ATLAS COPCO INTERIM REPORT (unaudited) Three months ended March 31 1997

28 apr 1997

Comparable earnings up 7 percent

The Atlas Copco Group´s invoiced sales for the first three months of 1997 amounted to SEK 6,406 m. (6,034), up 6 percent. Orders received increased by 8 percent to SEK 7,215 m. (6,657). The exchange-rate differences, primarily the strengthening of USD, had a positive effect of approximately 3 percent on both invoiced sales and orders received.  The Atlas Copco Group´s profit after financial income and expense amounted to SEK 735 m. (803). The profit margin was 11.5 percent (13.3). Adjusting for nonrecurring items of SEK 117 m. in the first quarter of 1996, profit after financial income and expense increased by 7 percent.  Demand in 1997 is expected to remain largely unchanged. Previous forecast with somewhat higher profit compared to 1996 stands firm. Structural changes  In December 1996, Atlas Copco acquired the Swiss company Elesta Automation AG, which has annual sales of about SEK 20 m. The acquisition is a step in Atlas Copco´s strategy to further strengthen its position in advanced motion control systems for industrial machines. Elesta is part of Atlas Copco Industrial Tools and Equipment division in the Industrial Technique business area.  In March 1997, Worthington Compressors, a company within Industrial Air division, signed a joint venture agreement for production of oil-injected screw compressors with Shanghai General Ma-chinery Group, China.The joint venture will start production during the fourth quarter 1997. Atlas Copco´s share is 58 percent.  A preliminary agreement has been reached with the French company Compagnie Fives-Lille on acquiring the company Thomé-Crépelle, which is primarily manufacturing industrial reciprocating compressors. The company, which has 200 employees and is located in Lille, France, has annual sales of approximately SEK 255 m. Subject to final agreement and necessary approvals, the acquisition is planned to take place before the end of the second quarter 1997. Increase of demand in some markets  Increased demand was noted in South America, Japan, Australia and certain European markets, including Great Britain. However, demand in other markets, including the U.S. and Germany, remained unchanged. Sales of small and medium-sized compressors, mining equipment and power tools increased during the first quarter of 1997 compared to the corresponding period of 1996. Earnings  Operating profit amounted to SEK 748 m. (769), corresponding to 11.7 percent of invoiced sales. Excluding nonrecurring items the operating profit for the first quarter of 1996 was SEK 652 m., corresponding to 10.8 percent of invoiced sales. The operating profit, up 15 percent excluding nonre-curring items in 1996, was improved due to some volume increase and favorable exchange-rate de-velopments, mainly the strengthening of USD.  Net financial items amounted to SEK -13 m. (34), of which net interest items accounted for SEK  -21 m. (35). Interest income from cash holdings in Sweden and from currency hedging of foreign net assets was negatively affected by the dramatically lower interest rates in Sweden compared to previous year.  Profit after financial income and expense amounted to SEK 735 m. (803), corresponding to a profit margin of 11.5 percent. Excluding nonrecurring items the profit for the first quarter of 1996 was SEK 686 m., corresponding to a profit margin of 11.4 percent. Profit after financial income and expense, excluding nonrecurring items, increased by 7 percent.  Net profit for the period totaled SEK 440 m. (539). Earnings per share were SEK 2.40 (2.94) and SEK 10.02 (10.64), based on earnings during the most recent 12 months. Excluding nonrecurring items earnings per share for the first quarter of 1996 was SEK 2.48.  The return on capital employed during the most recent 12 months was 20.1 percent (22.3) and on shareholders´equity 15.9 percent (19.0). Goodwill  In connection with the acquisition of the American company, Milwaukee Electric Tool Corporation, as of August 1, 1995, a goodwill item in the amount of SEK 3,100 m. arose. This goodwill is amortized over a period of 40 years. For purposes of comparison, the impact on earnings resulting from the application of goodwill amortization over periods of 20 and 40 years is shown below.  The equity/assets ratio is 50.6 percent. Based on a 20-year amortization period, the comparable figure is 50.3 percent.  During 1995, the Swedish Financial Accounting Standards Council implemented a general review of its recommendation, which prescribed amortization of goodwill over a maximum of 20 years, and published a new version, which became effective on January 1, 1997. However, with regard to the maximum amortization period for goodwill, the Council has elected to delay its recommendation pending the position adopted by the International Accounting Standards Committee (IASC). Atlas Copco intends to follow the final recommendation of the Council. Net indebtedness and cash flow  The Group´s net indebtedness, meaning the difference between interest-bearing liabilities and liquid assets, amounted to SEK 1,660 m. (2,845), of which SEK 1,987 m. (1,943) related to pension provisions. The debt/equity ratio, meaning net indebtedness in relation to shareholders´ equity, decreased to 13 percent (26).  Net cash flow, after dividends and taxes, during the period amounted to SEK 456 m. (326). Liquid assets at the end of the period totaled SEK 3,037 m. (2,300).  Including minority interests, the Atlas Copco Group´s shareholders´ equity totaled SEK 12,642 m. (11,132), corresponding to SEK 69 per share (61). The equity/assets ratio was 51 percent (48). Investments  Investments in machinery and buildings totaled SEK 190 m. (192). Personnel  At the end of the period, the number of employees was 20,909 (21,118). Business areas  Compressor Technique  The Compressor Technique business area consists of five divisions in the following product areas:  Industrial compressors, Portable compressors and Gas and process compressors.  Orders received during the period increased by 8 percent to SEK 3,306 m. (3,065). Sales of portable compressors and smaller industrial compressors increased, particularly in southern European markets. Demand for oil-free industrial compressors improved in North and South America, while there was a decline in South East Asia.  Invoiced sales increased by 7 percent to SEK 2,809 m. (2,630).  Operating profit increased by 16 percent to SEK 462 m. (399). The improvement was due to higher volumes and favorable exchange rates. Construction and Mining Technique  The Construction and Mining Technique business area consists of six divisions in the following product areas: Drill rigs, Rock drilling tools, Construction tools and Loading equipment.  Orders received during the period increased by 17 percent to SEK 1,736 m. (1,481). One order in New Zealand for a tunnel boring machine represents approximately one third of the increase. Demand for rock drilling equipment and loaders from the mining industry remained favorable. Significant orders were signed in South America, Australia and Ghana, among other markets. The construction market continued to be weak, particularly in Europe with the exception of Italy and the Nordic countries, where orders received increased compared to the corresponding period in 1996.  Invoiced sales totaled SEK 1,458 m. (1,448).  Operating profit decreased by 17 percent to SEK 90 m. (109). The decline was mainly due to lower sales volumes. The improved currency situation, particularly the strengthening of USD, had no effect during the quarter due to hedging contracts. Industrial Technique  The Industrial Technique business area consists of five divisions in the Power tools, Assembly systems and Motion control product areas.  During the period the relocation of Chicago Pneumatic´s operations from Utica, New York, to Rock Hill, South Carolina, was realized, and the Desoutter division completed its move to new facilities outside London.  Orders received during the period increased by 3 percent to SEK 2,173 m. (2,111). Sales of pneumatic power tools increased in some European markets, Brazil and Japan. Orders received for elec-tric power tools in the U.S. during the period were lower compared to an unusually strong first quarter of 1996, although the current trend remains slightly positive. Notable orders for assembly systems were received in North America and Brazil.  Invoiced sales increased by 9 percent to SEK 2,139 m. (1,956).  Operating profit totaled SEK 218 m. (289). Excluding nonrecurring items the profit for the first quarter of 1996 amounted to SEK 172 m. The improvement of 27 percent, excluding nonrecurring items in 1996, was due to higher sales volumes and lower operational costs. Outlook  Demand in 1997 is expected to remain largely unchanged. Previous forecast with somewhat higher profit compared to 1996 stands firm.  Stockholm, April 28, 1997  Giulio Mazzalupi  President and Chief Executive Officer  The interim report on the Atlas Copco Group´s operations during the first six months of 1997 will be published on August 18, 1997. For further information, please contact:  Carl-Johan Wachtmeister, Senior Vice President, Corporate Communications,  phone +46 8 743 8070, mobile +46 70 543 8070  Hans Ola Meyer, Senior Vice President, Group Treasurer,  phone +46 8 743 8292