Atlas Copco : Quarterly Report Q1 2021

Press release from Atlas Copco AB

April 27, 2021

Atlas Copco

First-quarter report 2021

Record order intake and improved revenue and profit

The comparison figures presented in this report refer to previous year unless otherwise stated.

• Order intake increased 9% to record MSEK 30 468 (28 039), organic growth of 18%
• Revenues increased 4% to MSEK 26 021 (25 098), organic growth of 13%
• Operating profit increased 5% to MSEK 5 387 (5 124), corresponding to a margin of 20.7% (20.4)
• • Adjusted operating profit, excluding items affecting comparability, was MSEK 5 649 (5 099), corresponding to a margin of 21.7% (20.3)
• Profit before tax amounted to MSEK 5 343 (5 010)
• Basic earnings per share were SEK 3.38 (3.16)
• Operating cash flow at MSEK 4 321 (3 825)
• Return on capital employed was 23% (29)

	January - March
MSEK	2021	2020
Orders received	30 468	28 039	9%
Revenues	26 021	25 098	4%
EBITA*	5 742	5 430	6%
- as a percentage of revenues	22.1	21.6
Operating profit	5 387	5 124	5%
- as a percentage of revenues	20.7	20.4
Profit before tax	5 343	5 010	7%
- as a percentage of revenues	20.5	20.0
Profit for the period	4 117	3 840	7%
Basic earnings per share, SEK	3.38	3.16
Diluted earnings per share, SEK	3.38	3.15
Return on capital employed, %	23	29

* Operating profit excluding amortization of intangibles related to acquisitions.

Near-term demand outlook

Although the world's economic development remains uncertain, Atlas Copco expects that the customers' business activity level will remain at the high current level.

Previous near-term demand outlook (published January 29, 2021):

Although the world's economic development remains uncertain, Atlas Copco expects that the demand for the Group's products and services will remain at current level.

Quarterly and annual financial data in Excel format can be found at: https://www.atlascopcogroup.com/en/investor-relations/financial-reports-presentations/latest-results

Atlas Copco Group Center
Atlas Copco AB	Visitors address:	Telephone: [phone]	A Public Company (publ)
SE-105 23 Stockholm	Sickla Industriväg 19	www.atlascopcogroup.com	Reg. No: 556014-2720
Sweden	Nacka		Reg. Office Nacka

Atlas Copco - Q1 2021

Review of the first quarter

Market development

The customers' activity level as well as their willingness to invest in new equipment continued the improvement seen already in the previous quarter. Order volumes were better than expected and exceeded the already high level of the first quarter 2020.

The strong order growth was primarily due to increased demand for vacuum equipment to the semiconductor industry. However, order growth was also achieved for vacuum equipment to other industries, as well as for industrial and portable compressors, power equipment, and industrial assembly tools and solutions.

The service business continued to grow in all business areas, while the demand for the specialty rental business remained unchanged.

Strong order growth was achieved in most regions, particularly in Asia, across all business areas.

Geographic distribution of orders received

	Atlas Copco Group
January - March 2021	Orders Received, %	Change*, %
North America	23	+17
South America	3	+21
Europe	28	+10
Africa/Middle East	4	-1
Asia/Oceania	42	+34
Atlas Copco Group	100	+20

*Change in orders received compared to the previous year in local currency.

2 (18)

Sales bridge

	January - March
	Orders
MSEK	received	Revenues
2020	28 039	25 098
Structural change, %	+3	+2
Currency, %	-12	-11
Organic*, %	+18	+13
Total, %	+9	+4
2021	30 468	26 021
*Volume, price and mix.

Orders, revenues and operating profit margin

35 000	35%
30 000	30%
25 000	25%
20 000	20%
15 000	15%
10 000	10%
5 000	5%
0	0%

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
2018	2018	2018	2018	2019	2019	2019	2019	2020	2020	2020	2020	2021
			Orders received, MSEK				Revenues, MSEK
			Operating margin, %					Adjusted operating margin, %

Geographic distribution of orders received and revenues

January - March 2021	Compressor Technique, %	Vacuum Technique, %	Industrial Technique, %	Power Technique, %	Atlas Copco, %
	Orders	Revenues	Orders	Revenues	Orders	Revenues	Orders	Revenues	Orders	Revenues
	received		received		received		received		received
North America	20	21	19	18	32	31	27	25	23	22
South America	5	6	0	0	2	1	6	7	3	4
Europe	35	35	11	13	36	38	35	36	28	30
Africa/Middle East	7	7	1	2	2	1	8	9	4	5
Asia/Oceania	33	31	69	67	28	29	24	23	42	39
	100	100	100	100	100	100	100	100	100	100

Atlas Copco - Q1 2021

Revenues, profits and returns

Revenues increased 4% to MSEK 26 021 (25 098), corresponding to an organic growth of 13%. Currency had a negative effect of 11%, and acquisitions added 2%.

The operating profit increased 5% to MSEK 5 387

(5 124) and includes a change in provision for share-relatedlong-term incentive programs, reported in Common Group Items of MSEK -262 (+55). Previous year's items affecting comparability also included a restructuring cost of MSEK -30 in the business area Industrial Technique.

Adjusted operating profit increased 11% to MSEK 5 649 (5 099), corresponding to a margin of 21.7% (20.3). Higher revenue volumes supported the margin, while currency had a negative impact. The margin in all business areas also benefited from the remaining effects of last year's cost containments.

The net currency effect compared to the previous year was negative MSEK 1 065, mainly due to the weaker USD.

Net financial items were MSEK -44(-114). Interest net at MSEK -42(-65) was lower compared to the previous year due to less interest-bearing debt. Other financial items, mainly financial exchange differences, were MSEK -2(-49). Profit before tax amounted to MSEK 5 343 (5 010), corresponding to a margin of 20.5% (20.0). Corporate income tax amounted to MSEK -1 226 (-1 170), corresponding to an effective tax rate of 22.9% (23.4).

Profit for the period was MSEK 4 117 (3 840). Basic and diluted earnings per share were SEK 3.38 (3.16) and SEK 3.38 (3.15), respectively.

The return on capital employed during the last 12 months was 23% (29). Return on equity was 27% (33). The Group uses a weighted average cost of capital (WACC) of 8.0% as an investment and overall performance benchmark.

Revenues and operating profit - bridge

3 (18)

Operating cash flow and investments Operating cash surplus increased to MSEK 6 773 (6 420). Working capital increased by MSEK 500 (increase of 336). Net investments in rental equipment were MSEK -84 (-150)and net investments in property, plant and equipment were MSEK -340 (-411).

Operating cash flow (important internal KPI, but not an IFRS measurement, and hence defined on page 13) reached MSEK 4 321 (3 825).

Net indebtedness

The Group's net indebtedness amounted to MSEK 11 429 (13 859), of which MSEK 2 837 (3 075) was attributable to post-employment benefits. The Group's interest-bearing liabilities have an average maturity of 4.7 years. The net debt/EBITDA ratio was 0.5 (0.5) and the net debt/equity ratio was 19% (24).

Acquisition and divestment of own shares

During the quarter, 657 943 A shares, net, were sold for a net value of MSEK 323. These transactions are in accordance with mandates granted by the Annual General Meeting and relate to the Group's long-term incentive programs. See page 17.

Employees

On March 31, 2021, the number of employees was 40 482 (39 611). The number of consultants/external workforce was 3 290 (3 030). For comparable units, the total workforce decreased by 253 from March 31, 2020.

		Volume, price,			Items affecting	Share-based
MSEK	Q1 2021	mix and other	Currency	Acquisitions	comparability	LTI* programs	Q1 2020
Atlas Copco Group
Revenues	26 021	3 208	-2 895	610	-	-	25 098
Operating profit	5 387	1 590	-1 065	25	30	-317	5 124
	20.7%						20.4%

*LTI= Long term incentive

Atlas Copco - Q1 2021			4 (18)
Compressor Technique
	January - March
MSEK	2021	2020
Orders received	13 032	12 800	2%
Revenues	11 522	11 588	-1%
EBITA*	2 804	2 593	8%
- as a percentage of revenues	24.3	22.4
Operating profit	2 730	2 520	8%
- as a percentage of revenues	23.7	21.7
Return on capital employed, %	84	80

* Operating profit excluding amortization of intangibles related to acquisitions .

• Record order intake
• Service continued to grow
• Operating profit margin at 23.7%

Sales bridge

	January - March
	Orders
MSEK	received	Revenues
2020	12 800	11 588
Structural change, %	+0	+0
Currency, %	-11	-12
Organic*, %	+13	+11
Total, %	+2	-1
2021	13 032	11 522
*Volume, price and mix.

Industrial compressors

The demand for industrial compressors was strong, and order volumes increased compared to the previous year and compared to the previous quarter. Large, and small/medium-sized industrial compressors grew at a similar pace.

Geographically, and compared to the previous year, order volumes increased in all regions.

Gas and process compressors

Order volumes for gas and process compressors did not reach the previous year's level but increased markedly compared to the previous quarter.

Year-on-year, order volumes decreased in all regions except North America, where the order intake increased.

Compressor service

Service orders increased both compared to the previous year and sequentially.

The year-on-year growth was primarily driven by increased demand in Asia and South America, while orders in other regions where basically unchanged.

Innovation

1. new range of small-sized industrial compressors, the Atlas Copco G 2-7, was introduced. Unlike other compressors of similar size, these compressors are based on screw technology with superior efficiency and built for continuous use. In addition to high energy efficiency and low carbon footprint, the new compressors offer a reduced noise level of 20% compared to similar products.

Acquisitions

The business area completed three acquisitions in the quarter:

Kawalek Kompressoren, a German compressed air distributor and service provider with 10 employees.

DGM SRL, an Italian distributor of compressed air equipment and related services with 21 employees.

Cooper Freer Ltd, a UK-based compressed air distributor and service provider with 18 employees.

Revenues and profitability

Revenues reached MSEK 11 522 (11 588), corresponding to an organic increase of 11%.

The operating profit increased 8% to MSEK 2 730 (2 520), corresponding to a margin of 23.7% (21.7). The higher margin was primarily due to higher revenue volumes, while currency had a negative impact. Return on capital employed (last 12 months) increased to 84% (80).

Orders, revenues and operating profit margin

15 000	30%
12 500	25%
10 000	20%
7 500	15%
5 000	10%
2 500	5%
0	0%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021

Orders received, MSEK

Revenues, MSEK

Operating margin, %

Atlas Copco - Q1 2021			5 (18)
Vacuum Technique
	January - March
MSEK	2021	2020
Orders received	8 799	7 116	24%
Revenues	6 808	6 159	11%
EBITA*	1 817	1 630	11%
- as a percentage of revenues	26.7	26.5
Operating profit	1 695	1 497	13%
- as a percentage of revenues	24.9	24.3
Return on capital employed, %	20	22

• Operating profit excluding amortization of intangibles related to acquisitions .

• Record orders, revenues and operating profit
• Very strong quarter for all segments, semiconductor business in particular
• Operating profit margin at 24.9%

Sales bridge

	January - March
	Orders
MSEK	received	Revenues
2020	7 116	6 159
Structural change, %	+1	+1
Currency, %	-15	-13
Organic*, %	+38	+23
Total, %	+24	+11
2021	8 799	6 808
*Volume, price and mix.

Semiconductor and flat panel display equipment

The demand for equipment to the semiconductor industry remained very strong, and the order intake increased significantly compared to the previous year and sequentially. The strong demand was primarily related to production capacity investments, but also investments in new technology.

Geographically, and compared to the previous year, the order growth was achieved across all major regions.

Industrial and scientific vacuum equipment

Order volumes for industrial and scientific vacuum equipment also increased considerably, supported by increased demand from most customer segments.

Year-on-year, the order intake increased in Asia, and Europe but decreased in North America.

Vacuum service

Service orders increased year-on-year and sequentially, both to industrial vacuum customers and to the semiconductor industry.

Geographically, and compared to the previous year, the order intake increased in all regions.

Innovation

A new vacuum pump with smart connectivity capabilities targeting a wide range of industrial applications was introduced, the Leybold DRYVAC DV 800. A patented rotor design and low constant power consumption generate increased energy efficiency compared to older technologies in targeted applications.

Acquisitions

The business area completed the acquisitions of

Ehrler & Beck GmbH, a European distributor of industrial vacuum equipment and service solutions. The company is based in Germany and has 15 employees.

Revenues and profitability

Revenues increased 11% to record MSEK 6 808 (6 159), corresponding to an organic increase of 23%.

The operating profit increased 13% to MSEK 1 695 (1 497), corresponding to a margin of 24.9% (24.3). The margin was supported by higher revenue volumes, but negatively affected by currency. Return on capital employed (last 12 months) was 20% (22).

Orders, revenues and operating profit margin

10 000	50%
9 000	45%
8 000	40%
7 000	35%
6 000	30%
5 000	25%
4 000	20%
3 000	15%
2 000	10%
1 000	5%
0	0%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021

Orders received, MSEK

Revenues, MSEK

Operating margin, %

Adjusted operating margin, %