SKF Year-end results 2013
Tom Johnstone, President and CEO
Key achievements 2013
Acquisitions and divestments:
• acquisition of German-based ship components provider
Blohm + Voss Industries (BVI)
• acquisition of US-based Kaydon Corporation
• divestment of the aerospace metallic rods business
New facilities:
• lubrication systems laboratory in SKF Global Technical Centre, India
• manufacturing unit in Pune in India for producing housings for bearings
• gearbox remanufacturing centre in Tianjin, China
• SKF opened six new SKF Solution Factories: in Toronto, Canada,
in Manesar, India, in Urumqi, China and in Abu Dhabi, United Arab
Emirates. There are now 27 SKF Solution Factories worldwide.
© SKF Group
Slide 1
28 January 2014
Bearing
Key achievements 2013
•
In 2013, SKF provided around SEK 4 billion in verified savings
for customers and since 2003 the accumulated figure is over
SEK 27 billion.
•
SKF Distributor College awarded its 200,000th certificate.
The recipient is Yang Chunxiao, an employee of Shandong Jiarui
Industry Develop Co, Ltd, one of SKF’s Certified Maintenance
Partners in China, who completed a course on ”selling value”.
•
SKF’s factories in Ahmedabad, India and in Dalian, China
was awarded LEED Gold certification.
SKF was included in the
FTSE4Good Index Series
for the 13th successive year
© SKF Group
Slide 2
28 January 2014
SKF was included in the Dow Jones
Sustainability Indexes for the 14th
successive year
Examples of new business in Q4 2013
•
SKF started deliveries of wheel hub bearing units and MacPherson
suspension bearing units to Volvo Car Corporation in their new factory in
Chengdu, China for the delivery of the newly launched Volvo S60L car model.
•
SKF received an order from Hyundai Motors as a supplier of the recently
launched robust MacPherson suspension bearing unit. The value of the order
is around SEK 370 million.
•
SKF is providing bearings, lubrication systems and engineering support for
a US-based pump producer for London’s Lee Tunnel Project is building its
largest-ever waste water pump, which will contribute to London’s storm
water and sewage overflow issues.
•
SKF received an order for compact tapered bearing unit from Tikhvin
Freight Car Building Plant, affiliated to United Wagon Company LLC. The
value of the order is around SEK 120 million.
•
SKF was awarded by CSR ZHUZHOU ELECTRIC CO., LTD in China a
contract for locomotive bearings for a value of SEK 76 million.
•
SKF gained lubrication business worth SEK 38 million from a heavy
industry customer in Peru.
© SKF Group
Slide 3
28 January 2014
Examples of new business in Q1 – Q3 2013
New business
•
with Pratt & Whitney, to supply engine main shaft bearings
•
with Nordex for delivery of main shaft bearings and lubrication systems
•
for automated lubrication systems installed in the MSC Home Terminal
cranes in Belgium’s Port of Antwerp
•
with Turbomeca a 10-year contract worth SEK 900 million
•
with Fiat for the delivery of wheel hub bearing units, worth SEK 1 billion
•
with Great Wall Motors in China for high pressure valve stem seals,
hub bearing units and bearing retainers. SKF and Great Wall Motors
also signed a strategic partnership for developing sustainable solutions
in energy efficient vehicles.
•
with Goldwind for SKF Nautilus bearing units, worth SEK 100 million
•
with Tangshan Loco and Changchun Railway Co for wheel set bearings
for high speed trains
•
with Wuhan Iron & Steel Heavy Industry Group Co, Ltd (WISCO Heavy)
to establish a remanufacturing centre in Wuhan, China.
© SKF Group
Slide 4
28 January 2014
Examples of new technologies, products and solutions 2013
Sealed SKF single
row angular
contact ball
bearings
SKF Telescopic
pillars series
CPMA and CPMB
for medical
equipment
Reinforced
all-rubber
HSS seals
Super precisions
bearings for
wood-working
applications
SKF Extended Life
spherical plain
bearing
SKF InsightTM
Internally powered sensors
and data acquisition electronics
sensing directly on the bearing
SKF extreme
temperature
bearings
SKF Axial
excluder seal
© SKF Group
Slide 5
28 January 2014
Robust angular
steering
column
bearing
SKF Condition Based
Lubrication
An energy efficient
high speed permanent
magnet solution
High pressure valve
stem seal with lower
friction
SKF Group – Q4 2013
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Operating margin excl. one-time costs,%
Profit before tax, SEKm
Cash flow, SEKm
Organic sales growth in local currency:
SKF Group:
6.9%
Strategic Industries:
6.5%
Regional Sales and Service:
4.6%
Automotive:
10.8%
2013
16,430
-1,547
-9.4
11.0
-1,760
-6,732
2012
14,984
1,221
8.1
10.2
969
1,076
Europe:
North America:
Asia:
Latin America:
Key points
Sales volumes up by 7.1% y-o-y
Manufacturing higher compared to last year
Inventories 21.5% of sales (20.9% excluding Kaydon)
© SKF Group
Slide 6
28 January 2014
3%
4%
15%
11%
SKF Group – 2013
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Operating margin excl. one-time costs,%
Profit before tax, SEKm
Cash flow, SEKm
Organic sales growth in local currency:
SKF Group:
-0.7%
Strategic Industries:
-4.1%
Regional Sales and Service:
-2.1%
Automotive:
5.3%
2013
63,597
3,693
5.8
11.9
2,821
-5,342
2012
64,575
7,314
11.3
12.0
6,408
3,555
Europe:
North America:
Asia:
Latin America:
Key points
Sales volumes down by -0.7% y-o-y
Manufacturing relatively unchanged compared to last year
Inventories 21.5% of sales (20.9% excluding Kaydon)
© SKF Group
Slide 7
25 January
28
July 20162014
-3%
-3%
2%
10%
Operating profit excluding one-time costs
Q4 2013
2013
Reported operating loss/profit
-1,547
3,693
Reported operating margin
-9.4%
5.8%
-3,000
-3,000
-260
-260
-90
-615
-3,350
-3,875
Operating profit excl. one-time costs
1,803
7,568
Operating margin excl. one-time costs
11.0%
11.9%
SEKm
One-time costs:
European Commission provision
Kaydon
Other
Total one-time costs
© SKF Group
Slide 8
28 January 2014
Adjusted 2013 key figures
Reported
2013
Excl. EC
provision
Excl.
Kaydon
Inventories of annual sales
21.5
-
20.9
Net working capital of sales
31.7
-
30.6
ROCE
7.5
13.4
-
ROE
4.6
17.7
-
Equity/assets ratio
29.8
34.0
-
Gearing
52.9
56.0
-
117.3
102.7
-
%
Net debt/equity
© SKF Group
Slide 9
28 January 2014
Organic sales growth in local currency
% change
y-o-y
2011
© SKF Group
Slide 10
28 January 2014
2012
2013
Growth development by geography
Organic growth in local currency Q4 2013 vs Q4 2012
Europe
3%
North
America
4%
Asia/Pacific
15%
Latin
America
11%
© SKF Group
Slide 11
28 January 2014
Middle East
& Africa
16%
Growth development by geography
Organic growth in local currency 2013 vs 2012
Europe
-3%
North
America
-3%
Asia/Pacific
2%
Latin
America
10%
© SKF Group
Slide 12
28 January 2014
Middle East
& Africa
3%
Components in net sales
2011
2013
2012
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
20.1
12.6
6.2
0.0
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
Structure
5.0
4.4
5.1
4.8
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
Price/mix
1.3
1.6
2.0
2.8
1.9
2.0
0.5
0.7
0.7
-0.6
-0.2
-0.2
26.4
18.6
13.3
7.6
1.0
-0.8
-3.7
-4.2
-6.5
0.4
3.1
11.7
-10.8 -12.2
-6.3
-2.1
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
-2.1
7.0
5.5
1.4
2.8
-6.4
-7.8 -10.5
-4.6
0.9
9.6
Percent y-o-y
Volume
Sales in local
currency
Currency
Net sales
© SKF Group
Slide 13
15.6
28 January 2014
6.4
Growth in local currency, including structure
% y-o-y
16.3%
1.8%
-2.1%
Structure in 2011: 4.8%
Structure in 2012: 0.4%
Structure in 2013: 2.5%
© SKF Group
Slide 14
28 January 2014
Operating profit as reported
SEKm
2011
© SKF Group
Slide 15
28 January 2014
2012
2013
Operating profit excluding one-time items
SEKm
2011
© SKF Group
Slide 16
28 January 2014
2012
2013
Operating margin
%
16
14
12
14.7*
14.5
12.0*
11.9*
11.4
10
8
6
5.8
4
2
0
2011
One-time items
* Excluding one-time items
© SKF Group
Slide 17
28 January 2014
2012
2013
Operating margin per business area
%
Regional Sales
and Service
Strategic
Industries
Automotive
2011
2012
2013
Excluding one-time items
© SKF Group
Slide 18
28 January 2014
(eg. restructuring, impairments, capital gains)
Inventories as % of annual sales
%
excl. Kaydon
2011
© SKF Group
Slide 19
28 January 2014
2012
2013
Return on capital employed
One-time costs
* Excluding one-time costs
%
23.9*
23.6
17.2*
15.1*
16.2
7.5
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 20
28 January 2014
New ROCE and Net working capital targets
SKF financial targets
Previous targets
New targets
Operating margin level
15%
15%
Annual sales growth
in local currencies
8%
8%
ROCE
27%
20%
-
27%
18%
-
Net working capital of sales
Inventories of sales
© SKF Group
Slide 21
28 January 2014
Key elements of capital efficiency
30
-8 percentage points
in 11 years
28
Flat over 11 years
35
34
33
26
32
31
24
30
29
22
28
27
20
26
18
25
02
03
04
05
06
07
08
09
10
11
Plant and property as % of sales
* Excluding Kaydon
12
13 *
02
03
04
05
06
07
08
09
Slide 22
28 January 2014
11
12
Net working capital as % of sales
* Excluding Kaydon
Main actions
© SKF Group
10
•
Continue PPE and sales ratio going forward
•
Step-up activities to:
- work with flexibility in our factories to reduce inventory
- improve collection of accounts receivables
- get effects on A/P from new purchasing activities
13 *
Cash flow, after investments before financing
SEKm
*
***
**
2011
2012
Excl. acquisitions and divestments: *
**
***
****
© SKF Group
Slide 23
28 January 2014
Q3 2012
Q1 2013
Q3 2013
Q4 2013
2013
SEK 1,707 million
SEK -69 million
SEK 871 million
SEK 1,170 million
****
Net debt
SEKm
AB SKF,
dividend paid (SEKm):
2011 Q2
2,277
2012 Q2
2,504
2013 Q2
2,530
Cash out from
acquisitions (SEKm):
2012 Q3
829
2013 Q1
823
2014 Q4
7,900
2011
2012
2013
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 24
28 January 2014
Debt structure, maturity years
EURm
850
500
100
100
© SKF Group
Slide 25
28 January 2014
110
100
• Available credit facilities:
EUR 500 million 2017
SEK 3,000 million 2016
SEK 3,000 million 2017
500
•
No financial covenants nor material
adverse change clause
Fourth quarter 2013
2013
2012
Net sales
16,430
14,984
Operating loss/profit
-1,547
1,221
1,803
1,521
Operating margin, %
-9.4
8.1
Operating margin excl. one-time costs, %
11.0
10.2
Loss/profit before taxes
-1,760
969
Net loss/profit
-2,043
995
-4.57
2.12
-6,732
1,076
SEKm
Operating profit excl. one-time costs
Basic earnings per share, SEK
Cash flow, after investments before financing
© SKF Group
Slide 26
28 January 2014
Full year 2013
2013
2012
63,597
64,575
Operating profit
3,693
7,314
Operating profit excl. one-time costs
7,568
7,754
5.8
11.3
11.9
12.0
Profit before taxes
2,821
6,408
Net profit
1,044
4,816
2.00
10.23
-5,342*
3,555*
SEKm
Net sales
Operating margin, %
Operating margin excl. one-time costs, %
Basic earnings per share, SEK
Cash flow, after investments before financing
* excluding acquisitions and divestments, SEK 3,117 million (4,188).
© SKF Group
Slide 27
28 January 2014
January 2014: SKF demand outlook Q1 2014
Demand compared to the first quarter 2013
The demand for SKF’s products and services is expected to be slightly higher for the
Group, Europe and North America. It is expected to be slightly lower in Latin America
and higher in Asia Pacific. For Strategic Industries it is expected to be relatively
unchanged, for Regional Sales and Service slightly higher and for Automotive higher.
Demand compared to the fourth quarter 2013
The demand for SKF’s products and services is expected to be slightly higher for the
Group, Europe and North America. It is expected to be relatively unchanged in Asia
Pacific and slightly lower in Latin America. For Regional Sales and Service and
Automotive it is expected to be slightly higher and for Strategic Industries relatively
unchanged.
Manufacturing
Manufacturing is expected to be higher year over year and slightly higher compared
to the fourth quarter.
© SKF Group
Slide 28
28 January 2014
SKF demand outlook Q1 2014, regions
Share of net sales
2013
Sequential trend
for Q1 2014
Q1 2014
vs Q1 2013
Europe
42%
+
Asia Pacific
24%
++
North America
24%
+
Latin America
7%
+
Total
© SKF Group
Slide 29
28 January 2014
SKF demand outlook Q1 2014, business areas
Share of net sales
2013
Sequential trend
for Q1 2014
Q1 2014
vs Q1 2013
Strategic
Industries
29%
+/-
Regional Sales
and Service
39%
+
Automotive
27%
++
+
Total
© SKF Group
Slide 30
28 January 2014
SKF sequential volume trend Q1 2014, main segments
Share of net
sales 2013
29% Industrial distribution
14% Cars and light vehicles
11% Vehicle service market
11% Industrial, general
12% Industrial, heavy, special and off-highway
5% Energy
5% Aerospace
3% Two-wheelers and Electrical
5% Railway
5% Trucks
© SKF Group
Slide 31
28 January 2014
Guidance for the first quarter 2014*
• Tax level: around 30%
• Financial net for the first quarter:
Around SEK -250 million
• Currency impact on operating profit versus 2013
Q1:
SEK -90 million
Full year:
SEK -300 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 32
28 January 2014
Dividend proposal
AB SKF’s Board proposes an unchanged
dividend of
SEK 5.50 per share
to the Annual General Meeting
© SKF Group
Slide 33
28 January 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 34
28 January 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
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 35
28 January 2014
SKF cost reduction programme - restructuring status
Q4
Q1
Q2
Q3
Q4
2012
2013
2013
2013
2013
2013
Total
Cost
200
250
190
15
50
505
705
Full year saving
150
100
80
5
40
225
375
People
530
410
320
15
130
875
1,405
SEKm
© SKF Group
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 37
28 January 2014
© SKF Group
Slide 38
15 October 2013