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Atlas Copco profit misses forecast as vacuum business tumbles

Atlas Copco headquarters are pictured outside Stockholm

By Marie Mannes

STOCKHOLM (Reuters) -Swedish industrials group Atlas Copco reported softer-than-expected fourth-quarter profits on Thursday and said demand was expected to remain around current levels, sending its share price down nearly 5%.

Persistent supply chain challenges and higher costs have weighed on the maker of compressors, vacuum pumps and industrial tools in recent quarters. Its customers are also scaling back investments, especially within its key vacuum division which counts the major semiconductor producers as its main clients.

Adjusted operating profit for Sweden's most valuable listed company rose to 8.03 billion crowns ($782.9 million) from 6.46 billion a year earlier, while analysts polled by Refinitiv on average had expected earnings of 8.56 billion.

In the fourth quarter, order intake at its vacuum business fell 22% to 8.48 billion crowns, once again denting results. On an organic basis, or like-for-like, orders at the vacuum division fell 33%, while for the group as a whole they dropped 7%.

The company's vacuum gear business, which competes with the likes of Pfeiffer Vacuum, is an important indicator for Atlas as it typically offers a forward-looking gauge of demand for the broader group.

Semiconductor makers have been widely expected to reduce investments in 2023, due to consistent supply chain issues and U.S. restrictions on chip and equipment exports to China.

Despite this, Atlas Chief Executive Mats Rahmstrom said he expects semiconductor demand to increase and for investments to rise in the next few years.

"The expectations are that it will really take off in 2024," he told Reuters.

Atlas stock was down around 5% at 1517 GMT.

JPMorgan said the poor order intake for the vacuum division was expected.

"The negative surprise for us is on the margin, a very un-Atlas like miss," the broker said.

Atlas as a group delivered an operating margin of 19.5% compared with 18% at its vacuum division.

On a call with analysts, Rahmstrom said there "should be no reason" for the company's margins not to return to their historical levels of around 24/25%, but warned that it was too early to expect that to happen in the upcoming quarter.

The company plans to pay an ordinary dividend of 2.30 crowns per share, sharply down from 7.60 crowns paid last year, but roughly matching analysts' average expectation for 2.28 crowns.

($1 = 10.2568 Swedish crowns)

(Reporting by Marie Mannes, additional reporting by Jagoda Darlak, editing by Terje Solsvik and Sharon Singleton)