INTERVIEW-Atlas Copco sees services sustaining mining growth

Mon May 20, 2013 4:09pm BST

Quotes

   

* Sees solid growth in mining services, consumables

* Sees benefits from efficiency drive by miners

* Says less negative on outlook, including in mining

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, May 20 (Reuters) - Engineering group Atlas Copco expects resilient service revenues and efficiency drives by cost-conscious miners to sustain growth in its mining and rock drilling business.

The global mining industry is suffering a hangover from a decade-long boom of rapid expansion and expensive projects with firms such as BHP Billiton and Rio Tinto now slashing billions of dollars of spending.

The deep cuts saw Atlas's mining orders fall 26 percent year-on-year in the first quarter, but in a Reuters interview Chief Executive Ronnie Leten voiced confidence in the resilience of the business, which accounts for a third of group sales.

The Belgian with nearly three decades of experience at the Swedish company said he was aiming for revenues from services and consumables such as drill bits, which together make up 60 percent of the total at the mining unit, to grow by high single-digit percentages in the years ahead.

Barring any sharp fall in the overall economy, this should underpin growth in the mining business, which also includes a civil works segment for projects such as highway tunnels that has not seen the downturn evident in mining, Leten said.

"We believe that it will be tough. But on the other hand, there are spots where we believe that we could extend our offering, we can get further automation and get deeper into that," he said.

Atlas Copco, which along with cross-town rival Sandvik supplies more than half the global market for underground mining gear, was seeing a gradual positive trend in consumables, usually a good gauge of underlying demand.

Positive signs in markets such as China and the United States also left Leten more confident about prospects.

"I'm not as negative and worried as I was in September/October. And the reason for that is that I believe the world growth will come," he said.

PRODUCTIVITY GUYS

A drive to boost efficiency in mines after the free-wheeling boom years should also work in the group's favour as it puts a premium on equipment usage and the related services needed to keep gear such as drill rigs running smoothly, Leten said.

"We have profiled ourselves as productivity guys in the mines," he said at Atlas Copco's headquarters, itself perched atop an old underground mine on the eastern outskirts of the Swedish capital where the company still tests its equipment.

"That part is becoming more important because people want to boost site safety, automation and mechanisation. Automation and mechanisation - I don't hear anything else."

Atlas Copco's single biggest mining exposure is in gold at roughly one third of the total, which unlike metals such as copper and iron ore has only recently run into weak prices with a fall of almost 20 percent since the start of the year.

"You see that in gold people are hesitating to invest a bit," Leten said. "Eventually I think it will come anyhow because the world will need these gold resources. I still see orders coming in for copper ... I see it still for iron ore and even for coal." (Editing by Mark Potter)