Atlas Copco 2008 â tough ending to a record year Annual Report ...

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administration reportBoard of Directors’ Reporton 2008 OperationsMarket Review andDemand DevelopmentAtlas Copco recorded strong order growth for most of its productsand services in the first three quarters of 2008 but with the globalfinancial crisis accelerating during the fall, demand fell sharplytowards the end of the year. The largest swing in demand was seenin the mining business, which recorded excellent growth up untilSeptember and then suffered from both order cancellations andlower volumes. This development was a result of sharply droppingmetal prices and lower demand for raw material. The demand frommost manufacturing and process industries for industrial equipmentwas more stable, but this segment also experienced a slowdownin the last quarter. Demand from the construction industryslowed down in certain areas already early in the year. Order intakefor aftermarket products showed continued strength and recordedhealthy growth through out the year.Orders received increased 7%, to MSEK 73 572 (69 059).Volumes decreased 1% for comparable units with a similar developmentin all business areas. Construction and Mining Techniquevolumes decreased 2%, and both Compressor Technique andIndustrial Technique were flat. Prices increased 3% and structuralchanges (acquisitions and divestments) added 5%.See also business area sections on pages 24–35.North AmericaNorth America accounted for 18% (20) of orders received.Demand for mining equipment was very strong during the mainpart of the year, boosted by high activity in the coal mining sectorin the United States. Order intake for most types of constructionequipment decreased as the weakness in the residential constructionsegment spread to other parts of the construction industryduring the year. The demand for compressed air solutions, includingair treatment and aftermarket products, from the manufacturingand process industries remained relatively favorable throughoutthe year. The motor vehicle industry had a tough end of theyear and demand for advanced assembly tools and systemsdecreased compared with the previous year. The good developmentin many segments early in the year was offset by the deterioratingbusiness climate in the last quarter and in total, ordersreceived were flat in local currencies.South AmericaSouth America, representing 8% (7) of orders received, was notun affected by the global slowdown in the fourth quarter, butdemand held up better than in other regions and most majorcountries recorded double-digit growth for the year. Increaseddemand was recorded for compressors, mining and constructionequipment and industrial tools. In total, orders received increased23% in local currencies.EuropeThe development in Europe, representing 39% (40) of ordersreceived, varied between regions and industries but the generaldrop in demand in the fourth quarter was also visible here.Demand for mining equipment was strong in Eastern Europe.Demand from the construction industry in Western Europe weakened.Order intake for light construction equipment from rentalcompanies were considerably lower than the previous year. Investmentsin compressed air equipment continued on a good level forlarge machines while demand for small and medium-sized compressorsweakened, especially from customer segments with a consumerexposure. Demand for advanced assembly tools and systemsfrom the motor vehicle industry increased. Geographically,the best development was recorded in Eastern Europe, the Alpineregion and the Nordic countries. In total, orders received increased1% in local currencies.Africa/Middle EastThe Africa/Middle East region accounts for 12% (10) of ordersreceived. The region developed favorably for most products andservices. Demand for mining equipment was particularly strongin southern and central Africa. In total, orders received increased29% in local currencies.Asia/AustraliaThe demand in Asia/Australia, representing 23% (23) of ordersreceived, leveled off in the fourth quarter but the region startedthe year with strong growth. Demand for mining equipment wasvery strong in Australia and Asia recorded good growth for constructionequipment during the first nine months. Demand wasalso solid for compressed air equipment although the previousyear saw some very large Asian orders, which were not repeated in2008. Order intake for industrial tools was healthy in Asia, bothwithin the general industrial and the motor vehicle segment. Intotal, orders received increased by 4% in local currencies.Significant Events andStructural ChangesAcquisitionsThe Group completed six acquisitions during the year, whichadded annual revenues of MSEK 345 and 459 employees. TheCompressor Technique business area made four acquisitions,including two distributors, but also divested a non-core part of itsrental business in Spain. Another distributor acquisition wasannounced in January 2009. The Construction and Mining Techniquebusiness area completed one acquisition and also acquireda 25% stake in two Indian companies. The Industrial Techniquebusiness area acquired a distributor during the year. Acquisitionsare always integrated into the existing business structure in orderto give the best possibilities for profitable growth and to exploit synergies.See also business area sections on pages 24–35 and note 2.12 Atlas Copco 2008
New divisionEffective January 1, 2008, Atlas Copco’s first service division was createdwithin the Compressor Technique business area. Customer serviceand spare parts operations from other divisions within the businessarea have been merged into a dedicated service division.Personnel reductionsFollowing the drop in demand across the businesses during the fourthquarter, measures to adjust capacity and costs have been taken acrossthe Group. The workforce was reduced with 1 365 employees in thefourth quarter 2008. Costs related to these activities amounted toMSEK 258 in 2008.80 00060 00040 000MSEKOrders receivedChange of President and CEOIn January 2009, the Atlas Copco Board announced that RonnieLeten, presently President of the Compressor Technique businessarea, will be the new President and CEO of the Atlas Copco Group,effective June 1, 2009. He will replace Gunnar Brock who has decidedto leave his position after seven years of leading the Group.20 000004 1)05 06 07 08Orders received, MSEK1) Including discontinued operations.Subsequent eventsIn connection to the fourth quarter results on February 2, it wasannounced that additional reductions in the workforce will be madeduring 2009, which are expected to affect more than 3 000 peopleglobally. Costs related to these reductions are estimated to totalMSEK 400.Geographic distribution of orders received, by business area, %CompressorTechniqueConstructionand MiningTechniqueIndustrialTechniqueGroupNorth America 15 21 21 18South America 7 11 5 8Europe 43 31 57 39Africa/Middle East 10 16 2 12Asia/Australia 25 21 15 23Total 100 100 100 100Distribution of orders received, by geographic region, %CompressorTechniqueConstructionand MiningTechniqueIndustrialTechniqueTotalNorth America 40 48 12 100South America 43 51 6 100Europe 54 32 14 100Africa/Middle East 42 56 2 100Asia/Australia 55 38 7 100Orders received by customer category, %CompressorTechniqueConstructionand MiningTechniqueIndustrialTechniqueGroupConstruction 14 37 1 22Manufacturing 36 0 84 25Process industry 26 0 2 13Mining 6 56 0 26Service 9 2 2 6Other 9 5 11 8Total 100 100 100 100Customers are classified according to standard industry classification systems.The classification does not always reflect the industry of the end user.Near-term demand outlookThe current economic situation makes the outlookvery uncertain, but demand is expected to remainvery weak in most industries and regions.Published February 2, 2009Atlas Copco 2008 13
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Audit ReportTo the Annual Meeting o
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Sustainability ReportAtlas Copco’
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SUSTAINABILITY REPORTRoles and resp
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SUSTAINABILITY REPORTSociety and th
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SUSTAINABILITY REPORT10080604020050
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SUSTAINABILITY REPORTIn 2008, CO 2
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SUSTAINABILITY REPORTwinter and coo
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SUSTAINABILITY REPORTNo. of acciden
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SUSTAINABILITY REPORTBusiness Partn
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SUSTAINABILITY REPORTShareholdersTh
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SUSTAINABILITY REPORTSustainability
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Corporate Governance ReportThe Boar
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Corporate Governance ReportBoard of
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Corporate Governance ReportGroup St
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Corporate Governance ReportGroup Ma
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Corporate Governance ReportRemunera
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Corporate Governance ReportBusiness
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The Atlas Copco ShareAt December 31
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the atlas copco shareOwnership stru
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Five Years in SummaryMSEK 2004 1) 2
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Financial InformationWelcome to the
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We are committed to yoursuperior pr
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