Slower orders for Atlas Copco spooks industry rivals too

Atlas Copco vacuum pumps at a customer site – Image courtesy of Atlas Corpco

STOCKHOLM, Oct 19 (Reuters) – Sweden’s Atlas Copco reported lower than expected third-quarter orders on Friday and forecast softer demand for the remainder of the year, sending shares in the industrial equipment maker tumbling.

The sector has been under pressure in recent months due to worries over slowing global growth, not least in China where purchasing managers indices and auto sales have slipped amid a tariffs stand-off with the United States.

Atlas Copco, which makes compressors, vacuum pumps and industrial tools, reported an order intake of 23.4 billion Swedish crowns ($2.59 billion) for the third quarter, down 1 pct year-on-year on a like-for-like basis and well below the 24.4 billion expected by analysts.

A major part of the company’s vacuum business relies on the semiconductor industry which it is feared may be entering a slower phase of capital spending following years of booming demand.

Excluding acquisitions and currency fluctuations, the order intake of the vacuum business was down 19 percent in the quarter versus an expected 1 percent drop.

In addition to expected lower spending from chipmakers, Atlas on Friday forecast a weakening demand from the automotive sector in the coming quarter.

“There are more uncertainties in the global economy and that has affected some customers’ investment decisions,” Atlas Copco CEO Mats Rahmstrom said in a statement.

“As expected, the semiconductor business had a negative order development in the quarter.”

The company said it expected overall demand to be “somewhat lower” in the fourth quarter versus the third.

“A lower outlook due to weaker semi(conductor) and auto demand confirms our concerns around short-cycle demand,” Barclays analysts said in a note.

Both Sandvik and SKF have large exposure to the automotive industry.

Atlas Copco, which sells to chip makers such as Samsung and Intel in its vacuum technique business, had forecast in July lower third-quarter equipment demand from the semiconductor industry, citing a pause in spending at some of its biggest clients.

The vacuum unit derives more than half of its sales from the semiconductor industry, and its sales account for roughly a quarter of the Atlas Copco group total.

Atlas Copco’s biggest business, Compressor Technique, also missed forecasts, but by a slimmer margin.

Group operating earnings rose to 5.26 billion crowns in the third quarter from 5 billion a year ago, lagging a mean forecast of 5.46 billion in a Reuters poll of analysts.

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