Tom Johnstone, President and CEO
CMD 2013
Key items
• H1 summary and outlook
• SKF priorities
• Specific focus
- IT investment (UNITE)
- Cost reduction and Purchasing
© SKF Group
CMD 2013
Highlights H1 2013
Acquisitions and divestments
• SKF completed the acquisition of German-based ship components provider
Blohm + Voss Industries (BVI)
• SKF divested the aerospace metallic rods business
New facilities in India
• a new lubrication systems laboratory in SKF Global Technical Centre
• a new manufacturing unit in Pune for producing housings for bearings
Two new SKF Solution Factories
Inaugurated in Madrid, Spain and
Katowice, Poland
Katowice, Poland
Programme to improve efficiency, reduce cost
and strengthen profitable growth continues
• one-off costs of around SEK 440 million
• annual savings of around SEK 180 million
© SKF Group
CMD 2013
Madrid, Spain
Highlights H1 2013
Some examples of new business
• with Pratt & Whitney, to supply engine main shaft bearings
• with Nordex for delivery of mainshaft bearings and lubrication systems
• for automated lubrication systems installed in the MSC Home Terminal
cranes in Belgium’s Port of Antwerp
• with a steel and mining company for industrial bearings and units, seals,
mechatronics, and services
• with Öhlins Racing AB for SKF’s integrated monotube seal
• with the Chinese customer Great Wall for hub bearing units
• 10-year contract worth SEK 900 million with Turbomeca
• service contracts worth SEK 200 million in Latin America
• contract for wheel hub bearing units (HBU3) to Volvo Car Corporation
Thrust main shaft bearing,
one of the bearings for the
ARRANO Engine of TURBOMECA
© SKF Group
CMD 2013
Half year 2013
2013
2012
31,544
34,105
3,317
4,185
Operating margin, %
10.5
12.3
Operating margin excl. one-offs, %
11.9
12.7
Profit before taxes
2,864
3,730
Net profit
1,922
2,570
Basic earnings per share, SEK
4.10
5.44
Cash flow, after investments before financing
255
1,382
SEKm
Net sales
Operating profit
© SKF Group
CMD 2013
Growth development by geography and by business area
Organic growth in local currency YTD 2013 vs YTD 2012
Europe
-7%
North
America
-6%
Asia/Pacific
-5%
Latin
America
11%
SKF Group:
-5.1%
Strategic Industries:
-9.9%
Regional Sales and Service -6.3%
Automotive
2.0%
© SKF Group
CMD 2013
Middle East
& Africa
-4%
SKF demand outlook Q3 2013, regions
Share of net sales
2012
Sequential trend
for Q3 2013
Q3 2013
vs Q3 2012
Europe
43%
+/-
Asia Pacific
24%
+
North America
23%
+
Latin America
7%
++
Total
© SKF Group
CMD 2013
+
SKF demand outlook Q3 2013, business areas
Share of net sales
2012
Sequential trend
for Q3 2013
Q3 2013
vs Q3 2012
Strategic
Industries
31%
+
Regional Sales
and Service
39%
+
Automotive
27%
+
Total
© SKF Group
CMD 2013
+
Key items
• H1 summary and outlook
• SKF priorities
• Specific focus
- IT investment (UNITE)
- Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF priorities
© SKF Group
CMD 2013
Growth and operating margin 2002 - 2012
SEKm
+51%
70 000
-12%
60 000
+17%
50 000
-4%
40 000
Operating
margin 11.4%,
excl. one-time
costs 12.0%
30 000
Operating
margin 9.5%
20 000
10 000
O
© SKF Group
CMD 2013
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Key elements of Sustainable Profitable Growth
S2M
QPM
PEER
Cirval Lincoln ABBA
GLO
ALS Baker
GBC
BVI
Macrotech
Acquisitions
Platforms
Asset life cycle
+ service
2nd brands
New products
© SKF Group
CMD 2013
SKF BeyondZero
portfolio
Key items
• H1 summary and outlook
• SKF priorities
• Specific focus
- IT investment (UNITE)
- Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF investment in IT – UNITE programme
Preferred by customers, employees and partners. Strong in purchasing and operations.
Customers
Employees
Knowledge Engineering Company
Operations
One SKF
UNITE
© SKF Group
CMD 2013
Suppliers
UNITE - One End-to-End Process
1. Go To
Market
2. Manage
opportunities
3. Process
order &
confirmation
Customer to Cash
Forecast-to-Fulfill
Purchase-to-Pay
Record-to-Report
4. Sales &
Operations
Planning
5.S&OP
Meeting
6. Manage
suppliers &
contracts
Suppliers
7. Order &
receive
goods/
services
Customers
10. Deliver &
customer
Follow-up +
Payment
© SKF Group
CMD 2013
9. Production
execution
8. Production
scheduling
SKF investment in IT – UNITE programme
Multi year programme
• New Demand Chain systems
• New Finance system
First main installations
• Sales unit in Q2 2014
• Sales & Manufacturing unit in Q4 2014
Estimated cost
• SEK ~500 m in 2013 (of which SEK ~300 m capitalised)
• SEK ~900 m in 2014
© SKF Group
CMD 2013
Key items
• H1 summary and outlook
• SKF priorities
• Specific focus
- IT investment
- Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF Restructuring programme –
costs and expected savings
Restructuring activities launched in:
Q4 2012
Q1 2013
Q2 2013
Total
One-off costs
200
250
190
640
Annual savings when
fully implemented
150
100
80
330
SEKm
•
© SKF Group
The savings for the second half 2013 from these programmes will be around
SEK 150 million, evenly split between the third and the fourth quarter.
CMD 2013
SKF Global Spend
Total SKF spend
Direct Material
18%
Total SKF spend is SEK 36 billion – direct and
indirect representing ~ 50% respectively
44%
Rings & Subcontracting
40 000
36 153
38%
35 000
30 000
20 000
Components
SEK 17.7 billion
19 119
25 000
Steel Raw Material &
Rolling Elements
17 034
Indirect Material & CAPEX
15 000
8%
10 000
12%
27%
5 000
Facility Management
Professional Services
13%
Logistics
0
Total
Direct
Material
Indirect
Material
18%
21%
SEK 15.6 billion
© SKF Group
MRO
CMD 2013
IT
CAPEX
Challenges in the global supply chain – many factors
Natural disasters
Geopolitical Risk
Supply Chain Disruptions
Market demand variations
and volatility
Price and
currency volatility
Effective sourcing strategy
Global & Local Supplier
Relationships
© SKF Group
CMD 2013
Supplier Innovations
Sustainable and
Responsible Sourcing
Key initiatives to achieve savings
• Category and business
driven purchasing
• Supplier consolidation
and localization
• Leverage of all purchasing
power across all
businesses
• Product, process & system
standardization
• Total cost approach and
leading purchasing
practices applied
© SKF Group
CMD 2013
Success Story – localization of cages in China
Target:
•
China supplier development to secure capacity
and Q C D I M targets
SKF benefits:
•
Access to a supplier base in China close to Dalian
•
100% localization
•
2 suppliers fully approved in China
•
Worldwide supplier market base fitting with new
SKF manufacturing footprint
•
Development of a Chinese suppliers base with
export capacity
© SKF Group
CMD 2013
Contract Status:
2012/2013
Savings:
-40/50% vs Import
in China
Success Story
Packaging – Cross platform leverage
Corrugated & Anti-counterfeit packaging
Activity
Combine purchasing of
packaging materials across a
number of units
Total Savings:
USD 760,000 – 30% savings
SKF benefits
•
Reduction in supply base
•
Cost savings
•
Standardized packaging
from one supplier
© SKF Group
CMD 2013
Supplier reduction:
14
3
Success Story
Standardization of capital equipment
• Equipment for Grinding,
Honing, Laser marking
and Assembly
• HBU3 channel
standardization
SEK 280 million of total cost savings
• Clear business requirements
• Improved sourcing process
• Standardization of equipment
• Cross business leverage
• Regional Asian supplier base
developed with global capabilities
© SKF Group
CMD 2013
Purchasing ramp up and saving plan
2013
2014
2015
2016
SEK 1,500 m
• Separation of strategic tasks
from transactional tasks
• New Group Purchasing
organization in operation
• New process framework
• Sourcing waves 1 / Speed
sourcing started to leverage
spend across all BUs
• Sourcing waves 2 and
continued Speed Sourcing
activities
• Supplier Innovation
Programmes on stream
• Strategic Partnership
Agreements with key suppliers
• Integration of BU
Purchasing
• Common purchasing
processes
• Localization of the strategic
supplier base
• Supplier consolidation
© SKF Group
CMD 2013
• Category and business driven
organization fully leveraging
SKF’s purchasing power
• Purchasing supporting the full
internal value chain
• Focus on Total Cost of
Ownership (TCO)
• Strong alignment with the
business through a clear target
setting process
• Highly competent purchasing
professionals
• Reduced supply chain risk and
costs through top performing
suppliers in Q C D I M
SKF priorities
© SKF Group
CMD 2013
Key business message
• No change in demand outlook for Q3
• SKF priorities in focus – good progress in H1
• New IT investment (UNITE) and purchasing programmes
going according to plan
© SKF Group
CMD 2013