I hand over?
Thank you, Ronnie. A few comments before we come to the end and to the Q&A. As usual, we look a little bit further in the profit and loss statement. In the financial net, you saw the comments that it was quite high compared to last year. Not because of the interest costs really, which actually was slightly lower than last year, but because in the fourth quarter we had some extra negative foreign exchange differences of financial character. All of them are of that nature. We have had devaluations in Venezuela. We've had negative currency developments in a couple of other countries around the world, and that hits us. We also have a little bit of an effect in there of the delayed payment for the Henrob acquisition, which is in a foreign currency and in U.S. dollar.
Since we don't hedge, we have a bit of a negative there. Remember what Ronnie has said many times, that the business is doing better when the dollar is strong. We don't mind that particularly. If you look further down on the taxes, we had 24.8% in the quarter, better than last year quarter, but fairly much in line with before. I also expect going forward that somewhere between 24% and 25% is a good rough estimate of where next year hopefully will be. The earnings per share we saw in the summaries already, and we'll just leave it by that. Ronnie alluded to the profit bridge, and here we see on the quarter. Let's just look on the next slide instead, on the various business areas.
You can see, of course, that even if it's different between the business areas, the impact on the margin is positive from the currency. Of course, you have a translation effect on revenues, but we have more than the relative share on the profit, and hence it is improving, and that's what we have commented in the report as well. When you go further, you can also see that in the bridge, we also have the acquisition effect and the one-times. If you see through the column of one time and acquisitions for Compressor Technique, you will have the one-time costs of about SEK 120 million in the fourth quarter, and you have the gain, particularly from the big acquisition of Edwards. Those are the two components in that. Otherwise, I think that there is no extreme comment on anything else.
We have three business areas that had a slightly negative revenue bridge in the quarter and one positive, Industrial Technique, and you can see how the relative flow-through is on the four business areas there to give an indication. I've said it before, this is certainly nothing that can be copied for every quarter going forward. It's much more volatile, but it gives an indication on how the quarter ended up.
There are two slides on the year summary, I think that one thing that I can do on the group here, because what Ronnie started saying, we have a two percentage point drop in this margin in a year that we are pretty happy with, you might say, "Well, where does that come from?" If you take it in rough, big chunks, you can say that half a percentage point comes from the slight volume effect that we have and also the dilution from acquisitions. That's roughly half a percentage point. You have another half a percentage point negative from the one-time items, particularly in the corporate side, where we had very positive one-time items last year that didn't repeat itself.
We have about one and a half percentage point impact on the group from the lower profit in MR, in Mining and Rock. That's where the heavy-- Of course, that one and a half on MR is also affected by the impairment charge that they took in the third quarter, that explains why that impact is rather big. If you put that all together, you have two and a half percentage points, we have half a percentage point gain from the currency impact on the margin. That's a little bit in the rough way to make the bridge between 20 and 18. I think that can be good to have as a rough indication. I won't go through the business area bridges for the full year, but you have it there if you want to.
When we come to slide 18 on the balance sheet, you see the numbers are getting bigger and bigger every quarter. Now we're above SEK 100 billion in total assets. Of course, there's a very big impact here on pure translation from euros and dollars, and particularly dollars and other currencies. From last year, there's actually about SEK 9 billion impact purely by translating the same dollars and renminbis and whatnot into SEK. That's also good to have as a rough idea. I'll comment more here because it relates to the changes in the balance sheet, namely on the cash flow on slide number 19. There are some big things that swings between fourth quarter 2013 and 2014. One of them is taxes, where we have big variations between quarters in what is actually paid to the authorities. It's not a Swiss clock, again.
It varies a little bit. You see there was an over-normal amount in Q4 last year, you could say under normal in Q4 this year for various reasons. If you see at the year-end figures is more in line with what we actually have in the profit and loss statement on the taxes. Income statement-wise, 24%-25%, that's what we expect. The other big thing worth mentioning is change in working capital. Ronnie said we're very happy with the release of particularly inventory in the fourth quarter. You see the impact here on the cash flow. All in all, leading to more than SEK 5 billion, which is a record ever for the company. Coming at the end to the slide 20 on earnings and dividends.
The earnings per share of 10 or 10.01, to be correct, is to be seen in relation to the proposed dividend of SEK 6 and the mandatory redemption of another SEK 6. In this chart, it's good actually, because there you can appreciate that four times in the last 10 years, basically, we have proposed and we have done these type of extra distribution of capital. We're using the same methodology as in the previous year, mandatory redemption of shares, which means that we split the existing shares in two. We assign SEK 6 as value to the so-called redemption share. After a period of trading, a couple of weeks, that redemption share is redeemed back by the company at the price of SEK 6. The share capital goes back to the same amount of shares as before. That's the methodology.
I should also say that we have proposed the dividend this year, the ordinary dividends we paid in two installments. I should correct myself. I said we have proposed from this year to do that, so it will be a change of our dividend policy and the way that we want the dividend to even better reflect the cash generation of the operations in the group, which is stable over the year rather than very fluctuating like some companies might have. This is the reason, and that allows us to have a more efficient cash management in the company. It is fine-tuning, if you like, and we think that is the background for the proposal. With that, I hand it back to you, Ronnie.
To the sophisticated outlook, as you see here, where we said that we believe that the demand for the business we are in is expected to increase somewhat. What is the background where we keep on that? I think it is mainly where we see that our service business is doing solid. In some businesses we have, in some of the business areas, maybe our equipment is a bit under pressure, but I think we believe in total that demand is a positive one. That is the reason why we said increased somewhat. By this, Hans Ola, I think we have done the presentation.
Great. We go to the Q&A session, and perhaps we can ask the operator to repeat the procedure for putting new questions. We have a couple already lined up, but can you do that, please?
As a reminder, it is 01 on your telephone keypad if you have a question. 01.
Excellent, short, and correct instruction. I think to give a chance to some people here in Nacka first, if there is any question, then please raise your hand. Otherwise, it might come one later. Okay, we have one question here.
Yes, Anders Berning representing myself. A question regarding Russia and the situation there. How has that affected the group?
Yeah. I can take. Of course. These things don't help really growth. What we have seen in the ruble and the devaluation, what is the only defense you have as a company like ours, which is not producing in Russia, is increasing prices, to make the match again for the devaluation of the ruble. That's one part. We see also that, of course, some of the business get a little bit more careful. People postpone certain purchasing. That is more or less what we see. Actually, and if you look more in detail, I think we still see definitely not something falling off of the cliff. Now, looking forward, okay, what will it bring for the country, for the business in Russia? We will see in the next coming six to 12 months what this will really be.
I think as Atlas Copco, we are taking, I think the right measures, adapting our organization, making sure that the balance sheet is on the right side, in the right currency, adapting the inventory to be shorter in that part. That is what we have been doing. We'll see, I think, the next coming six to 12 months, if nothing is changed dramatically, I think it will have a real impact, I think.
Good. Thank you. I think we then move over to the telephone line and take the questions one by one.
We have a question from Mr. Fredric Stahl at UBS. Please go ahead.
Yeah. Hi, good afternoon, Ronnie, Hans Ola. It's Fredric here from UBS. I was wondering on Compressor Technique. You haven't really been growing much there over the last few years, and you made a push a while back for, I think you used the term feet on the street and then pulled back from that. With process industries likely to weaken and emerging markets to stay soft in the foreseeable future, I wondered if you could update us on your view on how to get the business back to growth. If you have accepted no growth and just protect your margins there.
No, for sure I've not accepted no growth, I will definitely never say to this call, that the Atlas Copco people will hear that. That will be a proxy for them. No way. If you dig deeper a bit into, of course, you don't see all these figures and all that, what we see in Compressor Technique, we see still a good solid development on service. That is also where we make the highest profitability. We still don't have 100% one-to-one ratio. We have not climbed fully the ladder, the service ladder, as we explained many times. There is for sure still some big potential on it and that I think works fine. It could always be better. There's always a better way, as you know that. That is okay.
I think when you look to the small compressors and that business, it's growing. That area is definitely growing. These businesses have never been going up highly double digits, but constantly you see some development going on in all the different continents. In U.S. more than, let's say, in Asia. Where is it coming from? I think there we had new products. We really go for the market, our feet in the street with new products, with our innovation gives this result. Where we get really the hit, and that is when we aggregate the figures where we, so to say, have the leak, is in the bigger compressors. This is maybe already the fifth quarter I'm saying this.
That's okay. We take a note.
I know it can be a bit boring, but it's a fact, where we see that that business is going down. Where is it coming from? It's mainly Asia. That's the biggest business, is Asia. That is where the market is softer. Do we lose market share? Because that was, of course, my first thing all the time, because when you see these figures, you really immediately say, "Do we lose market?" No. The market is softer. That is an area where the remedy to that is to get more share out of that market. That market has shrinked. There are no steel plants built in China, as an example. We all hope that India takes up again, but even after the elections, we have not seen really a takeoff of that economy.
That is an area which we have to sit out a bit, and in the meantime, move our cheese to areas where we can grow, and where we see some potential. That is, as I'm speaking, what we are doing.
On that, what % of CT's orders was from large orders in the quarter? Can you give us that number?
I don't know it in the quarter, no. I think if you give an idea, I think if you take the gas and process business, I think it was around 10, 12 something % of that one. You have the larger oil-free turbos. It's a business between maybe 10%-15%, which is highly affected. That one.
Very good. Thank you very much.
We go to the next question, please.
The next question comes from Andre Kukhnin at Credit Suisse. Please go ahead.
Oh, good afternoon. Yes, it's Andre from Credit Suisse. I actually have a question on CT as well and following up on the previous one. In terms of your outlook that you gave today, what are you discounting for CT within that? Also just on that issue of the larger equipment going down, when do we start comping those declines? It feels like we've been well over a year or so. Has there been substantial sequential declines there that obviously will take a while to come through?
Yeah. I think just to make it easy on this, like I said, I think the big one, I'm looking to [Anzula], what is it? Five quarters ago that we already maybe something like that, even that we saw that Asia was, and mainly China, for this part of machines where that business was softening. You can see, if you go back mid-2012, when all this happened around the mine and all that, I think a couple quarters later, you saw also that, I think, and then with the new installation of Xi Jinping and the new measures and the new refocus that they said, "Okay, there will be less expansion in CapEx for certain businesses," which has an effect on this largest part on that one. We have got some compensation for that in North America, for sure.
That is where we got some more. It's not at the same magnitude. It is really slowing going down. Can it go further? Yeah. As long as it has not reached zero, you can say, yes, it goes down. On the other hand, of course, it's also up to us to come up with new machines, new innovative products, and getting share. That is the work to do.
To come back to what you said in your question that, of course, if you read the report, you see a different wording than four quarters ago when we talked about significant drop of large machines and so on. Of course, you cannot have significant.
No, no.
You come down to zero very quickly.
Yeah.
Of course, it has leveled out, and that's also what is reflected in the report.
Yeah.
It's not a strong level, so to speak. That's a little bit compared to the mining equipment in that respect. Due to Asia. Yeah.
Got it.
Thank you.
Thank you.
We take another question, please.
We have a question from Mr. Alex White at J.P. Morgan. Please go ahead.
Good afternoon, everybody. My question was around the Edwards margin within Compressor Technique. If I add back the SEK 50 million one-off, then it looks like it fell to around 18% from, what, 19.4% or something like that in Q3, despite the sales being a lot stronger sequentially. Just wondering what drives the fall in profitability there, if it's a mix issue or a seasonal issue. Just any detail you can provide.
To be honest, I think, because it's a bit lower than maybe some of the other quarters, even I didn't make a remark on that, even to the management, because it's a bit mix here. Maybe you get a bigger order with a little bit lower margin part in that. There is not a significant or a real fundamental reason where what can I say, okay, that is the reason why it is done. On the other hand, you see this business The one where we report and we depreciate some intangibles. If you take that, if we do comparable measures, it's a business +20% EBIT. I never had, really in my calculations when we did the acquisition, I had even not thought we could reach that with all the measures we did. I'm not at all concerned.
On the other hand, I'm happy because there's maybe one project here and there where the price was a bit lower. On the other hand, what you also should know, we have not talked about that, but I will mention it now. When we announced this acquisition, we said, of course, Edwards was strong and is strong, and it's getting stronger on the semicon and the flat screen and the solar part. On the other hand, Atlas Copco wants to make them stronger on the general vacuum, utility vacuum. That is, as I'm speaking, is happening. That is where we really invest. We invest in feet in the street. We heavily invest in R&D because we have the competence from Edwards. They are the specialists in vacuum, and then this together with the specialist in Belgium when it comes to the Airtech guys on certain core elements creation.
These two together had to come up with new products. That is what we are doing, and this money we expend, and we don't put on the balance sheet. That is what you see. This was this year, this will also next year, and of course, that is where we are working hard to get the real harvesting after two or three years. That is, I think, is a duty for us to do that, to make that part stronger.
Yeah. Perhaps we're a victim of being too transparent on the decimals of the margin in newly acquired businesses. When we debate it internally, we say they did 19%, that's very strong, and that's it.
That was a good question, I think.
Good spotted from Alex.
Good spotted. Yeah.
Okay. Thanks very much, guys.
Good. Next question, please.
We have a question from Mr. Lars Brorsson at Barclays. Please go ahead.
Hi, thanks very much. Good afternoon, Ronnie, Hans Ola. I'll stick with Edwards for now. Sorry to belabor the topic, but I hope maybe you could give us a little bit of visibility here on an order bridge. I'm trying to get a sense for the underlying organic growth in Edwards in Q4 FX, and also what you see, Ronnie, as you move into 2015 for the Edwards business. I appreciate most of the focus now is perhaps outside of the semi segment within Edwards in terms of your initiatives. We've seen most semi-cap equipment names deliver quite robust outlooks into 2015, as many foundries obviously are engaged in quite an aggressive ramp. Wonder whether you can give us a status update here on the semi segment, particularly across a couple of Edwards' key customers, including Samsung. Thanks.
It seems that Apple has some money to invest. Let's say it is a double-digit growth, what we have in Edwards if we compare 2013 with 2014. Higher than 10, we can say that part. Of course, the biggest contributor is semicon. That's for sure. That is also their biggest business. You see the Intel and the Samsung from this world still investing, and I'm not a specialist in this business but try to get more insight. I still see that there is good demand in that area. Capacity increase is still going on, so that's a good side. If you see if the report comes from these guys and they see they make good profit, yeah, most likely they will go on with these projects.
On the other hand, what is moving on, what we also promised when we announced it now a year and a half ago, that is the utility and the general vacuum as well as the service. That is, as I speak, and come back to my previous answer, that there is some growth. Of course, that is the first year, and it was not expected as that it will be very strong because we need to ramp up. We need to get the organization first, lift the organization, because you can come in and acquire a company and be a Mr. Wise Knows. I think who would like to meet someone like that? You need also to match the culture in the organization. That we have done.
I think now we are really on the move to really get expansion and feet in the street, and as I said, also expansion in R&D, and that is happening now. There is some growth. If semicon was high double digit, this part was a little bit less growth in maybe close to double digit. Maybe, yeah, high single digit. That was the other part.
Maybe just, sorry, to the question earlier about demand outlook and what's embedded for CT. Would it be fair to say that as Edwards now moves into organic in your bridge for CT in the first quarter, you would expect Edwards to contribute positively to the organic growth rather in Q1 for CT?
Yeah. That you can answer that. Of course, one should say, if you look to Edwards from mid-2013, it really went up. It was actually more or less, you can say, the day we had a handshake, and we agreed and signed the contract, then suddenly the customers start to order. We will get for 2014, it went up also. Of course, if you compare the first part of the year 2013 with the first part of 2014, you see a high increase. When you go further into the year, you see a lower growth. I will not expect from Edwards an organic growth high double digit. I don't believe in that. I think it will be a solid development, but not high double digit.
Thank you.
Do we have another question on the line?
We have a question from Mr. Erik Karlsson at AKO Capital. Please go ahead.
Hello. Thanks for taking my question. I have a question on Industrial Technique. I noticed you wrote in the presentation, Henrob is doing well so far. If I remember correctly, you previously said that SCA Schucker is doing very well as well. Given that the strategy of adding more fastening technology seems to be working really well, what is the opportunity to accelerate that expansion strategy?
I think to do more of this, Erik, what we have already done, because we still have some good ideas in further expansion our feet on the street. Let me give an example. We acquired a couple companies like Titan, Tentec, all that, the bolting, the high torque. I think it's just the beginning. That is an area where we further develop. Of course, we are also still on the hunting side. We can expand in the same area as you just mentioned, Henrob, SCA, and all the fastening technologies. We keep doing that. We have mapped the appetite. It's there and okay. It lends when we feel, of course, when there's two to make a tango. That is what is happening now.
How is the other side looking there at the moment?
Say it again.
How is the other side of the dance looking at the moment? Do you see anything in the pipeline for this year?
It's pretty good looking. I don't want to spread rumors on that because you see, sometimes we do small ones, big ones.
Yeah.
Big ones takes a bit longer, you never know. Sometimes it can take two, three years. If you take Henrob, it was a couple of years that we have been looking to them, and it's waiting for the right moment. We are definitely, and that I want to stress for everybody, we are definitely committed to Industrial Technique. We still believe it is a business area with big growth potential, big profitable growth potential, and that is what we keep doing it. We are very happy that the first quarter with Henrob, with the integration, knowing each other, leading the company, that that works. I think we're also starting up the projects at port. That is hard work for all these people. Starting up new lines is always challenging, and it's good to see that.
It also gives confidence to the organization, and we keep working hard on that.
Great stuff. Thanks a lot.
Thank you. Do you still have some questions left on the telephone line?
The next question comes from Mr. Peder Frölén at Handelsbanken Capital Markets. Please go ahead.
Yes, thank you. Hi, Ronnie. Hi, Hans Ola. A question, Hans Ola, on the FX. Could you please shed some light, I missed the first part of the call, maybe you have already discussed it, but could you please shed some light over the translation transaction effect going into the quarter? As that might be a short answer, here's another question. Could you also please try to explain the consumables business being down sequentially when we see quite strong production numbers coming out? Is that a combination of both volume and price, and could you share some light of an eventual de-stocking still?
Let me start with the short one as you said. You know that we don't elaborate too much on the future, but you saw the operating profit impact we estimated at just short of SEK 500 million for Q4 compared to Q4 2013. It's evident, I think, to you and to everybody that it will be more than that going into Q1, comparing Q1 2014 then, of course.
We are in that trend right now. To give you a very good estimate of how much it will be, I don't think it will benefit very much. I know for your modeling, I understand that, but still, that's what I definitely see. Then it becomes a lot of speculation exactly how the mix will be and what will happen to the currencies as we move along. The impact in Q2, judging from what we see today, will also be big, of course. Then we will start moving to compare specifically Q4, of course, but also to a certain extent, Q3, more in line with the current year. For the full year, it will be a lot of impact for the first half and much less for the second half. We do see an even more impact in Q1. That's correct.
Could you maybe shed some light of the flows from 2013, given the annual report, right? Given acquisitions and some actions with weak economies, commodity economies and so forth, I guess that the dollar flows have, if anything, expanded in 2014 versus 2013. Is that the correct assumption?
That's a correct assumption when you look at that currency isolated. Yes.
I'll use that.
To make then the long answer now on the consumable, Peder.
You are the CEO.
Yeah. Right. You called me the CEO, I said. I think because we wrote that then, of course, I was expecting a question like that because we see still good demand for iron ore, copper, zinc. These levels are still good, and then suddenly, why is Atlas Copco writing about a negative on consumable? Of course, you compare with previous quarters or the year-over-year quarter. If I look really more in detail, I think it's still a solid development. Of course, it has gone down. The figures are the figures, but that is comparison with a couple of orders where last quarter which we compared was a bit higher. We got a one-off order. These type of comparison you get into the comparisons of these stages, you get into the comparison.
If I look to the factory and the loads and the orders, there is still good development on the consumables. I'm not worried on that part. What we are doing in that part, because the exploration consumables is still at a very low level. I don't see any big light there. Maybe we have to wait until the gold price is going up a little bit more. Maybe then it comes back. If you see the production consumables, it's a good demand. That is what we see. We keep doing good work on that. At the same time, as I speak, we also adapting our stock levels there. These are the areas what we do, but there is still a good development going on the consumables. Nothing to, at least in the CEO's mind, there's nothing worrying on the consumable side.
Okay. Thank you, gentlemen.
Thank you. We go to the next.
We have a question from Mr. [Mark Sherman] at Bank of America. Please go ahead.
Yes. Thank you. Good afternoon, Ronnie and Hans Ola. Just a couple of questions. Firstly, on oil and gas. Ronnie, how do you think about this? Firstly, in terms of direct impact, you could see maybe, I guess weaker demand for some of the turbo compressors. Maybe it's weak already, but some areas are likely to struggle. How do you think about indirect areas? I guess the construction I'm thinking about here, because Caterpillar were citing weaker construction activity related to oil and gas versus perhaps the benefit you might see on the consumer side, which could help Edwards. What are you thinking about the gas price as it affects your business? That was question number 1. Then secondly, an exciting one on FX. I'm sorry if I've missed this before, but maybe one for Hans Ola.
Any guidance for FX for first quarter or full year 2015 if the rates stay at the current levels? Thank you.
I think, Hans Ola, you should know that what it will be in quarter one.
Yeah. It was actually the previous question, Mark, and if I repeat it very quickly this time then, that we don't give a projection, as you know, quarter by quarter, but we expect it clearly to be more than in Q4 comparison with Q4, and that was SEK 500 million as wrote in the report. We take that. For the full year, I think we'll have to come back.
Okay.
I think the development on the currency is not bad for us.
No. By no means. It's both affecting positively in numbers and in the margin that we have seen, yeah.
If the ruble will stabilize, that will be interesting.
Yeah, that's interesting.
Mark, coming back on your question, oil and gas, you should know Atlas Copco's direct exposure to oil and gas is not big.
Sure.
Sometimes we regret it, sometimes we are happy. When it comes to these big turbos, and then these companies, these 4 or 5 companies who are in that, Atlas Copco is not in that business. Fortunately or unfortunately, depending on what cycle we are, we are not in that part. We are not in this big thing of actual, what is it? 20, 30, 100 megawatt compressors. We are not in that part. From that point, there's no effect on. Although, and that's mainly on CT, we see, and if you go to the region Houston, we see some customers coming under pressure. That is then for us, mainly on the drilling side, on the smaller compressors. Now for us, it's on the smaller compressor and mainly for our brand Quincy.
It's not to do with the Atlas Copco, because Atlas Copco brand is hardly in that. There we see some orders of some customers really suffering and/or postponing it or getting a little bit more trouble on that, and that's the direct effect. On the other hand, of course, if a big business like oil and gas does not do CapEx or go down, for sure there will be some negative indirect effect because maybe maintenance companies will not invest.
Some other thing will not do a big investment or expansion. That is the negative indirect part we will get. On the other hand, like you mentioned, we'll see where this money, which comes available for all the consumers will go to. And that is the big question for all of us, I think. Will it be helping growth in Europe? Will it even help the growth in the world? Hallelujah, who knows? That I think when we are six months further, we will see where this money will be allocated to. On the other hand, I think that's nice to be in Atlas Copco. Everybody use compressed air. So if they use more consumer, more clothing, there is more weaving going on, so more compressors will be sold there.
I think in the process industry, if there are more plastics or other polymers are used because they're cheaper, I think you use more compressors, more maintenance. So that is where I put my bet on. And internally, we said, "Don't make a big fuss on oil and gas. Don't use it." Certainly that is bad weather. I think there is a lot of talk about negative, but there is also, I think, positive opportunities for us in that area. So I don't make, on that part, not a big thing. Having said Caterpillar on construction, I read also that report, and I tried myself to find out where could it play with us. So I made also a couple calls around in Atlas Copco to try to demystify that.
And I could not find immediately a good project where to say, "Okay, there I can talk it down." I don't have it.
Transparent as always.
Yeah.
Yeah.
I think, yeah.
That's good.
Thanks, Ronnie. Just one quick follow-up. On China, you mentioned obviously the weakness in mining, but how is the industrial demand? It sounds like that's a fair bit more robust. Is that the case? Is commodity areas weak, industrial areas more robust? Is that fair?
If we take China and industrial, of course, the large machines or large compressors, also industrial process, whatever you name it, that is soft. If you then look to the small to medium-sized compressors, I think that business keeps up. Is it really great? No, but it keeps up. We see on industrial, and then I'm talking about Industrial Technique. Take aerospace, take railway transport, take Motor Vehicle, that part, that business is really, should I use the word booming? That goes very strong. That's also something what is supporting the growth in Industrial Technique. That's also China. Unfortunately, that business is not as big, maybe yet, as compressor sale. If you are in China in the right segment, it's hallelujah. If you are in air separation, you are in trouble.
If you look to read the report of SKF, you can see that. You see these areas, they go very strong there.
Yeah.
That's the same what we see.
Brilliant. Thank you very much.
Thank you. Then we take another question.
We have a question from Mr. James Moore at Redburn. Please go ahead.
Yes. Good afternoon, everyone. Hi, Ronnie. Hi, Hans Ola.
Hi.
I think my questions on oil, ruble, currency, compressor, mining have sort of been touched on, maybe I'll go back to mining. With the further weakness that we've seen in the iron ore, coal, copper prices, but the gold price up. Within the world of production and consumables, I saw your comment that consumables were down both sequentially and year-on-year, and you made a point about that. Within that, are you in any way seeing gold growth shift in a better direction than copper, coal, and iron ore? If not, is that something you think might start happening as we progress through the year? Do you worry about the commodity mix? I know gold's a big slice, but it's not everything.
Yeah. Normally, James, you are better than I in that. If you take copper, because prices has dropped a little bit, although I see the demand for copper still doing great. If you look to the utilizations of the mines, you see that it's high. For me, I think there will be still, maybe not this year, but more copper investments taking place as we speak. That's my bet. What will the gold price do? You see the gold price today, it comes closer and closer to the break even to start again.
To do a type of exploration here and there. If we get maybe another six, 7% up, I think there are for sure people looking into that. That I think is not bad because we all know if gold will come, and this of course now we do speculations If gold will come, you would see exploration also coming up again. That's also a business, the underground gold, that is also good for us because underground machines and our exposure to these mines is higher. That will be a good development. We need maybe a bit more volatility in the market to get that up. I think when it comes to the mines and equipment, I think for this year and we see how long, I think it will be a replacement market.
It's already since mid-2012 that everybody is a little bit careful in their CapEx, you also know these boomers and these underground drill machines, they don't last 10 years. You heard me also that I'm more positive on service because we see that already now in the market. This underground service, at the end of the day, you have to come and make a confession because the machine needs to have an upgrade or you have to buy a new one. This is different with the larger surface drills, which last longer. The underground, that I think is an area where I believe there will be still some activities going on.
That's very interesting. Can I just jump back to the geographic orders of the business? You talked earlier about all major markets in Europe developing positively, which is quite a big statement. Do you see much of a change there? Is there any particular country driving it? Is there a particular business? Are there any themes behind that? Is it just an easy comp? Maybe you could expand a bit on Europe.
Yeah. I mentioned, if you read the transcript of last quarter, I mentioned also that I was a bit more positive on Europe because what I saw, and you know James with what triggers me in my analysis, as you also have your indicators, I have a bit the indicators the same as I see in Atlas, and that is the small to medium sized compressors. I see this in almost all markets in Europe, of all countries in Europe, going up. I see more activity. And that we should not forget, I think we compare with lower levels.
We see some development, good development, good demand in Europe. Of course, it's not high double digit. That's not what I'm talking, but I see growth. I see that. I see some growth in U.K., I see some Germany growing, I see some Italy, Spain, I see a positive development. I see, and that is mainly if I take my trigger, our, I should say, small to medium size compressors or yellow canopies. Then if I take it aggregated, it is like that.
Very interesting. Thank you very much.
Thank you, James. Let's see, we might not be able to take all questions from the telephone line, but we take a few more. Please go ahead.
We have a question from Mr. Daniel Cunliffe at Liberum Capital. Please go ahead.
Hello there. Thanks for taking my question. Just one question on the pricing for MR and CT. I've seen this the first time since I think zero price for several years. Is there anything behind this such as dilution from acquisitions, lower Asian orders, FX, i.e., things that can certainly improve as these factors unwind? Or is this as simple as weaker price due to the cycles, lower OE price? Some sort of clarity and understanding would be useful there. The second question is, I suppose a follow-up is, would you expect to keep prices flat from here or the zero price actually tip slightly negative or actually to recover? I'd be interested in your thoughts with regards to that. Thank you.
Yeah. You see, Atlas Copco and pricing, what makes us to stay on the positive side is the innovation. I think if you really, by innovation, create productivity for your customers, then you also get value, then you can do an upselling because you can share the gain with your customer. That is also what we are working on. That's one from the machine side. Of course, on the service side, there, I think of course it's a bit the same, but on the other hand, you also have a part of inflation or deflation. In areas where you have a lower inflation, it gets less price increases on the service side, and that you should take into account as we go now in the course of the year or whatever, when we will get proper inflation in the world.
That's one thing, but mainly the pricing in MR, CT, IT, and all that is always driven by innovation. That is where we get the pricing power. Of course, you can get some quarters, whether it's here and there. Of course today, in the mining part, of course, it's the purchasers have the power now. Sometimes you have to be a bit more aggressive, and that's mainly what happened with a couple of orders. I think as such, fundamentally, there is nothing changed.
You don't see zero as the new normal? You think you can sort of bounce back to 1%?
About the total profitability of the business in here with the pricing, it's more the latter comment that Ronnie refers to, that we compare exactly the same product one year to another, that is impacted specifically by the services aspect as you see gradually. We don't make projections, there is no feeling that we are moving into negative territory because that's not really.
I've not seen any fundamental, if I do business reviews with the different divisions and all that, I have not seen really signals that they said, "Okay, now we become like in the mobile telephone business, every month it goes down." That business we are not in now. I think you still are able, with innovation, to create expansion in the productivity.
Okay.
Thank you.
Thank you.
We need to take the final question, unfortunately. I know that there might be some unanswered questions, but please come back to us individually after the call then to cover those. We take the final question now, considering the time.
We have a question from Mr. Andreas Koski at Deutsche Bank. Please go ahead.
Yes, hi. Thanks for taking my question. Most of my questions have already been answered, maybe you can share with us what we should expect in terms of CapEx for 2015, because I noticed that in Q4 now we have investments in PP&E of SEK 521 million, which is significantly higher than Q1 to Q3.
Oh, it's a good observation, actually. We have added businesses, not only Edwards, we have added also Henrob, we have added a couple of other acquisitions where the run rate, first of all, of investments to revenue is higher than the average in Atlas Copco. That has affected us a little bit, and you can see it in that. I would say that is the main explanation. When I look at the overall like for like, MR, CT, the CR compared to two, three years ago, I don't see any trend in increase, on the other hand. Here we have a couple of things. I would expect that it is a slightly higher level in next year than for the full year 2014. There will be oscillations over the quarters, of course.
Mainly Edwards and Henrob.
Mainly Edwards and Henrob that both have affected the current, but also is at a slightly higher level than we are used to.
Yeah.
Yeah, because I would say historically, you've been around 1.5% of sales, and this quarter you were about 2%. Should we expect about 2% of sales now, or between 1.5 and 2?
I think 1.5%-2% on the revenue of Atlas Copco is becoming quite a big difference at the end of the day, because we will always be a very small step, gradual investment type of company. We very seldom have large, one-time big investments, as you know. It might be 2% in one quarter, but it might be back to 1.5% the next quarter. That's what I'm trying to say.
Okay.
It's not a very useful tool for us to predict internally either, to be perfectly honest. Slightly higher CapEx for the full year, that I think is a fair estimate, yeah.
Thank you very much.
Thank you. With that, as I said, it took longer. I thought we covered a lot of ground in the first couple of questions, there are always more questions. Unfortunately, we have passed the hour with 10 minutes, I would like to thank, or we would like to thank everybody participating here and on the telephone conference, and we'll be back with the first quarter results in April. Thank you.