Atlas Copco (ATCO) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw mixed demand with solid order intake overall; strong growth in gas and process compressors, while industrial compressors remained flat; order declines in industrial assembly, vision solutions, and power and flow; Asia, especially China, was weak due to softness in automotive, lithium-ion battery, and solar sectors.

• Service business delivered strong growth across all regions and divisions, supporting overall performance.

• Revenues grew 3% year-over-year to SEK 44.8 billion, with an organic decrease of 2%; orders received were SEK 43.6 billion, down 1% organically.

• Operating cash flow surged to SEK 6.9 billion from SEK 2.9 billion a year ago; growth in all regions except Asia.

• Profit for the period increased 10% to SEK 7.6 billion, positively impacted by a SEK 510 million tax provision release.

Financial highlights

• Operating margin was 21.1%, nearly flat year-over-year; adjusted operating margin at 21.8% (22.4% excluding intangibles); EBITA margin stable at 22.4%.

• Return on capital employed reached 29%, and return on equity was 31%.

• Effective tax rate dropped to 17.6% due to a one-time tax provision release; expected to remain about 1pp lower for the next 10 quarters.

• Operating cash flow before acquisitions and dividends for H1 was SEK 13.5 billion, up from SEK 7.8 billion.

• Net indebtedness decreased to SEK 21.6 billion, with net debt/EBITDA at 0.5.

Outlook and guidance

• Customer activity is expected to remain at current levels in the near term; no significant positive or negative signs detected in internal or external indicators.

• Currency effects are expected to be similar in magnitude but negative in the next quarter.