SKF Half-year results 2014
Tom Johnstone, President and CEO
15 July 2014
Examples of new business
•
Envision Energy, China
Strategic long-term partnership
•
A customer in the automation industry
Roller screw electromechanical cylinder
•
Dongfang Electric New Energy Equipment
Main shaft bearings
•
Aurizon, Australia
Service contract
•
A customer in the oil and gas industry
Asset management services
•
Bosch Service, Brazil
SKF’s vehicle aftermarket product range
© SKF Group
Slide 2
15 July 2014
Highlights
• Inauguration of SKF Campus and SKF North East Asia Distribution
Centre in Shanghai.
• New SKF Solution Factory in Nieuwegein in the Netherlands.
• Events during the quarter:
- SKF Wind Farm Management Conference in Berlin
- SKF Life Cycle Management Conference in Buenos Aires
- SKF Asset Management Conference in Prague
© SKF Group
Slide 3
15 July 2014
Customer awards
• Best Technical and Service Award 2013 – Envision Energy, China
• Supplier Excellence Award 2013 – National Oilwell Varco (NOV), USA
• Premium Supplier Award – Joy Global Underground Mining LLC, USA
• Marine Supplier of the year Award 2014 – Rolls-Royce Marine
• Excellent Supplier Award – ABB Marine, China
• Supplier Certification of Appreciation – Nissan, China
• Quality Gold Award 2013 – Yamaha Motor Company
• The Qualitas Award – Fiat/Chrysler, Argentina
© SKF Group
Slide 4
15 July 2014
New products and solutions
SKF Gear
Bearing Unit
Floating
piston
SKF
Tachometer
SKF Shaft
Alignment Tool
Low torque operator
valve solution
SKF Wireless
Machine Condition
Sensor
© SKF Group
Slide 5
15 July 2014
Electric grease
transfer pump
SKF Wireless
MicroVibe
Low friction grease
for hub bearing units
SKF @ptitude
Connect
Turbulo BlueMon
emission monitoring system
SKF Group – Q2 2014
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before tax
Basic earnings per share, SEK
Cash flow after investments before financing excl. EU payment
Cash flow after investments before financing
Organic sales growth in local currency:
SKF Group
4.6%
Strategic Industries
11.1%
Regional Sales and Service
2.0%
Automotive
1.3%
Slide 6
15 July 2014
2013
17,955
2,096
11.7
12.3
1,761
2.54
1,423
-1,402
16,392
1,837
11.2
12.4
1,627
2.36
1,147
1,147
Europe
North America
Asia
Latin America
Middle East and Africa
Key points
Sales volumes up by 3.6% y-o-y.
Manufacturing was slightly higher compared to last year.
© SKF Group
2014
1%
3%
14%
2%
14%
SKF Group – Half year 2014
Financial performance (SEKm)
Net sales
Operating profit
Operating margin, %
Operating margin excl. one-time items, %
Profit before tax
Basic earnings per share, SEK
Cash flow after investments before financing excl. EU payment
Cash flow after investments before financing
Organic sales growth in local currency:
SKF Group
5.2%
Strategic Industries
9.0%
Regional Sales and Service
2.2%
Automotive
4.5%
Key points
Sales volumes up by 5.0% y-o-y.
Manufacturing was higher compared to last year.
© SKF Group
Slide 7
15 July 2014
2014
2013
34,689
4,120
11.9
11.9
3,548
5.26
1,164
-1,661
31,544
3,317
10.5
11.9
2,864
4.10
255
255
Europe
North America
Asia
Latin America
Middle East and Africa
3%
3%
13%
1%
18%
Organic sales growth in local currency
% change
y-o-y
2012
© SKF Group
Slide 8
15 July 2014
2013
2014
Organic sales growth in local currency
% y-o-y
5.2%
-0.7%
-2.5%
© SKF Group
Slide 9
15 July 2014
Structure in 2012: 0.4%
Structure in 2013: 2.5%
Structure in 2014: 4.2%
Sales development by geography
Organic growth in local currency Q2 2014 vs Q2 2013
Europe
1%
North
America
3%
Asia/Pacific
14%
Latin
America
2%
© SKF Group
Slide 10
15 July 2014
Middle East
& Africa
14%
Sales development by geography
Organic growth in local currency YTD 2014 vs YTD 2013
Europe
3%
North
America
3%
Asia/Pacific
13%
Latin
America
1%
© SKF Group
Slide 11
15 July 2014
Middle East
& Africa
18%
Components in net sales
2012
Percent y-o-y
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Volume
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
6.2
3.6
Structure
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
4.7
3.8
Price/mix
1.9
2.0
0.5
0.7
0.7
-0.6
-0.2
-0.2
-0.4
1.0
Sales in local
currency
1.0
-0.8
-3.7
-4.2
-6.5
0.4
3.1
11.7
10.5
8.4
Currency
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
-2.1
-0.1
1.1
Net sales
1.4
2.8
-6.4
-7.8 -10.5
-4.6
0.9
9.6
10.4
9.5
© SKF Group
Slide 12
15 July 2014
Operating profit as reported
SEKm
2012
© SKF Group
Slide 13
15 July 2014
2013
2014
Operating profit excluding one-time items
SEKm
2012
© SKF Group
Slide 14
15 July 2014
2013
2014
Operating margin
One-time items
* Excluding one-time items
%
12.0*
11.9*
11.9
11.3
5.8
© SKF Group
Slide 15
15 July 2014
11.9*
Operating margin per business area as reported
%
Specialty Business
Strategic Industries
Regional Sales
and Service
Automotive
2012
© SKF Group
Slide 16
15 July 2014
2013
2014
Operating margin per business area excl. one-time items
%
Specialty Business
Strategic Industries
Regional Sales
and Service
Automotive
2012
© SKF Group
Slide 17
15 July 2014
2013
2014
SKF’s programme to improve efficiency and reduce cost
Restructuring, SEKm:
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13
2013 Q1/14 Q2/14
Total
Cost taken
200
250
190
0
50
490
0
100
790
People affected
530
410
320
0
130
860
0
170
1,560
80
0
40
220
0
100
470
Giving future gross savings, SEKm:
Full year gross saving
150
100
Realized gross savings from total programme, SEKm:
vs 2012
vs 2013
Q1/13
Q2/13
Q3/13
Q4/13
2013
Q1/14
Q2/14
2014
Restructuring
15
35
75
75
200
70
50
120
S&A
50
50
50
50
200
0
0
0
Purchasing
100
100
100
100
400
60
100
160
Total
165
185
225
225
800
130
150
280
Note: Run rate Q2 2014 SEK 1,340 million vs 2012.
© SKF Group
Slide 18
15 July 2014
Operating profit bridge, Q2 2014
SEKm
+150
+160
1,837
Q2 2013
© SKF Group
Slide 19
15 July 2014
+134
+160
Volumes Price/mix Specialty Savings
excl.
Business
Specialty
Business
+70
-120
-295
2,096
Q2 2014
One-time Currencies R&D,
inflation etc.
items
Operating profit bridge, half year 2014
SEKm
+440
+280
+400
+60
+240
-220
-397
4,120
3,317
Q2 2013
© SKF Group
Slide 20
15 July 2014
Volumes Price/mix Specialty Savings
excl.
Business
Specialty
Business
Q2 2014
One-time Currencies R&D,
inflation etc.
items
Net working capital as % of annual sales
Target: 27%
%
2012
© SKF Group
Slide 21
15 July 2014
2013
2014
Return on capital employed
One-time items
* Excluding one-time items
%
17.1*
15.1*
14.6*
16.2
7.5
8.7
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 2014
Cash flow, after investments before financing
SEKm
5)
4)
2012
2013
Excl. acq. and div.:
© SKF Group
Slide 23
15 July 2014
Excl. EU payment
1)
2)
3)
4)
5)
Q3 2012
Q1 2013
Q3 2013
Q4 2013
Q2 2014
2014
SEK 1,707 million
SEK -69 million
SEK 871 million
SEK 1,170 million
SEK 1,423 million
Net debt
SEKm
AB SKF,
dividend paid (SEKm):
2012 Q2
2,504
2013 Q2
2,530
2014 Q2
2,530
Cash out from
acquisitions (SEKm):
2012 Q3
829
2013 Q1
823
2013 Q4
7,900
2012
2013
2014
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 24
15 July 2014
EU payment (SEKm):
2014 Q2
2,825
Debt structure, maturity years
850
500
500
200
100
© SKF Group
Slide 25
15 July 2014
100
110
• Available credit facilities:
EUR 500 million 2019
SEK 3,000 million 2016
SEK 3,000 million 2017
•
No financial covenants nor material
adverse change clause
July 2014: SKF demand outlook Q3 2014
Demand compared to the third quarter 2013
The demand for SKF’s products and services is expected to be slightly higher for
the Group and North America, higher for Asia, relatively unchanged for Europe
and slightly lower for Latin America. It is expected to be higher for Strategic
Industries and relatively unchanged for Regional Sales and Service and
Automotive.
Demand compared to the second quarter 2014
The demand for SKF’s products and services is expected to be relatively
unchanged for the Group and Europe. It is expected to be slightly higher for
North America and Asia and slightly lower for Latin America. For Strategic
Industries it is expected to be slightly higher and for Regional Sales and Service
and Automotive it is expected to be relatively unchanged.
Manufacturing
Manufacturing is expected to be slightly higher year over year and relatively
unchanged compared to the second quarter.
© SKF Group
Slide 26
15 July 2014
SKF demand outlook Q3 2014, main regions
Share of net sales
2013
Sequential trend
for Q3 2014
Q3 2014
vs Q3 2013
Europe
42%
+/-
Asia Pacific
24%
++
North America
24%
+
Latin America
7%
+
Total
© SKF Group
Slide 27
15 July 2014
SKF demand outlook Q3 2014, main business areas
Share of net sales
2013
Q3 2014
vs Q3 2013
Strategic
Industries
29%
++
Regional Sales
and Service
39%
+/-
Automotive
27%
+/-
Total
© SKF Group
Sequential trend
for Q3 2014
Slide 28
+
15 July 2014
SKF sequential volume trend Q3 2014, Industries
Share of net
sales 2013
6%
Aerospace
5%
Energy
4%
Railway
2%
Two-wheelers and Electrical
29%
Industrial distribution
14%
Cars and light vehicles
13%
Industrial, heavy, special and off-highway
11%
Vehicle service market
11%
Industrial, general
5%
© SKF Group
Slide 29
Trucks
15 July 2014
Guidance for the third quarter 2014*
• Tax level: around 30%
• Financial net for the third quarter:
Around SEK -230 million
• Currency impact on operating profit versus 2013
Q3:
SEK +50 million
Full year:
SEK -70 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 30
15 July 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 31
15 July 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
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 32
15 July 2014
© SKF Group
15 July 2014