© SKF Group CMD 2013
Agenda
• Financial development
• Cash flow, working capital
• Financial position
• Second brand strategy
• Acquisitions
© SKF Group CMD 2013
Half year 2013
SEKm 2013 2012
Net sales 31,544 34,105
Operating profit 3,317 4,185
Operating margin, % 10.5 12.3
Operating margin excl. one-offs, % 11.9 12.7
Profit before taxes 2,864 3,730
Net profit 1,922 2,570
Basic earnings per share, SEK 4.10 5.44
Cash flow, after investments before financing 255 1,382
© SKF Group
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2011 2012 2013
Excluding one-off items(eg. restructuring, impairments, capital gains)
CMD 2013
© SKF Group CMD 2013
On sales including Intra-Group sales
H1 2013
On external net sales approx. figures
H1 2013
Automotive business (~28%)
Automotive
Automotive excluding one-off
4.4%
5.0%
5.3%
6.0%
Industrial business (~68%)
Strategic Industries 9.2%
SI excluding one-off 11.2%
Regional Sales and Service 11.5%
RSS excluding one-off 11.7%
Industrial business 13.0%
Industrial business excluding one-off 14.6%
Business segment margins
© SKF Group CMD 2013
-4
-2
0
2
4
6
8
10
12
14
16
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
SKF Group – operating margin development
Including one-off costs
Excluding one-off costs
© SKF Group CMD 2013
How did we get there?
SKF today – more robust, more diverse
• Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital
• Manufacturing footprint in best cost countries
• Customized solutions, value added products, technology platforms
• Diversifying growth, faster growing segments and geographies
• Acquisitions supporting growth and profitability
© SKF Group CMD 2013
Cash flow, after investments before financing
-1 000
-500
0
500
1 000
1 500
2 000
2 500
SEKm
2011 2012 2013
* SEK 1,707 million, excluding acquisitions and divestments.
** SEK -69 million, excluding acquisitions and divestments.
*
**
© SKF Group CMD 2013
Property, plant and equipment / Sales
18
20
22
24
26
28
30
02 03 04 05 06 07 08 09 10 11 12
%
-9 percentage points in 10 years
© SKF Group CMD 2013
Inventories / Sales
%
18
19
20
21
22
23
02 03 04 05 06 07 08 09 10 11 12
Target 18%
-1 percentage points in 10 years
© SKF Group CMD 2013
Net working capital / Sales
%
25
26
27
28
29
30
31
32
33
34
02 03 04 05 06 07 08 09 10 11 12
Flat over 10 years
NWC = Trade A/R + Inventories – Trade A/P
© SKF Group CMD 2013
Capital management focus
• Continue PPE & sales ratio going forward
• Step-up activities to:
- reach long term stock target of 18% of sales
- improve A/R / sales ratio
- get effects on A/P from new purchasing activities
© SKF Group CMD 2013
Financial position Q2 2013
Net debt, incl. pension liabilities SEK 18,776 million
Key measures
Gearing 54% Target level around 50%
Net debt/Equity 84% “ “ “ 80%
Credit ratings: S&P A-
Moody’s A3
© SKF Group CMD 2013
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
© SKF Group CMD 2013
History of strong cash flow generation and a shareholder friendly distribution policy
2003 – H1 2013, accumulated rounded figures
SEKm
EBITDA 85,000 Investments (21%) 18,000
Fin. Net, taxes, wc, others (37%) -32,000 Acquisitions (16%) 14,000
Cash flow from operations (61%) 52,000 Dividends/redemption (35%) 30,000
Extra pension funding (4%) 3,000
© SKF Group CMD 2013
Investments and innovation – Acquisitions 2003-2013
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)
SealsBearingsand units
Lubrication systemsServices Mechatronics
BVI (2013)
© SKF Group CMD 2013
Acquisitions in the last year
•General Bearing Cooperation (GBC)Acquired in August 2012
Net sales around USD 155 millionEmployees around 1,380Customers OEM and end-user in the truck, trailer, automotive
and industrial transportation marketsHeadquarter North AmericaFactories 3 in ChinaManufacturing ball bearings, tapered roller bearings
and precision roller bearings
•Blohm + Voss Industries (BVI)Acquired in February 2013
Net sales around EUR 100 millionEmployees around 400Headquarter GermanyManufacturing premium quality equipment for critical marine
applications, including shaft components (seals and bearings), stabilizers, and oily water separators
© SKF Group CMD 2013
Acquisition criteria
• Strategic fit with clear potential synergies and ability to exploit these in a reasonable timeframe.
• Strong commitment and ownership by acquiring Business Area.
• Profitable high quality companies with strong management and preferably larger deals.
• EPS accretive in the first full year, positive TVA effect in two to three
years, including amortization of intangible assets.
© SKF Group CMD 2013
Acquisition strategy for profitable growth
• Acquisitions are seen as one important driver for growth and value creation.
• Integration of Lincoln, General and BVI is going well so SKF is able to make additional larger acquisitions.
• SKF has the financial means and acquisition project resources in place to continue to pursue relevant acquisitions.
• Focus is on SKF platforms and PT products.
© SKF Group CMD 2013
Strategy for second brands
• Capture mid-market growth
• Lower cost manufacturing
• Global market approach
• Segment focus
- PEER, Industrial segments
- GBC, Auto, HD segments
© SKF Group CMD 2013
Sustainable profitable growth – application specific products and second brands
• Knowledge engineering• Documented value• Cost reduction• Brand
• Application specific products
Second brands• Strong cost focus• Peer/General/Hyatt brands
Low
Middle
High
© SKF Group CMD 2013
Business by industry
Truck & Trailer
Cars
OtherAgricultural
Other
TransmissionElectrical
Industrialdistribution
Fluidmachinery
Materialhandling
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