skf year-end results 2014investor.skf.com/sites/default/files/report/q4_2014_presentation.pdfskf...

SKF Year-end results 2014 Alrik Danielson, President and CEO

28 January 2015

© SKF Group 28 January 2015

Examples of new business in Q4 2014

• GE Aviation and Safran Group, Mainshaft and gearbox

(Snecma & Hispano-Suiza) bearings

• Chongqing Gearbox Co., Ltd, China Bearing sets

• Andritz Hydro, Germany Special bearing and sealing

solution

• Mazda, Mexico Low-friction wheel bearing

units

• Daimler, Germany Wheel hub bearing units

• Jiangsu Jintongling Fluid Machinery Co., Ltd, High-speed permanent

China magnetic motor unit solutions

Slide 2


Examples of new business in Q1 – Q3 2014

• Hindustan Aeronautics Ltd, India Customized bearings for helicopter

transmission and main rotor

• Bell Helicopter Textron Inc.,USA Elastomeric bearings

• Turbogaz, Ukraina Magnetic bearings

• SCA, BillerudKorsnäs, Condition monitoring solutions

Vattenfall, Sweden

• Geely Automobile, China Transmission seals

• Volkswagen, Germany Energy efficient tapered roller and ball

bearings

• Envision Energy, China Strategic long-term partnership

Slide 3


Examples of new business in Q1 – Q3 2014

• Dongfang Electric New Energy, China Main shaft bearings

equipment

• Aurizon, Australia Service contract

• Doosan Heavy Industries and SKF Supergrip Bolts

Construction, South Korea and SKF Nautilus bearing

• HSD SpA, Italy Super precision bearings

and engineering support

• Tesla Motors, USA Bearing for the gearbox, e-motor

and wheels

• Volvo Cars, Sweden Wheel hub bearing units

• Scania, Sweden Wheel bearing units and high

pressure valve stem seals

Slide 4


Customer awards Q4 2014

Slide 5

• Best supplier award – Kirloskar Pneumatic Company Ltd., India

• Best supplier award – Nanjing Gearbox Company, China

• Top runner-up ’Best Vendor’ – Tata Steel, India

• Winner ’Cloud’ category – Software AG Innovation Awards

• Supplier Quality Excellence awards 2014 – General Motors, USA

• Quality Silver Award 2014 – Bajaj Auto Limited, India

© SKF Group 28 January 2015 Slide 6

Examples of new technologies, products and solutions 2014

Compact tapered roller

bearing unit for heavy

freight

PuraBreeze

100

SKF Mudblock

cassette seals,

MUD 11

SKF

@ptitude

Connect

Floating

piston

Tapered roller bearing unit

for passenger railway

applications

SKF Gear

Bearing

Unit

Electric grease

transfer pump

SKF Wireless

Machine

Condition

Sensor

SKF

Tachometer

SKF Wireless

MicroVibe

SKF Oil

Injection Sets -

THKI series


SKF Group – Q4 2014

Slide 7

Financial performance (SEKm) 2014 2013

Net sales 18 499 16 430

Operating profit 1 608 -1 547

Operating margin, % 8.7 -9.4

Operating margin excl. one-time items, % 11.2 11.0

Profit before tax 1 293 -1 760

Basic earnings per share, SEK 1.84 -4.57

Cash flow after investments before financing 2 053 -6 732

Organic sales growth in local currency:

SKF Group 2.8% Europe 1%

Strategic Industries 7.4% North America 2%

Regional Sales and Service 2.2% Asia 8%

Automotive -0.5% Latin America 4%

Middle East and Africa -5%

Key points

Sales volumes up by 1.8% y-o-y.

Manufacturing was relatively unchanged compared to last year.


SKF Group – 2014

Slide 8

Financial performance (SEKm) 2014 2013

Net sales 70 975 63 597

Operating profit 7 801 3 693

Operating margin, % 11.0 5.8

Operating margin excl. one-time items, % 11.7 11.9

Profit before tax 6 668 2 821

Basic earnings per share, SEK 10.10 2.0

Cash flow after investments before financing excl. EU payment 4 693 5 342

Cash flow after investments before financing 1 868 5 342

Organic sales growth in local currency:

SKF Group 3.9% Europe 1%

Strategic Industries 8.4% North America 3%

Regional Sales and Service 1.8% Asia 10%

Automotive 2.0% Latin America 1%

Middle East and Africa 9%

Key points

Sales volumes up by 3.3% y-o-y.

Manufacturing was slightly higher compared to last year.


Organic sales growth in local currency

Slide 9

-10

-8

-6

-4

-2

0

2

4

6

8

% change

y-o-y

2012 2013 2014


Organic sales growth in local currency

Slide 10

-4

-2

0

2

4

6

2012 2013 2014

% y-o-y

Structure in 2012: 0.4%



-2.5%

-0.7%

3.9%


Sales development by geography Organic growth in local currency Q4 2014 vs Q4 2013

Slide 11

Europe

1%

Asia/Pacific

8%

Middle East

& Africa

-5%

Latin

America

4%

North

America

2%


Sales development by geography Organic growth in local currency 2014 vs 2013

Slide 12

Europe

1%

Asia/Pacific

10%

Middle East

& Africa

9%

Latin

America

1%

North

America

3%


Components in net sales

Slide 13

2012 2013 2014

Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9 1.8

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9

Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3 1.0

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 3.7

Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9

Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6


Operating profit as reported

Slide 14

-2 000

-1 500

-1 000

-500

0

500

1 000

1 500

2 000

2 500

SEKm

2012 2013 2014


Operating profit excluding one-time items

Slide 15

0

500

1000

1500

2000

2500

SEKm

2012 2013 2014


Operating margin

Slide 16

0

2

4

6

8

10

12

14

16

2012 2013 2014

%

5.8

11.3

12.0* 11.9*

One-time items

* Excluding one-time items

11.0

11.7*


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Regional Sales

and Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area as reported

Strategic Industries


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Regional Sales

and Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area excl. one-time items

Strategic Industries


Operating profit bridge, Q4 2014 excl. One-time items

Slide 19

0

500

1000

1500

2000

2500

3000

-1 547

+75 +2 078 +165 +23

+110

+300 -398

SEKm

Q4 2013 Q4 2014 Volumes

excl.

Specialty

Business

Specialty

Business

Savings Currencies Other* Price/mix

excl.

Specialty

Business * R&D, S&A, IT, inflation etc.

+1 803

One-time items

2013: - 3 350

2014: -470


Operating profit bridge, 2014 excl. One-time items

Slide 20

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

+7 568 +505 +8 291 +390

+375 +500 +180 -1 227

SEKm

2013 2014 Volume

excl.

Specialty

Business

Specialty

Business

Savings Currencies Other* Price/mix

excl.

Specialty

Business * R&D, S&A, IT, inflation etc.

One-time items

2013: - 3 875

2014: -490


Net working capital as % of annual sales

Slide 21

25

26

27

28

29

30

31

32

33

34

35

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

%

2012 2013 2014

Target: 27%


Return on capital employed

Slide 22

0

5

10

15

20

2012 2013 31 December 2014

%

13.9

7.5

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.

14.8*


-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 23

SEKm

2012 2013 2014

Excl. acq. and div.: 1) Q3 2012 SEK 1 707 million

2) Q1 2013 SEK -69 million

3) Q3 2013 SEK 871 million

4) Q4 2013 SEK 1 170 million

Excl. EU payment 5) Q2 2014 SEK 1 423 million

4) 5)

1)

3)

2)


Net debt

Slide 24

-35 000

-30 000

-25 000

-20 000

-15 000

-10 000

-5 000

0

SEKm

2012 2013 2014

AB SKF,

dividend paid (SEKm):

2012 Q2 2 504

2013 Q2 2 530

2014 Q2 2 530

Cash out from major acquisitions (SEKm):

2012 Q3 829

2013 Q1 823

2013 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


Debt structure, maturity years

Slide 25

0

100

200

300

400

500

600

700

800

900

2015 2016 2017 2018 2019 2020 2021

EURm

• Available credit facilities:

EUR 500 million 2019

SEK 3 000 million 2016

EUR 150 million 2017

• No financial covenants nor material

adverse change clause

200

100 100 110

500 500

850


January 2015: SKF demand outlook Q1 2015

Slide 26

Demand compared to the first quarter 2014

The demand for SKF’s products and services are expected to be slightly

higher for the Group, higher for Asia and relatively unchanged for Europe,

North America and Latin America. It is expected to be relatively

unchanged for Automotive Market and Specialty Business and slightly

higher for Industrial Market.

Demand compared to the fourth quarter 2014

The demand for SKF’s products and services are expected to be relatively

unchanged for the Group, Europe and Latin America, and slightly higher

for Asia and North America. It is expected to be relatively unchanged for

Industrial Market and Automotive Market and slightly higher for Specialty

Business.

Manufacturing

Manufacturing is expected to be higher year over year and compared to

the fourth quarter.


SKF demand outlook Q1 2015, main regions

Share of net sales

2014

Europe 41%

Asia Pacific 25%

North America 25%

Latin America 6%

Total

Q1 2015

vs Q1 2014

+/-

++

+/-

+/-

+

Slide 27

Sequential trend

for Q1 2015


SKF demand outlook Q1 2015, main business areas

Share of net sales

2014

Industrial

Market 60%

Automotive

Market 26%

Specialty

Business 13%

Total

Q1 2015

vs Q1 2014

+

+/-

+/-

+

Slide 28

Sequential trend

for Q1 2015


SKF sequential volume trend Q1 2015, Industries

Slide 29

14% Cars and light vehicles

6% Energy

28% Industrial distribution

14% Industrial, heavy, special and off-highway

11% Industrial, general

9% Vehicle service market

6% Aerospace

5% Railway

5% Trucks

2% Two-wheelers and Electrical

Share of net sales 2014


Guidance for the first quarter 2015*

Slide 30

• Tax level: < 30%

• Financial net: around SEK -250 million

• Currency impact on operating profit vs 2014

Q1: SEK +300 million

Full year: SEK +900 million

• Additions to PPE: around SEK 1.7 billion for 2015

* Guidance is approximate and based on current assumptions and exchange rates.


SKF’s programme to improve efficiency and reduce cost

Q4

12

Q1

13

Q2

13

Q3

13

Q4

13

2013 Q1

14

Q2

14

Q3

14

Q4

14

2014 Total

Cost, SEKm 200 250 190 0 50 490 0 100 20 220 340 1 030

People affected 530 410 320 0 130 860 0 170 30 100 300 1 690

Giving future gross

savings:

Full year gross

savings SEKm

150 100 80 0 40 220 0 100 5 100 205 575

Slide 31

Realized gross savings from total programme, SEKm

Restructuring

Q1

13

Q2

13

Q3

13

Q4

13

2013 Q1

14

Q2

14

Q3

14

Q4

14

2014

Restructuring 15 35 75 75 200 70 50 10 10 140

S&A 50 50 50 50 200 0 0 0 0 0

Purchasing 100 100 100 100 400 60 100 100 100 360

Total 165 185 225 225 800 130 150 110 110 500


New productivity improvement programme

• Main activities:

Productivity gain through merging the industrial businesses

- merger between Strategic Industries & Regional Sales and Service

worldwide

- streamlining of supporting country organisations in all main countries

General staff optimization and productivity improvements

- in Group Headquarters and central staff functions

- in the Automotive business

• Reduction of annual cost by SEK 1.2 billion by the end of 2016

Total cost for the programme around SEK 1.4 billion

1 500 people impacted.

Major part of the programme implemented within 2015.


Cautionary statement

Slide 33

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”.

skf year-end results 2014investor.skf.com/sites/default/files/report/q4_2014_presentation.pdfskf...

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