Atlas Copco Group - Epiroc Split Update

Atlas Copco Group - Epiroc split update

Capital Markets Day 2017 Hans Ola Meyer, CFO 2 Agenda

11. Rationale for the split

21. Carve-out and listing project

31. Financials

Update on the split Capital Markets Day 2017 3 Strategic rationale and business benefits Split the Group into one INDUSTRIAL and one MINING/INFRASTRUCTURE company

Both businesses are global leaders . A fully focused, dedicated in their respective areas management can – serve customers even better – drive growth and profitability The businesses have different end- . The synergies between the two markets and different demand drivers businesses are limited . A separation into two world-leading The businesses have different demand listed companies will facilitate a fair patterns valuation on the stock market

Update on the split Capital Markets Day 2017 4 Two world class companies

Atlas Copco Epiroc

~34 500 BSEK 84 21%* ~12 500 BSEK 30 19%* Industry Employees Revenue Operating Mining Infrastructure Employees Revenue Operating margin margin

* Indicative 12 month figures at September 30, 2017 Update on the split Capital Markets Day 2017 5 Two world class companies Operating margin (EBIT), %

30%

25%

20%

15% EBIT margin EBIT

10%

0% 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017

Atlas Copco excluding MR Atlas Copco MR Large cap global multi industrials Mining and construction equipment companies

Large cap global multi industrials: 3M, ABB, Alfa Laval, Assa Abloy, Caterpillar, Danaher, Deere, Dover, Eaton, Emerson, Fortive, Geberit, General Electric, Graco, Hitachi, Honeywell, Illinois Tool Works, Komatsu, Kone, Legrand, Mitsubishi Heavy Industries, Nordson, Parker-Hannifin, Rockwell Automation, Rolls-Royce, Roper Technologies, Sandvik, Schindler, Schneider Electric, Siemens, SKF, Smiths Group, Trelleborg, United Technologies, Volvo, Wartsila, Weir and Xylem Mining and construction equipment companies: Caterpillar, Komatsu, Metso, Sandvik and Weir Source: FactSet and Company filings 6 Two world class companies Cash generation

30%

25%

) / Sales / ) 20%

NWC

∆ -

+/ 15%

Capex -

10% (EBITDA

0% 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017

Atlas Copco excluding MR Atlas Copco MR Large cap global multi industrials Mining and construction equipment companies

220

200

180

160 CAGR ~ 5% 140 ~ 5% ~ 3%

Organic sales developement sales Organic 120 ~ 1% 100

80 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017

Atlas Copco excluding MR Atlas Copco MR Large cap global multi industrials Mining and construction equipment companies

Large cap global multi industrials: 3M, ABB, Alfa Laval, Assa Abloy, Caterpillar, Danaher, Deere, Dover, Eaton, Emerson, Fortive, Geberit, General Electric, Graco, Honeywell, Illinois Tool Works, Kone, Legrand, Nordson, Parker-Hannifin, Rockwell Automation, Rolls-Royce, Roper Technologies, Sandvik, Schindler, Schneider Electric, Siemens, SKF, Smiths Group, Trelleborg, United Technologies, Volvo, Wartsila, Weir and Xylem Mining and construction equipment companies: Caterpillar, Metso, Sandvik and Weir Source: FactSet and Company filings 8

Carve-out project

Update on the split Capital Markets Day 2017 9 The startingscope point

BOARD OF DIRECTORS

PRESIDENT AND CEO

GROUP MANAGEMENT BUSINESS AREAS AND CORPORATE FUNCTIONS

COMPRESSOR VACUUM INDUSTRIAL MINING AND ROCK POWER TECHNIQUE TECHNIQUE TECHNIQUE EXCAVATION TECHNIQUE TECHNIQUE

• Compressor Technique • Vacuum Technique • Industrial Technique Service • Mining and Rock • Power Technique Service Service Service • MVI Tools and Excavation Service • Specialty Rental • Industrial Air • Semiconductor Service Assembly Systems • UndergroundPortable Air Rock • Portable Energy Excavation • Oil-free Air • Semiconductor • General Industry Tools and – Incl Handheld equipment • Construction Tools • Professional Air • High Vacuum Assembly Systems • SurfacePower and and Flow Exploration Drilling • Gas and Process • Industrial Vacuum • Chicago Pneumatic Tools • Drilling Solutions • Medical Gas Solutions • Industrial Assembly Solutions • Rocktec • Airtec • Rock Drilling Tools

Divisions generally conduct business through product companies, distribution centers and customer centers

Update on the split Capital Markets Day 2017 10 The scope

BOARD OF DIRECTORS

PRESIDENT AND CEO

GROUP MANAGEMENT BUSINESS AREAS AND CORPORATE FUNCTIONS

COMPRESSOR VACUUM INDUSTRIAL POWER EPIROC TECHNIQUE TECHNIQUE TECHNIQUE TECHNIQUE

• Compressor Technique • Vacuum Technique • Industrial Technique Service • Power Technique Service • Service Service Service • MVI Tools and • Specialty Rental • Underground Rock • Industrial Air • Semiconductor Service Assembly Systems • Portable Air Excavation • Oil-free Air • Semiconductor • General Industry Tools and – Incl. Handheld equipment • Surface and Exploration • Professional Air • High Vacuum Assembly Systems • Power and Flow Drilling • Gas and Process • Industrial Vacuum • Chicago Pneumatic Tools • Drilling Solutions • Medical Gas Solutions • Industrial Assembly • Rocktec Solutions • Airtec • Rock Drilling Tools • Hydraulic Attachment Tools

Divisions generally conduct business through product companies, distribution centers and customer centers

Update on the split Capital Markets Day 2017 11 The carve-out and spin-off project organization Spans the entire world Atlas Copco External Atlas Copco AB Board External advisors KPMG •Shearman & Sterling Programme Owners Roschier •Blink SEB + Deutsche Bank •Brann Steering Committee Mercer •Marsh Dynapac Carve-out EY •+ Locally contracted Programme leaders

Program Management Office

Work Streams

Finance Financial Solutions Tax/Ownership structure Legal & Spin-off Operations

HR, Pension & Internal Comm. CorpCom & Brand Strategy Board, CEO and Insurance IT Union Epiroc Corporate Office

Holding regions Russia, Central Asia Spain, Portugal, Italy, Western Europe Nordic, Baltic Canada Japan, Korea Turkey & Middle East Morocco & Eastern Europe Greece

Greater China / India South East Asia Latin America & Brazil Southern Africa Australia USA Algeria Mongolia

Local Project Leaders

78 Local Project Leaders with 250+ Local Team Members

Update on the split Capital Markets Day 2017 12 Epiroc carve-out and spin-off timeline

Epiroc legal Atlas Copco All Tax and Legal Step structure Audit by AGM Listing on Plans approved established Stand-alone Nasdaq Stockholm Nasdaq Stockholm

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

1. Blueprint and planning 2. Execution and local transactions 3. Stand alone 4. Transition

2017 2018

Atlas Copco - Notice to Atlas - Listing Committee Q4 report, Copco AGM decision, Nasdaq incl. dividend - Information Stockholm proposal brochure on - Publishing of Epiroc dividend listing prospectus proposal, incl. - Capital Markets financial targets, Day, Epiroc capitalization etc.

Update on the split Capital Markets Day 2017 13 Epiroc carve-out

. The project is on time, no red flags MSEK . Estimated transaction expense 600 – Of which expensed Q2-Q3 in 2017 140 . One-off write-down of IT system in Q3 2017 170

. Estimated tax expense 800 – Net, after deduction of step-up values 500 14

Financials

Update on the split Capital Markets Day 2017 15 Epiroc Group – preliminary reporting segments (IFRS)

BOARD OF DIRECTORS Revenues by reporting segments

PRESIDENT AND CEO

GROUP MANAGEMENT BUSINESS AREA AND CORPORATE FUNCTIONS “Tools & Attachments” “EQUIPMENT & “TOOLS & ATTACHMENTS” SERVICE” ~30%

• Service • Rock Drilling Tools • Surface and Exploration • Hydraulic Attachments Drilling ~70% • Underground Rock Excavation “Equipment • Drilling Solutions & Service” • Rocktec

NOTE! The reporting segments will be confirmed in Q2 2018.

Update on the split Capital Markets Day 2017 16 Revenues and Operating profit – Atlas Copco and Epiroc

Revenue split Operating profit split

Epiroc Epiroc

BSEK 30 BSEK ~5.7 19% margin

BSEK ~17.8 BSEKBSEK xx 84 21% margin

Atlas Copco Atlas Copco

NOTE! All figures presented are indicative and based on Sep 30, 2017 financials

Update on the split Capital Markets Day 2017 17 Capital employed – Atlas Copco and Epiroc

Capital Employed

Epiroc

BSEK ~20

BSEK ~60

Atlas Copco

NOTE! All figures presented are indicative and based on Sep 30, 2017 financials

Update on the split Capital Markets Day 2017 18 Capitalization - Atlas Copco and Epiroc

. Work in progress, but….

– Both companies share the same history, and has some similar characteristics . strong financial position gives freedom . access to all financial debt markets is important . modest recurring investment need, thanks to business model

Update on the split Capital Markets Day 2017 19 Capitalization - Atlas Copco and Epiroc

– Customer demand differs….

220

200

180

160

140

120

100 Organic sales developement sales Organic

80 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017

Atlas Copco excluding MR Atlas Copco MR

– This will be reflected in the capitalization of the two companies. . A somewhat lower average financial leverage (lower Net debt/EBITDA ratio) in Epiroc than for Atlas Copco

Update on the split Capital Markets Day 2017 20 Capitalization - Atlas Copco and Epiroc

– Atlas Copco and Epiroc Boards of Directors and Management teams will in Q1 2018, jointly decide on the “day one” capitalization for Atlas Copco and Epiroc.

Update on the split Capital Markets Day 2017 21 Epiroc Executive Team

Per Lindberg Helena Hedblom Anders Lindén President and CEO Senior Executive Vice Senior Vice President Currently President and President Mining and Controlling and Finance CEO, Billerud Korsnäs Infrastructure (CFO) Starts February 1st, 2018

Mattias Olsson Jörgen Ekelöw Senior Vice President Senior Vice President Corporate Communications General Counsel Currently Head of IR, Assa Abloy Starts Mid January 2018

Update on the split Capital Markets Day 2017 22 Epiroc Board of Directors

Ronnie Leten (COB) Johan Forssell Anders Ullberg Former CEO Atlas Copco President and CEO Investor COB Boliden and COB Electrolux Board member Atlas Copco, Studsvik Board member SKF Investor, Wärtsilä, Patricia Board member Atlas Industries and EQT Copco, Beijer Alma and Valedo Partners

Ulla Litzén Lennart Evrell Board member Alfa Laval, President and CEO Boliden Electrolux, Husqvarna, Board member Boliden, NCC and Ratos SCA and the Confederation of Swedish Enterprise

Update on the split Capital Markets Day 2017 23

Committed to sustainable productivity.

Update on the split Capital Markets Day 2017 24 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.”

Update on the split Capital Markets Day 2017