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TRANSCRIPT
The SKF Group
SKF Investor Relations
1 September 2009
2SKF - A truly global company
Established: 1907
Sales 2008: SEK 63,361 million
Employees: 44,799
Production sites: 110 in 28 countries
SKF presence: in over 130 countries
Distributors/dealers: 15,000 locations
Global certificates: ISO 14001
OHSAS 18001 certification
3
Aerospac
e Railwa
yOff-highway
Trucks
Two-wheeler and Electrical
General industry
Heavy industry
Special
industrial
equipment
Vehicle Service Market
Industrial distribution
Cars and light trucks
Commercial transport
Industrial business
Net sales by customer segment
Energy
4
53
53
68
1
22
9
4
9
40
19
48
171412
37
19
55
North America
Latin Americ
a
WesternEurope
Eastern Europe
Middle East and
Africa
Asia
Net sales
Average number of employees
Tangible asset
% of group total
SKF 2008
(18)
(8)(13)(26)
(13)
(14)
(2002)(1998)
(25)
(14)
(19)
(10)(12)
(9)
Sweden
5
To equip the worldwith SKF
knowledge
SKF Group Vision
6Platforms – investing in the future
Organic * Investing above depreciation* 9 new factories (6 opened already, 3 under development)* Significant investment in existing operations (e.g. Sweden, Germany)
Acquisitions* Over SEK 5.2 billion invested * 20 acquisitions – all platforms
R&D & AE * New energy efficient bearings and solutions* New market offers/products
~SEK 24 billion (~USD 3.5 billion) invested since 2003
7Investing in new factories in Russia and India
Tver, Russia
Ahmedebad, India
Haridwar, India
8SKF Solution Factory competences
1
2
3Advanced
capabilities
Foundationalrequirements
Extendedcapabilites
…
…
…
Examples of capabilities:
9SKF Solution Factories 2009
Brazil
Colombia
Mexico
Alberta
TianjinShanghai
Taiwan
India
Australia
Russia
Turkey
Sweden
UKGermanyItaly
Johannesburg
PlannedOpened
Texas
10
New pitch bearingdesign with improvedcorrosion protection
DRTRB-unit “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
SKF wind energy industry
11What is SKF knowledge?
12
Bearingsand units
SKF’s platforms
13
Seals
SKF’s platforms
14
Mechatronics
SKF’s platforms
15SKF’s platforms
Lubrication systems
16SKF’s platforms
Services
17Acquisition 2003-2009Identifying gaps and opportunities in all platforms
SealsBearingsand units
Lubrication systemsServices Mechatronics
Products
Technologies
Geographies
Segments
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)
18Investing in R&D for staying in the forefront
>30%
increase in R&D spending
in 2008
Main areas:
• Environment
• Core technologies
• New products
• Strengthen R&D activities in fast growing regions
• Strengthen links with universities and high
schools.
19Six Sigma
2009 Q2 status:• 18 Master Black Belts
• 421 Black Belts
• 2,165 Green Belts
• 452 projects closed whereof 17 replicated
• 1,131 projects ongoing
Hard savings 2005: SEK 150 m 2006: SEK 200 m 2007: SEK 302 m 2008: SEK 462 m 2009 Ytd: SEK 184 m
4 dimensions:”Standard” Six Sigma, Design for Six Sigma, Lean Six Sigma and Six Sigma for Growth
20
10
12
14
16
18
20
22
24
26
2003 2004 2005 2006 2007 2008 H1 2009
13.9
19.0
21.8
24.7 25.4
Return on capital employed%
24.2
Long-term targets
• 12% Operating margin level• 6-8% Growth per annum (local)
• 24% Return on capital employed
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008 H12009
Operating margin%
9.910.8
12.6
8.0
12.912.2
4.3 (6.6 ex. rest)
13.4
-20
-15
-10
-5
0
5
10
15
2003 2004 2005 2006 2007 2008 H12009
Sales growth in local currency%
5.2
11.8
7.3* 7.5*
13.2
7.1
-21.3
Financial performance
* Excluding effect from sale of Ovako:2005: 10.4%
2006: 10.1%
The SKF Group
Half-year results 2009
22Key points from Q2 report
• Record quarterly cash flowQ2: SEK 2,425 m H1: SEK 2,948 m
• Dramatic drop in sales volume continuedQ2: -30.8% H1: -28.9%
• Strong price/mixQ2: 5.6% H1: 6.3%
• Cost reduction efforts in focus and giving results- new programme announced- annualised savings from all programmes, around SEK 800
million- in addition, significant short-time working being utilized
• Demand outlook for Q3 - significant decline year over year- decline levelling off sequentially
23Highlights Q2 2009
SKF
• inaugurated a new Solution Factory in Turin, Italy
• signed a contract with Cambridge University Department of Materials Science and Metallurgy to set up the SKF University Technology Centre on Steels on campus in Cambridge
• won an order to supply Guohua Energy Investment Co. Ltd. in China with SKF WindCon online condition monitoring systems and other related services
• signed a long-term contract with Hero Honda in India to supply ball bearings
• acquired the remaining 49% of the shares in Macrotech Polyseal Inc., now called SKF Polyseal Inc.
• in cooperation with the Czech police, confiscated over 30 tons of counterfeit SKF bearings.
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SEKm 2009 2008
Net sales 14,167 16,077
Operating profit 474* 2,135
Operating margin 3.4% 13.3%
Operating margin excl. restructuring, %
6.9% 13.3%
Profit before taxes 312 1,978
Net profit 323 1,369
Basic earnings per share, SEK 0.69 2.95
Cash flow after investments before financial items 2,425 872
Second quarter 2009
* Q2 restructuring SEK 500 mOperating profit excl. restructuring activities SEK
974 m
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SEKm 2009 2008
Net sales 29,016 31,673
Operating profit 1,242* 4,175
Operating margin 4.3% 13.2%
Operating margin excl. restructuring, %
6.6% 13.2%
Profit before taxes 843 3,902
Net profit 717 2,665
Basic earnings per share, SEK 1.55 5.72
Cash flow after investments before financial items 2,948 741
Half year 2009
* H1 restructuring SEK 675 mOperating profit excl. restructuring activities SEK
1,917 m
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-25
-20
-15
-10
-5
0
5
10
15
2007 2008 YTD J une 2009
Growth in local currency(Organic growth + Acquisition/Divestments)
% y-o-y
Acquisitions/Divestments
Organic growth
13.2%
Long-term target level: 6-8% per annum
7.1%-21.3%
27Sales in local currencies (excl. structural changes)
-30
-25
-20
-15
-10
-5
0
5
10
15% change y-o-y
2007 2008 2009
28Sales volume
-35
-30
-25
-20
-15
-10
-5
0
5
10% change y-o-y
2007 2008 2009
29Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
7.9 6.9 9.0 6.3 4.9 6.2 2.7 -13.0 -26.9 -30.8
4.0 4.6 3.7 1.0 1.0 1.3 0.5 2.4 1.4 1.1
1.8 2.7 2.0 3.2 3.8 4.0 6.4 8.5 7.1 5.6
13.7 14.2 14.7 10.5 9.7 11.5 9.6 -2.1 -18.4 -24.1
-5.6 -2.3 -1.9 -2.0 -1.2 -4.1 -0.9 10.3 13.6 12.2
8.1 11.9 12.8 8.5 8.5 7.4 8.7 8.2 -4.8 -11.9
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currencyCurrency
Net sales
2007 2008 2009
30Operating margin
0
2
4
6
8
10
12
14
2007 2008 YTD June 2009
%
12.9 12.2
Long-term target level: 12%
4.3
13.3* 12.7*
6.6*
Restructuring and one-time items* Excluding restructuring and one-time
items
31Operating margin
%
0
2
4
6
8
10
12
14
16
2007
Long-term target level: 12%
2008 2009
Restructuring and one-time items
32
-15
-10
-5
0
5
10
15
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per division
Industrial
Service
Automotive
%
2007 2008
Excluding one-off items (eg. restructuring, impairments, capital gains)
2009
33Activities to adapt to lower demand
• Restructuring/impairment programmesPeople Costs charged to
operating profit
announced:Q4 2008 2,500 SEK 340 m Q1 2009 500 SEK 175 m
Q2 2009 900 SEK 500 m3,900 SEK 1,015 m
At the end of June 2009, around 3,800 people have left the Group since H2 2008, of which around 2,000 people
under the programmes.
Total savings from these activities SEK 800 m.
• In addition, around 18,000 people in short-time working.
34
18
19
20
21
22
23
24
25
Inventories as % of annual sales
%
2007
Long-term target level: 18%
2008 2009
35Return on capital employed
0
5
10
15
20
25
30
2007 2008 YTD June 2009
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.
%
Long-term target level: 24%
24.9 24.0
13.4
36Net debt (Short-term financial assets minus loans and post-employment benefits)
-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):2007 Q2 2,0492008 Q2 2,2772009 Q2 1,594
Redemption (SEKm):
2007 Q2 4,5542008 Q2 2,277
2007 2008 2009
37AB SKF, debt structure
Amount in million Maturity
Euro Bond EUR 132* 2010-06
SEK Bond SEK 1,500 2011-06
Term loan in euro EUR 150 2013-06
Euro Bond EUR 500 2013-12
Euro loans EUR 130 2014-03
Euro loan EUR 100 2016-06
* Was EUR 250 million, reduced by EUR 118 million in Q2.
38Cash flow, after investments before financial items
-1 000
-500
0
500
1 000
1 500
2 000
2 500
2007
SEKm
Cash out fromacquisitions* (SEKm):
2007 1,2092008 1,2842009 223
2008 2009
* including non-controlling interests.
39July 2009: Outlook for the third quarter 2009
Compared to last year the demand for SKF products and services is expected to be significantly lower in the third quarter compared to the third quarter last year for the Group in total, for all the Divisions and for all regions.
Compared to the second quarter and adjusted for seasonality, demand is expected to be relatively unchanged for the SKF Group in total. It is expected to be lower in Europe, relatively unchanged in North America and slightly higher in Asia and Latin America. It is expected to be slightly higher for the Automotive Division, relatively unchanged for the Service Division and slightly lower for the Industrial Division.
The manufacturing level will be significantly lower year on year and relatively unchanged compared to the second quarter.
40Volume trends(based on current assumptions)
Daily volume trends for: Q2 2009 Q3 2009
Net sales2008
Europe
56%
North America
17%
Asia Pacific19%
Latin America
5%
Total
Outlook Q32009 vs
2008
---
---
---
---
---
41
20% Industrial OEM,
General+Special
12%
6%
5%
Industrial OEM, Heavy+Off-
highway
Energy
Aerospace
23%
5%
Industrial distribution
Trucks
13%
9%
3%
3%
Cars
Vehicle Service Market
Railway
Electrical and two-wheeler
Sequential volume trend main segments Q3 2009(based on current assumptions)
Net sales 2008
42Guidance for the third quarter 2009
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -200 million
• Exchange rates on operating profit versus 2008Q3: SEK 260 million
Full year: SEK 900 million
• Additions to PPE: Slightly below SEK 2 billion for 2009
Guidance is approximate and based on current assumptions and exchange rates
43Key focus areas ahead 2009
• Profit and cash flow- maintain positive price/mix- drive operational efficiency and cost reduction- reduce working capital and investments
• Adjustment of manufacturing output to new demand levels- restructuring- short-time working
• Growing segments and geographies
• Strengthening the platform/segment approach
• Competence development
SKF Care and Six Sigma as guiding lights
44SKF Care
Employee Care
Community CareEnvironmental Care
Business Care
BeyondZeroT
M
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008
SKF Care
Operating margin
45SKF Group Vision
To equip the worldwith SKF
knowledge
46Cautionary 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; "Most important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.
47Welcome to the IR website – www.skf.com > Investors
Investor Relations function:
Head:Marita BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]
Assistant:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]
Event coordinator and secretary:Monica SvenssonTel: +46 31 3372452Fax: +46 31 3371722E-mail: [email protected]
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