SKF First-quarter results 2014 Tom Johnstone, President and CEO 15 April 2014 Highlights Q1 2014 Examples of new business • 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, Vattenfall, Sweden: condition monitoring solutions • Geely Automobile, China: transmission seals • Volkswagen, Germany: energy efficient tapered roller and ball bearings One of the largest cement producers in Latin America: major service contract • Examples of new products: • © SKF Group Extended range of infrared thermometers Slide 2 15 April 2014 Awards received in Q1 2014 Customer awards • Technical Cooperation Award, Goldwind • Supplier of the Year Award, Varian Medical Systems • Volvo Cars Quality Excellence (VQE) Award • Excellent Supplier Award, Geely • Excellent Quality Supplier Award, Hino Motors • Supplier of the Year Award, General Motors Golden Mousetrap Awards Best Product of the Year for Electronics & Test, Editors of Design News © SKF Group Slide 3 15 April 2014 SKF Group – Q1 2014 Financial performance Net sales, SEKm Operating profit, SEKm Operating margin, % Operating margin excl. one-time items, % Profit before tax, SEKm Cash flow after investments before financing, SEKm Cash flow from operations, SEKm 2014 2013 16,734 2,024 12.1 11.4 1,787 15,152 1,480 9.8 11.4 1,237 -259 -892 314 403 Organic sales growth in local currency: SKF Group: 5.8% Europe: Strategic Industries: Regional Sales and Service: Automotive: North America: Asia: Latin America: 6.5% 3.0% 8.1% Key points Sales volumes up by 6.2% y-o-y Manufacturing higher compared to last year © SKF Group Slide 4 15 April 2014 4% 3% 11% 4% Organic sales growth in local currency % change y-o-y 2012 © SKF Group Slide 5 15 April 2014 2013 2014 Organic sales growth in local currency % y-o-y 5.8% -0.7% -2.5% © SKF Group Slide 6 15 April 2014 Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.7% Growth development by geography Organic growth in local currency Q1 2014 vs Q1 2013 Europe 4% North America 3% Asia/Pacific 11% Latin America 4% © SKF Group Slide 7 15 April 2014 Middle East & Africa 21% Components in net sales 2012 Percent y-o-y 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 Sales in local currency 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 © SKF Group Slide 8 15 April 2014 Operating profit as reported SEKm 2012 © SKF Group Slide 9 15 April 2014 2013 2014 Operating profit excluding one-time items SEKm 2012 © SKF Group Slide 10 15 April 2014 2013 2014 Operating margin One-time items * Excluding one-time items % 12.0* 11.9* 11.3 11.4* 5.8 © SKF Group Slide 11 15 April 2014 12.1 Operating margin per business area % Regional Sales and Service Specialty Business Strategic Industries Automotive 2012 2013 Excluding one-time items © SKF Group Slide 12 15 April 2014 (eg. restructuring, impairments, capital gains) 2014 Net working capital as % of annual sales % 2012 © SKF Group Slide 13 15 April 2014 2013 2014 Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 14.6* 16.2 7.5 8.4 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 14 15 April 2014 Cash flow, after investments before financing SEKm **** 2012 © SKF Group Excl. acquisitions and divestments: * ** *** **** Slide 15 15 April 2014 2013 Q3 2012 Q1 2013 Q3 2013 Q4 2013 SEK 1,707 million SEK -69 million SEK 871 million SEK 1,170 million 2014 Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7,900 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives. © SKF Group Slide 16 15 April 2014 Debt structure, maturity years 850 500 500 200 100 © SKF Group Slide 17 100 110 • Available credit facilities: EUR 500 million 2017 SEK 3,000 million 2016 SEK 3,000 million 2017 15 April 2014 • No financial covenants nor material adverse change clause First quarter 2014 2014 2013 16,734 15,152 2,024 1,480 Operating margin, % 12.1 9.8 Operating margin excl. one-time items % 11.4 11.4 Profit before taxes 1,787 1,237 Net profit 1,275 818 Basic earnings per share, SEK 2.72 1.74 Cash flow, after investments before financing -259 -892 314 403 SEKm Net sales Operating profit Cash flow from operations © SKF Group Slide 18 15 April 2014 April 2014: SKF demand outlook Q2 2014 Demand compared to the second quarter 2013 The demand for SKF’s products and services is expected to be slightly higher for the Group, North America and Asia. It is expected to be relatively unchanged for Europe and slightly lower for Latin America. For Strategic Industries and Automotive it is expected to be slightly higher and for Regional Sales and Service relatively unchanged. Demand compared to the first quarter 2014 The demand for SKF’s products and services is expected to be slightly higher for the Group, for North America and Asia. It is expected to be relatively unchanged for Latin America. For Strategic Industries and Automotive it is expected to be slightly higher and for Regional Sales and Service relatively unchanged. Manufacturing Manufacturing is expected to be higher year over year and slightly higher compared to the first quarter. © SKF Group Slide 19 15 April 2014 SKF demand outlook Q2 2014, main regions Share of net sales 2013 Sequential trend for Q2 2014 Q2 2014 vs Q2 2013 Europe 42% +/- Asia Pacific 24% + North America 24% + Latin America 7% + Total © SKF Group Slide 20 15 April 2014 SKF demand outlook Q2 2014, main business areas Share of net sales 2013 Q2 2014 vs Q2 2013 Strategic Industries 29% + Regional Sales and Service 39% +/- Automotive 27% + Total © SKF Group Sequential trend for Q2 2014 Slide 21 + 15 April 2014 SKF sequential volume trend Q2 2014, Industries Share of net sales 2013 5% 14% Cars and light vehicles 11% Vehicle service market 6% Aerospace 4% Railway 2% Two-wheelers and Electrical 29% Industrial distribution 13% Industrial, heavy, special and off-highway 11% Industrial, general 5% © SKF Group Energy Slide 22 Trucks 15 April 2014 Guidance for the second quarter 2014* • Tax level: around 30% • Financial net for the second quarter: Around SEK -230 million • Currency impact on operating profit versus 2013 Q2: SEK -125 million Full year: SEK -350 million • Additions to PPE: Around SEK 1.6 billion for 2014 * Guidance is approximate and based on current assumptions and exchange rates. © SKF Group Slide 23 15 April 2014 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 © SKF Group Slide 24 15 April 2014 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 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 25 15 April 2014