STOCKHOLM (Reuters) – the Swedish industrial group Atlas Copco (ATCOa.ST) is set to benefit from a shift in the direction of electric cars, after investing in technology to meet a challenge and that is the pain of many of the traditional parts suppliers, a company said.
FILE PHOTO: the Atlas Copco logo will be shown on the “Bauma trade fair for Construction, building material and Mining Machines and Construction Vehicles, and Equipment in Munich, southern Germany, 11 April 2016. REUTERS/Michael Dalder/File Photo
While the total demand from the auto industry, the expected decline in the short term, by the trade of the rates, the slowing of Chinese demand and uncertainty about new technology, Atlas Copco is well placed to emerge eventually as the winner in the electrification of transportation, the executive told Reuters.
But patience is probably needed.
Shares in Atlas Copco have lost a fifth of their value this year and Barclays downgraded the company this month, says her concern, 2019 income was becoming more and more a shift to the Industrial Engineering unit, which accounts for the bulk of Atlas Copco’s automotive exposure.
Henrik Elmin, head of Industrial Engineering, told Reuters the picture was mixed, but noted potential advantage of newer technologies that connect to components that are difficult to weld.
“We see a number of projects are delayed or stopped, and the others, which is to be accelerated,” he said in an interview. “We see many opportunities in the battery.”
Elmin added: “The total of the auto industry side is what we have said, that there is slightly lower demand in the near future.”
Global data for November showed signs of a car sales stabilise, with the steep falls seen in China and Europe.
To get ahead in the transformation of the automotive industry, Industrial Engineering has purchased a number of companies specializing in technology for the dispensing of adhesives and other techniques that are necessary as car manufacturers move in the direction of lighter vehicles.
Industrial Technology, reported a 3 billion Swedish crown ($332 million) operating profit in the January-July period of 13 billion in sales, competes with the likes of Stanley Black & Decker (SWK.N) in industrial power tools and Nordson (NDSN.O), and Graco (GGG.N) in applying the glue.
It comes 60 per cent of the turnover of the automotive industry, with the rest coming from various sectors, including the aerospace, energy and electronics. Atlas Copco also makes products such as compressors and vacuum pumps.
The International Energy Agency forecast this year that the number of electric cars around the world would hit 125 million in 2030, an increase of 3 million euro in 2017.
The tree presents a major challenge for many providers whose activities are built around the internal combustion engine cars, electric cars are only equipped with about 7000 parts compared to more than 20,000 for an internal combustion engine powered, according to a report by KPMG.
But it means that new assembly technologies are in increasing demand, playing in the hands of Industrial Engineering, who bought adhesive dispensing gear-maker SCA in 2011, and hit self-pierce riveting specialist Henrob in 2014.
This year, it is yet another connection with the purchase of the flow analysis confirmation company Klingel.
While the hybrid and electric cars, which still have an internal combustion engine, would be a positive Industrial Engineering, pure battery cars are seen creating an even greater boost, because of the great opportunities in the very large battery pack, Elmin said.
“If you assemble a battery pack, it is above all the tightening and gluing, but we also see in a number of projects, compelling, and flow analysis confirmation,” Elmin said.
He pointed to the water-proofing and temperature control as two essential components in the production of batteries, with a great potential for adhesives, gear business.
Reporting by Johannes Hellstrom; Editing by Keith Weir