Atlas Copco Annual report 2020 Atlas Copco is the home of industrial ideas. Our innovative products, solutions, and services are demanded by every type of industry. They enable everything from industrial automation to reliable medical air solutions. This annual report reflects Atlas Copco’s mission of creating sustainable, profitable growth. It integrates financial, sustainability, and governance information to describe the Group in a comprehensive and cohesive manner. CONTENTS Summary of 2020 1 Industrial ideas drive development President and CEO 3 Atlas Copco has been turning THIS IS THE ATLAS COPCO GROUP great ideas into business-critical This section contains Atlas Copco’s vision, mission, benefits since 1873. By listening to strategy, goals, structure and governance, how we do our customers and knowing their business and create value for all stakeholders. 5 needs, we deliver value and innovate with the future in mind. Our goals 6 THE YEAR IN REVIEW Cover image: Electric tightening tool from Atlas Administration report Copco used at a robot automated This section describes Atlas Copco’s annual station in the electronics industry. performance and achievements. 13 Compressor Technique 22 Vacuum Technique 25 Industrial Technique 28 Power Technique 31 GRI Standards and external review Delivering lasting value in a sustainable way 34 Atlas Copco reports on its sustainability work for 2020 according to Products and service 35 GRI Standards, Global Reporting Initiative’s reporting guidelines, level Core, which also constitutes Atlas Copco’s statutory sustainability report. People 36 Ernst & Young has expressed an opinion that a statutory sustainability Safety and well-being 38 report has been prepared according to the Swedish Annual Accounts Act, and has performed a limited review of the sustainability report according Ethics 39 to GRI Standards, core option, see page 139. More information can be found at: www.atlascopcogroup.com. Environment 41 Risks, risk management and opportunities 44 Notice The amounts are presented in MSEK unless otherwise indicated The Atlas Copco share 49 and numbers in parentheses represent comparative figures for the Corporate governance 51 preceding year. The figures presented in this report refer to continuing operations unless otherwise stated. Financial statements (Group) 62 Notes (Group) 66 Forward-looking statements Some statements in this report are forward looking, and the actual out- Financial statements (Parent) 108 comes could be materially different. In addition to the factors explicit- Notes (Parent) 110 ly discussed, others could have a material effect on the actual outcomes. Such factors include, but are not limited to, general business conditions, Signatures of the Board of Directors 122 fluctuations in exchange rates and interest rates, political developments, Audit report 123 the impact and pricing of competing products, product development, commercialization and technological difficulties, supply-chain interrup- Financial definitions 126 tions, and major customer credit losses. Sustainability notes (Group) 127 Atlas Copco AB is a public company. Atlas Copco AB and its subsidiaries GRI index 134 are sometimes referred to as the Atlas Copco Group, the Group, or Auditor’s Limited Assurance Report on Atlas Copco. Atlas Copco AB is also sometimes referred to as Atlas Copco. Atlas Copco AB’s sustainability report 139 Any mentioning of the Board of Directors or the Board refers to the Board of Directors of Atlas Copco AB. Three years in summary 140 Contacts 141 The audited annual accounts and consolidated accounts can be found on pages 13–38, 44–48 and 61–122, excluding the quarterly data on page 79. The corporate governance report examined by the auditors can be found on pages 51–60. Sustainability information that has been reviewed by the auditors can be found on pages 5–12, 23, 26, 29, 32, 34–43 and 127–138. THIS IS THE ATLAS COPCO GROUP Atlas Copco 2020 – a year of challenges and reduced demand, but also with emerging opportunities Revenues: MSEK 99 787 (–4%) Operating margin: 19.2% Return on capital employed: 23% MSEK Orders received and revenues, MSEK Revenues by region MSEK 120 000 120 000 Asia/Oceania, 37% North 100 000 America, 24% 100 000 Africa/ 80 000 Middle East, 5% 80 000 South Orders Europe, 30% America, 4% 60 000 received 60 000 Revenues 40 000 40 000 20 000 20 000 0 2017* 2018 2019 2020 0 Share of revenues 2017* 2018 2019 2020 Service, 36% Equipment, 64% Return on capital employed and operating margin, % % 35 35 30 28 25 20 21 Return on Orders received by customer category 15 capital 14 employed 10 Operating General manu- 7 Other, 13% 5 margin facturing, 20% Service, 7% 0 0 Electronics, 19% 2017* 2018 2019 2020 Construction, 11% * Figures for 2017 are restated for IFRS 15 and refer to continuing Process industry, 20% Automotive, 10% operations after the distribution of Epiroc in 2018. % 35 28 Key financial data, MSEK 2020 2019 2018 2017* Orders received 100 554 106 104 97 132 90 132 21 Revenues 99 787 103 756 95 363 85 653 EBITDA 24 335 14 26 597 24 510 22 383 – in % of revenues 24.4 25.6 25.7 26.1 Operating profit 19 146 7 21 897 21 187 18 748 – in % of revenues 19.2 21.1 22.2 21.9 0 Adjusted operating profit 19 998 2017* 222018 677 2019 202021 135 18 824 – in % of revenues 20.0 21.9 22.2 22.0 Profit before tax 18 825 21 572 20 844 17 591 – in % of revenues 18.9 20.8 21.9 20.5 Profit for the year 14 783 16 543 16 336 16 674 Basic earnings per share, SEK 12.16 13.60 13.45 13.72 Diluted earnings per share, SEK 12.14 13.59 13.43 13.61 * Figures for 2017 are restated for IFRS 15 and refer to continuing operations after the distribution of Epiroc in 2018. Atlas Copco 2020 1 THIS IS THE ATLAS COPCO GROUP A decentralized group with four business areas The Atlas Copco Group is a world-leading provider of sustainable productivity solutions, demanded by all types of industries, enabling everything from industrial automation to reliable medical air solutions. The Group offers innovative compressors, air treatment systems, vacuum solutions, industrial power tools and assembly systems, machine vision, and power and flow solutions. Atlas Copco develops products and services focused on productivity, energy efficiency, safety and ergonomics, supported by insights from connected products. The company was founded in 1873, is based in Nacka, Sweden, and has a global reach spanning more than 180 countries. In 2020, Atlas Copco had about 40 000 employees at year end. Compressor Technique 2020 Orders received: MSEK 47 401 Revenues by region Orders received by customer category Revenues: MSEK 47 329 Operating margin: 22.5% Other, 19% General manu- Asia/Oceania, 31%North facturing, 26% America, 22% The Compressor Technique business area provides Service, 11% compressed air solutions; industrial compressors, Africa/ Middle East, 7% Electronics, 3% gas and process compressors and expanders, air and Construction, 12% gas treatment equipment, air management systems, South Europe, 35% America, 5% Process industry, 27% Automotive, 2% and service through a global network. Share of revenues: Equipment, 57% Service, 43% Read more on page 22 Vacuum Technique 2020 Revenues by region Orders received by customer category Orders received: MSEK 25 583 Revenues: MSEK 24 685 Other, 3% General manu- Asia/Oceania, 63% North facturing, 11% Operating margin: 22.4% America, 21% The Vacuum Technique business area provides vacuum products, exhaust management systems, valves and Africa/ Process related products, and service through a global network. Middle East, 2% Europe, 14% industry, 19% Electronics, 67% Share of revenues: Equipment, 73% Service, 27% Read more on page 25 Industrial Technique 2020 Orders received: MSEK 16 254 Revenues by region Orders received by customer category Revenues: MSEK 16 176 Operating margin: 15.0% Other, 10%General manu- Asia/Oceania, 27% North America, facturing, 19% 31% Service, 5% The Industrial Technique business area provides Africa/ Electronics, 3% industrial power tools, assembly and machine vision Middle East, 2% Construction,5% solutions, quality assurance products, software, South and service through a global network. Europe, 38% America, 2% Process industry, 4% Automotive, 54% Share of revenues: Equipment, 72% Service, 28% Read more on page 28 Power Technique 2020 Orders received: MSEK 11 810 Revenues by region Orders received by customer category Revenues: MSEK 12 106 Operating margin: 13.2% Other, 20% General manu- Asia/Oceania, 22%North facturing, 20% America, 26% The Power Technique business area provides air, power Service, 8% and flow solutions through products such as mobile Africa/ Electronics, 1% Middle East, 10% compressors, pumps, light towers and generators, South Process along with a number of complementary products. Europe, 36% America, 6% Construction, 35% industry, 16% It also offers specialty rental and provides services through a global network. Share of revenues: Equipment, 59% Service, 11% Service (specialty rental), 30% Read more on page 31 2 Atlas Copco 2020 PRESIDENT AND CEO Overcoming challenges and building for the future In last year’s annual report I wrote that we will continuously monitor our strategies and targets, and reassess them when necessary to continue to deliver the best customer value in the most sustainable way. Little did I know that 2020 would be a year that would transform the way we live, work and do business, and that our organization would be challenged in completely new ways. Our set-up and agile teams have made it possible to cope with the challenges and our efforts and focus made it possible to deliver solid performance despite the market conditions. Our first and foremost priority has been safety. Despite lockdowns and other restrictions due to the Covid-19 pandemic, we were able to ensure that our most critical production flows and services could stay up and running.