october 23, 2008, atlas copco group q3 results october 23, 2008

1October 23, 2008, www.atlascopco.com

Atlas Copco Group

Q3 Results

October 23, 2008


Contents

Q3 Business Highlights

Market Development

Business Areas

Financials

Outlook


Q3 - Highlights

Good order growth across all business areas and most regions

Continued strong development of the aftermarket business

Record operating profit and margin– Price increases continue to offset component cost increases

– Neutral currency effect

Solid financial structure– Increased interest costs but very favorable loan maturity profile


Q3 - Figures in summary

9% organic order growth

Revenues of MSEK 18 440; 13% organic growth

Operating profit up 16% to MSEK 3 640– Operating margin at 19.7% (19.0)

Profit before tax at MSEK 3 224 (2 708)

Earnings per share for continuing operations SEK 1.99 (1.54)

Operating cash flow MSEK 1 054 (1 586)


Contents


Market Development

Business Areas

Financials

Outlook


Orders received - Local currencyGroup total +19% YTD, +9% last 3 months

(Structural change +6% YTD, 0% last 3 months)

September 2008 A = Portion of sales, Year-to-date, %

B = Year-to-date vs. prev. year, %

18 +15 +7

39 +13 +4

12 +43 +43

18 +13 -3

5 +23 +118 +36 +33

A B CA = Portion of sales, Year-to-date, %


C = Last 3 months vs. prev. year, %


Q3 - The Americas

Overall healthy quarter in North America– Mining segment still strong, especially coal

in the US

– Weaker demand for construction equipment and from automotive industry

– Strong growth in Mexico

Continued strong demand from all customer segments in South America

September 2008

A B C

8 +36 +33

18 +15 +7

A = Portion of sales, Year-to-date, %




Q3 - Europe and Africa/Middle East

Growth in Europe– Good mining demand continues

– Low activity in the construction segment and weaker demand from consumer goods related industries in Western Europe

– Good growth in Eastern Europe, the Nordic countries, and Germany

Continued strong demand in Africa / Middle East

September 2008

A B C

39 +13 +4

12 +43 +43

A = Portion of sales, Year-to-date, %




Q3 - Asia and Australia

Stable demand development in Asia – Good order growth for mining

equipment and industrial tools

– Fewer large compressor orders and somewhat slower industrial growth in China affect compressor sales

Mining equipment high in demand in Australia

September 2008 A = Portion of sales, Year-to-date, %


C = Last 3 months vs. prev. year, %A B C

18 +13 -3

5 +23 +11


Organic* Growth per Quarter

Change in orders received in % vs. same quarter previous year

Atlas Copco Group, continuing operations

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*Volume and price


Atlas Copco Group – Sales Bridge

July - September January - SeptemberOrders Revenues Orders Revenues

MSEK Received Received

2007 17 388 16 431 50 243 45 806Structural change, % 0 0 +6 +7Currency, % -1 -1 -3 -3Price, % +3 +3 +3 +3Volume, % +6 +10 +10 +12Total, % +8 +12 +16 +192008 18 842 18 440 58 135 54 446


Contents


Market Development

Business Areas

Financials

Outlook


Revenues Operating Operating ROCEMSEK profit margin12 month values, period ending Sep. 2008 Sep. 2008 Sep. 2008 Sep. 2008

Compressor Technique 34 397 7 161 20.8% 59%Construction and Mining Technique 30 775 5 550 18.0% 31%Industrial Technique 7 369 1 493 20.3% 51%Eliminations/Common Group Functions -546 -325Atlas Copco Group 71 995 13 879 19.3% 34%*

* excluding w rite-dow n of RSC notes

Atlas Copco GroupOperating Profit and Return On Capital Employed (ROCE) by Business Area


Compressor Technique


4% organic order growth– Slow-down in demand for smaller industrial compressors in

Western Europe

– Favorable demand for large industrial compressors

– Strong aftermarket sales

Operating margin at 21.3%– Previous year 20.7% adjusted for capital gain



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Quarterly operating margin, %

Quarterly operating margins include Prime Energy from Q1 2006.*Volume and price


Continued high order growth; 17% organically– Demand from the mining industry still strong

– Construction demand slower in North America and Western Europe, specifically for light equipment

Operating profit up 30%, margin at 18.8% (16.9)

Two new factories inaugurated– Drilling consumables factory in Canada

– Road construction equipment factory in India

Construction and Mining Technique


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Construction and Mining Technique

*Volume and price


Industrial Technique

4% organic order growth– Growth in motor vehicle industry

– Strong aftermarket business

Operating profit margin at 18.8% (22.5, adjusted for restructuring costs)– Margin affected negatively by sales mix and production disturbances

related to restructuring of pneumatic tools manufacturing

Acquisition of US distributor



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*Volume and price


Contents


Market Development

Business Areas

Financials

Outlook


Group Total

July - September January - SeptemberMSEK 2008 2007 % 2008 2007 %

Orders received 18 842 17 388 +8 58 135 50 243 +16

Revenues 18 440 16 431 +12 54 446 45 806 +19

Operating profit 3 640 3 127 +16 10 518 8 705 +21

- as a percentage of revenues 19.7 19.0 19.3 19.0

Profit before tax 3 224 2 708 +19 9 604 8 400 +14

- as a percentage of revenues 17.5 16.5 17.6 18.3

Profit from continuing operations 2 432 1 890 +29 7 087 6 040 +17

Profit from discontinued operations, net of tax 184 53

Profit for the period 2 432 1 890 7 271 6 093

Basic earnings per share, SEK 1.99 1.54 5.94 4.97

- of which continuing operations, SEK 1.99 1.54 5.79 4.93

Return on capital employed, % 341) 312)

1) Excluding non-recurring w rite dow n of RSC notes. 2) Including discontinued operations.


Profit BridgeJuly – September, 2008 vs 2007

Organic Growth One-time items

MSEK Price/Volume Acq./Div.

Atlas Copco Group

Revenues 18 440 2 169 -215 55 16 431

EBIT 3 640 573 0 -60 3 127

% 19.7% 26% - - 19.0%

Q3 2008 Currency Q3 2007


Profit Bridge – by Business AreaJuly – September, 2008 vs 2007

One-time items in the previous year include a capital gain in Compressor Technique and restructuring costs in Industrial Technique, both affecting the one-time items column reversely

Q3 2008 Organic Growth Currency One-time items Q3 2007

MSEK Price/Volume Acq./Div.


Revenues 9 028 769 -50 5 8 304

EBIT 1 921 190 10 -80 1 801

% 21.3% 25% - - 21.7%

Construction & Mining Technique

Revenues 7 742 1 248 -175 35 6 634

EBIT 1 455 349 -15 2 1 119

% 18.8% 28% - 6% 16.9%


Revenues 1 788 117 10 15 1 646

EBIT 337 -26 0 20 343

% 18.8% -22% - - 20.8%


Balance Sheet

MSEK Sep 30, 2008 Dec 31, 2007 Sep 30, 2007

Intangible assets 12 177 19% 11 665 21% 11 578 21%

Rental equipment 1 992 3% 1 906 3% 1 920 3%

Other property, plant and equipment 5 698 9% 4 894 9% 4 629 8%

Other fixed assets 4 797 7% 4 245 7% 4 793 9%

Inventories 16 371 25% 12 725 22% 11 962 21%

Receivables 19 770 30% 16 627 29% 16 141 29%

Current financial assets 1 531 2% 1 124 2% 1 131 2%

Cash and cash equivalents 3 403 5% 3 473 6% 4 020 7%

Assets classified as held for sale 39 0%

TOTAL ASSETS 65 778 56 659 56 174

Total equity 18 759 29% 14 640 26% 13 054 23%

Interest-bearing liabilities 27 694 42% 24 397 43% 25 403 45%

Non-interest-bearing liabilities 19 325 29% 17 622 31% 17 717 32%

TOTAL EQUITY AND LIABILITIES 65 778 56 659 56 174


0,90,6

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2005 2006Q1

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2006 2007Q1

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2007 2008Q1

2008Q2

2008Q3

Capital Structure Net Debt/EBITDA


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9000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Public Bonds Bank Loans

Loan Maturity Profile


Cash FlowContinuing operations

July - September January - SeptemberMSEK 2008 2007 2008 2007

Operational cash surplus after tax 2 936 2 576 8 557 7 312 of which depreciation added back 524 445 1 483 1 302Change in working capital -772 -168 -3 103 -1 461 Cash flows from operational activities 2 164 2 408 5 454 5 851Investments in tangible fixed assets -708 -635 -2 008 -1 707Sale of tangible fixed assets 126 165 370 532Other investments, net -528 -352 -1 466 -1 013Cash flow from investments -1 110 -822 -3 104 -2 188 Operating cash flow 1 054 1 586 2 350 3 663Company acquisitions/ divestments -45 -68 -223 -5 750


Contents


Market Development

Business Areas

Financials

Outlook


Near-term Outlook

The overall demand for Atlas Copco’s products and services is expected to decrease somewhat compared to the most recent quarters. Demand from the mining industry is foreseen to decrease from the current high level and construction in North America and Western Europe will remain weak. The recent strong growth in emerging markets is expected to moderate.


Cautionary Statement

“Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially effected by other factors like for example, the effect of economic conditions, exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development, commercialization and technological difficulties, supply disturbances, and major customer credit losses.”

october 23, 2008, atlas copco group q3 results october 23, 2008

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