Atlas Copco AB

Thank you very much and very welcome to everybody to this quarter four and full year report from Atlas Copco. We will soon hear Mats Rahmström, our CEO's comments to the quarter.

But before that, I'll also repeat again what the operator said, we will have a Q&A session. And for that I also remind as I usually do that we prefer or as you say on one question each and then come back in the queue for questions if so required.

With that I think we kick right off, Mats.

Okay. Thank you, Hans Ola.

And I will start on page number two. And if we compare a little bit Q3 with Q4, we can see that the operating and somewhat softer business climate and a little bit what stands out of course it's the auto sector, we have seen a decline.

A 1% organic growth and with continued strong Compressor Technique and also strong on Vacuum. We continue to grow the service business, three out of four business areas continue to be on a resilient and organic growth and a solid profitability for the quarter.

Go to Slide number 3. And you can see down the numbers but confirming this we can see 25.5% on orders received.

And SEK 27 billion of revenues, which is the record quarter so for it received and revenues a solid performance for the quarter. I think I go on the operating profit margin to the adjusted one, it's adjusted for two things and you recognize when the share is strong development, we have a revaluation of the LTE programs that SEK 221 million.

And then we have been top on the softening market in auto and we have the restructuring cost on SEK 65 million for industrial technique and looking at that we're at SEK 5.9 billion and a 7% Q4 operating profit. Hans Ola will take you through a little bit more granularity on the cash flow and also return on capital employed later.

But maybe just looking at the graph before we change and you can see, it's quite a solid month anyway considering. Go to Slide number 4 and this is the full year down and supported by currency but we have done record orders, record revenues and record profit.

And of course, we can see the continued growth for Compressor Technique, mainly the large compressor throughout the years and stronger than Q3, Q4 for Vacuum and a little bit softer power at the end of the year but good development. And good for the resilience that we can see them both geographically that they're growing in a good way and also that service helps us to build on the continued resilience.

We have a record number of acquisitions that we have done for the year and main part of those are distributors facility that we build on the business. It's a very solid business model for us that we have done a number of years.

But we also acquired some new platforms for growth and that's entering a little bit to the chiller business. I'm very excited about the dispense acquisition in electronics.

And of course, we have the cryo business from Brooks but also the on-site gas generation. So please see that.

And the proposed dividend from the bottom is up 11% to SEK 7 and in two installments. We go to slide number 5.

And here full year in numbers down and maybe the one that we are extra proud of is SEK 104 billion in revenues and it's the first time a little bit of for us and we are back above SEK 100 billion after the split with Epiroc. It's a good number for us and a solid margin.

If we go to slide number 6. I think you can read this thing in two ways.

You can see it all green, which is very promising both for year and for the quarter. You can see that we have 35% of our business in Asia.

One of the group region is still Asia for us, we're happy about that. But internally, we start more talking a challenge out how do we get to alignment with the GDP development globally.

So this is a very positive development for us. If you take a negative approach on it, it's throughout the sector.

For the quarter, you have a decline in both North America, in Brazil, in Europe and in Asia. So it's quite consistent throughout the geographical region for us.

To give you a little bit more detail starting in North America, we continue to have a strong Compressor Technique driven by larger compressors, strong Vacuum supported by the dry technologies and significantly softer Industrial Technique with the outlook linked and a somewhat weak power as well. If you go to Brazil, I think the view is in generally fairly positive and the only business that is negative is also linked to outlook which is Industrial.

Europe strong. Compressor Technique strong, vacuum negative, industrial as well, especially they are linked to Germany and the auto industry there and a flat power technique.

Then we look at the year for Asia and also the quarter for the Asia, you can see that quite a positive development. And of course, here we see that the development in semi kicks in, in Vacuum which is very positive, but also the Compressor Technique and Power Technique has a positive development both for the quarter and the year.

So it's -- but we have a product range today that is very competitive on this market, which is -- it's a necessity for the development of the company for the future. If we go to slide number 7, I can just confirm that we have five quarters now with growth.

If you go to slide number 8, we can still see that we have support from currency both from orders and revenue around 4%. And then we can also link in them the structural changes the acquisition about 3% on orders and organic down 1%.

If we go to slide number 9. Nothing really new.

What stands out as a stellar performance for the quarter would be the Vacuum Technique. They have steady growth I mean in both they see growth in industrial and scientific and a very solid profitability considering then that we also have a group diluting the bottom line a little bit.

Also positive for Compressor Technique and you can see the double-digit for Industrial orders. We take business area by business maybe start on the graph.

So there is solid for being a Q4 for them both from orders also very good revenues. We can also see that we continue on the service and development in a positive way taking advantage more and more of -- for those participated in the Capital Markets Day that you see a lot of what do on the digitalization and connectivity.

I think step-by-step we can take advantage of that and help that journey in service as well. The one thing that we see that this deviate a little bit from previous quarter is that this is then with smaller Industrial Compressors, but it's the lower demand for those but we have continue on the bigger compressors.

That's a little bit sign on the demand in the marketplace. Operating margin at 23.1% and that of course includes the number of acquisitions that we will see the full impact in the coming years.

I think that's quite solid as well. Another product in the corner there, this is continuing and we are growing quite rapidly in new pressure and this is another addition to that portfolio of product.

Vacuum Technique on slide number 11, you can see the last two quarters Q3 and then Q4 very solid development. And it's intrinsically the same comment that I had in Q3.

It's the development of the Chinese market where they're building up the semi industry. That's very positive for us.

And we can see the traditional OEM place also continue to invest in technology. And we have seen on the -- when a little bit we could see a correlation between industrial and scientific and they did touch, little bit and we can see both industrial and scientific being positive for the quarter.

So strong orders received strong invoicing and continued a very strong operating margin. Of course we have to remind ourselves that the 24.3% includes groups or I should say, Industrial Technique on slide number 12 and reflected a little bit for a softer out-of-market in a number of quarters.

And you can see that many of the customers in this segment are a little bit in transformation. One is them of course strong traditional combustion engine to either hybrids or full electric vehicles.

We can also see that previously output, the production rate for last year is down being normally, don't align fully with that. It's more productive.

But at the same time, you can see that they run a lot of cost-out programs. And we can see the effect of that is that they pushed a little bit traditional technologies forward or change their mind a little bit on the platform they are building.

So this is in full effect right now in the quarter and you can see that orders were quite big although we kept up the revenues. And here we are certain that we take the cost and restructure a little bit.

And in the quarter you saw SEK 65 million down to adjust a little bit the cost structure for future demand as well. I should say though that going to hybrid or electric vehicles with the investments we have done, if you build a battery car you can come for the dispense technologies which are used for mixed materials.

You need it for self, if you like to use aluminum -- aluminum flow drilling similar thing there. So we're in a very good position actually the big part of this transformation to electric vehicles and you can see the battery pack at the new engine and there are a number of physical application produced technologies on the battery pack as well.

So even though it's a little bit down now, we believe that we have the right technology to be part of this transformation going forward. To take power; orders down 2%, we are not really seeing a full impact of any weakness in the construction market.

In our case, it's a weaker U.S. market and we are seeing some of the equipment companies not placing as many orders that they have in the past, although it's only down 2%.

And of course a very important quarter to see the trend in this business with Q1, which should be the better seasonality in this business and we should then see, if we get a strong Q1 or not in this. So, have to look forward a little bit now.

But otherwise you can see in the four quarters yes, it's not too bad so to say. And operating margin of 16% considering the segment, I would say that we are pleased with that anyway.

Yes, that's it. In the summary a little bit, I think I can hand it over to you Hans Ola Meyer.

Okay. Thank you, Mats.

Let's have a look a little bit beyond the operating profits that Mats commented quite extensively already. Of course in the slide number 14 here, all of the margin numbers that you see on the different levels are the reported ones, whereas in the Q4 report that we will receive, you can also see the adjusted ones which gives perhaps a little bit absolute explanation of how the quarter on an adjusted basis was.

On that note, between operating profit and profit before tax, it is of course missing the financial net. And the minus SEK 55 million of this year, albeit a little bit lower than perhaps what we had expected, I mean slightly lower interest net negative, its contracts very much with a positive SEK 273 million that we had in the Q4 last year.

But as we commented, that wasn't a special gain that we have after repatriation of equity from a broad equity denominated in Euros. We made quite hefty capital gain and FX gain on that.

Adjusted for that last year of the financial net in 2018, Q4 was SEK 89 million. I would say going forward, that somewhere between this year's SEK 55 million and SEK 89 million is probably a rough estimate what we would expect third quarter going forward.

If we go further down, we come to the tax and again, it was more last year that had an extraordinary positive impact with about SEK 600 million of one-off extraordinary tax booked positive effect. So, if we adjust for that, it was roughly 24% income tax last year compared to the 22.3% this year.

My comment would be very similar to the financial net, so that, if we expect somewhere in the future between 23% and 24% of effective tax that's more to be expected I would say. And that goes of course also for the earnings per share.

Final comment on this slide. Many of you have noticed, that of course the return on capital employed have decreased and it's a full three percentage points, which is where in our case perhaps, but I would say that two percentage points out of that is related to accounting basically.

So it's the IFRS 16 impact and it's also an impact on some other accounting changes. So, on a comparable basis, you can say that the positive impact on returns that we have had from -- over the full year, I will stress from currency has been compensated for the dilution that the new acquisitions bring to the group.

So that explains a little bit that three percentage points loss on return of capital employed, which obviously always is a full year 12-month number. If we then move to the next slide number 15, we have the profit bridge.

And I think the only comment here before we look at the business areas in the next slide is that, the currency impact on operating profit looking again the SEK 165 million that is for this quarter. We would expect something similar judging from where we have the currencies today or the FX rates today for Q1 compared to Q1 in 2019.

That's what one would expect at this moment at least. But as I said, let's move on to Slide number 16.

And again, I need to repeat myself. We shouldn't focus too much on separate quarters, but at least for transparency reasons is where it comes out.

It shows, of course, that the operating profit of Vacuum Technique and Compressor Technique has responded very well through the volume increase that they had over and above what would be a long-term average. Of course, you can also see that currency has helped, of course, in absolute numbers, but if we weigh it together, it has been slightly negative effect on the operating profit margin compared to Q4 in 2018.

I think those are the main things the comment there. And if there is anything that you wonder about, of course, we can come back to this in Q&A.

Moving to Slide number 17, again, not so much more to add. You'll see, of course, that in a year time we have increased on a like-for-like basis from SEK 100 billion to SEK 112 million in total assets.

And from that we can say that about SEK 3 billion of that is coming from currency translation during simple and about SEK 6 billion comes from the acquisition of Brooks in the middle of the year. So that leaves an organic increase of the balance sheet of somewhere around SEK 2 billion to SEK 3 billion, otherwise not so much specific to that.

I go on to slide number 18. It's the sum of everything.

In one way, it's the cash flow and we managed to edge just above the SEK 5 billion on the operating cash flow performance leading to SEK 14.6 billion, which is the highest number we've had in a year following the -- after the split from Epiroc, of course. The only thing that we noticed is what we mentioned also in the report that the investment didn't completely die in Q4.

It was actually the effect of a -- positive effect from having a sale-leaseback transaction recorded in the cash flow on the investment net number there. So underlying the number was more in line with last year actually.

We go on from there. And finally on earnings per share and dividend were not stronger with SEK 7 that the Board proposes to the AGM, which means an 11% increase over the SEK 6.30 from last year.

And again, as I have said a couple of times, the earnings per share last year was a bit flattered by this extra positive tax bookings that we had at the end of last year. So with that, I think, I'll just leave it to Mats to finalize before the Q&A.

To the near-term outlook then on Slide 20, and here we try a little bit to guide what we see in the different segments in the market. And when we now go from Q4 to Q1 down sequentially, you can see that the one change that we see in the market is mainly in the general industry market that of course the impact on Industrial Technique, but also with the industrial compressors.

We can see that it's softer demand there. We have no reason really to see its ability account.

We have not seen too many capacity investments with the exception of China. Utilization is still hovering a little bit, and that's why we have also guided them a little bit for somewhat softer demand than what we see in Q1 -- Q4, sorry.

Yeah. Yeah.

And in this we have not including any impact from possible China to follow the development of the Corona Virus. We'll see how that will develop.

We can see that ourselves. We will have -- our factories will be close one more week and [indiscernible] before we start up production, and that is our plan right now and we can see that as many of our customers as well.

We'll see how that develop, and that's mainly the -- yeah, to see what happens from this development.

Thank you, Mats. I'll just ask the operator to repeat the procedures for the question and answer then we go right at it.

Hi. Good afternoon.

I wanted to ask a question regarding CT, which relates also to a question in Industrial Vacuum, which is during 2019 you did have a very strong performance from a growth perspective on part of the growth tailwinds came from the self-inflicted, let's say, new product development cycle. And I was wondering into 2020, whether that created an artificial, let's say, high growth rate for you in essence?

And whether that product development cycle continues to be as strong as it was in 2019? And that relates to the question on Industrial Vacuum as well.

I guess what I wanted to understand is how does it compare when it's growing now as reported today versus the declines in most of types of industrial compressors that we see on the other side of CT? And I leave it at that.

Sorry. Thank you.

But on the CT side, for the large compressors, we have a strong belief that is supported by a new generation of all three machine. And also in gas and process that we see -- that they have developed a number of segments.

This is more product business where we also see that in those two areas, I would say that we believe that we are gaining market share driven by energy efficiency of all new products. We are also launching a lot on new products in the Industrial segment.

But in the Industrial segment, I would say, we can see somewhat softer demand for products. And I would say it's more of a short-term CapEx decision for the management team there more on the long-term you can see that it has continued.

We have no reason really to believe that it will be softer on the large compressors. On Industrial, I agree with you when I talked about the general industry market that could be a strong correlation with the industrial power tool and smaller compressors and that as we link between the Industrial Vacuum overlapping a little bit the drive in semi.

You can for example say that our vacuum application on a mobile phone that both into the semi side but also the Industrial side. That's a little bit the correlation.

But also back you can see that we are launching a number of products. And I would, of course, be disappointed that if those didn't take market share especially on the energy efficiency.

Now we start to link more and more also then the efficiency of the financial payback for us many years ago and feel it. But now, it's environmental really taken off.

People have an interest to make sure that the carbon footprint is reduced as well. So, get a little bit of financial impact on your decision, but also a benefit on that.

So, we have the most energy efficient products in large and industrial compressors will be of great importance are likely.

Thank you.

Yes. Hi, Mats and Hans Ola.

It’s Klas from Citi. So the first one is Mats is coming back to the guidance obviously, we hear you on automotive.

But I'm interested in your comment on the Industrial side again? It seems like you said there's more weakness on the smaller and medium size, the larger compressors and gaps are still holding up.

If you just confirm that? And then if you could tell us a little bit more by region on the smaller and medium side we're hearing from others that China is looking a bit better now towards the end of the quarter.

But I guess you don't see that. So how will you start there?

Let's see with the China question to start with that and we have not really see -- if you link that to auto we have not seen an improvement. And I think it's probably the area where it's most challenging in terms of developing the industry right now for us.

So that's linked to new programs available for us in and if you look at the 55, I think I reported something that last year they closed 22 factories and they opened 5. And in previous years of course then we have seen more greenfield projects to work on.

So I wouldn't predict right now that we will see a turnaround quickly on that side. Now...

I meant more on the Industrial side in China Mats, sorry.

Okay. It pretty much follow the patent we see that.

If you -- and sorry to link it back. When we see a softer outlook, of course, we report out trucks and cars and Tier 1, but that's the Tier 3, the Tier 4, the Tier 5 which is normally defined as generally in the many are very dependent on this industry and this is the patent I've seen throughout my carrier.

And right now I see then a softer demand in general industry both in industrial smaller size compressor is also softer than in the past. So just confirming what you just said it's our view right now.

My second and final one is on services. So there was no growth in IT and PT that is quite rare.

I can see the equipment being pushed to the right, but it was a little bit surprising to see the services level off as well. Can you tell us a bit more about what happened?

How do you think about the ability to grow services in IT and PT against this market weakness?

Let's start with IT. They start to become quite developed when it comes to contract linked to the digitalization.

And I think that it's something that we do uniquely versus our competitors. And so I think they have an upside to trying to lean more uptime to service contracts and that should be extremely valuable for someone making 50, 60 cars an hour.

So that's actually positively. On the other side then there is a strong correlation between equipment sales maybe and/or service and the line speeding principally.

So if you reduce line speed with 20%, 30% you normally reset the service schedule on the tools as well. So that's -- this is a little bit of that what I experienced in 2008 as well but the production is running with normal speed and they don't see the service continue, but there is a correlation with number of produced cars so to say versus service.

Thank you.

Thank you for taking the question. Hi, Mats.

Hi, Hans Ola. I guess, coming back to the previous question.

The sort of, softness or the change in Industrial Technique is that really what we're talking about Mats? Is that primarily due to project pushouts i.e.

kind of deferral within Asia? Is that the bulk of what's going on?

And do you see -- I mean it doesn't sound like you see that changing anytime soon, but I just wanted to confirm that point. And then the second point is if we look at the orders geographically across the group North America is now at 2%.

Can you give us a sense of how that trended sequentially within the quarter i.e. the weakness in general industry is that something that was ongoing in the quarter?

Is it more stable? How do we think about that coming into 1Q 2020?

Thank you.

Okay. On the first question on IT, did you mean IT in general or general industry and Industry Techniques declare?

No, sorry. I meant more the auto's exposure in Industrial Technique.

Within the press release you refer to push out of investments and projects, I may be putting turn together and getting five, but in response to Klas's question you were talking about fewer greenfield projects et cetera in Asia, you're basically talking about the same thing?

Yes. And if you remember on slide 6 when we talked about the geographical development as well, you can see IT actually being down in all geographical regions with exceptional Africa, which is a very small region for Industrial Technique.

So it's, kind of, comment among all the auto OEM, and of course they are going through some of the financial difficulties. They have cost-out program.

At the same time they're fighting lower volume. At the same time they need to find CapEx down for a new generation of cars if that is a platform being for a hybrid or a fully electric vehicle.

And what I'm saying is in principle we're in the middle of this right now and that we see in our numbers both of them geographically widespread, but we're in a good position when they start launching electrically build programs or hybrid programs and we have the technologies. So, it’s not that we are losing up market share online.

I think probably that we're actually gaining in some key accounts.

Understood. And then just on -- just your general sense of what's going on in North America is that stable towards the end of the quarter, or we think that was a bit of a soft spot with Sandvik as well, is that something that you see as a weak point globally or not really?

I don't see -- I think we have identified any specific trends. Of course with the business like ours there's quite a lot of investment in the numbers.

I mean in the graph if you look geographically, we don't distinguish between service and equipment. And of course the -- apart from the auto side and what we commented on the PT I mean the rental companies in the U.S., it's not that we see any dramatic acceleration or deceleration of trends from the previous part of the year to be honest.

So it's a little bit -- but IT is important in the U.S. and Western Europe, as well as in China of course and they weigh on the numbers of course.

Thank you vey much both.

Hi. Thanks for taking my question.

Mats sorry to come back to the demand outlook. But clearly I mean if your orders are down sequentially in line with your demand outlook that would imply a double-digit organic order drop year-over-year albeit of course on tough comps from last year, but I don't think we've seen that since 2013.

I wonder what you're baking in, in terms of sort of the key variables. I mean, this would be obviously for Q1, which typically is seasonally bigger in PT, it sounded like you were a little more sensitive on the outlook in PT?

And also just specifically on IT, we talked a fair bit around automotive. Can you remind us please how much is Aerospace for you?

And are you baking in any disruption to the Boeing supply chain from the production disruption we're seeing on the 737 MAX?

Let's -- if I can keep up with you. Aerospace it's the second biggest -- normally second biggest segment for general industry Industrial Technique.

And the one I had it normally off road. So I don't think you have defined it by size but it's at least number two.

And correct that the Boeing business have been softer for quite some time. I think that's what I can share with you on those accounts.

The second one…

Yeah, I think just started our side I just wanted to make sure I understood. You said something that the outlook it indicates sort of a double-digit down.

Was that something you picked up from us or…

I see what really -- yes. I mean, we can debate the numbers and I can come back to you offline.

But, I think, if you're seeing orders down sequentially, I think, that would suggest year-over-year. We are talking about double-digit organic order drop.

And I appreciate the comps are tough. But I just wanted to understand – yes, go on.

Well, let me make one comment there on the sequential. Our outlook is looking at economic activity at customer segments.

That's what we tried to do. So we would have been much more explicit, if we projected our order intake for Q1.

Now, if you look back historically and you can see it in the graphs that we published as well, Q1 tends to always be a very good orders intake quarter. And that, I mean, compared to Q4, for example, which actually has a little bit of completely the opposite factor.

Is that something we drive, or is it just how our customer segments work? Well, it's definitely not the drive from our side but -- so it's more reflecting that that is a pattern that we have in our businesses.

If it's large annual budgets that are managed as customers or not? I don't know.

But when we say an outlook like this, it is really trying to look at the underlying activity level at customers. And then, we don't make any specific projection that Q1 order intake is going to be so much weaker or better or whatever than Q4.

Our statement, in our mind, could very well be combined with a higher order intake in Q1 than in Q4. And if you go back over 10 15 years, like I have the luxury to be able to do, you will find that that is actually absolutely true.

In other words, Q1 is, as a quarter over a year, strong, Q4 order intake over a full year is a weak quarter normally. And that is a pattern that we have seen for many, many years.

That's why, perhaps, we don't make so many specific comments in that respect.

I understand, Hans Ola. It was only because you don't seasonally adjust your outlook, right?

And then, there's a bit of seasonality in PT and I didn't mean to suggest that you're down double-digit. I just want to understand, why would you not see the ordinary seasonal ramp particularly in PT?

And as I was pointing, it sounded in Mats' introductory comments, although, there was a little more tentativeness around what you're seeing in that part of the business? I just want to clarify that.

Yes. I think you saw Mats' slide when he commented on PT, that Q1 2018 was like a rocket and that comparison will obviously be a very tough one to beat.

When we go back a year or, let's say, to April last year, the comments were very specific, that we have made some very successful inroads on certain customer accounts in that geographic area and that is not part of the normal seasonality. But, again, I repeat, we don't normally see and we expect that this year as well, that Q1 is a fairly good order intake quarter compared to the average over the year.

And I should stop now, because otherwise the message becomes confusing, even more confusing. But was that somewhat helpful for you Lars?

It was. Thanks, Hans Ola.

Can I just clarify, when you say your factories will be closed for one more week, does that include your entire China footprint? I just want to verify that, please?

That is -- normally, we are closed for the New Year's celebration. And now that that has been expanded one more week, that is correct.

That’s clear. Thanks, guys.

Thank you.

Hi. Good afternoon, everyone.

Look, the book-to-bill ratio has been below 1 times in the past two to three quarters now at both PT and IT, with growth actually turning negative now. So in your experience, in terms of the lead times between PT, IT and CT, and given the order intake for smaller compressors has just started to decrease as well.

Would you say that CT will follow the negative trend of PT and IT into 2020?

I'm not sure we have any empiric data on that scenario that you described, but I assume if you have a softer market, in general, it would not be too positive for smaller CapEx investment, is a compressor or a tool or something else that you need. So, -- but I'm not sure I can correlate exactly to the scenario you described, plus I don't have that data.

So, you don't really see any specific lead-times between let's say IT and CT in reality?

No, not that we follow here, no.

Okay. Thanks very much.

Can I ask also a second one on the currency impact because there was a big difference between the Q3 effect and the Q4 effect with Q3 basically being a benefit of 80 bps for margins and now in Q4, that's diluted by up to 30 bps and that was clearly not what I was forecasting myself. So, just if you could explain how can we have such a big difference on the transaction side relative to currencies?

Well, basically all of that from Q3 to Q4, you can see that the development of last year plays in just as much as the development of this year, obviously. Because we are comparing Q3 to Q3 first and then we compare our Q4 to Q4 last year.

And last year, we had a weakening of the Swedish krona. We had the strengthening of the dollar continuously so to speak at the end of the year, whereas in this quarter, we have the opposite.

We had a moderation of the dollar strength, we had a comeback of the British pound, we had a strengthening of the Swedish krona. We had a couple of breaking trends compared to the first three quarters of the year, that's what I'm saying.

So, internally, we were not that surprised that the analysis comes to that we actually lost on the margin compared to Q4 last year. That for me is not so strange even if I understand it surprised you.

And what kind of guidance so did you give for Q1 already?

Well, I mean the only thing that we normally say is what absolute number do we expect to be in Q1 compared to Q1 last year. And there we believe we will see something similar to what we saw in Q4-Q4 bridge, which was 165 as you see in the report.

That's just math. What that at the end of the day will mean for the margin effect let's come back to that.

It becomes too many unknowns to be a good guidance at this point I would say.

Okay. Thanks very much.

Okay. Thank you.

Yes. Thank you for taking my question.

I have also two questions. And the first one is on the outlook as well.

Could you just please clarify if you said that you expect end market demand in the semiconductor to be somewhat lower in the first quarter as well?

No, I did not specifically comment on that. What I said about the semi is that we see last two quarters had a great success in new technologies from the more established players in the market and that we can see both capacity and technology investments in China where we've also been successful.

If you look at any of the statistics for the semi industry, we see that utilization is not increasing. It's rather flat as we have not seen so many capacity investments linked to memory.

So, otherwise we did not specifically comment going forward. If we're going to be successful and need to continue to go up and we -- the bigger orders either for technology or capacity than in China.

So, you don't want to say what you expect in terms of end market demand for this specific segment?

We don't see an upstream in terms of capacity that we have--.

Okay. And then secondly, you talked about the turbo compressor in your report and then you mentioned it also on the presentation.

I understand this turbo compressor was for low-pressure applications. But yes, as you know there are a couple of companies out there saying that they will move into high-pressure applications as well.

And I just wonder, what is your aftermarket opportunity in turbo compressors as compared to screw compressors? Is it significantly lower aftermarket opportunity there?

We have seen the different technologies and there are service opportunities also with the turbo compressors that you referred to that at least is our experience. Now, this product does not compete with the reference you make to other companies, this is for another segment at this point at least.

Otherwise, I guess, the – to dig a little bit deeper when we meet up with one of the competitor people. But as you know from the technology it's less but it's a small portion of the market.

And we still believe that there are more energy-efficient solution for most of the applications that this we go after.

Yeah. But it is a lower aftermarket opportunity in turbo compressor compare to screw compressors?

For the technology you referred to…

Yeah, yeah. Thank you very much.

My question has already been answered. Thank you.

Okay. Thank you.

Yes. Thanks.

Hi. Good afternoon.

My question is on Vacuum Technique and slightly longer-term in nature. If we see another good year of growth in 2020 and I think consensus got around 10% growth.

How should we think about margins evolving? Obviously, you've shown good margin resilience despite a challenging market earlier in the year.

Do you see upside to the 25% margin you've delivered if the market comes back strongly?

Maybe Hans Ola can give you more granularity but at least when I have discussions with the different divisions and the business area, it's more drive. We believe that the currently 23 to 25 bracket of operating margin it's a good one.

And we are more trying to find more volume, new applications, new customer's that's really where we have the focus. And Hans Ola, if you want to…

No. I think that's really a full answer in a way, because when we've had the question many times over the years mostly in the beginning regarding Compressor Technique.

But I think the answer when it comes to Vacuum Technique is very similar. We really hunt for new applications for possibility to grow rather than drive the operating margin.

And that takes quite a lot of effort in terms of R&D, in terms of presence in the market, in terms of application, knowledge et cetera. So, you know, that of course when you have a short period of tremendous load in factories and you can just sell out every capacity that you have, it will have a good impact short-term on the margin.

And we've seen a couple of those periods. But seen as you said yourself a little bit longer term, the efforts are constantly put in which of course means that we see value creation that we might not see a dramatic margin growth, even if we are successful so to speak.

And also I think we're trying to – from the other perspective and trying to protect our margin building the resilience by keeping investing in industrial services, building on the industrial product portfolio to get a better balance between semi and industrial application and scientific. So that's also an effort we are trying to make over on the coming years as well.

Great. Thank you.

Thank you.

Yes. Hi.

Thanks for the call. My question is relating to your M&A strategy.

You have been quite active on M&A front in 2019 and even in 2020, so far. Can you please discuss your appetite for M&A for the rest of this year?

And whether do you see hope for sizable acquisitions this year? And also, are there any specific end markets so you would prefer?

And especially any areas you do not currently operate in? Thank you.

But I think we have the capability and the balance sheet of course then to do things that we would like to do. And out to the 21, now 22 divisions, that is we have.

We would say that, 20 of them have a green light them to go ahead and present the strategy, what they'd like to do. And in some areas, we like to do more of the same, where that's possible.

And in other areas, of course we look at adjacent applications or adjacent technologies, like they try for example in semi. But tools everything together I would say that, we're trying to enter into things where we see that we can become one of the leaders in the segment, we don't not want to be number three, number four or number five in the world.

We really like to make sure that we can invest enough. We would like to see a product that is critical for our customers, for that time or on their line.

We like to see it possible that there's an opportunity to work with the customer, on service and service contracts as well. And maybe the fourth permit is that, we're trying to find products where we can work a little bit on our outsourced model to the same in the semi sales.

And we're looking of course in different areas depending on the division. I don't want to guide exactly what we're looking at.

But, you can see some last year than that of course we are trying out a little bit on the Chile side, fairly new tractions for electronics which is a huge market and expanding the on-site oxygen and nitrogen. We have the Atlas Copco brand.

We have strengthened it a little bit on something that we find interesting as well. And of course with cryo acquisition we enter into the chambers a little bit in semi.

And of course there we can also look at adjacent applications to that. Now we have the turbo compressor in and also the maybe that guides a little bit on what we're looking at in terms of strategy.

And that we have the potential down to be active and to see if we can find something that generates value to our shareholders.

Okay. Thank you.

Thank you so much. And thanks to everybody participating on the call.

I then close the meeting. And hope to speak to you again, when this time for the similar conference call in April on the first quarter results.

Thank you very much. Bye-bye.