skf year-end results 2012
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SKF Year-end results 2012. Tom Johnstone, President and CEO. Summary of the quarter. Weaker sales in the quarter - lower overall demand - inventory destocking in the market Impact on the operating margin due to significantly lower manufacturing Continued reduction on inventories - PowerPoint PPT PresentationTRANSCRIPT
SKF Year-end results 2012Tom Johnstone, President and CEO
30 January 2013Slide 2© SKF Group
Summary of the quarter
• Weaker sales in the quarter- lower overall demand- inventory destocking in the market
• Impact on the operating margin due to significantly lower manufacturing
• Continued reduction on inventories
• Strong cash flow
• Accelerated and expanded activities to reduce costs by SEK 3 billion by the end of 2015 and strengthen growth
• Acquisition of Blohm + Voss Industries
30 January 2013Slide 3© SKF Group
Programme to improve efficiency, reduce cost and strengthen profitable growth
Main activities:• consolidation of production between sites• transfer of production from West Europe to serve faster growing markets with more local production• optimization and productivity improvements in the manufacturing
and demand chain processes• consolidation of and efficiency improvements in administration
and support functions• reduction in purchasing cost mainly through standardization and rationalization of the supplier base.
Reducing annual costs by SEK 3 billion by the end of 2015Total costs for the programme SEK 1.5 billion for the years 2012 to 20152,500 people impacted, early retirement and other voluntary and agreed reductions
30 January 2013Slide 4© SKF Group
Acquisitions in the last 12 months
•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)Transaction is subject to relevant regulatory approvals
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
30 January 2013Slide 5© SKF Group
BVI strengthening SKF’s position as a marine specialist
• Strategic fit with SKF Marine growth strategy
• Complementary product portfolio
• Secure the leadership with propulsion system OEMs
• Widen the scope of supply for the application life-cycle
Today, SKF sales to the marine industry is around SEK 1.5 billion. Main applications are propulsion systems, including thrusters, pods and gearboxes.
30 January 2013Slide 6© SKF Group
Some examples of new businesses in 2012
Industrial • new generation Nautilus bearing to Siemens• main shaft solutions to Vestas V112-3.0 MW turbine• axle boxes and wheel set bearing units to Siemens Rail Systems• SKF ConRo Compacts to a major metal industry customer• third strategic partnership agreement with Baosteel Group Corporation • maintenance services to LKAB• integrated maintenance solutions to Fibria• two custom-designed SKF spherical roller bearings, 8.8 tonnes each,
for Caesars High Roller observation wheel in Las Vegas
Automotive• SKF Bus Door Actuator to Volvo Buses• rear wheel bearing units and front suspension bearing units to Volvo Car Corporation • wheel bearing units and clutch bearings to Audi• bearing and units to Scania for wheels and transmissions • bonded piston seals to Mazda Motor Corporation
30 January 2013Slide 7© SKF Group
Some highlights from 2012
• SKF celebrated 100 years of business in China - inaugurated a new bearing and truck hub unit factory in Jinan - broke ground on a new regional distribution centre in Shanghai - announced the establishment of a new SKF Campus in Jiading, Shanghai, containing a new
factory for automotive and the Global Technical Centre China, SKF Solution Factory and SKF College
• New facilities- Railway test centre in Tver, Russia- Five new SKF Solution Factory: USA, Romania, Italy, Australia and the Netherlands
• PartnershipWith Protean Electric for supplying products to Protean’s in-wheel electric motors for electric vehicles and hybrid cars.
• Documented delivered value SKF provided SEK 4.1 billion in verified savings for customers.
• SKF Distributor College awarded its 170,000th certificate
• Dow Jones Sustainability Indexes and FTSE4Good - member of DJSI indexes for the 13th successive year - included for the 12th successive year in the FTSE4Good Index Series
30 January 2013Slide 8© SKF Group
Some examples of new products in 2012
SKF ChainLube oil projection system
New temperature monitoring system for railway
Shaft sealing solutions
SKF Low Friction Hub Bearing Unit
SKF Bus Door Actuator
A hand-held, 18-volt,
lithium-ion grease gun
SKF SpeedSensor Unit
SKF Solar Hub
SKF Nautilus range extensions
SKF Compact Wire Steering
Bearing
SKF Machine Condition Indicator
30 January 2013Slide 9© SKF Group
R&D – main areas and investments in 2012
Main areas• Environment• Core technologies• New products• Strengthen R&D activities
in fast growing regions• Strengthen links with
universities and high schools
First filing patent application +30%
+10%2.5% of sales
421
30 January 2013Slide 10© SKF Group
Launch of new climate targets
• SKF launched the SKF BeyondZero 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.
Growth target:SEK 2.5 billion to SEK 10 billion by 2016
30 January 2013Slide 11© 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
One SKF and SKF Care as guiding lights
30 January 2013Slide 12© 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
One SKF and SKF Care as guiding lights
.
30 January 2013Slide 13© SKF Group
SKF Group – 2012
Financial performance 20122011Net sales, SEKm 64,57566,216Operating profit, SEKm 7,3339,612Operating margin, % 11.414.5Profit before tax, SEKm 6,5118,932Cash flow, SEKm 3,5553,848
Organic sales growth in local currency:SKF Group: -2.5%Industrial market, Strategic Industries: -3.0% Regional Sales and Service:-1.8% Automotive: -3.4% Key points Sales volumes down by -3.9% y-o-yManufacturing significantly lower y-o-yInventories down to 19.9% of sales
Europe: -4.7%North America:6.8%Asia: -9.5%Latin America:11.3%
30 January 2013Slide 14© SKF Group
Organic sales growth in local currency
-10-505
10152025
20122010 2011
% change y-o-y
30 January 2013Slide 15© SKF Group
Europe-7%
Asia/Pacific -11%
Latin America
9%Middle East & Africa -9%
NorthAmerica
2%
Growth development by geography Organic growth in local currency Q4 2012 vs Q4 2011
30 January 2013Slide 16© SKF Group
Europe-5%
Asia/Pacific -10%
Latin America
11% Middle East & Africa -2%
North America
7%
Growth development by geography Organic growth in local currency 2012 vs 2011
30 January 2013Slide 17© SKF Group
Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
5.3 16.6 19.0 16.3 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9
0.0 0.0 0.0 0.0 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0
-0.3 -0.5 0.3 0.9 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7
5.0 16.1 19.3 17.2 26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2
-7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6
-2.7 10.9 16.1 11.0 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8
Percent y-o-y
Volume
Structure
Price/mix
Sales in local currencyCurrency Net sales
2010 2011 2012
30 January 2013Slide 18© SKF Group
-5
0
5
10
15
20
2010 2011 2012
Growth in local currency, including structure
% y-o-y
Structure in 2011: 4.8%Structure in 2012: 0.4%
14.2%
16.3%
-2.1%
30 January 2013Slide 19© SKF Group
Operating profit
0300600900
1 2001 5001 8002 1002 4002 700SEKm
2010One-time items
2011 2012
30 January 2013Slide 20© SKF Group
%
02468
10121416
2010One-time items
2011 2012
Operating margin
30 January 2013Slide 21© SKF Group
02468
10121416
2010 2011 2012
%
One-time items * Excluding one-time items
14.7*14.2*
13.8 14.5 12.0*
Operating margin
11.4
30 January 2013Slide 22© SKF Group
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2010 2011 2012
Excluding one-off items(eg. restructuring, impairments, capital gains)
30 January 2013Slide 23© SKF Group
18
19
20
21
22
23
24
25
Inventories as % of annual sales
%
2010 2011 2012
30 January 2013Slide 24© SKF Group
Return on capital employed
05
1015202530
2010 2011 2012
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
24.0 23.6
30 January 2013Slide 25© SKF Group
Cash flow, after investments before financing
-6 000
-5 000-4 000
-3 000
-2 000
-1 000
01 000
2 000
SEKm
2010 2011 2012 * SEK 798 million, excluding SEK 6,799 million for the acquisition of Lincoln.**SEK 1,707 million, excluding acquisitions and divestments.
***
30 January 2013Slide 26© SKF Group
Net debt
-20 000-18 000-16 000-14 000-12 000-10 000-8 000-6 000-4 000-2 000
0SEKm
AB SKF, dividend paid (SEKm):2010 Q2 1,5942011 Q2 2,2772012 Q2 2,504
2010 2011 2012
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
30 January 2013Slide 27© SKF Group
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018 2019
EURm
265*
100100100**
500
110
0
500
• Available credit facilities:
EUR 500 million 2017 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
Debt structure on 31 December, maturity years
To adjust the debt structure: * Redemption of bonds 2013 - EUR 131 million** Early repayment of loans 2014 - EUR 30 million
30 January 2013Slide 28© SKF Group
SEKm 2012 2011
Net sales 14,984 16,257Operating profit 1,227 2,006Operating margin, % 8.2 12.3Profit before taxes 995 1,823Net profit 1,011 1,205Basic earnings per share, SEK 2.16 2.57Cash flow, after investments before financing 1,076 853
Fourth quarter 2012
30 January 2013Slide 29© SKF Group
SEKm 2012 2011
Net sales 64,575 66,216Operating profit 7,333 9,612Operating margin, % 11.4 14.5Profit before taxes 6,511 8,932Net profit 4,878 6,224Basic earnings per share, SEK 10.37 13.29Cash flow, after investments before financing 3,555 3,848
Full year 2012
30 January 2013Slide 30© SKF Group
January 2013: SKF demand outlook Q1 2013
Demand compared to the first quarter 2012The demand for SKF’s products and services is expected to be lower for the Group. For Europe it is expected to be significantly lower, for Asia slightly lower and for North America and Latin America relatively unchanged. The demand is expected to be lower for Industrial Market, Strategic Industries and SKF Automotive, for Industrial Market, Regional, Sales and Services it is expected to be slightly lower.
Demand compared to the fourth quarter 2012The demand for SKF’s products and services is expected to be relatively unchanged for the Group, for the business areas and for the regions.
ManufacturingManufacturing is expected to be lower year over year and higher compared to fourth quarter.
30 January 2013Slide 31© SKF Group
Share of net sales*2012
Europe 43%
Asia Pacific 24%North America 22%
Latin America 8%
Total
Q1 2013 vs Q1 2012
----==--
Sequential trend for Q1
2013
SKF demand outlook Q1 2013, regions(based on current assumptions)
* Previously published shares have been restated in February 2013.
30 January 2013Slide 32© SKF Group
Sequential trend for Q1 2013
Share of net sales2012
Strategic Industries 31%
Regional Sales and Service 39%
Automotive 27%
Total
Q1 2013 vs Q1 2012
-------
SKF demand outlook Q1 2013, business areas(based on current assumptions
30 January 2013Slide 33© SKF Group
6%2%
29%13%
13%12%10%
6%4%5%
AerospaceTwo-wheelers and ElectricalIndustrial distributionIndustrial, heavy, special and off-highwayCars and light vehiclesIndustrial, general Vehicle service marketEnergyRailwayTrucks
Share of net sales 2012*
SKF sequential volume trend Q1 2013, main segments(based on current assumptions)
* Previously published shares have been restated in February 2013.
30 January 2013Slide 34© SKF Group
Guidance for the first quarter 2013
• Tax level: around 30%
• Financial net for the first quarter:Around SEK -200 million
• Exchange rates on operating profit versus 2012Q1: SEK -50 millionFull year: SEK -250 million
• Additions to PPE: Around SEK 1.7 billion for 2013
Guidance is approximate and based on current assumptionsand exchange rates
30 January 2013Slide 35© SKF Group
Dividend proposal
AB SKF’s Board proposes an unchanged dividend of
SEK 5.50 per share to the Annual General Meeting
30 January 2013Slide 36© SKF Group
New IT systems
• Primarily for Sales/customer relationship, Purchasing, Demand chain and Finance
• New common IT infrastructure for all five technology platforms
• To implement common, best practice processes across the SKF Group globally, enabling business efficiency, speed and growth
• Will be implemented over a number of years with initial roll-out in 2014
30 January 2013Slide 37© SKF Group
Key focus areas 2013
• Managing the uncertain and different demand environment - Profit and cash flow
• Initiatives and actions to support long-term financial targets - New factories in Mysore and Bengaluru in India
- New warehouse in Shanghai, China
- SKF Campus in Shanghai, China, including:‣ New factory for automotive‣ Global Technical Centre China‣ SKF Solution Factory‣ SKF College
- Integration of new acquisitions, GBC and BVI
- Cost reduction and efficiency programme
- New IT systems
• Business Excellence and competence development
One SKF and SKF Care as guiding lights
30 January 2013Slide 38© SKF Group
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”.
30 January 2013Slide 39© SKF Group