In the third-quarter ended Sept. 30, 2006, Stockholm, Sweden-based Atlas Copco Group reported revenues of U.S. $5 billion, an increase of 22 percent from $4.1 billion in 2005, corresponding to 15 percent volume growth. The group’s operating profit increased 41 percent to $920.6 million from 654.6 million a year ago.
On Oct. 6, Atlas Copco agreed with private equity firms Ripplewood Holdings LLC and Oak Hill Capital Management, LLC, to sell the majority of its construction equipment rental business in North America, in a transaction with a total value of approximately U.S. $3.8 billion in cash and securities. The cash proceeds are estimated at $3.3 billion. Upon completion of the transaction, Atlas Copco will have a 14.5-percent minority stake in the business, with a book value of 1$36.6 million, and hold rights to notes of up to $409.8 million. Issuance of the notes is contingent upon the profit development of the business until the end of 2008. The estimated gain, net of taxes, is $1.1 billion. The transaction is subject to customary closing conditions and regulatory approvals and is expected to occur before the end of 2006.
RSC Equipment Rentals 3Q06 revenues for continuing operations were $28.1 million, compared with $24.3 million a year ago. The company’s operating profit was $9.8 million, compared with 6.8 million in the same period of 2005.
“We continue to grow very strongly and very profitably,” said Gunnar Brock, president and CEO of the Atlas Copco Group. “In the third quarter we achieved double-digit growth in all regions and the after-market business developed favorably for all business areas. Going forward, Atlas Copco has three powerful and profitable industrial business areas, all with leading global market positions. They are unified and strengthened through the sharing of brand names, resources and processes, and have continued excellent opportunities for very profitable growth and value creation.”
The Compressor Technique business area consists of five divisions: industrial compressors, compressed air treatment products, portable compressors and generators, gas and process compressors, as well as specialty rental. Third-quarter 2006 revenues were U.S. $871.4 million, compared to $716.8 million a year ago.
In the quarter, the company made a strategic investment in compressor component manufacturing in China, opening a screw compressor element manufacturing plant in Wuxi, China. The new plant serves as a complement to the main plant in Antwerp, Belgium.
The company reported that sales of portable compressors, primarily serving construction-related customers, continued to increase significantly. Also the portable generator business grew at a healthy pace in the quarter.
The Construction and Mining Technique business area, which consists of seven divisions including drilling equipment and construction tools reported third-quarter revenue of $623.9 million, compared with $521.5 million a year ago. The demand from the construction industry was favorable. Sales of rigs for surface applications, such as quarries and road construction, increased significantly. Order intake increased for light construction equipment, primarily breakers and drills.
The Industrial Technique business area consists of five divisions including industrial power tools. Third-quarter revenues were down 3 percent to $203.6 million, from $210.9 million a year ago.
The demand for Atlas Copco’s products and services, from most customer segments such as mining, construction, and the manufacturing and process industries, is expected to remain at the current high level in the near term.