COMMITTED TO SUSTAINABLE PRODUCTIVITY€¦ · COMMITTED TO SUSTAINABLE PRODUCTIVITY We stand by our...

Atlas Copco Capital Markets Day November 19, 2014

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ATLAS COPCO GROUP

Atlas Copco Capital Markats Day 2014

Ronnie Leten, President and CEO

Hans Ola Meyer, CFO

COMMITTED TO SUSTAINABLE PRODUCTIVITY

We stand by our responsibilities towards our customers,

towards the environment and the people around us.

We make performance stand the test of time.

This is what we call – Sustainable Productivity.

Group PresentationAtlas Copco Capital Markets Day 2014

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2

AGENDA

1. Business overview

2. Global trends

3. The strategic pillarsfor profitable growth

4. Summary

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Established 1873 in Stockholm, Sweden

Four focusedbusiness areas

Compressor Technique Industrial Technique Mining and Rock Excavation Technique Construction Technique

Global presence Customers in more than 180 countries

Employees1) 44 242 in more than 90 countries

Revenues2) BSEK 90

Market Cap.1) BSEK 247

Trading information

FACTS IN BRIEF

A share B share

NASDAQ OMX ATCO A ATCO B

ISIN code SE0000101032 SE0000122467

1) End of September 20142) 12 months until September 2014

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3

BUSINESS OVERVIEW

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ATLAS COPCO

A world leading provider of sustainable productivity solutions

Agile and resilient operations

Strong global service business

Strong value creation track record

Consistent strategy

Group Presentation

6

Atlas Copco Capital Markets Day 2014


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CONSISTENT STRATEGY

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Products, servicesand solutions

First in Mind—First in Choice® for customers and prospects for all brands.

Increase customer loyalty. Increase customer energy efficiency by 20% by 2020*.

Offer safe and reliable products and services.

Operations

First in Mind—First in Choice® employer for today’s and future employees.

Competence development to achieve good results and yearly coaching/ appraisals to all employees.

Increase diversity in both gender and nationality. Encourage internal mobility.

Safe and healthy working environment for all employees.Zero work-related accidents. Sick leave below 2.5%.

No corruption or bribes. Work with business partners committed to high ethical, environmental and social standards.

Develop new products and services with a lifecycleperspective.

Construct Atlas Copco buildings according to sustainable building standards**.

Decrease CO2 emissions from operations by 20% in relation to cost of sales by 2020*.

Decrease CO2 emissions from transport of goods by 20% in relation to cost of sales by 2020*.

Keep water consumption at current level.

Reuse or recycle waste.

FinancialsAnnual revenue growth of 8% over a business cycle.

Sustained high return on capital employed.

All acquired businesses to contribute to economic value added.

Annual dividend distribution about 50% of earnings per share.

* Base year 2010.** Leadership in Energy and Environmental Design (LEED) or comparable green building criteria.

GOALS FOR SUSTAINABLE, PROFITABLE DEVELOPMENT

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PERFORMANCE SUMMARY 2013


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FOUR BUSINESS AREAS AND 23* DIVISIONS

IndustrialTechnique

Industrial Technique Service

MVI Tools and Assembly Systems

General Industry Toolsand Assembly Systems

Chicago Pneumatic Tools

Industrial Assembly Solutions*

Group Management and corporate functions

Compressor Technique Service

Industrial Air

Oil-free Air

Vacuum Solutions

Gas and Process

Medical Gas Solutions

Airtec

CompressorTechnique

Mining and Rock Excavation Technique

Mining and Rock Excavation Service

Underground Rock Excavation

Surface and Exploration Drilling

Drilling Solutions

Rock Drilling Tools

Rocktec

Common service providers

President and CEO

Board of Directors

ConstructionTechnique

Construction Technique Service

Specialty Rental

Portable Energy

Road Construction Equipment

Construction Tools

*Industrial Assembly Solutions – new from January 1, 2015

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6

HOW WE DO BUSINESS

• Leverage the competence of our partners

• ~75% of product cost is purchased material

Supplier

• Sales and service

• Manufacturing

• Design and development

Atlas Copco• Own the relationship

with the customer

• ~ 80% direct sales

Customer

Product driven, customer focused

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AGILE AND RESILIENT OPERATIONS

Variable cost structure and asset light operations

Stable service business

Continuous investments in innovation

Competent and committed employees

Resilience

Agile operational set-up

Vol

ume

/ P

rofit

s

Deteriorating business climate Reduce variable costs Working capital reduction

Improving business climate Add variable costs Working capital increase Small incremental

investments

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PERFORMANCE


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LEADERSHIP IN SUSTAINABLE PRODUCTIVITY

November 28, 2014Atlas Copco Group Presentation

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Q3 IN BRIEF

Improved industrial demand– Order growth for industrial tools and small

industrial compressors

– Strong quarter for vacuum solutions

Unchanged demand for mining equipment

The service business continued to develop well

Strong North America, weak Asia

Record revenues and strong operatingcash flow

Acquisition of Henrob– A market leader in self-pierce riveting 0%

5%

10%

15%

20%

25%

0

5 000

10 000

15 000

20 000

25 000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Orders received, MSEK Revenues, MSEK

Operating margin, % Adjusted operating margin, %

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10 -2 +1

Excl. Edwards -2 09 +9 +18

Excl. Edwards +8 +18

31 +9 +11

Excl. Edwards +1 +5

24 +14 +12

Excl. Edwards -6 -8

4 +6 +4

Excl. Edwards +5 +2

22 +27 +33

Excl. Edwards +10 +15

ORDERS RECEIVED – LOCAL CURRENCY

September 2014

A = Share of orders received, year-to-date, %

B = Year-to-date vs. previous year, %

C = Last 3 months vs. previous year, %

100 +12 +15

Excl. Edwards +2 +4

A B C

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FINANCIAL PERFORMANCE

0%

5%

10%

15%

20%

25%

-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sept.2014

Revenues, MSEK

Operating margin, %

Adjusted operating margin, %

CAGR 10 years, %

Continuing operations, excl. divested operations in rental service and professional electric tools. 12 month figures.CAGR calculated 10 years until 2013

CAGR 2004–2013

~11%

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RESILIENCE

Larger share of service

Lean foot-print – asset light

Decentralized Group


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In periods of volume declines

Average volume change. Quarterly reported operating margin, excluding Rental Service

Q4 94 - Q3 96 Q4 97 - Q3 99 Q2 00 - Q1 02 Q4 07 - Q3 09 Q1 12 – Q4 13

10.2%10.6%

12.6% 13.2%13.4%

12.7%

19.7%

15.9%

20.7% 19.5%

17.6%

0%

5%

10%

15%

20%

25%

94Q

4

95Q

4

96Q

4

97Q

4

98Q

4

99Q

4

00Q

4

01Q

4

02Q

4

03Q

4

04Q

4

05Q

4

06Q

4

07Q

4

08Q

4

09Q

4

10Q

4

11Q

4

12Q

4

13Q

4

Operating margin, %

14%

-1%

3%

-3%

8%

-3%

14%

-18%

7%

-5%

-20%

-10%

0%

10%

20%

Average volume change in the period, %

CAPITAL EMPLOYED

-10 000

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sept.2014

Cash and other financial assets

Working capital, net

Other, net

Property, plant and equipment

Intangible assets

Group Presentation

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WORKING CAPITAL DEVELOPMENT

0%

5%

10%

15%

20%

25%

30%

0

5 000

10 000

15 000

20 000

25 000

30 000

Net working capital,average, MSEK

Net working capitalaverage / 12 monthsrevenues

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AGILE AND RESILIENT

-20 000

-15 000

-10 000

-5 000

0

5 000

10 000

15 000

2007 2008 2009 2010 2011 2012 2013 Sept. 2014

Revenue change(volume), MSEK

Change in workingcapital, MSEK

Group Presentation

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Revenue growth vs. change working capital



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CAPITAL STRUCTURE

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3

Group Presentation

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Net Debt*/EBITDA

* Net Debt adjusted for the fair value of interest rate swaps


CASH GENERATION

0

50

100

150

200

250

300

0

2 500

5 000

7 500

10 000

12 500

15 000

2007 2008 2009 2010 2011 2012 2013 Sept. 201412M

Operating cashflow, MSEK (LHS)

Cash conversion %(RHS)

Group Presentation

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Cash conversion=operating cash flow / net profit from continuing operations

Cashconversion

2007 –Sept. 2014

86%



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DIVIDENDS AND DISTRIBUTIONAnnual dividend distribution about 50% of earnings per share

1.502.13 2.38

3.00 3.00 3.004.00

5.005.50 5.50

4.84

22.38

9.00

3.71

5.22

12.24

6.09

8.33

5.14

8.16

10.6811.47

9.95

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dividend, SEK EPS, SEK Dividend + redemption per share

0%

25%

50%

75%

100%

2010 2011 2012 2013 2014Dividend in % of basic EPS

Goal, % (February 2, 2011)

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sept.2014

Return on CapitalEmployed, %

WACC, pre-tax, %

RETURN ON CAPITAL EMPLOYED

Group Presentation

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Reported, including discontinued operations


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0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EVA, MSEK

EVA, accumulated,MSEK

ECONOMIC VALUE ADDED - EVA

Group Presentation

Reported, including discontinued operations

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BUSINESS AREAS

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COMPRESSOR TECHNIQUE

Medical gas solutions & air treatment eq.

Compressors &vacuum pumps

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Textile

Medical

Wood & paper Food & beverages

Electronics Chemical /petrochemical …and more

Assembly

COMPRESSOR TECHNIQUE

In Brief

Leverage investments in presence and innovation

Grow the vacuum solutions business

Strengthen the service platform

Orders, revenues and operating margin

0%

5%

10%

15%

20%

25%

0

2 500

5 000

7 500

10 000

12 500

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014


Operating margin, %


30

ROCE43%


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INDUSTRIAL TECHNIQUE

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Vehicle maintenance Aerospace Electronics

Automotive Offroad

Metal fabrication White goods

Shipyards/offshore Oil & gas

INDUSTRIAL TECHNIQUE

In Brief

Focus on further developing the offer withinassembly technologies

Innovation is key

Extend the service offer


0%

5%

10%

15%

20%

25%

30%

0

500

1 000

1 500

2 000

2 500

3 000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014


Operating margin, %


32

ROCE40%


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MINING AND ROCK EXCAVATION TECHNIQUE

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Quarrying Ground engineeringCivil engineering Water well, oil & gas

Underground mining Surface mining Exploration

MINING AND ROCK EXCAVATION TECHNIQUE

In Brief

Innovation and automation is key

High focus on service and consumables

Strengthen the agility and resilience


0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2 500

5 000

7 500

10 000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014


Operating margin, % Adjusted operating margin, %


34

ROCE29%


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CONSTRUCTION TECHNIQUE

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Light compaction Road construction On-site energy Concrete Demolition / recycling Infrastructure

Rental General construction Tunneling Water well, oil & gas Mining Quarries

CONSTRUCTION TECHNIQUE

In Brief

Focus on growth

Strenghen market position in our niches

Innovation is key

Develop a service network for an indirectchannel


0%

4%

8%

12%

16%

20%

0

1 000

2 000

3 000

4 000

5 000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014


Operating margin, %


36

ROCE12%


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GLOBAL TRENDS

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CAPITALIZING ON GLOBAL TRENDS

Continued expansion of

growth markets

Energy efficiency and productivity

requirementsfrom industry

Investments in infrastructure and therefore minerals

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Investments in infrastructure

Mining machinery investments

Industrial machinery investment

Construction

Mining

Industry

PRIMARY DRIVERS OF REVENUES

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Group Presentation

Equipment Service

Construction activity

Metal and ore production

Industrial production


SUSTAINABILITY TRENDS ARE BUSINESS DRIVERSEnergy efficiency, safety, legislation…

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Innovative products Acquisitions

Sustainability trends

Revenues and growth

CUSTOMER DEMAND


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THE STRATEGIC PILLARSFOR PROFITABLE GROWTH

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THE STRATEGIC PILLARS FOR PROFITABLE GROWTH

Group Presentation

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INCREASE PRESENCE IN FAST GROWING ECONOMIES …AND STRENGTHEN IN MATURE MARKETS

Direct presence

Develop local competence

Create high brand awareness

Group Presentation

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Presence


0

5 000

10 000

15 000

20 000

1994 Sept.2014

REVENUE SPLIT SEPTEMBER 2014 VERSUS 1994

Share of revenues September 2014

Share of revenues 1994

+388%

Average exchange rates

1994Sept.2014

∆

USD 7.72 6,66 -14%

EUR 9.32 9.00 -3%

NorthAmerica22%

SouthAmerica9%

Asia/Australia28%

Europe31%

Africa/Middle East10%

xx%

0

2 000

4 000

6 000

8 000

10 000

1994 Sept.2014

+594%

0

5 000

10 000

15 000

20 000

25 000

30 000

1994 Sept.2014

+162%

0

5 000

10 000

15 000

20 000

25 000

1994 Sept.2014

+549%

0

2 000

4 000

6 000

8 000

10 000

1994 Sept.2014

+601%

1994 figures are including the later divested professional electric tools business AEG.

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Group Presentation

xx%

19%

6%

51%

6%

18%

Presence



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ACQUISITION STRATEGY

Acquisitions are primarily done in, or very close to, the already existing core businesses.

All acquired businesses are expected to make a positive contribution to economic value added.

Characteristics


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Presence

Industry-to-industry

Geographically spread customer base

Leadership in niche markets

Differentiated core technology

Strong base of business partners

Healthy service potential

Leveraging...

Application knowledge

Efficient manufacturing and product development processes

Capacity to swiftly market products and services globally

ACQUISITIONS

0

2

4

6

8

10

12

14

16

18

20

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Acquired revenues,MSEK (LHS)

Employees (LHS)

Number of acquisitions(RHS)

Acquired revenues and employees at the time of the acquisition. Revenues from distributors are not included.

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Presence

81 Acquisitions

>BSEK 26Revenues


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Innovation

WHY DRIVE FOR INNOVATION?

Creates sustainable customer productivity

Reduces life cycle cost– Drives energy efficiency

– Increase safety

Drives organic growth

Supports/drives profitability– Pricing power

– Cost savings

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0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2007 2008 2009 2010 2011 2012 2013 Sept.2014

Research and development expenses, including capitalized expenditures, MSEK

Total as % of revenues

SERVICE GROWTHEQUIPMENT GROWTHGROWTH IN EQUIPMENT AND SERVICE

0%

10%

20%

30%

40%

50%

60%

0

10 000

20 000

30 000

40 000

50 000

60 000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sept.2014

Equipment revenues,MSEK

Service revenues,MSEK

Service, share ofrevenues, %


48

Service

Continuing operations, excl. divested operations in rental service and professional electric tools. 12 month figures.CAGR calculated 10 years until 2013

10 y CAGR Equipment

~ 10%Service

~12%


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Service

FOCUS ON SERVICE2014 vs. 2011 – Service, consumables and rental

0

2 000

4 000

6 000

8 000

10 000

12 000

Sept.2011

Sept.2014

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Sept.2011

Sept.2014

0

500

1 000

1 500

2 000

2 500

Sept.2011

Sept.2014

0

1 000

2 000

3 000

4 000

Sept.2011

Sept.2014

+39% +10%+9%+44%

Compressor Technique

Construction Technique

Mining and Rock Excavation Tech

Industrial Technique

+ Service agreements+ Connectivity+ Focus on core

+ Service agreements+ Calibration+ Focus on core

+ Productivity and efficiency+ Focus on core– Exploration activity

+ Specialty rental+ Focus on core– Construction activity

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OPERATIONAL EXCELLENCE

Lean production

Cost and capital efficiency

Utilizing technology for efficiency

Group Presentation

50

Operationalexcellence



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INCREASE CUSTOMER SERVICE

Work more efficiently through standardizedsolutions and processes

Spend less time on administration and more time with customers

Have consistentbusiness processes

Improve financial performance and increase customer loyalty!

Operationalexcellence

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People

RESULTS-DRIVEN AND COMMITTED CULTURE

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CULTURE, VALUES AND BUSINESS PRINCIPLES

“We grow loyal and experienced local leaders in all countries”

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Group Presentation

People


SUMMARY

A world leading provider of sustainable productivity solutions

Agile and resilient operations

Strong global service business

Consistent strategy

Strong value creation track record

Fit for more

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PEOPLE MAKE IT HAPPEN

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COMMITTED TO

SUSTAINABLE PRODUCTIVITY.

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CAUTIONARY STATEMENT

“Some statements herein are forward-looking and the actual outcome could be materially

different. In addition to the factors explicitly commented upon, the actual outcome could be

materially and adversely affected by other factors such as the effect of economic conditions,

exchange-rate and interest-rate movements, political risks, the impact of competing products

and their pricing, product development, commercialization and technological difficulties, supply

disturbances, and major customer credit losses.”

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COMMITTED TO SUSTAINABLE PRODUCTIVITY€¦ · COMMITTED TO SUSTAINABLE PRODUCTIVITY We stand by our...

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