Atlas Copco : Quarterly Report Q4 2020

Press release from Atlas Copco AB

January 29, 2021

Atlas Copco

Interim report on Q4 and full-year summary 2020

Solid finish to a challenging year

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

• Order intake increased 1% to MSEK 25 868 (25 625), organic growth of 7%
• Revenues decreased 6% MSEK 25 738 (27 319), unchanged organically
• Significant negative currency translation effects from a stronger SEK
• Operating profit decreased 5% to MSEK 5 373 (5 627), corresponding to a margin of 20.9% (20.6)
• • Adjusted operating profit, excluding items affecting comparability, was MSEK 5 402 (5 913), corresponding to a margin of 21.0% (21.6)
• Profit before tax amounted to MSEK 5 293 (5 572)
• Basic earnings per share were SEK 3.45 (3.55)
• Operating cash flow at MSEK 6 459 (5 084)
• Return on capital employed was 23% (30)
• The Board of Directors proposes a dividend of SEK 7.30 per share (7.00) to be paid in two installments

	October - December		January - December
MSEK	2020	2019		2020	2019
Orders received	25 868	25 625	1%	100 554	106 104		-5%
Revenues	25 738	27 319	-6%	99 787	103 756		-4%
Operating profit	5 373	5 627	-5%	19 146	21 897		-13%
- as a percentage of revenues	20.9	20.6		19.2	21.1
Profit before tax	5 293	5 572	-5%	18 825	21 572		-13%
- as a percentage of revenues	20.6	20.4		18.9	20.8
Profit for the period	4 196	4 331	-3%	14 783	16 543		-11%
Basic earnings per share, SEK	3.45	3.55		12.16	13.60
Diluted earnings per share, SEK	3.44	3.53		12.14	13.59
Return on capital employed, %	23	30

Near-term demand outlook

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.

Previous near-term demand outlook (published October 22, 2020):

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 - Q4 2020

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Summary of full-year 2020

Orders and revenues

Orders received in 2020 decreased 5% to MSEK 100 554 (106 104), corresponding to an organic decline of

5%. Revenues decreased 4% to MSEK 99 787 (103 756), corresponding to a 3% organic decline.

Sales bridge

	January - December
	Orders
MSEK	received	Revenues
2019	106 104	103 756
Structural change, %	+3	+3
Currency, %	-3	-4
Organic*, %	-5	-3
Total, %	-5	-4
2020	100 554	99 787
*Volume, price and mix.

Orders, revenues and operating profit margin

120 000									30%
100 000									25%
80 000									20%
60 000									15%
40 000									10%
20 000									5%
0								0%
2010* 2011* 2012* 2013* 2014* 2015* 2016*	2017	2018	2019	2020
			Orders received, MSEK		Revenues, MSEK
			Operating margin, %	Adjusted operating margin, %

Results and cash flow

Operating profit decreased 13% to MSEK 19 146 (21 897), corresponding to a margin of 19.2% (21.1). Items affecting comparability amounted to MSEK -852(-780), whereof the change in provision for share-relatedlong-term incentive programs, reported in Common Group Items, was MSEK -312(-663). Other items affecting comparability includes MSEK -330 related to restructuring costs in the business areas Vacuum Technique, Industrial Technique, and Power Technique. In addition, another MSEK -210 was related to a provision for settlement of a pension dispute in Edwards Ltd (Vacuum Technique), dating back to before the acquisition of Edwards Ltd in 2014. Adjusted operating margin was 20.0% (21.9). Changes in exchange rates compared with the previous year had a negative effect of MSEK 880 on the operating profit. Profit before tax amounted to MSEK 18 825 (21 572), corresponding to a margin of 18.9% (20.8). Income tax expense amounted to MSEK 4 042 (5 029).

Profit for the period was MSEK 14 783 (16 543). Basic and diluted earnings per share were SEK 12.16 (13.60) and SEK 12.14 (13.59), respectively.

Operating cash flow (important internal KPI, but not an IFRS measurement, and hence reconciled on page 15) before acquisitions, divestments and dividends reached MSEK 18 910 (14 625).

Dividend

The Board of Directors proposes to the Annual General Meeting that a dividend of 7.30 (7.00) per share to be paid for the 2020 fiscal year. Excluding shares currently held by the company, the proposed dividend corresponds to a total of MSEK 8 878 (8 506).

In order to facilitate a more efficient cash management, the dividend is proposed to be paid in two equal instalments, the first with record date April 29, 2021 and the second with record date October 25, 2021.

Personnel stock option program

• 2010-2016figures are best estimated numbers, as the effects of the split of the Group and restatements for IFRS 15 are not fully reconciled.

The Board of Directors will propose to the Annual General Meeting a similar performance-basedlong-term incentive program as in the previous years. For Group Management, participation in the plan will require own investment in Atlas Copco shares. It is proposed that the plan is covered as before through the repurchase of the company's own shares. The details of the proposal will be communicated in connection with the Notice of the Annual General Meeting.

Atlas Copco - Q4 2020

Review of the fourth quarter

Market development

The overall demand for Atlas Copco's products and services improved both compared to the previous quarter and the previous year. Year-on-year order growth was achieved for both equipment and services and in all regions except North America, where the order volumes decreased slightly.

Order volumes increased for industrial compressors,

while orders for gas and process compressors did not reach the previous year's high level. The order intake for vacuum equipment grew, supported primarily by increased demand from customers in the semiconductor industry, but also from other customer segments. Order volumes for industrial tools and assembly solutions to the automotive industry increased compared to previous year's low level, while orders from other segments decreased. The demand for power equipment such as portable compressors, generators, and pumps increased.

The service business grew in all business areas except Industrial Technique. The specialty rental business decreased compared to the previous year.

Geographic distribution of orders received

	Atlas Copco Group
October - December 2020	Orders Received, %	Change*, %
North America	22	-2
South America	4	+33
Europe	31	+8
Africa/Middle East	6	+20
Asia/Oceania	37	+14
Atlas Copco Group	100	+9

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

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Sales bridge

	October - December
	Orders
MSEK	received	Revenues
2019	25 625	27 319
Structural change, %	+2	+2
Currency, %	-8	-8
Organic*, %	+7	+0
Total, %	+1	-6
2020	25 868	25 738
*Volume, price and mix.

Orders, revenues and operating profit margin

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
2018	2018	2018	2018	2019	2019	2019	2019	2020	2020	2020	2020

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

Geographic distribution of orders received and revenues

October - December 2020	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	21	20	20	18	29	30	22	23	22	22
South America	6	5	0	1	2	2	8	8	4	4
Europe	37	36	14	15	40	40	38	38	31	32
Africa/Middle East	8	7	3	3	1	1	10	8	6	5
Asia/Oceania	28	32	63	63	28	27	22	23	37	37
	100	100	100	100	100	100	100	100	100	100

Atlas Copco - Q4 2020

Revenues, profits and returns

Revenues decreased 6% to MSEK 25 738 (27 319), with a negative currency effect of 8%, but was unchanged organically. Acquisitions added 2%.

The operating profit decreased 5% to MSEK 5 373

(5 627) and includes a small change in provision for share- related long-term incentive programs, reported in Common Group Items of MSEK -29(-221). Previous year's items affecting comparability also included a restructuring cost of MSEK -65 in the business area Industrial Technique.

Adjusted operating profit decreased 9% to MSEK 5 402 (5 913), corresponding to a margin of 21.0% (21.6). Currency and dilution from acquisitions were the main explanations for the lower margin.

The net currency effect compared to the previous year was negative MSEK 590, mainly due to the weaker USD.

Net financial items were MSEK -80(-55) and interest net was MSEK -43(-67). Other financial items, mainly financial exchange differences, were MSEK -37 (+12). Profit before tax amounted to MSEK 5 293 (5 572), corresponding to a margin of 20.6% (20.4). Corporate income tax amounted to MSEK -1 097 (-1 241), corresponding to an effective tax rate of 20.7% (22.3).

Profit for the period was MSEK 4 196 (4 331). Basic and diluted earnings per share were SEK 3.45 (3.55) and SEK 3.44 (3.53), respectively.

The return on capital employed during the last 12 months was 23% (30). Return on equity was 27% (35). The Group uses a weighted average cost of capital (WACC) of 8.0% as an investment and overall performance benchmark.

Operating cash flow and investments

Operating cash surplus increased slightly to MSEK 6 858 (6 684), despite the lower operating profit. Net working capital decreased by MSEK 1 182 (decrease of 199) in the quarter, mainly due to a reduction of inventory. Net investments in rental equipment were MSEK -89(-267) and net investments in property, plant and equipment were

Revenues and operating profit - bridge

4 (20)

MSEK -373(-88). Previous year's net investments in property, plant and equipment included proceeds from a sale and lease back transaction in the US of approximately MSEK 400.

Operating cash flow (important internal KPI, but not an IFRS measurement, and hence defined on page 15) reached MSEK 6 459 (5 084).

Net indebtedness

The Group's net indebtedness increased to MSEK 16 421 (12 013), due to the recent acquisitions, but partly compensated by the strong cash generation. MSEK 3 488 (3 488) of the net debt was attributable to post- employment benefits. The Group's interest-bearing liabilities have an average maturity of 4.8 years. The net debt/EBITDA ratio was 0.7 (0.5) and the net debt/equity ratio was 31% (23).

Acquisition and divestment of own shares

During the quarter, 256 136 A shares and 8 899 B shares, net, were sold for a net value of MSEK 114. 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 19.

Employees

On December 31, 2020, the number of employees was 40 160 (38 774). The number of consultants/external workforce was 2 907 (3 225). For comparable units, the total workforce decreased by 944 from December 31, 2019.

				Items affecting
		Volume, price,		comparability and	Share-based
MSEK	Q4 2020	mix and other	Currency	acquisitions	LTI* programs	Q4 2019
Atlas Copco Group
Revenues	25 738	-56	-2 080	555	-	27 319
Operating profit	5 373	89	-590	55	192	5 627
	20.9%					20.6%

*LTI= Long term incentive