the skf group skf investor relations october 2013
TRANSCRIPT
The SKF Group
SKF Investor Relations
October 2013
© SKF Group 15 October 2013Slide 2
SKF - A truly global company
Established: 1907
Sales 2012: SEK 64,575 million
Employees 2012: 46,775
Production sites: around 140 in 28 countries
SKF presence: in over 130 countries
Distributors/dealers: 15,000 locations
Global certificates: ISO 14001
OHSAS 18001 certification
© SKF Group 15 October 2013Slide 3
7%3%
35%
5%
3%
24% 23%
Vehicle aftermark
et
6%
4%4%
5%
12%9%
6%
10%
29%
2%
13%
Net sales - 2012
Aerospace Railway
Off-highwayTrucks
Two-wheelers and Electrical
Industrial, general
Cars and light
trucks
Industrial, heavy and
special
Industrial distributio
n
Energy
9%
Asia/Pacific
Latin America
North America
Middle East & Africa
Western Europe
Eastern Europe
Sweden
* Previously published shares have been restated in February 2013
© SKF Group 15 October 2013Slide 4
7
35
3
8 9
1
8 7
10
6
0
24
35
23
26
7
12
37
30
39
North America
Latin America
WesternEurope
Eastern Europe
Middle East and Africa
Asia/Pacific
Net salesAverage number of employees Tangible asset
% of group total SKF 2012
(18)
(8)(13)
(26)(13)
(14)
(2002) (1998)
(25)(14)(19)
(10)(12) (9)
Sweden
(4) (4) (3)
(5)(12)(15)(3) (9) (3)
(2) (2) (0)
(47)(46)(53)
(6) (5) (4)
(5)(14)(12)(3) (9) (3)
(3) (2) (0)
(48)(44)(53)
© SKF Group 15 October 2013Slide 5
Operating margin
%
© SKF Group 15 October 2013Slide 6
Return on capital employed
%
© SKF Group 15 October 2013Slide 7
Growth in local currencies
%
© SKF Group
Long-term financial targets
27%Return on capital
employed
8%Changes in sales in local currency,
incl. structure
15%Operating
margin, level
-20
-15
-10
-5
0
5
10
15
20
0
5
10
15
05
1015202530
07 08 09 10 1120
12
YTD13
September 2013September 2013
© SKF Group 15 October 2013Slide 9
SKF’s priorities
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
Capital efficiency•Fixed cost reduction•Working capital efficiency
Cost reduction•Consolidation of manufacturing•Optimization and productivity improvements•Reduction in purchasing costs
Investments & Innovation •New and existing facilities•Research and development
© SKF Group 15 October 2013Slide 10
To equip the worldwith SKF knowledge
SKF Group Vision
© SKF Group 15 October 2013Slide 11
SKF BeyondZero
• SKF launched the BeyondZeroTM 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.
SKF’s climate strategy targets:
• Increase revenue from SKF BeyondZero portfolio from SEK 2.5 bn to SEK 10 bn by 2016
• Reduce total annual energy use by 5% below the 2006 level by 2016
• Reduce energy use per production output by 5% y-o-y from 2012 to 2016
• Reduce CO2 emissions per tonne-kilometre by 30% 2016 vs 2011 for transports managed by SKF Logistics Services
• Major suppliers certified according to ISO 50001 by 2016
© SKF Group 15 October 2013Slide 12
Opened
Planned
Tianjin
Taiwan
Shanghai
Pune
Istanbul
JohannesburgBrasil “IXION”
Colombia
Moscow
HoustonMonterreyMexico
Edmonton
Nordic (Gothenburg)
UK
Germany
Italy
France
Perth
Rumania
Cleveland Spain
Poland
23 SKF Solution Factories 2013
© SKF Group 15 October 2013Slide 13
SKF Solution Factory
Segments & Application KnowledgePlatforms & Technology Competence
Capabilities
Sealing Solutions Mechanical Services Lubrication Solutions
Training Center
Bearing Service WorkshopCondition Monitoring ServicesRemote Monitoring Center
MaPro/CoMo Product Repair A & MC
SKFSolution Factory
© SKF Group 15 October 2013Slide 14
Slab continuous caster – metal industry
Telescopic actuators for mould adjustment
SKF DryLube Bearings and SNL Housings for roll out table
SKF ConRo Top roll line units
SKF ConRo Low roll line units
SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines
SKF ConRo Compact roll line units
SKF Caster Analyst System for roll lines
© SKF Group 15 October 2013Slide 15
Wheel-loader – Construction
Central gearHybrid pinion units
Wheel end• Integrated smart wheel bearing units with sensors• SKF Mudblock cassette seals
Motor hoodElectromechanical actuators
Chassis lubricationCentralized lubrication systems
© SKF Group 15 October 2013Slide 16
New pitch bearingdesign with improvedcorrosion protection
DRTRB-unit SKF Nautilus with segmented cagefor minimized friction
New CRB-design withextra-high carrying capacityfor wind-gearboxes.
XL Hybrid bearingswith ceramic ballsfor superior insulation
SKF WindCon 3.0/WebconIntranet supervisedcondition monitoring
Automatic centralizedlubrication kits for reduced maintenance cost
Wind turbine - Energy
© SKF Group 15 October 2013Slide 17
SKF’s environmentally positive customer solutions
Designed for environment
Designed for environment
A solution that is primarily designed to improve environmental performance by itself
E2 - 30% less energy compared to a standard bearing
SKF’s solutions which realize significant environmental benefits
Applied for environment
Applied for environment
A solution that enables improved environmental performance in a specific application
SKF sensor bearing
Stop-start system
Up to 15% better fuel economy of the car
© SKF Group 15 October 2013Slide 18
SKF energy efficient (E2) bearings
PeruIndustria Textil Piura• 60,000 E2 deep
groove ball bearing
IndiaSangam Group
ChinaConveyors used in mining industry. 130,000 E2 bearing
IndonesiaLeuwijaya Textile• 30,000 E2 bearing
• potential 325,000 for 3 different customers
© SKF Group 15 October 2013Slide 19
What is SKF knowledge?
© SKF Group 15 October 2013Slide 20
SKF technology platforms
Bearingsand units
© SKF Group 15 October 2013Slide 21
SKF technology platforms
Seals
© SKF Group 15 October 2013Slide 22
SKF technology platforms
Mechatronics
© SKF Group 15 October 2013Slide 23
SKF technology platforms
Lubrication systems
© SKF Group 15 October 2013Slide 24
SKF technology platforms
Services
© SKF Group 15 October 2013Slide 25
Acquisition 2003-2013Identifying gaps and opportunities in all platforms
Products
Technologies
Geographies
Industries
SNFA (2006)
S2M (2007)
QPM (2008)
Economos (2006)
Macrotech (2006)
Macrotech (2009)
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)
SealsBearingsand units
Lubrication systemsServices Mechatronics
BVI (2013)
SKF Nine-month results 2013Tom Johnstone, President and CEO
© SKF Group 15 October 2013Slide 27
Highlights Q3 2013
• Acquisition of Kaydon Corporation announced.
New business
• Agreements with Fiat, worth SEK 1 billion for the delivery of wheel hub bearing units.
• Agreements with Great Wall Motors in China for high pressure valve stem seals and bearing retainers. SKF and Great Wall Motors also signed a strategic partnership for developing sustainable solutions in energy efficient vechicles.
• A supply agreement with Goldwind, worth SEK 100 million for SKF Nautilus bearing units.
• Major orders from Tangshan Loco and Changchun Railway Co for wheel set bearings for high speed trains.
• Order from a Chinese customer, worth SEK 22 million for bearingsfor upgrading local coal power plants.
• An order from an European customer, worth SEK 21 million for cryogenic bearings.
© SKF Group 15 October 2013Slide 28
• A three-year service contract, worth SEK 43 million with a major oil and gas company in Latin America.
• An agreement with Wuhan Iron & Steel Heavy Industry Group Co, Ltd (WISCO Heavy) to establish a remanufacturing centre in Wuhan, China.
• SKF opened a gearbox remanufacturing centre in Tianjin, China.
• SKF Distributor College awarded its 190,000th certificate.
Highlights Q3 2013
SKF’s factory in Dalian, China was awarded LEED Gold certification.
SKF was included in the Dow Jones Sustainability Indexes for the 14th successive year.
© SKF Group 15 October 2013Slide 29
Kaydon Corporation
Key facts and figures - 2012
• Headquarters in Ann Arbor, Michigan U.S.
• Established 1941
Friction control 54%Friction control 54% Specialty products 23%Specialty products 23%Velocity control 23%Velocity control 23%
• USD 475 million in sales
• 2,187 employees
Ring & SealBearing
© SKF Group 15 October 2013Slide 30
Kaydon net sales – 2012
Industries Geographies
13%
6%10%
5%3%
27%
13%
18%
5%
Automation & Robotics
PowerGeneration
Aerospace
MilitaryHeavyEquipment
MedicalEquipment
PetroleumProcessing
Other
Semicond.24%
12%2%
62%North
America
Europe
AsiaOther
© SKF Group 15 October 2013Slide 31
New products - examples
Maintenance products:
SKF Axial excluder seal
SKF Condition Based Lubrication
Sealed SKF single row angular contact ball bearings
Reinforced all-rubber HSS seals
Oil storage station
Grid and gear coupling grease
Digital oil pressure gauge
Super precisions bearings for wood-working applications
© SKF Group 15 October 2013Slide 32
SKF Group – Q3 2013
Financial performance 2013 2012
Net sales, SEKm 15,623 15,486Operating profit, SEKm 1,923 1,908Operating margin, % 12.3 12.3Operating margin excl. restructuring,% 12.9 12.3Profit before tax, SEKm 1,717 1,709Cash flow, SEKm 1,135 1,097
Organic sales growth in local currency:
SKF Group: 2.0%Strategic Industries: -0.9% Regional Sales and Service: 0.3% Automotive: 7.5%
Key points
Sales volumes up by 2.2% y-o-yManufacturing slightly higher compared to last yearInventories 21.3% of sales
Europe: 1%North America: -2%Asia: 5%Latin America: 9%
© SKF Group 15 October 2013Slide 33
Organic sales growth in local currency
-10
-5
0
5
10
15
20
25
20132011 2012
% change y-o-y
© SKF Group 15 October 2013Slide 34
Europe1%
Asia/Pacific 5%
Latin America
9%Middle East
& Africa 8%
NorthAmerica
-2%
Growth development by geography Organic growth in local currency Q3 2013 vs Q3 2012
© SKF Group 15 October 2013Slide 35
Europe-4%
Asia/Pacific -3%
Latin America
10%Middle East
& Africa 0%
NorthAmerica
-4%
Growth development by geography Organic growth in local currency YTD 2013 vs YTD 2012
© SKF Group 15 October 2013Slide 36
Components in net sales
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2
Structure 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6 1.1
Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2
Sales in local currency
26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1
Currency -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2
Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9
2011 2012 2013
© SKF Group 15 October 2013Slide 37
-10
-5
0
5
10
15
20
2011 2012 YTD 2013
Growth in local currency, including structure
% y-o-y
Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in YTD 2013: 1.8%
-1.2%
16.3%
-2.1%
© SKF Group 15 October 2013Slide 38
Operating profit
0
300
600
900
1 200
1 500
1 800
2 100
2 400
2 700
SEKm
2011
One-time items
2012 2013
© SKF Group 15 October 2013Slide 39
%
0
2
4
6
8
10
12
14
16
2011
One-time items
2012 2013
Operating margin
© SKF Group 15 October 2013Slide 40
0
2
4
6
8
10
12
14
16
2011 2012 YTD 2013
%
One-time items * Excluding one-time items
14.7*
12.2*
11.1
14.5 12.0*
Operating margin
11.4
© SKF Group 15 October 2013Slide 41
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2011 2012 2013
Excluding one-off items(eg. restructuring, impairments, capital gains)
© SKF Group 15 October 2013Slide 42
18
19
20
21
22
23
24
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Inventories as % of annual sales
%
2011 2012 2013
© SKF Group 15 October 2013Slide 43
Return on capital employed
0
5
10
15
20
25
30
2011 2012 YTD 2013
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.
%
16.213.5
23.617.2*
15.2*
23.9*
One-off costs
* Excluding one-off costs
© SKF Group 15 October 2013Slide 44
Cash flow, after investments before financing
-1 000
-500
0
500
1 000
1 500
2 000
2 500SEKm
2011 2012 2013
* SEK 1,707 million, excluding acquisitions and divestments.** SEK -69 million, excluding acquisitions and divestments.*** SEK 871 million, excluding acquisitions and divestments.
*
**
***
© SKF Group 15 October 2013Slide 45
Net debt
-20 000
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0
SEKm
AB SKF, dividend paid (SEKm):2011 Q2 2,2772012 Q2 2,5042013 Q2 2,530
2011 2012 2013
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
Cash out fromacquisitions (SEKm):
2012 Q3 8292013 Q1 823
© SKF Group 15 October 2013Slide 46
0
100
200
300
400
500
600
2013 2014 2015 2016 2017 2018 2019 2020
EURm
265
100100100
500
110
500
• Available credit facilities:EUR 500 million 2017 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
Debt structure, maturity years
100
© SKF Group 15 October 2013Slide 47
SEKm 2013 2012
Net sales 15,623 15,486
Operating profit 1,923 1,908
Operating margin, % 12.3 12.3
Operating margin excl. one-offs, % 12.9 12.3
Profit before taxes 1,717 1,709
Net profit 1,165 1,251
Basic earnings per share, SEK 2.47 2.67
Cash flow, after investments before financing 1,135 1,097
Third quarter 2013
© SKF Group 15 October 2013Slide 48
SEKm 2013 2012
Net sales 47,167 49,591
Operating profit 5,240 6,093
Operating margin, % 11.1 12.3
Operating margin excl. one-offs, % 12.2 12.6
Profit before taxes 4,581 5,439
Net profit 3,087 3,821
Basic earnings per share, SEK 6.57 8.11
Cash flow, after investments before financing 1,390* 2,479*
Nine-month 2013
* excluding acquisitions and divestments, SEK 1,947 million (3,112).
© SKF Group 15 October 2013Slide 49
October 2013: SKF demand outlook Q4 2013
Demand compared to the fourth quarter 2012The demand for SKF’s products and services is expected to be slightly higher for the Group, Asia and Europe and relatively unchanged for North America and Latin America. It is expected to be slightly higher for Strategic Industries and Regional Sales and Service and higher for Automotive.
Demand compared to the third quarter 2013The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe, North America and Latin America as well as for all the business areas. It is expected to be slightly higher for Asia.
Manufacturing Manufacturing is expected to be higher year over year and relatively unchanged compared to the third quarter.
© SKF Group 15 October 2013Slide 50
Share of net sales2012
Europe 43%
Asia Pacific 24%
North America 23%
Latin America 7%
Total
Q4 2013 vs Q4 2012
+
+
+/-
+/-
+
Sequential trend for Q4 2013
SKF demand outlook Q4 2013, regions
© SKF Group 15 October 2013Slide 51
Sequential trend for Q4 2013
Share of net sales2012
Strategic Industries
31%
Regional Sales and Service
39%
Automotive 27%
Total
Q4 2013 vs Q4 2012
+
+
++
+
SKF demand outlook Q4 2013, business areas
© SKF Group 15 October 2013Slide 52
6%
5%
4%
2%
29%
13%
13%
12%
10%
6%
Aerospace
Trucks
Railway
Two-wheelers and electrical
Industrial distribution
Industrial, heavy, special and off-highway
Cars and light vehicles
Industrial, general
Vehicle after market
Energy
Share of net sales 2012
SKF sequential volume trend Q4 2013, main segments
© SKF Group 15 October 2013Slide 53
Guidance for the fourth quarter 2013*
• Tax level: a little above 30%
• Financial net for the fourth quarter:Around SEK 210 million excluding Kaydon acquisition
• Currency impact on operating profit versus 2012Q4: SEK 120 millionFull year: SEK 630 million
• Additions to PPE: Around SEK 1.7 billion for 2013
* Guidance is approximate and based on current assumptions and exchange rates
© SKF Group 15 October 2013Slide 54
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
© SKF Group 15 October 2013Slide 55
SKF’s priorities
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
Capital efficiency• Fixed cost reduction• Working capital efficiency
Cost reduction• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs
Investments & Innovation • New and existing facilities• Research and development
© SKF Group 15 October 2013Slide 56
Cost reduction – specific programme 2012-2015
Main activities:
• Consolidation of manufacturing- merger between sites- transfer to faster growing markets with more local production
• Optimization and productivity improvements- in the manufacturing and demand chain processes- in administration and support functions
• Reduction in purchasing cost- mainly through standardization and rationalization
of the supplier base.
Reduction of annual cost by SEK 3 billion by the end of 2015
- Total cost for the programme around SEK 1.5 billion
- 2,500 people impacted,
© SKF Group 15 October 2013Slide 57
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”.
© SKF Group 15 October 2013Slide 58
© SKF Group 15 October 2013Slide 59
Welcome to the IR website – www.skf.com > Investors
Investor Relations function:
Head:Marita BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]
Investor Relations:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]
Event and road shows coordinator:Helena KarlssonTel: +46 31 3372142Mobile: +46 705 642142E-mail: [email protected]