The SKF Group
SKF Investor Relations
January 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
25 July 2016
Net sales by customer segment* 2012
Cars and
light trucks
Industrial
distribution
29%
13%
29%
6%
Aerospace
6%
4%
4% Railway
4%
4% Off-highway
5%
2%5%
10%
Vehicle Service
Market
12%
10%6%
9%
6%
Energy
Industrial,
heavy and
special
* Previously published shares have been restated in February 2013
© SKF Group
Slide 2
25 July 2016
9%
2%
12%
Industrial,
general
Trucks
Two-wheelers
and Electrical
Net sales 2012, Geographical distribution*
Middle East
& Africa
Asia/Pacific
North America
3%
22%
24%
8%
Eastern
Europe
5%
3%
35%
Western Europe
* Previously published shares have been restated in February 2013
© SKF Group
Slide 3
25 July 2016
Latin America
Sweden
SKF 2012
(1998)
(2002)
% of group total
(48)(44)(53)
Net sales*
(47)(46)(53)
Average number of
employees
Tangible asset
37
39
(10)(12) (9)
35
(13) (14) (8)
30
(25)(14)(19)
(26)(13)(18)
24
26
22
(5)(14)(12)
(6) (5) (4)
12
(5) (12)(15)
(4) (4) (3)
8
8 8
7
7
© SKF Group
Slide 4
25 July 2016
Latin
America
(3) (9) (3)
10
3
North
America
(3) (9) (3)
Western
Europe
Sweden
9
5
6
Eastern
Europe
(3) (2) (0)
(2) (2) (0)
3
1
0
Middle East Asia/Pacifi
and Africa
c
Operating margin
%
16
14
12
10
8
6
4
2
0
2003
© SKF Group
Slide 5
25 July 2016
2004
2005
2006
2007
2008
2009
2010
2011
2012
Return on capital employed
%
30
25
20
15
10
5
0
2003
© SKF Group
Slide 6
25 July 2016
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 7
25 July 2016
2004
2005
2006
2007
2008
2009
2010
2011
2012
SKF Group Vision
To equip the world
with SKF knowledge
© SKF Group
Slide 8
25 July 2016
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 9
25 July 2016
21 SKF Solution Factories 2012
Nordic
(Gothenburg)
Edmonton
UK
France
Monterrey
Mexico
Rumania
Germany
Italy
Cleveland
Moscow
Istanbul
Tianjin
Shanghai
Houston
Taiwan
Pune
Colombia
Opened
Planned
© SKF Group
Slide 10
25 July 2016
Brasil “IXION”
Johannesburg
Perth
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 11
25 July 2016
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 12
25 July 2016
Wheel-loader – Construction
Central gear
Hybrid pinion units
Chassis lubrication
Centralized lubrication systems
Motor hood
Electromechanical actuators
Wheel end
© SKF Group
Slide 13
25 July 2016
• 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 14
25 July 2016
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 15
25 July 2016
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 16
25 July 2016
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 17
25 July,
July 2016
2016
SKF technology platforms
Bearings
and units
© SKF Group
Slide 18
25 July,
July 2016
2016
SKF technology platforms
Seals
© SKF Group
Slide 19
25 July,
July 2016
2016
SKF technology platforms
Mechatronics
© SKF Group
Slide 20
25 July,
July 2016
2016
SKF technology platforms
Lubrication
systems
© SKF Group
Slide 21
25 July,
July 2016
2016
SKF technology platforms
Services
© SKF Group
Slide 22
25 July,
July 2016
2016
Acquisition 2003-2012
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)
Lubrication
systems
Safematic
Scandrive
(2003)
PMCI
(2007)
ALS
PB&A
(2006)
Sommers
Monitek
Segments
© SKF Group
Slide 23
25 July 2016
Peer
(2008)
GBC
(2012)
(2005)
(2004)
Lincoln
Industrial
(2008)
(2007)
(2009)
Vogel
QPM
ABBA
Jaeger
Technologies
Geographies
(2006)
Mechatronics
(2006)
(2010)
TCM (2003)
(2007)
Cirval
(2005)
(2008)
SKF Year-end results 2012
Tom Johnstone, President and CEO
Summary of the quarter
• Weaker sales in the quarter
- lower overall demand
- inventory destocking in the market
• Impact on the operating margin due to significantly lower manufacturing
• Continued reduction on inventories
• Strong cash flow
• Accelerated and expanded activities to reduce costs by SEK 3 billion
by the end of 2015 and strengthen growth
• Acquisition of Blohm + Voss Industries
© SKF Group
Slide 25
25 July 2016
Programme to improve efficiency, reduce cost and
strengthen profitable growth
Main activities:
• consolidation of production between sites
• transfer of production from West Europe to serve faster growing markets
with more local production
• optimization and productivity improvements in the manufacturing
and demand chain processes
• consolidation of and efficiency improvements in administration
and support functions
• reduction in purchasing cost mainly through standardization and
rationalization of the supplier base.
Reducing annual costs by SEK 3 billion by the end of 2015
Total costs for the programme SEK 1.5 billion for the years 2012 to 2015
2,500 people impacted, early retirement and other voluntary and agreed reductions
© SKF Group
Slide 26
25 July 2016
Acquisitions in the last 12 months
• General Bearing Cooperation (GBC)
Acquired in August 2012
Net sales
Employees
Customers
Headquarter
Factories
Manufacturing
around USD 155 million
around 1,380
OEM and end-user in the truck, trailer, automotive
and industrial transportation markets
North America
3 in China
ball bearings, tapered roller bearings
and precision roller bearings
• Blohm + Voss Industries (BVI)
Transaction is subject to relevant regulatory approvals
Net sales
Employees
Headquarter
Manufacturing
© SKF Group
Slide 27
25 July 2016
around EUR 100 million
around 400
Germany
premium quality equipment for critical marine
applications, including shaft components (seals
and bearings), stabilizers, and oily water separators
BVI strengthening SKF’s position as a marine specialist
• Strategic fit with SKF Marine growth strategy
• Complementary product portfolio
• Secure the leadership with propulsion system OEMs
• Widen the scope of supply for the application life-cycle
Today, SKF sales to the marine industry is around SEK 1.5 billion.
Main applications are propulsion systems, including thrusters,
pods and gearboxes.
© SKF Group
Slide 28
25 July 2016
Some examples of new businesses in 2012
Industrial
•
•
•
•
•
•
•
•
new generation Nautilus bearing to Siemens
main shaft solutions to Vestas V112-3.0 MW turbine
axle boxes and wheel set bearing units to Siemens Rail Systems
SKF ConRo Compacts to a major metal industry customer
third strategic partnership agreement with Baosteel Group Corporation
maintenance services to LKAB
integrated maintenance solutions to Fibria
two custom-designed SKF spherical roller bearings, 8.8 tonnes each,
for Caesars High Roller observation wheel in Las Vegas
Automotive
•
•
•
•
•
SKF Bus Door Actuator to Volvo Buses
rear wheel bearing units and front suspension bearing units to Volvo Car Corporation
wheel bearing units and clutch bearings to Audi
bearing and units to Scania for wheels and transmissions
bonded piston seals to Mazda Motor Corporation
© SKF Group
Slide 29
25 July 2016
Some highlights from 2012
•
SKF celebrated 100 years of business in China
- inaugurated a new bearing and truck hub unit factory in Jinan
- broke ground on a new regional distribution centre in Shanghai
- announced the establishment of a new SKF Campus in Jiading, Shanghai,
containing a new factory for automotive and the Global Technical Centre China,
SKF Solution Factory and SKF College
•
New facilities
- Railway test centre in Tver, Russia
- Five new SKF Solution Factory: USA, Romania, Italy, Australia and the Netherlands
•
Partnership
With Protean Electric for supplying products to Protean’s in-wheel electric motors
for electric vehicles and hybrid cars.
•
Documented delivered value
SKF provided SEK 4.1 billion in verified savings for customers.
•
SKF Distributor College awarded its 170,000th certificate
•
Dow Jones Sustainability Indexes and FTSE4Good
- member of DJSI indexes for the 13th successive year
- included for the 12th successive year in the FTSE4Good Index Series
© SKF Group
Slide 30
25 July 2016
Some examples of new products in 2012
SKF Compact
Wire Steering
Bearing
SKF Speed
Sensor Unit
SKF Machine
Condition
Indicator
New temperature
monitoring
system for
railway
A hand-held,
18-volt,
lithium-ion
grease gun
SKF Low Friction Hub
Bearing Unit
Shaft
sealing solutions
SKF Solar Hub
SKF ChainLube
oil projection
system
SKF Bus Door Actuator
© SKF Group
Slide 31
25 July 2016
SKF Nautilus
range extensions
R&D – main areas and investments in 2012
Main areas
•
•
•
•
Environment
Core technologies
New products
2.5% of sales
Strengthen R&D activities
in fast growing regions
• Strengthen links with
universities and high
schools
© SKF Group
+10%
Slide 32
25 July 2016
421
First filing patent
application +30%
Launch of new climate targets
• SKF launched the SKF BeyondZero portfolio with products
and solutions, which will both improve energy efficiency
and reduce the environmental impact.
Growth target:
SEK 2.5 billion to
SEK 10 billion by 2016
• SKF revised targets for its climate strategy and also partnered
with the WWF in their Climate Savers Programme.
© SKF Group
Slide 33
25 July 2016
Key focus areas ahead 2012
• Managing the uncertain and different demand environment
- regions and segments
• Profit and cash flow
- inventory management
• Initiatives and actions to support long-term financial targets
• Continue the integration of Lincoln
• Business Excellence and competence development
• Implement the new organization for the Industrial market
One SKF and SKF Care as guiding lights
© SKF Group
Slide 34
25 July 2016
Key focus areas ahead 2012
• Managing the uncertain and different demand environment
- regions and segments
• Profit and cash flow
- inventory management
• Initiatives and actions to support long-term financial targets
• Continue the integration of Lincoln
• Business Excellence and competence development
• Implement the new organization for the Industrial market
One SKF and SKF Care as guiding lights
© SKF Group
Slide 35
25 July 2016
SKF Group – 2012
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Profit before tax, SEKm
Cash flow, SEKm
2012
64,575
7,333
11.4
6,511
3,555
2011
66,216
9,612
14.5
8,932
3,848
Organic sales growth in local currency:
SKF Group:
Industrial market,
Strategic Industries:
Regional Sales and Service:
Automotive:
-2.5%
-3.0%
-1.8%
-3.4%
Key points
Sales volumes down by -3.9% y-o-y
Manufacturing significantly lower y-o-y
Inventories down to 19.9% of sales
© SKF Group
Slide 36
25 July 2016
Europe:
-4.7%
North America: 6.8%
Asia:
-9.5%
Latin America: 11.3%
Organic sales growth in local currency
% change
y-o-y
25
20
15
10
5
0
-5
- 10
2010
© SKF Group
Slide 37
25 July 2016
2011
2012
Growth development by geography
Organic growth in local currency Q4 2012 vs Q4 2011
Europe
-7%
North
America
2%
Asia/Pacific
-11%
Latin
America
9%
© SKF Group
Slide 38
25 July 2016
Middle East
& Africa
-9%
Growth development by geography
Organic growth in local currency 2012 vs 2011
Europe
-5%
North
America
7%
Asia/Pacific
-10%
Latin
America
11%
© SKF Group
Slide 39
25 July 2016
Middle East
& Africa
-2%
Components in net sales
2010
2011
Percent y-o-y
Q1
Volume
5.3 16.6 19.0 16.3
Structure
0.0
Price/mix
Sales in local
currency
Q2
Q3
Q4
Q4
20.1 12.6
6.2
Q1
Q2
Q3
Q4
0.0
-0.8 -2.8
-5.0
-5.9
0.0
5.0
4.4
5.1
4.8
-0.1
0.0
0.8
1.0
-0.3 -0.5
0.3
0.9
1.3
1.6
2.0
2.8
1.9
2.0
0.5
0.7
26.4 18.6 13.3
7.6
1.0 -0.8
-3.7
-4.2
0.4
3.6
-2.7
-3.6
1.4
2.8
-6.4
-7.8
5.0 16.1 19.3 17.2
Net sales
-2.7 10.9 16.1 11.0
25 July 2016
Q3
0.0
-7.7 -5.2
Slide 40
Q2
0.0
Currency
© SKF Group
Q1
2012
-3.2
-6.2
-10.8 -12.2 -6.3 -2.1
15.6
6.4
7.0
5.5
Growth in local currency, including structure
% y-o-y
20
16.3%
14.2%
15
10
5
-2.1%
0
-5
2010
2011
Structure in 2011: 4.8%
Structure in 2012: 0.4%
© SKF Group
Slide 41
25 July 2016
2012
Operating profit
SEKm
2 700
2 400
2 100
1 800
1 500
1 200
900
600
300
0
2010
One-time items
© SKF Group
Slide 42
25 July 2016
2011
2012
Operating margin
%
16
14
12
10
8
6
4
2
0
2010
One-time items
© SKF Group
Slide 43
25 July 2016
2011
2012
Operating margin
%
16
14.2*
14
12
13.8
14.7*
14.5
12.0*
11.4
10
8
6
4
2
0
2010
One-time items
* Excluding one-time items
© SKF Group
Slide 44
25 July 2016
2011
2012
Operating margin per business area
%
18
15
Regional Sales
and Service
12
9
Strategic Industries
6
3
0
Automotive
-3
Q1
Q2
2010
Q3
Q4
Q1
Q2
Q3
Q4
2011
Q1
Q2
2012
Excluding one-off items
© SKF Group
Slide 45
25 July 2016
(eg. restructuring, impairments, capital gains)
Q3
Q4
Inventories as % of annual sales
%
25
24
23
22
21
20
19
18
2010
© SKF Group
Slide 46
25 July 2016
2011
2012
Return on capital employed
%
30
24.0
25
23.6
20
16.2
15
10
5
0
2010
2011
2012
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 47
25 July 2016
Cash flow, after investments before financing
SEKm
2 000
**
1 000
*
0
- 1 000
- 2 000
- 3 000
- 4 000
- 5 000
- 6 000
2010
2011
2012
* SEK 798 million, excluding SEK 6,799 million for the acquisition of Lincoln.
** SEK 1,707 million, excluding acquisitions and divestments.
© SKF Group
Slide 48
25 July 2016
Net debt
SEKm
0
AB SKF,
dividend paid (SEKm):
2010 Q2
1,594
2011 Q2
2,277
2012 Q2
2,504
- 2 000
- 4 000
- 6 000
- 8 000
- 10 000
- 12 000
- 14 000
- 16 000
- 18 000
- 20 000
2010
2011
2012
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 49
25 July 2016
Debt structure on 31 December, maturity years
• Available credit facilities:
EUR 500 million 2017
SEK 3,000 million 2017
EURm
•
No financial covenants nor material
adverse change clause
600
500
500
500
2018
2019
400
265*
300
200
100
100**
100
100
110
2014
2015
2016
2017
0
0
2012
2013
To adjust the debt structure:
© SKF Group
Slide 50
25 July 2016
* Redemption of bonds
2013 - EUR 131 million
** Early repayment of loans
2014 - EUR 30 million
Fourth quarter 2012
2012
2011
14,984
16,257
1,227
2,006
Operating margin, %
8.2
12.3
Profit before taxes
995
1,823
1,011
1,205
2.16
2.57
1,076
853
SEKm
Net sales
Operating profit
Net profit
Basic earnings per share, SEK
Cash flow, after investments before financing
© SKF Group
Slide 51
25 July 2016
Full year 2012
2012
2011
64,575
66,216
7,333
9,612
11.4
14.5
Profit before taxes
6,511
8,932
Net profit
4,878
6,224
Basic earnings per share, SEK
10.37
13.29
Cash flow, after investments before financing
3,555
3,848
SEKm
Net sales
Operating profit
Operating margin, %
© SKF Group
Slide 52
25 July 2016
January 2013: SKF demand outlook Q1 2013
Demand compared to the first quarter 2012
The demand for SKF’s products and services is expected to be lower
for the Group. For Europe it is expected to be significantly lower, for Asia
slightly lower and for North America and Latin America relatively
unchanged. The demand is expected to be lower for Industrial Market,
Strategic Industries and SKF Automotive, for Industrial Market,
Regional, Sales and Services it is expected to be slightly lower.
Demand compared to the fourth quarter 2012
The demand for SKF’s products and services is expected to be relatively
unchanged for the Group, for the business areas and for the regions.
Manufacturing
Manufacturing is expected to be lower year over year and higher
compared to fourth quarter.
© SKF Group
Slide 53
25 July 2016
SKF demand outlook Q1 2013, regions
(based on current assumptions)
Share of net sales*
2012
Sequential trend
for Q1 2013
Q1 2013
vs Q1 2012
Europe
43%
---
Asia Pacific
24%
-
North America
22%
=
Latin America
8%
=
--
Total
* Previously published shares have been restated in February 2013.
© SKF Group
Slide 54
25 July 2016
SKF demand outlook Q1 2013, business areas
(based on current assumptions
Share of net sales
2012
Sequential trend
for Q1 2013
Q1 2013
vs Q1 2012
Strategic
Industries
31%
--
Regional Sales
and Service
39%
-
Automotive
27%
--
--
Total
© SKF Group
Slide 55
25 July 2016
SKF sequential volume trend Q1 2013, main segments
(based on current assumptions)
Share of net
sales 2012*
6% Aerospace
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 service market
6% Energy
4% Railway
5% Trucks
* Previously published shares have been restated in February 2013.
© SKF Group
Slide 56
25 July 2016
Guidance for the first quarter 2013
• Tax level: around 30%
• Financial net for the first quarter:
Around SEK -200 million
• Exchange rates on operating profit versus 2012
Q1:
SEK -50 million
Full year:
SEK -250 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 57
25 July 2016
Dividend proposal
AB SKF’s Board proposes an unchanged
dividend of
SEK 5.50 per share
to the Annual General Meeting
© SKF Group
Slide 58
25 July 2016
New IT systems
• Primarily for Sales/customer relationship, Purchasing,
Demand chain and Finance
• New common IT infrastructure for all five technology
platforms
• To implement common, best practice processes across
the SKF Group globally, enabling business efficiency,
speed and growth
• Will be implemented over a number of years with initial
roll-out in 2014
© SKF Group
Slide 59
25 July 2016
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 60
25 July 2016
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 61
25 July 2016
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 62
25 July 2016
Investor Relations:
Anna Alte
Tel: +46 31 3371988
Mobile: +46 705 271988
E-mail: anna.alte@skf.com
Event coordinator and assistant:
Helena Karlsson
Tel: +46 31 3372142
Mobile: +46 705 642142
E-mail: helena.karlsson@skf.com
© SKF Group
Slide 63
25 July 2016