Transcript Slide 0
16 October 2007 0
The SKF Group
Nine-month results 2007
Tom Johnstone, President and CEO
Major events during the third quarter 2007
• SKF signed an agreement to acquire the magnetic bearing company S2M. The acquisition is subject to approval by relevant authorities.
• SKF and Meridium, Inc. signed an agreement allowing SKF to license and distribute Meridium’s software and to provide consultation, implementation and training services for asset management using Meridium APM software applications.
• SKF has been selected to be a member of Dow Jones' Sustainability World Indexes (DJSI World) and the pan European sustainability benchmark (DJSI STOXX) for the eighth year in succession. 2 16 October 2007
Third quarter 2007
SEKm Net sales Operating profit Operating margin Profit before taxes Net profit Basic earnings per share, SEK Cash flow after operating investments before financial items Cash flow after operating investments before financial items, excluding acquisitions *
11.9% excluding Ovako
16 October 2007 2007 14,155 1,803 12.7% 1,646 1,174 2.48
1,274 1,237 2006 12,544 1,538 12.3%* 1,422 966 2.06
-143 1,380 3
Nine months 2007
SEKm Net sales Operating profit Operating margin Profit before taxes Net profit Basic earnings per share, SEK Cash flow after operating investments before financial items Cash flow after operating investments before financial items, excluding acquisitions *
11.7% excluding Ovako
16 October 2007 2007 43,489 5,708 13.1% 5,428 3,662 7.76
1,509 2,212 2006 39,206 4,849 12.4%* 4,541 3,175 6.81
597 2,265 4
Operating margin
%
2 1 0 6 5 4 3 14 13 12 11 10 9 8 7
2005 16 October 2007 2006 2007 5
Operating margin
16 October 2007 %
14 12 10 8 6 4 2 0 10.8
10.4* 12.6
11.3* 2005 2006
* excluding income from the jointly controlled company Oy Ovako Ab
13.1
YTD September 2007
6
Operating margin per division
7 % 14 12 10 8 6 4 2 0 Q1 2005 Q2 Q3 Q4 Q1 2006 Q2 Q3 Q4 Q1 2007 Q2 Q3
Service Industrial Automotive
16 October 2007
Sales in local currencies (excl. structural changes)
8 % change y-o-y
2005 16 October 2007 2006 2007
Growth development / local currency
9
Acquisitions / Divestments Organic growth
% Y-o-Y 14 12 10 8 6 4 2 0 7.3* 7.5* 14.2
2005 2006
* Excluding effect from Ovako: 2005 2006 16 October 2007 10.4% 10.1%
YTD September 2007
Net sales development per quarter
10 Percent y-o-y Volume Structure Price / Mix Sales in local currency Currency Net sales 2005 Q1 Q2 Q3 Q4 2006 Q1 Q2 Q3 Q4 2007 Q1 Q2
Q3
8.3
2.3
3.6
14.2
7.6
5.1
1.3
6.0
2.5
0.2
-2.9
-3.7
-4.9
-0.5
3.6
11.4
2.1
4.3
2.6
0.2
2.9
4.0
2.0
4.0
3.3
1.1
8.8
4.6
7.9
4.0
6.9
4.6
9.0
3.7
2.0
2.3
1.8
2.7
2.0
6.4
15.7
13.7
14.2
14.7
-3.2
0.2
3.2
9.4
8.0
1.0
-2.1
-5.8
-5.6
-2.3
-1.9
11.0
11.6
7.5
9.6
12.0
5.0
4.3
9.9
8.1
11.9
12.8
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Cash flow,
after operating investments before financial items
11 SEKm
1 700 1 500 1 300 1 100 900 700 500 300 100 -100 -300 -500 -700
2005 16 October 2007 2006 2007 Cash out from acquisitions (SEKm) : 2005 2006 YTD September 2007 419 2,129 703 Cash in from Ovako (SEKm) : 2006 Q4 1,217 2007 Q2 46
Net cash
(Short-term financial assets - loans) SEKm 3 000 2 000 1 000 0 -1 000 -2 000 -3 000 -4 000 -5 000 -6 000 2005 16 October 2007 2006 2007 12 AB SKF, dividend paid (SEKm) : 2005 Q2 2006 Q2 2007 Q2 1,366 1,821 2,049 2005 Q2, redemption 2007 Q2, redemption 2,846 4,554
Inventories as % of annual sales
%
23 22 21 20 19 18
2005 2006 Target, end 2007: 18% 2007 13 16 October 2007
Return on capital employed
%
27 26 25 24 23 22 21 20 19 2005 2006
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non interest bearing liabilities.
16 October 2007
YTD September 2007
14
September 2007: Outlook for the fourth quarter 2007
(compared to the third quarter 2007)
15 The market demand for SKF's products and services in the fourth quarter of 2007 is expected to be higher for the Group. The demand is expected to be higher in Europe, significantly higher in Asia and Latin America and relatively unchanged in North America. The demand is expected to be higher in all divisions.
The manufacturing level for the fourth quarter 2007 will be unchanged compared to the third quarter 2007, while higher in absolute terms due to normal seasonality, and significantly higher than the fourth quarter 2006. 16 October 2007
Volume development
Europe Net sales 2006 54% North America 20% Asia Pacific Latin America Total 18% 5% Daily volume trend for: Q3 2007 Q4 2007 Outlook Q4 2007 vs 2006 ++ = +++ +++ ++ 16 16 October 2007
Financial targets – long term
Operating margin, level Growth in local currencies, per annum Return on capital employed Gearing 12% 6-8% 24% around 50% 17 16 October 2007
Guidance 2007
18 • Tax level: around 32-33% • Financial net Around minus SEK 130 million per quarter • Exchange rates on operating profit versus 2006 Q4: a negative effect of approximately SEK 130 million Full year: a negative effect of approximately SEK 630 million • Additions to property, plant and equipment: slightly above SEK 2 billion Guidance based on current assumptions and exchange rates 16 October 2007
New automotive business
Ford Motor Company
Front and rear wheel bearings for the new Ford Focus
Shanghai Automotive Industry Corporation
Front and rear wheel bearings for a new car platform
Fiat Group Automobiles
Rear wheel bearing for a new Alfa Romeo platform
Gigant Group
Integrated truck hub unit 16 October 2007 19
New railway business
Bombardier Transportation
a special tapered roller bearing design to the Ile de France suburban trains 16 October 2007 20
Photo: Bombardier Transportation
Cautionary statement
Cautionary statement
This report 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 Board of Directors' Report; "Most important factors influencing the financial result", "Financial risks" and "Sensitivity analysis", and in this quarterly report under "Risks and uncertainties in the business."
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