Atlas Copco - Annual Report 1999

INDUSTRIAL TECHNIQUE
INDUSTRIAL TECHNIQUE
Competition Intensifies
in Dynamic Markets
For Industrial Technique, stable demand from the engineering, automotive,
and construction industries led to a rise in sales, to SEK 10,345 m. (10,059),
despite the August 31 divestment of Atlas Copco Controls. The operating
profit margin ended at 10 percent (10), or 9 percent excluding the non-
recurring items presented below.
1999 1998 1997
Revenues, SEK m. 10,345 10,059 9,316
Operating profit, SEK m. 1,032 1,046 942
Return on capital employed, % 14 14 13
Investments, SEK m. 323 338 279
Number of employees 7,133 7,831 7,898
Industrial Technique develops, manufactures, and markets
pneumatic and electric power tools and assembly systems. The
business area operates plants in the U.S., Sweden, Germany,
France, Great Britain and India.
Revenues
Revenues rose 3 percent, to sek 10,345 m. (10,059). Orders received
were up 5 percent, at sek 10,533 m. (10,015). All regions
except South America reported sales on a par with or higher
than sales in 1998. The North American market, in particular,
enjoyed strong revenue growth.
Earnings
Operating profit decreased 1 percent, to sek 1,032 m. (1,046), representing
an operating profit margin of 10.0 percent (10.4).
Return on capital employed was 14 percent (14).
Operating profit included non-recurring items of sek 83 m.
related to the net effect of restructuring in the Alliance Tools
division and proceeds from the divestment of Atlas Copco
Controls, effective August 31, 1999.
Business development
The business area enjoyed a healthy level of demand overall.
The dynamism in the market is driven by demanding customers
who make tough demands on continuous development, innovation,
and value-added services.
Milwaukee’s electric tools are marketed and sold through
industrial, contractor, hardware and home center distributors. The
Internet is used to support sales activities. All of these channels
focus on expanding their businesses to reach professional endusers.
As the premier brand in this category, Milwaukee has a
56 ATLAS COPCO 1999
clear opportunity to seize a leading position
in all channels by providing the right
products, training, marketing, and sales
support that will enable them to grow
among a wide range of professional endusers.
In 1999, Milwaukee grew its business
by further broadening its product range,
boosting accessories, and capitalizing on
campaigns related to the company’s 75 th
anniversary.
For Atlas Copco Industrial Tools and Equipment, business
developed favorably in 1999. A refined growth strategy was formulated.
Growth will be generated through closer customer relations
for better customer satisfaction, increased revenues from
services, and growth in the base business. The foundation for
growth is innovative products and a focused market segmentation.
In this context, the service concept can encompass numerous
activities, including installation, repairs, preventive maintenance,
replacements, inventory management, calibration, torque
setting, training, and production engineering.
To improve internal and external efficiency, Atlas Copco
Electric Tools is currently consolidating its manufacturing and
sales organization. A regional office for Asia was recently established
in Singapore, and the European structure of the division
will be refined for more efficient service to customers. All production
activities have been concentrated to Winnenden, Germany.
In the Alliance Tools division, the different business units
developed unevenly. While Chicago Pneumatic’s Automotive
division, and Georges Renault further exploited their base businesses
and new niche markets, Chicago Pneumatic’s Industrial
and Construction units had to cope with tough market conditions
which affected the overall efficiency. In the third quarter, a
consolidation program was launched that is aimed at improving
these business units. Part of this is a consolidation of manufacturing
and development from the U.S. to England and India.
For the business area as a whole the use of products, and
specifically the accessories business, play an important role.
Product development
In 1999, Atlas Copco Industrial Tools and Equipment introduced
more products than ever before. A turbo grinder, a
series of pulse tools, and a range of angle nut runners are a
few innovations from 1999. Also, several novel tools, assembly
systems, and electronic control systems will be launched
in early 2000.
Atlas Copco Electric Tools developed a new generation of
motors and a new type of percussion drill that focus on ergonom-