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 1
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 2
15 October 2013
Kaydon Corporation
Key facts and figures - 2012
• Headquarters in Ann Arbor, Michigan U.S.
• Established 1941
Friction control 54%
Slide 3
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 4
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 5
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 6
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 7
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 8
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 9
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 10
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 11
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 12
15 October 2013
2012
2013
Operating margin
%
16
14
12
10
8
6
4
2
0
2011
2012
One-time items
© SKF Group
Slide 13
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 14
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 15
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 16
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 17
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 18
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 19
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 20
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 21
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 22
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 23
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 24
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 25
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 26
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 27
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 28
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 29
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 30
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
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15 October 2013
© SKF Group
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15 October 2013