July 20, 2018 / 10:30 AM / 4 months ago

Atlas Copco shares fall as growth slowdown in vacuum raises worries

STOCKHOLM (Reuters) - Shares of Sweden’s Atlas Copco (ATCOa.ST) slid on Friday after reporting lower-than-expected order growth in its Vacuum Technique unit that accounts for a quarter of group sales and saying demand from the semiconductor industry would fall.

Challenges facing the vacuum unit, a main driver for the company’s growth in recent years and reliant on the semiconductor industry for sales, overshadowed a rise in group profit and orders in the second quarter.

Analysts have been concerned about the growth outlook for Atlas’ vacuum unit given worries over waning demand for memory chips and the impact of U.S. tariffs on China on chipmaker spending. Atlas shares were down 4.6 percent by 1204 GMT.

Group order intake hit a record 25.1 billion crowns in the quarter, just beating the 24.8 billion Reuters poll forecast, but organic order bookings in the vacuum unit alone grew 8 percent compared with the 14 percent expected by analysts.

“Demand from most customer segments is expected to remain at current high level,” the maker of compressors, vacuum pumps and industrial tools said in a statement.

But it added: “Equipment demand from the semiconductor industry is expected to be somewhat lower in the near-term.”

“The big negative is the semiconductor outlook and there is a slowdown in Vacuum Technique orders,” Kepler Cheuvreux analyst Markus Almerud said.

“The semi side of vacuum should have higher margins than the industrial side hence it will depress on the margins if the semi side comes down in Vacuum Technique”.

Vacuum Technique’s client list includes Samsung (005930.KS), TSMC (2330.TW), as well as Dutch group ASML (ASML.AS). Competitors include Germany’s Pfeiffer Vacuum (PV.DE).

Semiconductor bellwether ASML this week gave an upbeat forecast for the remainder of the year. TSMC, the world’s largest contract chipmaker, trimmed annual revenue and capital spending forecasts, in part due to bleak demand from the smartphone industry.

Atlas said the order intake for industrial and high vacuum equipment had increased significantly from the previous year.

In May, the head of the vacuum unit told Reuters he expected double-digit organic order growth in 2018 despite a rise of just 2 percent in the first quarter.

The Atlas Copco Group’s second-quarter operating earnings rose to 5.43 billion Swedish crowns ($609.5 million) from 4.60 billion in the year-ago quarter, beating a mean poll forecast of 5.32 billion.

Reporting by Johannes Hellstrom; Additional reporting by Esha Vaish; Editing by Niklas Pollard and Edmund Blair

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