committed to sustainable productivity€¦ · committed to sustainable productivity we stand by our...
TRANSCRIPT
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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Atlas Copco Capital Markets Day November 19, 2014
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AGENDA
1. Business overview
2. Global trends
3. The strategic pillarsfor profitable growth
4. Summary
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Group PresentationAtlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
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BUSINESS OVERVIEW
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Group PresentationAtlas Copco Capital Markets Day 2014
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
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Atlas Copco Capital Markets Day November 19, 2014
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CONSISTENT STRATEGY
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Group PresentationAtlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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PERFORMANCE SUMMARY 2013
Group PresentationAtlas Copco Capital Markets Day 2014
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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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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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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Group PresentationAtlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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Group PresentationAtlas Copco Capital Markets Day 2014
PERFORMANCE
Group PresentationAtlas Copco Capital Markets Day 2014
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Atlas Copco Capital Markets Day November 19, 2014
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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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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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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Group PresentationAtlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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RESILIENCE
Larger share of service
Lean foot-print – asset light
Decentralized Group
Group PresentationAtlas Copco Capital Markets Day 2014
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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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Atlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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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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Group PresentationAtlas Copco Capital Markets Day 2014
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
Atlas Copco Capital Markets Day 2014
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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
Atlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
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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Atlas Copco Capital Markets Day 2014
Reported, including discontinued operations
Atlas Copco Capital Markets Day November 19, 2014
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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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Atlas Copco Capital Markets Day 2014
BUSINESS AREAS
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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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COMPRESSOR TECHNIQUE
Medical gas solutions & air treatment eq.
Compressors &vacuum pumps
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Group PresentationAtlas Copco Capital Markets Day 2014
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
Orders received, MSEK Revenues, MSEK
Operating margin, %
Group PresentationAtlas Copco Capital Markets Day 2014
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ROCE43%
Atlas Copco Capital Markets Day November 19, 2014
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INDUSTRIAL TECHNIQUE
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Group PresentationAtlas Copco Capital Markets Day 2014
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
Orders, revenues and operating margin
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
Orders received, MSEK Revenues, MSEK
Operating margin, %
Group PresentationAtlas Copco Capital Markets Day 2014
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ROCE40%
Atlas Copco Capital Markets Day November 19, 2014
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MINING AND ROCK EXCAVATION TECHNIQUE
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Group PresentationAtlas Copco Capital Markets Day 2014
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
Orders, revenues and operating margin
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
Orders received, MSEK Revenues, MSEK
Operating margin, % Adjusted operating margin, %
Group PresentationAtlas Copco Capital Markets Day 2014
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ROCE29%
Atlas Copco Capital Markets Day November 19, 2014
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CONSTRUCTION TECHNIQUE
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Group PresentationAtlas Copco Capital Markets Day 2014
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
Orders, revenues and operating margin
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
Orders received, MSEK Revenues, MSEK
Operating margin, %
Group PresentationAtlas Copco Capital Markets Day 2014
36
ROCE12%
Atlas Copco Capital Markets Day November 19, 2014
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GLOBAL TRENDS
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Group PresentationAtlas Copco Capital Markets Day 2014
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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Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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Investments in infrastructure
Mining machinery investments
Industrial machinery investment
Construction
Mining
Industry
PRIMARY DRIVERS OF REVENUES
39
Group Presentation
Equipment Service
Construction activity
Metal and ore production
Industrial production
Atlas Copco Capital Markets Day 2014
SUSTAINABILITY TRENDS ARE BUSINESS DRIVERSEnergy efficiency, safety, legislation…
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Group PresentationAtlas Copco Capital Markets Day 2014
Innovative products Acquisitions
Sustainability trends
Revenues and growth
CUSTOMER DEMAND
Atlas Copco Capital Markets Day November 19, 2014
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THE STRATEGIC PILLARSFOR PROFITABLE GROWTH
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Group PresentationAtlas Copco Capital Markets Day 2014
THE STRATEGIC PILLARS FOR PROFITABLE GROWTH
Group Presentation
42
Atlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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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
43
Presence
Atlas Copco Capital Markets Day 2014
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.
44
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
Group PresentationAtlas Copco Capital Markets Day 2014
45
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.
46
Group PresentationAtlas Copco Capital Markets Day 2014
Presence
81 Acquisitions
>BSEK 26Revenues
Atlas Copco Capital Markets Day November 19, 2014
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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
47
Group PresentationAtlas Copco Capital Markets Day 2014
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, %
Group PresentationAtlas Copco Capital Markets Day 2014
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%
Atlas Copco Capital Markets Day November 19, 2014
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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
49
Group PresentationAtlas Copco Capital Markets Day 2014
OPERATIONAL EXCELLENCE
Lean production
Cost and capital efficiency
Utilizing technology for efficiency
Group Presentation
50
Operationalexcellence
Atlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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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
51
Group PresentationAtlas Copco Capital Markets Day 2014
People
RESULTS-DRIVEN AND COMMITTED CULTURE
52
Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
27
CULTURE, VALUES AND BUSINESS PRINCIPLES
“We grow loyal and experienced local leaders in all countries”
53
Group Presentation
People
Atlas Copco Capital Markets Day 2014
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
54
Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
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PEOPLE MAKE IT HAPPEN
55
Group PresentationAtlas Copco Capital Markets Day 2014
COMMITTED TO
SUSTAINABLE PRODUCTIVITY.
56
Group PresentationAtlas Copco Capital Markets Day 2014
Atlas Copco Capital Markets Day November 19, 2014
29
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.”
58
Group PresentationAtlas Copco Capital Markets Day 2014