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Good afternoon, good morning or good evening to everybody on the conference call. And, of course, first of all, welcome everybody here in Stockholm to the conference call on the interim report for the year 2018, or the Q4 report, as we normally call it. We will follow a nontraditional format. We will try to end within the hour, and at least half of the time or preferably a little bit more will be dedicated to questions and answer session, where we will take intermediate questions from the audience here and the telephone conference, but we will definitely come back to that. I will say as I normally do, I ask all the people that have lined up for questions during that session to restrain to one question in order to allow as many people as possible to ask their direct questions to management. So with that, I think we can just kick it off and I invite our CEO, Mats Rahmström to the podium.
Thank you, Hans Ola. If I start then with quarter 4. On revenues, proud in my organization that we reached that SEK 25 billion, 7% organic growth. Actually, it proves a little bit that operations was really delivering in both Q3 but also in Q4. So I would say that -- if you talk about deliveries as such, I would say that in principally over the year now we are catched up and back on normal delivery time and with the new setups a little bit with some new suppliers, we also claim that we are a little bit more agile to ups and downs in the economy.Operating profit SEK 5.6 billion, up 17%, also a record for us. Hans Ola will give you a little bit more detail later on, on the -- just results, but the long-term incentive is the main part of the difference.Service, fantastic growth in service. Really good to see that getting traction in the organization. You know that CT has always taken the lead and developed service and service programs in a good way. And I think where I came from, Industrial Technique have followed and also generate good growth on helping our customers in a good way. Now we also see Vacuum Technique good in semi but also the industrial side we see relative growth month-to-month so that's good to see and also in PT. So in principle, you had growth for service in all the business areas in all regions, which gives us that resilience that we really like. As we flagged a little bit earlier, there is slower activities in some areas. Auto is one sector where we see that we get a lot of requests but it takes a little bit more time to get decisions.Equipment. Still up on CT, IT and PT and then down on Vacuum. This confirms a little bit the numbers but maybe to, one, highlight that what was the orders received, and if you look at the graph, you can see that even though that the organic growth was 1%, you can see it was actually quite a strong quarter anyway. And if you benchmark, of course, it's not as strong as the Q1, Q2, but in pardon with Q3 and also if you go back one year, you can see it's still on the very high level. So we were actually quite pleased with the orders received for the quarter.On the cash flow here, you can see almost SEK 5 billion and the comparable number is around SEK 4 billion for last year from the Industrial part when we exclude the Epiroc part. Looking at the full year, it was the best year ever for Atlas Copco, and I think we had records on orders received, revenues and profit. What a fantastic year for the teams around the world. The one thing that I'm actually proud of is that we have launched a lot of new products, and I can see that the value generation in the way we design and develop and the way we train the sales force, it's more and more a consultancy role where we actually quote things today. And that's something that I think is very much appreciated when we talk real value to our customers. So product and innovation is something that really drives our business. I already mentioned service. I think in principally, all the divisions now is up and running. Some are already taking the digital step with the full connectivity and the data analytics. And some are a little behind, but I think we have taken huge steps when it comes to connectivity and the service business as well. We did 5 acquisitions. Same thing here. We have 20 divisions that is stable, is profitable. And, of course, they can take the route a little bit for organic growth. We talked about innovation and what we put into R&D, but also looking at different acquisitions now. And it's a little bit more the timing, and we never give in on the value creation. So it's really important to us. We will never pay too much from our point of view, so to say. So it will come but the plans are in place and people have very good strategy for what they like to do. We did actually the split of Epiroc as well. It's almost like we forgot it now, but it was a fantastic job done by the team. The thing I see, of course, is now with industrial focus, complete industrial focus, it actually frees up a little bit of time for us and it's a very dedicated team working on developing the industrial business. So for my part, it was a success to split with every -- so we will have that work in a successful way. But also -- so and I can see that we actually put all our resources on thinking into industrial development.The proposed dividend from the board, it's SEK 6.30, and I think it's up around 20% versus last year. So it's quite a strong increase and this is, of course, when we calculate the industrial part and split that and that's what we have on that slide. Full year's numbers. I am not going to take you through this. So in the material, orders received up 5%, revenues 8%. And comparing to where we have been in the past, I think it's quite a good ambition. We are very close, SEK 97 billion in orders received. I think it's an amazing result actually. I will spend a little bit more time on this. It's also linked a little bit to the statement we'll make later. North America, up 5% for the quarter. Strong drive in the organization and in the economy as we see it. Actually here we have the -- in all business areas, you can see positive development and also strong service development. So that complete region was very positive for the quarter.If I go down to South America then, you can see 0% but for the year, actually, Brazil is the main country for us being industrial. We are up some double-digit there, 11%. The view from our teams on the election there is rather positive, I must say. They look forward to the business environment in 2019. So we have expectations, but also there we had positive on the service SSM. So that's good. Africa, you can see in Africa, it's Power Technique with the portables and it's the Compressor Technique. They're actually doing quite okay there. And in the Middle East, it's more of a mix but there you also have Vacuum Technique and that's the part that is actually down a little bit. But that's more key account orders, I would say, so it's not that we are losing market shares or anything like that. Then if we take Europe, up 3%. I think it's like the third strongest quarter we have had. A little bit more mix there. CT is positive. We can see Vacuum is down, even though that is not our biggest region. IT down a little bit and that's probably related a little bit to the auto sector as we see it. Power Technique, also positive. And also the add-on service is positive.The one area where we see a little bit of issues is, of course, U.K. I don't think I need to imagine the reason for that but the investment climate is not what it has been. But the engine of Europe is Germany, and there we see a little bit of a softness now. I think it's related a lot to the auto sector with the new expectations on diesel versus petrol, for example. It can also be the possible tariffs with the U.S. but Europe is a little bit softer there. We also see Italy and Turkey, of course, being a little bit more turbulent. And take Asia. It's 1% down. But it's mainly downlinked to South Korea, which we also mentioned in report. It's actually quite positive still for Compressor Technique and Industrial Technique. Power Technique is rather small. It's mainly portables that we sell. And South Korea down a little bit. China kept up on the good level but we still see that there is a hesitation in the decisions in China as well for the bigger projects. A little bit the same here down. Of course, the 1% is down related to the Vacuum Technique. The other ones have positive development on equipment. Currency still with us, 5%, both orders received and revenues. Maybe you need glasses in the back. What I am happy about, Industrial Technique, of course, 4%. Power Technique have had 2 very strong quarters. It's a good mix in Power Technique right now as well. A lot of rental business, a lot of portables is that you see in the profit. But the big engine for our operations, of course, is to make sure that we have strong growth, and organic growth in Compressor Technique. Launching a lot of new products. I think you've seen it on Capital Markets Day but also in this presentation there and there is more to come there. And I think that's the only way for us to stay ahead of the competition and it's good to see that they are at 7% for the last quarter of the year. And then we start with Compressor Technique. As I mentioned, 7%, which is good. Record revenues. I think you can see that on the bar there, very strong for them as well and 23.1% operating profit. So I think the only discussion me and the management have is like why do we develop more top line? Where can we find more business in the world? So that's an important task for them. North America, Africa, positive, slightly down, more soft or flat in Asia and Europe. And also the biggest compressor that we have also very, very positive for the quarter. And even here then when we have the 1:1 ratio with service of our equipment, we see strong continued growth with service. And they are furthest ahead with the digitalization. Every of the standard compressor is connected today principally if the customers allow it. And we can increase it make service calls to the customer, and we are seeing something happen there, especially if they sign up with a service contract. And it is very much appreciated, and I think we start to see how we can create real value with digitalization. Vacuum Technique, 17% decline. And it's mainly in semi and of course, looking at the sequential then orders received, you can see it's slightly positive and the way we look at it, Industrial was rather flat. But they also had the -- quite a tough comparison with big orders from last year. And actually the sequential growth is from semi, but I need to highlight it's more of a key account approach. This could have been in Q3 or in Q1. We don't see a shift there in any way but still positive that we are on this level. And if you look at the level where we are now and you can compare it with 2017, I think we are on a high and a good level, and we should be able to deliver good profit on this level. Margin, 25%, still a top performance I think from the Vacuum team. And the service is extremely important here for us to get that resilience. You know that -- I think it's 60%, we normally say it's semiannually if it's 60%. And to get there, the industrial growth in equipment, and of course, also the high and the service division to grow, it's very, very important for us. And normally, we say around 20% is service but that is, of course, increasing by the quarter when this is developing. So very happy about that. Underlying demand, still we very much believe in this market on memory and logic. You can see different reports coming out but the way we operate and the way we connect ourselves, so we still believe the market is developing in a very good way. We just need to be a little bit patient and see when it comes with a little bit bigger orders as well. I should mention also you know that we intend to buy Brooks Automation in the U.S. When we sat down, we said that we would close it Q1 most likely. Due to the government shutdowns that handles the regulations, we believe it's more pushed into Q2 right now. And when we have more news then we have to get back to you, but I wanted to mention that. Industrial. Look at the gray bar on the right. They really picked up on deliveries and record revenues, very strong. But also you can see 4% organic growth even though that we see more activity on the general industry market and somewhat softer then on the MVI market or auto market. But there's a couple of things that I find interesting when we talk about auto and, one is, of course, that the footprint discussions, so why do I need to manufacture my cars due to different tariffs? And if put that in a little bit perspective, if someone moves a factory, that's really good news to us actually because it's very unlikely that they would bring tools and their systems with them. So that kind of -- that makes a little bit hesitant, right, could be good for us. If they change powertrain, if they go from diesel to petrol, that's positive. If it goes to hybrid, so if it goes to electric, that -- those changes, of course, is also retooling and change in technology. So in the long run, they are not directly correlated, as you know, to the production output or sales. It's more the project based and running new programs in the pipeline. And then the product portfolio now is of course with the sound equipment, we have the dispense equipment, we have the self-pierce riveting and also the flow drills. So if a customer says, well, I'm going to use more mixed material in my design, which is principally around us, then we have a lot of the technologies for them to help them out with the next-generational cars. This is also part of the product launch that we do here. It's also part of the digital journey. This is QAT, quality assurance systems, and now we can connect that in a good way and get more analytics into a vessel also. Also on the product side, we're developing more and more digital solutions. If Andrew were here, he would say that he is the star performer because we have very strong development in orders received for a couple of quarters. I'm pleased to see that. I mentioned it earlier, I can do it again. It's rental doing very well, specialty rental for us and also portables, which is very positive for our mix. And you can see that we made a lot of changes here before light construction is out. Dynapac is out, but you can also see that on the -- if you look at the last 4 quarters, it's a little bit on another level where -- compared to where we've been in the past. So I think that focus on a number of products and customers and the restructuring we did of the sales team around the world, is actually paying off in a good way. And the margin now down 16.5% almost, adjusted 15.4%. I think it's an okay margin, working a lot with the rental company and construction markets. So return on capital employed is also good. So I think we start to look more and more at what can we do more? Can we help our customers with more products or more sales? Asia is a little bit untapped. I think for portables we are there, but other products is a little bit less. The new machine here on the picture, part of our rental fleet so it's an oil-free machine. And it's also now designed with the latest emission standards available, which is also very, very good. So if I summarize down I think you've seen all these numbers. It's of course on the record revenues, so we're happy with record profit and I want to highlight the strong orders received, service growth in all business areas, and, of course, the strong cash flow. So, Hans Ola, you're going to help me out a little bit?
For a while. Yes, and I'll invite you back for the tricky part. Exactly, so we have talked about the operating profit performance as you can see on the slide there. And of course, as you have read the reports, you know that we had some help in there this time in this quarter. The stock market was going down and so did the Atlas Copco shares so the provision for long-term incentives that we always carry, we could release some profit from that or some provisions from that. So adjusted, the margin was 21.9%, and if we look at last year, we had the opposite effect. There was a negative in the reported results so the adjusted profit last year was 22.2%. We are hovering around that level as you can see. Further down, there were more special items this quarter than we normally have. We had in the financial net, which of course is the difference then between operating profit and profit before tax. We had an extra gain, you can say, of SEK 360 million, which is related to currency effects and tax effects that comes from an internal restructuring inside Atlas Copco.We reorganized the structure and hence we have to do certain transactions at market fair value, which is exactly according to the rules. But that means that we can have these type of effects as a one-off from time to time. We don't do these internal restructurings of ownership within the group all the time, but this time, we have it, and it was quite significantly positive. And that's why we mentioned it specifically. What you also saw is we gave an information that the interest net, which is more of a normal run rate minus SEK 98 million, which I would also think is pretty close to what we expect going forward for the near couple of quarters. So around SEK 100 million negative. The other effects, like we saw a big positive this quarter, might come but then, of course, it's a one-off and then we will comment on that. So that's how you should read, let's say, the financial net. If we then look at the low profit before tax, we have the income tax expense, another positive one-off that sums -- a couple of them actually, that sums up to SEK 600 million positive roughly. The biggest one is related to a refiling of tax declarations in Belgium, which we have been allowed to do by the Belgian tax authorities. And those of you that remember a couple of years ago, we had a big negative from the EU Commission challenging the way that Belgian State taxes companies, and we were one of the affected. But the Belgian State also recognized that had you known this, you would have filed in a different way, and we got the positive of that, which was more than half of those SEK 600 million positive. Again, we mentioned the SEK 600 million because we don't consider it run rate. So if I adjust for it, we had a tax of about 22.5% and that -- even that was slightly below run rate. I expect it to be somewhere above 24% going forward as a best guess for the next couple of quarters going forward. And last year, to be fair, it was also an extra negative on the tax rate. Otherwise, it would have been around 26% instead of the 30% you see here. Effect on basic earnings per share is of course also including these one-offs and it's roughly somewhere like 80 or in that neighborhood that you could say it's too good to be a run rate of the earnings per share in the fourth quarter. If we move further and looked at the famous profit bridge then where we tried to eliminate the noncomparable effects of the long-term incentive program that I mentioned, the acquisitions and other items affecting comparability and the currency effect, then we get to a relatively meager flow-through of about 6% in the quarter. So in other words, the extra revenue hasn't yielded too much. There are basically 2 effects explaining that, and I'll turn to the next and then we can see that one of the reasons when we looked at the different business areas on this slide, you can see that Vacuum Technique, which has grown in revenue but very small in relation to the SEK 5.7 billion that they have in turnover. And the reason why there is no profit leverage, so to speak, from that small revenue increase is basically that this is not an exact science between each quarter. And I would still argue that we see a similar type of normal flow-through, normal leverage in Vacuum Technique as we see in the other business areas over a period of time. In this case, of course, it's a reflection that Mats have not forced a reduction of investments. Mats has not forced a reduction of R&D expense, in spite of the fact that they had faced a little bit of a tougher market environment. So hence that relationship here in Vacuum Technique is, of course, also affecting the previous slide. And the other effect was on the corporate side where there were some effects in the quarter that was bigger negative effects than in the previous quarters. But otherwise, if we look at Compressor Technique, if we look at Industrial Technique, and Power Technique, they are all showing a sort of a healthy leverage in the way. You could say that it's below 30% that I have guided for before in those cases, but again, over time, I think 30% is still something that one can look at. But for each quarter, there will be variations in a similar way that Power Technique had the opposite, a much stronger-than-normal. Balance sheet, I won't dwell too much. You can see the dramatic impact of us having split out Epiroc as a separate company. So it's difficult to read these comparisons. I think it's easier if we look here. Well, not so much easier in this slide, but I can guide a little bit better here if you look at the cash flow. Specifically, the fourth quarter this year is unaffected by the discontinued operations of course. So we -- just as Mats said, we have about SEK 5 billion in operating cash flow before we make acquisitions and before we make dividends, et cetera, and if we eliminate in an estimated way, we don't have audited statements for continuing operations on cash flow. Hence, we just say that it's around SEK 4 billion that would be comparable to the SEK 5 billion this year. But this -- these 3 columns here, the last year December, the full year '19 -- '18, and the full year '17 has that included. Earnings and dividends, I talked about the effect of these onetimes and of course, that helped us to come almost at the earnings per share of last year when we were including the discontinued operations. The proposal, SEK 6.30 is looking like that, but if we try to put it in perspective of the continuing operations and again, I would state -- I stress that these are estimated -- the dividend number here is not audited to be SEK 5.20. It's just to give a fair representation of what the continuing operations had last year. So with that, I hand it back to Mats for some final comments before the Q&A.
Thank you, Hans Ola. You flipped it here already. So this is something that it's a little bit of a new initiative in the group and I think it can be very valuable for our shareholders and our customers. And principally what we see is that, as you know we generate good cash and from time to time, you can even say that we are cash rich. And we say that well, with the return on capital that we see, could we generate more organic growth? We have good acquisition plans, we can finance that. But what we have done is we went back to the organization, in principally, you can think about yourself as R&D managed the 1 out of 21 divisions and said, well, if you really could fund more R&D projects, what would you do? How can we do that? But there are some criteria that comes with the package. And that is one, it's not more of the same because we already financed the next generation of what we already have. So it be -- it needs to be something new. It needs to be adjacent. It needs to end with the same customers and it should be real products. It's not a lab or a core development. It's something that has a marketing plan, something that we can see market potential for. And what we're doing, in principally, is trying to see if we can finance a little bit more of the industrial ideas that we talk so much about in innovation, and we see of course less risky than acquisitions and also generating very good value creation for our shareholders. So the challenge is out there right now with 21 divisions and in principally, when they have their business reviews, which they have quarterly, they can come and say, "Okay, I have this, which is part of my core, but my customers also would like to have this. This is the potential market for this. This is how we can get there. A program would look like this." So we think it's something that's internally and with our board at least have been seen as something very positive to see if we can really see if we can find new ideas that can drive our top line. But then at my first meeting when the BA come and they present to me and Hans Ola and then he said, he had 3 projects that we wanted to do and then we learned, okay, so if we invest in this, will we actually get the real product? And they said, well, we don't know because we haven't tried yet. And then we say, we need to try something different. So we have pushed this a little bit and changed a little bit how we finance this. And they said, okay, Mr. R&D manager, you say that this is an idea that you have, can you build a prototype in 3 months or 6 months? And then we only finance that period and then they come back with it and we look at it again and say, okay, you are here so we finance the rest. Normally when we finance it the next generation of tools, the compressor, it's programs that last maybe 2 to 5 years and that's not what we're talking about. This is new things that is adjacent to the products that we sell today. How much we are going to spend depends on the ideas, probably not crazy money but it's something that we think that we can, over time, continue then to drive organic growth in the group.I think this is the final slide. Hans Ola and I have been debating over the last week this sentence. We don't use it so much internally, we work more with the continuous plans already for any scenario but we also like to guide you the best we can. And we have been in between in what we say here, somewhat lower orders or should we say remain on the current level because we have already indicated a little bit what's happening in some segments. And that's been going on a little bit between us but after a couple of questions, we said so if we look forward a little bit for the coming 3 months, what do we see as changing to something more positive. And the 2 things we said that would maybe turn things to a more positive, one would actually be the Brazilian market, where we see things that there is a positive environment right now, and the other thing was that if the Congress solved -- resolved the trade barrier discussions, Europe, U.S., China, if that happens, we also think that the decision for some of the investment could actually turn this to something positive. But then I said so was our products not so positive then for our business. We can see a little bit softer business in Germany, as I said. We can see a little bit more time in Asia, specifically, China. And then we also said that, well, all the global indicators that we see is actually taking down growth and as diversified as we are in all industries around the world, it will influence us as well over time. The tariffs, which could be positive if we find solutions to it. On the other side, it's been, say, the 25% tariff to some of the products for -- it's very little influence on us but it could have very big influence on our -- some of our customers' decisions. So that I don't think if that could not fix, so. Brexit, clearly negative. U.S. and U.K. business is significantly slower. Yellow vests in France, very little impact financially on us, but still the GDP growth rate in France is already low and I think they expect this to be not positive going forward either. Germany, I mentioned. The finances in Italy, the issues in Turkey, so we have said that, well, looking at this both sides, we cannot say anything else and that's somewhat lower than current level. And that's where we, in principally, ended up as a guidance for the coming quarter. Hans Ola?
Thank you, Mats. Then to the fun part, as I said, the questions and answers. We will do it the same way. I think first of all, for the conference call participants, can you please repeat the instructions, operator?
[Operator Instructions]
Great. So I'll take the 1-second silence before we take the first questions to say what I forgot. Sorry, before we let you in, I forgot to say what I normally do. I say what is the currency impact going forward? And I got the queue mark from the team here. We believe if the rates stay as they are, the dollar, euro, kronor and everything, about the same bridge effect between Q1 and Q1 last year as we had between Q4 and Q4 2017. Roughly the same, in that respect. So sorry for that, that was something I forgot earlier. First question?
Andreas Brock at Coeli. So the star in the portfolio this quarter was Power Technique and, Mats, you mentioned there about the margins, saying coming up now to recently very good level. On the flip side, I will say that the consolidation in the rental business in the U.S. like the United Rentals, et cetera, that should over time give them economies of scale and start pushing down your margin. What are your thoughts about that?
Sorry, the rental business is doing what? It was difficult to hear.
It was consolidating in the U.S. So over time that should give them bargaining power and that should push your margin down. But -- to the contrary, your margins are doing very well and going up.
I actually believe that on those type of products, you can already today see that the price is one factor, of course. What I say to my team at least is that if we're going to sell to a rental house, we need to differentiate something with the product. It's actually more than price but otherwise, you are absolutely dead-on. If it's just important that if you don't take full advantage out. But they're working on the product portfolio. The Electric, you have seen already. They're working on more environmentally friendly. So they're trying to add a little bit to that like we do in all parts of the world. So I think innovation brings it forward and I can say that the brand recognition gives us a little bit of a price premium in many of the discussions. Also, delivery capacity making the product. So I am not saying that you're wrong. I am just trying to say what is our counter to a scenario like that.
Yes, here in front. We have one more.
It's Anders Idborg from ABG. So on the margin mix, in Vacuum, you still have sales growth in Vacuum, albeit very low now. You still talk about -- and you have services growing, but you already now talked about a deteriorating mix. So what are the big moving parts there? I assume you have some pieces within equipment that starts dropping off for semis, et cetera. And particularly then when we move into 2019, I assume we have a much lower billings of semi equipment. So how will that affect basically mix in the first half of 2019, please?
No. But I think that as you know, we don't go into details exactly how we break it down. But if you've followed us, you can see that it's an area, of course, with less invoicing, could possibly then challenge us a little bit. On the other side then we are building the service business, we are building the industrial business with new products. So even on the orders received levels that we are today, I believe we'd have a healthy profit. I don't know, Hans Ola, if you'd like to add something there?
No. We are of course comparing with periods where the semi-equipment part or that division within semi was extraordinarily successful in both the high level and the output they got through, the factories was extraordinary, so it gave a very good profit impact. And that's the reason we talk about the slightly different sales mix perhaps, but that's the main reason comparing backwards. We believe that we are very resilient in relation also to the other businesses of Atlas Copco.On the other hand, when you have the effects of last year with 25% and even 26% operating profit, what we do believe is that also on the flip side when revenues fall, you will also have to expect that we are affected in a similar way on the downside, i. e. a little bit more than what Compressor Technique can show in the downturn, for example. So the oscillations are slightly bigger in that sense. Still, we believe that the operating profit margin performance is really something that we can be fully compared between their Vacuum Technique and Compressor Technique over a period of time. There we have not changed our opinion, really.
And I think for the complete level for the VA, I think it's enough that you go actually back to 2017 to versus where we are right now and then the -- it could be a little bit of mix differences, but that's why I say I'm quite comfortable with volume that we have right now. On top of that, in the semi-division, since it's a little bit more up and down, we also have significantly more temporary employees than in the other divisions. So we should be able to adjust quickly than in any other area.
It's Andreas Koski from Nordea. So maybe I could follow up on that because, as you just mentioned, you'd expect somewhat bigger oscillation in the EBIT margin for Vacuum Technique than for Compressor Technique. Is that based on bigger moves in volumes or is it also that you expect a higher drop-through during those times because during your presentation you said that the drop-through will be around 30% also for Vacuum Technique. But in -- is that what you expect also when revenues drop significantly?
That's normally -- that's basically what we refer to, yes, because of the key account structure and the sensitivity to not having the same diversity as the other businesses that I referred to. But you can also say that the level of Vacuum, the level of service business is significantly lower, still. It's around 25% perhaps right now in Vacuum but it's about -- close to or above 40% in Compressor Technique, as you know.
So you do not expect that the drop-through will be closer to 50%, 60% as we saw during the growth period in 2017 and beginning of 2018?
I think that was extraordinary on the positive side because we were catching up with investments, and we still managed the output and that was extraordinary I think you for that period, yes.Are we having some questions in the call?
Operator, do we have any questions from the call?
Our first question comes from the line of Graham Phillips from Jefferies.
My one question is on Vacuum Technique. You mentioned the industrial high-end decreased in terms of activity. I think it's the first time you've mentioned that, and can you sort of contrast a little bit about the decline in orders we've seen for a couple of quarters now? How quickly would that result in a decline in sales given there is some incremental sales coming from I think the EUV, ASML work that you were talking about last year? And does the service and the orders, are they comparable when you think about -- sorry, are orders and sales comparable when you think about the impact of service -- growing service element. Are all the service orders booked in orders?
Yes. On the last part, I can confirm that when they have service revenue, it's the same period as the service order, basically. If that was one question that you have.
When we look at the industrial, it's actually a couple of divisions in that. When we see the numbers, we also said in principally it's okay, so why don't we see the same relative growth as we have seen in the past. And that's a little bit back to the industrial. And our capital applications that touch a little bit on mobile phones as well. They might not do the screens but they might do the backside of a phone, for example. So you have a little bit of that but not much.But the big thing is, in principle right now at least is that they have seen that the market is still good out there, but the benchmark we have now for this quarter was really tough for them. So we still expect, and we are pushing them to continue to push out the new product, and we like to see a continued market share gains in the industrial and High Vacuum, in principally.
Okay. But as you think about sort of the markets there, the industrial markets in Vacuum, let's say, compared to the industrial markets in Compressor, you have got presumably exposure to more price-sensitive industries, oil and gas infrastructure, China. I mean, it does seem that there's a dichotomy there, one is looking much better than the other.
Hans Ola, do you want to take that one?
Yes, I think I understand what you mean that the comments about small- and medium-sized industrial compressors looks healthier than the comments in the Industrial Vacuum equipment. Is that what you mean?
Yes.
And then, of course, what you saw also on Compressor Technique that it was slanting towards the biggest increase as we saw there were in the large and gas and process compressors. So I wouldn't refer to it as a tremendous world of difference between the two. And then if you couple it with the two comments that Mats made that on the one hand, we had a couple of very significant orders to this sector in vacuum equipment, last year it made the comparison very, very difficult. And secondly, there are in the electronics industry or whatever we should call it, mobile phones is an example of it, there are applications where they have seen a clear impact of the downtrend in Asia that we have talked about also from a semiconductor perspective. So there is some overlap in that like Mats mentioned.
Our next question comes from the line of Klas Bergelind from Citi.
Mats and Hans Ola, it's Klas from Citi. My question is on the guidance and thinking about sales volumes for the year. You're guiding for somewhat lower into the first quarter. I know that this is perhaps tricky to answer, but I get this to maybe down 4% to 5% from current levels to SEK 22.5 billion, SEK 23 billion. And the first quarter is typically the largest, at least over the last few years, they've had an annualized that, consider your lead times, this means that sales for the year if we stay at this level should come down mid-single digit. So I know you don't guide for the year, but given the importance of the first quarter, I'm curious to understand what you mean by somewhat lower. And then also I had a sort of question within this. In your conclusion Mats, you didn't mention on the uncertainty side Semis or automotive. So are you effectively saying that the uncertainty is more on the industrial side, just to confirm that? So first, was it somewhat lower roughly, and on semi automotive, please.
I can start -- I -- always tricky to follow you, Klas, because there's so many questions. But if you take Q4 versus Q1, that is correct that Q1 is orders received normally an average somewhat higher. We normally don't see seasonality but if you actually match it, you will see that there is a little bit of a change there. On the auto sector, still, concern among many of the manufacturers and that is actually quite a lot of projects in the pipeline because everyone knows that they need to make the change. If that is for powertrain reasons, that could be done all the way to electric, or if it's a diesel discussion to more of a petrol solution. So there's a lot of business out there, so it's not by any means that we were not working or anything like that. But it takes time today to get to a decision point where they say this is actually what we're going to do. And that's why I also said in my positive view on Q1 if we get a solution on the disagreements on trade, I think a lot of those decisions could be significantly easier for our customers. So that's a little bit where we are right now. If you go China, it's the biggest part where they're actually quoting pure electric and it's significant higher than sales today, so they are really on top of their strategies when it comes to electric. So that's part of what I would say in Asia that also keeps that up a little bit. Then they take in a very little bit of the subsidies for some of the cars so that's what we see there. In semi, I comment anyway that since I brought it up before I think that's fair. Semi what we see, even if then if you read anything about semi, they say CapEx is probably down in 2019 versus 2018. Okay, so we take that. And that might between -- the guidance might be between minus 5 to minus 15. But when I have my discussion, my team is like, well, the Q1 and Q2 was so fantastic in semi so even if you get a rounding business on that level, it's still on a very high level for semi. So I'm not saying it's turnaround, we're going to see something like that. I'm just saying that semi, the drive that they have towards technology and the technology investments, that is not one of the bigger plays that they get away from, otherwise, the Chinese will catch them. So for sure, over time, the investments will be there. Exactly when? We don't know, and we have to live with that. That's a little bit where I stand on semi and auto. Hans Ola, I'm sure Klaus had more questions, but I didn't pick those up.
No, I think you summarized those two at the end. So what is somewhat in semi and autos, so I think you covered it well. Can we take one more question from the conference call because we took 3 there, we take 3 there and then we can go back here in Stockholm.
Our next question comes from the line of Guillermo Peigneux from UBS.
Guillermo Peigneux from UBS. Question regarding Semis and it is more informational for me. Can you point us as to how much is China as we stand in Vacuum Technique? How much of that actually will be Semis, how much of that will be Industrial, if you can share that with us.
I don't have that.
Well, the China part oscillates, of course, just like the Korea part oscillates. So it is a little bit tricky, and I don't want to go into make too many comments about specific quarters, even let alone months because there is variation. And this again comes back to the comment we have done many times now that it's a key account business when it comes to semi equipment and hence it's difficult. But China is definitely one of the biggest countries, I mean whether it's -- the 3 big ones are always U.S., Korea and China.
But you don't mention China as being weak in your press release today.
We include the high -- the display market as well in that comment as you could see, the flat panel display equipment.
I think China has made quite a lot of investments in new greenfield plants in principally. With the ambition that they have to be a leader, I think the teams that are now invested in these companies expect results. But if they want to go all the way, I think they probably need to double the investments over time from where they've been. So -- but that's -- that might be still far in the future, I think they need to deliver memories or logic to the customer in a good way right now. So that's the position where they are, so. But there were some huge...
And regarding gas and process, obviously, this typically goes to process industries, but could you mention which industries were for you more positive during the quarter.
Primarily it was gas related I would say that stood out but not only as one single application. But that was some significant orders in that, yes.
Was it down on CT?
On CT specifically, if we talk about the gas and process compressor component.
Yes, they had a strong quarter.
Thank you, Guillermo. One more question here in Stockholm, Anders, please go ahead.
Anders Roslund, Pareto. I had one question regarding Industrial Technique. That's normally your early cyclical business. It was holding up relatively well. What do you see there in terms of automotive and general engineering versus a longer-term trend of automation and robotics?
Good question. I think, first, it's more than half of our business because we have the -- a family business in the auto sector, but we also have the dispense business, which is principally also in auto, maybe 90% to 95%. As I said, the auto, they have their challenges, but a number of these projects going on is actually to our benefit over time. And that's what we see. If you want to build a lighter car, you need to go to some other materials, spot welding will most likely not be possible in composites or aluminum, so then you need some sort of glue, and we have the dispense system to do that. You can go to fluid drilling or self-pierce riveting if it's aluminum to aluminum, so we can have the market with that as well. So those changes are very interesting. What we are going after right now in auto is a lot of the battery manufacturers around the world. And that we have now for quite some time now and the battery manufacturers, they actually use all our technologies that we have available. There's a lot of safety applications because you want it to be very stable and actually, it should dispense equipment as well. So there is a lot of that. And then there is a strategy between different OEMs if they actually want to build packs themselves, put them in the car or if they want to source the complete package. But that's one of the new interesting tiers in the auto industry, I must say. General industry, I think we saw in the report that they continue to be fairly strong. You have the aerospace, it was mentioned, the off-road was mentioned as well, and some of the bigger customers there like Volvo and I think Caterpillar delivered -- reported today as well. So those are some of the customers that are very interesting for the general industrial market. So let's see what happens. I have never seen over time, economy that if auto is a little bit slower that general industry would keep up, but maybe it will happen this time but that's a little bit was in our statement as well that we expect these economies to move a little bit to a slower pace.
Great. I look around here and then we take another question from the conference call, please.
Our next question comes from the line of Alexander Virgo from Bank of America Merrill Lynch.
Perhaps just picking up Mats on your last comment there with respect to other results happening today. And could you comment a little bit more regionally on construction market development with a little bit of color particularly on China and perhaps the U.S.?
Construction -- then I would refer to a little bit the Power Technique development and the Power Technique is -- I mean it's a little bit of the setup of the business as well. If you look at the way they go to market with renting equipment, clearly the U.S. North American market is #1 in rental equipment. #2 is Europe. I think we have developed well in Europe, and we also made a little steam acquisition on rental, which is developing in a good way for us. And then in Asia, I still think there's limited, at least for us, success in rental and I think the rent is significantly less. When we talk today about construction, we still say looking forward at -- at least the growth we follow GDP, we don't expect much more. But those are the regions as well where we see that if you want to be really strong, it's really in North America and U.S. And of course, then to sell equipment, China is one of the biggest markets for portables and the light towers and so on.
If we stay on the Power Technique side, you could say that Asia was not -- and that is, of course, affected by China, was not the strongest part of the world, so the relative performance of the other regions was actually better in Power Technique. Not always related to construction, of course, but it's part of it. Mats mentioned North America and rental companies before and India as an exception from the trend in Asia, in general, was very positive. But we also know that it has certain specific segments that either are very strong or in some cases weaker. So it's perhaps not the general construction indicator market for us so much.
One more.
Yes, I think we can take one last question from the conference call and then we need to wrap up, I think.
Our next question comes from the line of Andrew Wilson from JPMorgan.
Hopefully, it's a quick one, which I guess will fit the timeline. And it's really a follow-up to Klas' comment, and you kind of reverted back to outlook commentary on a group level and didn't call out specifically if it's in your automotive, which you obviously did in Q3. I mean, just the thinking behind that, is it fair to assume that we can assume a similar outlook for semi and auto as covered by that somewhat weaker commentary that you talked to, and therefore there's nothing I guess weaker to assume in those 2 markets than what you're seeing at a group level.
I think you didn't listen proper.
Well, I tried to listen.
Sometimes, it's tricky on the conference call. Sorry about that, Andrew, but the way I understood you is that is the outlook compared to Q3 to be understood as semi and auto are 2 areas among others and they are hence embedded in the general outlook statement. And I think, yes, that's pretty correct interpretation, I would say. With that, this concludes our session for today. Thank you very much for coming here in Stockholm and also for participating on the conference call. Thank you very much, and bye-bye.
Thank you.