Atlas Copco - Annual Report 1999

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COMPRESSOR TECHNIQUE COMPRESSOR TECHNIQUE Stable Demand for Industrial Compressors and Generators Demand for compressors ended strong despite a slow start in 1999. European markets remained stable, and the Asia-Pacific region showed encouraging signs of recovery during the second half of the year. Sales reached SEK 13,202 m. (13,540), and operating profit was SEK 2,153 m. (2,283). From January 1, 1999, the equipment rental operations are reorganized into a new business area, Rental Service (see page 62–65), outside Compressor Technique. 1999 1998 1997 Revenues, SEK m. 13,202 13,540 12,674 Operating profit, SEK m. 2,153 2,283 2,299 Return on capital employed, % 27 30 36 Investments, SEK m. 453 488 521 Number of employees 8,288 8,565 8,037 The Compressor Technique business area, headquartered in Antwerp, Belgium, develops Atlas Copco’s position as the world’s leading provider of equipment for air compression. The business area develops, manufactures, and markets top quality products for industrial customers who demand a high level of operating reliability and productivity in their operations. Each division is responsible for the development, manufacture, marketing, and sales of its own products. Manufacturing and assembly are concentrated to Belgium, the U.S., Germany and France. Revenues Compressor Technique’s revenues remained largely unchanged at sek 13,202 m. (13,540), while orders received ended at sek 12,965 m. (13,161). Business in Central Europe and the Mediterranean region was strong, while demand was flat in North America and quite weak in South America. East and Southeast Asia showed solid signs of recovery, especially in South Korea and China. Earnings Operating profit decreased to sek 2,153 m. (2,283). Earnings equaled 16.3 percent (16.9) of revenues. The return on capital employed ended at 27 percent (30). Business development In 1999, Compressor Technique made several important moves to develop its business. New compressor types from Industrial Air and Oil-free 44 ATLAS COPCO 1999 Air divisions attracted heightened interest from customers in new market segments and new markets. For example, variable speed drive compressors and compact industrial compressors, which reduce customers’ operating costs, are products with continued growth potential. Sales and rentals of portable compressors and generators were particularly healthy. For Portable Air, organic growth was complemented by acquisitions, and inter-company sales to Atlas Copco’s rental operations in North America remained strong. Process industries were uneven in 1999. Orders from the chemical and petrochemical sectors were reasonable, while the air separation market was extremely weak. Important orders were received from key customers and these niche segments and applications represent good growth opportunities. To further emphasize market presence, new sales companies were established in two important markets: Indonesia and Egypt. Product development In 1999, Compressor Technique confirmed its position as the world’s leading developer and innovator of compressor technologies. Key compressor components, overall performance, productivity, and designs were all enhanced to better fulfill the demands of existing and new customers. Industrial Air and Oil-free Air continued to develop the popular variable speed drive compressors that employ a system that continuously adjusts the machine’s energy consumption to the level needed, thus dramatically reducing energy costs in many applications. Also, several ranges of small and large compressors were augmented to better fit customers’ demands. Portable Air launched several new compressor models, including oil-free compressors for rental, and a new open frame generator range. Applied Compressor and Expander Technique, which traditionally manufactures large customized compressor installations, shipped its first standardized turbo compressors for air separation. To safeguard Atlas Copco’s strong position in compressor technologies, various patent applications emanating from basic development activities were filed and granted during the year. These patents will further sharpen Compressor Technique’s competitive edge during the next decade.
Investments The business area invested a total of sek 239 m. (259) in property and machinery. The majority of investments related to the replacement of production equipment, flow improvements and capacity extension. By year-end, the Business Area launched an ambitious investment in an expansion of a laboratory for product development in Antwerp, Belgium. Investments in rental equipment totaled SEK 214 m. (229). Training Training during the year centered on Atlas Copco’s crucial customer relationships. Programs covering service development and training, customer care, and general customer focus were implemented worldwide. Compressor Technique’s success greatly depends on product development and innovation, so during the year the business area continued to emphasize efficient exchange of information between product development, production, and the sales organization, which primarily interacts with customers. Other efforts included management seminars and the adoption of a reinforced training policy that aims at safeguarding the continuous development of employees. Structural changes At January 1, 1999, Atlas Copco’s Prime division was withdrawn from Compressor Technique to form a new business area, Rental Service (see pages 62–65). The Portable Air division acquired two specialty rental companies during the year. On January 1, 1999, Atlas Copco acquired South African Rand-Air Ltd. with roughly 200 employees and an annual turnover of sek 90 m. At July 1, ABIRD BV based in Rotterdam was acquired. ABIRD BV had 25 employees at the time and annual sales of sek 40 m. In addition to this, the manufacture and assembly of compressors was further consolidated during the year. Most notably, capacity was extended in Wuxi, China, while a unit in Japan was divested and one in China closed. Market outlook Global demand for Compressor Technique’s products and services is foreseen to increase in the near term. The Asian and North American markets are expected to lead this expansion. Oscar Duprix Luc Hendrickx Johan Molin Ronnie Leten James Tapkas Share of Group revenues 36% Revenues SEK m. 15,000 12,000 9,000 6,000 3,000 0 95 96 97 98 99 COMPRESSOR TECHNIQUE Business Area Executive: Bengt Kvarnbäck Compressor Technique’s divisions are: • Portable Air, President Oscar Duprix • Oil-free Air, President Luc Hendrickx • Industrial Air, President Johan Molin • Airtec, President Ronnie Leten • Atlas Copco Applied Compressor and Expander Technique, President James Tapkas Earnings and Return SEK m. % 2,500 2,000 1,500 1,000 500 0 95 96 97 98 99 40 32 24 16 Return on capital employed, % Operating profit SEK m. ATLAS COPCO 1999 45 8 0 COMPRESSOR TECHNIQUE
Page 1 and 2: Atlas Copco Annual Report 1999 99 A
Page 3 and 4: Atlas Copco 1999 Revenues Group rev
Page 5 and 6: The Board of Directors’ Report on
Page 7 and 8: Wuxi compressor plant in China exte
Page 9 and 10: ponding to a margin of 6.9 percent
Page 11 and 12: Product development 1999 1998 Resea
Page 13 and 14: Consolidated Balance Sheet ATLAS CO
Page 15 and 16: Notes to Atlas Copco Group Cash Flo
Page 17 and 18: Notes to the Financial Statements S
Page 19 and 20: The Parent Company reports all leas
Page 21 and 22: Remuneration and other fees for mem
Page 23 and 24: 8 Taxes Group Parent Company 1999 1
Page 25 and 26: NOTES TO THE FINANCIAL STATEMENTS N
Page 27 and 28: 18 Shareholders’ equity Group Sha
Page 29 and 30: 23 Current liabilities to credit in
Page 31 and 32: Goodwill The Group applies an amort
Page 33 and 34: Number of Per- Book shares cent val
Page 35 and 36: ing this report in February 2000, t
Page 37 and 38: for sale and recorded at fair value
Page 39 and 40: On January 1, 1999, the Rental Serv
Page 41 and 42: fully served previously. The Prime
Page 43 and 44: ATLAS COPCO AND THE BUSINESS ENVIRO
Page 45: Distribution of Revenues by Busines
Page 49 and 50: Lead time cut from 35 days to six T
Page 51 and 52: Premier web pages improve informati
Page 53 and 54: Structural changes To adjust to dep
Page 55 and 56: Protecting operator and environment
Page 57 and 58: Uniroc offers full service to Mount
Page 59 and 60: ics for the end-user. Also, in-hous
Page 61 and 62: Starting in October 1999 and runnin
Page 63 and 64: Moving customer-supplier relationsh
Page 65 and 66: efficient way to develop already es
Page 67 and 68: A hub system to serve non-urban are
Page 69 and 70: Internet Makes Impact as Business T
Page 71 and 72: Evaluation of power tools To develo
Page 73 and 74: Excellence in Sales Every year, the
Page 75 and 76: ight to existing shareholders. The
Page 77 and 78: Five Years in Summary Atlas Copco G
Page 79 and 80: Summary in USD and EUR Atlas Copco
Page 81 and 82: Consolidated Balance Sheet in USD a
Page 83 and 84: Group Management Giulio Mazzalupi P
Page 85 and 86: Kurt Hellström Ulla Litzén Tore H
Page 87 and 88: Addresses Group Center Atlas Copco

Atlas Copco - Annual Report 1999

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