skf nine -month results 2014
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SKF Nine -month results 2014. Tom Johnstone , President and CEO. 15 October 2014. Alrik Danielson , new President and CEO from 1 January 2015. B.Sc in Business Administration and International Economics from the University of Gothenburg 1987-2005Previous positions within SKF : - PowerPoint PPT PresentationTRANSCRIPT
SKF Nine-month results 2014Tom Johnstone, President and CEO
15 October 2014
© SKF Group 15 October 2014
Alrik Danielson, new President and CEO from 1 January 2015
B.Sc in Business Administration and International Economics from the University of Gothenburg
1987-2005 Previous positions within SKF:• Financial controller in Gothenburg• President, Industrial Division in Spain and Portugal• President, SKF do Brazil• President, Industrial Division and several other managerial positions.
2005-2014 Höganäs AB, President and CEO
Slide 2
© SKF Group 15 October 2014
Examples of new business
• Doosan Heavy Industries and Construction, SKF Supergrip BoltsSouth Korea SKF Nautilus bearing
• A leading Chinese locomotive manufacturer Traction motor bearings
• HSD SpA, Italy Super precision bearings and engineering support
• A major Australian customer Maintenance contractin the agriculture industry
• Medical device manufacturer in California, Slewing ring bearingsUSA
Slide 3
© SKF Group 15 October 2014
Examples of new business
• Tesla Motors Bearing for the gearbox, e-motor and wheels
• Volvo Cars Wheel hub bearing units
• Scania Wheel bearing units and high pressure valve stem seals
Slide 4
© SKF Group 15 October 2014
Customer awards
Slide 5
• Supplier Performance Award – Snecma, Safran Group, France
• Best Supplier Award – Weg Electric Motor Manufacturing Co., Ltd, China
• Best Supplier Award – Shanghai Hanbell Precise Machinery Co. Ltd., China
• Excellent Engineering Development Award – Shanghai Automobile Gear Works (SAGW), China
• Fiat Qualitas Award – Fiat, Argentina
• Certificate of Appreciation for quality and delivery performance – Honda, India
© SKF Group 15 October 2014
Highlights
• New Kaydon factory at the SKF Campus in Cajamar, Brazil.
• New Global Technical Center in the greater Chicago area, US.
• For the 15th year in a row, one of the world’s most sustainable companies by the Dow Jones Sustainability World Index (DJSI).
• For the 14th consecutive year, a constituent of the FTSE4Good Index Series.
Slide 6
© SKF Group 15 October 2014
Examples of new products and solutions
SKF Machine Tool Observer MTx
SKF Static Motor Analyzer Baker AWA-IV
Compact tapered roller bearing unit for heavy freight
Tapered roller bearing unit for passenger railway applications
SKF Multilog On-line System IMx-M
SKF Multilog Online System IMx-B
SKF Mudblock cassette seals, MUD 11
PuraBreeze 100
© SKF Group 15 October 2014
SKF Group – Q3 2014
Slide 8
Financial performance (SEKm) 2014 2013
Net sales 17,787 15,623Operating profit 2,073 1,923Operating margin, % 11.7 12.3Operating margin excl. one-time items, % 11.8 12.9Profit before tax 1,827 1,717Basic earnings per share, SEK 3.01 2.47Cash flow after investments before financing excl. EU payment 1,476 1,135Cash flow after investments before financing 1,476 1,135
Organic sales growth in local currency:
SKF Group 3.3% Europe 0%
Strategic Industries 9.1% North America 3%Regional Sales and Service 0.8% Asia 8%
Automotive -0.5% Latin America 0%Middle East and Africa 7%
Key pointsSales volumes up by 1.9% y-o-y.Manufacturing was relatively unchanged compared to last year.
© SKF Group 15 October 2014
SKF Group – Nine month 2014
Slide 9
Financial performance (SEKm) 2014 2013
Net sales 52,476 47,167Operating profit 6,193 5,240Operating margin, % 11.8 11.1Operating margin excl. one-time items, % 11.8 12.2Profit before tax 5,375 4,581Basic earnings per share, SEK 8.27 6.57Cash flow after investments before financing excl. EU payment 2,640 1,390Cash flow after investments before financing -185 1,390
Organic sales growth in local currency:
SKF Group 4.6% Europe 2%
Strategic Industries 8.7% North America 3%Regional Sales and Service 1.7% Asia 11%
Automotive 2.8% Latin America 1%Middle East and Africa 14%
Key pointsSales volumes up by 3.8% y-o-y.Manufacturing was slightly higher compared to last year.
© SKF Group 15 October 2014
Organic sales growth in local currency
Slide 10
-10
-8
-6
-4
-2
0
2
4
6
8
% changey-o-y
2012 2013 2014
© SKF Group 15 October 2014
Organic sales growth in local currency
Slide 11
2012 2013 YTD 2014-4
-2
0
2
4
6
% y-o-y
Structure in 2012: 0.4%Structure in 2013: 2.5%Structure in 2014: 4.7%
-2.5%
-0.7%
4.5%
© SKF Group 15 October 2014
Sales development by geographyOrganic growth in local currency Q3 2014 vs Q3 2013
Slide 12
Europe0%
Asia/Pacific8%
Middle East& Africa
7%
LatinAmerica
0%
NorthAmerica
3%
© SKF Group 15 October 2014
Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013
Slide 13
Europe2%
Asia/Pacific11%
Middle East& Africa
14%
LatinAmerica
1%
NorthAmerica
3%
© SKF Group 15 October 2014
Components in net sales
Slide 14
2012 2013 2014
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9
Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4
Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3
Sales in local currency
1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4 8.6
Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3
Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9
© SKF Group 15 October 2014
Operating profit as reported
Slide 15
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500SEKm
2012 2013 2014
© SKF Group 15 October 2014
Operating profit excluding one-time items
Slide 16
0
500
1000
1500
2000
2500SEKm
2012 2013 2014
© SKF Group 15 October 2014
Operating margin
Slide 17
2012 2013 YTD 20140
2
4
6
8
10
12
14
16
%
5.8
11.3
12.0* 11.9*
One-time items
* Excluding one-time items
11.8
© SKF Group 15 October 2014Slide 18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-3
0
3
6
9
12
15
18
Regional Salesand Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area as reported
Strategic Industries
© SKF Group 15 October 2014Slide 19
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-3
0
3
6
9
12
15
18
Regional Salesand Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area excl. one-time items
Strategic Industries
© SKF Group 15 October 2014
SKF’s programme to improve efficiency and reduce cost
Slide 20
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Q3/14 Total
Cost taken 200 250 190 0 50 490 0 100 20 810
People affected 530 410 320 0 130 860 0 170 30 1,590
Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Q3/14 2014
Restructuring 15 35 75 75 200 70 50 10 130
S&A 50 50 50 50 200 0 0 0 0
Purchasing 100 100 100 100 400 60 100 100 260
Total 165 185 225 225 800 130 150 110 390
Restructuring, SEKm:
Realized gross savings from total programme, SEKm:
Full year gross saving 150 100 80 0 40 220 0 100 5 475
Giving future gross savings, SEKm:
vs 2012 vs 2013
Note: Run rate Q3 2014 SEK 1,340 million vs 2012.
© SKF Group 15 October 2014
Operating profit bridge, Q3 2014
Slide 21
0
500
1000
1500
2000
2500
3000
+301,923+165 2,073
+112+110 +65 +100 -432
SEKm
Q3 2013 Q3 2014Volumes excl.
Specialty
Business
Specialty
Business
Savings One-time items
Currencies Other* Price/mix
* R&D, S&A, IT, inflation etc.
© SKF Group 15 October 2014
Operating profit bridge, nine month 2014
Slide 22
0
1000
2000
3000
4000
5000
6000
7000
8000
+4305,240
+225 6,193+352+390
+505 -120 -829
SEKm
Q1-Q3 2013
Q1-Q3 2014
Volumes excl.
Specialty
Business
Specialty
Business
Savings One-time items
Currencies Other* Price/mix
* R&D, S&A, IT, inflation etc.
© SKF Group 15 October 2014
Net working capital as % of annual sales
Slide 23
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q325
26
27
28
29
30
31
32
33
34
35
%
2012 2013 2014
Target: 27%
© SKF Group 15 October 2014
Return on capital employed
Slide 24
2012 2013 419120
5
10
15
20
%
8.57.5
16.2
17.1*15.1*
One-time items * Excluding one-time items
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.
13.9*
© SKF Group 15 October 2014
-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
Cash flow, after investments before financing
Slide 25
SEKm
2012 2013 2014
Excl. acq. and div.: 1) Q3 2012 SEK 1,707 million2) Q1 2013 SEK -69 million3) Q3 2013 SEK 871 million4) Q4 2013 SEK 1,170 million
Excl. EU payment 5) Q2 2014 SEK 1,423 million
4) 5)1)
3)
2)
© SKF Group 15 October 2014
Net debt
Slide 26
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0SEKm
2012 2013 2014
AB SKF, dividend paid (SEKm):2012 Q2 2,5042013 Q2 2,5302014 Q2 2,530
Cash out from majoracquisitions (SEKm):
2012 Q3 8292013 Q1 8232013 Q4 7,900
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
EU payment (SEKm):
2014 Q2 2,825
© SKF Group 15 October 2014
Debt structure, maturity years
Slide 27
2015 2016 2017 2018 2019 2020 20210
100
200
300
400
500
600
700
800
900
EURm
• Available credit facilities:EUR 500 million 2019SEK 3,000 million 2016
EUR 150 million 2017
• No financial covenants nor material adverse change clause
200
100 100 110
500 500
850
© SKF Group 15 October 2014
October 2014: SKF demand outlook Q4 2014
Slide 28
Demand compared to the fourth quarter 2013The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be slightly higher for Strategic Industries, relatively unchanged for Regional Sales and Service and slightly lower for Automotive.
Demand compared to the third quarter 2014The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be relatively unchanged for Strategic Industries, slightly higher for Regional Sales and Service and slightly lower for Automotive.
ManufacturingManufacturing is expected to be slightly lower year over year and compared to the third quarter.
© SKF Group 15 October 2014
SKF demand outlook Q4 2014, main regions
Share of net sales 2013
Europe 42%
Asia Pacific 24%
North America 24%
Latin America 7%
Total
Q4 2014 vs Q4 2013
+/-
+
+
-
+/-
Slide 29
Sequential trend for Q4 2014
© SKF Group 15 October 2014
SKF demand outlook Q4 2014, main business areas
Share of net sales 2013
StrategicIndustries
29%
Regional Sales and Service
39%
Automotive 27%
Total
Q4 2014 vs Q4 2013
+
+/-
-
+/-
Slide 30
Sequential trend for Q4 2014
© SKF Group 15 October 2014
SKF sequential volume trend Q4 2014, Industries
Slide 31
29% Industrial distribution
6% Aerospace
13% Industrial, heavy, special and off-highway
11% Industrial, general
5% Energy
4% Railway
2% Two-wheelers and Electrical
14% Cars and light vehicles
11% Vehicle service market
5% Trucks
Share of net sales 2013
© SKF Group 15 October 2014
Guidance for the fourth quarter 2014*
Slide 32
• Tax level: < 30%
• Financial net: around SEK -220 million
• Currency impact on operating profit vs 2013Q4: SEK +230 million
Full year: SEK +110 million
• Additions to PPE: around SEK 1.7 billion for 2014
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group 15 October 2014
SKF’s priorities
Slide 33
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
Investments & Innovation • New and existing facilities• Research and development• IT systems and mobility
Cost reduction• Business Excellence• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs
Capital efficiency• Fixed capital• Net working capital
© SKF Group 15 October 2014
Cautionary statement
Slide 34
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”.