0 15 july 2011. skf half-year results 2011 tom johnstone, president and ceo 15 july 2011
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15 July 2011
SKF Half-year results 2011
Tom Johnstone, President and CEO
15 July 2011
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15 July 2011
Q2 2011
• Strong performance 2011 2010
Operating profit, SEKm 2,6232,239Operating margin, % 15.7 14.3Profit before tax, SEKm 2,446 2,047Cash flow, SEKm 1,300 1,160
• Strong organic sales growth in local currency:SKF Group: +14.2%Europe: +14.0% Industrial Division: +18.5% North America: +15.8%Service Division:
+16.6% Asia: +16.9% Automotive Division: +6.2%Latin America: +2.9%
Outlook for Q3 for SKF Group
• DemandSignificantly higher compared to Q3 2010Slightly higher sequentially compared to Q2 2011
• Manufacturing levelSignificantly higher year over yearRelatively unchanged compared to Q2 2011
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H1 2011
• Strong performance H1 2011 H1 2010
Operating profit, SEKm 5,127 3,941Operating margin, % 15.3 13.1Profit before tax, SEKm 4,764 3,551Cash flow, SEKm 1,672 1,192
• Strong organic sales growth in local currency:
H1 2011
SKF Group: +17.6%
Europe: +17.7%North America: +20.1%Asia: +19.2%Latin America: +10.0%
Industrial Division: +19.7%Service Division: +19.3%Automotive Division: +12.6%
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•SKF and Chalmers University of Technology agreed to establish a University Technology Centre (UTC) within the area of sustainability and environment.
•SKF issued a EUR 500 million Eurobond with a maturity of seven years.
•SKF Logistics Services was awarded ”Best service provider” by the Belgian Shippers’ Council Organization of Traffic Management (OTM).
•SKF awarded and celebrated its 100,000th certificate in the SKF Distributor College.
•SKF signed a strategic partnership agreement with Maanshan Iron & Steel (MaSteel) in Nanjing, China.
•SKF Asset Management conference was held in Buenos Aires, Argentina
Highlights Q2 2011
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New businesses in Q2 2011
SKF:
•entered a long-term contract with Bombardier Aerospace to supply over 40 different rod assemblies and titanium bearings.
•signed a contract, worth EUR 15 million, with MAN Diesel Turbo for magnetic bearings and related electronic components to be used in two sub-sea natural gas sets of compressors.
•entered into a project with Volvo Car Corporation and Volvo Group aimed at evaluating industrialization of flywheel systems.
•gained new business in Columbia for the remanufacturing of large size bearings.
•expanded the range of the SKF Hub Knuckle Module. The Ferrari 458 Italia sports car is equipped with this new single nut hub bearing unit.
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Example of new products
SKF DryLube bearings New series of virtually maintenance free bearings with an extended service life in extreme temperatures. The main areas for SKF DryLube is within the metal industry and the food & beverage industry.
SKF Low Weight Hub Bearing Unit A new wheel-end solution that contributes to a significant weight reduction and thereby reduces fuel consumption and CO2 emissions.This hub bearing unit is mainly for larger cars and light trucks
SKF Double Clutch Bearing Set Provides higher efficiency and reduces fuel consumption and CO2 emissions for double clutch transmissions compared to standard transmissions. This bearing set is mainly for cars.
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Sales volume
-35-30-25-20-15-10-505
10152025
% change y-o-y
2009 2010 2011
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Organic growth in local currencies
-30-25-20-15-10-505
10152025
% change y-o-y
2009 2010 2011
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Europe+14%
Asia/Pacific +17%
Latin America
+3% Middle East & Africa
+12%
North America +16%
Growth development by geography Organic growth Q2 2011 vs Q2 2010
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Europe+18%
Asia/Pacific +19%
Latin America +10% Middle
East & Africa +8%
North America +20%
Growth development by geography Organic growth H1 2011 vs H1 2010
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-25
-20
-15
-10
-5
0
5
10
15
20
2009 2010 YTD J une 2011
Growth in local currency
% y-o-y
Acquisitions/DivestmentsOrganic growth
-19.0% 14.2% 22.3%
Long-term target: 8% per annum
Total growth
4.7%
17.6%
0.0%
14.2%
1.0%
-20.0%
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Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-26.9 -30.8 -24.9 -14.1 5.3 16.6 19.0 16.3 20.1 12.6
1.4 1.1 1.2 0.4 0.0 0.0 0.0 0.0 5.0 4.4
7.1 5.6 3.7 0.3 -0.3 -0.5 0.3 0.9 1.3 1.6
-18.4 -24.1 -20.0 -13.4 5.0 16.1 19.3 17.2 26.4 18.6
13.6 12.2 6.6 -1.4 -7.7 -5.2 -3.2 -6.2 -10.8 -12.2
-4.8 -11.9 -13.4 -14.8 -2.7 10.9 16.1 11.0 15.6 6.4
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency
Currency
Net sales
2009 2010 2011
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Operating profit
0200400600800
1 0001 2001 4001 6001 8002 0002 2002 4002 6002 800
SEKm
2009
Restructuring and one-time items
2010 2011
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Operating margin
%
0
2
4
6
8
10
12
14
16
2009
Restructuring and one-time items
2010
Long-term target level: 15%
2011
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Operating margin
0
2
4
6
8
10
12
14
16
2009 2010 YTD June 2011
%
5.7
8.0*
Restructuring and one-time items* Excluding restructuring and one-time
items
15.3
Long-term target level: 15%
14.2*
13.8
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-12-10-8-6-4-202468
1012141618
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per division
IndustrialService
Automotive
%
Excluding one-off items(eg. restructuring, impairments, capital gains)
2009 2010 2011
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SEKm 2011 2010
Net sales 16,712 15,709
Operating profit 2,623 2,239
Operating margin, % 15.7 14.3
Profit before taxes 2,446 2,047
Net profit 1,743 1,451
Basic earnings per share, SEK 3.76 3.09
Cash flow, after investments before financing
1,300 1,160
Second quarter 2011
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SEKm 2011 2010
Net sales 33,414 30,155
Operating profit 5,127 3,941
Operating margin, % 15.3 13.1
Profit before taxes 4,764 3,551
Net profit 3,363 2,521
Basic earnings per share, SEK 7.20 5.36
Cash flow, after investments before financing
1,672 1,192
Half year 2011
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18
19
20
21
22
23
24
25
Inventories as % of annual sales
% Long-term target level: 18%
2009 2010 2011
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Cash flow, after investments before financing
-6 000-5 500-5 000-4 500-4 000-3 500-3 000-2 500-2 000-1 500-1 000
-5000
5001 0001 5002 0002 500
SEKm
2009 2010
Cash out fromacquisitions (SEKm):
2009 2412010 6,7992011 6
2011
* SEK 798 million, excluding the acquisition of Lincoln Industrial.
*
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Return on capital employed
0
5
10
15
20
25
30
2009 2010 YTD June 2011
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.
%
9.1
24.0
Long-term target: 27%
25.9
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Net debt (Short-term financial assets minus loans and post-employment benefits)
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0SEKm
AB SKF, dividend paid (SEKm):2009 Q2 1,5942010 Q2 1,5942011 Q2 2,277
2009 2010
Cash out fromacquisitions (SEKm):
2009 2412010 6,7992011 6
2011
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0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2018
Debt structure
Maturity years, EURm
446
100100
• Credit facilities:EUR 500 m 2014
SEK 3,000 m 2017
• No financial covenants nor material adverse change clause
130
500
000
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July 2011: Outlook for the third quarter 2011
Demand compared to the third quarter last yearThe demand for SKF’s products and services is expected to be significantly higher for the Group as well as for Asia and Latin America. For Europe and North America it is expected to be higher.It will be significantly higher for the Industrial Division and for the Service Division and higher for the Automotive Division.
Demand compared to the second quarter 2011 and adjusted for normal seasonalityThe demand for SKF’s products and services is expected to be slightly higher for the Group as well as for North America. It is expected to be relatively unchanged for Europe, higher in Asia and significantly higher in Latin America. For the Industrial Division and the Service Division it is expected to be slightly higher and for the Automotive Division relatively unchanged.
Manufacturing levelThe manufacturing level will be significantly higher year on year and relatively unchanged compared to the second quarter, adjusted for normal seasonality.
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Demand outlook, regions(based on current assumptions and adjusted for normal seasonality)
Sequential trends for: Q2 2011 Q3 2011
Share of net sales2010
Europe46%
North America
18%
Asia Pacific27%
Latin America
6%
Total
Q3 2011 vs Q3 2010
++
++
+++
+++
+++
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15 July 2011
Demand outlook, divisions(based on current assumptions and adjusted for normal seasonality)
Sequential trends for Q3 2011
Share of net sales2010
Industrial32%
Service36%
Automotive30%
Total
Q3 2011 vs Q3 2010
+++
+++
++
+++
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14%
12%
5%
25%
18%
10%
5%
4%
4%
3%
Cars
Vehicle Service Market
Energy
Industrial distribution
Industrial OEM,
General+Special
Industrial OEM, Heavy + Off-
highway
Aerospace
Railway
Trucks
Electrical and two-wheeler
Sequential volume trend main segments Q3 2011(based on current assumptions and adjusted for normal seasonality)
Share of net sales 2010
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Guidance for the third quarter 2011
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -175 m
• Exchange rates on operating profit versus 2010Q3: SEK -400 mFull year: SEK -1.3 bn
• Additions to PPE: Around SEK 2.0 bn for 2011
Guidance is approximate and based on current assumptions and exchange rates.
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Key focus areas ahead 2011
• Profit and cash flow- manage currency and material headwinds
• Manufacturing and suppliers to support growth
• Growing segments and geographies
• Initiatives and actions to support long term targets
• Integration of Lincoln Industrial
• Business Excellence and competence development
One SKF and SKF Care as guiding lights
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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”.
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