- SKF.com

Transcript - SKF.com

SKF First-quarter results 2014

Tom Johnstone, President and CEO

15 April 2014

Highlights Q1 2014

•

Examples of new business

Hindustan Aeronautics Ltd, India: • Bell Helicopter Textron Inc.,USA: • Turbogaz, Ukraina: • SCA, BillerudKorsnäs, Vattenfall, Sweden: • Geely Automobile, China: • Volkswagen, Germany: • One of the largest cement producers in Latin America: customized bearings for helicopter transmission and main rotor elastomeric bearings magnetic bearings condition monitoring solutions transmission seals energy efficient tapered roller and ball bearings major service contract •

Examples of new products:

Extended range of infrared thermometers © SKF Group 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

Organic sales growth in local currency:

SKF Group: 5.8% Strategic Industries: Regional Sales and Service: Automotive: 6.5% 3.0% 8.1%

Key points

Sales volumes up by 6.2% y-o-y Manufacturing higher compared to last year

2014

16,734 2,024 12.1

11.4

1,787 -259 314 Europe: North America: Asia: Latin America:

2013

15,152 1,480 9.8

11.4

1,237 -892 403 4% 3% 11% 4% © SKF Group Slide 4 15 April 2014

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% Latin America 4% Middle East & Africa 21% © SKF Group Slide 7 15 April 2014 Asia/Pacific 11%

Components in net sales

Percent y-o-y Volume Structure Price/mix Sales in local currency Currency Net sales 2012

-0.8

-0.1

1.9

-2.8

0.0

2.0

1.0

0.4

1.4

-0.8

3.6

2.8

-5.0

0.8

0.5

-3.7

-2.7

-6.4

-5.9

1.0

0.7

2013

-8.7

1.5

0.7

-1.6

2.6

-0.6

-4.2

-6.5

-3.6

-4.0

-7.8

-10.5

0.4

-5.0

-4.6

2.2

1.1

-0.2

3.1

11.7

-2.2

0.9

-2.1

9.6

2014

7.1

4.8

-0.2

6.2

4.7

-0.4

10.5

-0.1

10.4

Operating profit as reported

SEKm © SKF Group Slide 9 15 April 2014 2012 2013 2014

Operating profit excluding one-time items

SEKm © SKF Group Slide 10 15 April 2014 2012 2013 2014

Operating margin

% 12.0* 11.3

11.9* One-time items * Excluding one-time items 12.1

11.4* 5.8

Operating margin per business area

% 2012 © SKF Group Slide 12 15 April 2014 2013 Excluding one-time items (eg. restructuring, impairments, capital gains) 2014 Regional Sales and Service Specialty Business Strategic Industries Automotive

Net working capital as % of annual sales

% 2012 © SKF Group Slide 13 15 April 2014 2013 2014

Return on capital employed

% 17.1* 16.2

15.1* One-time items * Excluding one-time items 14.6* 8.4

7.5

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.

Cash flow, after investments before financing

SEKm **** 2012 2013 © SKF Group Excl. acquisitions and divestments: * Q3 2012 SEK 1,707 million ** Q1 2013 SEK -69 million *** Q3 2013 SEK 871 million **** Q4 2013 SEK 1,170 million Slide 15 15 April 2014 2014

Net debt

SEKm 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

Debt structure, maturity years

850 500 500 200 100 100 110 © SKF Group Slide 17 15 April 2014 • Available credit facilities: EUR 500 million 2017 SEK 3,000 million 2016 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

First quarter 2014

SEKm Net sales Operating profit Operating margin, % Operating margin excl. one-time items % Profit before taxes Net profit Basic earnings per share, SEK Cash flow, after investments before financing Cash flow from operations

2014

16,734 2,024 12.1

11.4

1,787 1,275 2.72

-259 314

2013

15,152 1,480 9.8

11.4

1,237 818 1.74

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 demand outlook Q2 2014, main regions

Share of net sales 2013 Europe 42% Asia Pacific Total 24% North America 24% Latin America 7% Sequential trend for Q2 2014 Q2 2014 vs Q2 2013 +/ + + + © SKF Group Slide 20 15 April 2014

SKF demand outlook Q2 2014, main business areas

Share of net sales 2013 Strategic Industries Regional Sales and Service 29% 39% Automotive 27% Total Sequential trend for Q2 2014 Q2 2014 vs Q2 2013 + +/ + + © SKF Group Slide 21 15 April 2014

SKF sequential volume trend Q2 2014, Industries

Share of net sales 2013 5% Energy 14% 11% Cars and light vehicles Vehicle service market 6% 4% 2% Aerospace Railway Two-wheelers and Electrical 29% 13% 11% 5% Industrial distribution Industrial, heavy, special and off-highway Industrial, general Trucks © SKF Group Slide 22 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’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 • • •

Investments & Innovation

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”.