Atlas Copco is characterized by focused businesses, a global presence with direct sales and service, a strong, stable and growing service business, professional people, and an asset-light and flexible manufacturing setup. Atlas Copco is committed to sustainable productivity, which means that we do everything we can to create lasting results with responsible use of resources – human, natural and financial resources.
The Atlas Copco Group has a vision to become and remain First in Mind—First in Choice with our customers and other principal stakeholders. To achieve our vision, we have defined a clear strategy and a number of focus areas to make sure that we are building an organization that will deliver lasting results. Read more about our strategy and focus areas here. Our mission is to achieve sustainable, profitable growth.
* Annual revenue growth of 8% over a business cycle
* Sustained high return on capital employed
* Annual dividend distribution about 50% of earnings per share
Atlas Copco’s organization is based on the principle of decentralized responsibilities and authorities. In 2017, Atlas Copco’s operations were organized in five business areas comprised of 27 divisions. From January 1, 2018, the Group is organized in five business areas comprised of 28 divisions. The Mining and Rock Excavation Technique business area belongs to Epiroc, the business was distributed to shareholders of Atlas Copco as a dividend. Read more about the split here. The organization has both operating and legal units. Each operating unit has a business board reflecting the operational structure of the Group. The duty of a business board is to serve in an advisory and decisionmaking capacity concerning strategic and operative issues. It also ensures the implementation of controls and assessments. Each legal company has a legal board focusing on compliance and reflecting the legal structure of the Group. The Board of Directors is responsible for the organization and management of the Group, regularly assessing the Group’s financial situation and financial, legal, social and environmental risks, and ensuring that the organization is designed for satisfactory control. The Board formally approves the Business Code of Practice. The President and CEO is responsible for the ongoing management of the Group following the Board’s guidelines and instructions. The President and CEO is responsible for ensuring that the organization works towards achieving the goals for sustainable, profitable growth. The business areas are responsible for developing their respective operations by implementing and following up on strategies and objectives to achieve sustainable, profitable development. The divisions are separate operational units, responsible for delivering results in line with the strategies and objectives set by the business area. Each division has global responsibility for a specific product or service offering. A division can have one or more product companies (units responsible for product development, manufacturing and product marketing), distribution centers, and several customer centers (units responsible for customer contacts, sales and service) dedicated or shared with other divisions.
Customer focus is a guiding principle for Atlas Copco. The ambition is to build close relationships with customers to help them increase their productivity in a sustainable way. Customer engagement, sales and service take place through direct and indirect channels (mainly distributors) as well as through digital channels, in order to maximize market presence. The Group has a global reach and sales in more than 180 countries. Sales of equipment is performed by engineers with strong application knowledge and the ambition to offer the best solution for the customer’s specific application. Service and maintenance performed by skilled technicians is an integral part of the offer. Service is the responsibility of dedicated divisions in each business area. The responsibility includes development of service products, sales and marketing, technical support as well as service delivery and follow-up. More than 35% of revenues are generated from service (spare parts, maintenance, repairs, consumables, accessories, and rental). These revenues are more stable than equipment sales and provide a strong base for the business.
The manufacturing philosophy is to manufacture in-house those components that are critical for the performance of the equipment. For non-critical components, Atlas Copco leverages the capacity and the competence of business partners and cooperates with them to continuously achieve product and process improvements. Approximately 75% of the production cost of equipment represents purchased components and about 25% are internally manufactured core components, assembly costs and overhead. Equipment represents less than 60% of revenues and Atlas Copco has organized its manufacturing and logistics to be able to quickly adapt to changes in equipment demand. The manufacturing of equipment is primarily based on customer orders and only some standard, high volume equipment is manufactured based on projected demand. The assembly of equipment is to a large degree carried out in own facilities. The assembly is typically lean and flow-oriented and the final product is normally shipped directly to the end user. The organization works continuously to use human, natural or capital resources more efficiently, while ensuring highest quality.
Atlas Copco believes that there is always a better way of doing things. Innovation and product development are very important and all products are designed internally. A key activity is to design new or improved products that provide tangible benefits in terms of productivity, energy efficiency and/or lower life cycle cost for the customer, and at the same time can be efficiently produced. Atlas Copco protects technical innovations with patents. Innovation also includes better processes to improve the flow and utilization of assets and information. Innovation will improve customer satisfaction and contribute to strengthening customer relations, the brand, as well as financial performance. Overcapacities and inefficiencies must always be challenged.
The need for investments in property, plant and equipment are moderate due to the manufacturing philosophy and can be adapted in the short and medium term to changes in demand. Most investments are related to machining equipment for core manufacturing activities and to production facilities, primarily for core component manufacturing and assembly operations. The working capital requirements of the Group are affected by the relative high share of sales through own customer centers, which affects the amount of inventory and receivables. In an improving business climate with higher volumes, more working capital will be tied up. If the business climate deteriorates, working capital will be released.
Acquisitions are primarily made in, or very close to, the already existing core businesses. All divisions are required to map and evaluate businesses that are adjacent and can offer tangible synergies with existing businesses. All acquired businesses are expected to make a positive contribution to economic value added. You can find a list of significant acquisitions here.
Financial statements are prepared in accordance with law and International Financial Reporting Standards. However, financial results are not the only measure of success, which is why Atlas Copco also integrates sustainability and social responsibility into its business reporting. You can find more information on audit and financial reporting here.
Atlas Copco believes that competent and committed leaders are crucial to achieving sustainable profitable growth and has developed a leadership model. All managers are entitled to receive a mission statement from their manager, which outlines the long-term expectations and goals and is described in both quantitative as well as qualitative measures. Typically a mission has a timeframe of three to five years. Based on the mission statement, it is expected that the manager develops a vision, which clarifies how the mission will be achieved, as well as the strategies, the organization and the people required to make it happen. Atlas Copco strives to be a good employer to attract and develop qualified and motivated people. All employees are responsible for their own professional career and supported by continuous competence development and an internal job market. Employees are encouraged to grow professionally and take up new positions. If the company needs to adapt capacity in a deteriorating business climate, the first action is to stop recruitment. Layoffs are the last resort.