Transcript Document

The SKF Group
Half-year results, 2006
2006-07-14
3
Major events - acquisitions and divestment
Completed:
• Macrotech Polyseal Inc., a leader in fluid power seals.
• SNFA SAS, a leading French manufacturer of bearings for aerospace and
machine tool applications.
Still subject to customary due diligence and regulatory approvals:
• Economos, a manufacturer of hydraulic and pneumatic seals.
• The lubrication systems business of John Crane Safematic Oy, part of
Smiths Group plc.
• Divestment of SKF's forging business at the Luchow factory in Germany
KG.
to Johann Hay GmbH & Co
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4
Acquisition - Macrotech Polyseal
Included in the second quarter reporting as part of Automotive Division
• Yearly sales: 33 million US dollar
• 397 employees
• 51% acquired in April 2006, full ownership latest in 2009
• Price: approximately 21 million US dollar for 51%
• Renamed to SKF Polyseal Inc.
Hydraulic
seals
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PTFE
technology
Acquisition - SNFA
Will be included in the third quarter reporting
• Sales in 2005: 82 million euro
• 720 employees
• Bearings for the Aerospace industry, high
precision ball
bearings for machine tool and other special applications
• Price: 138.5 million euro (cash and debt free)
6
Acquisition - Economos
• Sales in 2005: 77 million euro
• 899 employees
• Sealing solutions and engineering plastics solutions
Subject to customary due diligence, signing of a definitive share purchase agreement and relevant regulatory approvals.
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7
Acquisition - Safematic lubrication system business
• Sales in 2005: 25 million euro
• 127 employees
• John Crane Safematic Oy's lubrication systems
Smiths Group plc.
• Price: 22.9 million euro
Subject to relevant regulatory approvals and is expected
to be finalized during the third quarter.
2006-07-14
business is part of
8
Second quarter 2006
MSEK
2006
2005
13,373
12,739
Operating profit
1,702
1,388
Operating margin
12.7%
10.9%
Profit before taxes
1,520
1,319
Net profit
1,071
904
Basic earnings per share, SEK
2.30
1.95
Cash flow after investments before financing
561
262
Net sales
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9
Operating margin
%
13
12
11
10
9
8
7
6
5
4
3
2
1
0
2003
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2004
2005
2006
10
Operating margin
excl. income from jointly controlled company OY Ovako Ab
%
13
12
11
10
9
8
7
6
5
4
3
2
1
0
2003
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2004
2005
2006
11
Operating margin per division
%
14
Industrial
12
Service
10
8
6
Automotive
4
2
0
Q1
2004
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Q2
Q3
Q4
Q1
2005
Q2
Q3
Q4
Q1
2006
Q2
12
Sales in local currencies (excl. structural changes)
% change y-o-y
16
14
12
10
8
6
4
2
0
2003
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2004
2005
2006
13
Net sales development per quarter
2005
2004
2006
Percent y-o-y
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Volume
4.8
8.9
9.6
10.2
8.3
7.6
5.1
1.3
6.0
2.5
Structure
0.1
0.0
2.2
2.0
2.3
0.2
-2.9
-3.7
-4.9
-0.5
Price / Mix
1.1
1.8
2.3
4.2
3.6
3.6
2.1
2.6
2.9
2.0
Sales in local
currency
6.0
10.7
14.1
16.4
14.2
11.4
4.3
0.2
4.0
4.0
Currency
-4.6
-2.3
-2.9
-3.8
-3.2
0.2
3.2
9.4
8.0
1.0
Net sales
1.4
8.4
11.2
12.6
11.0
11.6
7.5
9.6
12.0
5.0
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Growth development / local currency
6% annual growth rate (whereof 4% organic)
% Y-o-Y
12
10
8
6
4
2
0
11.8
7.3
5.2
2003
3.8
2004
Acquisitions / Divestments
Organic growth
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(Organic 6.5)
2005
YTD June
2006
14
Growth development / local currency
excluding the effect from the Ovako divestment
% Y-o-Y
12
10
8
6
4
2
0
11.8
7.7
5.2
2003
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10.4
2004
2005
YTD June
2006
15
Cash flow, after investments before
financing
MSEK
1 600
1 400
1 200
1 000
800
600
400
200
0
2003
Cash out from acquisitions:
2005 MSEK 419 (mainly Jaeger in Q2)
2004 MSEK 644 (mainly Vogel in Q3)
2003 MSEK 89
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2004
2005
2006
16
17
Net cash
(Short-term financial assets - loans)
MSEK
AB SKF, dividend paid:
5 500
2003 Q2, MSEK
4 500
911
2004 Q2, MSEK 1,138
3 500
2005 Q2, MSEK 1,366
2 500
2006 Q2, MSEK 1,821
1 500
2004 Q2, Pension:
MSEK 3,100
500
2005 Q2, Redemption,
2,846
-500
-1 500
2003
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2004
2005
2006
MSEK
18
Inventories as % of annual sales
%
23
Target, end 2007 - 18%
22
21
20
19
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2003
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2004
2005
2006
19
Currency management and net currency flows
Net currency flows 2005 excl. Ovako:
Currency management 2006:
• 75% of net currency flows in USD
hedged 3-12 months.
are
6000
2006
CAD
Others
2000
0
profit 2006 vs 2005:
- 2000
MSEK 150
MSEK 120
- 4000
slightly over MSEK 200*
* Full year 2006, estimated positive effect based on current
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Euro
4000
• All other currency flows are not
hedged.
• Positive effect on the operating
Q1
Q2
USD
- 6000
assumptions and exchange rates.
SEK
20
Financial net
YTD June
2006
Q2 2006
Interest income/expense, net
2005
-29
-28
-33
Interest on post-employment
benefits
-235
-59
-115
Other items*, net
190
-95
-44
Financial net
-74
-182
-192
MSEK
* includes e.g. share swaps, capital gains/losses and foreign
exchange gains/losses.
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July 2006: Outlook for the third quarter 2006
The market demand for SKF's products and services in the third quarter of 2006 is
expected to be slightly higher compared to the second quarter 2006. The demand is
expected to be higher in Europe, significantly higher in Asia and to remain on a high
level in North America and Latin America.
The manufacturing level for the third quarter of 2006 will be unchanged compared to
the second quarter 2006, while lower in absolute terms due to normal seasonality.
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Volume development
Net sales
2005
Daily volume trend for:
Q2 2006
Q3 2006
Outlook Q3
2006 vs 2005
Europe
55%
+
North America
20%
=
Asia Pacific
17%
+++
Latin America
5%
+
Total
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+
23
SKF Group targets
• 10% Operating margin level
•
6% Growth per annum
2006
• 20% ROCE
• 18% Inventory / sales
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2007
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Guidance 2006
• Underlying tax level: around 32-33%
• Financial net, annual level: approximately MSEK 300-350
• Currency effect, based on current assumptions and
exchange rates, is
estimated to be slightly negative for
the third and for the fourth quarter of 2006.
For the full
year, the positive effect is estimated to be slightly over
MSEK 200.
• Additions to property, plant and equipment: approximately
depreciations
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in line with
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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 20-F report on file with the SEC (United States Securities and Exchange
Commission) under "Forward-Looking Statements" and "Risk Factors".
2006-07-14