Earnings per share up despite weaker demand

ATLAS COPCO Interim report at September 30, 2001 (unaudited) Earnings per share up despite weaker demand · Order volumes 1 percent less than in Q3 2000. · Lower demand in the Americas and most parts of Asia. · Good order intake in Europe and Middle East. · Operating profit down 4 percent, at MSEK 1,627; profit after financial items up 3 percent, to MSEK 1,287 including positive currency effects of MSEK 125. · Earnings per share up 9 percent, at SEK 4.06 (3.71). · Strong operating cash flow of MSEK 1,403 (453). Note: All comparative figures are for the third quarter of 2000, unless otherwise stated. July-Sept. Change January-Sept. Change 2001 2000 % 2001 2000 % Orders received 12,885 11,74 +10 38,57 34,451 +12 3 3 Revenues 13,041 11,79 +11 38,02 33,686 +13 5 2 Operating profit 1,627 1,700 -4 4,782 4,569 +5 - as a percentage of 12.5 14.4 12.6 13.6 revenues Profit after 1,287 1,245 +3 3,646 3,318 +10 financial items - as a percentage of 9.9 10.6 9.6 9.8 revenues Earnings per share*, 4.06 3.71 +9 11.27 9.83 +15 SEK Equity capital per 131 112 share, SEK Return on capital employed 14 14 (12-month values) *) Number of shares: 209.6 m. Near-term development Atlas Copco is basing its near-term activities on the current demand situation, which is as follows: Still weak in North America and relatively good in Europe, the Middle East, and Africa. In South America and Asia, the demand is now declining from recent good level. Contingency plans to cope with a more negative scenario have been implemented or are ready to be executed. Summary of nine-month results Atlas Copco Group Orders received for the first nine months advanced 12%, to MSEK 38,573 (34,451), corresponding to volume growth of 1% for comparable units. The positive translation effect from foreign exchange rate fluctuations was 11 percentage points. Revenues rose 13%, to MSEK 38,022 (33,686), corresponding to volume growth of 1%. The Group's operating profit rose 5%, to MSEK 4,782 (4,569), giving a profit margin of 12.6% (13.6). Profit after financial items amounted to MSEK 3,646 (3,318), up 10%, corresponding to a margin of 9.6% (9.8). The total impact of foreign exchange rate fluctuations was approximately MSEK +425. Operating cash flow before acquisitions and dividends equaled MSEK 3,881 (461). Review of third quarter Atlas Copco Group Market development Before September 11, overall demand in North America was thin. The terrorist attacks in New York and Washington further quelled demand. Some immediate effects on equipment, accessories, and short-term rental demand were seen. Most notably affected was equipment such as industrial, professional electric, and light construction tools, driven by production and construction activity. Construction activity in the United States, particularly in the non- residential segment, was on average less than in the preceding year, primarily affecting demand in the equipment rental business. Demand from the mining sector in South America was relatively good, despite less favorable market conditions. This helped to compensate for the effects of the general economic slowdown in Brazil, the biggest market in the region. In Europe, overall demand remained healthy. Many markets in Western Europe, including Germany and France, recorded robust demand for investment-related equipment like high-end industrial compressors, advanced fastening tools and systems, and surface drilling rigs. However, demand for standard compressors and tools from construction as well as manufacturing industries was generally weaker than in the first half of the year. In Central and Eastern Europe, demand for equipment, consumables, and service remained buoyant. The Middle East also sustained a favorable level of demand. In Africa, the situation was mixed, with solid demand from industrial and construction customers, and somewhat softer needs from mining than in recent quarters. In Asia, demand growth was flatter than previous quarters, mainly due to weaker economic development in Southeast Asia and more modest growth in China. Orders and revenues Orders received totaled MSEK 12,885 (11,743), up 10%. Order volumes were 1% lower, though, as almost the entire increase resulted from positive foreign exchange effects of about MSEK 1,200. The Compressor Technique business area achieved volume gains, while the other three business areas recorded less volume than in the same quarter of 2000. Revenues rose 11%, to MSEK 13,041 (11,795), corresponding to unchanged volumes for comparable units. Earnings and profitability Operating profit declined 4%, to MSEK 1,627 (1,700), compared to the same quarter the preceding year. This corresponded to a margin of 12.5% (14.4). The lower margin resulted mostly from lower profit in the U.S.- based Rental Service business area, while the other business areas were in line with the previous year's results. Operating profit includes the positive effects of currency fluctuations, primarily arising from translation gains into a weak Swedish krona. The impact in the quarter was approximately MSEK +150, while the effect on the operating margin was only slightly positive. Net interest expense equaled MSEK -318 (-454), and foreign exchange differences on financial items were negative for the quarter, at MSEK - 22 (-1). Strong positive cash flow in the preceding 12 months and lower short-term interest rates had a positive effect on the net interest expense. Profit after financial items increased 3%, to MSEK 1,287 (1,245), corresponding to a margin of 9.9% (10.6). The effects of foreign exchange fluctuations were about MSEK +125. Net profit totaled MSEK 851 (778), or SEK 4.06 per share (3.71). The return on capital employed for the 12 months to September 30, 2001, was 14% (14), and the return on shareholders' equity 13% (13). The Group's weighted average cost of capital (WACC) was about 7.5% (8), for a pretax cost of capital of about 11.5%. Cash flow and investments The operating cash surplus after tax for the third quarter reached MSEK 1,692 (1,834), corresponding to 13% (16) of Group revenues. Working capital decreased MSEK 78 (109) during the quarter, leading to a cash flow from operations before investing activities of MSEK 1,770 (1,943). Net investment in tangible fixed assets was MSEK 357 (1,469) for the quarter. The sharp decrease primarily reflected less need for investment in the rental fleet because of the decrease in rental revenue. Operating cash flow before acquisitions and dividends equaled MSEK 1,403 (453). For further information: Media Annika Berglund Senior Vice President Group Communications Phone: +46 8 743 8070 Mobile: +46 70 322 8070 annika.berglund@atlascopco.com Analysts Mattias Olsson Investor Relations Manager Phone: +46 8 743 8291 Mobile: +46 70 518 8291 mattias.olsson@atlascopco.com Overhead presentations from Atlas Copco For your convenience, an overhead presentation of Atlas Copco's third- quarter results will be published on Atlas Copco's Internet site. Please go to www.atlascopco-group.com > Investor Relations > Presentations Internet site for the Atlas Copco Group More information is available at www.atlascopco-group.com. Interim report as per December 31, 2001 The fourth-quarter report will be published on February 14, 2002. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/23/20011023BIT00740/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/23/20011023BIT00740/bit0001.pdf The full report