Good afternoon,
good morning, good day, wherever you are attending. A heartily welcome to this interim report on Q4 and full year results for Atlas Copco Group. We do this as usual with the attendance here physically in Stockholm, but also a lot of participants on the telephone conference. We will start by me handing over the word to our CEO, Roni Lettin, who will give his comments to the report and then as usual open up for questions in about 15, 20 minutes' time. So without further ado, Tony.
Thank you, Angela, and welcome everybody here in Stockholm and wherever you are in the world. As usual, I will go through the presentation. I will try to make it short, so we have enough time here for your questions during this one hour. If I go immediately to the first slide where we see the Q4 in brief, as it says. What do we see today?
We see a rather stable industrial demand, and the mining equipment remains weak. So this is a bit to take away from the quarter. And if you look back to Q3, you will have seen more or less the same picture. So on other hand, I think we see more or less in Q4 what we have seen in Q3. Maybe with a bit more stable, if I can use and stress that word, industrial demand.
Service Business and our hard work and our focus continues to grow. So I'm very pleased to see that even in the mining side for those who are looking for that question or that answer. It develops at a good level. Unfortunately, we have to take measures on the mining equipment. We have businesses where we see minus 30%, minus 40% on the equipment side.
And so that means, of course, you have to adapt your capacity. You have to adapt your suit to come up because we had partly a soft landing, but more or less we come now to a base where we need to take more of these measures. And we are very pleased and I'm very proud that we finally got Edwards after 6 months. So also Brazil and China agreed with the closing on the buying of Edwards for us. So this is in brief the Q4.
I've got now 2 Edwards just to give you a bit more flavor on that. I will not read everything. But what we can say is that the last two quarters of Edwards were very solid, very strong. What means also if the preliminary statement what we got
from the
previous owners, it is right, then we have to pay also the full additional payment in case. And that will be somewhere at end of February. On one hand, we pay the full price, but on the other hand, I'm very pleased to see that it is a very healthy business doing great and that we have first happy customers and also happy collaborators that we can join together. So I'm very pleased to see this development. The figures, I would not spend too much time on that.
We come back on that later 1 by 1. But let me go immediately to Slide number 6, and then I give you the overview of the geographical scenery. North America, if I take the 3 countries, Mexico, Canada, of course, heavily contaminated by the mining demand. But if we take the biggest economy, U. S, doing fine, doing good.
We see an increased demand for industrial tools, mainly coming from MBI, Aerospace. So that's good. And also for gas and process was a good quarter this time. So we have a stable development for industrial compressors. So the yellow canaries are doing fine in U.
S. And also we see good demand for construction equipment. But like already said, lower intake on the mining side in all the 3 countries. When we take South America, yes, a low mining and we know Chile, Peru, Brazil, they're all heavily involved in the mining. So that is lower.
So you see also minus 15%, even I would say we're comparing with a good quarter last year. But still minus 15% is a real drop. And that is an area where especially when it comes to Brazil, where I saw soft development. A bit of growth in the construction side, so I'm pleased to see that. And that also happened Brazil actually.
Is it self help? Do we take share? I'm going to say I do not have that really detailed information yet. So that is for the next months to investigate more when we get the statistics, but anyhow, the figures were good. With regard then to Europe, overall, unchanged.
We see a small increase. But if we take it now from a positive side, and that is also the reason why I wrote it here, we see a positive France and Spain. And this has been many, many months since we have seen that. So that is a good of course, we all know it's at a very low level, but at least we see a positive. And the same is on Russia, where we got a big drop from the mining, but there also we see a slight positive trend and the industrial as also the industrial tools, they are doing fine there.
But of course, there are still markets which are suffering. If we take here the Nordic part, which was reasonable, say, softer compared to last year if we make a comparison. Okay, mining equipment and of course then you talk mainly the Nordic and Russia not the best. Service overall in Europe doing great all over. Africa, Middle East, we had a very solid construction mining demand.
Also the southern part of Africa was very good. So the if I take specific South Africa, I think that is very good development. And you know South Africa is a significant market for us. So that was good to hear that we got that, I think, when it comes to the northern part because it's more compresses, which were positive, if I can say it this way. Then I go to one other big part and then we talk about Asia, where we see a solid development in industrial tools.
If we take the 2 big countries there, India and I take China, we see a very good development for the industrial tools, mainly again coming from NBI, But also the small to medium sized compressors have done very well in that region. Lower in construction, so it's tougher also in China, still not really the market we would like to see of course, we are a real niche player when it comes to construction. It's a of course, we are a real niche player when it comes to construction in some of these markets. But again, a very strong development for service, and that is all over and more specific also on the compressor side, we have done a very good development on the service. Australia, look this minus 35%.
Yes, mining is extremely low. If we make a comparison on the equipment part, we can maybe say that we are on the level of 2,009 in Australia, maybe with a small percentage difference, but not much. So it has really dropped very much when it comes to the equipment side. Yes, you see here the overview. We see many, many quarters a drop.
And of course, this statistic is heavily affected by the mining development. If we do it for the other three business areas, you would see a slight positive one. To the Perch, yes, I will not say too much on this. You see still the currencies minus 4 and that, of course, contaminated when you make a comparison, not only on the top line, but also on the profitability part. And we all know this currency is weak.
This time, if we take it for the full year 2013, this time when the top currencies, we are not talking so much about renminbi, dollar, euro. Here we talk about other currencies, the mining currencies that we talked, the Brazilian real, the Australian dollar, the South African rand, which really have dropped dramatically and lately you will see the Turkish lira. And of course, there is where that was Copco is operating. If you're working in 182 countries, yes, you get affected by this. The price volume, you see here the development line.
I'm pleased to see that even if the market is getting tough that we get really also the reward for the work we do on innovation and business you see on the pricing level. We then take it by business area. If I go through that and starting with Compressor Technique and now on Slide number 12, a slight organic growth, so coming from the real day by day business, the small to medium sized compressors, they keep going. The big tickets that we have been talking now for many, many months is not really taking off. So let's see what 2014 is giving on that part.
And we all know this big the majority of this big ticket is, of course, coming from Asia, and that is where we need to see that. But service, I've already mentioned it, continue to grow. Operating margin, 23%. You could say, oh, this is significant lower. Okay.
We took some here and there extra costs. But on the other hand, I think given the mix and the invoicing level of equipment, it is a margin which is, I think, dependable. And acquisition of Edwards, I talked already about that. We do that. And of course, I'm extremely proud as I also was last time when we could say that we have this VSD Plus.
Now we also have extended the range. So this will definitely bring us good sales and also good market share. So I'm very pleased and would like to congratulate the engineers who have been working there many, many years on that. In vessel technique, see this is what I would like to have, see 10% double digit growth. So we were used to that.
So we are back. Coming from motor vehicle, almost, say, in all the big big continents, and then I'm talking North America, even in Europe, but of course, then we had India and China, as I elaborate before on that. But also general industry and service had had a very good positive development. So yes, a very nice place to be these days in the Industrial Technique. Margin, very solid.
They do a very good work on real innovation and on their productivity. And we're also very happy to get 2 extra acquisitions. So that also strategically, we have really now a full range of bolting technique when it comes to low and high torque. We have it all now and we also have an assembly solution expert under the belt. So this is going as we would like to be.
Mining and rock excavation, I would like to skip that slide very quickly. If you see minus 17, that's definitely not the place you would like to be, but it happens. So like I said, mining equipment, minus 30%, minus 40% in certain areas. But on the other hand, the resilient part, the service part, the consumable parts is working. It's not that, like I say, double digit growing, but it's definitely positive.
And that's good to see. If you take the production consumables, we see a positive trend. And then that you say, okay, that means there is definitely demand for iron ore, copper, zinc and all these commodities. So there is definitely a demand. And the same is on service because they go hand in hand.
The margin, 18.8% adjusted for extra cost. Of course, we get also lower volume, a bit more equipment invoicing. So also the not a very favorable mix, meaning that with the restructuring and the lower volume, we have also a lower margin. You could say, yes, we would like to have a bit more. Yes, I agree.
But we see I think we will see here definitely a phase or a moment that we have to adapt to the new norm. We will like a ride there also will take further efficiency measures, which we have done, but also we will do even more. And also, we had a couple of smaller service acquisitions with Archer and one here in this was in U. S. And one here in Sweden actually.
Construction Technique, also here we saw some growth, although it was tough in Asia, as it also mentioned there, negative development in Asia. But I think the other markets was okay. And we see also our growth construction. We have not been talking many quarters about that. But you see, when we get some positives, we like also to talk about it.
We also hear we are coming with our actions, we come to a good result there. Operating margin 8.5%. One should know here, this is a business area which is affected the most by the currency. They had big customers in Australia, in Brazil, and we all know how that market has developed when it comes to currency. One point, and it's not to make the comparison more difficult for you this year, but we moved one division, which was hosted in Compressor Technique.
We moved that to Construction Lequique as I felt that we had much more potential and synergies with the portable energy and the specialty rental. So as we are a public driven organization, it will allow us to accelerate certain going to market. And so we streamline the organization in that area. Group total, so on Slide number 16, the overview, nothing nothing more special if you compare the operating profit in money terms. The 2 big takeaways is, the currencies, especially then mining currencies, which has cost us significant amount of profit in transaction.
And of course, the mining and rock excavation volume and extra cost, which makes this gap of, yes, around EUR 500,000,000,000 yes, EUR 500,000,000,000 where, yes, we have this. This is mainly because if you look to all the other business areas, you could say more or less if you exclude currency, you can say that they are more positive. So I would like to hand over to Hans Zula.
Thank you, Roni. We will try to speed up so that we leave some time or I'll be rather quick. Just a few things that I normally comment on. On the financial net that you see here as the difference between operating profit and profit before tax came in just above $200,000,000 negative, more or less the same as last year. Going forward with the acquisition of Edwards and so on, now clear, we expect that the run rate per quarter will stay actually somewhere in that region, EUR 200,000,000 to EUR 250,000,000 negative.
That's the best estimate we can do today. When you go further down and come to profit for the period, you see that we lost a little bit more compared to last year, 15%. It indicates a slightly higher tax rate, 26%. However, I see it within the normal variations, nothing very dramatic in that. I still expect that 25% 3.9% last year, 4th quarter was that we were adapting to lower income tax rate in Sweden, for example, as you might recall, which made sort of a onetime correction at that time.
So if we then move on to the next, the famous profit bridge, This is for the quarter for the group. It looks as if it's trying to prove that these type of bridges are very difficult to read on a quarter by quarter basis and this is not an exception. It seems that we are losing quite a lot for every krona of lower sales. But I think the explanations, Ronny, I've already touched upon, it's really very much related to the drop of profitability in MR. If we then look at the year, next slide, which is number 18, I think, you can see that it looks a little bit more evened out.
And the loss of top line of SEK 3 300,000,000 is giving roughly a third lower effect on the profit, so about 36% there. Now that is for the group. So if we look at the different business areas, you get even more confused perhaps on a quarterly basis. In compressor technique, I don't think one should over read that because you are comparing 1 quarter and the deviations are not very big in relation to the absolute value of the business, neither on revenue and profit. So again, as we move quickly to the next slide, which again shows the full year, you can see that for most of the businesses, we are in the range of 30%, 40%, whether it's up or down on revenue.
But again here, I just repeat myself, the opposite now suddenly is true for compressor technique. We are improving a lot in profitability if you take out the currency here. So the message, we cannot rely to these bridges to give us the full understanding and the full explanation of everything, but at least it's there and it's numbers that you also can see from the report itself. If I then move on to the balance sheet, I'm on Page 21. As you can see, the year has really been one of having a little bit more cash on the balance sheet.
And come 9th January, you saw the reason for that. So we have the big acquisition of Edwards. And then you can also see on the top intangible assets that we do by other companies as well. So we're increasing intangible assets and goodwill. The rest of the balance sheet is very similar to the year before.
And then all that together gives us a cash flow and I will again just point at a few lines. One is that in spite of releasing cash for working capital in this quarter, we did not manage to reduce inventory as much as we did in the Q4 last year. So that is why we got a little bit less positive cash flow on that line. And the rest of the negative difference with last year, EUR 2,600,000,000 versus EUR 4,300,000,000 is really to be found in the operating performance. There are a number of issues.
EBIT is operating profit dropped €500,000,000 roughly as you saw from the graphs. And then there are also some effects of non cash items, which is very much related to rules for revenue recognition, for example, and that is a little bit more complicated to go into more details. But the run rate of the quarter is very much in line with the year. We managed $10,000,000,000 in operating cash flow for the full year and that's, as you say, a run rate of $2,500,000,000 roughly. So I leave it
there to Ronny to finalize. Yes. So a summary of the year and if I can say as a first and a reasonable stable industrial and construction equipment with a slight growth if you take it on aggregated level, but a very, very weak mining equipment part. So which resulted then also in the figures you have just seen by Hanzula.
But on
the other hand, we continue to invest. We continue to invest in market presence. I mentioned we are now in 182 countries. So we're really digging deeper into the market. We grabbed the service, which we believe we deserve and also great productivity for our customers.
And last but the least, we make sure we have the best product. So we are not holding back on that part. Of course, we're always looking to better portfolio management when it comes to the projects, but there is no immediately reason to hold back on that. And of course, this is the result. It is what it is, where you if you make the bridge, Han Solo has already done, in summary, you can say when you look to the operating profit, a big hit on the mining side, a big hit on the currency and the 3 other business areas have not been able to compensate.
And that gives this difference in profitability. And the Board is proposing a dividend of 5.5 as it was last year. When it comes then to the outlook, as you see, we are always very sophisticated here where we expect it to remain at current level. I'm sure you have the possibility to ask more questions after this now. Thank you, Roni.
We will turn to the telephone conference, and we will also have opportunity to post questions here in Stockholm. Before we start though, I would ask everyone or almost instruct that we stay with one main question and then a follow-up per person. That means that we allow more people to put questions as well. Hope that can be respected. With that, I turn to the operator, if you can repeat the instructions for posing questions on the telephone conference
call, please. Our first question comes from Mr. Markus Almerud from Morgan Stanley. Please go ahead.
Hi, Markus Almerud here from Morgan Stanley. My first question is on the margin in MR. Do you see the margin aftermarket falling at all? Or is it only in the equipment that you see the majority of the fall? That's my first question.
And then if you can talk a little bit about the dividend and the consideration that you had when the board had been keeping dividends steady despite a very strong balance sheet and continuous cash flow generation? Thank you.
Of course, when it comes to the aftermarket, when we really look to the day by day business on the aftermarket, it more or less stays at the same level. If I go back a couple of quarters that people were really concerned about, say, pricing and OpEx. Of course, when it is this type of market where you're in, you always get more negotiation, but I don't feel that, that is the main issue. I think for us, the big challenge in aftermarket is always if we want to grow, you must make sure you keep the same efficiency. And that is the challenge we have, but that we also had a year ago and we have 6.
So to answer your question, I think it's not when you get the margin, it is in volume, in under absorption from factories and also the sales organization. And last but not least, I should stress that maybe I've not stressed enough, we have not hold back on design and development. So you also get that because you divide by less volume. When it comes to the dividend, what are the considerations? First, of course, when you look to the earnings per share, they are not as they were the year before.
So that we have a payout ratio where we said 50. So you can say, okay, you only made 9 point 9.35%. So okay, that's half, we keep that. On the other hand, we have done the acquisition, which we have paid. This was almost SEK 1,000,000,000, which we have been doing.
So from that point, we do. And then, yes, you see, let's keep a very healthy strong balance sheet for what is going to come, like we also explained that last time. So that was the 3 considerations, which we said let's invest in the business. I think the dividend is healthy and let's stick to that level.
Thank you.
We'll take one question more from the conference and then we go into Stockholm here.
Our next question comes from Mr. Aaron Ebitson from Goldman Sachs. Please go ahead.
Yes. Hi there. Good afternoon. I've only got one sort of question, but it's divided into smaller bits. But it's all about Edwards.
So first of all, can you talk about this? Or am I just going to get that you can't comment on it?
Yes. Okay. Fine.
So very good then. So if I look at the EBITDA number that you've given in pounds and the top line number you've given, I guess an EBITDA number of about GBP 50,000,000 in the 4th quarter and revenues up 50% year over year. So my first question is basically, is this correct? And was anything in particular that drove that massive growth? Do you now expect a sort of meaningful slowdown going into the going into 2014?
Or is this sort of this, okay, call it second half then of April, so it was very strong. Is that something you see can continue at a reasonably similar level? Or is there any obvious reason why this should drop off dramatically? And then my second question was just on related to budget on your guidance for amortization of EUR 250,000,000. Edwards obviously have their own amortization, so to speak.
Has that been effectively nullified now when you have realized the intangibles? So the total amortization from the Edwards acquisition will run at roughly EUR 250,000,000 or are there sort of GBP 20,000,000 or so that Edwards are currently doing themselves being added to that? That was my question. Thank you.
Just the last one, you take later and I'll answer my part on that one. Aaron, you spotted very well when it comes to the sales and EBITDA and the figures. So I'm impressed that you really got that. But the last 4 months in Edwards were very strong. So they really get a lot of semi business that was good.
I think there's a lot of fabs on place and that really accelerated their order book and also their output, which lead it then to a very good EBITDA. Having said that, okay, what about 2014 because this was history and it's always nice when you look to the multiples and all this part and from the buying side, but it's history. I don't think that you should extrapolate quarter 4 and multiply that by 4. I think that would I would love that it would be. If we look to it, I think you should be somewhere, say, quarter 2, quarter 3 is, say, a more normal figure, I think, for that type of business.
So it was really accelerated the last 2, 3 I'd say 4 months you could say that it was really good. And we were, of course, very happy because we had agreed on the price. So the money stays in the company. So that's also the reason why almost the price is €50,000,000 €60,000,000 lower.
I just wanted to add just what Roni sort of hinted at that this business with a few large customers and the sector like that has a tendency to be a bit more lumpy in aggregate than what we perhaps can see in a big business area in Atlas Copco or something. So that is behind the Yes.
And we know and this we all will learn together. So saying we know that it has certain cyclicality and that is also where we need to make it more resilient and that's also the task in the years to come and the challenge perhaps Opco to invest more in general vacuum and others.
On the second question, Aaron, no, you're right. The assessment of the assets that we buy is starting from scratch, so to speak. So it's correct that this is the full amortization of intangibles that we will carry when we consolidate it in Atlas Copco. I stress again though that we are talking preliminary numbers and unaudited financial statements and all of that. So we will of course come back with more information when the as the year progresses and that becomes more and more finalized.
As you probably know, a purchase balance sheet has 1 year of a lifetime to be final final. But this is absolutely the best indication we can give right now.
Okay, perfect. Thanks very much. But just running to your comments, I'm going to stop soon. But as I'm sure you can appreciate from the outside when you structured the deal the way you've done, there is maybe some fear that the Edwards organization would have been extremely keen to over these last 4 months sort of deliver everything they could. But your feeling is not that there was a sudden ramp or unexpected in the
and I would like to use that methods everywhere. It's actually not because the order book is still there. It's definitely real orders what I think the customers came up with a couple of projects, which came on cost. And even I think the people inside the networks have even not hoping to get that part of that one. So it's not that they have pre emptied the order book.
It's we will go in, in a normal quarter, at least as good as I know the business today. And when I talk to the people running the business today, people from AdWords, people now from AppPost, Copco, it seems to a normal going into a normal quarter as planned.
Okay, very good. Thank you. I'll get back to my line.
We'll start here in Stockholm. We have
And are you getting a pre buy on the back of it? And then a follow-up on compressor technique when it comes to large kicks, gas and process and oil and gas end markets. Have they recovered from or do you see them recovering as we're speaking in 2014? Or they continue to be lackluster? Thank you.
Yes. Of course, what we try on the pricing, especially in markets where we talk South Africa, Australia, India, when you get this because immediately, I tell you, I'm immediately on the phone when you see that where you try to compensate that, but you're always delayed. So that's first thing. So you get a lag. Then when we can, we do.
And why do we use the word can? We also have local competition and see what is the balance there, because you can push up the price, but maybe don't sell anymore. So you have to see what is the local competition. Do they also have the same pain, okay? Then they're happy that the market leader is doing that.
And for sure, after a couple of months, everybody will follow. And that's what we do. We try to do as much as possible to push it. There are countries who are very used to that like South Africa, they do immediately. Countries like Australia, they fight back.
That is another because also they have local production. So that is more tougher to do that. Yes, on the compressor side and the bigger tickets, it has been soft in 2013. The oil and gas parts of the gas and process business as we call it, of course, it has to do a lot with fuel gas boosters with geothermal, with LNG. So that's where we are because we are not really on the big gas oil and gas side, single shafts, that's what we're not on.
So we need to look to these segments. And you see LNGs, LNG ships, that's an area where and you read also, you see how many of them, that's an area where we see more activity. But okay, now it's show me the money. That is the next part of it. But it looks at least that there is activity.
There is more activity part of that. But a lot is also the time that we were doing fantastic in gas and fossil was also the time that air separation was good because that is where aquascopically is very strong. And you know also air separation was a lot to do with steel plants, a lot to do with steel plants in China and you know so that business is very low. So I have and you hear me, so I'm more positive, but okay, now I have to see if it comes.
Yes. One other question today, Andreas Koski from Nordea.
The measures you are taking in mining and rock exploration,
how would they support profitability going forward? What kind of savings do you expect? And what should we think about the operating leverage? Should it stay around 40%, 45%?
Of course, first, what the measures we're taking is to adapt for the new and the new body. We need to reduce we have reduced we have to reduce the rate. That's the first thing. So we need to adapt. That's the first one.
I think if you look back a couple years and you look to the volume, then also we came up with a margin of 20 plus. And of course, if we exclude the currencies, because that's an area where because if you look to Australian dollar, it's a value if you take the rand, because that I can never compensate whatever I do in restructuring. So if you exclude that part, we should come back to the level where we were if you take the same in volume, that one. Consumer service are doing good. I think that is not again, excluding currency, it's not really effective.
It's doing fine. So I am if we go through this cycle, which will take us maybe 1, 2 to get back net. I think we should normally that's at least my plan.
And the second question is regarding your sophisticated outlook. Can you please break it up by the business areas?
We demystify it. I think, say, the industrial construction part, that I have a slight more positive look. And that was also the question when you were asking about gas and process. I have a small where I hope it comes. But of course, why?
If you take it geographically, you hear and you read Europe is doing a bit better here and there. Is it coming? Whereas U. S, they know lately was a bit different, but okay. I think when it comes to our CapEx in LatAm.
But on the other hand, South America, what is Brazil going to do? Big question. Is China after Chinese New Year? What we see, I'm waiting for the sealing March in China. Is it coming?
That you could see when I listen to our Chinese people in on the street and then say, yes, because there is strength, but of course, it's a lot of self help activity. So I think it could be slightly positive. On construction, I think there's a lot of self help. We have done a lot of work. So there I think we should be able to do that.
But then the big, big question is around the mining. What will it be? Can it go much lower? There's not much equipment anymore. Not many people buy today drills.
So from that point of view, I don't think it can go much lower. And like I said in the beginning of this presentation, consumer production, consumer shows slight positive part. So if you read my outlook, you can take it maybe a bit on the positive side than depending on where I sit from the 0 base.
Perhaps also looking at the length of the outlook, I mean, we're not talking, as you know, about next year. We're talking about next quarter mostly, and that's the horizon. And that underlines what Ronny is trying to say that with specifically with the investments goods, it should have been very strong signals already for that to materialize. So that's perhaps
And going back to Arren's question, this is excluding Edwards. Because if we would compare Edwards quarter 1 last year, now maybe we have an increase, but it's excluding.
Should we go to now? No, we have 2 questions at that time. So we go to the telephone conference and then we come back here.
Our next question comes from Mr. Lars Borsen from DNB. Please go ahead.
Thank you very much. A couple of follow-up questions if I could. Just on the outlook, Ronny. Thanks for that. Can I just ask whether you have seen anything in January so far in your industrial businesses in emerging markets to make you more cautious here?
And also can I just confirm that the guidance is adjusted normal seasonality, which of course, historically has seen orders up 10%, 15% quarter over quarter from Q4 into Q1, of course, 2013 being quite weak though?
Yes. For January, again, the Chinese never have the Chinese New Year at the same day. So they disturb again the statistics because January was a rather short month in China. But if I one market where I'm a bit careful with, if I talk on the negative part is Brazil. Where we need to see what is really going to happen.
Of course, you have also there the seasonality because it's the holiday period and then we come into Carnival. So always January, February are difficult to eat. But I saw the last quarter and yes, that is something where I need to watch out. Of course, you have markets like Turkey, which is also significant now with the lira dropping, okay, and then having interest rates up, what will that give to the business? Who knows?
So that is something if I take South Africa, if I take that as an emerging market, I think it was at the end of the year good. India was okay. So that's a bit of a mixed view I have on that. Russia again, January in Russia is so short because they have another 2 weeks holiday. So January is always difficult for us to integrate.
I never make any conclusion out in general. I always take the 2 months together.
On your follow-up there, yes, we try to look through the normal seasonality, as you say, when we talk about the outlook of steady or up or down. That's what we try to do, yes. Thanks.
On the basis now that we see stable demand in that business, do you expect to be done with those capacity adjustments in mining? Or should we expect there to be more to come on the basis again that mining can stabilize from a demand perspective?
Roni alluded to it already in the initial, so I think he can continue
to answer the question. Yes. I think there is more to come. We need I think we did and management did some of the activities, especially on the manufacturing side, weather it, but there is more to come on that side. We have some areas where we need to adapt because we had planned a bit of soft planting because now we are entering in a bit of lower equipment production also because we have the inventory part.
So there will be some more layoffs on that part of reductions, unfortunately, at the least. Thanks.
Next question from the telephone, please.
Our next question comes from Mr. Alex Wei from JPMorgan. Please go ahead.
Good afternoon everybody. It's Alex at JPMorgan. My first question is just on trying to understand the compressor technique margins a little bit better. The volumes pre FX were up 240,000,000 dollars at the sales level, but then EBIT declined $20,000,000 at the EBIT level. I'm just trying to understand if there's a big mix impacts there or is it the acquisition dilution that you talk about?
And I guess if it is the acquisition dilution, I mean is this just one off acquisition related costs as the transaction is closed? Or is it just that they are lower margin and therefore will continue to sort of drag that business down over the coming few quarters as well? That's the further question.
Yes. No, I'm because it's 23% and if you compare with last year where it was 24% plus, of course, it's a drop. But it's partly it's mix where you get that drag down the margin a bit. And then we took some extra cost where we had done some movement of some activities, operations, which we yes, we adapted, but we didn't announce it as extra cost because this is we take it as it is and we felt it was not worthwhile of really making a special note for that. It's not or Anzula must correct me on the acquisition dilution.
I think that is not part. It's not much
No, it's there. It's there. It's always there. Whenever compressor technique acquires. It will dilute, but not more than in the most recent quarters there.
You're right about that. But let me just highlight again what Roni said also in his initial comments that above 24% is a very strong quarter last year. And of course, some quarters do have a little bit of an accumulation of costs that doesn't happen in a corresponding quarter. And I think it's that's how we see, if you could call it, normal variations or whatever. But nothing specific on the acquisition dilution.
And I think if you compare with last year, it will have a bit of currency. Absolutely, yes. It's not something what keeps me awake whenever this I think it's still a clean result.
Yes. Sure.
Go ahead.
My second question was just really around the sequential decline in mining aftermarket volumes that you saw. If I look at the sequential trends for one of your close competitors that provides a bit more quantitative detail in its reporting, then Q4 historically would have been up kind of 10% or more relative to Q3. Would you normally expect aftermarket to increase sequentially in Q4? And I'm just wondering what's driving the weakness there.
And I must agree with you also when you look to correct it with the one time cost that you come up to 18.8 times you would have seen maybe a 20%. That is also what I would have liked to see. I think there are 2 explanations. 1 is partly a bit of mix, where we see mix in the mix, I think, on equipment side, where we got some equipment invoice with lower margin. So that is one which dragged it down.
And another one, and again, it's a bit the same as we had with CT, and I have to apologize if we confuse you a bit. Of course, we have announced this one off cost, but there is definitely everywhere in the world when it comes to mining and equipment, It's cost here and there. But I don't want to really bundle it for everybody and make a shelter. So they take it. It is it's very visible.
And yes, this is the onetime costs here and there, but it's now taking place. Adapting to the new suit. It's not only happening in Sweden, it's also happening in U. S, it's happening in China, It's happening in India, Brazil, in Africa. It's happening all over here and there to adapt.
And that is what you see. And that we will most likely and I'm not going to make any projection now on the profitability, but this is what I also expect we will most likely see in the next quarter and maybe also in quarter 2 in that business area.
Then we move back to Stockholm here. Yes. Two questions, Anders Schulz from Swedbank. First, are there any cancellations in the mining sector? And 2, the strong organic growth in Industrial Tools, what is market growth and what is your own initiatives?
On the first one, yes, there are some cancellations in the quarter, but commented to the tune of €350,000,000 or something like that. So it's less than that in Q4.
It's much less than that.
Is it half full?
Well, it's much less than
in Q3. But there is some on a direct question, I can't lie. Yes, there are some cancellations in there. Okay.
But it's slow. It's whatever. But now you get because you really look
to it back Yes, yes. In a normal quarter 2 years ago, we wouldn't have
talked about it. We wouldn't have talked about it. On IT, if I would ask Mats Wamsa, I would say it's all self help. I think this is true. I think it's like when you play soccer, it's always the same guy who makes the goal because he is there.
We have the right products. We have also had the right people with the feet on the street and the business is there. Let's be honest, there is a lot of investments taking place in aerospace. There's a lot of investment taking in new models in China, in India, in U. S, in Europe.
In NBI, yes. Yes, in NBI. But the people are there. So I think but we also have worked a lot over the last 3, 4 years to get a full new product range, And I think we should be very proud that we have that part. And also, I think just to you remember, we acquired another company, was it 2 years ago, SCA.
And that also helps us because we see that was really what the car business needs, the need of that. And I think we have now really expand that with under the hands of Acrescopco that business has grown very well and that helped us. So self help with tailwind.
A follow-up question. On your page 7, mining, rock, exclamation to Nick, you talk about service and consumables. And I can only see unchanged, very low, slightly lower. So it doesn't seem to be much in your comments here. I'm wondering whether you saw anything recently that basically reached that up.
Yes.
I think when it comes to consumables, you should look to up a scope call on the consumer 2 legs. What I've been talking about is one leg is the production consumables. And they go. These are really influenced by the iron ore, the copper, the zinc and all that and the drilling thing. That is the one I have been eluded on.
And in the other one, the exploration is gone. And that you can read in other companies, whatever. That's another lack. And that, of course, when you look to Page 7, it's a total. We have not elaborated on that.
So that's the freedom I have been giving you on that. Yes. I think the service part, as I said, the service part is slightly positive if you take it in total. And then there's a take it down. I really look at all this as price volume that is it's not really but it's really slightly positive.
That is where we see that. There was a lot of talk, was it 9 months ago in the society about where you're also living, about pricing and all that part and everybody was nervous. That with all respect, I don't see that. Is there, of course, push in efficiency, productivity? Yes, yes, of course.
And that is I'm happy for that because that is also what we need to get because then you see the difference in sales.
Us. Good. We'll go back to the conference on the telephone and take 2 more questions, please.
Our next question comes from Mr. Ben Maslin from Bank of America. Please go ahead.
Yes. Thank you. Hi, Ronny. Hi, Hans Ola. Just on Mining and Rock, just to clarify, I guess, you've taken perhaps more restructuring or cost above the line than some of your other mining peers.
Just to clarify what you said, you're saying there was a bit of
a short term drag on the margin at the moment from these actions that will drop out in a few quarters? And then related to that, how far would you say you are from kind of rightsizing the business to current demand levels on the equipment side? Where are your production rates now in relation to orders? Thank you.
Yes. I think, as I mentioned, I think it was another question when it comes to production levels. I still feel that you take it on the specifically now I'm talking mining. We still have too much ship entry. So if you want to reduce that, that means that you will produce less than you really invoice.
So that is for sure. But this will not take place in 1 month because we cannot do that. Unfortunately, I would love to have done that because you have a full product range. So this will be spread that work will be spread maybe over a year or even longer. I would really have to adapt to a new norm.
But that is what takes place and that's also the reason why I said we need to adapt to the new norm. Will it be have an effect on the margin? And then I'm talking really about equipment margin. Yes, I think I would be here really lying if I would not believe that. I think we need to adapt.
There are a couple of factories where we are working hard to do that. There are other places where we have done the work. How far are you? Are you halfway? Are you I think we are further than halfway because Anzula mentioned also I think here on the amount of people.
I don't think we will lose as many people as we have already done, but there will be more to be done on that part.
Okay. Thank you.
And then just a follow-up on We have one more thank you, Ben. And more question on the telephone conference, please.
Our next question comes from Mr. Peter Selliers from Understakson. Please go ahead.
Yes, good afternoon. Thank you. Just a clarification to begin with. Mining orders sequentially off the market. You talked about consumables ex exploration flat, expiration down and service flat.
Is that correct?
Talking compared to Q3? Yes. Yes. That's basically correct, yes. It's not very big percentages here.
We're not talking double digit on any of the components of these 3 years, spare parts, service or consumables. But your description is fine. Okay.
And then just a very simple follow-up for Wassoula. FX is moving all over the place. What can you tell us about the Q1 on EBIT as what we knew today?
Well, yes, you picked the right words. It's almost all over the place. We unfortunately cannot say that the currency headwind is behind us. It will drag on for a while into next year, of course, much less if everything stays as today in the second half. But both in Q1 and Q2 just making the numbers, there will be a headwind.
Then of course, there are some specials now and then that is difficult to predict, but somewhat less than what we have seen in the last quarter perhaps, but still negative. That's what we expect for the first two periods.
Okay. That's right. And then
also the peso and the In
the last week only, the Indonesian rupee is there. All the emerging countries are again having it on the current system.
Very quickly. Invoicing CT, I sensed very, very strong Q4. Was that more than normally strong in your book as well? Or
There is it's not the first time that the year ends with a rather strong invoicing, sometimes depending on the customers, sometimes depending on the sales force of ours. But that's not unusual. But it was good. But you also recall that we had talked about waiting for some more invoicing in quarters before. And with some delays, yes, you get it after a while.
But it's rather I think when it comes to CT, it is rather a repetitive seasonal behavior that December
is Yes. It's rather strong. Yes. So that's no exception from this. Yes.
Because it because it's normal. The guys were not pushing. The customers were definitely not pushing for getting the equipment.
Yes, one final question then in Stockholm. And then we have to stop after that. And I apologize for the just a moment. I apologize to the people on the telephone conference, but we are, of course, available to answer your question as quickly as possible after the call. Sorry about that.
So the final question here in Stockholm.
This is a general question. Have you benefited from the strong krona compared with the weaker euro and weaker dollar and the currencies
in the world around? No. We don't really have that mix in our portfolio. So a strong krona in our case is actually hurting us in terms of real profits and also in translation. As we alluded to a couple of times, a weak emerging market currency or even a weak dollar is, of course, it means that it's a stronger Swedish krona.
So the other side of the coin, That is not helping us now. So I'm sorry the time has run very quickly when you have fun as always. But as I said, don't despair. There are people and personally as well that we can tend to your questions after the call as well. Thank you very much for attending and see you in a