Atlas Copco AB

Hans Ola Meyer - SVP Controlling and Finance Ronnie Leten - President and Chief Executive Officer

Klas Bergelind - Citigroup Guillermo Peigneux - UBS Markus Almerud - Kepler Cheuvreux Lars Brorson - Barclays Capital Andre Kukhnin - Credit Suisse Andreas Willi - JP Morgan Peder Frölén - Handelsbanken Capital Markets

Thank you. My name is Hans Ola Meyer.

I am the CFO of the Group and I welcome you all to this Atlas Copco second quarter conference call. Today me and our CEO, Ronnie Leten are calling in from the center of compressed air in the world, i.e.

Antwerp in Belgium. I also have to say that whilst we are on the second quarter conference call, our thoughts go to the victims of the dreadful acts in Nice last night.

And as we have airports and flights to catch after this call and considering the security increases that might have happened I am sorry to say that we have to finish sharp by 4 o’clock today and that means that I would again urge anyone that pose us question to restrict to one question to allow time to a few more people on the call that would be very helpful. And our IR department led by Mattias Olsson will do everything they can to cover up for the remaining questions after the call.

So with that, I will immediately handover for the first comments by Ronnie on the sales and results of the first quarter – second quarter, sorry.

Yes, first quarter we had a couple months ago. So welcome all to the call and as Hans Ola already indicated I will go through and try to maybe already preempt some questions so you can really specify on one.

Q2 we can say, coming back to the last two, three quarters maybe a bit the same view with one exception that I see the overall industrial businesses we have that had a solid development and we saw and maybe for those who have been following Atlas Copco very closely, they saw that we also had record orders for Compressor Technique as well as for the Industrial Technique which I think is something to mention. But on the other hand we also have another part in our Group and that’s the mining and construction demand and that compared to last year was weaker.

Although, I have to say if you look sequential we saw a better mining and rock excavation business if you take it sequentially. When it comes to operating margin, sequentially an improvement.

I will also elaborate a bit later and again if you look to the different business area where the sequential improvement is is [MR] [ph], that is the main takeaway and other three business areas have done compared to previous time at a good solid development level. Operating cash flow was at solid level, so also every business start that worked on reducing the working capital.

So to summarize, I can say I'm pleased to - reasonable pleased with the order development and of course it can always be better, but I see that the focus on one hand on good innovation, so that really creates productivity for our customers, so new products they give good return and I will elaborate also a little bit when I talk about the different business areas, so I am very pleased to see that hard work in silence is paying off and that is always good that you – yes, when you lead the Company that also is giving results. So that I think is the summary.

If we look to the figures, the next Slide heading is the figures in summary. Yes, you can see the figures it's rather straight solid development, operating profit close to MSEK4.8, so that – and adjusted even a little bit more so.

And soft 19%, I can say if we take it as it is, so that giving also the currencies and some of the items affecting comparability in line of where the business is cruising to date and Hans Ola will elaborate a bit more on when he looks to the flow through bits on the currency. When we look now to the next Slide where we see the different regions and I will start maybe best with Europe, you see a zero, of course it again – if I took it from an aggregated level, solid industrial part, mining bit down and that this mining, construction and because that's where that part is headed under and then we had a challenging comparison for Construction Technique as we had last year record order income on that part.

So it means, yes, an okay Europe I would say. If we then go to Asia where I can say that all countries were at the good level, where India was maybe the leading performer where all business areas were very strong in India.

When we talk about China, we still see a very solid Industrial Technique, we had an okay Mining and Rock Excavation, a bit softer construction and on Compressor Technique it was solid. We have a very solid Compressor Technique in China.

We have exception on the gas and process units, so the larger units were softer, but you know these I’ve been seeing now for three, four years, so the business is getting relatively smaller and smaller, so it will have less and less affect on our figures, but anyhow a good Asia. We will then go to the other side of the world and I go to North America.

Before I go a little bit more in detail I would like to give a comment on the minus five which you say what is this. There I would have to say that we have a negative effect and it's mainly in U.S.

in this period due to orders from say one big international customer or two big international customers in which now the reporting is of the – the sale is done in different countries in the world. And so if we correct the figures or adapting it is better to say because the figures are correct, but if adapting the figures for that reporting of that sales then it is a slight negative, so it's not the minus five, but then you have a slide negative point to that.

So – but if I give a bit of reflection on North America, we had a very solid development in the industrial business; again I think the service business was very strong. The small units, the small-to-medium sizes were also at the good level and remember that last year quarter two was still the quarter before the oil crisis, so it was still a very solid month is only next quarter when we do another type of comparison.

We had also a very solid construction so that was doing fine in North America, but unfortunately mining was rather weak in that region. If we then go to South America, of course we all know Brazil is a tough environment now.

There are a couple of positive spots in Brazil, it's not that it is that dead. But we can say that the business is rather difficult challenging in that area.

And then we go Africa, Middle East where I can say of course overall mining weak with maybe a couple of good spots here and there and of course when it comes to Compressor Technique which is then one of the bigger players there and specially in Middle East it was a rather tough environment in that area. So overall we could say maybe that this price take away is that I see a solid Asia and that is good and the industrial part is in Europe and North America at a good level.

Then I would like to go to the next Slide, where we have the Order Growth. I will skip that one.

We go to the Sales Bridge straightforward figures where you see that the volume in orders is slightly down, price is zero which is slightly positive, but of course we don't report after the comma, and then we have structural change with a couple of acquisitions which we had in the quarter. Then I would like to go to the Slide heading Compressor Technique, so the comments per business area.

And here we see an order intake; I said it is record order intake. As I mentioned already an organic growth that is fantastic to see a very solid service business, very stable order income for vacuum and compressors, so that this continue to do a good development and you know if we then and go to elaborate a bit on the gas and process is the largest one which were still soft and then of course Asia had very good development where India was the champion of the quarter.

Margin very rocksolid, margin is good to see that as a clean good result close to the 23 and that’s even included the vacuum business, so very good result. And acquisitions, we are very pleased to see also a couple of days ago that we got the last approval from the authorities, so we will now prepare for all the closing of the deal and that is expected to take place, yes, we can say opening in the first of September where we will have labeled under the belt.

I think when it comes to acquisitions we had a couple of small distributors and also we had another Company in Germany, Schneider which we acquired during the quarter. So summarize a very solid Compressor Technique and Vacuum business, so very well done from the team.

Industrial Technique, I also here - remember also you – most of you on the phone were a bit concerned about what is going to happen last quarter because we had at that time a negative organic growth, but where I try to explain that we were comparing with a very big order in one of our businesses which you don't get every quarter, but that the trend is still solid and you see also hear a very solid growth, so the trend continues and it's mainly in the automotive and coming of course from new products overall. So a very solid overall business in Industrial Technique also in the Service business it works fine and the margin I think was a good rocksolid 22 plus margin of course if you compare to last year you can see a little lower of course you have a bit of effect of a bit of currencies but on the other hand and it's a bit of product mix where we sometimes have bigger projects where gross profits are slightly down it's not that they're bad but of course in the mix it plays that - it was definitely in line of my expectation.

Mining and Rock Excavation, so here we see a slight decrease organically. Still I call it a weak demand for equipment.

So it's maybe the new norm, which we have to accept service business sequential stable year-over-year a little bit down. So that it's good to see also that there are no further mines closed at least not where we are involved because that’s the ones we are tracking.

So that stayed flat and then also it's good to see that our consumable business is year-on-year is stable which is I think is a very good achievement. And that's also mainly coming from our new products, which we bring into the market which makes yes a good sales as this market is of course a bit under pressure by of course lower volume from before and of course and competition plays.

And the only way to work in this is to work with innovation. The margin up sequential we are not there where we all like to be, but like I used to say I am very happy, but of course not satisfied.

But I really see that the team is working let's say like hell to prove that they can do it and so it's great I was very pleased to see that they bend to trend and did not except the margins which they had in quarter one but definitely now came with a good solid 17%. So let’s see what will come in the next quarter, but it's good to see is extremely pleased to see that effect how quickly they can really react on that.

But of course unfortunately or fortunately we still have the possibility to increase the efficiency and which will keep doing. Construction Technique, so we compare with a very solid quarter last year so we should not forget that so that makes the comparison tough.

We got lower demand for some equipment in some areas like you see Brazil, Africa, China was weak, so it hits of course then the topline, but on the other hand we saw some growth in North America. So that is good and the margin is at reasonable level because we also know all of us that we would like to see that a little bit up, but of course with the pressure on the under absorption in certain areas it is not so easy to do.

So there we are. Then I will go to the next slide, where we have the P&L and I think the figures I have already commented on that and I think I will hand over to my colleague here Hans Ola explain everything about the currencies and the text.

I will try to keep it so that we have some time for questions as well. I think that apart from the operating profit development that Ronnie has already covered pretty well then we have as you have all seen probably that the financial net became much more negative than last year; we had minus 350 roughly against minus 220 last year.

And the main reason for the difference in that is not so much the interest costs as you could see from the report, but it's other financials and what is that. Whether the majority of that is that we in the second quarter bought back some of our 2017 maturity bonds from the market and that carries a negative one-time effect, which we then recover if I use that word every month following that by paying a lower interest rate on new borrowing, so that was the majority.

The balance or the rest of the negatives were primarily devaluation effects and actually including also some negative effects from the Brexit or let's say the Brexit effect on the pound. So things that should not be repeated, if we look – hopefully if we look forward to the next quarter and so I think that net of interest net of around slightly more than MSEK200 is probably a good expectation or thereabouts at least.

If we then go down further, we come to the as normal to the tax cost which is significant cost of course and you can also see there that just as in the first quarter we have the same type of effect of the big Belgium tax issue that we have where the EU has declared that the profit treatment in Belgium is not inline with the state-aid rules according to the EU. The Belgian state has appealed that decision.

We have done as well as we wrote in the report, but until we have those things declared and settled we will have to see that our tax rate will probably over in this area between 27% and 28% is our best estimate at the time. If we look at the earnings per share I think with these one-time, if I call them right, left or unplanned one-time negative effects on the financial net, it probably would be better to talk about the 270, 275 earnings per share the underlying number for this quarter.

I will come back to the tax of Belgium later on when we look at the cash flow statement. Next Slide which I think is number 13 is showing the Profit Bridge and it's not – it's pretty straightforward on the group level.

As you can see we have a negative effect of provisions for long-term incentives or options, we have a big negative from currency and we don't have as last year any restructuring that in the same way that we had in the second quarter which then helps us in this bridge it becomes a positive explanation there, but otherwise you can see that by and large the currency is what we have lost in terms of profit. If we look by business area on the next Slide, again not any dramatic revelations from this slide really.

There is a flow through whether it's a positive flow through of increased revenues as in CT the same, but negative in MR and construction technique, but it's understandable ratios I would say. And then of course you also see that for this period we don't have very much help from the acquisitions in terms of margins, but that can sometimes be with the effect of right depreciation of intangibles et cetera which weighs quite heavily in the beginning of acquisitions.

But otherwise I think I leave that slide and I will talk a little bit about the balance sheet on Slide 15. Actually lot and lot to comment, you can generalize it a little bit and say that compared to last year it's basically the cash that is – it’s a little bit more than from June last year and if you compare with December the beginning of the year it’s actually the late deterioration of the Swedish Krona in the last part of second quarter that that really explains it I would say then we have to translate foreign currencies to a higher number and that basically explains the difference with December.

I move on to the cash flow and as I alluded to before let us get that off the table right where you see a huge tax payment in the second quarter, but you also see further down in the table that since this is not really at all any operational flow, we adjust the operating cash flow for this tax payment in Belgium. One question you could have is of course that why do you pay if you are appealing?

Why are you – then almost accepting the payment, no we don't, obviously we pay, because in that way we can stop the charging of interest cost because of course we can never be sure about the outcome at the end of the day and that might take quite a long time until we know what the verdict from the appeal will be. And in that meantime we would like to stop the clock from interest charges and that's why we have paid it to an escrow account as it's called.

The other things in that - is that we released good money from the working capital which compensated basically for the lower profit that you can see from the operating profit level compared to last year and some other minor changes in the cash flow, but a solid BSEK 3.5 and I think with the level of profit that we have right now we are pleased with that. So with that, I leave it to Ronnie for the outlook.

Yes. So the real sentence as you can see it remain at current level that's at least at the moment, but what we see and it's mainly you can say if I make a bit remarks on that outlook solid industrial development what we expect and then of course a bit unpredictable mining which is for me still not really transparent enough that today where will it really be the next quarter and then nothing called so and as a bit maybe the same also on the construction side which is partly also influenced by some of our businesses in the rents or when – or exposed to oil and gas.

And by this, I will hand over to the questions.

Yes. So please operator could you just give the final instructions and then we'll kick off the question-and-answer session.

Yes, hi Ronnie, hi Hans Ola. It’s Klas from Citi.

My question is on mining, South America, Australia is now doing better, it’s also interesting to see that consumables are bottoming and that’s typical leading indicator for CapEx. We know about the large order with BHP, but could we talk a little bit about quotation activity, when you guide for flat demand I assume that you see flat demand for mining as well.

We're thinking why can't mining move higher here a bit quarter-on-quarter given the increases we see in commodities?

Yes, I think you’ve heard my outlook a bit, where I say the – I call it a bit unpredictable part of the mining, because there is definitely activities on the mining, it's not that they stand still there is quotation level, but of course the decision process is not the most – not the quickest one, so that is the reason why I am a bit more reluctant to sound positive in that area, because why someone taking so much time to take a decision because he is also uncertain. So that is the underlying part what we see and that is also what we got here in Australia, because we see mines more and more focusing on automation, remote running the machines.

So that is really an activity where we spend a lot of time and also our competitors spend time on that. But into the consumables, I try to explain a little bit that you don't read too much out of it.

I think we did a good job, I think with new products of course you can also be the positive guy and say yes, I think the volume is going up and there is more, but I would not go on that although if you see the activity levels and the volumes are not low. What is happening is and that we see some and that I have mentioned many times and then you also – if you follow the mining you see some mines closing, so there is movements going on, but on the other hand that the most productive ones they are doing good output.

So it's a matter of us to see that we're on the right place. So there is a lot of movements going on not only on the service side, but also in the consumer business.

And there again, it’s innovation, new products is the answer to compensate for that.

Can I ask a very quick follow-up? On the industrial compressors in China which is now improving.

This is one of the first signs where we see industrial demand increasing in China outside of construction improved housing starts et cetera. Ronnie, do you think you saw the momentum here into the second half, or is this just a couple of large orders booked in the quarter?

Yes, if I listen to say the guys and the girls on the ground and they sound less negative on China. And again I’m really trying to pick my words not to bring you a really an excitement, but I think it is less negative let's call it like that.

I’m not calling to be over positive, but there is some development on the industrial side in certain sectors, and that is what we have been working on. There is also a lot of self-help and that we started to be more aggressive with our innovation what does it mean the time to market.

We spent a lot of work in China to accelerate our innovation and our product offer and that also has brought some success, so I'm very proud on the organization that they were doing that. Unfortunately what we still see is the big pick is the gas and process, it is still low, but like I said in the beginning it gets – it is already going down now for two, three years, so it gets smaller and smaller so it becomes less and less significant.

Thank you, Ronnie.

Hi, good afternoon. It’s Guillermo Peigneux from UBS.

I wanted to ask a question regarding actually Construction Technique. It is actually a number of quarters now that we see with volumes obviously on weak market conditions, but also positive pricing.

To be honest the margins holding up at a good level, is this the case that this is probably only – you are willing to lose market share, so to say, in order to keep profitability in this business as we speak?

Yes. I think one is when [indiscernible] – holding up the margin is also in some of the divisions they have done a lot on two things on – they did a couple of restructuring and that I think also if you look back in your notes last year we closed two plants, so that of course has to click in I think also a couple new products which we launch, which we also presented at BOMA which took place a couple months ago.

So that is the positive side, while as the negative side I think it's still tough in road construction. We know Brazil, Australia, Russia, Middle East I think it’s a very, very low activity and of course that bites unfortunately for these guys.

And then I hinted a bit when I was explaining on the geographical part that the specialty rental and then the Middle East was tougher. So you had a couple positive and a couple negative part and this is a little bit different than that they cannot show even a better result if they didn't get this road construction and specialty, with that seem even a better profitability, but it is what it is.

Thank you. Really tiny brief follow-up.

The autonomous mining order I guess in the future when you see many more of this I was wondering about whether you could guide us to the size of the tickets on average going forward or in the past or some kind of reference for us to understand?

I hope that the future is for all of us in the business because that is I think definitely the new productivity which we can create as equipment provided not on the Atlas, but also our colleagues in this business, because that is the new one, that’s the future of the mining, the mine of the future because less and less people, more safe, so more productivity that will take. But these tickets they can go from let's say from half a million to a couple of million dollars depending on how the customer is releasing the upgrades if we think about upgrades, because this order was definitely I call it the mid-life upgrade of different machines, but you also get the new machines which we are going to sell.

Most of them have already got this facility in their – yes, embedded already. So I'm sure within a couple maybe one to two years we even don’t talk, bit longer, but maybe three years we will not talk about that specifically because it becomes new normal.

It's a good momentum for equipment providers like us and also for service providers because that creates new opportunities for the mines themselves.

Thank you very much.

Thank you.

Hi, I’m Markus from Kepler Cheuvreux. To continue in mining I was very happy I could say to see the margin bounce back, but there was also a pretty big bounce.

So can you explain a little bit what went on here between the quarters and just try to understand what kind of direction we should see in coming quarters. So was there a lot of mix here I mean we saw consumables and the sales being weak in the first quarter and then stable in this quarter, so if you could just explain the different parts of and the different drivers?

Thanks.

We got because you're talking bounce back sequentially of course.

Yes, exactly.

Yes. No doubt we had a better currency situation, thanks primarily what happened at the end of the period so to speak.

But we had a particularly weak dollar in the beginning of the year and that straightened out and it even improved at the very end of the second quarter due to the Brexit. So that is clearly a big reason for the – across the business areas, they’ve all been favored by that.

The rest is of course that its volume related because we do have significantly higher revenue in the second quarter. However, on that point it's not the huge impact on the margin because when it swings like that you normally get much more of equipment sales and of course the ratio between equipment and service and consumables is normally quite important to – for the total overall margin of the business.

So in short, it was primarily the effect and let's agree on that that this is not going from 14% operating profit to 20%, so it’s relatively small improvements, very positive as you say, but as it is about the percentage point to be honest and most of that comes from the currency help actually and the rest is the volume component.

Okay, perfect. And then if I can just ask it do you have a question in a different way, if you would have stripped out automation order, the autonomous automation order would you have still grown the equipment order sequentially?

In where? Do you…

In MR.

In MR? Well, I mean we mentioned this order because it's a significant important order I mean it's not that it's a huge order and right off the top of my head I didn't do the numbers of that.

So I can’t say, but the reason primarily we mentioned it is of course we think it's a significant indication of what will come in terms of progress and interest that’s when we alluded to before. So – but I don't have it.

It would not make a huge difference on the global basis, obviously not.

Okay. Hans, thank you very much.

Thank you.

Thanks very much Hans Ola and Ronnie. Can I just follow-up on the mining consumers and sorry to belabor the point, but can I just understand Ronnie what it is you're saying around the underlying demand trends on consumables and mining aftermarket more generally, obviously it's the first time in three years we're seeing consumable stable year-over-year improving quarter-over-quarter.

I understand you had to put that down lastly to market share gains given product introductions here? Can you talk a little bit about what you see in terms of the market trends and also perhaps through the quarter whether you saw any change to trend sequentially during the course of Q2?

Thanks.

Yes. I didn’t see on the trend in the quarter, I didn't see much difference say in that part than of course it's not always easy to look if you really want to – to try to make a conclusion out of the topline development in a certain sector.

If you take the new product launches which we have taken and you get a boost from that part and that is what I try to – and I'm not trying to talk it down, I'm only try to say what I see and my conclusion. I don't see a real, real trend break, it of course there is positive – more positive measurement and when you look to the quotations people are really trying to do that.

I think they know what to do. There is also more clarity which mines are closed, it’s more an execution level, there is less uncertainty on that part.

That's for sure and that is good because that means that you know which projects will go through or which works will they do and ones which they will not do where before maybe six months or even 12 months ago, you never know because there were more rumors okay this mine will be closed and that will be done. I think that is more or less.

I'm not saying that it comes to an end, but that's more clear and business needs clarity, because then people can take initiative then orders are coming then that people start to work on efficiency and that is what we see today. But I'm not calling to support last till to say that, okay, now so the lead to whole consumable business is going up, because there is much more volume.

But it says is definitely that the volume has not dropped and that this will sure, so which is maybe really good news. And on the other hand even if they buy new products, innovative products it means also that they need that, but there are also means for us most likely that we gain some share in certain areas, but of course the difference - sequential difference is not huge.

I think it’s – yes, because it's slightly flat, you can say slightly positive flat.

I think just to be clear, sorry, is your outlook into Q3 predicated on a continuation of those trends, are you not a down quarter in services as you see it now and again to me are certainly big surprise to see two down quarters and services.

Yes. I think I'm really on service seeing a sequential flat – I think also the consumables would see how successful.

But my big question marks, my uncertainty sits in equipment and that can shift, because there you don't see a real continuity yet and I explained that I think in one of the first questions we got this morning here or this afternoon here. So that makes – my visibility on that although we have quotations, we have discussions and all that.

Yes, it's only when the plans that we are really happy.

Thanks.

Thanks Lars.

Yes. Good afternoon.

Thanks very much for taking my questions. Can I just start with industrial side and come back to maybe slightly broader picture that you’ve now – I think reported sequential growth in four out of four industrial segments across CT and Industrial Technique.

So can you take a step back and can you tell us how much that is just normal seasonality or is there actually underlying improvement do you seeing and if there is underlying then is it market so is it your share gains?

Yes, thank you. I think it is at least improvement where maybe sounds a little bit more conservative to the previous question from Lars on the mining side.

I would say – I would go on the other side for the industrial part because I see some still good activities in Europe I see in U.S. I see booming in India.

I think and not so weak Russia and I think I see some good spots in Asia and then more specific in China and Korea and that counts for compressors, counts for the vacuum and counts for the industrial technique. Is it really growing no we really entering into double-digit growth no, no that definitely I don't want to say that and I don't believe that, but there we saw some growth where we had before a bit topper of course when you look to our figures and again bigger tickets are also part of our business and that drags it down.

And okay if they were good, were part of the Atlas Copco’s business if they are better also part of the Atlas Copco business. So that if I think the - but I use to say my yellow canneries and median small to medium size and also the tools business I think as the positive – reasonable positive development.

It all depends a bit, you have still some negative there because if you take South America it's tough we all know about Brazil which is a big market and we should not underestimate it is also a big market for us because we have a strong market share there so that market drops, yes you get a double dipper.

Very clear, interesting. Thank you.

Can I just follow up on the MR mining margin improvement Hans Ola you said FX but year-on-year in the bridge I think FX is the same impact in Q2 versus Q1. So could you clarify how that made a positive contribution because we obviously all very keen to find out whether there is still a further curve there with new managements making progress towards that 18% I think that was mentioned before i.e.

are we getting there earlier was there really something that was in Q1, that it was exogenous and helped.

I mean now with a report in Q2 at 2017 of course it is more Q1 that stands out and Q2 if I put it that way if you look at the most recent year of margins and what I meant was not related to the year-on-year bridge because there as you say there is from the margin impact not so it's negative for MR clearly negative year-on-year. Sequentially was what I was talking about and there it has been a help for all business areas including MR, but they also have the effects of self-help and some revenue impact also from better volumes in the second quarter, but we should not boost ourselves and say it’s a fantastic profit quarter if we wouldn't have had some better currencies than in Q1 it would have been a little bit lower margin.

So we have to be honest and so it has helped also the MR improvement, but to say that it's just a fluke and then we will fall back again that's not our - that's not our projection either.

So the ship is not yet in the harbor?

No more to do.

Very good, thank you very much.

Thank you.

Yes, good afternoon, Ronnie and Hans Ola. I have a question on label which we now start consolidating in the second half may be you can provide us a bit of an update on the business in terms of what do you see from the impact on the financial as well, in terms of at any integration costs or [indiscernible] amortization we should be aware of for the second half.

And I don't know whether you can provide us some kind of update on where the business stands at the moment as it joins your group?

Yes. So of course before all this release of the antitrust authorities I think we got all the selective data and because we have – because you should know we were competitors until a couple days, so that is one thing.

So we not always have – we were not allowed to do that to get all the details on that part. So then when I talk you should take that into account.

Now when we look to topline, the industrial vacuum where they are in it and that was also during the sales process. Last year we saw that there was a soft development, although of course a seller likes always use to do up selling, but of course we have to do our work and due diligence in a proper way and knowing the market today we have made all those assessments, so it is more or less inline of our assessment, but we made whatever 12 months ago or something that we worked on that, but it's still that business is still on the soft side.

And when we comment on vacuum you have to remember that we have a large share of semiconductor exposure in vacuum which has done very well and they don't so.

Yes. And the high vacuum and all that part, so there is – of course there are businesses which are good in the vacuum and in the business which are a little bit soft in the vacuum.

So that is on the level the topline and when it comes to the bottom line and of course we will come to that later on a bit more detail, but I can already say that from a profitability point of view that you should not expect too much from it this year, because you know we will have to do some integration cost and all type of work that needs to be done. And I prefer to take that the sooner the better, because if you just take all the rebranding we need to do, if you just take an example, yes, that's a cost that comes and yes, that goes with the transaction and we have to take it over the P&L and we take it.

So this year don't expect too much, we will – I think within a couple of weeks we will have all the details and then we will also make sure you will get a bit more information from IR which they will then bring on that one, so that is to do that. We are doing, because like I said the rebranding is in the area which we will do then you have a couple of people here and there, so that…

It’s not rebranding in the marketplace let's say – that we are getting rid of over the part of their branding, so to speak of that.

Yes. The only combination of that – we are not allowed to use the early come so - that you will get within a couple of weeks if you allow Mattias is sure as he is also chasing everybody and because he wants to provide you with all the data because he knows he will get the questions and we will make sure that you get them as soon as we have them our self in detail.

And we can repeat for everybody that this is of course coming into the group then as of September 1 as we said and we will try to help you. Overall, given what Ronnie said on the topline comments, what we have guided when we bought the business from a profitability point of view, we shouldn't expect that they are running at very different performance levels by and large, but we will update you as Ronnie said a little bit more come into the third quarter.

Yes.

And in terms of the follow-up just on the mining margins, again if I look sequentially the revenue increase and the profit increase it seems to be mostly explained by operating leverage, so should we therefore assume then the cost savings you talked about in Q1 to mainly only help in the second half?

Yes. I think you know, of course Hans Ola has explained a little bit that of course some of this is held by currency, we do that of course and Andreas you have heard me talking straight last quarter of course internally the guys have taken activities and measures and adopting the suite and making sure, okay we make priorities on profitability because I felt that we were running in the wrong direction, so we had to do other type.

The biggest help came from – partly from current season, the rest still need to come that the self-help harvesting is in process.

Thank you very much.

Thank you.

Yes. Can you hear me?

Yes.

Yes. We are there.

Thank you. So I need to ask on the guidance again, I'm sorry about this, but I mean as I look at its acquisition contribution will increase quarter-on-quarter, the FX negative impact might diminish a bit also and we see some positive signs.

So what you need to have a slightly better demand in Europe. I mean that's really the question how much room do you actually have.

I figure that it’s wise to have a sort of a steady demand on your outlook, but the fact is the demand was organically four percentage point that’s a quarter-on-quarter in Q2. So could you please again just give us the reason why we shouldn't expect more to come?

Yes, Peder if we were only having let say the small-to-medium size compressors the vacuum and the Industrial Technique, you will sign immediately have called together with your hinting hey guys where you are not more positive. And you heard me talking and even in our title when I start talking about that we see the industrial part.

Yes, I see more positive part also on the service side activity, because we see the utilization of the equipment which is at the good level, so we see China with a couple of – we see new products. Yes, I think [Ronnie] will be a bit more positive.

Yes, I agree. The thing is where I am still uncertain is on my construction and also on the mining a Rock Excavation which is – I have less confidence that will really take of like we all hope for, so that breaks it down.

So I have an organization where on one hand, my left hand this is happy and my right hand this is concerned and two together which is sometimes good to have as a business. But of course if I want to make it in one line and aggregated let say, yes, I have to make my confession and then I say it is flat.

And for a short period ahead like the near-term outlook, it’s of course not the case that we expect big differences and then it becomes almost rolling the dice to indicate a slight up or a slight down you see what I mean, so that's why I’m going to stick with an unchanged.

Yes, you should also see it, I think and minus one to plus one to, to be honest this is unchanged for me.

My follow-up, yes Hans Ola, any fixed guidance on EBIT?

We do have at the end of the period as we said that this was positive and our basket of currencies versus the krona and versus the euro and so on which are the negative currencies in our exposure basket. It has improved, so we believe looking at last year we believe more that it will be a fairly neutral, it could even be slightly positive bridge to Q3 last year, but mind you that is also due to the fact that that we have a negative impact in the Q3 last year.

So it was pretty, pretty neutral would be my estimate for Q3 compared to last year.

Thanks a lot guys and have a good one.

Thanks. End of Q&A

Hi, operator and all of you that I know already have questions on the call. We are forced as I said before to end the call here.

And I'm sure that Mattias and the IR Department will do everything they can to help you those that didn't get their questions asked. Otherwise apart from that, I will just leave you with the wishing you a very good summer.

And a good weekend.

And a good weekend.

Okay, see you guys.

Thank you.

Bye.

Bye-bye.