The SKF Group SKF Investor Relations January 2014.

The SKF Group

SKF Investor Relations

January 2014

© SKF Group Slide 2

SKF - A truly global company

Established: 1907

Sales 2013: SEK 63,597 million

Employees 2013: 48,401

Production sites: around 165 in 28 countries

SKF presence: in over 130 countries

Distributors/dealers: 15,000 locations

Global certificates: ISO 14001

OHSAS 18001 certification


7%3%

35%

5%

3%

24% 24%

Vehicle aftermark

et

6%4%3%

5%

11%10%

5%

11%

29%

2%

14%

Net sales - 2013

Aerospace Railway

Off-highwayTrucks

Two-wheelers and Electrical

Industrial, general

Cars and light

trucks

Industrial, heavy and

special

Industrial distributio

n

Energy

9%

Asia/Pacific

Latin America

North America

Middle East & Africa

Western Europe

Eastern Europe

Sweden

* Previously published shares have been restated in February 2013


North America

Latin America

WesternEurope

Eastern Europe

Middle East and Africa

Asia/Pacific

Net salesAverage number of employees Tangible asset

% of group total SKF 2013

(18)

(8)(13)

(26)(13)

(14)

(2002) (1998)

(25)(14)(19)

(10)(12) (9)

Sweden

(4) (4) (3)

(5)(12)(15)(3) (9) (3)

(2) (2) (0)

(47)(46)(53)

(6) (5) (4)

(5)(14)(12)(3) (9) (3)

(3) (2) (0)

(48)(44)(53)


Operating margin as reported

%


Return on capital employed

%


Growth in local currencies

%


Long-term financial targets

20%Return on capital

employed

15%Operating

margin, level

-20

-15

-10

-5

0

5

10

15

20

07 08 09 10 11 12 130

5

10

15

07 08 09 10 11 12 13

0

5

10

15

20

25

30

07 08 09 10 11 12 13

8%Changes in sales in local currency,

incl. structure


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

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

Investments & Innovation • New and existing facilities• Research and development• IT systems and mobility

28 January 2014

© SKF Group 15 October 2013Slide 10

To equip the worldwith SKF knowledge

SKF Group Vision


SKF BeyondZero

• SKF launched the BeyondZeroTM portfolio with products and solutions, which will both improve energy efficiency and reduce the environmental impact.

• SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme.

SKF’s climate strategy targets:

• Increase revenue from SKF BeyondZero portfolio from SEK 2.5 bn to SEK 10 bn by 2016

• Reduce total annual energy use by 5% below the 2006 level by 2016

• Reduce energy use per production output by 5% y-o-y from 2012 to 2016

• Reduce CO2 emissions per tonne-kilometre by 30% 2016 vs 2011 for transports managed by SKF Logistics Services

• Major suppliers certified according to ISO 50001 by 2016

© SKF Group

Opened

Planned

Tianjin

Taiwan

Shanghai

Pune

Istanbul

JohannesburgBrasil “IXION”

Colombia

Moscow

HoustonMonterreyMexico

Edmonton

Nordic (Gothenburg)

UK

Germany

ItalyFrance

Perth

Rumania

Cleveland Spain

PolandToronto

UrumquiThe Netherlands

Abu Dhabi

Manesar

Slide 12

27 SKF Solution Factories 2013


SKF Solution Factory

Segments & Application KnowledgePlatforms & Technology Competence

Capabilities

Sealing Solutions Mechanical Services Lubrication Solutions

Training Center

Bearing Service WorkshopCondition Monitoring ServicesRemote Monitoring Center

MaPro/CoMo Product Repair A & MC

SKFSolution Factory


Slab continuous caster – metal industry

Telescopic actuators for mould adjustment

SKF DryLube Bearings and SNL Housings for roll out table

SKF ConRo Top roll line units

SKF ConRo Low roll line units

SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines

SKF ConRo Compact roll line units

SKF Caster Analyst System for roll lines


Wheel-loader – Construction

Central gearHybrid pinion units

Wheel end• Integrated smart wheel bearing units with sensors• SKF Mudblock cassette seals

Motor hoodElectromechanical actuators

Chassis lubricationCentralized lubrication systems


New pitch bearingdesign with improvedcorrosion protection

DRTRB-unit SKF Nautilus with segmented cagefor minimized friction

New CRB-design withextra-high carrying capacityfor wind-gearboxes.

XL Hybrid bearingswith ceramic ballsfor superior insulation

SKF WindCon 3.0/WebconIntranet supervisedcondition monitoring

Automatic centralizedlubrication kits for reduced maintenance cost

Wind turbine - Energy


SKF’s environmentally positive customer solutions

Designed for environment

Designed for environment

A solution that is primarily designed to improve environmental performance by itself

E2 - 30% less energy compared to a standard bearing

SKF’s solutions which realize significant environmental benefits

Applied for environment

Applied for environment

A solution that enables improved environmental performance in a specific application

SKF sensor bearing

Stop-start system

Up to 15% better fuel economy of the car


SKF energy efficient (E2) bearings

PeruIndustria Textil Piura• 60,000 E2 deep

groove ball bearing

IndiaSangam Group

ChinaConveyors used in mining industry. 130,000 E2 bearing

IndonesiaLeuwijaya Textile• 30,000 E2 bearing

• potential 325,000 for 3 different customers


What is SKF knowledge?


SKF technology platforms

Bearingsand units



Seals



Mechatronic



Lubrication systems



Service


Acquisition 2003-2013Identifying gaps and opportunities in all platforms

Products

Technologies

Geographies

Industries

SNFA (2006)

S2M (2007)

QPM (2008)

Economos (2006)

Macrotech (2006)

Macrotech (2009)

Baker (2007)

PMCI (2007)

PB&A (2006)

Monitek (2006)

Safematic (2006)

Vogel (2004)

ALS (2007)

Sommers (2005)

ABBA (2007)

Jaeger (2005)

Peer (2008)

GLO (2008)

TCM (2003)

Scandrive (2003)

Cirval (2008)

Lincoln Industrial (2010)

GBC (2012)

BVI (2013)

Kaydon (2013)

SealsBearingsand units

Lubrication systemsServices Mechatronics

SKF Year-end results 2013Tom Johnstone, President and CEO

© SKF Group

Key achievements 2013

28 January 2014 Slide 27

Bearing

Acquisitions and divestments:

• acquisition of German-based ship components provider Blohm + Voss Industries (BVI)

• acquisition of US-based Kaydon Corporation

• divestment of the aerospace metallic rods business

New facilities:

• lubrication systems laboratory in SKF Global Technical Centre, India

• manufacturing unit in Pune in India for producing housings for bearings

• gearbox remanufacturing centre in Tianjin, China

• SKF opened six new SKF Solution Factories: in Toronto, Canada,in Manesar, India, in Urumqi, China and in Abu Dhabi, United Arab

Emirates. There are now 27 SKF Solution Factories worldwide.


Key achievements 2013

• In 2013, SKF provided around SEK 4 billion in verified savings for customers and since 2003 the accumulated figure is over SEK 27 billion.

• SKF Distributor College awarded its 200,000th certificate. The recipient is Yang Chunxiao, an employee of Shandong Jiarui Industry Develop Co, Ltd, one of SKF’s Certified Maintenance Partners in China, who completed a course on ”selling value”.

28 January 2014

SKF was included in the FTSE4Good Index Series for the 13th successive year

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

• SKF’s factories in Ahmedabad, India and in Dalian, China was awarded LEED Gold certification.

© SKF Group

Examples of new business in Q4 2013

• SKF is providing bearings, lubrication systems and engineering support for a US-based pump producer for London’s Lee Tunnel Project is building its largest-ever waste water pump, which will contribute to London’s storm water and sewage overflow issues.

• SKF received an order for compact tapered bearing unit from Tikhvin Freight Car Building Plant, affiliated to United Wagon Company LLC. The value of the order is around SEK 120 million.

• SKF was awarded by CSR ZHUZHOU ELECTRIC CO., LTD in China a contract for locomotive bearings for a value of SEK 76 million.

• SKF gained lubrication business worth SEK 38 million from a heavy industry customer in Peru.

Slide 2928 January 2014

• SKF started deliveries of wheel hub bearing units and MacPherson suspension bearing units to Volvo Car Corporation in their new factory in Chengdu, China for the delivery of the newly launched Volvo S60L car model.

• SKF received an order from Hyundai Motors as a supplier of the recently launched robust MacPherson suspension bearing unit. The value of the order is around SEK 370 million.

© SKF Group

Examples of new business in Q1 – Q3 2013

New business

• with Pratt & Whitney, to supply engine main shaft bearings

• with Nordex for delivery of main shaft bearings and lubrication systems

• for automated lubrication systems installed in the MSC Home Terminal cranes in Belgium’s Port of Antwerp

• with Turbomeca a 10-year contract worth SEK 900 million

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

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

• with Goldwind for SKF Nautilus bearing units, worth SEK 100 million

• with Tangshan Loco and Changchun Railway Co for wheel set bearings for high speed trains

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

Slide 3028 January 2014

© SKF Group 28 January 2014 Slide 31

Examples of new technologies, products and solutions 2013

High pressure valve stem seal with lower friction

SKF Extended Life spherical plain bearing

An energy efficient high speed permanent magnet solution

Sealed SKF single row angular contact ball

bearings

Reinforced all-rubber HSS seals

Super precisions bearings for

wood-working applications

SKF Axial excluder seal

SKF Condition Based Lubrication

SKF extreme temperature

bearings

SKF Telescopic pillars series CPMA and CPMB

for medical equipment

Robust angular steering column bearing

SKF InsightTM Internally powered sensors and data acquisition electronics sensing directly on the bearing


SKF Group – Q4 2013

Financial performance 2013 2012

Net sales, SEKm 16,430 14,984Operating profit, SEKm -1,547 1,221Operating margin, % -9.4 8.1Operating margin excl. one-time costs,% 11.0 10.2Profit before tax, SEKm -1,760 969Cash flow, SEKm -6,732 1,076

Organic sales growth in local currency:

SKF Group: 6.9%Strategic Industries: 6.5% Regional Sales and Service: 4.6% Automotive: 10.8%

Key points

Sales volumes up by 7.1% y-o-yManufacturing higher compared to last yearInventories 21.5% of sales (20.9% excluding Kaydon)

Europe: 3%North America: 4%Asia: 15%Latin America: 11%

28 January 2014

© SKF Group April 19, 2023Slide 33

SKF Group – 2013

Financial performance 2013 2012

Net sales, SEKm 63,59764,575Operating profit, SEKm 3,6937,314Operating margin, % 5.811.3Operating margin excl. one-time costs,% 11.9 12.0Profit before tax, SEKm 2,8216,408Cash flow, SEKm -5,3423,555

Organic sales growth in local currency:

SKF Group: -0.7%Strategic Industries: -4.1% Regional Sales and Service: -2.1% Automotive: 5.3% Key points

Sales volumes down by -0.7% y-o-yManufacturing relatively unchanged compared to last yearInventories 21.5% of sales (20.9% excluding Kaydon)

Europe: -3%North America: -3%Asia: 2%Latin America: 10%

28 January 2014

© SKF Group

Operating profit excluding one-time costs

SEKm Q4 2013 2013

Reported operating loss/profit -1,547 3,693

Reported operating margin -9.4% 5.8%

One-time costs:

European Commission provision -3,000 -3,000

Kaydon -260 -260

Other -90 -615

Total one-time costs -3,350 -3,875

Operating profit excl. one-time costs 1,803 7,568

Operating margin excl. one-time costs 11.0% 11.9%

Slide 34 28 January 2014

© SKF Group

Adjusted 2013 key figures

% Reported 2013Excl. EC

provisionExcl.

Kaydon

Inventories of annual sales 21.5 - 20.9

Net working capital of sales 31.7 - 30.6

ROCE 7.5 13.4 -

ROE 4.6 17.7 -

Equity/assets ratio 29.8 34.0 -

Gearing 52.9 56.0 -

Net debt/equity 117.3 102.7 -

Slide 35 28 January 2014


Organic sales growth in local currency

20132011 2012

% change y-o-y

28 January 2014


Europe3%

Asia/Pacific 15%

Latin America

11%Middle East

& Africa 16%

NorthAmerica

4%

Growth development by geography Organic growth in local currency Q4 2013 vs Q4 2012

28 January 2014


Europe-3%

Asia/Pacific 2%

Latin America

10%Middle East

& Africa 3%

NorthAmerica

-3%

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

28 January 2014


Components in net sales

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

Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1

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

Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -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 11.7

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

Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6

2011 2012 2013

28 January 2014


Growth in local currency, including structure

% y-o-y

Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in 2013: 2.5%

1.8%

16.3%

-2.1%

28 January 2014


Operating profit as reported

SEKm

2011 2012 2013

28 January 2014


Operating profit excluding one-time items

SEKm

2011 2012 2013

28 January 2014


0

2

4

6

8

10

12

14

16

2011 2012 2013

%

One-time items * Excluding one-time items

14.7*

11.9*

5.8

14.5 12.0*

Operating margin

11.4

28 January 2014


Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2011 2012 2013

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

28 January 2014


Inventories as % of annual sales

%

2011 2012 2013

28 January 2014

excl. Kaydon


Return on capital employed

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.

%

16.2

7.5

23.617.2*

15.1*

23.9*

One-time costs

* Excluding one-time costs

28 January 2014

© SKF Group

New ROCE and Net working capital targets


SKF financial targets Previous targets New targets

Operating margin level 15% 15%

Annual sales growth in local currencies

8% 8%

ROCE 27% 20%

Net working capital of sales - 27%

Inventories of sales 18% -

© SKF Group

Key elements of capital efficiency

18

20

22

24

26

28

30

02 03 04 05 06 07 08 09 10 11 12 13 *

-8 percentage points in 11 years

25

26

27

28

29

30

31

32

33

34

35

02 03 04 05 06 07 08 09 10 11 12 13 *

Flat over 11 years

Plant and property as % of sales Net working capital as % of sales

Main actions

•Continue PPE and sales ratio going forward

•Step-up activities to: - work with flexibility in our factories to reduce inventory - improve collection of accounts receivables - get effects on A/P from new purchasing activities

* Excluding Kaydon * Excluding Kaydon



Cash flow, after investments before financing

SEKm

2011 2012 2013

Excl. acquisitions and divestments:* Q3 2012 SEK 1,707 million** Q1 2013 SEK -69 million*** Q3 2013 SEK 871 million**** Q4 2013 SEK 1,170 million

*

**

***

28 January 2014

****


Net debt

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 8232014 Q4 7,900

28 January 2014

© SKF Group

Debt structure, maturity years


EURm

100100100

500

110

500

850

• Available credit facilities:EUR 500 million 2017SEK 3,000 million 2016

SEK 3,000 million 2017

• No financial covenants nor material adverse change clause


SEKm 2013 2012

Net sales 16,430 14,984

Operating loss/profit -1,547 1,221


Operating margin, % -9.4 8.1

Operating margin excl. one-time costs, % 11.0 10.2

Loss/profit before taxes -1,760 969

Net loss/profit -2,043 995

Basic earnings per share, SEK -4.57 2.12

Cash flow, after investments before financing -6,732 1,076

Fourth quarter 2013

28 January 2014


SEKm 2013 2012

Net sales 63,597 64,575

Operating profit 3,693 7,314


Operating margin, % 5.8 11.3

Operating margin excl. one-time costs, % 11.9 12.0

Profit before taxes 2,821 6,408

Net profit 1,044 4,816

Basic earnings per share, SEK 2.00 10.23

Cash flow, after investments before financing -5,342* 3,555*

Full year 2013

* excluding acquisitions and divestments, SEK 3,117 million (4,188). 28 January 2014


January 2014: SKF demand outlook Q1 2014

Demand compared to the first quarter 2013The demand for SKF’s products and services is expected to be slightly higher for the Group, Europe and North America. It is expected to be slightly lower in Latin America and higher in Asia Pacific. For Strategic Industries it is expected to be relatively unchanged, for Regional Sales and Service slightly higher and for Automotive higher.

Demand compared to the fourth quarter 2013The demand for SKF’s products and services is expected to be slightly higher for the Group, Europe and North America. It is expected to be relatively unchanged in Asia Pacific and slightly lower in Latin America. For Regional Sales and Service and Automotive it is expected to be slightly higher and for Strategic Industries relatively unchanged.

Manufacturing Manufacturing is expected to be higher year over year and slightly higher compared to the fourth quarter.

28 January 2014


Share of net sales2013

Europe 42%

Asia Pacific 24%

North America 24%

Latin America 7%

Total

Q1 2014 vs Q1 2013

+

++

+

-

+

Sequential trend for Q1 2014

SKF demand outlook Q1 2014, regions

28 January 2014


Sequential trend for Q1 2014

Share of net sales2013

Strategic Industries

29%

Regional Sales and Service

39%

Automotive 27%

Total

Q1 2014 vs Q1 2013

+/-

+

++

+

SKF demand outlook Q1 2014, business areas

28 January 2014


29%

14%

11%

11%

12%

5%

5%

3%

5%

5%

Industrial distribution

Cars and light vehicles

Vehicle service market

Industrial, general

Industrial, heavy, special and off-highway

Energy

Aerospace

Two-wheelers and Electrical

Railway

Trucks

Share of net sales 2013

SKF sequential volume trend Q1 2014, main segments

28 January 2014


Guidance for the first quarter 2014*

• Tax level: around 30%

• Financial net for the first quarter:Around SEK -250 million

• Currency impact on operating profit versus 2013Q1: SEK -90 millionFull year: SEK -300 million

• Additions to PPE: Around SEK 1.6 billion for 2014

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

28 January 2014


Dividend proposal

AB SKF’s Board proposes an

unchanged dividend of

SEK 5.50 per share

to the Annual General Meeting

28 January 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

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

Investments & Innovation • New and existing facilities• Research and development• IT systems and mobility

28 January 2014


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,

28 January 2014

© SKF Group

SKF cost reduction programme - restructuring status

SEKmQ4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013 2013 Total

Cost 200 250 190 15 50 505 705

Full year saving 150 100 80 5 40 225 375

People 530 410 320 15 130 875 1,405


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”.

28 January 2014


Welcome to the IR website – www.skf.com > Investors

Investor Relations function:

Head:Marita BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]

Investor Relations:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]

Event and road shows coordinator:Helena KarlssonTel: +46 31 3372142Mobile: +46 705 642142E-mail: [email protected]

The SKF Group SKF Investor Relations January 2014.

Documents

Transcript of The SKF Group SKF Investor Relations January 2014.