SKF Nine-month results 2012
Tom Johnstone, President and CEO
17 October 2012
Strong performance in a challenging market
•
Weaker sales during the quarter, impacted by overall economy
•
Significantly lower manufacturing and inventories reduced
•
Good operating margin
•
Strong cash flow
•
Further investments to support long-term growth and profitability
© SKF Group
Slide 1
17 October 2012
Highlights Q3 2012
• Acquisition and divestments completed
- acquisition of General Bearing Corporation (GBC)
- divestment of the SKF distributor businesses in Australia and New Zealand
• New businesses
- magnetic bearings to two new major gas projects in Australia
- five-year contract with LKAB for maintenance services
- third strategic partnership agreement with Baosteel Group Corporation
- SKF Bus Door Actuator to Volvo Buses
- SKF’s bonded piston seals to Mazda Motor Corporation
• Three new SKF Solution Factories
- USA, Romania and Italy
• SKF Distributor College
- awarded its 160,000th certificate
© SKF Group
Slide 2
17 October 2012
Highlights Q3 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
• Debt structure
- new eurobond of 500m with maturity 2019
- revolving credit facility of EUR 500m extended to 2017
• 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 3
17 October 2012
New products Q3 2012
New temperature
monitoring
system for
railway
Self powered
wireless
sensor for
railway
Device for monitoring freight
car mileage and maintenance
history
New range of
freight bearings,
tapered roller
bearing units
© SKF Group
Slide 4
17 October 2012
SKF ChainLube oil
projection system
for food processing
New low friction
bearing seal
for railway
SKF Group – Q3 2012
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Profit before tax, SEKm
Cash flow, SEKm
Q3 2012
15,486
1,913
12.4
1,734
1,097
Q3 2011
16,545
2,479
15.0
2,345
1,323
Organic sales growth in local currency:
SKF Group:
Industrial market,
Strategic Industries:
Regional Sales and Service:
Automotive:
-4.5%
-5.6%
-4.7%
-3.5%
Key points
Sales volumes down by 5.0% y-o-y
Manufacturing significantly lower y-o-y
Inventories down to 20% of sales
© SKF Group
Slide 5
17 October 2012
Europe:
North America:
Asia:
Latin America:
-7%
+5%
-11%
+8%
Organic sales growth in local currency
% change
y-o-y
25
20
15
10
5
0
-5
2010
© SKF Group
Slide 6
17 October 2012
2011
2012
Growth development by geography
Organic growth in local currency Q3 2012 vs Q3 2011
Europe
-7%
North
America
5%
Asia/Pacific
-11%
Latin
America
8%
© SKF Group
Slide 7
17 October 2012
Middle East
& Africa
-4%
Growth development by geography
Organic growth in local currency YTD 2012 vs YTD 2011
Europe
-4%
North
America
8%
Asia/Pacific
-9%
Latin
America
12%
© SKF Group
Slide 8
17 October 2012
Middle East
& Africa 0%
Components in net sales
2010
2011
Percent y-o-y
Q1
Volume
5.3
Structure
0.0
0.0
0.0
Price/mix
-0.3
-0.5
0.3
Sales in local
currency
5.0
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
16.6 19.0 16.3
20.1
12.6
6.2
0.0
-0.8
-2.8
-5.0
0.0
5.0
4.4
5.1
4.8
-0.1
0.0
0.8
0.9
1.3
1.6
2.0
2.8
1.9
2.0
0.5
16.1 19.3 17.2
26.4
18.6
13.3
7.6
1.0
-0.8
-3.7
-10.8 -12.2
-6.3
-2.1
0.4
3.6
-2.7
7.0
5.5
1.4
2.8
-6.4
Currency
-7.7
-5.2
Net sales
-2.7
10.9 16.1 11.0
© SKF Group
Slide 9
17 October 2012
2012
-3.2
-6.2
15.6
6.4
Growth in local currency, including structure
% y-o-y
20
16.3%
14.2%
15
10
5
-1.4%
0
-5
2010
2011
Structure in 2011: 4.8%
Structure in 2012: 0.2%
© SKF Group
Slide 10
17 October 2012
YTD 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 11
17 October 2012
2011
2012
Operating margin
%
16
14
12
10
8
6
4
2
0
2010
One-time items
© SKF Group
Slide 12
17 October 2012
2011
2012
Operating margin
%
16
14.2*
14
12
13.8
14.7*
14.5
12.6*
12.3
10
8
6
4
2
0
2010
One-time items
* Excluding one-time items
© SKF Group
Slide 13
17 October 2012
2011
YTD 2012
Operating margin per business area
%
18
Regional Sales
and Service
15
12
Strategic Industries
9
6
Automotive
3
0
Q1
Q2
2010
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2011
Excluding one-off items
© SKF Group
Slide 14
17 October 2012
(eg. restructuring, impairments, capital gains)
Q2
Q3
2012
Third quarter 2012
2012
2011
15,486
16,545
1,913
2,479
12.4
15.0
Profit before taxes
1,734
2,345
Net profit
1,266
1,656
2.71
3.52
1,097
1,323
SEKm
Net sales
Operating profit
Operating margin, %
Basic earnings per share, SEK
Cash flow, after investments before financing
© SKF Group
Slide 15
17 October 2012
Nine month 2012
2012
2011
49,591
49,959
6,106
7,606
12.3
15.2
Profit before taxes
5,516
7,109
Net profit
3,867
5,019
8.22
10.72
2,479
2,995
SEKm
Net sales
Operating profit
Operating margin, %
Basic earnings per share, SEK
Cash flow, after investments before financing
© SKF Group
Slide 16
17 October 2012
Inventories as % of annual sales
%
25
24
23
22
21
20
19
18
2010
© SKF Group
Slide 17
17 October 2012
2011
2012
Return on capital employed
%
30
24.0
25
23.6
18.4
20
15
10
5
0
2010
2011
YTD 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 18
17 October 2012
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 19
17 October 2012
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 20
17 October 2012
Debt structure on 30 September, maturity years
EURm
600
500
500
500
2018
2019
396
400
300
200
130
100
100
100
110
2015
2016
2017
0
0
2012
2013
2014
• Available credit facilities:
EUR 500 million 2017
SEK 3,000 million 2017
© SKF Group
Slide 21
17 October 2012
•
No financial covenants nor material
adverse change clause
October 2012: SKF demand outlook Q4 2012
Demand compared to the fourth quarter last year
The demand for SKF’s products and services is expected to be lower for
the Group and for Europe. For Asia it is expected to be slightly lower and
for North America and Latin America relatively unchanged. The demand is
expected to be lower for Industrial Strategic Industries and Industrial Regional
Sales and Service and relatively unchanged for Automotive.
Demand compared to the third quarter 2012
The demand for SKF’s products and services is expected to be slightly lower
for the Group, for all the business areas and for Europe, Asia and North
America. For Latin America demand is expected to be relatively unchanged.
Manufacturing
Manufacturing is expected to be lower year on year and slightly lower
compared to third quarter.
© SKF Group
Slide 22
17 October 2012
SKF demand outlook Q4 2012, regions
(based on current assumptions)
Share of net sales
2011*
Sequential trend
for Q4 2012
Q4 2012
vs Q4 2011
Europe
44%
--
Asia Pacific
28%
-
North America
19%
+/-
Latin America
8%
+/--
Total
* Previously published shares have been restated to reflect
the total Group business and customer delivery locations.
© SKF Group
Slide 23
17 October 2012
SKF demand outlook Q4 2012, business areas
(based on current assumptions)
Share of net sales
2011
Sequential trend
for Q4 2012
Q4 2012
vs Q4 2011
Strategic
Industries
31%
--
Regional Sales
and Service
39%
--
Automotive
27%
+/-
--
Total
© SKF Group
Slide 24
17 October 2012
SKF sequential volume trend Q4 2012, main segments
(based on current assumptions)
Share of net
sales 2011*
5% Aerospace
13% Cars and light vehicles
4% Railway
28% Industrial distribution
13% Industrial, general
12% Industrial, heavy, special and
off-highway
10% Vehicle service market
5% Energy
5% Trucks
3% Two-wheelers and electrical
© SKF Group
Slide 25
17 October 2012
* Previously published shares have been restated to reflect
the total Group business and customer delivery locations.
Guidance for the fourth quarter 2012
• Tax level: around 30%
• Financial net for the fourth quarter:
Around SEK 200 million
• Exchange rates on operating profit versus 2011
Q4:
SEK -50 million
Full year:
SEK 200 million
• Additions to PPE: Around SEK 2.0 billion for 2012
Guidance is approximate and based on current assumptions
and exchange rates
© SKF Group
Slide 26
17 October 2012
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 27
17 October 2012
Long-term financial targets
15%
8%
27%
© SKF Group
Slide 28
17 October 2012
Operating margin, level
Annual sales growth in local currencies
Return on capital employed
Main initiatives going forward
• Accelerate profitable growth
- intensify the platform and industry approach
- launch more new offerings – green and BZ portfolio
- strengthen the service business
- focus on faster growing regions/ industries
- develop other brands
• Reduce cost and eliminate waste
- Business Excellence throughout the Group
- BCC manufcaturing and sourcing
- integrated cost reduction activities (ICR)
• Invest in growth
- Sales and engineering resources
- Factories in growth markets
- Solution factories
- R&D
- Acquisitions
- New IT systems
© SKF Group
Slide 29
17 October 2012
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 30
17 October 2012
© SKF Group
Slide 31
17 October 2012