skf group tore bertilsson, executive vice president and cfo september 2012
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SKF Group
Tore Bertilsson, Executive Vice President and CFO
September 2012
Slide 2© SKF Group
Agenda
• SKF Group overview
• Strategic direction and initiatives
• Business update
Slide 3© SKF Group
SKF - A truly global company
Established: 1907
Sales 2011: SEK 66,216 million
Employees 2011: 46,039
Production sites: around 130 in 32 countries
SKF presence: in over 130 countries
Distributors/dealers: 15,000 locations
Global certificates: ISO 14001
OHSAS 18001 certification
Slide 4© SKF Group
Net sales 2011
Asia/Pacific28%
Latin America8%
North America19%
Middle East & Africa 1%
Western Europe37%
Eastern Europe 4%
Sweden 3%
Previously published shares have been restated to reflect the new business structure from 2012.
Slide 5© SKF Group
5%
4%
4%
5%
13%8%
5%
10%
28%
3%
13%
Net sales by customer segment 2011
Aerospace
Railway
Off-highway
Trucks
Two-wheeler and Electrical
Industrial, general
Cars and light
vehicles
Industrial, heavy and
special
Vehicle Service Market
Industrial distribution
Energy
Previously published shares have been restated to reflect the new business structure from 2012.
Slide 6© SKF Group
SKF platforms
Managing and reducing friction/energy
Slide 7© SKF Group
Long-term financial targets
27%Return on
capital employed
8%Changes in sales in local currency
15%Operating
margin, level
-20
-15
-10
-5
0
5
10
15
20
0
5
10
15
05
1015202530
07 08 09 10 11
H1/12
Slide 8© SKF Group
SKF Group – operating margin development
-6
-4
-2
0
2
4
6
8
10
12
14
16%
Slide 9© SKF Group
How did we get there?
• Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital
• Manufacturing footprint in best cost countries
• Reducing working capital
• Customized solutions, value added products, technology platforms
• Diversifying growth, faster growing segments and geographies
• Acquisitions supporting growth and profitability
SKF today – more robust, more diverse
Slide 10© SKF Group
• Accelerate profitable growth- intensify the platform and industry approach- launch more new offerings – green and BZ portfolio- strengthen the service business- focus on faster growing regions/ industries- develop other brands
• Reduce cost and eliminate waste- Business Excellence throughout the Group- BCC manufcaturing and sourcing- integrated cost reduction activities (ICR)
• Invest in growth- Sales and engineering resources- Factories in growth markets- Solution factories- R&D- Acquisitions- New IT systems
Main initiatives going forward
Slide 11© SKF Group
R&D – investments and main areas
Investments
2008 +30%
2009 Same
2010 +10%
2011 +20%
Patents +30%
2012 +10%
Main areas
• Environment
• Core technologies
• New products
• Strengthen R&D activities in fast growing regions
• Strengthen links with universities and high schools
Slide 12© SKF Group
Examples of new products launched in 2012
SKF Nautilus
rangeextensions
Servo Actuator for industrial applications
Next generation SNL, SE housings
A hand-held, 18-volt,
lithium-ion grease gun
SKF SpeedSensor Unit
Integrated monotube seal
SKF Compact
Wire Steering Bearing
SKF Solar Hub
SKF Thruster Monitoring
SKF Bus Door Actuator
Slide 13© SKF Group
Investing for the future
Mysore, India
Dalian, China Jinan, China
Bengaluru, India
Slide 14© SKF Group
Acquisition strategy for profitable growth
• Acquisitions are seen as one important driver for growth and value creation.
• Lincoln integration 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.
• Increasing activity and opportunities in M&A market
Slide 15© SKF Group
Acquisitions 2003-2012Identifying gaps and opportunities in all platforms
SealsBearingsand units
Lubrication systemsServices Mechatronics
Technologies/ Products
Geographies
Segments
SNFA (2006)
S2M (2007)
QPM (2008)
Economos (2006)
Macrotech (2006)
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)
Focus on industrial and aftermarket business.
Slide 16© SKF Group
Branding strategy – to address the market
Second brands•Strong cost focus• Peer/General/Hyatt brands
• Application specific products
• Knowledge engineering• Documented value• Cost reduction• Brand
High
Middle
Low
• Capture mid market growth - lower cost manufacturing
Slide 17© SKF Group
BeyondZeroTM
0
-
+BeyondZero
Customers:SKF BeyondZero
portfolio
Innovate and offer our customersnew technologies, products andservices with enhanced environmentalperformance characteristics.
Suppliers TransportationSKF
Manufacturing
Reduce the negative environmentalimpact from our own operations andthose of our suppliers.
Scope 2 Scope 1 Scope 3
Slide 18© SKF Group
BeyondZero portfolio – how it works
DESIGNED FOR
• Total direct CO2 savings• Total revenue
APPLIED FOR
• Total enabled CO2 savings• Total revenue
Criteria• Life cycle trade off’s• Base line comparison• CO2 / environmental savings
Slide 19© SKF Group
BeyondZero portfolio, examples
SKF ConRo reduced CO2 emissions with 1.5 tonne per unit and year.
If SKF were to equip all new motors ranging from sizes 1-50 HP with its current SKF E2 bearing range, a yearly 290,000 tonnes of CO2 emissions would be avoided.
A light commercial vehicle with four SKF Low Weight Hub Bearing Units reduces CO2 by 5.0 kg CO2 per year.
Slide 20© SKF Group
0
2
4
6
8
10
12
14
16
2010 2011 YTD 2012
%
One-time items * Excluding one-time items
14.7*
Long-term target level: 15%
14.2*
13.8 14.5 12.7*
Operating margin
12.3
Slide 21© SKF Group
SKF demand outlook Q3 2012, regions
Sequential trends for: Q2 2012 Q3 2012
Share of net sales2011*
Europe44%
Asia Pacific28%
North America
19%
Latin America
8%
Total
Q3 2012 vs Q3 2011
-
+/-
++
+
+/-
* Previously published shares have been restated to reflect the total Group business and customer delivery locations.
Slide 22© SKF Group
5%
5%
28%
13%
12%
10%
4%
3%
13%
5%
Energy
Aerospace
Industrial distribution
Industrial, general
Industrial, heavy, special and off-highway
Vehicle service market
Railway
Two-wheelers and electrical
Cars and light vehicles
Trucks
SKF sequential demand trend Q3 2012
Share of net sales 2011*
* Previously published shares have been restated to reflect the total Group business and customer delivery locations.
Slide 23© SKF Group
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018
Debt structure, maturity years
EURm
396
100100
• Credit facilities:EUR 500 million
2017 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
130
500
110
0
Slide 24© SKF Group
Key focus areas ahead 2012
• Managing the uncertain and different demand environment- regions and segments
• Profit and cash flow- inventory management
• Initiatives and actions to support long-term financial targets
• Continue the integration of Lincoln
• Business Excellence and competence development
• Implement the new organization for the Industrial market
Slide 25© SKF Group
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