SKF Year-end results 2014
Alrik Danielson, President and CEO
28 January 2015
Examples of new business in Q4 2014
• GE Aviation and Safran Group,
(Snecma & Hispano-Suiza)
Mainshaft and gearbox
bearings
• Chongqing Gearbox Co., Ltd, China
• Andritz Hydro, Germany
Bearing sets
• Mazda, Mexico
Low-friction wheel bearing
units
• Daimler, Germany
• Jiangsu Jintongling Fluid Machinery Co., Ltd,
Wheel hub bearing units
China
© SKF Group
Slide 2
28 January 2015
Special bearing and sealing
solution
High-speed permanent
magnetic motor unit solutions
Examples of new business in Q1 – Q3 2014
•
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
bearings
Energy efficient tapered roller and ball
•
Envision Energy, China
Strategic long-term partnership
© SKF Group
Slide 3
28 January 2015
Examples of new business in Q1 – Q3 2014
•
Dongfang Electric New Energy, China
Main shaft bearings
equipment
•
Aurizon, Australia
Service contract
•
Doosan Heavy Industries and
Construction, South Korea
SKF Supergrip Bolts
and SKF Nautilus bearing
•
HSD SpA, Italy
Super precision bearings
and engineering support
•
Tesla Motors, USA
Bearing for the gearbox, e-motor
and wheels
•
Volvo Cars, Sweden
Wheel hub bearing units
•
Scania, Sweden
Wheel bearing units and high
pressure valve stem seals
© SKF Group
Slide 4
28 January 2015
Customer awards Q4 2014
• Best supplier award – Kirloskar Pneumatic Company Ltd., India
• Best supplier award – Nanjing Gearbox Company, China
• Top runner-up ’Best Vendor’ – Tata Steel, India
• Winner ’Cloud’ category – Software AG Innovation Awards
• Supplier Quality Excellence awards 2014 – General Motors, USA
• Quality Silver Award 2014 – Bajaj Auto Limited, India
© SKF Group
Slide 5
28 January 2015
Examples of new technologies, products and solutions 2014
SKF Gear
Bearing
Unit
SKF Wireless
Machine
Condition
Sensor
Tapered roller bearing unit
for passenger railway
applications
Electric grease
transfer pump
SKF
Tachometer
© SKF Group
Slide 6
28 January 2015
SKF Wireless
MicroVibe
SKF
@ptitude
Connect
PuraBreeze
100
Floating
piston
SKF Mudblock
cassette seals,
MUD 11
Compact tapered roller
bearing unit for heavy
freight
SKF Oil
Injection Sets THKI series
SKF Group – Q4 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
Organic sales growth in local currency:
SKF Group
2.8%
Strategic Industries
7.4%
Regional Sales and Service
2.2%
Automotive
-0.5%
Slide 7
28 January 2015
2013
18 499
1 608
8.7
11.2
1 293
1.84
2 053
16 430
-1 547
-9.4
11.0
-1 760
-4.57
-6 732
Europe
North America
Asia
Latin America
Middle East and Africa
Key points
Sales volumes up by 1.8% y-o-y.
Manufacturing was relatively unchanged compared to last year.
© SKF Group
2014
1%
2%
8%
4%
-5%
SKF Group – 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
3.9%
Strategic Industries
8.4%
Regional Sales and Service
1.8%
Automotive
2.0%
Slide 8
28 January 2015
2013
70 975
7 801
11.0
11.7
6 668
10.10
4 693
1 868
63 597
3 693
5.8
11.9
2 821
2.0
5 342
5 342
Europe
North America
Asia
Latin America
Middle East and Africa
Key points
Sales volumes up by 3.3% y-o-y.
Manufacturing was slightly higher compared to last year.
© SKF Group
2014
1%
3%
10%
1%
9%
Organic sales growth in local currency
% change
y-o-y
8
6
4
2
0
-2
-4
-6
-8
-10
2012
© SKF Group
Slide 9
28 January 2015
2013
2014
Organic sales growth in local currency
% y-o-y
6
3.9%
4
2
0
-0.7%
-2
-2.5%
-4
2012
2013
Structure in 2012: 0.4%
Structure in 2013: 2.5%
Structure in 2014: 3.7%
© SKF Group
Slide 10
28 January 2015
2014
Sales development by geography
Organic growth in local currency Q4 2014 vs Q4 2013
Europe
1%
North
America
2%
Asia/Pacific
8%
Latin
America
4%
© SKF Group
Slide 11
28 January 2015
Middle East
& Africa
-5%
Sales development by geography
Organic growth in local currency 2014 vs 2013
Europe
1%
North
America
3%
Asia/Pacific
10%
Latin
America
1%
© SKF Group
Slide 12
28 January 2015
Middle East
& Africa
9%
Components in net sales
2012
Percent y-o-y
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1 Q2
Q3
Q4
Volume
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
6.2 3.6
1.9
1.8
Structure
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
4.7 3.8
5.4
0.9
Price/mix
1.9
2.0
0.5
0.7
0.7
-0.6
-0.2
-0.2
-0.4 1.0
1.3
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
8.6
3.7
Currency
0.4
3.6
-2.7
-3.6
-4.0
-5.0
-2.2
-2.1
-0.1 1.1
5.3
8.9
Net sales
1.4
2.8
-6.4
-7.8
-10.5
-4.6
0.9
9.6
© SKF Group
Slide 13
28 January 2015
10.4 9.5 13.9 12.6
Operating profit as reported
SEKm
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
2012
© SKF Group
Slide 14
28 January 2015
2013
2014
Operating profit excluding one-time items
SEKm
2500
2000
1500
1000
500
0
2012
© SKF Group
Slide 15
28 January 2015
2013
2014
Operating margin
One-time items
* Excluding one-time items
%
16
14
12.0*
11.9*
11.7*
12
11.3
10
11.0
8
6
5.8
4
2
0
2012
© SKF Group
Slide 16
28 January 2015
2013
2014
Operating margin per business area as reported
%
18
15
Regional Sales
and Service
Specialty Business
Strategic Industries
12
9
6
3
Automotive
0
-3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012
© SKF Group
Slide 17
28 January 2015
2013
2014
Operating margin per business area excl. one-time items
%
18
15
Regional Sales
and Service
12
Specialty Business
Strategic Industries
9
6
3
Automotive
0
-3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012
© SKF Group
Slide 18
28 January 2015
2013
2014
Operating profit bridge, Q4 2014 excl. One-time items
SEKm
3000
+300
2500
2000
+1 803
1500
-1 547
+75
+165
+23
-398
+110
+2 078
1000
500
0
© SKF Group
Q4 2013
Slide 19
28 January 2015
Volumes Price/mix Specialty
excl.
excl.
Business
Specialty Specialty
Business Business
Savings
One-time items
2013: - 3 350
2014: -470
Currencies
Other*
Q4 2014
* R&D, S&A, IT, inflation etc.
Operating profit bridge, 2014 excl. One-time items
SEKm
10000
9000
+505
8000
+390
+375
+500
+180
-1 227
+8 291
+7 568
7000
6000
5000
4000
3000
2000
1000
0
© SKF Group
2013
Slide 20
28 January 2015
Volume
excl.
Specialty
Business
Price/mix
excl.
Specialty
Business
Specialty
Business
Savings
Currencies
Other*
2014
* R&D, S&A, IT, inflation etc.
One-time items
2013: - 3 875
2014: -490
Net working capital as % of annual sales
Target: 27%
%
35
34
33
32
31
30
29
28
27
26
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012
© SKF Group
Slide 21
28 January 2015
2013
2014
Return on capital employed
One-time items
* Excluding one-time items
%
20
17.1*
15.1*
15
16.2
14.8*
13.9
10
7.5
5
0
2012
2013
31 December 2014
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
28 January 2015
Cash flow, after investments before financing
SEKm
2,000
1)
5)
4)
1,000
3)
0
2)
-1,000
-2,000
-3,000
-4,000
-5,000
-6,000
-7,000
2012
2013
Excl. acq. and div.:
© SKF Group
Slide 23
28 January 2015
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
0
AB SKF,
dividend paid (SEKm):
2012 Q2
2 504
2013 Q2
2 530
2014 Q2
2 530
-5,000
-10,000
-15,000
Cash out from major
acquisitions (SEKm):
2012 Q3
829
2013 Q1
823
2013 Q4
7 900
-20,000
-25,000
-30,000
-35,000
2012
2013
2014
Net debt: Loans and net provisions for post-employment benefits
less short-term financial assets excluding derivatives.
© SKF Group
Slide 24
28 January 2015
EU payment (SEKm):
2014 Q2
2 825
Debt structure, maturity years
EURm
850
900
800
700
600
500
500
500
400
300
200
200
100
100
100
110
2015
2016
2017
0
• Available credit facilities:
EUR 500 million 2019
SEK 3 000 million 2016
EUR 150 million 2017
© SKF Group
Slide 25
28 January 2015
2018
•
2019
2020
2021
No financial covenants nor material
adverse change clause
January 2015: SKF demand outlook Q1 2015
Demand compared to the first quarter 2014
The demand for SKF’s products and services are expected to be slightly
higher for the Group, higher for Asia and relatively unchanged for Europe,
North America and Latin America. It is expected to be relatively
unchanged for Automotive Market and Specialty Business and slightly
higher for Industrial Market.
Demand compared to the fourth quarter 2014
The demand for SKF’s products and services are expected to be relatively
unchanged for the Group, Europe and Latin America, and slightly higher
for Asia and North America. It is expected to be relatively unchanged for
Industrial Market and Automotive Market and slightly higher for Specialty
Business.
Manufacturing
Manufacturing is expected to be higher year over year and compared to
the fourth quarter.
© SKF Group
Slide 26
28 January 2015
SKF demand outlook Q1 2015, main regions
Share of net sales
2014
Sequential trend
for Q1 2015
Q1 2015
vs Q1 2014
Europe
41%
+/-
Asia Pacific
25%
++
North America
25%
+/-
Latin America
6%
+/+
Total
© SKF Group
Slide 27
28 January 2015
SKF demand outlook Q1 2015, main business areas
Share of net sales
2014
Q1 2015
vs Q1 2014
Industrial
Market
60%
+
Automotive
Market
26%
+/-
Specialty
Business
13%
+/-
+
Total
© SKF Group
Sequential trend
for Q1 2015
Slide 28
28 January 2015
SKF sequential volume trend Q1 2015, Industries
Share of net
sales 2014
14%
6%
© SKF Group
Cars and light vehicles
Energy
28%
Industrial distribution
14%
Industrial, heavy, special and off-highway
11%
Industrial, general
9%
Vehicle service market
6%
Aerospace
5%
Railway
5%
Trucks
2%
Two-wheelers and Electrical
Slide 29
28 January 2015
Guidance for the first quarter 2015*
• Tax level: < 30%
• Financial net: around SEK -250 million
• Currency impact on operating profit vs 2014
Q1:
SEK +300 million
Full year:
SEK +900 million
• Additions to PPE: around SEK 1.7 billion for 2015
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group
Slide 30
28 January 2015
SKF’s programme to improve efficiency and reduce cost
Restructuring
Q4
12
Q1
13
Q2
13
Q3
13
Q4
13
2013
Q1
14
Q2
14
Q3
14
Q4
14
2014
Total
Cost, SEKm
200
250
190
0
50
490
0
100
20
220
340
1 030
People affected
530
410
320
0
130
860
0
170
30
100
300
1 690
150
100
80
0
40
220
0
100
5
100
205
575
Giving future gross
savings:
Full year gross
savings SEKm
Realized gross savings from total programme, SEKm
Q1
13
Q2
13
Q3
13
Q4
13
2013
Q1
14
Q2
14
Q3
14
Q4
14
2014
Restructuring
15
35
75
75
200
70
50
10
10
140
S&A
50
50
50
50
200
0
0
0
0
0
Purchasing
100
100
100
100
400
60
100
100
100
360
Total
165
185
225
225
800
130
150
110
110
500
© SKF Group
Slide 31
28 January 2015
New productivity improvement programme
• Main activities:
Productivity gain through merging the industrial businesses
- merger between Strategic Industries & Regional Sales and Service
worldwide
- streamlining of supporting country organisations in all main countries
General staff optimization and productivity improvements
- in Group Headquarters and central staff functions
- in the Automotive business
• Reduction of annual cost by SEK 1.2 billion by the end of 2016
Total cost for the programme around SEK 1.4 billion
1 500 people impacted.
Major part of the programme implemented within 2015.
© SKF Group
28 January 2015
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 33
28 January 2015