SKF First-quarter results 2014
Tom Johnstone, President and CEO
15 April 2014
Highlights Q1 2014
Examples of new business
•
Hindustan Aeronautics Ltd, India:
customized bearings for helicopter
transmission and main rotor
•
Bell Helicopter Textron Inc.,USA:
elastomeric bearings
•
Turbogaz, Ukraina:
magnetic bearings
•
SCA, BillerudKorsnäs, Vattenfall, Sweden:
condition monitoring solutions
•
Geely Automobile, China:
transmission seals
•
Volkswagen, Germany:
energy efficient tapered roller and ball bearings
One of the largest cement producers
in Latin America:
major service contract
•
Examples of new products:
•
© SKF Group
Extended range of infrared thermometers
Slide 2
15 April 2014
Awards received in Q1 2014
Customer awards
•
Technical Cooperation Award, Goldwind
•
Supplier of the Year Award, Varian Medical Systems
•
Volvo Cars Quality Excellence (VQE) Award
•
Excellent Supplier Award, Geely
•
Excellent Quality Supplier Award, Hino Motors
•
Supplier of the Year Award, General Motors
Golden Mousetrap Awards
Best Product of the Year
for Electronics & Test,
Editors of Design News
© SKF Group
Slide 3
15 April 2014
SKF Group – Q1 2014
Financial performance
Net sales, SEKm
Operating profit, SEKm
Operating margin, %
Operating margin excl. one-time items, %
Profit before tax, SEKm
Cash flow after investments before financing, SEKm
Cash flow from operations, SEKm
2014
2013
16,734
2,024
12.1
11.4
1,787
15,152
1,480
9.8
11.4
1,237
-259
-892
314
403
Organic sales growth in local currency:
SKF Group:
5.8%
Europe:
Strategic Industries:
Regional Sales and Service:
Automotive:
North America:
Asia:
Latin America:
6.5%
3.0%
8.1%
Key points
Sales volumes up by 6.2% y-o-y
Manufacturing higher compared to last year
© SKF Group
Slide 4
15 April 2014
4%
3%
11%
4%
Organic sales growth in local currency
% change
y-o-y
2012
© SKF Group
Slide 5
15 April 2014
2013
2014
Organic sales growth in local currency
% y-o-y
5.8%
-0.7%
-2.5%
© SKF Group
Slide 6
15 April 2014
Structure in 2012: 0.4%
Structure in 2013: 2.5%
Structure in 2014: 4.7%
Growth development by geography
Organic growth in local currency Q1 2014 vs Q1 2013
Europe
4%
North
America
3%
Asia/Pacific
11%
Latin
America
4%
© SKF Group
Slide 7
15 April 2014
Middle East
& Africa
21%
Components in net sales
2012
Percent y-o-y
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Volume
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
6.2
Structure
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
4.7
Price/mix
1.9
2.0
0.5
0.7
0.7
-0.6
-0.2
-0.2
-0.4
Sales in local
currency
1.0
-0.8
-3.7
-4.2
-6.5
0.4
3.1
11.7
10.5
Currency
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
-2.1
-0.1
Net sales
1.4
2.8
-6.4
-7.8
-10.5
-4.6
0.9
9.6
10.4
© SKF Group
Slide 8
15 April 2014
Operating profit as reported
SEKm
2012
© SKF Group
Slide 9
15 April 2014
2013
2014
Operating profit excluding one-time items
SEKm
2012
© SKF Group
Slide 10
15 April 2014
2013
2014
Operating margin
One-time items
* Excluding one-time items
%
12.0*
11.9*
11.3
11.4*
5.8
© SKF Group
Slide 11
15 April 2014
12.1
Operating margin per business area
%
Regional Sales
and Service
Specialty Business
Strategic Industries
Automotive
2012
2013
Excluding one-time items
© SKF Group
Slide 12
15 April 2014
(eg. restructuring, impairments, capital gains)
2014
Net working capital as % of annual sales
%
2012
© SKF Group
Slide 13
15 April 2014
2013
2014
Return on capital employed
One-time items
* Excluding one-time items
%
17.1*
15.1*
14.6*
16.2
7.5
8.4
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 14
15 April 2014
Cash flow, after investments before financing
SEKm
****
2012
© SKF Group
Excl. acquisitions and divestments: *
**
***
****
Slide 15
15 April 2014
2013
Q3 2012
Q1 2013
Q3 2013
Q4 2013
SEK 1,707 million
SEK -69 million
SEK 871 million
SEK 1,170 million
2014
Net debt
SEKm
AB SKF,
dividend paid (SEKm):
2012 Q2
2,504
2013 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 16
15 April 2014
Debt structure, maturity years
850
500
500
200
100
© SKF Group
Slide 17
100
110
• Available credit facilities:
EUR 500 million 2017
SEK 3,000 million 2016
SEK 3,000 million 2017
15 April 2014
•
No financial covenants nor material
adverse change clause
First quarter 2014
2014
2013
16,734
15,152
2,024
1,480
Operating margin, %
12.1
9.8
Operating margin excl. one-time items %
11.4
11.4
Profit before taxes
1,787
1,237
Net profit
1,275
818
Basic earnings per share, SEK
2.72
1.74
Cash flow, after investments before financing
-259
-892
314
403
SEKm
Net sales
Operating profit
Cash flow from operations
© SKF Group
Slide 18
15 April 2014
April 2014: SKF demand outlook Q2 2014
Demand compared to the second quarter 2013
The demand for SKF’s products and services is expected to be slightly higher for
the Group, North America and Asia. It is expected to be relatively unchanged for
Europe and slightly lower for Latin America. For Strategic Industries and
Automotive it is expected to be slightly higher and for Regional Sales and Service
relatively unchanged.
Demand compared to the first quarter 2014
The demand for SKF’s products and services is expected to be slightly higher for
the Group, for North America and Asia. It is expected to be relatively unchanged
for Latin America. For Strategic Industries and Automotive it is expected to be
slightly higher and for Regional Sales and Service relatively unchanged.
Manufacturing
Manufacturing is expected to be higher year over year and slightly higher
compared to the first quarter.
© SKF Group
Slide 19
15 April 2014
SKF demand outlook Q2 2014, main regions
Share of net sales
2013
Sequential trend
for Q2 2014
Q2 2014
vs Q2 2013
Europe
42%
+/-
Asia Pacific
24%
+
North America
24%
+
Latin America
7%
+
Total
© SKF Group
Slide 20
15 April 2014
SKF demand outlook Q2 2014, main business areas
Share of net sales
2013
Q2 2014
vs Q2 2013
Strategic
Industries
29%
+
Regional Sales
and Service
39%
+/-
Automotive
27%
+
Total
© SKF Group
Sequential trend
for Q2 2014
Slide 21
+
15 April 2014
SKF sequential volume trend Q2 2014, Industries
Share of net
sales 2013
5%
14%
Cars and light vehicles
11%
Vehicle service market
6%
Aerospace
4%
Railway
2%
Two-wheelers and Electrical
29%
Industrial distribution
13%
Industrial, heavy, special and off-highway
11%
Industrial, general
5%
© SKF Group
Energy
Slide 22
Trucks
15 April 2014
Guidance for the second quarter 2014*
• Tax level: around 30%
• Financial net for the second quarter:
Around SEK -230 million
• Currency impact on operating profit versus 2013
Q2:
SEK -125 million
Full year:
SEK -350 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 23
15 April 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 24
15 April 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
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15 April 2014