Atlas Copco : Quarterly Report Q3 2021

Press release from Atlas Copco AB

October 21, 2021

Atlas Copco

Third-quarter report 2021

Strong order intake and profit with solid cash flow

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

• Order intake increased 36% to MSEK 33 023 (24 246), organic growth of 36%
• Revenues increased 12% to MSEK 27 824 (24 849), organic growth of 12%
• Operating profit increased 26% to MSEK 6 000 (4 760), corresponding to a margin of 21.6% (19.2)
• • Adjusted operating profit, excluding items affecting comparability, was MSEK 6 109 (5 021), corresponding to a margin of 22.0% (20.2)
• Profit before tax amounted to MSEK 5 945 (4 696)
• Basic earnings per share were SEK 3.74 (2.98)
• Operating cash flow at MSEK 4 664 (5 143)
• Return on capital employed was 27% (24)

	July - September		January - September
MSEK	2021	2020		2021	2020
Orders received	33 023	24 246	36%	96 020	74 686			29%
Revenues	27 824	24 849	12%	81 379	74 049			10%
EBITA*	6 373	5 119	24%	18 400	14 750			25%
- as a percentage of revenues	22.9	20.6		22.6	19.9
Operating profit	6 000	4 760	26%	17 311	13 773			26%
- as a percentage of revenues	21.6	19.2		21.3	18.6
Profit before tax	5 945	4 696	27%	17 160	13 532			27%
- as a percentage of revenues	21.4	18.9		21.1	18.3
Profit for the period	4 557	3 618	26%	13 245	10 587			25%
Basic earnings per share, SEK	3.74	2.98		10.88	8.71
Diluted earnings per share, SEK	3.73	2.97		10.85	8.70
Return on capital employed, %	27	24

* Operating profit excluding amortization of intangibles related to acquisitions.

Near-term demand outlook

Atlas Copco expects that the customers' business activity level will remain high, but weaken compared to the very high level in the third quarter.

Previous near-term demand outlook (published July 16, 2021):

Atlas Copco expects that the customers' business activity level will remain at the high 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 - Q3 2021

Summary of nine-month results

Orders received in the first nine months of 2021 increased by 29% to MSEK 96 020 (74 686), corresponding to an organic growth of 35%. Acquisitions contributed with 3% and currency had a negative effect of 9%. Revenues reached MSEK 81 379 (74 049), corresponding to a 15% organic increase.

Operating profit increased by 26% to MSEK 17 311

(13 773). The operating margin was 21.3% (18.6). Adjusted for items affecting comparability, the margin was 21.9%

2 (18)

(19.7). There was a negative impact of changes in exchange rates for the first nine month of MSEK 1 730.

Profit before tax was MSEK 17 160 (13 532), corresponding to a margin of 21.1% (18.3). Profit for the period totaled MSEK 13 245 (10 587). Basic and diluted earnings per share were SEK 10.88 (8.71) and 10.85 (8.70) respectively.

Operating cash flow before acquisitions, divestments and dividends totaled MSEK 12 728 (12 451).

Review of the third quarter

Market development

The overall demand for Atlas Copco's equipment and service remained high, and the order intake increased significantly compared to the previous year's low level. Order volumes increased for all types of equipment and service, with solid growth in all business areas and in all regions.

Sequentially, the overall demand remained more or less unchanged. The strong order increase for vacuum equipment to the semiconductor industry was offset by a decreased order intake for industrial and portable compressors, industrial tools and assembly solutions, and industrial vacuum equipment. Order volumes for the service business was unchanged compared to the previous quarter.

Geographic distribution of orders received

	Atlas Copco Group
July - September 2021	Orders Received, %	Change*, %
North America	24	+44
South America	4	+31
Europe	27	+27
Africa/Middle East	4	+10
Asia/Oceania	41	+47
Atlas Copco Group	100	+38

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

Sales bridge

	July - September
	Orders
MSEK	received	Revenues
2020	24 246	24 849
Structural change, %	+2	+2
Currency, %	-2	-2
Organic*, %	+36	+12
Total, %	+36	+12
2021	33 023	27 824
*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	Q2	Q3
2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021

Orders received, MSEK		Revenues, MSEK
Operating margin, %		Adjusted operating margin, %

Geographic distribution of orders received and revenues

July - September 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	22	21	23	21	31	31	25	28	24	24
South America	6	5	0	1	3	3	9	8	4	4
Europe	32	32	15	14	35	35	37	36	27	28
Africa/Middle East	6	6	1	1	1	2	8	8	4	4
Asia/Oceania	34	36	61	63	30	29	21	20	41	40
	100	100	100	100	100	100	100	100	100	100

Atlas Copco - Q3 2021

Revenues, profits and returns

Revenues increased 12% to MSEK 27 824 (24 849), corresponding to an organic growth of 12%. Currency had a negative effect of 2%, and acquisitions added 2%.

The operating profit increased 26% to MSEK 6 000

(4 760) and includes a change in provision for share-relatedlong-term incentive programs, reported in Common Group Items of MSEK -109(-101). Previous year's items affecting comparability also included restructuring costs of MSEK -160 in the business area Industrial Technique.

Adjusted operating profit increased 22% to MSEK 6 109 (5 021), corresponding to a margin of 22.0% (20.2). The higher profit margin was mainly due to the organic revenue growth. The net currency effect compared to the previous year was positive MSEK 50.

Net financial items were MSEK -55(-64) and interest net was at MSEK -71(-66). Other financial items, including financial exchange differences were MSEK +16 (+2). Profit before tax amounted to MSEK 5 945 (4 696), corresponding to a margin of 21.4% (18.9). Corporate income tax amounted to MSEK -1 388 (-1 078), corresponding to an effective tax rate of 23.3% (23.0).

Profit for the period was MSEK 4 557 (3 618). Basic and diluted earnings per share were SEK 3.74 (2.98) and SEK 3.73 (2.97), respectively.

The return on capital employed during the last 12 months was 27% (24). Return on equity was 30% (27). The Group uses a weighted average cost of capital (WACC) of 8.0% as an investment and overall performance benchmark.

3 (18)

Operating cash flow and investments Operating cash surplus increased to MSEK 7 285

(6 023). Net financial items and taxes paid amounted to MSEK -1 676 (-1 419). Working capital decreased by MSEK 77 (decrease of 1 707). The big difference compared to the previous year was mainly due to last year's strong reduction of inventories and receivables. Net investments in rental equipment were MSEK -147(-59) and net investments in property, plant and equipment were MSEK -513(-333).

Operating cash flow (important internal KPI, but not an IFRS measurement, and hence defined on page 13) reached MSEK 4 664 (5 143).

Net indebtedness

The Group's net indebtedness amounted to MSEK 9 649 (18 662), of which MSEK 2 530 (3 543) was attributable to post-employment benefits. The Group's interest-bearing liabilities have an average maturity of 4.3 years. The net debt/EBITDA ratio was 0.3 (0.8) and the net debt/equity ratio was 16% (33).

Acquisition and divestment of own shares

During the quarter, 968 397 series A shares, net, were sold for a net value of MSEK 561. 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 September 30, 2021, the number of employees was 42 066 (39 759). The number of consultants/external workforce was 3 854 (2 756). For comparable units, the total workforce increased by 2 768 from September 30, 2020.

Revenues and operating profit - bridge

		Volume, price,			Items affecting	Share-based
MSEK	Q3 2021	mix and other	Currency	Acquisitions	comparability	LTI* programs	Q3 2020
Atlas Copco Group
Revenues	27 824	2 945	-380	410	-	-	24 849
Operating profit	6 000	1 038	50	0	160	-8	4 760
	21.6%						19.2%

*LTI= Long term incentive

Atlas Copco - Q3 2021						4 (18)
Compressor Technique
	July - September		January - September
MSEK	2021	2020		2021	2020
Orders received	13 874	11 600	20%	41 178	35 534	16%
Revenues	12 792	11 890	8%	36 526	34 883	5%
EBITA*	3 174	2 799	13%	8 972	7 918	13%
- as a percentage of revenues	24.8	23.5		24.6	22.7
Operating profit	3 087	2 729	13%	8 733	7 693	14%
- as a percentage of revenues	24.1	23.0		23.9	22.1
Return on capital employed, %	94	75

* Operating profit excluding amortization of intangibles related to acquisitions .

• Solid demand, record revenues and operating profit
• Strong growth for all compressor types
• Continued growth for service

Sales bridge

	July - September
	Orders
MSEK	received	Revenues
2020	11 600	11 890
Structural change, %	+3	+2
Currency, %	-1	-1
Organic*, %	+18	+7
Total, %	+20	+8
2021	13 874	12 792
*Volume, price and mix.

Industrial compressors

The demand for industrial compressors increased considerably compared to the previous year. Large and smaller-sized compressors grew at a similar pace in the quarter.

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

Sequentially, the order intake did not reach the previous quarter's level, primarily due to lower demand in Asia and Europe.

Gas and process compressors

Order volumes for gas and process compressors increased noticeably compared to the previous year. Solid order growth was achieved in all regions except Europe, where order volumes decreased.

Compressor service

The demand for service increased and order volumes grew in all regions. Sequentially, however, the order intake was basically unchanged.

Innovation

A new range of oil-injected screw compressors, the Alup Evoluto 30-45kW, was introduced. The new products are available with fixed speed, variable speed drive, and permanent magnet motor to meet different customer needs. Customers will benefit from up to 7% more energy efficiency compared to previous models, lower noise levels, and a reduced surface footprint of about 10%.

Acquisitions

In the quarter, the business area acquired CPC Pumps International Inc., a Canadian company specialized in the design, manufacturing, and servicing of custom-engineered, mission critical centrifugal pumps. The company has 110 employees and revenues of about MSEK 385 in 2020. AEP, a French compressor distributor and service provider with 8 employees was also acquired in the quarter.

Revenues and profitability

Revenues reached record MSEK 12 792 (11 890), corresponding to an organic increase of 7%.

The operating profit increased 13% to MSEK

3 087 (2 729), corresponding to a margin of 24.1% (23.0). Increased organic revenues was the main explanation for the higher operating margin. Acquisitions affected the margin negatively, while currency had no impact. Return on capital employed (last 12 months) increased to 94% (75).

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	Q2	Q3
2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021

Orders received, MSEK		Revenues, MSEK		Operating margin, %

Atlas Copco - Q3 2021						5 (18)
Vacuum Technique
	July - September		January - September
MSEK	2021	2020		2021	2020
Orders received	10 782	5 736	88%	28 718	18 575	55%
Revenues	7 249	5 928	22%	21 277	18 622	14%
EBITA*	1 876	1 478	27%	5 605	4 521	24%
- as a percentage of revenues	25.9	24.9		26.3	24.3
Operating profit	1 748	1 354	29%	5 232	4 129	27%
- as a percentage of revenues	24.1	22.8		24.6	22.2
Return on capital employed, %	24	19

• Operating profit excluding amortization of intangibles related to acquisitions .

• Record order intake driven by strong demand from the semiconductor industry
• Solid growth for industrial vacuum equipment and service
• Operating profit margin at 24.1%

Sales bridge

	July - September
	Orders
MSEK	received	Revenues
2020	5 736	5 928
Structural change, %	+1	+0
Currency, %	-6	-2
Organic*, %	+93	+24
Total, %	+88	+22
2021	10 782	7 249
*Volume, price and mix.

Semiconductor and flat panel display equipment

The demand from the semiconductor and flat panel display industry increased significantly, and the order intake reached a new record level. The strong growth, year-on- year and sequentially, was primarily driven by customers' investments in new production capacity.

Geographically, and compared to the previous year, all regions recorded strong order growth.

Industrial and scientific vacuum equipment Order volumes for industrial and scientific vacuum equipment grew strongly compared to the previous year, supported by increased demand from most customer segments. Strong order growth was achieved in all regions.

Compared to the previous quarter, the order intake decreased, primarily due to lower demand in North America and Asia.

Vacuum service

Order volumes for service increased from both industrial customers and from the semiconductor industry. The growth was supported by the high utilization of customers' operations and previous growth of new equipment sales. Geographically, solid order growth was achieved in most regions.

Innovation

The business area introduced new variants of the Edwards iXM dry pumps with an extended applications coverage into areas requiring increased pump running temperatures within the semiconductor industry. The new products are smaller, lighter, and 30% more energy efficient compared to competing products.

Revenues and profitability

Revenues increased 22% to MSEK 7 249 (5 928), corresponding to an organic increase of 24%.

The operating profit increased 29% to MSEK 1 748 (1 354), corresponding to a margin of 24.1% (22.8). The margin was supported by higher volumes and currency, but negatively affected by increased costs related to supply chain constraints.

Return on capital employed (last 12 months) was 24% (19).

Orders, revenues and operating profit margin

12 000														60%
11 000														55%
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	Q2	Q3
201820182018201820192019201920192020202020202020202120212021

Orders received, MSEK		Revenues, MSEK
Operating margin, %		Adjusted operating margin, %