The Year in Review – Administration Report
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THE YEAR IN REVIEW – ADMINISTRATION REPORT THE YEAR IN REVIEW MARKET REVIEW AND DEMAND Europe DEVELOPMENT The orders received in local currencies in Europe increased 10% and The overall demand for Atlas Copco’s equipment and services improved 4% excluding Edwards. All business areas achieved low single digit somewhat in 2014. The order intake of small and medium-sized com- organic growth. Geographically, there were small differences between pressors to the manufacturing industry increased, while orders for large the markets. The order volumes in southern and eastern Europe grew compressors for the process industry decreased. The order intake for compared to the low levels of the previous year, while the order vol- vacuum solutions was strong. The orders received for industrial tools umes in northern and western Europe remained fairly stable. The and assembly systems increased, supported by investments from the service business grew in all business areas. In total, Europe accounted motor vehicle, aerospace and electronics industries. The demand for con- for 30% (32) of orders received. struction equipment for infrastructure and civil engineering work was relatively soft and orders were largely unchanged. The demand for Africa/Middle East mining and rock excavation equipment remained at a low level and the Orders received decreased 1% in local currencies in the Africa/Middle order volumes were slightly lower compared to the previous year. East region, which accounted for 10% (11) of the Group’s orders The service business continued to develop positively. Service received. The order intake increased for industrial compressors and and parts had an organic growth of nearly 5%. The specialty rental tools and for construction equipment, but decreased for mining business also had a positive development, while consumables for equipment. The service business grew in all business areas, except in mining and civil engineering had a negative development. Mining and Rock Excavation Technique. See also business area sections on pages 20–35. The Group’s order intake increased 15% to a record MSEK 93 873 Asia/Australia (81 290). The organic order growth was 1%, more favorable exchange The orders received in local currencies in Asia/Australia increased rates contributed with 2% and acquisitions with 12%, of which 11% 15%, but decreased 4% excluding Edwards. The investments in indus- was attributable to Edwards. trial tools and assembly systems increased and Industrial Technique achieved healthy growth. Also, the order intake for vacuum solutions North America were strong in the region, supported by good demand from the semi- The order intake in local currencies in North America increased 26% conductor industry. The order intake for industrial compressors, and 10% excluding Edwards. Primarily the United States, but also mining and construction equipment, however, decreased, negatively Canada and Mexico achieved growth. The order volumes increased impacted by low investments in China, India and in several countries for industrial tools and assembly systems, for construction and in South East Asia. The service business for industrial compressors mining equipment as well as for small- and medium-sized industrial and tools continued to grow at a high pace in the region. The service compressors, while they were lower for large compressors. The service business for mining was stable, whereas it decreased for construction business grew in all business areas. In total, North America equipment. In total, Asia/Australia accounted for 28% (27) of accounted for 23% (20) of orders received. orders received. South America Near-term demand outlook The South American orders increased 6% in local currencies. The Published January 29, 2015 order intake increased for all business areas, except for Construction The overall demand for the Group is Technique. The service business grew in all business areas. In total, expected to increase somewhat. South America accounted for 9% (10) of orders received. ORDERS RECEIVED, REVENUES SALES BRIDGE Atlas Copco Group AND OPERATING MARGIN Orders received Orders on hand, December 31 Revenues 2012 90 570 24 020 90 533 MSEK % Structural change, % +1 +1 100 000 25 Currency, % –4 –4 80 000 20 Price, % +1 +1 Volume, % –8 –5 60 000 15 Total, % –10 –7 40 000 10 2013 81 290 19 263 83 888 Structural change, % +12 +12 20 000 5 Currency, % +2 +2 0 0 Price, % +1 +1 2010 2011 2012 2013 2014 Volume, % +0 –3 Orders received, MSEK Total, % +15 +12 Revenues, MSEK 2014 93 873 22 830 93 721 Operating margin, % 14 Atlas Copco 2014 THE YEAR IN REVIEW – ADMINISTRATION REPORT Market presence Certifications on quality, environment, health and safety The presence was further strengthened with the addition of sales and In September 2012, Atlas Copco decided that all product companies, service engineers in many markets. as well as all sites with 70 or more employees shall have ISO 9001, Atlas Copco had own customer centers in 91 (92) countries and ISO 14001 and OHSAS 18001 certifications. The goal was not fully production facilities in 30 (23) countries on five continents at the end achieved in 2014, but all sites have initiated the certification process. of the year. Revenues were reported in 185 (182) countries. Changes in Group Management Other, 8% Manufacturing, 33% Nico Delvaux was appointed President of the Compressor Technique ORDERS Service, 5% business area as from August 1, 2014. He was previously President of RECEIVED BY Construction, the Construction Technique business area and replaced Stephan CUSTOMER 20% CATEGORY Process Kuhn, who left the Group. Mining, 20% industry, 14% Andrew Walker was appointed President of the Construction Technique business area and member of Group Management, effec- tive September 15, 2014. He was previously President of the Service division in the Compressor Technique business area and replaced IMPORTANT EVENTS Nico Delvaux, who was appointed president of the Compressor Technique business area. Acquisitions and divestments The Group completed seven acquisitions during the year, which Recognitions added net revenues of MSEK 9 322 in 2014. The most significant Atlas Copco achieved the following recognitions: inclusion in was Edwards Group Ltd., a leading global supplier of vacuum and Dow Jones Sustainability World Index and FTSE4Good; included as abatement solutions, with revenues in 2014 of MSEK 8 535. See also one of the 100 most innovative companies in the world by Forbes; note 2 and business area sections on pages 20–35. and ranked 23 among the world’s top sustainable companies by Global 100. Investments in innovation The amount invested in product development, including capitalized expenditures, increased 30% to MSEK 2 991 (2 306) corresponding to 3.2% (2.7) of revenues. The increase was primarily due to acquisi- FINANCIAL SUMMARY AND ANALYSIS tions. The number of employees in research and development KEY FINANCIAL DATA, MSEK 2014 2013 increased with 18%. Most of the employees are based in Europe, Orders received 93 873 81 290 but the rate of increase in Asia was high. Revenues 93 721 83 888 EBITDA 20 724 19 759 Investments in manufacturing and distribution Operating profit 17 015 17 056 and capacity adjustments – in % of revenues 18.2 20.3 The Group’s increased investments in property, plant and equipment Adjusted operating profit 17 744 16 993 of MSEK 293 to MSEK 1 548 was primarily related to acquired busi- - in % of revenues 18.9 20.3 nesses but also included other investments, such as investments in a Profit before tax 16 091 16 266 new regional distribution center in China. Several actions to adjust – in % of revenues 17.2 19.4 capacity to the lower demand for mining equipment were imple- Profit for the year 12 175 12 082 mented, including consolidation of some manufacturing facilities. Basic earnings per share, SEK 10.01 9.95 Consolidation of manufacturing was also made in the Compressor Diluted earnings per share, SEK 9.99 9.92 Technique business area. SALES BRIDGE Compressor Industrial Mining and Rock Construction Technique Technique Excavation Technique Technique Orders received Revenues Orders received Revenues Orders received Revenues Orders received Revenues 2012 33 480 32 725 9 435 9 566 33 482 34 054 14 607 14 658 Structural change, % +1 +1 +2 +1 +1 +1 +1 –1 Currency, % –4 –4 –3 –3 –5 –5 –5 –5 Price, % +1 +1 0 0 +3 +2 +1 +1 Volume, % –3 –1 +3 +1 –21 –13 +1 0 Total, % –5 –3 +2 –1 –22 –15 –2 –5 2013 31 765 31 782 9 594 9 501 26 092 29 013 14 260 13 967 Structural change, % +28 +28 +6 +8 +1 +1 +1 +1 Currency, % +4 +4 +5 +5 +0 +0 +2 +3 Price, % +1 +1 +0 +1 +1 +1 +1 +1 Volume, % +0 +0 +7 +7 –3 –13 +0 +1 Total, % +33 +33 +18 +21 –1 –11 +4 +6 2014 42 249 42 165 11 335 11 450 25 752 25 718 14 847 14 739 Atlas Copco 2014 15 THE YEAR IN REVIEW – ADMINISTRATION REPORT Revenues The operating profit for the Mining and Rock Excavation Technique The Group’s revenues increased by 12% to a record MSEK 93 721 business area decreased 29% to MSEK 4 307 (6 083), including (83 888). The goal is to achieve annual revenue growth of 8% over impairment of assets and restructuring costs of MSEK 415 (120) and a business cycle. In the past 10 years, the compound annual growth corresponding to a margin of 16.7% (21.0). The adjusted operating rate has been 8.1%. If the divested businesses related to equipment margin was 18.4% (21.4) and was impacted negatively by lower vol- rental are excluded, the compound annual growth rate has been umes and dilution from acquisitions, but was supported by currency. approximately 11%. The operating profit for the Construction Technique business area increased 2% to MSEK 1 768 (1 733), corresponding to a margin of 12.0% (12.4).