The SKF Group
SKF Investor Relations
October 2013
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
Slide 1
15 October 2013
Net sales - 2012
Cars and
light trucks
Industrial
distribution
Aerospace
6%
4% Railway
4% Off-highway
13%
29%
5%
2%
10%
Vehicle
aftermarket
6%
Energy
12%
9%
9%
Industrial,
heavy and
special
Middle East
& Africa
Trucks
Two-wheelers
and Electrical
Industrial,
general
* Previously published shares have been restated in February 2013
© SKF Group
Slide 2
15 October 2013
Asia/Pacific
3%
North
America
23%
24%
Latin
7%
3% America
Eastern 5%
Europe
35%
Western
Europe
Sweden
SKF 2012
(1998)
(2002)
% of group total
Net sales
Average number of employees
Tangible asset
(48)(44)(53)
(47)(46)(53)
37
39
(10)(12) (9)
35
(13) (14) (8)
30
(25)(14) (19)
(26)(13)(18)
24
23
26
(5)(14)(12)
(6) (5) (4)
12
(5) (12)(15)
(4) (4) (3)
8
7
8
7
7
© SKF Group
Slide 3
15 October 2013
Latin
America
(3) (9) (3)
10
3
North
America
(3) (9) (3)
Western
Europe
Sweden
(3) (2) (0)
9
5
6
Eastern
Europe
(2) (2) (0)
3
1
0
Middle East Asia/Pacific
and Africa
Operating margin
%
16
14
12
10
8
6
4
2
0
2003
© SKF Group
Slide 4
15 October 2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
Return on capital employed
%
30
25
20
15
10
5
0
2003
© SKF Group
Slide 5
15 October 2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
Growth in local currencies
%
20
15
10
5
0
2003
-5
-10
-15
-20
-25
© SKF Group
Slide 6
15 October 2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
Long-term financial targets
15%
8%
27%
Operating
margin, level
Changes in sales
in local currency,
Return on capital
employed
incl. structure
15
-20
September 2013
© SKF Group
11
10
1
YT 2
D1
3
-15
09
-10
08
07
1
YT 2
D
13
11
10
09
08
07
0
-5
20
1
YT 2
D
13
5
0
11
10
10
5
09
15
08
10
07
30
25
20
15
10
5
0
20
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
Investments & Innovation
• New and existing facilities
• Research and development
Cost reduction
• Consolidation of manufacturing
• Optimization and productivity improvements
• Reduction in purchasing costs
© SKF Group
Slide 8
15 October 2013
SKF Group Vision
To equip the world
with SKF knowledge
© SKF Group
Slide 9
15 October 2013
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
Slide 10
15 October 2013
23 SKF Solution Factories 2013
Nordic
(Gothenburg)
Edmonton
UK
France
Cleveland
Monterrey
Mexico
Spain
Moscow
Poland
Rumania
Germany
Italy
Istanbul
Tianjin
Shangha
i
Houston
Pune
Colombia
Brasil “IXION”
Johannesburg
Opened
Planned
© SKF Group
Slide 11
15 October 2013
Perth
Taiwan
SKF Solution Factory
Segments & Application Knowledge
Platforms & Technology Competence
SKF
Solution Factory
Capabilities
Sealing Solutions
Bearing Service Workshop
MaPro/CoMo Product Repair
© SKF Group
Slide 12
15 October 2013
Mechanical Services
Lubrication Solutions
Condition Monitoring Services Remote Monitoring Center
A & MC
Training Center
Slab continuous caster – metal industry
Telescopic actuators for
mould adjustment
SKF ConRo Compact
roll line units
SKF ConRo Low roll
line units
SKF ConRo Top
roll line units
SKF DryLube Bearings
and SNL Housings for
roll out table
SKF sealed selfaligning bearing
system (CARB and
spherical roller
bearings) and
centralized lubrication
system for roll lines
SKF Caster Analyst
System for roll lines
© SKF Group
Slide 13
15 October 2013
Wheel-loader – Construction
Central gear
Hybrid pinion units
Chassis lubrication
Centralized lubrication systems
Motor hood
Electromechanical actuators
Wheel end
© SKF Group
Slide 14
15 October 2013
• Integrated smart wheel bearing
units with sensors
• SKF Mudblock cassette seals
Wind turbine - Energy
New CRB-design with
extra-high carrying capacity
for wind-gearboxes.
New pitch bearing
design with improved
corrosion protection
SKF WindCon 3.0/Webcon
Intranet supervised
condition monitoring
DRTRB-unit SKF
Nautilus with
segmented cage
for minimized friction
Automatic centralized
lubrication kits for
reduced maintenance cost
XL Hybrid bearings
with ceramic balls
for superior insulation
© SKF Group
Slide 15
15 October 2013
SKF’s environmentally positive customer solutions
SKF’s solutions which realize significant environmental benefits
Designed for
environment
Applied for
environment
Stop-start system
E2 - 30% less
energy compared to
a standard bearing
A solution that is primarily designed to
improve environmental performance by itself
© SKF Group
Slide 16
15 October 2013
Up to 15% better
fuel economy of
the car
SKF sensor bearing
A solution that enables improved environmental
performance in a specific application
SKF energy efficient (E2) bearings
China
India
Peru
Indonesia
Conveyors used in
mining industry.
130,000 E2 bearing
Sangam Group
Industria Textil Piura
Leuwijaya Textile
•
•
•
© SKF Group
Slide 17
15 October 2013
60,000 E2 deep
groove ball bearing
30,000 E2 bearing
potential 325,000 for
3 different customers
What is SKF knowledge?
© SKF Group
Slide 18
15 October 2013
SKF technology platforms
Bearings
and units
© SKF Group
Slide 19
15 October 2013
SKF technology platforms
Seals
© SKF Group
Slide 20
15 October 2013
SKF technology platforms
Mechatronics
© SKF Group
Slide 21
15 October 2013
SKF technology platforms
Lubrication
systems
© SKF Group
Slide 22
15 October 2013
SKF technology platforms
Services
© SKF Group
Slide 23
15 October 2013
Acquisition 2003-2013
Identifying gaps and opportunities in all platforms
Bearings
and units
Products
SNFA
(2006)
GLO
(2008)
S2M
(2007)
Seals
Economos
(2006)
Macrotech
Macrotech
(2006)
Services
Baker
(2007)
Slide 24
15 October 2013
ABBA
(2007)
(2005)
(2009)
QPM
(2008)
(2003)
PMCI
(2007)
ALS
PB&A
(2006)
Sommers
Monitek
© SKF Group
(2006)
Vogel (2004)
Lincoln
Industrial (2010)
Scandrive
Industries
Safematic
Mechatronics
Jaeger
Technologies
Geographies
Lubrication
systems
Peer
(2008)
GBC
(2012)
BVI
(2013)
(2006)
TCM (2003)
(2007)
Cirval
(2005)
(2008)
SKF Nine-month results 2013
Tom Johnstone, President and CEO
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 bearings
for upgrading local coal power plants.
• An order from an European customer, worth SEK 21 million for cryogenic bearings.
© SKF Group
Slide 26
15 October 2013
Highlights Q3 2013
• 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’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 opened a gearbox remanufacturing centre in Tianjin, China.
• SKF Distributor College awarded its 190,000th certificate.
© SKF Group
Slide 27
15 October 2013
Kaydon Corporation
Key facts and figures - 2012
• Headquarters in Ann Arbor, Michigan U.S.
• Established 1941
Friction control 54%
Slide 28
Velocity control 23%
Specialty products 23%
Ring & Seal
Bearing
© SKF Group
• USD 475 million in sales
• 2,187 employees
15 October 2013
Kaydon net sales – 2012
Industries
Geographies
Automation &
Robotics
Other
Asia
18%
Other
12%
27%
2%
Power
13% Generation
Semicond. 3%
Petroleum 5%
Processing
5%
13%
Medical
Aerospace
10% 6%
Equipment
Heavy
Military
Equipment
© SKF Group
Slide 29
15 October 2013
Europe 24%
62%
North
America
New products - examples
Sealed SKF single
row angular contact
ball bearings
SKF Axial
excluder seal
Reinforced
all-rubber
HSS seals
Super precisions
bearings for woodworking applications
SKF Condition
Based Lubrication
Maintenance products:
Oil storage
station
© SKF Group
Slide 30
15 October 2013
Grid and gear
coupling grease
Digital oil
pressure gauge
SKF Group – Q3 2013
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Operating margin excl. restructuring,%
Profit before tax, SEKm
Cash flow, SEKm
Organic sales growth in local currency:
SKF Group:
2.0%
Strategic Industries:
-0.9%
Regional Sales and Service:
0.3%
Automotive:
7.5%
2013
15,623
1,923
12.3
12.9
1,717
1,135
2012
15,486
1,908
12.3
12.3
1,709
1,097
Europe:
North America:
Asia:
Latin America:
Key points
Sales volumes up by 2.2% y-o-y
Manufacturing slightly higher compared to last year
Inventories 21.3% of sales
© SKF Group
Slide 31
15 October 2013
1%
-2%
5%
9%
Organic sales growth in local currency
% change
y-o-y
25
20
15
10
5
0
-5
- 10
2011
© SKF Group
Slide 32
15 October 2013
2012
2013
Growth development by geography
Organic growth in local currency Q3 2013 vs Q3 2012
Europe
1%
North
America
-2%
Asia/Pacific
5%
Latin
America
9%
© SKF Group
Slide 33
15 October 2013
Middle East
& Africa
8%
Growth development by geography
Organic growth in local currency YTD 2013 vs YTD 2012
Europe
-4%
North
America
-4%
Asia/Pacific
-3%
Latin
America
10%
© SKF Group
Slide 34
15 October 2013
Middle East
& Africa
0%
Components in net sales
2011
2013
2012
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
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
26.4
18.6
13.3
7.6
1.0
-0.8
-3.7
-4.2
-6.5
0.4
3.1
-10.8 -12.2
-6.3
-2.1
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
7.0
5.5
1.4
2.8
-6.4
-7.8 -10.5
-4.6
0.9
Percent y-o-y
Volume
Sales in local
currency
Currency
Net sales
© SKF Group
Slide 35
15.6
15 October 2013
6.4
Growth in local currency, including structure
% y-o-y
20
16.3%
15
10
5
0
-2.1%
-5
-1.2%
- 10
2011
© SKF Group
Slide 36
15 October 2013
2012
Structure in 2011:
4.8%
Structure in 2012:
0.4%
Structure in YTD 2013: 1.8%
YTD 2013
Operating profit
SEKm
2 700
2 400
2 100
1 800
1 500
1 200
900
600
300
0
2011
One-time items
© SKF Group
Slide 37
15 October 2013
2012
2013
Operating margin
%
16
14
12
10
8
6
4
2
0
2011
2012
One-time items
© SKF Group
Slide 38
15 October 2013
2013
Operating margin
%
16
14
12
14.7*
14.5
10
12.0*
12.2*
11.4
11.1
2012
YTD 2013
8
6
4
2
0
2011
One-time items
* Excluding one-time items
© SKF Group
Slide 39
15 October 2013
Operating margin per business area
%
18
15
9
Regional Sales
and Service
Strategic
Industries
6
Automotive
12
3
0
-3
Q1
Q2
2011
Q3
Q4
Q1
Q2
Q3
2012
Q4
Q1
2013
Excluding one-off items
© SKF Group
Slide 40
15 October 2013
Q2
(eg. restructuring, impairments, capital gains)
Q3
Inventories as % of annual sales
%
25
24
23
22
21
20
19
18
Q1
Q2
2011
© SKF Group
Slide 41
15 October 2013
Q3
Q4
Q1
Q2
2012
Q3
Q4
Q1
Q2
2013
Q3
Return on capital employed
One-off costs
* Excluding one-off costs
%
30
25
23.9*
20
23.6
15
17.2*
15.2*
16.2
13.5
10
5
0
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.
© SKF Group
Slide 42
15 October 2013
Cash flow, after investments before financing
SEKm
2 500
2 000
*
1 500
1 000
***
500
0
**
- 500
- 1 000
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
Slide 43
15 October 2013
Net debt
SEKm
0
AB SKF,
dividend paid (SEKm):
2011 Q2
2,277
2012 Q2
2,504
2013 Q2
2,530
- 2 000
- 4 000
- 6 000
- 8 000
- 10 000
- 12 000
Cash out from
acquisitions (SEKm):
2012 Q3
829
2013 Q1
823
- 14 000
- 16 000
- 18 000
- 20 000
2011
2012
2013
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 44
15 October 2013
Debt structure, maturity years
EURm
600
500
500
500
400
300
265
200
100
100
100
100
110
2014
2015
2016
2017
100
0
2013
• Available credit facilities:
EUR 500 million 2017
SEK 3,000 million 2017
© SKF Group
Slide 45
15 October 2013
•
2018
2019
2020
No financial covenants nor material
adverse change clause
Third quarter 2013
2013
2012
15,623
15,486
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
2.47
2.67
1,135
1,097
SEKm
Net sales
Operating profit
Basic earnings per share, SEK
Cash flow, after investments before financing
© SKF Group
Slide 46
15 October 2013
Nine-month 2013
2013
2012
47,167
49,591
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
6.57
8.11
1,390*
2,479*
SEKm
Net sales
Operating profit
Basic earnings per share, SEK
Cash flow, after investments before financing
* excluding acquisitions and divestments, SEK 1,947 million (3,112).
© SKF Group
Slide 47
15 October 2013
October 2013: SKF demand outlook Q4 2013
Demand compared to the fourth quarter 2012
The 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 2013
The 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
Slide 48
15 October 2013
SKF demand outlook Q4 2013, regions
Share of net sales
2012
Sequential trend
for Q4 2013
Q4 2013
vs Q4 2012
Europe
43%
+
Asia Pacific
24%
+
North America
23%
+/-
Latin America
7%
+/+
Total
© SKF Group
Slide 49
15 October 2013
SKF demand outlook Q4 2013, business areas
Share of net sales
2012
Sequential trend
for Q4 2013
Q4 2013
vs Q4 2012
Strategic
Industries
31%
+
Regional Sales
and Service
39%
+
Automotive
27%
++
+
Total
© SKF Group
Slide 50
15 October 2013
SKF sequential volume trend Q4 2013, main segments
Share of net
sales 2012
6% Aerospace
5% Trucks
4% Railway
2% Two-wheelers and electrical
29% Industrial distribution
13% Industrial, heavy, special and
off-highway
13% Cars and light vehicles
12% Industrial, general
10% Vehicle after market
6% Energy
© SKF Group
Slide 51
15 October 2013
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 2012
Q4:
SEK 120 million
Full 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
Slide 52
15 October 2013
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
Slide 53
15 October 2013
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
Investments & Innovation
• New and existing facilities
• Research and development
Cost reduction
• Consolidation of manufacturing
• Optimization and productivity improvements
• Reduction in purchasing costs
© SKF Group
Slide 54
15 October 2013
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
Slide 55
15 October 2013
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
Slide 56
15 October 2013
© SKF Group
Slide 57
15 October 2013
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: marita.bjork@skf.com
© SKF Group
Slide 58
15 October 2013
Investor Relations:
Anna Alte
Tel: +46 31 3371988
Mobile: +46 705 271988
E-mail: anna.alte@skf.com
Event and road shows coordinator:
Helena Karlsson
Tel: +46 31 3372142
Mobile: +46 705 642142
E-mail: helena.karlsson@skf.com