Atlas Copco AB
Q2 2021 Earnings Call Transcript

Published: 16 Jul 2021

[Operator:]

Ladies and gentlemen, welcome to the Atlas Copco Q2 Report for 2021. Today, I'm pleased to present CEO, Mats Rahmström; and CFO, Hans Ola Meyer. Please begin your meeting. I'll now hand over to Hans Meyer. Please begin.

[Hans Meyer:]

Thank you very much, and hello everybody. I'm very happy for many reasons to welcome you to this call today on the second quarter report from Atlas Copco. The report has been out for a while so I'm sure you've had the time to read it already. We will go straight in to the comments from our CEO, Mats Rahmström. And then after that, we will go into the Q&A session. And I'll come back to that after Mats' starting comments. So over to you, Mats.

[Mats Rahmström:]

Thank you so much. We will start with slide 2, Q2 in brief, trying to summarize the quarter for you. As you can see record order intake. And it was SEK32.5 billion for the quarter. And the year-on-year is up 54%. It might not be so relevant. But sequentially also an improvement on 6%. And then we also benchmarked with 2019, which was our best year in the past and then up to 28%. So it's an all time high on orders for not only in vacuum, but also in compressor technique and industrial technique. And it's spread out through all our region. So very positive trend. And you can also see sequentially, that was order grew for all our business areas. Record revenues. We like many others have huge challenges when it comes to sourcing of components -- as scarcity of components. But I think and do believe that we handled the situation quite well. And to confirm that we also had the record on SEK27.5 billion that as well. So quite proud of the team that is helping us in manufacturing logistics and purchase. The margin, reported margin 21.5% and adjusted for the revaluation of the long-term incentive 21.9%. If we go to slide 3. And this just confirms the numbers and it's quite an impressive graph. And we came in about our own expectations. And this time, the driver was not only in semi, very strong semi, but because many of the general industry segments been very strong. That helped us sequentially to improve from Q1 to Q2. On the bottom, the return on capital employed, stayed at 26% supported by volume. And of course it is delivered by the intangibles from ISRA, Perceptron and some other CT distributors. But pleased about that as well. If again, if we go to the geographical picture on slide 4; in the third box, you have the growth rates for the last three months comparing them with the COVID year. But instead I looked at the sequential improvement and then we have double digit growth and strongest growth in North America. It was also double digit in Latin America, and now seeing a bigger growth in Europe. So spread throughout, and I'm pleased to see with the 41% in Asia, which means that we are competitive in one of the most important regions. Yes, this confirms the 54% on slide 5. And as I said sequential up 6% versus 2019, 28. So it's clearly a strong performance from the group. If you look at the sales bridge, the structural change is plus three, it relates to the ISRA, Perceptron and CT distributors. But you can still see that we have headwind in constant currency. This is mainly related to the US dollar. Slide 7. Well impressing growth numbers, and of course, gaining in the group is the most profitable part with vacuum technique. So pleased to see such a strong compressor technique and vacuum technique. But now we also see strong growth rates on power and industrial. And down there the -- or slide 8, compressor technique. They did record on order level SEK14 billion strong developments go for industrial compressors, small and large we could see also strong service and also sequential increases in most of the areas. Revenues at 14% organically, SEK12 billion also strong for them, and a very, very strong margin at 23.9% supported by volume, slightly negative on the currency.

[Hans Meyer:]

Thank you, Mats. If we continue below the operating profit, you can see not much to comment on the financial items but perhaps more on the tax expense which looks to improve decrease quite a lot compared to last year but it's actually last year that included a couple of positive one times of releasing a few provisions, which you can also find in the report also commented last year, I think the 22% level is fairly representative of where are and should be in at this point in time. And then you can see the increase on net profit and consequently also basic earnings per share. And the return on capital employed has started to improve a little bit of the drop down to 23%, which was caused by the, let's say, immediate effect of the relatively large acquisitions last year, I think, if we move on to the next we have the profit bridge, as you can see, moving from, of course, a low 16% last year. We got a little bit of help, of course, from the not having the restructuring costs of last year, and also slightly less negative LTI program effect of the valuations.

[Mats Rahmström:]

Thank you, Hans Ola. On the near term outlook, then we are trying to guide on the activity level, this is along our key customers from Q2 to Q3. And we say that we see them remain high at the current level. And it is rather high for us. What we have seen in Q2 is strong semi improved, general industry for many of our segments of improved service. So I think the trends are positive. Then we still have to have in mind that semis and outlook could be seen as a key accounts, but positive trends although negatives, although the societies are open up. They can also see warning signs regarding Coronavirus on the Delta, although our operations are up and running today. The other thing is of course, if we see the short in industries supply chain is that would stop our customers from operating. But overall, we see a positive market and high activity level when we start the Q3.

[Hans Meyer:]

Very good. Thanks a lot.

[Mats Rahmström:]

And before the Q&A, we have a new picture for y'all to, Ola; you haven't seen I think yet. It's almost a legacy coming to end today with Hans Ola's last quarter report, retiring after 35 years in the group, 22 years as the CFO, and the 112 quarterly reports. That must be some sort of a record. So I like to thank you Hans Ola for your guidance, and your support during my time and when we work together for being fantastic and appreciated colleague. And you know that I always challenge you on the golf course whenever you want. And at the same time, Peter is in the room and is also on the picture, you can see that the rest exactly is the same. And you will get to know Peter more when we have the Q3 report. So welcome Peter as well. And now I think we're ready for Q&A.

[Hans Meyer:]

So okay, well, let me first thank you so much, Mats for those kind words. And thank everybody on the call for challenging us so well during many, many years. With that we move over to your Q&A session. And I'd like the operator please if you can repeat the process for the questions please.

[Operator:]

We have a question from the line of Guillermo Peigneux from UBS.

[GuillermoPeigneux:]

Good afternoon, Guillermo Peigneux from UBS. And I want to thank also Hans Ola for all these years and to be honest, all the things that I've learned. Sad to see you are leaving but also very happy to share with you all these years. And I have two questions, one and the follow up.

[HansMeyer:]

Well, I think I will disappoint to Guillermo this time. I have strict orders, only to accept one question at a time.

[GuillermoPeigneux:]

So let's fight until the end. But the question is, obviously, when it comes to the last, the second part of the year, I guess your leverage this quarter was good according to or even exceeding your expectations. But I wonder whether the dynamics that you see any component price and in the assembly process on your working capital will highlight that maybe actually going into the second half of this year, the operating leverage that we could assume, might be somewhat more modest? And that is my question.

[HansMeyer:]

I'm very sorry, Guillermo. There was some confusion. Yes. Could you repeat, please back the question.

[GuillermoPeigneux:]

Yes. It's always the second half of this year. The operating leverage that you got obviously during the first half was very good. In the second quarter in the first half was very good. And you were exceeding your expectations. But I wonder whether dynamics on raw materials, component pricing, working capital terms, we could assume that the second half, it'd be a bit more modest from an operating leverage perspective.

[HansMeyer:]

Yes, sorry, for not catching that the first time. Sorry, Guillermo. No, I think as I indicated already before, this is an extremely high level. And with the type of business model that we have, we're not expecting to see that when, let's say the revenue growth is more moderate, so to speak. Now, of course, with this order intake, we expect indeed to have a good trajectory for revenues for some time, of course, because certainly we want to deliver the goods that we have orders for. But I think one should be careful to project the same type of flow through, so your statement, if I understood your right, is that we probably should not expect the same. I would agree with that. I mean, we're in the beginning of a recovery phase still. And we know from investments that are granted investments that are coming on stream as we speak, we know from recruitments. We know from a number of these things that we are adding some cost. It's not the problem, of course, because we have the strong growth in the business, but indeed, it can have a certain moderating effect on the flow through, yes.

[Operator:]

Our next question comes from the line of Daniela Costa fro Goldman Sachs.

[DanielaCosta:]

Hi, good afternoon. Thanks for taking my question and extending the wishes of happy retirement to Hans Ola as well. My question is regarding understanding a bit better the profile of orders delivery in the vacuum technology business going forward. So how shall we think about like the orders that you have at hand now? Are they mainly for delivery this year? Sort of like will they impact organic sales growth next year as well? Can you just give us a little bit about like how you're seeing the order to sales development?

[MatsRahmström:]

So that briefly on the VT part, I think customers are aware that there is a shortage of capacity in industry considering the huge demand for semiconductors in many different segments of the market. And I'm sure that they have some pre orders so some of the orders are booked by the delivery time. But I would say the majority is expected to push out as much as we can this year. So it's not like it's scheduled for mid next year or anything like that. But a normal delivery time or the place to order for delivery as soon as possible.

[DanielaCosta:]

Yes, maybe kind of clarify just if I understood because when we look at like 40% growth rate, year-to-date on the order side. We shouldn't sort of like extrapolating towards next year revenue growth.

[HansMeyer:]

I think you should take Mats question as well, there is some pre ordering, meaning that we don't know whether that will actually be delivered exactly by the end of the year, or even spill over something, but we are talking about the majority being something that we see projects, and where we definitely do everything we can in order to respond in terms of deliveries. But to your point, it's an extraordinary increase that we have seen. So to expect that everything can be from a capacity point of view even be coped with inside the next two quarters is perhaps too optimistic, yes.

[Operator:]

Our next question comes from the line of Max Yates from Credit Suisse.

[MaxYates:]

Thank you very much. I just want to ask about geographic trends in compressor technique. And I know you don't sort of talk about trends through the order through the quarter. But I just wanted to understand if you can give us a little bit of color around what you're seeing in Europe, North America and China, and maybe not necessarily how that develops through the quarter, but are you seeing very different trends through those through regions, a bit of color there that would be helpful.

[HansMeyer:]

The comments that are in the report are basically as much as we can say, to your point, it's not about whether April was super strong, or June was strong or anything like that. But the strong take on the quarter in general, is the impressive growth in both North America and Asia of the industrial and pretty diversely exposed divisions, if we call it like that, and then I'm referring to all three business areas, at least the compressor technique and vacuum technique, but also industrial technique that address, let's say manufacturing segments primarily. And so it's really not as Mats have already pointed out, it's not only about semiconductor, making the big numbers this time; it's much more spread than that.

[MaxYates:]

So is it fair to assume that all regions and compressors are above their sort of pre pandemic levels? Because obviously, we can see compressors as a whole. But is it fair to assume that's true of all the regions? Or is it mainly driven by one? If we compared to 2019?

[HansMeyer:]

It's pretty well spread I would say, but as I alluded to that perhaps North America and Asia stands out a little bit more than the others. I don't have exactly in my head, whether it's a record level on all regions, unfortunately, but it's high levels in those two at least in record levels.

[Operator:]

Our next question comes from the line of Andrew Wilson from JP Morgan.

[AndrewWilson:]

Hi, good afternoon, everyone. Thanks for taking my question. I want to touch on compressor. There's a sort of interesting phrase used in the report this time. I don't recall seeing at least recently in terms of increased market penetration, which obviously has contributed to some of the growth. I just wondered if that was or if you can kind have elaborate a little bit on exactly. I mean, clearly, that will point to further market share gains, but just given that you've specifically highlighted that I'd be interested if there's anything particularly you can change the market or that you'd like to emphasizing, I guess how you win in those market share gains. Thanks.

[MatsRahmström:]

Yes, but that's correct. I think there is a couple of segments where we have invested over the last few years slightly more, and one of them being in fresh -- scarcity of fresh water. So it's low pressure machines. But we do believe that we gain market shares and you can see that we introduced even more products in this segment, that's something we are proud of, and that increase the penetration of that market. Same thing for high pressure. But we also invested a bit more in the product portfolio. And I can also see that medical has been performing very well, not only link to the COVID situation. So those are capital segments in the market, and on site gases, oxygen and nitrogen generation on site, it's another segment. So there you have four areas where we think we are gaining penetration in the market and upgrading equipment to something that is much more efficient than the present equipment.

[Operator:]

Our next question comes from the line of Madhvendra Singh from Bank of America.

[MadhvendraSingh:]

Yes, hi, and thanks for taking my question. And before I ask my question, again, no, all the best to Hans Ola for his retirement. So in terms of question the order growth which you have reported across the board it looks very strong. So just wondering whether there have been areas where you're actually seeing any growth rate peaking, or any slowdown per se, or any regional slowdown as well, if you have noticed, especially coming from let's say China, where the second quarter had already seen recovery from last year. So if you could talk about some growth trends. Thank you.

[MatsRahmström:]

If you look at our key markets, the power hubs of the world throughout the quarter being Asia, North America and Europe we see strong sequential growth. And the only region where we had a slight negative was Africa, which is small region for us, but otherwise, we have seen a very strong demand throughout many geographical areas.

[HansMeyer:]

And to conclude, as you alluded to China and the already good comparison levels last year, compared to the other regions due to recovery from COVID. No, we didn't see any difference, relative growth rates or anything there; it's exactly what Mats pointed out.

[MadhvendraSingh:]

And this is very I would say a positive surprise, because given kind of some logistical challenges, plus shortage of chips, semiconductor, those concerns. So, despite of these issues, you have been able to see strong non sequential growth. So is that a fair conclusion that these issues like chip shortages and logistical issues didn't really have any impact on your performance?

[MatsRahmström:]

No, it does have an impact on our performance as well. But as long as we are better than competition, then probably it's likely that they place the order with us. And remember then going into the COVID situation almost two years ago, we kept investing in R&D and in our portfolio, we kept investing in competence. And we kept investing in digitalization. So this was the reason to see if we can gain market share when the market is coming back. And we started to talk about supply chain in mid May last year that we see that okay, what can we do? How can we be ahead of the game and it's not scientific but hopefully those sorts of things initiatives that put us in a better position right now. And hopefully we are gaining market shares in many different parts.

[HansMeyer:]

In one way that Mats already commented upon it of course has already have impacted also us in the sense that without them we could possibly have had a little bit even higher deliveries already. But when it comes to orders is exactly what Mats comments.

[Operator:]

Our next question comes from the line of Klas Bergelind from Citi.

[KlasBergelind:]

Thank you. Hi, Mats and Hans Ola. It's Klas from Citi. So my one question is on semis and flat panel. It's flat quarter-on- quarter and still a very good level of course, but the reason for the very strong growth quarter-on-quarter in VT was obviously growth outside of semis? Have you seen, Mats, any difference between semis and flat panel towards the end of the quarter? I'm interested to hear is flat panel weakened at all? There's probably some gave away or give back or pre ordering in the first quarter but interested if there has been any underlying slowdown in parts of the semis flat panel structure. Thank you.

[MatsRahmström:]

I must I have t say I haven't followed the differentiation there in time. I don't have any numbers for that would be accurate.

[HansMeyer:]

I think we touched upon it lightly before that we haven't seen a major change in the underlying customer activities. So it's really as we have always said, the key account market extremely difficult to judge months, of course, but even quarters to what will be the actual demand level, and how can you interpret a little bit of a softer week or month or something, it's extremely difficult. So that's why we revert back to the more general statement that we haven't seen anything that we interpret that as a slowdown, nor an even stronger, big gap for that reason.

[Operator:]

Our next question comes from the line of James Moore from Redburn.

[JamesMoore:]

Yes, good afternoon, everyone. And Hans Ola, can I join the long list of congratulations? Wish you a happy retirement. So could you help us understand what's happening in your vacuum business a bit more? I mean the numbers are very big. And I know you like to -- but could you give us some rough estimate about how the service the two service businesses? Do they kind of just carry on growing? And I don't know a 10% type growth rate and everything else is just on the equipment side? And really, my question is about speed and service in vacuum and whether that also has extraordinary growth rates?

[HansMeyer:]

Well, it does not reach the extraordinary growth rates of the equipment that would be physically impossible. But it's interesting to see the type of growth that they have had compared to 2019, for example, which was previous best year we had and it's very, very strong, and it's very comforting levels. We see when we make that comparison, but they probably come to a sort of a yearly growth rate in that region that you mentioned yourself, roughly. And not on the 50%, 60%, 70% levels that we see there.

[JamesMoore:]

Understand. And we talk bout the equipment side on the orders, how much of this strong business is a function of the near term shortages of semiconductor supply chain versus the ongoing structural needs of a good growing more and more semiconductor market?

[MatsRahmström:]

We don't really; we're not in the market per quarter. We look at the number of construction sites around the world for semi plants coming up in the coming years. And yes to look at that I must say that it feels like we are truly in the right segment. And then of course, how much is the demand when the outdoor industry picked up again, in terms of that, it's very difficult for us to judge and I'm not sure the customer would tell us either. But to be in this segment, considering 5G is coming along, I can see more and more of our factories being connected. So I'm not really so concerned about the demand level for a number years to come. But it's been fluctuating between quarters as we have said and then on industrial and scientific of course, then we are gaining by us bringing better products to the market. So I'm quite pleased with the position that they have going forward.

[Operator:]

Our next question comes from the line of Sebastian Kuenne from RBC.

[SebastianKuenne:]

Hi, gentlemen. And my question would relate to the IT division, I would like to know, roughly, what's the proportion of businesses there that you do with electric car manufacturers or battery, electric car assembly, and so on what part of that business is currently related to electric?

[MatsRahmström:]

If you look at the industrial technique, as a whole, I believe 50% to 60% of the business is related output in one way or the other. And when I asked the same questions, because I do ask the same question, they say that the majority today is related to cell manufacturing batteries, or hybrid or fully electric and of course, the full electric is the one that is taking off more with different programs. So very little CapEx goes in from our side, at least into fossil fuel combustion and type, and most of what you see in the report is linked in one way or the other to electrification.

[SebastianKuenne:]

I would have one other question, if I may.

[HansMeyer:]

Do we have other questions still to take? Well, if you don't mind, if we continue with the next question, next person in line, and then we'll be happy to come back. I think we will have.

[Operator:]

Our next question comes from the line of

[UnidentifiedAnalyst:]

Hello, thanks for presentation. And thanks for taking my question. I was wondering if you could share some additional thoughts on your new machine vision solutions department. What kind of useful growth do you anticipate here and do yo plan to any more acquisitions there? Thank you.

[MatsRahmström:]

We have entered into this because we believe it's growing faster than GDP, we can see that they have, if I first talk about and had a very interesting surface vision, with 75% of the business and on industrial application, of course, we have access to all accounts within auto, for example. And we can see that the Metrology Park and industrial vision is growing. So we do expect higher growth rates from this. And that you can also see on the multiple that we paid for the company. It's developing quite well, not only for us, but also for competition. So it's a very good segment for us to be in. And that's the reason why we have entered it. And it's also a good combination with a lot of our own equipment. Because this is automation entering into many of our tightening applications. And then we can combine tools, software and vision systems. So I think both entities when it comes to the industrial applications, together with our tools, and then in terms of acquisition, you can take it segment by segment there's a possibility for a roll up. Absolutely. Is that the number one Pro is right now? Probably not. Because now we need integrate this, we need to fix Perceptron from the profit point of view. And then we're probably rather than to look at other candidates, if we do it successfully. And so far, we are very pleased with the acquisitions that we have done in this.

[Operator:]

We have a question from the line of Gael de-Bray from Deutsche Bank.

[GaelBray:]

Yes, good afternoon. Thank you very much. Congratulations, Hans Ola, obviously, but also congratulations to the entire group for very strong commercial performance this quarter. So I have a question in this respect. At the letters to CMD, you highlight that a large part of CT's commercial success was related to a strong increase in R&D or in particular over the past few years. And I think this default led to I think the number you provided at the time was 55 new products released in 2020 which compared to only 35 or so in the previous years. So would it be possible to have an up to date on this for 2021, on the number of new products, which is in the pipe for this year. And since you have a clear innovation focus on energy efficiency product, co2 emission resolution, and energy recovery and so on. I wonder if you would also have any comments on the new EU climate policy architecture, which was released just a couple of days ago. Thank you very much.

[MatsRahmström:]

If I start with the last question then we have not really dig deep into the new regulations. But in general, we are positive to support the transition of the society to be more CO2 neutral. And that we do from for a personal reason, of course, on the planet, but also from a business reason where we see that we provide our customers with the most energy efficient product and we intend to continue to do that everything that might leave a gap between us and some other competitors. So for us, these types of regulations for industries like to see less CO2 footprint is beneficial for a company like ours. And we do invest like you saw in today's presentation, as well even more resources into providing a financially something that is better for the customer, but also from an environmental perspective, and terms of what we will release and when for the market, I think we will keep that to ourselves and not share that with competition so much, but a big magnum of generous that is to show that has tons of new products coming and we will not release anything that's worse than we have or not better than competition. So every release would be the best product.

[Operator:]

Our next question comes from the line of Rizk Maidi from Jefferies.

[RizkMaidi:]

Yes, hi, thank you for taking my question. I just have a question on the order intake which was quite impressive. So it's quite a strong quarter for Hans Ola's last quarter. So within a 30% above 2019 levels. And if I look at the bar chart for the growth from page 5, this last quarter seems to default when comparing the trend of order intake since 2012. What would you attribute the strong demand to, is there any element of double ordering? Is the availability of liquidity out there? Or is this emergent trend from the back of COVID that just shortening of supply chain to restoring of capacity?

[HansMeyer:]

Well, I think we have to take turns on that one which is basically a very, very broad world economy, almost related question. It's difficult for us to pinpoint those factors, of course, but the combination, of course, I mean, I think the COVID recovery cannot explain all this i.e. that people who are scared to do investments for a while, then we would have possibly seen some growth. But to your point, it's way above those levels, of course, our exposure to very interesting end markets, like the semiconductor market that with the tailwinds that segment has, is a contributing factor definitely. And then, what also Mats alluded to we really focus on the product development and innovation and try to dig out so many, as many segments as possible where we feel that we have a product offer that we haven't really penetrated that specific segment with. I don't think that it's an effect of a big change from globalization to regional or localization yet but I don't know if I forget something there Mats or --

[MatsRahmström:]

No. But we were debating ourselves a little bit the gaps between 2019 and where we are today. Okay, you can say that it's built back up quickly than expected to the 2019 level. But now we are significant about that. And we do see these investments in semi. But we do believe that customers are pre ordering equipment, making sure that they are first in line for deliveries, and how much that is very difficult to speculate in. But then they also went through the other business is and say some are pre ordering tools in industry technique we don't think so. Industrial compressors, no, we don't think so. Power technique, we don't think so. So that it's in that scope, I think but we can also see the close link to some on things in the segments that we presented on the capital markets day where we are gaining speed in some segments, which we are also talked about in terms of penetration, so, no, I think many of these strategies are paying off. And right now when we speak about working on the next segments that we like to penetrate in the coming months, and yes.

[Operator:]

We have Guillermo Peigneux from UBS.

[MatsRahmström:]

Okay, perhaps we should wait with Guillermo little bit. Yes, we can go on to the -- hello, is that Guillermo?

[GuillermoPeigneux:]

Oh, yes. I have an additional question. Sorry for that I want to ask about the size of the business. You mentioned vision in a number of occasions in your report. And I wanted to ask whether you could share with us the size of the vision, the mission vision business as we speak.

[HansMeyer:]

Thank you. You can calculate more or less of yourself. We have reported a nice steady growth a couple of quarters ago, and that I would say continues. And the size of the two acquired companies. So it's -- there's nothing magic in that. It's not the agent part of industrial technique as of yet, of course. But yet, yes, it has grown repeatedly in the quarters that we have owned them.

[Operator:]

We have a question from the line of Lars Brorson from Barclays.

[UnidentifiedAnalyst:]

Hi. Thank you. Good luck, Hans Ola. And so if I try to peel the onion, a little bit on your comment around China and the industrial businesses in China, I noticed that your data process business is moving sideways, it was up in the first quarter. And now we're talking about sequential development. Is that driven by China? And whether assuming that that part of your business I mean, obviously, do you see notable correction in Asian gas and petrochem prices this year, I wonder whether you're starting to see an impact on your business. And then on sort of other industrials, short cycle of businesses in China again; we have done an earlier talk about a notable slowdown. Then in part driven by automotive, I wonder whether you can recognize that in your legacy, cyclical businesses, or your power tool business, your consumables, which perhaps the more production driven. But maybe that's been offset by strong growth in new emergency by the thesis. So I'm just trying to understand or maybe get a bit of flavor for the DNA of the growth profile of your Chinese business goal for the industrial assets, please. Thank you.

[MatsRahmström:]

Yes, maybe I should start on solar. On gas and process business, you say go sideways? Yes. Okay, I've had a couple of quarters where loss has been negative. Not specifically related to China. But with a better price at 75. I think that we start at least to see a more positive trend there, even though it has not shown in this quarter yet just. And in China, if I look at the quarter, and the last few quarters, it's been very solid. And I don't think we have any evidence that it's weakening for us yet at least but I can also follow your comments. And we have to wait and see little bit. I don't know if Hans Ola can elaborate on that. And there was a time ---

[HansMeyer:]

No. I think the numbers that are reported from China when it comes to CT, but many of the other business areas as well, are really very good. So it's not at all that it's only the semiconductor industry, the famous one with all the spend that is driving the growth. If we look at compressor technique, it's at very high levels. And that is irrespective of what type of compressors we're looking at basically so it's at very high levels. We can only reiterate that there's nothing in the cards that indicate the change of trend in that respect.

[Operator:]

Our next question comes from the line of William Mackie from Kepler Cheuvreux.

[WilliamMackie:]

Good afternoon. Thanks. Thank you very much for taking the question. Congratulations. My question actually relates to how you're thinking about investment across your business, if we look two record quarters, rising back on positive global economic outlook. And yet, really, your investment rates across the business haven't moved much against the 2019 levels in comparison, so can you maybe flesh out how you're thinking about where to prioritize investments across the businesses that's the four business areas, and perhaps where you see the most critical bottlenecks or areas that need to be expedited to meet this backlog that you face? Thank you.

[MatsRahmström:]

In our case, each business area has a plan to invest and what we do see as a change strategically, with the pandemic with protectionist that we have seen that we need to be more local for local. So we need to have a closer presence to customers and their application. So a lot of the investments lately have gone to Asia to support the vacuum divisions and that'd be always would like to have some extra capacity to take these peaks of orders. And now we utilize all the capacity that we have, and we continue to invest in local manufacturing and local development and local sourcing. And that also go for South Korea as well. So I will say that, and then we have the hub. So of course, we're here in Sweden industrial technique and in Belgium for CT, but if I just take what we have done the last year, I will say that a lot of our investment in Asia to support the growth rate we have in Asia. And we have 42% of the group's business in Asia today. So this is where we are bumping up capacity and competent.

[MatsRahmström:]

Thank you very much, William. I think that concludes right the line of questions, operator, is that correct?

[Operator:]

We do have a follow up question from Sebastian Kuenne from RBC.

[SebastianKuenne:]

I'd be honored to have the last question for you, Hans Ola. In the compressor business, does a lot of people come on hydrogen economy, of course, which will require very large scale gas compression, if you transport methane or hydrogen from Chile or from Africa, wherever you want to get it from. And I fear that Atlas Copco doesn't have that type of presence yet because they're usually reciprocating compressors that compress up to 3,000. Where do you see your portfolio? Again, in respect to 10 years from now, where you have to be in hydrogen economy? Do you think you're ready for that market? That would be my last question. Thank you.

[MatsRahmström:]

No, but I think Sebastian you are, when it comes to product range for all application in hydrogen. We don't have a full range of product there, we are of course, evaluating ourselves a little bit will hydrogen be the winner or will we see other winners like battery technology for the trucking industry, for example, but we are preparing our case to be ready and having the best product in this segment as well. But we think it's a few years away as well to really be a huge potential for compressor, as you say it's more of 500 bars and upwards in this segment. And we have a range, but it's not the complete range. But it's for sure, four of the future segments that we are showing interest and intent to have strong position in this segment when it takes off and if it takes off in the way we think.

[SebastianKuenne:]

And it could include M&A of course. May or may not include.

[MatsRahmström:]

Absolutely, it will include. It probably a little bit of everything.

[HansMeyer:]

It may to your point that's what Mats tried to say, yes. They include.

[Hans Meyer:]

Then I would like to say thank you to everybody. And I extend that to not just for this call, but as I indicated before, for all the years, and all the challenges and support given to me and to Atlas Copco, of course. So with that, thanks everybody, and have a nice summer. For those of you that have the opportunity to that. Thank you and goodbye.