Transcript Document

The SKF Group
First-quarter result, 2006
Tom Johnstone, President and CEO
2006-04-25
3
Major events 2006
• It was announced that Rautaruukki, SKF and Wärtsilä are exploring
ownership of Ovako.
strategic options for the
• Macrotech Polyseal Inc. was acquired, a leader in fluid power seals.
Yearly sales, approximately SEK 250 million. 397 employees.
• A memorandum of understanding was signed to buy 100% of the shares
of SNFA, a leading french
manufacturer of bearings for aerospace and
machine tool applications. Sales in 2004, 73,1 million
euros.
Approximately 700 employees.
• SKF received an order from Alstom for approximately 1 500 axleboxes
equipped with compact
tapered roller bearing units which incorporate
SKF sensors to monitor the bearing temperature as well as
speed and train positioning.
2006-04-25
4
First quarter 2006
MSEK
2006
2005
13,289
11,871
Operating profit
1,609
1,207
Operating margin
12.1%
10.2%
Profit before taxes
1,599
1,179
Net profit
1,138
816
Basic earnings per share, SEK
2.45
1.73
Cash flow after investments before financing
184
144
Net sales
2006-04-25
5
Operating margin
%
13
12
11
10
9
8
7
6
5
4
3
2
1
0
2003
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2004
2005
2006
6
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
7
Operating margin per division
%
14
Industrial
12
Service
10
8
6
Automotive
4
2
0
Q1
2004
2006-04-25
Q2
Q3
Q4
Q1
2005
Q2
Q3
Q4
Q1
2006
8
Sales in local currencies (excl. structural changes)
% change y-o-y
16
14
12
10
8
6
4
2
0
2003
2006-04-25
2004
2005
2006
9
Net sales development per quarter
2004
2005
2006
Percent y-o-y
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Volume
4.8
8.9
9.6
10.2
8.3
7.6
5.1
1.3
6.0
Structure
0.1
0.0
2.2
2.0
2.3
0.2
-2.9
-3.7
-4.9
Price / Mix
1.1
1.8
2.3
4.2
3.6
3.6
2.1
2.6
2.9
Sales in local
currency
6.0
10.7
14.1
16.4
14.2
11.4
4.3
0.2
4.0
Currency
-4.6
-2.3
-2.9
-3.8
-3.2
0.2
3.2
9.4
8.0
Net sales
1.4
8.4
11.2
12.6
11.0
11.6
7.5
9.6
12.0
2006-04-25
Growth development / local currency
6% annual growth rate (whereof 4% organic)
% Y-o-Y
11.8
12
10
8
7.3
5.2
6
(Organic 8.9,
Net acq/div -4,9)
4.0
4
2
0
2003
2004
Acquisitions / Divestments
Organic growth
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2005
2006 Q1
10
11
Cash flow, after investments before
financing
MSEK
1 600
1 400
1 200
1 000
800
600
400
200
0
2003
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2004
2005
2006
12
Net cash
(Short-term financial assets - loans)
MSEK
Dividend paid:
5 500
2003 Q2, MSEK 911
4 500
2004 Q2, MSEK 1 138
3 500
2005 Q2, MSEK 1 366
Proposal:
2006 Q2, MSEK 1 821
2 500
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
13
Inventories as % of annual sales
%
23
Target, end 2007 - 18%
22
21
20
19
18
Q1
Q2
2003
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Q3
Q4
Q1
Q2
2004
Q3
Q4
Q1
Q2
2005
Q3
Q4
Q1
2006
April 2006: Outlook for the second quarter
2006
The market demand for SKF's products and services in the second quarter of 2006 is
expected to be slightly higher compared to the first quarter 2006. The demand is expected
to be slightly higher in Europe and North America, significantly higher in Asia and to
remain on a high level in Latin America.
The manufacturing level for the second quarter of 2006 will be unchanged compared to the
first quarter 2006.
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15
Volume development
Net sales
2005
Daily volume trend for:
Q1 2006
Q2 2006
Outlook Q2
2006 vs 2005
Europe
55%
=/+
North America
20%
+
Asia Pacific
17%
+++
Latin America
5%
++
Total
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+
16
SKF Group targets
• 10% Operating margin level
•
6% Growth per annum
2006
• 20% ROCE
• 18% Inventory / sales
2006-04-25
2007
17
Guidance 2006
• Underlying tax level: around 32%
• Financial net, annual level: approximately MSEK 200
• Currency, based on current assumptions and exchange
rates: a positive MSEK
150 for Q2, 2006 and a positive
MSEK 450 for the year
• Additions to property, plant and equipment: in line with depreciations
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Acquisition - Macrotech Polyseal Inc.
• Macrotech is a leader in fluid power seals for industrial customers
in the US market
• SKF acquired 51% of the shares in April and will, as part of the
agreement acquire the remaining 49% within three years
• Yearly sales: approximately USD 33 million
• Factories in Salt Lake City, USA
• 397 employees
Piston seals
2006-04-25
Buffer seals for large rod
applications
Rod seals
Piston seals for rotary
manifold
Rod wipers for linear
actuators
19
The new Pendolino train from Alstom
1,500 axleboxes equipped with compact tapered roller
bearing units and
SKF sensors to monitor temperature, speed and train
positioning.
The new Pendolino generation is the fourth generation of
trains based on tilting technology, which are equipped with
SKF bearing solutions.
2006-04-25
20
SKF electromechanical solution
NIMAK, a German spot welding equipment
manufacturer, will be using the SKF
electromechanical solution in their
welding guns.
2006-04-25
21
Spindle service, some recent events
• SKF signed a cooperation agreement covering machine tool spindle services
with the Japanese company Niigata Machine Techno Co Ltd. . This means
that SKF will provide spindle services for Niigata Machine Techno's customers.
• SKF signed a global service agreement with Alteams Oy in Finland for the
reconditioning of machine tool spindles used in their production locations
in Finland, Sweden, China, and Russia.
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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".
2006-04-25