- SKF.com

Report
SKF Nine-month results 2014
Tom Johnstone, President and CEO
15 October 2014
Alrik Danielson, new President and CEO from 1 January 2015
B.Sc in Business Administration and International Economics
from the University of Gothenburg
1987-2005 Previous positions within SKF:
• Financial controller in Gothenburg
• President, Industrial Division in Spain and Portugal
• President, SKF do Brazil
• President, Industrial Division
and several other managerial positions.
2005-2014 Höganäs AB, President and CEO
© SKF Group
Slide 2
15 October 2014
Examples of new business
• Doosan Heavy Industries and Construction,
South Korea
SKF Supergrip Bolts
SKF Nautilus bearing
• A leading Chinese locomotive manufacturer
Traction motor bearings
• HSD SpA, Italy
Super precision bearings
and engineering support
• A major Australian customer
Maintenance contract
in the agriculture industry
• Medical device manufacturer in California,
USA
© SKF Group
Slide 3
15 October 2014
Slewing ring bearings
Examples of new business
• Tesla Motors
Bearing for the gearbox, e-motor
and wheels
• Volvo Cars
Wheel hub bearing units
• Scania
Wheel bearing units and high pressure
valve stem seals
© SKF Group
Slide 4
15 October 2014
Customer awards
• Supplier Performance Award – Snecma, Safran Group, France
• Best Supplier Award – Weg Electric Motor Manufacturing Co., Ltd, China
• Best Supplier Award – Shanghai Hanbell Precise Machinery Co. Ltd., China
• Excellent Engineering Development Award – Shanghai Automobile
Gear Works (SAGW), China
• Fiat Qualitas Award – Fiat, Argentina
• Certificate of Appreciation for quality and delivery
performance – Honda, India
© SKF Group
Slide 5
15 October 2014
Highlights
• New Kaydon factory at the SKF Campus in Cajamar, Brazil.
• New Global Technical Center in the greater Chicago area, US.
• For the 15th year in a row, one of the world’s most
sustainable companies by the Dow Jones Sustainability
World Index (DJSI).
• For the 14th consecutive year, a constituent of the
FTSE4Good Index Series.
© SKF Group
Slide 6
15 October 2014
Examples of new products and solutions
SKF Multilog Online
System IMx-B
Compact tapered
roller bearing unit
for heavy freight
SKF Mudblock
cassette
seals,
MUD 11
SKF Static
Motor Analyzer
Baker AWA-IV
© SKF Group
15 October 2014
Tapered
roller bearing
unit for passenger
railway applications
SKF Machine
Tool Observer MTx
SKF Multilog
On-line System IMx-M
PuraBreeze 100
SKF Group – Q3 2014
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before tax
Basic earnings per share, SEK
Cash flow after investments before financing excl. EU payment
Cash flow after investments before financing
Organic sales growth in local currency:
SKF Group
3.3%
Strategic Industries
9.1%
Regional Sales and Service
0.8%
Automotive
-0.5%
Slide 8
15 October 2014
2013
17,787
2,073
11.7
11.8
1,827
3.01
1,476
1,476
15,623
1,923
12.3
12.9
1,717
2.47
1,135
1,135
Europe
North America
Asia
Latin America
Middle East and Africa
Key points
Sales volumes up by 1.9% y-o-y.
Manufacturing was relatively unchanged compared to last year.
© SKF Group
2014
0%
3%
8%
0%
7%
SKF Group – Nine month 2014
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before tax
Basic earnings per share, SEK
Cash flow after investments before financing excl. EU payment
Cash flow after investments before financing
Organic sales growth in local currency:
SKF Group
4.6%
Strategic Industries
8.7%
Regional Sales and Service
1.7%
Automotive
2.8%
Slide 9
15 October 2014
2013
52,476
6,193
11.8
11.8
5,375
8.27
2,640
-185
47,167
5,240
11.1
12.2
4,581
6.57
1,390
1,390
Europe
North America
Asia
Latin America
Middle East and Africa
Key points
Sales volumes up by 3.8% y-o-y.
Manufacturing was slightly higher compared to last year.
© SKF Group
2014
2%
3%
11%
1%
14%
Organic sales growth in local currency
% change
y-o-y
8
6
4
2
0
-2
-4
-6
-8
-10
2012
© SKF Group
Slide 10
15 October 2014
2013
2014
Organic sales growth in local currency
% y-o-y
6
4.5%
4
2
0
-0.7%
-2
-2.5%
-4
2012
2013
Structure in 2012: 0.4%
Structure in 2013: 2.5%
Structure in 2014: 4.7%
© SKF Group
Slide 11
15 October 2014
YTD 2014
Sales development by geography
Organic growth in local currency Q3 2014 vs Q3 2013
Europe
0%
North
America
3%
Asia/Pacific
8%
Latin
America
0%
© SKF Group
Slide 12
15 October 2014
Middle East
& Africa
7%
Sales development by geography
Organic growth in local currency YTD 2014 vs YTD 2013
Europe
2%
North
America
3%
Asia/Pacific
11%
Latin
America
1%
© SKF Group
Slide 13
15 October 2014
Middle East
& Africa
14%
Components in net sales
2012
Percent y-o-y
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Volume
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
6.2
3.6
1.9
Structure
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
4.7
3.8
5.4
Price/mix
1.9
2.0
0.5
0.7
0.7
-0.6
-0.2
-0.2
-0.4
1.0
1.3
Sales in local
currency
1.0
-0.8
-3.7
-4.2
-6.5
0.4
3.1
11.7
10.5
8.4
8.6
Currency
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
-2.1
-0.1
1.1
5.3
Net sales
1.4
2.8
-6.4
-7.8 -10.5
-4.6
0.9
9.6
10.4
9.5
13.9
© SKF Group
Slide 14
15 October 2014
Operating profit as reported
SEKm
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
2012
© SKF Group
Slide 15
15 October 2014
2013
2014
Operating profit excluding one-time items
SEKm
2500
2000
1500
1000
500
0
2012
© SKF Group
Slide 16
15 October 2014
2013
2014
Operating margin
One-time items
* Excluding one-time items
%
16
14
12.0*
11.9*
12
11.8
11.3
10
8
6
5.8
4
2
0
2012
© SKF Group
Slide 17
15 October 2014
2013
YTD 2014
Operating margin per business area as reported
%
18
15
Regional Sales
and Service
Specialty Business
Strategic Industries
12
9
6
3
Automotive
0
-3
Q1
Q2
2012
© SKF Group
Slide 18
15 October 2014
Q3
Q4
Q1
2013
Q2
Q3
Q4
Q1
2014
Q2
Q3
Operating margin per business area excl. one-time items
%
18
15
Regional Sales
and Service
12
Specialty Business
Strategic Industries
9
6
3
Automotive
0
-3
Q1
Q2
2012
© SKF Group
Slide 19
15 October 2014
Q3
Q4
Q1
2013
Q2
Q3
Q4
Q1
2014
Q2
Q3
SKF’s programme to improve efficiency and reduce cost
Restructuring, SEKm:
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13
2013 Q1/14 Q2/14 Q3/14
Total
Cost taken
200
250
190
0
50
490
0
100
20
810
People affected
530
410
320
0
130
860
0
170
30 1,590
80
0
40
220
0
100
Giving future gross savings, SEKm:
Full year gross saving
150
100
5
475
Realized gross savings from total programme, SEKm:
vs 2012
vs 2013
Q1/13 Q2/13 Q3/13 Q4/13
2013 Q1/14 Q2/14 Q3/14
2014
Restructuring
15
35
75
75
200
70
50
10
130
S&A
50
50
50
50
200
0
0
0
0
Purchasing
100
100
100
100
400
60
100
100
260
Total
165
185
225
225
800
130
150
110
390
Note: Run rate Q3 2014 SEK 1,340 million vs 2012.
© SKF Group
Slide 20
15 October 2014
Operating profit bridge, Q3 2014
SEKm
3000
2500
+165
2000
1,923
+112
+110
+65
+100
-432
2,073
+30
1500
1000
500
0
Q3 2013
© SKF Group
Slide 21
15 October 2014
Volumes Price/mix Specialty Savings
excl.
Business
Specialty
Business
One-time Currencies Other*
items
Q3 2014
* R&D, S&A, IT, inflation etc.
Operating profit bridge, nine month 2014
SEKm
8000
+505
+390
7000
6000
+430
+225
+352
-120
-829
6,193
5,240
5000
4000
3000
2000
1000
0
Q1-Q3
2013
© SKF Group
Slide 22
15 October 2014
Volumes Price/mix Specialty Savings One-time Currencies Other*
Q1-Q3
excl.
2014
Business
items
Specialty
* R&D, S&A, IT, inflation etc.
Business
Net working capital as % of annual sales
Target: 27%
%
35
34
33
32
31
30
29
28
27
26
25
Q1
Q2
2012
© SKF Group
Slide 23
15 October 2014
Q3
Q4
Q1
2013
Q2
Q3
Q4
Q1
2014
Q2
Q3
Return on capital employed
One-time items
* Excluding one-time items
%
20
17.1*
15.1*
15
16.2
13.9*
10
7.5
5
8.5
0
2012
2013
30 September 2014
ROCE: Operating profit plus interest income, as a percentage of twelve months
rolling average of total assets less the average of non-interest bearing liabilities.
© SKF Group
Slide 24
15 October 2014
Cash flow, after investments before financing
SEKm
2,000
1)
5)
4)
1,000
3)
0
2)
-1,000
-2,000
-3,000
-4,000
-5,000
-6,000
-7,000
2012
2013
Excl. acq. and div.:
© SKF Group
Slide 25
15 October 2014
Excl. EU payment
1)
2)
3)
4)
5)
Q3 2012
Q1 2013
Q3 2013
Q4 2013
Q2 2014
2014
SEK 1,707 million
SEK -69 million
SEK 871 million
SEK 1,170 million
SEK 1,423 million
Net debt
SEKm
0
AB SKF,
dividend paid (SEKm):
2012 Q2
2,504
2013 Q2
2,530
2014 Q2
2,530
-5,000
-10,000
-15,000
Cash out from major
acquisitions (SEKm):
2012 Q3
829
2013 Q1
823
2013 Q4
7,900
-20,000
-25,000
-30,000
-35,000
2012
2013
2014
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 26
15 October 2014
EU payment (SEKm):
2014 Q2
2,825
Debt structure, maturity years
EURm
850
900
800
700
600
500
500
500
400
300
200
200
100
100
100
110
2015
2016
2017
0
• Available credit facilities:
EUR 500 million 2019
SEK 3,000 million 2016
EUR 150 million 2017
© SKF Group
Slide 27
15 October 2014
2018
•
2019
2020
2021
No financial covenants nor material
adverse change clause
October 2014: SKF demand outlook Q4 2014
Demand compared to the fourth quarter 2013
The demand for SKF’s products and services are expected to be relatively
unchanged for the Group and for Europe, slightly higher for Asia and North
America and slightly lower for Latin America. It is expected to be slightly
higher for Strategic Industries, relatively unchanged for Regional Sales
and Service and slightly lower for Automotive.
Demand compared to the third quarter 2014
The demand for SKF’s products and services are expected to be relatively
unchanged for the Group and for Europe, slightly higher for Asia and North
America and slightly lower for Latin America. It is expected to be relatively
unchanged for Strategic Industries, slightly higher for Regional Sales and
Service and slightly lower for Automotive.
Manufacturing
Manufacturing is expected to be slightly lower year over year and
compared to the third quarter.
© SKF Group
Slide 28
15 October 2014
SKF demand outlook Q4 2014, main regions
Share of net sales
2013
Sequential trend
for Q4 2014
Q4 2014
vs Q4 2013
Europe
42%
+/-
Asia Pacific
24%
+
North America
24%
+
Latin America
7%
+/-
Total
© SKF Group
Slide 29
15 October 2014
SKF demand outlook Q4 2014, main business areas
Share of net sales
2013
Q4 2014
vs Q4 2013
Strategic
Industries
29%
+
Regional Sales
and Service
39%
+/-
Automotive
27%
-
Total
© SKF Group
Sequential trend
for Q4 2014
Slide 30
+/-
15 October 2014
SKF sequential volume trend Q4 2014, Industries
Share of net
sales 2013
29%
6%
Aerospace
13%
Industrial, heavy, special and off-highway
11%
Industrial, general
5%
Energy
4%
Railway
2%
Two-wheelers and Electrical
14%
Cars and light vehicles
11%
Vehicle service market
5%
© SKF Group
Industrial distribution
Slide 31
Trucks
15 October 2014
Guidance for the fourth quarter 2014*
• Tax level: < 30%
• Financial net: around SEK -220 million
• Currency impact on operating profit vs 2013
Q4:
SEK +230 million
Full year:
SEK +110 million
• Additions to PPE: around SEK 1.7 billion for 2014
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group
Slide 32
15 October 2014
SKF’s priorities
Sustainable profitable growth
• Expand the platform concept
• Exploit the asset life cycle approach
• Develop new products and grow SKF BeyondZero portfolio
• Extend and grow second brands
• Acquisitions
Capital efficiency
• Fixed capital
• Net working capital
© SKF Group
Slide 33
15 October 2014
Investments & Innovation
• New and existing facilities
• Research and development
• IT systems and mobility
Cost reduction
• Business Excellence
• Consolidation of manufacturing
• Optimization and productivity improvements
• Reduction in purchasing costs
Cautionary statement
This presentation contains forward-looking statements that are based on the current
expectations of the management of SKF.
Although management believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove to have been correct. Accordingly, results could differ materially from those
implied in the forward-looking statements as a result of, among other factors, changes
in economic, market and competitive conditions, changes in the regulatory
environment and other government actions, fluctuations in exchange rates and other
factors mentioned in SKF's latest annual report (available on www.skf.com) under the
Administration Report; “Important factors influencing the financial results", "Financial
risks" and "Sensitivity analysis”.
© SKF Group
Slide 34
15 October 2014

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