We have some people here in the mine, our presentation mine and test mine here in Naka,
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 Ronny who will take us through his comments on the quarterly results and then we'll open up for questions and answers. And I say already right now that if we can restrict it to one question per person, it would be very good. So because the quarter Q4 release is always a little bit more lengthy than the other one.
So if you can respect that, I'd be most grateful. Thank you very much. And again very welcome. Ronny?
So thank you, Hamzula. Let's go immediately to slide number 2, where we see Q4 in brief. And as I said, I'm very proud to see record orders received and revenue we all know partly also held 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. And you see here the organic growth 2%, strong solid service development.
So it's good to see that that strategy keeps working. So I'm always very pleased to see that. The industrial part of our business does good, industrial tools, the MVI, aerospace doing great. And then we had the small to medium sized compressors, which had a robust development and the low ones the lower ones was in the larger part of the business. So 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 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. But on the other hand, we see for our products a negative overall development in Asia. Record cash flow more than SEK 5,000,000,000 so 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. So great to see that. And 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 SEK 5.5 last year.
And also we will go to an extra distribution of cash through a redemption of DKK 6 per share. So in total, we will hand out DKK 12. Does that mean that we stopped 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. And we still believe even after this twelve kroner distribution that we had the gun power in the balance sheet to do a big one. Let me go then to the figures. I will not read them more than you can see on the slide, whereas maybe one thing is on the 4th bullet adjusted operating margin. So it's more or less at the same level as last year.
But of course, if you make a more in-depth analysis, you will see that the robustness is a bit better than last year. But Hans Ole will also when he goes to the flow through bridge elaborate a bit more on that. Profit before tax, okay, of course, is higher and the earnings you can reach yourself. And of course, cash flow, I've already mentioned that. If we go quick over the summary in 20 14, so I know this increased of 15%.
So hitting the 93 level, as I said, a record organic growth is only a 1% or a bit more than 1. Not really a very strong one. At least I'm happy that we kick in again with organic growth because at the beginning of the year it was definitely not the case because this is also supported by a good service business. But 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. So this that organization has done great. Also the small to medium sized compressors keeps going. So also there our new technology our DSD plus the same as in industrial tools with new products it really boosts the order income. And of course, mining and construction and the large part is then the negative part.
If we take the full year, Asia was not a star. There was time that Asia was the star. Now this time it's North America is the star. But 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. So I think for us it's important that we grab the total market.
Cash flow a bit less than €14,000,000,000 So you see it here and leading to an operating margin for the year of 18.2%. And one last one, I think we are very happy. We had it's now a year that we have Edwards Tecum and Akos Copco and we can say that it was a very successful acquisition first from an integration point of view, culture match, but also from a performance point of view. So we are very pleased to see this development. Let me go quick through the regions.
Let me talk about the 2 positive ones. You could say the 3 positive, but I think the main positive ones is Europe and North America. So that is an area where we see that almost all markets in Europe show a positive development. And 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. So China and India for our business, it's really not the growth market. So we have to work harder there and going after more share.
That's the only one as the market is less. So we have to take more share. I think 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. And when it comes to Australia, slight improvement on the mining side compared to last year for Australia. And one should not forget that we had done a significant acquisition in terms 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, so 2%, 3%. So compared with history, of course, it's low, but at least it's positive. If 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%. So that works fine.
And of course, the structural part, which is hand drop and headwinds mainly, which made it a quarter with plus 24%. If we go then to the different business areas, I'll 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 2 or 3 quarters now.
We see small to medium sized compressors doing okay, Of course, stronger in North America than in Asia. But also here we are helped by the innovation. The VSD is very success. So that helps of course the sales. And the larger part is softer.
And that the larger part with those who follow Arthroscopic and Oda, but that's mainly also Asia. Again, a strong quarter for Edwards. So that keeps going. That's also mainly semicon. So that works great.
And adjusted, we come to a margin of 22.2%. And the adjustments are a couple of small topics here and there. But if you take it in total, it was around €120,000,000 So a reasonable quarter for Compressed Technique. Then we go to Industrial Technique keeps rock solid because the real part which we are looking to is to make sure that Handrop is well integrated because that's significant acquisition for this business area. So we had a good start, but that's always good to see.
Solid service division outcome. So that's great. And the Swiss clock, although maybe I should not use that word anymore now these days with this volatility in currency, But the operating margin keeps going on 22.6%. So a bit dilution of acquisition at the other end a bit on that, but it helped on the currency side. So a very solid good development for industrial technique.
Then we come to the Rockies MR, the mining and rock excavation technique, as it says here, the lower order intake for equipment and again the larger equipment, so the service part is tough. The underground is a bit better where we see some replacement orders. Good and you have seen that when I was explaining you about the geographical spread. Australia, we see a bit more positive side there. So we got some good orders, but again a lower Asia.
One thing is and that's maybe something to remember what we see and that is so the last 6 months, we see a good development on service in the mining and rock excavation business area. And 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. So I'm very pleased to see that happening. Of course, one knows that we still have some work to do on the inventory. So we are really working further on that part.
And I'm very happy also to see that the effort what we do in the organization is also yielding results. So inventory in MR went really down. And of course that also contributed to the cash flow. Operating margin an 18.5%, so a solid margin given with all the activities that they are doing. Construction Technique, a lower income for larger portable compressors.
So 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. But on the other hand, we had a stable income for demolishing tools. So all be all a little bit negative organic.
But I think if you really look under it, it was more or less a flat development. So good Europe and North America where like Brazil and China were tougher and a margin around just below 11%. If we then take the group and then I will hand over to Hansula. So here you see the figures for the quarter. Profit 15% up, profit before taxes 13% and of course the earnings per share 2.74%.
So making a year having an earnings per share a bit more than 10%. And in total revenue 12% up. Profit looks like it's flat, but you will see also when Hans Ul explained 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 business area. So, Amzula, can I hand over? Yes.
Ronny,
a few comments before we come to the end and to the Q and A. As usual, we look a little bit further in the profit and loss statement and 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 Q4, we had some extra negative foreign exchange differences, a financial character and also well, all of them are of that nature. We have had devaluations 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.
And we also have little bit of an effect in there of the delayed payment for the Hendrog acquisition, which is in the foreign currency and in U. S. Dollar. And since we don't hedge, we have a bit of a negative there. But remember that what Roni has said many times that the business is doing better when the dollar is strong.
So 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. And I also expect going forward that somewhere between 24% 25% is a good rough estimate of where next year hopefully will be. And the earnings per share we saw in the summaries already and we'll just leave it by that. Ronny alluded to the profit bridge and here we see on the quarter, but 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 EUR 120,000,000 in the Q4 and you have the gain from particularly from the big acquisition of Edwards. And those are the 2 components in that.
Otherwise, I think that there is no extreme comment on anything else. We have 3 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 4 business areas there to give an indication. But 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. And then there are 2 slides on the year summary. And I think that one thing that I can do on the group here because what Roni started saying we have a 2 percentage point drop in this margin in a year that we are pretty happy with and you might say, well, where does that come from? If you take it in rough big chunks, you can say that 0.5 percentage point comes from the slight volume effect that we have and also the dilution from acquisitions. So that's roughly 0.5 percentage point.
You have another 0.5 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. And then we have about 1.5 percentage point impact on the group from the lower profit in MR in Mining and Rock. So that's very heavy. Of course, that 1.5% on MR is also affected by the impairment charge that they took in the Q3. So that explains why that impact is rather big.
If you put that all together, you have 2.5 percentage points, but then we have 0.5 percentage point gain from the currency impact on the margin. So that's a little bit in the rough way to make the bridge between 2020 2018. 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. Then 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 €100,000,000,000 in total assets. But of course, there's a very big impact here on pure translation from euros and dollars and particularly dollars and other currencies. So from last year, there's actually about €9,000,000,000 impact purely by translating the same dollars and renminbi and whatnot into Swedish krona. So 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 in slide number 19.
There are some big things that swings between Q4 2013 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 and you see that was an over normal amount in Q4 last year and you could say under normal in Q4 this year for various reasons. But 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.
Again, income statement wise 24% to 25% that's what we expect. The other big thing worth mentioning is change capital. And Ronny said, we're very happy with the release of particularly inventory in the Q4 and you see the impact here on the cash flow. All in all, leading to more than €5,000,000,000 which is a record ever for the company. Coming then at the end to the slide 20 on earnings and dividends.
The earnings per share of 10 or 10 point 01 to be correct is then to see 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 that four times in the last 10 years basically we have proposed and we have done these type of extra distribution of capital. And we're using the same methodology as in the previous year, mandatory redemption of shares, which means that we split the share the existing shares in 2. We assign DKK 6 as value to the so called redemption share. And then after a period of trading a couple of weeks that redemption share is redeemed back by the company at the price of DKK6 or the DKK6.
So and then the share capital goes back to the same amount of shares as before. So that's the methodology. I should also say that we have proposed the dividend this year, the ordinary dividend we paid in 2 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. So this is the reason and that allows us to have a more efficient cash management in the company. So it's fine tuning if you like and we think that's the background for the proposal. So with that, I hand it back
to you Roni 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? Why we keep on that? I think it's mainly where we see that our service business is doing solid. In some businesses we have and some of the business areas maybe our equipment is a bit under pressure.
But I think it's we believe in total, yes, that demand is a positive one. So that's the reason why we said increased somewhat. So by this, Anzula, I think we have done the presentation. Great.
So we go to the Q and 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? Excellent. Short and correct instructions.
So I think to give a chance to some people here in Naka, 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 Perning representing myself. A question regarding Russia and the situation there. Has that affected the group? Yes.
I can take of course. It 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 reducing in Russia is increasing prices to make the match again for the devaluated of the ruble. That's one part. We see also that because some of the business get a little bit more careful, so people postpone certain purchasing that is more or less what we see.
But 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 6 to 12 months what this will really be. I think as scope go, we have taken I think the right measures, adapting our organization, making sure that the balance sheet is on the right side, in the right currency, getting adapting the inventory to be sharper in that part. So that is what we are have been doing. But we'll see I think the next coming 6 to 12 months.
If nothing has 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 1 by 1.
We have a question from Mr. Felix Dahl at UBS. Please go ahead.
Yes. Hi, good afternoon, Ronny, Hans Ola. It's Frederic 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 pull back from that.
With process industries likely to weaken and emerging markets to stay soft over the foreseeable future, I wondered if you could update us on your view on how to get the business back to growth or if you have accepted no growth and just protect your margins
here? No. For sure, that's not No. And for sure, I have not accepted no growth. And I will definitely never say this call so that the Apopka people will hear that that will be a proxy for them.
No way. But if you dig deeper a bit into of course, you don't see all these figures and all that. But what we see in compressed technique, we see still a good solid development on service. And that is also where we make the highest profitability. We still don't have 100 percent one to 1 ratio.
We have not climbed fully the ladder, the service ladder as we explained many times. So there is for sure still some big potential and that I think works fine. It could always be better. There's always a better way as you know that. But that is okay.
Then 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 okay 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 if 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 compresses.
And this is maybe already the 5th quarter, I'm saying. This is always a bit boring, but it's a fact Where we see that that business is going down. And where is it coming from? It's mainly Asia. That's the biggest business is Asia.
That is yes, when the market is softer, do we lose market share? Because that was of course my first thing all the time because when you see this figures, you really immediately say, do we lose? No. The market is softer. And that is an area where what is the remedy to that is to get more share out of that market.
But that market has screened. 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 where we yes, 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.
And that is, yes, as I'm speaking what we are doing.
Can I on that, can I what percentage of your CT's orders came from was from large orders in the quarter? Can you give us that number?
I don't know it in the quarter, no. But I think if you give an idea, I think if we take the gas and process business, I think it was around 10%, 12%, 12% something of that one. So and then you have the larger oil free turbos. So it's a business between maybe 10%, 15%, which is highly affected.
Very good. Thank you very much.
So we go to the next question please.
The next question comes from Iskandri Kukhnin at Credit Suisse. Please go ahead.
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. So in terms of your outlook that you gave today, what is what are you discounting for CT within that? And also just on that issue of the larger equipment going down, when do we start comping those declines?
Because it feels like we've been well over a year. So is there or has there been substantial sequential declines there that obviously will take a while to come through?
Yes. 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, 5 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 take if you go back mid-twenty 12 when all this happened around the mine and all that, I think a couple of 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, but it's not at the same magnitude.
So it is really slowing going down. Can it go further? Yes, as long as it does not reach 0, you can say yes, it goes down. On the other hand, of course, it's also up to us to, yes, come up with new machines, new innovative products and getting share. That is
the work to do. To come back to your what you said in your question that, of course, if you read the report, you see a different wording than 4 quarters ago when we talked about significant drop of large machines and so on. So of course, you cannot have significant, significant on then you come down to 0 very quickly. So of course, it has leveled out and that's also what is reflected in the report. But it's not a strong level so to speak and that's a little bit compared to the mining equipment in that respect
due to Asia. Yes.
So thank you. Thank you. We'll take another question please.
We have a question from Mr. Alex White at JPMorgan. Please go ahead.
Good afternoon, everybody. My question was around the Edwards margin within compressor technique. If I add back the €50,000,000 one off, then it looks like it fell to around 18% from, what, €19,400,000,000 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, yes, because it's a bit lower than maybe some of the other quarters, but 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 of that. But 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 that is a solid, if we do comparable measures, is it a business plus 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. So that is one. So I'm not at the lowest concerned. On the other hand, I'm happy because there's maybe one project here and there where the invoicing of where the price was a bit lower. On one end, with Ruyolo and 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 it's Edwards is strong was strong and is strong and it's getting stronger on the semi con and the flat screen and the solar part. But on the other hand, Apascopco wants to make them stronger on the general vacuum utility vacuum. That is as I'm speaking is happening. And that is where we really invest. We invest in feet in the street.
We heavily invest heavily invest in R and D, because we have the competence from Edwards. They are the specialists in vacuum. And then this together with the specialists in Belgium when it comes to the Airtech guys on certain core elements creation. These 2 together had to come up with new products. And that's what we are doing.
And this money we expand and we don't put on the balance sheet. And that is what you see. And this will 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 2 or 3 years.
And that is I think is a duty for us to do that to make that path stronger.
Yes. Perhaps we're a victim of being too transparent on the decimals of the
And that's it.
But good question. It was good spot on the and that's it. Good question.
It was good spot from Alex. Good spot. Yes.
Okay. Thanks very much guys.
Good. So next question please.
We have a question from Mr. Lars Brorsen at Barclays. Please go ahead.
Yes. Hi. Thanks very much. Good afternoon, Ronny, 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 ex 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. But 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.
I 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.
Yes. It seems that Apple has some money to invest. That's Let's say it is double digit growth what we have in Edwards if we compare 2013 with 2014, so 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. So you see the Intel and the Samsung from this world still investing. And when and I'm not a a specialist in this business and but try to get more insight, I still see that there is good demand in that area. So capacity increase is still going on. So that's a good sign.
And if you see the report comes from these guys and they see they make good profit, yes, then most likely they will go on with these projects. On the other hand, what is moving on and what we also promised when we announced it now a year and a half ago that 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. But of course that is the 1st year and it was not expected as it 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 Nose. I think we would like to meet someone like that. So you need also to match the culture in the organization. But that we have done. And I think now we are really on the move to really get expansion in feed industry and as I said also expansion in R and D and that is happening now.
There is some growth. So if semi was high double digit, this part was a little bit less growth in maybe close to double digits a bit maybe yes, high single digit. That was the part the other part.
So maybe just sorry to the question earlier about demand outlook and what's embedded for CT. Would it be fair to say that as it was now moved into organic in your bridge for CT in the Q1, you would expect, Edward, to contribute positively to the organic growth rather in Q1 for CT?
Yes, yes, yes. That you can answer that. Of course, one should say, if you look to AdWords from mid-twenty 13, 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 customer start to order. So we will get for 2014 it went up also.
And of course, if you compare the 1st part of the year 2013 with the 1st part of 20 14 you see a high increase. When you go further into the year you see a lower growth. So we will I will not expect from Edwards an organic growth high double digit and 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 of Akyol Capital. Please go ahead.
Hello. Thanks for taking my question. I have a question on Industrial Technique. I noticed you wrote in the presentation, Henrobb is doing well so far. And if I remember correctly, you previously said that a CA Shuker is doing very well as well.
So given that opportunity to accelerate that expansion strategy?
I think to do more of this Eric 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 copper companies like Titan, DenTek, all that, the bolting, the high torque, I think it's just the beginning. So 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 handrop SCA and all the fastening technologies. We keep doing that and we have mapped the so we have mapped the appetite. It's there and okay. It blends when we feel of course when yes when there's 2 to make a tango that is what is happening now.
And how is the other
side looking there at the moment?
Say it again?
How is the other side of
the Danske looking at the moment?
Do you see anything in the pipeline for this year?
It's pretty good looking. So I don't want to spread rumors on that because you see sometimes you do small ones, big ones. Big ones takes a bit longer and you never know. So sometimes it can take 2, 3 years. If you take like Henrop, I think it was a couple of years when we have been looking to them and it's waiting for the right moment.
So but 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. And we are very happy that the Q1 with Henrop, the integration, knowing each other, living the company that works. I think we're also starting up the projects at 4th. That is hard work for all these people.
Starting up new lines is always challenging and it's good to see that. So it also gives confidence to the organization and we keep working hard on that. Great stuff. Thanks a lot.
Thank you. And we still have some questions left on the telephone line.
The next question comes from Peter Frelian at Handelsbanken Capital Markets. Please go ahead.
Yes. Thank you. Hi, Roni. Hi, Hans Ole. A question, Hansola, on the FX.
Could you please shed some light? I missed the first part of the call. Maybe I've already discussed it. But could you please shed some light over the translation transaction effects going into the quarter? And 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 shed some light of an eventual destocking still?
Yes. Let me start with a 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 €500,000,000 for Q4 compared to Q4 2013. And 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. So we are in that trend right now.
But to give you a very good estimate of how much it will be, I don't think it will benefit very much. But I know for your modeling, I understand that. But still that's what I definitely see. And 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.
But 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. So for the full year, it will be a lot of impact for the first half and much less for the second half. But we do see an even more impact in Q1. That's correct.
Yes. But could you maybe shed some light of the we know the flows from 2013 given that in your report, right? And given acquisitions and some actions with weak sort of economies, commodity economies and so forth, I guess that the dollar flows has sort of, if anything, expanded in 2014 versus 2013. Is that a correct assumption?
Yes. That's a correct assumption when you look at that currency isolated, yes.
Okay. Okay. I'll leave that.
Yes. So to make then the long answer now on the consumer books, Peter, I was saying yes, yes, right. You called me the CFO. I think because we wrote that then and of course, I was expecting the question like that, because we see still good demand for iron ore, copper, zinc. These levels are still good?
And then suddenly, why is Aposcope Co writing about a negative on consumable? Of course, it's always comparable you compare with previous quarters or the year on year quarter. So 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 where we which we compared was a little bit higher.
We got a one off order. But these type of comparison you get into the comparisons. So these figures you get into the comparison. But if I look to the factory and the loads and the orders, there is still good development on the consumables. So I would not I'm not worried on that part.
What we are doing in that part because you know the exploration consumables is still at a very low level. I don't see any big light there. So 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 in consumables, it's a good demand.
And that is what we see we keep doing good work on that. And at the same time, as I speak, we're also adapting our stock levels there. So these are the areas what we do. But there is still a good development going on, on the consumables. So nothing to at least in the CEO's mind there's nothing worrying on the consumables side.
Okay. Thank you, gentlemen.
Thank you. So we go to the next.
We have a question from Mr. Mark Schuhrman of Bank of America. Please go ahead.
Yes. Thank you. Good afternoon, Ronny and Hans Ola. Just a couple of questions. Firstly, on oil and gas, Ronny, 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 was fighting weaker construction activity related to oil and gas versus perhaps the benefit you might see on the consumer side, which could help Edward. So what are you thinking about the gas price as it affects your business? That was question number 1.
And then secondly, an exciting one on FX. I just I'm sorry if I've missed this before, but maybe on the Panzula. What is there any guidance for FX for Q1 or full year 2015 if it stay if the rates stay at the current levels? Thank you.
I think, Camzula, you should know that what it will be in quarter 1.
Yes. It was actually the previous question, Marc. 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 €500,000,000
as we
wrote in the report. So we take that for the full year, I think we'll have to come back.
Okay.
But I think the development on the currency is not bad for us.
No, no, no, no, no. By no means. It's both affecting positively in numbers and in the margin that we have seen. If the
ruble will stabilize that will be Yes. That's the question. But coming Mark coming back on your question on oil and gas, you should know, Atascopka's direct exposure to oil and gas is not big. And sometimes we regret it. Sometimes we are happy.
When it comes to this big turbos and then this company, this 4 or 5 companies who are in that, Acroscopco is not in that business. Fortunately or unfortunately, yes, depending on what cycle we are, we are not in that part. So we are not in this big single actual, what is it, 20, 30, 100 megawatt compressors. We are not in that part. So from that point, there's no effect on it.
Although and that's mainly on CT, we see and if you go to the region Houston, yes, we see some customers coming yes, we see some customers coming under pressure. And that has been for us mainly on the small on the drilling side, on the smaller compressors you say as a now for us it's on the smaller compressor and mainly for our brand Quincy. It's not with the Atlas Copco because Atlas Copco brand is hardly in that. There we see some orders or some customers really, yes, suffering and or postponing it or, yes, 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, yes, we will for sure there will be some indirect effect, negative indirect effect because maybe maintenance companies will not invest. Some other thing will not, yes do a big investment or expansion. That is the indirect part 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's 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 6 months further, we will see where this money will be allocated to.
On the other hand, I think that's nice to
be an
aposcopco. Everybody use compressed air. So if they use more consumer, more clothing, there is more weaving around, 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, yes, I think you use more compressors, more maintenance. So that is where I put my bet on.
And internal, we said don't make a big fuss on oil and gas. Don't use it. Certainly, that is bad weather. I think it's not. 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 couple of calls around in the end of the scope 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.
I don't have it.
Transparent as always.
Yes. I think yes.
Thanks, Ronen. Just one quick follow up. On China, basically, how 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 all commodity areas weak, industrial areas more robust? Is that fair?
If we take China in industrial, of course, the large machines or large compressors also industrial process whatever you name it that is soft. But if you then look to the small to medium side compressors, I think that business keeps up. Is it really great? No, but it keeps up. Where 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 and that's also something what is supporting the growth in Industrial Technique and that's also China. Unfortunately, that business is not as big maybe yet as compressed as that. But that goes for that. So if you are in China in the right segment, it's hallelujah. If you are in air separation, you are in trouble.
If you are in and look to read the report of SKF, you can see that. Then you see these areas, they go very strong there. And that's in what we see.
Yes. Brilliant. Thank you very much.
So thank you. And then we'll take another question.
We have a question from Mr. James Moore at Redburn. Please go ahead.
Yes. Good afternoon, everyone. Hi, Roni. Hi, Han Solo. I think my questions on oil ruble currency, compressor, mining have sort of been touched on.
So 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 sort of production and consumables, I saw your comment that consumables are down both sequentially and year on year and you made a point about that. But within that, are you in any way seeing gold growth shift in a better direction than copper, coal and iron ore? And if not, is that something you think might start happening as we progress through the year? And do you worry about the commodity mix?
I know gold is a big slice, but it's not everything.
Yes. Normally, James, you are better than I in that. So in if you look to 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 is high. So for me, I think there will be still, I think maybe not this year, but more copper investments taking place as we speak.
That's my bet. Gold is a big question. Okay. What will the gold price do? You see what you see the gold price today.
It comes closer and closer to the breakeven to start again to do a type of exploration here and there. So if we get another maybe another 6%, 7% up, I think there are for sure people looking into that. And 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. And that's also a business.
Then gold the underground gold, that's also good for us because underground machines and our
volatility
in the market to get that up. But I think when it comes to the mine and the mines and equipment, I think for this year and yes, we'll see how long, I think it will be a replacement market. It's already since mid-twenty 12 that everybody is a little bit careful in their CapEx. But you also know these boomers and these underground drill machines, they don't last 10 years now. 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, yes, 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 service drills, which last longer.
But the underground that I
think is an area where I believe there will be still some activities going on.
So interesting. Can I just jump back to the geographic orders of the business? And you talked earlier about all major markets in Europe developing positively, which is quite a big statement. And do you see much of a change there? Is there any particular country driving it?
Is there a it a particular business? Are there any themes behind that? Is it just an easy comp? Maybe you could expand a bit on Europe. Yes.
I mentioned if you read the transcript of last quarter, I mentioned also that there was a bit more positive on Europe because what I saw and I always go and you know James with what triggers me in my analysis as you also have your indicators, I have a bit of indicators the same as I see in ADAS and that is the small to medium sized compressors. I see this in almost all markets in Europe of all countries in Europe coming up. And I see more activity. But and that we should not forget, I think we compare with lower levels. But we see some development, good development, good demand in Europe.
So is it of course, it's not high double digit. That's not what I'm talking about. I see growth. I see that. I see some growth in U.
K. I see some Germany going. I see some Italy, Spain. I see a positive development. So that I see and that is mainly if I take my trigger my of our, I should say, small to medium sized compressors over yellow canaries.
And then if I take it aggregated, it is like that.
Very interesting. Thank you very much.
Thank you, James. And let's see. We might not be able to take all questions from the Delfon line, but we take a few more. So please go ahead.
We have a question from Mr. Daniel Kalief at Liberum Capital. Please go ahead.
Hello, thanks for taking my question. Just one question on the pricing for MR and ET. I've seen this is the first time you've seen I think 0 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? So some sort of clarity and understanding would be useful there. And then the second question is, I suppose a follow-up is would you expect to keep prices flat from here? Or the 0 price actually tip slightly negative?
Or actually to recap, I'd be interested in your thoughts with regards to that. Thank you.
Yes. You see, arthroscopic and pricing, what makes us to stay on the positive side is the innovation. I think if you really buy 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 for on the machine side. When 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. So 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 year or whatever when we will get proper inflation in the world.
So that's one thing. But mainly the pricing in MRCT IT and all that is always driven by innovation. That's 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 not really yes, it's the purchase has had the power now.
Sometimes you have to be a bit more aggressive and that's mainly what happened with a couple of orders. But I think as such fundamentally there is nothing changed.
So you don't see 0 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 is more the latter comment that Ronny refers to that we compare exactly the same product 1 year to another. And that is impacted specifically by the service aspect as you see gradually. We don't make projections and we put that there is no feeling that we are moving into negative territory because that's not really
I have not seen any fundamental if I do 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 time it goes every month go down. That business we are not in, no. I think it's still you're still unable with innovation to create expansion in the productivity. Okay. Thank you.
Thank you. Lot, we take 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. But we take the final question now considering the time.
We have a question from Mr. Andreas Koski of Deutsche Bank. Please go ahead.
Yes. Hi. Thanks for taking my question. And most of my questions have already been answered. But 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 PPE of EUR 521,000,000 which is significantly higher than Q1 to Q3?
No, it's a good observation actually. It's we have added businesses not only Edwards. We have added also Handrock. 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. And that has affected us a little bit and you can see it in that.
I would say that that is the main explanation. When I look at the overall like for like MRCT, the CR compared to 2, 3 years ago, I don't see any trend in increase on the other hand. But here we have a couple of things. So I would expect that it is a slightly higher level in next year than for the full year 2014. But there will be oscillations
over the quarters, of course. Mainly Edwards and Handroff. And then Handroff.
Mainly Edwards and Handroff that both have affected the current, but also is at the slightly higher level than
we are used to. Yes.
Because I would say historically you've been around 1.5% of sales and this quarter you were about 2%. So should we expect about 2% of sales now or
between 1.5% and 2%?
1.5% or 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. So if you it might be 2 in 1 quarter, but it might be back to 1.5 the next quarter. That's what I'm trying to say. So it's not a very useful tool for us to predict internally either to be perfectly honest on the other.
But slightly higher CapEx for the full year that's I think is a fair estimate, Jan. First a lot of ground in
the first couple of questions, but there
are always more questions. Unfortunately, we have passed the hour with 10 minutes. So 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 Q1 results in April. Thank you.