Hello, and welcome to the Atlas Copco meeting. I have the honor today to present. I will give the speech to the four ministers to see who are [audio distortion]
[Foreign Language]
Thank you very much.
A welcome here in Stockholm . Sunny but cold. The Europeans are in sketches on [purple drawing]. A very much welcome to you as well, of course. We're going to follow a known format here. I will soon hand over the word to our CEO, Ronnie Leten, who will make his comment on the quarter. We will then turn back to have a Q&A session both here and on the telephone lines. I think that's enough as a welcome. Please, Ronnie, take it on.
Thank you, Hans Ola. I expect you also to see that we have blue skies.
[audio distortion]
Welcome all of you. I will go to the presentation and also try not to get to, refer to the stage where we are. Let's go in Italy to highlight and, to, talk where are we in the quarter four. It is, and it's a question to see also overall high level amount, overall distributed, quite sure of the sector. I have a couple of managers of [audio distortion]
feeling that in the our industrial cities business area, but also in congressional. What at least we should not forget to say, there is solid planning business. To be sure, and already that was put in several occasions, is our, passing list was mainly doing, from China, but I will elaborate later on that.
A good, I should say a strong note is set on the side enough to welcome, and that makes me very happy that our work we do in in this area is really, yielding good results. That was put on the gateways, also led to revenues, or at least, we made a record historian again. It's great to see that. Also, if we look through the quarter, we landed several ecosystems. I think that's been, the last, couple of weeks in December that we got the overall and also that we got a little bit earlier in the quarter with the others closed. Repeat investing in, in, in our operations right on the design as well, despite also in capacity in Asia in our sectors. There is a growing demand of, mass products coming from, fourth quarter last year, and this is a total of more than SEK 2 billion.
Now it's a slight number three where we have the biggest. I will not elaborate much on it. It's quite natively operating profit, and I will elaborate later on that also. What we see is here a 50% increase from also fourth quarter's split. That first quarter is why I can see a nice plan. The second one is the, and the other one is the long-term assurance program. We plan to have a 21.6, 21.7 assessment where we are really losing business. Maybe one goes to the last time. We will talk about, our, RSC shares. We sold more, and we also expect the RSC was sold, to Europe as well. This is a closed loss. The operating debt flow, almost SEK 1.6 billion, which is, of course, giving growth, less or less development. Again, there we will elaborate a bit more later.
Progressively, you take quarters, this way that there's more newspapers. Of course, a very solid quarter, + 16%, compared to last year. You see it almost spread all over with, the Australia as the, positive side. I will talk a little bit more on that new slide. Now I'm sliding by, and I will take you, Eric. Let me step over. Times, that we see the development in North America. You see here a + 90%. It is solid development for all business areas, even [audio distortion] . They're dealing, orders, good sequence. We see that too, plus see it also in those techniques areas. The automotive is going from productive high, but also the general industry as well. We see also our efforts in the service also create some good growth in the automotive.
South America, the mining and everything are really developing well. It's mainly mining. We see a very solid Peru, Chile, Colombia. On the other hand, we see a stable, gradually growing land results. Makes me very [Foreign Language] . Let's take a week on the consumption side. As I already also mentioned, we increased in stocks and mainly again in Brazil. Here how we're keeping the total +22%. I cannot say more. [audio distortion] Although you see a + 13%, it's okay. A very solid growth. The very few. First, I should say the 13, I should correct with the condition of structures. Maybe around three quarter plans. It is the highest thing of the structural. Again, coming from the recent over here, Russia is doing well and a reasonable journey. All the other parts, then it's a vertical, south. I think about it in Spain, France.
Still not much to see there. Brands from Africa at this list. Plus [once], we should say okay with prices for gold. Again, it's coming from also about the southern part of Africa. You shouldn't see too many from mining and of the orders. We're not landing in the quarter. If you take it over the cycle of the quarters, you would see that perhaps, it's not seen so many of them. One thing I would like to say is that we see through, we see a lot of issues moving back in the Middle East. That is a good where we have northern part of, let's say, South. We see that again, there is activity coming. Asia, high order intake, strong development in India, Southeast Asia, Korea, if China. We need to accept them from China.
You see also here a + 14% and a strong development in our off-market Indian area. Definitely an area where we work hard on that is to make sure we strengthen our off-market organization. Very good with Australia. Maybe some of you remember, and you saw also the approved quarter in Australia was a bit softer there. + 36 was the government. I [audio distortion] say, 63. 63. That's what I meant when I talked about South Africa. Sometimes we record in the mining and then shift from one quarter to another. Still, a very strong demand for equipment in the mining business. Again, aftermarket, it's all of the quarterly. Eight quarters in a row. It will only be happy to see that as a CEO. We plan to go on that. Surface. The intake of water, twice volume. Notice this 14%. I think it's a solid development.
A little bit less currency compared to the full year. At the end of the year with, yeah, a +22% organic. I think that, I'm very proud of this figure. We also see the book to fill. We are more or less equal. In fact, there's also something which is quite strong. If we look at the quarter four, most of the time we have a much more higher revenue than all the 15 instances of time. It's really on par. I cannot say that the revenue is low. That's one. The other part to highlight is the price development. It's more or less 2%. That's good. It's the home inflation coming up to cover for [judgement ]. On slide number 11, it's a very good demand for industrial, breakfast and aftermarkets. The solid strong stocks of the healthy demand from product and organic health.
That's the things going on. We have good operating margin of + 23%. This is at least a good survival of the output in the quarter one point. We are planning to start, I should say, building a new factory for breakfast in Wishes, China, so as to expand our capacity there. We also had, at the end of the year and the beginning of this year, announced, luckily this is one in China from a small compressor company in the southern part of China. Then, a majority company in Texas that used to be services. We also come to the first of January. We also created a publicate division for air treatment, which we call inside quality air. Business which we had already since home, but now we felt that I needed to really have their own and there is something for them to end up.
We see a 26% organic growth coming from a strong motor vehicle, but also a strong general industry. Again, also the service callers very well. Profit is negative. Breakthrough 3.6 and it cannot stop between line view here on the real V-shaped. I will go on that in forever too. I think about that, but I'm very proud of the guys that are in this area. Also, we had two opposites in here where one was focused for the adjacent equipment and one in France chain for air [audio distortion] Continued high demand for equipment in the milling, but also high demand for aftermarket. It's hard work to find enough experienced engineers. Very new, highest through output, but the operating profit, solid 25%. That is also great to see. Here also we have done a couple of acquisitions where one with Colombia, which we took main distribution in on our side.
We had two acquisitions in Italy and one for the utility vehicles here in Sweden. Very solid development in the mining and auto space. Construction techniques, that is one area for to work on. Otherwise, this is an area where we might just see solid improvement. Unfortunately, we see strong. Really influenced by demand is Brazil and China. Here also from Brazil. Probably those were the reasonable see from the development in the aftermarket. The operating margin, 4.20%. We take the income that's gotten in an account and also the refugee cost. I think it would have been around 6%, 7%. Like it says, 6.6%. That is where we are on the business area construction. Before we give the word back to Hans Ola here in the overview, what the solid stories we see. +13 will bring you up, SEK 82 billion. We don't present every day.
A very solid operating profit and profit for a period of the banks of more than SEK 3 billion giving us an earnings share of almost [2.25]. That is one area which maybe we hardly talk about that, but I think the opportunity now to return from capital employed of 37%. Real analysis because I'm sure also some of you will talk about our inventory. Just to, we've seen plans for that.
Thank you, Ronnie. Just some very quick comments. You keep your basic profit margin as Ronnie has said. As we wrote in the reports, we have some non-repeating items in the factoring and lots for the bonds from intense programs in the group. That needs to be marked to market in the quarter. You have heard us before say that that affects the operating profit from time to time. This time it was negative. If you adjust for those, it's 21.6% of the underlying operating margin. We move down between the profit quarter tax and the profit for the period is, of course, the tax charge. That equates to 24.0% in the quarter. The year-end is 24.8%. For us, a fair indication of the funds base that we think will be also for 2012, we're between 24% and 35%.
If we move on from there and look at the other way, you can also see the earnings per share from here. You saw also in the beginning that the full year was 10.8 on an undiluted basis. Sorry. Also, I should stress, as normal, we try to understand the change not only in the revenue line, but also in the profit line. Take out from the overall view is that there is still a little bit of negative impact on the results from the currencies compared to the situation in Q4 last year. It might seem as if it should be about neutral if you just take the, you know, the system looked at the exchange rates in the currencies.
Of course, this way of calculating a bridge to talk about the type of volume of revenue and results did we have in Q4 last year and how has that changed in the same currencies this year? It's still always difficult to be completely exact in the, let's say, forecast of these impacts. However, I can assure you that the calculations made this quarter is exactly the same as we have used for as long as I can remember at least. You can also see that when it comes to one-time items, you heard that I talked about some restructuring costs. We also have some contribution from acquisitions in price in here. The restructuring is -SEK 125 million . Then we have contribution from acquisitions to make up the rest.
At how it distributes the business areas, you can see that the net of these items that try to get to what is the, let's say, the remaining normal flow through our profits per revenue increase, you see that it's much lower than normal in comparative fees. It's roughly what you would expect in a strong growth environment on the other two. Of course, we have not a calculable number on construction fees. In this regard, the 84% doesn't mean very much. If we stop here, there are some effects of these changes. As always, we sell more equipment. We withdraw an aftermarket. In exchange, the growth of the equipment sales is stronger than the aftermarket growth. That is noticeable in case of the technique. Also, when we do redistribution of where the profit is generated, it seems to be where the revenue is generated.
It's not always a perfect mix. Hence, that can also impact this number. It can also be an impact on the source through numbers. Again, if you continue to grow revenues as you have done in the last quarter, then we analyze this. We think that with some pricing component, we believe that somewhere 25%- 30% is still what we would expect if everything else is equal. Unfortunately, everything is not exactly equal from a quarter to another. That's a little bit to round off the comments on that one. We move to balance sheets and only talk a little bit about that. Both profit areas, both in need for capital, of course, and need for assets. You can see that in the increased inventories and the two primarily in this last year. That is, to all the substantials in a year's time. At least December, it's somewhat higher.
Which is less clear than with the crown sales development. On these numbers, we also have the same impression with you that it seems that these items are growing faster than the revenue and order growth. That is also true. You can calculate it easily. However, the growth of equipment is now stronger than the growth of aftermarket. The growth of mining business, which is stronger than the growth of the industrial compressor business, for example, than the construction business, is also somewhat negative to our, let's say, use of working capital. The mining industry has a higher than average tie-up of working capital to sales than the average of the whole. There are a group of these missed specs that make us also look a little bit to understand really where are we. We look at the situation in a single period after a good strong growth.
That's why we looked at December numbers for Q2 to date. As we can see, we always strive to be more efficient. When we look at this development, we still feel that the SEK 10 billion monthly higher sales today than in 2008. We are not so concerned about the build-up of working capital that we have seen in the quarter and in this year, but there is always room for improvement. I think it's worthwhile to put it a little bit in perspective through the numbers we have today. I move on to the next one. It's again an indication of our financial strength. It's strong. Following the rather large mandatory redemption of shares, we are hovering at 4.7, 4.8. I think it's strong, but as we discussed coming here, we don't feel that it's a burden to be strong in this respect in today's regulatory environment.
That is on the net debt to EBITDA. As a consequence of everything we have said together now, there's breakthrough, you can say. You can immediately see that compared to last year, the tax generation is not as strong. You can see the invest to growth and the tie-ups from our working capital, and that basically explains the difference. We come back to certain of these things, I'm sure, in the Q&A. I leave it next to Ronnie for some final remarks.
Yeah. Let's start. We moved to the year, I would put off 2011 because it may come towards me too quickly. Last year, and why do we call it a fantastic year? To our development, in growth. Importantly, there's a strong demand development. You have to have interesting investments. You have to look deep into the markets. You can name it North America. You can name it China. You can name it Russia. You can name it Africa. You've been digging deep into the markets. I think you certainly have new technology on board, acquired by our own people, or really this development and design has done a good job. I also feel that we got a new product, a lot of new products on the market. It's strange, the possibility of innovating in this market and also take a bigger share of the market.
Of course, we also have adapted. We have not only increased our capacity, but we also have adapted our capacity according to where our future demands are. We also have four records. That's the reason it was not the pricing area that was there. We had four records. We had two open years periods. Record goods received. Record revenue. This is a true profit and record operating margin for the year. That makes me call it a fantastic year. We come out with a cash flow of more than SEK 6 billion during the growth. I think these comparative figures here, I think this is from last year. You see the growth in Hans Ola. I didn't really elaborate on that one. I really see that this company is really generating good results. It boasts achievement of a solid 5%.
It's easy to remember if it is the five for all of you. I took that also into consideration with the positive voice. Again, I'm really proud of my crew and of the achievement for 2011. Look, statistics. I will not elaborate on that part. Here you see the 5.3. The earnings, SEK 33.20 per share. We talked about, you see, a real solid development over the last 10 years of earnings per share as well as also the. Let me go to your last slide where I'm sure also most of you have been looking to, and it's the same as we had in quarter three, actually. This quarter is definitely quicker than I expected from the year's ending in October, that's for sure. We see also, if you take the global outlook, there's a lot of uncertainty still in the market.
You should know that we are comparing to a very high demand already. That makes me feel okay to expect it to be not so much worsening compared to the other. Thank you very much. I think we go to business.
Yes, if the operator can just repeat the procedure for the questions on the telephone line, please.
We listen attentively to each of your questions. The first, now one on your [health] list. To cancel your question, [audio distortion]
Thank you. My treatment will start here in Stockholm time. We have one first question here. Please state your name and the quarter.
Sure. Hi. It's Fredric Stahl at UBS. There are two questions, please. One is, if you could go back to the operating values in the income from the service and maybe give us an idea of what was the evaluation from the acquisitions, so that we can see what the underlying values is. Two, if you could specify who did what the larger orders that you took in mining with them, so we can get a feeling for what the underlying order run rate is in that business. Thank you.
Please go to the last one.
I think we constantly get it is very enlightened on the land-based public. We have a good senior here. I think we've got several solid orders, mainly in Australia. It's not very long. This is an area. If you're in the [larger investment], two to three months ago, I was less of this, more concerned about the equipment demands for mining. I think it came mainly from Chile, Australia, and here and there. Maybe we take the last one.
Yeah. The reason for my question is shown in the slide. If you go back to that one. That was exactly the focus of your question. I don't know. There is something in the acquisitions that have been added, primarily some in industrial air. The other one, in terms of autos, are yet the development demand that we are running right now are yet to produce positive results shortly after the acquisition. You can see in that case of life dilution. Irrespective of that, we have a low flow through in the normal business if we exclude acquisitions. I think there is no clear answer that I can tell you start component has given 0.5% and whatnot. It is very clear when you see the development that we are investing currently in the aftermarket structure in the group.
Of course, there is a build-up, primarily in the East, but also in many of the other countries. The profitability of that is not exactly the same as in, let's say, the steady business. That affects, if you compare that with what did the quarter last year. The general growth in some areas means a source of we build an organization in certain aspects. That is, of course, we talked about it many times with how long can you grow without not starting to give some kind of cost development for the, I don't think it's like to leave you the impression that it's a cost issue, but it's something where, of course, the needs of business where we grow and immediately grow has impacted to a certain extent. I can only go back and say if what do we expect for the future.
I think this is the 1%- 2% price increase. The rhythm that we have had, we still expect ourselves to also have 25%, perhaps up to 30% in type of calculation would be what we also would expect. Then you get some quarters where one is in growth faster than the other one, etc., etc. Yes, that's the add-on comment I can make.
Yeah, please. Hi, George. Welcome.
Morning. I have two questions regarding the construction business. The first one is if you can ask about quantitative because the housing is valued and taken now. Also, more in detail in terms of researching. To talk about on the corruption, what is the inventory cut in the division? Please specify in more detail which that was in the number. It's at 6.6% in this number in each way. It's basically SEK 20 million- SEK 75 million not taking into account with fixing it around low results. Sorry, I didn't hear. This is a biology of the 6% needed margin because it's a little less.
Nothing else. Nothing else.
Okay.
You have to prove in the construction business you have to go up to the, if you wanted to do it by the.
[audio distortion]
Very strong.
The turnaround in the [construction business] development has a very high outcome of it. You can see a good job there. What do we expect?
Yeah. When, should I be sure? It's typically related to Hans Ola Meyer. I think when it comes to this full one, to find the distinction of what you do. Because we have seen that over the last year, we had to do some, we had to do some moving products to areas where we were frustrated that we were spending on the other side. We do a couple of movements which, improvement costs money. That is what we are doing. In the area, you can find in the area of road construction and in the area of construction tools.
There are those.
We also should remember the move from some of the activities from UAB to those from the United States to China. We had a couple of areas used. The majority of the under absorption is from [Brazil, from Italy], and then China. If you remember a couple of months back when I started talking about sustain there, we really have been breaking. Where on the other hand, all of us, the cycle in that business, which is strong in the first quarter, that is when the construction business is really buying. You have to get some interim community from several existing stocks or you get some of the growth. That is what we get. Penalty is seen. Also, the reason why first the demand is lowered and the absorption and orderly the profitability is low. That is the emphasis. You also see it still for Hans Ola.
It's still in business. He elaborates much less how they have a higher inventory in construction. Maybe another part that's a learning for all of us, I think, which we should have not seen. You have a seasonality in this business more than in any of other businesses. In a construction site. First, that's construction business. Our construction business, all the cash is equally broadly spread. Otherwise, you said you have a chance warm on the other side of the world. It's cold here and vice versa. We are not so equally spread in terms when it comes to our own trackers. That creates also a certain seasonality which we will get. Your learning, yeah. I think the learning is really to make sure that you, that's for us, and to work hard on to get to get on the market, really have continuity with your customers.
To do these two things very carefully. When it comes to interrelation with your customers, it's to show we're on the aftermarket side. That is where we have in the solutions for what you need. That's a good thing while the result is lower than other areas. That's exactly the two main way learning that.
We have one more question here in Stockholm, and then we move to the development.
Yeah.
Equipment, together to be around the property catalog. Aftermarket is growing fast, as you mentioned both earlier. Could you help us out here with the magnitude? If you can prove that that surprise to your quarter, what revenue do you usually put down with the quarter that you? Maybe, the whatever cost, output, what is currently equally on the balance. Finally, on to the returns. Can you tell us about how bad was China in this quarter, year on year, and I'm not sure of your opinion on the conferences you have been receiving on there.
Let's hear me the last question. When it comes to China, I would not talk about construction. I suppose we are good development in China when it comes to the quarterly report, which is rather stressed. When it comes to road construction, it is very low. [audio distortion] . It's really in Stockholm. You can say that there is no issues missing out of entry. That's not only with us, but with most of our competitors too. You have also our Chinese New Year. January will also not match. I think that I have to wait until mid-February to get a more qualified answer on that part. When it comes to the other flow over the quarter, I think it was reasonable, equally spread. I think it's not a good business. When you see North and South America, very solid. Europe here and there, equally.
I think on the ones it was better than ever. It is not working as we had predicted in the mining part. It's making only great impact. On aftermarket, yeah, it is a very solid development. It is, say, a strong double-digit development. The rest is just just go through.
That's the area again. Is it sequentially? How do you?
Yeah.
So, so.
Yeah, sequential is okay. It still keeps things going up.
The thing that happens in that phase is that the equipment, obviously, is harder when it's faster. Of course, it's working out all the time with Nix and whatnot. The difference is that the aftermarket is not only high on a year-on-year basis, like Ronnie said, but it's a very stable growth. That's exactly what we want to have and what we see if we look a little bit back. In short, towards the quarter, the growth was even stronger in the quick.
One thing I've already said since I have to make it. If you're going to expect from an aftermarket growing 20, 30%, it's not sustainable. If one quarter goes down for whatever reason, of course, it's possible that you can do it because you don't have to. You have to train people. If you run a solid stock figure, that's really very good.
Okay. Let's go online for three questions, please.
We have a question from the line of Nico Dil. Please go ahead.
Good afternoon, gentlemen. Nico Dil, JP Morgan. Three questions, please. First of all, record orders in less than six weeks and in mining and in mining. What is driving such strength today and how do you think about the future? Because we need to get the mining cabinets planned for major miners is pushed forward. There seems to be a substantial increase here year on year. Is that already in your order today or do you add in this quick order to move those here? Let's get to some questions here. We look at industrial technique. That was also assessing this call. I think it was also a liquid quarter in order. I wonder where you would put the weakness going forward as you indicate because the current environment is too weak in terms of going forward. The first question that I have is effectively around marketing industrial technique.
Very strong this quarter. Thought it was the second best quarter overall. In Q1 of our seven years, it also was such a strong quarter. Remember in 2010, we had a completely double technique in the sector in the third quarter. Was it effectively reporting a sustainable margin? Is that a strong indication in industrial technique as well? Or do you effectively see a 25%- 30% incremental margin [audio distortion]
[audio distortion]
Yeah. [Dyno]. Yeah. As we.
Oh, right. Yeah. We can start in mining. We moved to the outline that I gave and advice to go through our own guys and also to those mining business to continue this good development. It's also amazing that this is what I explained to Peter and the question of aftermarket. It's a real old pulp revisit to bring it in. That's sort of a discussion going on, on it. It's easy, of course, these days. You want to make sure that all mining companies can cooperate there in installation and get from us and from others. Finally, I think we could say normally expect solid, solid development on that front. When it comes to IT, that is coming from, failed to mention it. It's mainly coming from a lot of investment in models from auto vehicle industry, but also from general industry.
We see a lot of transformations now going from, say, simpler tools towards sophisticated tools, more in-depth quality tools. That is also the difference we made in the early days because that, again, is our technology where we really push them up and also make sure that the customer creates efficiencies. At the end of the day, you have a lower life cycle cost for a higher quality of your. That is when it comes to industrial techniques. Besides the sales and paper and models, I think it's also driven by our technology, our transformation. When it comes to the margin on IT, to avoid them, the outputs of margin on this law. I think then it could, of course, express the growth cost in the factory, raised into our traditional cost. I believe that margin was, yeah, a solid one.
It never looked like I said in that time when, Nico, when you came to CT. At that moment, I said that it was not sustainable. At this time, it will not be nice. This one, I believe I'm a job competitive.
It can only make one part of Nico's question, which was some of the good segments that you just touched upon and how does that build into the outlook. I don't know if I'm right, Nico.
That's correct. You know, half the company has a pretty good outlook. Here is the opportunity.
Good question. I'm sure that's not what you, no, I, Nico said I forgot to answer on that one. I think when, think again, just to have a repeat of the sense around Tiana. It is just the uncertainty. What none of us know is, you can say we take it by geographical block and you take Europe, the Europe units. What do, how will it look? You know, also, you need also a lot of uncertainty when it comes to design and construction. We'll just go greeners. The third one, you should not forget that we are running at a very high level already. That makes me feel, yeah, to be a little more prudent on that.
Where on the other hand, I understand, yeah, in the technique and mining there for the time being, discussed.
I think it's much the same situation as we felt three months ago. The overall situation does not make you extremely positive. Of course, we also know that Q4 sort of contradicted in some areas. That's an uncertainty that we felt. That is, again, a similar situation right now when you're pricing the share. Not to try to project the situation in the Q4 into the future. The trend doesn't necessarily continue without any, [audio distortion] . I put the next question in line on the telephone calls, please.
Our next question is from the line under Kevin Martin. Please go ahead.
Yes, I just have a question on the aftermarket. Even the strong growth in equipment that we have in the area we're investing in, not in the aftermarket. A year of most grand growth in aftermarket. Do you have anything?
No. I need to show you the trends. Again, I repeat myself. I think if you have a solid double-digit growth in the aftermarket, and now I'm thinking globally, I think you have done a secret shop. 2011 was already a very solid development in aftermarket. 2010 was a very solid development. Of course, you came out of a soft period, 2009, so we could be separate. I think already today, it's taken a hell of a lot of effort for us to really bring our service engineers to the street and to train them. You know, when you're 100 and you need 20, and you need to train 20. To train the 20, you need people. You see it is a rather demanding talent to really keep growing constantly on the aftermarket. I would not go on that point.
Sorry. Bringing it back to your previous answer, I think very much that aftermarket growth is much more consistent and it doesn't go in needle bounds, it is consistent.
One thing you guys maybe explain, on that on foreign aftermarket. The people who are growing up very globally, we are really trying to sell direct and also to do the service direct. We don't work 100% through business. Do we have distribution? Yes. We really make sure that we have this contact with the customer. That also means we need to train and to hire the people. We don't have, let's say, in one go you can sell all scrap items. The sales can go up and you buy them from your suppliers. In this case, it's a full package. What makes those margins to get, yeah, the seen high growth in aftermarket. On the other hand, it also means that we have no space in the aftermarket. One thing is good price to be taken in 2008.
Okay, thank you.
Thank you.
The third question from the telephone lines before we switch back to the talk.
The next question from the line on [GitHub]. Go ahead.
Good afternoon, everybody. It's Connor with the HSV team. Two questions, please. The first question is on construction technique. I think you more or less acknowledged, in answer to somebody else just now, that there are some bottom-up problems at that business as well as weak end-market demand. How long do you think it'll take to turn around those bottom-up problems? You said, as you specifically said to us, and customer relationships. How long might the executive customer take? Really, you can't just snap your fingers and pickle instantly. The second question is on your mid-market strategy. With most European engineering firms, you've talked about growing your mid-market business over the past year or so. I keep listening to evidence of negative impacts on your price mix of this mid-market growth strategy, and I can't see any evidence of a negative impact.
Does this mean your mid-market growth strategy isn't working, or does it mean it's too small to measure? The resulting market explanation is negative.
[audio distortion] of the mid-market business, of course, we are developing this further. The reason we do that is also to dig deeper into the growth and think it's a bigger share of the market. We see this business is more or less growing in line with the top-market business. That is the reason why I see that. There is definitely growth in that area. Not always, just to do some more now. Not always this mid-market is giving lower margins. Now I have really confused and you've made it easier for me to base that into your markets. I don't mind this mid-market profits. When it comes to bottom-up and how long will it take, I think that the case for markets to play, give me three years to really bring it up to a sustainable level.
I was thinking that statement, there is no reason, in the capital market day and today, to get away from that. Typically, you work what you need to do on having to bring our suppliers and share parts, digging deeper into the market, moving factories here and there, and investing in the aftermarket. We keep doing that. That means again within three years.
That's really helpful.
In the meantime, some improvements for sure.
Thank you.
We take a question here in Stockholm.
Thank you. Sorry. Thank you. Ralph Bosch. Just a question there on China following up on weak construction demand. If what is the relative of weak construction demand and no road equipment coming out from the factories, it's relatively that mining is eventually slow as China's primary driver of mining in the world. Are you, have you seen anything on that, on this, what I'm in the mining equipment segment? There were some headlines on Bloomberg lately.
I've not seen on that part. Maybe it's too early or whatever to learn from. I mentioned that all at the same and I was talking to some of the mines and others. We haven't seen any movements on that one where this was specifically on iron ore. Does it come or not? That is the reason why I say, yeah, my uncertainty is a question for me also. I think all of us, we should wait until maybe early March before we know.
All nice questions for you both again. I'd want for you, Ronnie, could you maybe, on the service organization, coming back to that, would be rather important. You wrote down with me some idea on how much bigger your service and aftermarket market organization is today compared to, say, a year ago or three years ago, to give us some outcome of what you're growing?
Okay. Now I'm looking to answer you when it comes to the amount of, [audio distortion] years ahead. Income.
Yeah. Yeah.
Now you need to have the CFO come up.
We know that quote also seems very good as a GCFO quote to have a first number for your enabled. What is interesting is the first year of 2008 when we were really in the, it proved to be the end of a very strong industry cycle at that time. We have increased the number of full-time employees in Atlas Copco with about 3,000 people. In the same period, we had increased service engineers with 3,000. They represent a little bit short of a third of total.
We plan to do that. She agreed that we wouldn't hold back to keep hiring even if it's happening a little bit so and so, because it seems too long before the service engineer, we could really correct it. She never came to that.
We hope to be back online. We have a few minutes left.
I think we have some 10 minutes, we can have this call.
We haven't. From the line, James Moore, please go ahead.
Good afternoon. Today is a bad, bad. I have a few questions. [audio distortion] , like 50%, 90% last quarter. Can you give us a number for this quarter? I'm wondering, do you suppose these things or decisions, you know, better technique and less profitable going faster to the driving the mix? Thirdly, our current charge crew rate would be top of people's assessments for rough 2012 efforts in bridging EBIT. Finally, please bring another redemption from the record, the order sale profit charges. Could you add to the chicken handling cost chart from the last week?
I think I'm doing number three and in case I'm one of them, please answer those. When it comes to less profitable things, we call them things in an area which is less, computers or larger, what is the main reason that you see more than you see a more, invoice you have, of course, then you will see a relative drop of the margin. I think the others are more or less in par with each other. When it comes to expansion, I hope not. The reason is that we really have been growing. We have the right acquisitions and hopes that we don't need to borrow, but we really create good operating margin contribution. There is no plan like that. We even have discussed in the import of this Friday call any of that one with only what the scope is in the code project.
If in given three years this cycle getting growth, we'll keep an eye. We also will hire some owners who really will let all acquisition cycle slow down. That is my goal. I hope I can accomplish that.
I think we should refer back to the comments we made earlier about, in this moment of the world economic situation, we don't mind having a strong physical situation. That's a follow-up.
[audio distortion]
Forgive me for not having a final document of the 10% claims, but, yeah, higher than in the third quarter. 69% was indeed what we said. It's 60% now, or even higher. It's a slightly higher percentage than it was in Q3.
[audio distortion]
Remind me again of it. Let's.
That's our employees. We've seen some news there. If you could give your best guess in India impact first, can you please? I mean, is that a win? Don't know.
It's less than that. All the reasons that I just explained before, and it's very tricky to know how the mix also of the hospital rates moves up the mix and exchange rates movement. If we look at what we can elaborate on the exchange rate, which we see is very worse than the average of 2011, you expect the positives of something in the region of SEK 0.5 billion on it.
Yeah, just from the latest quarter, if not, there is some positive catch-up to come in the first quarter from these more marina currencies dragging, bigger in the gold call.
Yeah, it's up. The dollar and the euro doesn't give the answers, to your point. That is when you have swings in the underlying volume of things in currency sites as South African rand, the Indian rupee, a couple of others, it can be difficult to take back to what your total impact would be. I think that's exactly what we have seen in the fourth quarter.
[audio distortion] sticking?
Just one question from the telephone line, please.
One last question from the lineup from the [broker]. Please go ahead.
Yeah. Hi, there, gentlemen. I just have two quick questions, please. One, just around the monthly that you said orders for larger technical items were down to the monthly in the quarter in Asia and Europe. I just wanted to get some thought power into that because, call the general caution and you can't make a specific thing tightened into the year-end or expect anything more sinister in there. This is a question we've just done on your own calculations. You've been looking at your monthly quarters coming and any uncertainty in the return environment.
I think that comes to larger orders that you've, I don't hear anything or I don't see anything that there is something to get on the large order of people's back on that. I see in certain areas a good quotation as of again compared to a previous period, maybe a bit softer, but not as it is in the small amount. When it comes to our own CapEx, to have seen when you look to the cash flow overview, when you start, I think all this, in the open area we have been almost on double from around SEK 800 million- SEK 1.7 billion or something. So it's almost double. We have done a couple of, from earlier, I think it was here in Sweden and a couple in China. I think it was.
More or less put yourself on this whole level. We have lifted lower because I don't do forward drive these myself. I proved a lot of hurdle expansions besides the ones you already in the pipeline. So it's not that you cannot expect much more. It's just not.
Yeah.
It's not so easy though to say that, look, start outlook and then you have a good, it's an obvious method. It's usually useful for investing for further presence in Asia, for example, will affect these things. You've got something that has longer flight content, you have capacity and all that. Nothing more to add to Ronnie's answer actually.
Okay.
If you're glad we are a little bit nice company, thank you. Then another one on the digital line.
The next question comes from the line of Ben Maslen. Please go ahead.
Yeah. Good afternoon, everyone. It's Ben from Merrill Lynch. Two critical issues. Firstly, Hans, in the bridge with Industrial Technique, the SEK 65 million kind of boost to EBIT from acquisitions or one-time items. Is that the level of profitability that the M&A is coming in at? Or is it just that we've been unwinding the negative from last year? That's the first question. Can you, just on the working capital, you seem to be filled. I'm just wondering if there's any impact on the margin from that at all, either positive or negative, either because you're seeing ahead of sales and kind of over-recovering your overhead, specifically inefficiencies from having extended lead times, inefficiencies in the plant and so forth. Just overall, if there's any impact on the margin in any of the businesses, thank you.
On Ben's argument, I think we already talked about it because there's a bit of a negative stone-cold to this interview, which does not make it more complicated. That is mainly in Brazil and in China.
Mm-hmm.
This inventory will have a negative on the opposite side. Hans will elaborate on that, what it meant, what is the reason why inventory is on us. I think it's in all, it has more mining, it's the plants, it's making it, looking in the middle of the road, having our largest market in Australia, buying the oil there. The selling options is to plan and more to get it tied up. I will not take that into account in any quarter.
On the industrial technique, that is the indication of good profitability from acquired companies. That's what you should read from that, from this dataset you get then. We are very happy both in intrinsic long-term view on those acquisitions that this area has made, and it's also showing similar profitability than what we have seen in similar segments of the equity in the last couple of years.
Okay.
All right, thanks a lot.
I think we have Roman again on the telephone line, so we'll take two more questions. The end of the year is at the top, unfortunately. As always, those of you that have further questions, please contact us after the call. We'll take one, two final questions.
Okay. Who comes to the line now? It's [Jim] of Finneas. Please go ahead.
Hi. Good afternoon. It's [Jim of Finneas and] Sony. I want to touch on looking at all the insights on comparative CFR, just in first impact, your profitable plan. Then compare it to your order intake. Looking at them, your outlook payments need to be consistent because it seems like the cost, if we start going through a run with the cost for all the intake, will come up to be slightly negative volume for the profitable first week of the 12th. It's volume growth year -over -year to be organic. Am I right in thinking that way?
I think that the comment that Ronnie made about some of the large acquisitions, etc., having a slightly weaker present at the end of the year in the fourth quarter is giving the interplay that you mentioned. That is probably, I don't know exactly the input to the person who displayed to you on the way I read you, is that the average first three quarters seem to be slightly higher in underlying order intake than fourth quarter is less.
Yeah. On the thing, are you looking at the mining? Like, you're sort of, if you're being interested here with this mining quarter, to be honest, it's not, because your first half of 2011 was really strong. The first half of 2012 grew a lot in order to be a very strong first half. Am I right?
I think that it is an observation that we share, that we had a very strong first part of 2011. Of course, that then in many markets continued to be on a high level, so to speak, even at the end of the year. Yet, it's partly our thinking that to defend that by Devo, going into next year, it's not going to happen shortly after, so to speak. If anyone's yet a little bit on the details of that, I don't think that we can agree on your observations, so to speak.
Yeah. That's also more [audio distortion] also a bit like that's what I tried to explain, that we compare at a very high level.
Yeah.
Yeah. Yeah. Last question. I'm looking at your SG&A and customer solvable. I'll focus on maybe if you could sort of highlight a little bit your guidance regarding how you build headcount arguments in the first quarter of 2012 and call me if you have any difficulties for the first quarter of 2012. Same with utility and probably with component cost. Just to try to analyze or try to estimate how your cost is going to improve in the first quarter.
I remember already when I was talking about the sales ratios out, the sales price and, in place. You, of course, some, some salary amount. That's for sure. You know also when we were elaborated on aftermarket. There's no cost, and with a certain inflation and salary increase. That's good for sure.
There's some [audio distortion] when it comes to the quality part because there is more on labor cost increases where that's typically bringing on very hard.
Yeah.
It's a big line. It can go up to 10%.
Mm-hmm.
If you exceed and it's merely whatever's too close to that, that's depending on which country you're in the world.
so just.
That was a fun surprise.
Okay. Thank you. Let me send the final question on the telephone line.
If someone's on the line, you'll have Martin for [Polsty] Go ahead.
Good afternoon, everyone. This is Mr. Clifford, please. On compressors, which effect diluted the margins between December year -on -year? Can you just confirm how much of that was due to service aftermarket versus purchase point, and versus the foreign leading orders being bigger in the quarter than the line orders? My second question on compressors, Mr. Ramsey now is planning a specialty in the future half of the year. Do we expect to, like, you know, dilution effect as when you're loading up that factory? If so, if it's the sale of stakeholders? Just the last question, are you seeing on the mining side any changes or any recent on mining exploration filling orders?
Any trend that you are from first? The mining exploration is when you just work with that, slower, slower adding system or a program with the, that's today from CFIC. Still, it's a good demand for our exploration. That's also, I think, a good example of what is going on and how do the mining companies think that the first ones respond. That is doing fine. When it comes to the nickel dilution, I think on the other hand, I think that's a little bit more interesting where we said, you know, I think the stakeholder-wise, we all, and others-wise, we all be investing into the market. We had clearly talked about presence. It's more people on the street. It's getting deeper into the market. It's setting up new, a new, the area now is waiting to do something in the business. It's easing and costing.
Perhaps you should see it more in that area. Therefore, I don't want to take the word dilution in my mouth on that. Then your second question was there. You're talking about China .
The difference is the new, that's started now for the second half of the year. Will there be kind of more diluted effort to get it loaded up so as the trend will scale up, or is it not material enough?
That's how it's not material enough. Today we are renting floor space. I think the new section will be also re-inaugurated, whether it's September or October this year. I suppose you'll notice that it's more so to be executed. You remember, at a given time, they have already diluted what type of money they're talking here. We can talk here about, on the million euros. We talked here in the corner between EUR 10 million and EUR 15 million now. It's not a big deal.
Okay. Thank you very much. I thank all participants on the telephone conference as well as here in Stockholm, which is a great thing. I wish you a nice evening and hope to see you again the next time to talk about the first quarter results. Thanks very much.