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TRANSCRIPT
The SKF Group
SKF Investor Relations July 2014
© SKF Group Slide 1
SKF - A truly global company
Established: 1907
Sales 2013: SEK 63,597 million
Employees 2013: 48,401
Production sites: around 165 in 28 countries
SKF presence: in over 130 countries
Distributors/dealers: 15,000 locations
Global certificates: ISO 14001 OHSAS 18001 certification
15 July 2014
© SKF Group Slide 2
7%3%
35%
5%
3%24% 24%
Vehicle aftermarket
6%4%3%
5%
11%10%5%
11%
29%
2%
14%
Net sales - 2013
Aerospace Railway Off-highway
Trucks Two-wheelers and Electrical
Industrial, general
Cars and light trucks
Industrial, heavy and
special
Industrial distribution
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
15 July 2014
© SKF Group Slide 3
North America
Latin America
Western Europe
Eastern Europe
Middle East and Africa
Asia/Pacific
Net sales Average number of employees Tangible asset
% of group total SKF 2013
(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)
15 July 2014
© SKF Group Slide 4
Operating margin as reported
0
2
4
6
8
10
12
14
16
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
15 July 2014
© SKF Group Slide 5
Return on capital employed
0
5
10
15
20
25
30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
15 July 2014
© SKF Group Slide 6
Growth in local currencies
-25
-20
-15
-10
-5
0
5
10
15
20
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
15 July 2014
© SKF Group Slide 7
Financial targets
15% Operating
margin
-20-15-10
-505
101520
07
08
09
10
11
12
13
Q114
0
5
10
15
07 08 09 10 11 12 13Q114
05
1015202530
07 08 09 10 11 12 13Q114
8% Changes in sales in local currency
incl. structure
One-time items
20% Return on capital
employed
One-time items for the individual year
© SKF Group Slide 8
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 capital • Net working capital
Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs
Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility
15 July 2014
© SKF Group 15 July 2014 Slide 9
To equip the world with SKF knowledge
SKF Group Vision
© SKF Group Slide 10
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 targets: • Increase revenue from SKF BeyondZero portfolio from SEK 2.5 billion to SEK 10 billion 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
15 July 2014
© SKF Group
28 SKF Solution Factory – June 2014
Slide 11
Taiwan Taichung Turkey Istanbul UK Luton USA Cleveland USA Houston
Poland Katowice Romania Bucharest Russia Moscow United Arab Emirats Abu Dhabi South Africa Witfield Spain Madrid Sweden Gothenburg
France Montigny Germany Schweinfurt India Pune India Manesar Italy Turin Mexico Monterrey Netherlands Ridderkerk Netherlands Nieuwegein
Australia Perth Brazil Cajamar Canada Edmonton Canada Toronto Columbia Bogota China Shanghai China Tianjin China Urumqi
15 July 2014
© SKF Group Slide 12
SKF Solution Factory
Segments & Application Knowledge Platforms & Technology Competence
Capabilities Sealing Solutions Mechanical Services Lubrication Solutions
Training Center Bearing Service Workshop Condition Monitoring Services Remote Monitoring Center
MaPro/CoMo Product Repair A & MC
SKF Solution Factory
15 July 2014
© SKF Group Slide 13
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
15 July 2014
© SKF Group Slide 14
Wheel-loader – Construction
Central gear Hybrid pinion units
Wheel end • Integrated smart wheel bearing units with sensors • SKF Mudblock cassette seals
Motor hood Electromechanical actuators
Chassis lubrication Centralized lubrication systems
15 July 2014
© SKF Group Slide 15
New pitch bearing design with improved corrosion protection
DRTRB-unit SKF Nautilus with segmented cage for minimized friction
New CRB-design with extra-high carrying capacity for wind-gearboxes.
XL Hybrid bearings with ceramic balls for superior insulation
SKF WindCon 3.0/Webcon Intranet supervised condition monitoring
Automatic centralized lubrication kits for reduced maintenance cost
Wind turbine - Energy
15 July 2014
© SKF Group Slide 16
SKF’s environmentally positive customer solutions
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
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
15 July 2014
© SKF Group Slide 17
SKF energy efficient (E2) bearings
Peru Industria Textil Piura • 60,000 E2 deep
groove ball bearing
India Sangam Group
China Conveyors used in mining industry. 130,000 E2 bearing
Indonesia Leuwijaya Textile • 30,000 E2 bearing • potential 325,000 for
3 different customers
15 July 2014
© SKF Group Slide 18
What is SKF knowledge?
15 July 2014
© SKF Group Slide 19
SKF technology platforms
Bearings and units
15 July 2014
© SKF Group Slide 20
SKF technology platforms
Seals
15 July 2014
© SKF Group Slide 21
SKF technology platforms
Mechatronic
15 July 2014
© SKF Group Slide 22
SKF technology platforms
Lubrication systems
15 July 2014
© SKF Group Slide 23
SKF technology platforms
Service
15 July 2014
© SKF Group Slide 24
Acquisition 2003-2013 Identifying 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)
BVI (2013)
Kaydon (2013)
Seals Bearings and units
Lubrication systems Services Mechatronics
15 July 2014
SKF Half-year results 2014 Tom Johnstone, President and CEO
15 July 2014
© SKF Group
Examples of new business
• Envision Energy, China Strategic long-term partnership
• A customer in the automation industry Roller screw electromechanical cylinder
• Dongfang Electric New Energy Equipment Main shaft bearings
• Aurizon, Australia Service contract
• A customer in the oil and gas industry Asset management services
• Bosch Service, Brazil SKF’s vehicle aftermarket product range
Slide 26 15 July 2014
© SKF Group
Highlights
• Inauguration of SKF Campus and SKF North East Asia Distribution Centre in Shanghai.
• New SKF Solution Factory in Nieuwegein in the Netherlands.
• Events during the quarter: - SKF Wind Farm Management Conference in Berlin
- SKF Life Cycle Management Conference in Buenos Aires - SKF Asset Management Conference in Prague
Slide 27 15 July 2014
© SKF Group
Customer awards
Slide 28
• Best Technical and Service Award 2013 – Envision Energy, China
• Supplier Excellence Award 2013 – National Oilwell Varco (NOV), USA
• Premium Supplier Award – Joy Global Underground Mining LLC, USA
• Marine Supplier of the year Award 2014 – Rolls-Royce Marine
• Excellent Supplier Award – ABB Marine, China
• Supplier Certification of Appreciation – Nissan, China
• Quality Gold Award 2013 – Yamaha Motor Company
• The Qualitas Award – Fiat/Chrysler, Argentina
15 July 2014
© SKF Group
New products and solutions
Slide 29
SKF Wireless MicroVibe
SKF Wireless Machine Condition
Sensor
SKF @ptitude Connect
SKF Shaft Alignment Tool
Low friction grease for hub bearing units
SKF Gear Bearing Unit
Floating piston
Electric grease transfer pump
SKF Tachometer
Low torque operator valve solution
Turbulo BlueMon emission monitoring system 15 July 2014
© SKF Group
SKF Group – Q2 2014
Slide 30
Financial performance (SEKm) 2014 2013 Net sales 17,955 16,392 Operating profit 2,096 1,837 Operating margin, % 11.7 11.2 Operating margin excl. one-time items, % 12.3 12.4 Profit before tax 1,761 1,627 Basic earnings per share, SEK 2.54 2.36 Cash flow after investments before financing excl. EU payment 1,423 1,147 Cash flow after investments before financing -1,402 1,147
Organic sales growth in local currency: SKF Group 4.6% Europe 1% Strategic Industries 11.1% North America 3% Regional Sales and Service 2.0% Asia 14% Automotive 1.3% Latin America 2%
Middle East and Africa 14% Key points Sales volumes up by 3.6% y-o-y. Manufacturing was slightly higher compared to last year.
15 July 2014
© SKF Group
SKF Group – Half year 2014
Slide 31
Financial performance (SEKm) 2014 2013 Net sales 34,689 31,544 Operating profit 4,120 3,317 Operating margin, % 11.9 10.5 Operating margin excl. one-time items, % 11.9 11.9 Profit before tax 3,548 2,864 Basic earnings per share, SEK 5.26 4.10 Cash flow after investments before financing excl. EU payment 1,164 255 Cash flow after investments before financing -1,661 255
Organic sales growth in local currency: SKF Group 5.2% Europe 3% Strategic Industries 9.0% North America 3% Regional Sales and Service 2.2% Asia 13% Automotive 4.5% Latin America 1%
Middle East and Africa 18% Key points Sales volumes up by 5.0% y-o-y. Manufacturing was higher compared to last year.
15 July 2014
© SKF Group
Organic sales growth in local currency
Slide 32
-10-8-6-4-202468
10
% change y-o-y
2012 2013 2014
15 July 2014
© SKF Group
Organic sales growth in local currency
Slide 33
-4
-2
0
2
4
6
8
2012 2013 YTD 2014
% y-o-y
Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.2%
-2.5%
-0.7%
5.2%
15 July 2014
© SKF Group
Sales development by geography Organic growth in local currency Q2 2014 vs Q2 2013
Slide 34
Europe 1%
Asia/Pacific 14%
Middle East & Africa
14%
Latin America
2%
North America
3%
15 July 2014
© SKF Group
Sales development by geography Organic growth in local currency YTD 2014 vs YTD 2013
Slide 35
Europe 3%
Asia/Pacific 13%
Middle East & Africa
18%
Latin America
1%
North America
3%
15 July 2014
© SKF Group
Components in net sales
Slide 36
2012 2013 2014 Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6
Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8
Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 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
Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1
Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5
15 July 2014
© SKF Group
Operating profit as reported
Slide 37
-2 000-1 500-1 000
-5000
5001 0001 5002 0002 5003 000
SEKm
2012 2013 2014
15 July 2014
© SKF Group
Operating profit excluding one-time items
Slide 38
0
500
1000
1500
2000
2500SEKm
2012 2013 2014
15 July 2014
© SKF Group
Operating margin
Slide 39
0
2
4
6
8
10
12
14
16
2012 2013 YTD 2014
%
5.8
11.3
12.0* 11.9*
One-time items * Excluding one-time items
11.9*
11.9
15 July 2014
© SKF Group Slide 40
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Regional Sales and Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area as reported
Strategic Industries
15 July 2014
© SKF Group Slide 41
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Regional Sales and Service
Specialty Business
Automotive
%
2012 2013 2014
Operating margin per business area excl. one-time items
Strategic Industries
15 July 2014
© SKF Group
SKF’s programme to improve efficiency and reduce cost
Slide 42
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Total
Cost taken 200 250 190 0 50 490 0 100 790
People affected 530 410 320 0 130 860 0 170 1,560
Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 2014
Restructuring 15 35 75 75 200 70 50 120
S&A 50 50 50 50 200 0 0 0
Purchasing 100 100 100 100 400 60 100 160
Total 165 185 225 225 800 130 150 280
Restructuring, SEKm:
Realized gross savings from total programme, SEKm:
Full year gross saving 150 100 80 0 40 220 0 100 470
Giving future gross savings, SEKm:
vs 2012 vs 2013
Note: Run rate Q2 2014 SEK 1,340 million vs 2012. 15 July 2014
© SKF Group
Operating profit bridge, Q2 2014
Slide 43
0
500
1000
1500
2000
2500
3000
+160 1,837 +160 2,096
+134 +150 +70 -120
-295
SEKm
Q2 2013 Q2 2014 Volumes excl.
Specialty Business
Specialty Business
Savings One-time items
Currencies R&D, inflation etc.
Price/mix
15 July 2014
© SKF Group
Operating profit bridge, half year 2014
Slide 44
0500
100015002000250030003500400045005000
+400 3,317
+60 4,120 +240
+280 +440 -220
-397
SEKm
Q2 2013 Q2 2014 Volumes excl.
Specialty Business
Specialty Business
Savings One-time items
Currencies R&D, inflation etc.
Price/mix
15 July 2014
© SKF Group
Net working capital as % of annual sales
Slide 45
2526272829303132333435
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
%
2012 2013 2014
Target: 27%
15 July 2014
© SKF Group
Return on capital employed
Slide 46
0
5
10
15
20
2012 2013 YTD 2014
%
14.6*
7.5 8.7
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.
15 July 2014
© SKF Group
-7 000
-6 000
-5 000
-4 000
-3 000
-2 000
-1 000
0
1 000
2 0001)
2)
3)
Cash flow, after investments before financing
Slide 47
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)
15 July 2014
© SKF Group
Net debt
Slide 48
-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 2,504 2013 Q2 2,530 2014 Q2 2,530
Cash out from 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
15 July 2014
© SKF Group
Debt structure, maturity years
Slide 49
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 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
200
100 100 110
500 500
850
15 July 2014
© SKF Group
July 2014: SKF demand outlook Q3 2014
Slide 50
Demand compared to the third quarter 2013 The demand for SKF’s products and services is expected to be slightly higher for the Group and North America, higher for Asia, relatively unchanged for Europe and slightly lower for Latin America. It is expected to be higher for Strategic Industries and relatively unchanged for Regional Sales and Service and Automotive. Demand compared to the second quarter 2014 The demand for SKF’s products and services is expected to be relatively unchanged for the Group and Europe. It is expected to be slightly higher for North America and Asia and slightly lower for Latin America. For Strategic Industries it is expected to be slightly higher and for Regional Sales and Service and Automotive it is expected to be relatively unchanged. Manufacturing Manufacturing is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.
15 July 2014
© SKF Group
SKF demand outlook Q3 2014, main regions
Share of net sales 2013
Europe 42%
Asia Pacific 24%
North America 24%
Latin America 7%
Total
Q3 2014 vs Q3 2013
+/-
++
+
-
+
Slide 51
Sequential trend for Q3 2014
15 July 2014
© SKF Group
SKF demand outlook Q3 2014, main business areas
Share of net sales 2013
Strategic Industries 29%
Regional Sales and Service 39%
Automotive 27%
Total
Q3 2014 vs Q3 2013
++
+/-
+/-
+
Slide 52
Sequential trend for Q3 2014
15 July 2014
© SKF Group
SKF sequential volume trend Q3 2014, Industries
Slide 53
6% Aerospace
5% Energy
4% Railway
2% Two-wheelers and Electrical
29% Industrial distribution
14% Cars and light vehicles
13% Industrial, heavy, special and off-highway
11% Vehicle service market
11% Industrial, general
5% Trucks
Share of net sales 2013
15 July 2014
© SKF Group
Guidance for the third quarter 2014*
Slide 54
• Tax level: around 30%
• Financial net for the third quarter: Around SEK -230 million
• Currency impact on operating profit versus 2013 Q3: SEK +50 million
Full year: SEK -70 million
• Additions to PPE: Around SEK 1.6 billion for 2014
* Guidance is approximate and based on current assumptions and exchange rates.
15 July 2014
© SKF Group
SKF’s priorities
Slide 55
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
15 July 2014
© SKF Group
Cautionary statement
Slide 56
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”.
15 July 2014
© SKF Group 15 July 2014 Slide 57
Welcome to the IR website – www.skf.com > Investors
Investor Relations function: Head: Marita Björk Tel: +46 31 3371994 Mobile: +46 705 181994 E-mail: [email protected]
Investor Relations: Anna Alte Tel: +46 31 3371988 Mobile: +46 705 271988 E-mail: [email protected]
Event and road shows coordinator: Helena Karlsson Tel: +46 31 3372142 Mobile: +46 705 642142 E-mail: [email protected]
© SKF Group 15 July 2014 Slide 58