1
SKF Half-year results 2015
Alrik Danielson, President and CEO
15 July 2015
2
Highlights - examples of new business in Q2 2015
•
United Technologies Corporation, USA
Pratt & Whitney
Long-term contract
Delivery of engine bearings
•
ReGen Powertech, India
Pitch and yaw bearing sets and
mainshaft bearings
•
PT. Kereta API Indonesia (Indonesian Railways)
Tapered roller bearing units
•
Floatel International AB, Sweden
Global service agreement including
SKF Multilog IMx-M
•
Volkswagen, Mexico
Wheel hub and MacPherson
suspension bearing units
© SKF Group
Slide 2
15 July 2015
3
Highlights
• Completed the divestment of:
- Erin Engineering and Research Inc. to Jensen Hughes,
a US-based engineering consultancy.
- Two filtration businesses, Purafil and Kaydon Custom
Filtration, to Filtration Group Corporation, an affiliate of
Madison Industries.
• New products:
- a smaller version of a shaft alignment tool
that it launched earlier in the year, designed
to make shaft alignment easy and intuitive.
- an upgraded version of the third generation
hub bearing unit, designed to reduce preload,
friction and CO2 emissions.
© SKF Group
Slide 3
15 July 2015
4
Highlights – customer awards received
•
Awards from SKF distributors:
-‘Supplier of the Year’
-‘Supplier of the Year in Transmission
and Technics 2014’
Motion Industries in Canada and in the
Southeast and Midwest regions of the
USA
Imes Dexis, Benelux
•
‘Best Supplier Award Year 2014’
Shanghai Hanbell Precise Machinery Co.,
China
•
‘Best
Shanghai Automobile Gear Works, China
•
‘Best Plant award’
© SKF Group
Slide 4
Supplier Award’
15 July 2015
The PSA Group, for SKF’s factories in
St Cyr, France and Tudela, Spain.
5
Automotive Market profit improvement programme
Clear aim of improving productivity and competitiveness
Three main focus areas:
Products – Review of product portfolio; emphasis on applicationfocused offerings with the specific performance required for the
application
Competitiveness – Improve our overall competitiveness; focus on
costs, manufacturing footprint and process technology
Vehicle Service Market – Further adapt aftermarket and OEM
offerings, as the design-life of products delivered to OEM customers
continues to increase; adapt our aftermarket offering to new reality,
ensuring a competitive offer and value proposition for second and
third vehicle owners
1.
2.
3.
 Actions to run as part of normal business; possible restructuring
costs to be communicated as and if they occur
 Intention to develop business as part of SKF
© SKF Group
Slide 5
15 July 2015
6
SKF Group – Q2 2015
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before taxes
Basic earnings per share, SEK
Net cash flow after investments before financing
Organic sales change y-o-y:
SKF Group
Industrial Market
Automotive Market
Specialty Business
*Adjusted for the EU payment this is 1 423 million
© SKF Group
Slide 6
15 July 2015
-1.5%
-2.5%
0%
1.0%
2015
2014
19 961
2 383
11.9
12.9
2 241
3.65
1 654
17 955
2 096
11.7
12.3
1 761
2.54
-1 402*
Europe
North America
Asia
Latin America
Middle East and Africa
0.7%
-5.7%
-3.7%
4.6%
15.7%
7
SKF Group – Half year 2015
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before taxes
Basic earnings per share, SEK
Net cash flow after investments before financing
Organic sales change y-o-y:
SKF Group
Industrial Market
Automotive Market
Specialty Business
-0.2%
-0.6%
0.3%
0.8%
Slide 7
15 July 2015
2014
39 415
4 104
10.4
12.6
3 833
6.11
2 642
34 689
4 120
11.9
11.9
3 548
5.26
-1 465*
Europe
North America
Asia
Latin America
Middle East and Africa
*Previously published cash flow information is restated and adjusted for the EU payment this is 1 360 million
© SKF Group
2015
0.8%
-4.1%
0.6%
1.5%
15.0%
8
Organic sales growth in local currency
% change
y-o-y
8
6
4
2
0
-2
-4
-6
-8
-10
2013
© SKF Group
Slide 8
15 July 2015
2014
2015
9
Organic sales growth in local currency
% y-o-y
6
3.9%
4
2
0
-0.7%
-2
-0.2%
-4
2013
2014
Structure in 2013: 2.5%
Structure in 2014: 3.7%
Structure in 2015: -0.1%
© SKF Group
Slide 9
15 July 2015
YTD 2015
10
Sales development by geography
Organic growth in local currency Q2 2015 vs Q2 2014
Europe
0.7%
North
America
-5.7%
Asia/Pacific
-3.7%
Latin
America
4.6%
© SKF Group
Slide 10
15 July 2015
Middle East
& Africa
15.7%
11
Sales development by geography
Organic growth in local currency YTD 2015 vs YTD 2014
Europe
0.8%
North
America
-4.1%
Asia/Pacific
0.6%
Latin
America
1.5%
© SKF Group
Slide 11
15 July 2015
Middle East
& Africa
15.0%
12
Components in net sales
2013
Percent y-o-y
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Organic
-8.0
-2.2
2.0
6.9
5.8
4.6
3.2
2.8
1.4
-1.5
Structure
1.5
2.6
1.1
4.8
4.7
3.8
5.4
0.9
0
-0.2
Sales in local
currency
-6.5
0.4
3.1
11.7
10.5
8.4
8.6
3.7
1.4
-1.7
Currency
-4.0
-5.0
-2.2
-2.1
-0.1
1.1
5.3
8.9
14.9
12.9
Net sales
-10.5
-4.6
0.9
9.6
10.4
9.5
13.9
12.6
16.3
11.2
© SKF Group
Slide 12
15 July 2015
13
Operating profit as reported
SEKm
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
2013
© SKF Group
Slide 13
15 July 2015
2014
2015
14
Operating profit excluding one-time items
SEKm
3000
2500
2000
1500
1000
500
0
2013
© SKF Group
Slide 14
15 July 2015
2014
2015
15
Operating margin
One-time items
* Excluding one-time items
%
16
14
12.6*
11.9*
12
11.7*
11.0
10
10.4
8
6
5.8
4
2
0
2013
© SKF Group
Slide 15
15 July 2015
2014
YTD 2015
16
Operating margin per business area, as reported
%
18
15
Industrial Market
12
Specialty Business*
9
6
Automotive Market
3
0
-3
Q1
2013
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2014
* Q4 2013, impacted by cost related to Kaydon acquisition
© SKF Group
Slide 16
15 July 2015
Q1
2015
Q2
17
Operating margin per business area, excl. one-time items
%
18
15
Industrial Market
Specialty Business
12
9
Automotive Market
6
3
0
-3
Q1
2013
© SKF Group
Slide 17
15 July 2015
Q2
Q3
Q4
Q1
2014
Q2
Q3
Q4
Q1
2015
Q2
18
Operating profit bridge, Q2 2015
SEKm
3000
+650
80
+2 383
2500
+2 096
2000
1500
-223
-80
-140
-1 547
1000
500
0
Q2 2014
One-time
items at 2014
exchange
rates
Organic sales in
local currencies
Currency
impact
Savings from
cost-reduction
programme
* Includes general inflation, manufacturing and purchasing impacts, IT project, and R&D.
© SKF Group
Slide 18
15 July 2015
Other*
Q2 2015
19
Operating profit bridge, YTD 2015
SEKm
5000
+1 100
4500
4000
3500
+4 104
+2 096
-396
-780
3000
2500
80
-20
-1 547
2000
1500
1000
500
0
YTD 2014
One-time
items at 2014
exchange
rates
Organic sales in
local currencies
Currency
impact
Savings from
cost-reduction
programme
* Includes general inflation, manufacturing and purchasing impacts, IT project, and R&D.
© SKF Group
Slide 19
15 July 2015
Other*
YTD 2015
20
Employee productivity and efficiency
• Expected productivity and efficiency gains from new
organisation on-track:
- merging the two industrial businesses
- general staff optimization and productivity improvements
• Agreements have been reached covering 60% of the concerned
individuals.
Q1 2015
Q2 2015
Target
Cost, SEKm
535
224
1 400
People affected
575
270
1 500
-
80
-
460*
170*
1 200
Cost savings
Annual cost savings, SEKm
* On a full-year basis, as of Jan 2016
© SKF Group
Slide 20
15 July 2015
21
Net working capital as % of annual sales
Target: 27%
%
35
34
33
32
31
30
29
28
27
26
25
Q1
2013
© SKF Group
Slide 21
15 July 2015
Q2
Q3
Q4
Q1
2014
Q2
Q3
Q4
Q1
2015
Q2
22
Return on capital employed
One-time items
* Excluding one-time items
%
20
15.1*
15
10
5
14.8*
14.7*
13.9
12.6
2014
YTD 2015
7.5
0
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 22
15 July 2015
23
Cash flow, after investments before financing*
SEKm
3,000
2,000
4)
1,000
2)
0
3)
1)
-1,000
-2,000
-3,000
-4,000
-5,000
-6,000
-7,000
2013
Excl. acq. and div.:
Excl. EU payment
© SKF Group
Slide 23
15 July 2015
2014
1) Q1 2013
2) Q3 2013
3) Q4 2013
4) Q2 2014
SEK -69 million
SEK 871 million
SEK 1 122 million
SEK 1 423 million
2015
* 2013 and 2014 are restated
24
Net debt
AB SKF,
dividend paid (SEKm):
2013 Q2
2 530
2014 Q2
2 530
2015 Q2
2 567
SEKm
0
-5,000
-10,000
Cash out from major
acquisitions (SEKm):
2013 Q1
823
2013 Q4
7 900
-15,000
-20,000
-25,000
Cash from
divestments (SEKm):
2015 Q2
1 000
-30,000
-35,000
2013
2014
2015
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 24
15 July 2015
EU payment (SEKm):
2014 Q2
2 825
25
Debt structure, maturity years
EURm
850
900
800
700
600
500
500
500
400
300
200
200
100
100
110
2016
2017
0
2015
• Available credit facilities:
EUR 500 million 2019
SEK 3 000 million 2018
EUR 150 million 2017
© SKF Group
Slide 25
15 July 2015
2018
•
2019
2020
2021
No financial covenants nor material
adverse change clause
26
July 2015: SKF demand outlook Q3 2015
Demand compared to the third quarter 2014
The demand for SKF’s products and services is expected to be relatively
unchanged for the Group, Europe and Asia. For North America it is
expected to be lower and for Latin America higher. For all business areas
it is expected to be relatively unchanged.
Demand compared to the second quarter 2015
The demand for SKF’s products and services is expected to be slightly
lower for the Group. For Europe it is expected to be lower and for all other
regions it is expected to be relatively unchanged. For the business areas,
Industrial Market and Specialty Business it is expected to be relatively
unchanged and for Automotive Market it is expected to be lower.
© SKF Group
Slide 26
15 July 2015
27
Guidance for 2015*
Q3 2015:
• Financial net: around -230 million
• Currency impact on operating profit vs 2014 Q3: 450 million,
based on exchange rates June 30.
2015:
• Tax level: below 30% for 2015
• Additions to PPE: around 1 700 million for 2015
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group
Slide 27
15 July 2015
28
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 28
15 July 2015