SKF Nine-month results 2013 Tom Johnstone, President and CEO.

SKF Nine-month results 2013Tom Johnstone, President and CEO

15 October 2013Slide 2© SKF Group

Highlights Q3 2013

• Acquisition of Kaydon Corporation announced.

New business

• Agreements with Fiat, worth SEK 1 billion for the delivery of wheel hub bearing units.

• Agreements with Great Wall Motors in China for high pressure valve stem seals and bearing retainers. SKF and Great Wall Motors also signed a strategic partnership for developing sustainable solutions in energy efficient vechicles.

• A supply agreement with Goldwind, worth SEK 100 million for SKF Nautilus bearing units.

• Major orders from Tangshan Loco and Changchun Railway Co for wheel set bearings for high speed trains.

• Order from a Chinese customer, worth SEK 22 million for bearingsfor upgrading local coal power plants.

• An order from an European customer, worth SEK 21 million for cryogenic bearings.


• A three-year service contract, worth SEK 43 million with a major oil and gas company in Latin America.

• An agreement with Wuhan Iron & Steel Heavy Industry Group Co, Ltd (WISCO Heavy) to establish a remanufacturing centre in Wuhan, China.

• SKF opened a gearbox remanufacturing centre in Tianjin, China.

• SKF Distributor College awarded its 190,000th certificate.

Highlights Q3 2013

SKF’s factory in Dalian, China was awarded LEED Gold certification.

SKF was included in the Dow Jones Sustainability Indexes for the 14th successive year.


Kaydon Corporation

Key facts and figures - 2012

• Headquarters in Ann Arbor, Michigan U.S.

• Established 1941

Friction control 54%Friction control 54% Specialty products 23%Specialty products 23%Velocity control 23%Velocity control 23%

• USD 475 million in sales

• 2,187 employees

Ring & SealBearing


Kaydon net sales – 2012

Industries Geographies

13%

6%10%

5%3%

27%

13%

18%

5%

Automation & Robotics

PowerGeneration

Aerospace

MilitaryHeavyEquipment

MedicalEquipment

PetroleumProcessing

Other

Semicond.24%

12%2%

62%North

America

Europe

AsiaOther


New products - examples

Maintenance products:

SKF Axial excluder seal

SKF Condition Based Lubrication

Sealed SKF single row angular contact ball bearings

Reinforced all-rubber HSS seals

Oil storage station

Grid and gear coupling grease

Digital oil pressure gauge

Super precisions bearings for wood-working applications


SKF Group – Q3 2013

Financial performance 2013 2012

Net sales, SEKm 15,623 15,486Operating profit, SEKm 1,923 1,908Operating margin, % 12.3 12.3Operating margin excl. restructuring,% 12.9 12.3Profit before tax, SEKm 1,717 1,709Cash flow, SEKm 1,135 1,097

Organic sales growth in local currency:

SKF Group: 2.0%Strategic Industries: -0.9% Regional Sales and Service: 0.3% Automotive: 7.5%

Key points

Sales volumes up by 2.2% y-o-yManufacturing slightly higher compared to last yearInventories 21.3% of sales

Europe: 1%North America: -2%Asia: 5%Latin America: 9%


Organic sales growth in local currency

-10

-5

0

5

10

15

20

25

20132011 2012

% change y-o-y


Europe1%

Asia/Pacific 5%

Latin America

9%Middle East

& Africa 8%

NorthAmerica

-2%

Growth development by geography Organic growth in local currency Q3 2013 vs Q3 2012


Europe-4%

Asia/Pacific -3%

Latin America

10%Middle East

& Africa 0%

NorthAmerica

-4%

Growth development by geography Organic growth in local currency YTD 2013 vs YTD 2012


Components in net sales

Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2

Structure 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6 1.1

Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2

Sales in local currency

26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1

Currency -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2

Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9

2011 2012 2013


-10

-5

0

5

10

15

20

2011 2012 YTD 2013

Growth in local currency, including structure

% y-o-y

Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in YTD 2013: 1.8%

-1.2%

16.3%

-2.1%


Operating profit

0

300

600

900

1 200

1 500

1 800

2 100

2 400

2 700

SEKm

2011

One-time items

2012 2013


%

0

2

4

6

8

10

12

14

16

2011

One-time items

2012 2013

Operating margin


0

2

4

6

8

10

12

14

16

2011 2012 YTD 2013

%

One-time items * Excluding one-time items

14.7*

12.2*

11.1

14.5 12.0*

Operating margin

11.4


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2011 2012 2013

Excluding one-off items(eg. restructuring, impairments, capital gains)


18

19

20

21

22

23

24

25

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Inventories as % of annual sales

%

2011 2012 2013


Return on capital employed

0

5

10

15

20

25

30

2011 2012 YTD 2013

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.

%

16.213.5

23.617.2*

15.2*

23.9*

One-off costs

* Excluding one-off costs


Cash flow, after investments before financing

-1 000

-500

0

500

1 000

1 500

2 000

2 500SEKm

2011 2012 2013

* SEK 1,707 million, excluding acquisitions and divestments.** SEK -69 million, excluding acquisitions and divestments.*** SEK 871 million, excluding acquisitions and divestments.

*

**

***


Net debt

-20 000

-18 000

-16 000

-14 000

-12 000

-10 000

-8 000

-6 000

-4 000

-2 000

0

SEKm

AB SKF, dividend paid (SEKm):2011 Q2 2,2772012 Q2 2,5042013 Q2 2,530

2011 2012 2013

Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

Cash out fromacquisitions (SEKm):

2012 Q3 8292013 Q1 823


0

100

200

300

400

500

600

2013 2014 2015 2016 2017 2018 2019 2020

EURm

265

100100100

500

110

500

• Available credit facilities:EUR 500 million 2017 SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

Debt structure, maturity years

100


SEKm 2013 2012

Net sales 15,623 15,486

Operating profit 1,923 1,908

Operating margin, % 12.3 12.3

Operating margin excl. one-offs, % 12.9 12.3

Profit before taxes 1,717 1,709

Net profit 1,165 1,251

Basic earnings per share, SEK 2.47 2.67

Cash flow, after investments before financing 1,135 1,097

Third quarter 2013


SEKm 2013 2012

Net sales 47,167 49,591

Operating profit 5,240 6,093

Operating margin, % 11.1 12.3

Operating margin excl. one-offs, % 12.2 12.6

Profit before taxes 4,581 5,439

Net profit 3,087 3,821

Basic earnings per share, SEK 6.57 8.11

Cash flow, after investments before financing 1,390* 2,479*

Nine-month 2013

* excluding acquisitions and divestments, SEK 1,947 million (3,112).


October 2013: SKF demand outlook Q4 2013

Demand compared to the fourth quarter 2012The demand for SKF’s products and services is expected to be slightly higher for the Group, Asia and Europe and relatively unchanged for North America and Latin America. It is expected to be slightly higher for Strategic Industries and Regional Sales and Service and higher for Automotive.

Demand compared to the third quarter 2013The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe, North America and Latin America as well as for all the business areas. It is expected to be slightly higher for Asia.

Manufacturing Manufacturing is expected to be higher year over year and relatively unchanged compared to the third quarter.


Share of net sales2012

Europe 43%

Asia Pacific 24%

North America 23%

Latin America 7%

Total

Q4 2013 vs Q4 2012

+

+

+/-

+/-

+

Sequential trend for Q4 2013

SKF demand outlook Q4 2013, regions


Sequential trend for Q4 2013

Share of net sales2012

Strategic Industries

31%

Regional Sales and Service

39%

Automotive 27%

Total

Q4 2013 vs Q4 2012

+

+

++

+

SKF demand outlook Q4 2013, business areas


6%

5%

4%

2%

29%

13%

13%

12%

10%

6%

Aerospace

Trucks

Railway

Two-wheelers and electrical

Industrial distribution

Industrial, heavy, special and off-highway

Cars and light vehicles

Industrial, general

Vehicle after market

Energy

Share of net sales 2012

SKF sequential volume trend Q4 2013, main segments


Guidance for the fourth quarter 2013*

• Tax level: a little above 30%

• Financial net for the fourth quarter:Around SEK 210 million excluding Kaydon acquisition

• Currency impact on operating profit versus 2012Q4: SEK 120 millionFull year: SEK 630 million

• Additions to PPE: Around SEK 1.7 billion for 2013

* Guidance is approximate and based on current assumptions and exchange rates


Key focus areas 2013

• Managing the uncertain and different demand environment

- Profit and cash flow

• Initiatives and actions to support long-term financial targets - New factories in Mysore and Bengaluru in India

- New warehouse in Shanghai, China

- SKF Campus in Shanghai, China, including:‣ New factory for automotive‣ Global Technical Centre China‣ SKF Solution Factory‣ SKF College

- Integration of new acquisitions, GBC and BVI

- Cost reduction and efficiency programme

- New IT systems

• Business Excellence and competence development

One SKF and SKF Care as guiding lights


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 cost reduction• Working capital efficiency

Cost reduction• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs

Investments & Innovation • New and existing facilities• Research and development


Cost reduction – specific programme 2012-2015

Main activities:

• Consolidation of manufacturing- merger between sites- transfer to faster growing markets with more local production

• Optimization and productivity improvements- in the manufacturing and demand chain processes- in administration and support functions

• Reduction in purchasing cost- mainly through standardization and rationalization

of the supplier base.

Reduction of annual cost by SEK 3 billion by the end of 2015

- Total cost for the programme around SEK 1.5 billion

- 2,500 people impacted,


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 Nine-month results 2013 Tom Johnstone, President and CEO.

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Transcript of SKF Nine-month results 2013 Tom Johnstone, President and CEO.