Atlas Copco, which makes compressors, construction and mining equipment, said its profit after financial items rose 20 per cent to 881 million crowns in the first three months of 1998 against market expectations of a 900 million crown profit.

Its share price was unchanged at 220 crowns immediately after the result but then slipped two crowns to 218.

"The result was very much in line with expectations," said Matteus brokerage analyst Angelica Hansson.

"Its main strength was the comments that Europe is going to be become better during the year."

Swedbank analyst Mats Larsson said there was not many surprises in the report although an operating profit of 1.04 billion crowns against 748 million a year ago was a bit lower than expected.

"This was mainly due to the compressor technique business area," saidLarsson, who was retaining a forecast for a full year 1998 profit of 3.88 billion crowns.

Although orders in this area rose 31 per cent to 4.32 billioncrowns, acquired units accounted for the rise. Industrial compressor sales rose in some European markets but fell in Asia and demand for portable compressors from the construction industry was low.

"Demand from the manufacturing industry is expected to be stronger than in the preceding year," Atlas Copco's chief executive Giulio Mazzalupi said in the earnings statement.

"The level of activity and, consequently, demand for consumables in the mining and construction industries are forecast to decline slightly, although investment activity should be stable."

Mazzalupi said positive development of demand in Europe seen so far this year was expected to continue throughout 1998.

Increased demand, particularly in Germany, France and eastern Europe, was the key factor for driving order in take up 16 per cent in the first quarter to 8.4 billion crowns whileturnover climbed 27 per cent to 8.1 billion crowns.

Europe accounted for 41 per cent of orders received in the three months ending March 31 against 43 per cent a year ago.

Mazzalupi said US demand was expected to stay high.

Orders received in North and South America were largely unchanged, excluding the effect of Prime Service Inc, a US equipment rental company Atlas Copco acquired last year.

North and South America made up 35 per cent and six per cent of orders respectively against 26 and six per cent a year ago.

However Mazzalupi said Asian markets, possibly with the exception of China, would remain weak. Atlas Copco has said it plans to make several acquisitions in China.

"The financial crises in southeast Asia and South Korea negatively affected sales in these markets as well as in Japan and Australia," Atlas Copco said. "Orders received in China/Hong Kong remained stable." Orders received from this region fell to 12 per cent of the group's total from 19 per cent a year ago but analysts werenot overly concerned.