Transcript Document
The SKF Group
Year-end result, 2005 Tom Johnstone, President and CEO
Areas in focus 2005 Performance 2005
3 • • Operating margin level Maintain a positive price/mix Recovery of raw material cost increase Continued sales growth Maintain organic growth pace Acquisition/divestment (mainly Ovako) • Strengthen the platform/segment offer • Cash flow after investments before financing and acquisitions 3.4% Done 8.4% -1.1% Ongoing MSEK 2 848 2006-01-26
4
Major events 2005
•
SKF steel business was merged into a jointly owned company Oy Ovako Ab. SKF's share is 26.5%.
• • •
Construction of a number of new factories in Asia was initiated.
Acquisition of Jaeger Industrial Ltd. and Sommers Industriteknik AB.
• • •
Announced the closure of two factories in the USA, for the automotive industry.
•
Rationalization in Europe, mainly in France. SKF included in sustainability indexes: DJSI World and DJSI STOXX - for the sixth year and FTSE4Good Index Series - for the fifth year.
Global OHSAS 18001 certification 4.2 billion SEK was distributed to SKF shareholders via the dividend and a share split/redemption programme.
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New divisional structure in 2006
Restated financial figures will be published on the Group's website during March 2006. 5
Industrial Service Division Division -Sales to the industrial OEM customers and the develop ment and manufacturing of a wide range of bearings, -Sales to the industrial aftermarket, mainly through a network of some 7 000 distributors linear motion and mecha -Knowledge based tronics products, couplings, solutions to optimise related products and lubrication systems.
asset efficiency.
-Logistic services.
Automotive Division -Sales, development and manufacturing of bearings, seals and components to automotive, two-wheelers, household appliances and power tools OEM manu facturers.
-Vehicle Service Market.
Sales - some 31% of the Group's sales*.
Sales - some 33%*.
Sales - some 36%*
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Fourth quarter 2005
MSEK Net sales Operating profit Operating margin Profit before taxes Net profit Earnings per share, SEK Cash flow after investments before financing 2005 12 648 1 268 10.0% 1 275 862 1.85
529 2004 11 536 1 183 10.3% 1 113 845 1.67
543 2006-01-26 6
Year-end result 2005
MSEK Net sales Operating profit Operating margin Profit before taxes Net profit Earnings per share, SEK Cash flow after investments before financing 2005 49 285 5 327 10.8% 5 253 3 607 7.73
2 430 2004 44 826 4 434 9.9% 4 087 2 976 5.90
2 153 2006-01-26 7
Operating margin
%
13 12 11 10 5 4 3 2 1 0 9 8 7 6
2002 2006-01-26 2003 2004 2005 8
9
Operating margin per division
% 14 12 10 8 6 4 2 0 Q1 2003 Q2 Q3 Q4 Q1 2004 Q2
Service Industrial
Q3 Q4 Q1 2005 Q2 Q3
Automotive
Q4
Aero and Steel excl. Ovako Electrical
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10
Sales in local currencies (excl. structural changes)
4 2 0 -2 -4 -6 % change y-o-y 18 16 14 12 10 8 6 2002
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11
Net sales development per quarter
Percent y-o-y 2003 Q1 Q2 Q3 Q4 2004 Q1 Q2 Q3 Q4 2005 Q1 Q2 Q3
Q4
Volume Structure Price / Mix Sales in local currency Currency 6.2
0.7
1.2
8.1
3.2
4.2
0.1
0.2
0.6
1.2
3.9
5.6
3.1
4.8
8.9
9.6
10.2
8.3
7.6
5.1
1.3
0.3
0.1
0.0
2.2
2.0
2.3
0.2
-2.9
-3.7
0.1
1.1
1.8
2.3
4.2
3.6
3.6
2.1
2.6
3.5
6.0
10.7
14.1
16.4
14.2
11.4
4.3
0.2
-9.3
-8.6
-5.5
-7.4
-4.6
-2.3
-2.9
-3.8
-3.2
0.2
3.2
9.4
Net sales -1.2
-4.7
0.1
-3.9
1.4
8.4
11.2
12.6
11.0
11.6
7.5
9.6
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Group sales volume vs Industrial production
14 12 10 8 6 4 2 0 03Q1 03Q2 03Q3 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3 05Q4 Group Sales Volume Global Industrial Production (Source: JP Morgan) 2006-01-26 12
Growth development / local currency
6% annual growth rate (whereof 4% organic) % Y-o-Y
12 10 8 6 4 2 0 3.0 5.2
2002 2003 Acquisitions / Divestments 2006-01-26 Organic growth
11.8
2004
7.3 (Organic 8.4, Net acq/div -1,1)
2005 13
Net sales per geography, 2005 (2004) Asia, 17% (15) Middle East and Africa, 3% (3) Latin America, 5% (5)
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North America, 20% (20) Central and Eastern Europe, 4% (4) Sweden, 4% (5) Western Europe excl. Sweden, 47% (48)
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Cash flow, after investments before financing
MSEK 1 600 1 400 1 200 1 000 800 600 400 200 0 - 200 2002 2003 2004 2005 2006-01-26 15
Net cash
(Short-term financial assets - loans) MSEK 5 500 4 500 3 500 2 500 1 500 500 -500 -1 500 2002 2003 2004 2005 2006-01-26 Dividend paid: 2001 Q2, MSEK 598 2002 Q2, MSEK 683 2003 Q2, MSEK 911 2004 Q2, MSEK 1 138 2005 Q2, MSEK 1 366 2004 Q2, Pension: MSEK 3 100 2005 Q2, Redemption, MSEK 2 846 16
Inventories as % of annual sales
% 23 22 21 20 19 Target, end 2007 - 18% 18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2002 2003 2004 2005 2006-01-26 17
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Currency management and net currency flows
Currency management 2006: • 75% of net currency flows in USD will be hedged 3-12 months, all other currency flows and also translation are not hedged.
• Negative effect for 2005 vs 2004: MSEK 150 • Estimated positive effect for 2006 vs 2005, based on current assumptions and exchange rates: Q1, 2006: MSEK 100 MSEK 400 Net currency flows 2005 excl. Ovako: 6000 USD Euro CAD Others 4000 2000 0 - 2000 - 4000 - 6000 SEK
January 2006: Outlook for the first quarter 2006
19 The market demand for SKF's products and services in the first quarter of 2006, compared to the previous quarter, is expected to remain on a high level in Europe, to be slightly higher in North America, significantly higher in Asia and to remain on a high level in Latin America. This is in addition to normal seasonality. The manufacturing level will be unchanged for the first quarter of 2006, compared to the fourth quarter of 2005, while higher in absolute terms due to normal seasonality.
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Volume trend for the first quarter 2006
Europe North America Asia Pacific Latin America Net sales 2005 October 2005 January 2006 55% 20% 17% 5% Total Note: This is the sequential development 2006-01-26 20
SKF Group targets
• • 10% Operating margin level 6% Growth per annum • 20% ROCE • 18% Inventory / sales
2006 2007
21 2006-01-26
Guidance 2006
• Taxes, annual level: around 32% • Financial net, for the year: approximately MSEK 200 • Currency, based on current assumptions and exchange rates: a positive MSEK 100 for Q1, 2006 and a positive MSEK 400 for the year • Addition to tangible assets: in line with depreciations 22 2006-01-26
SKF capital structure 2006
The AB SKF Board proposes the AGM to decide on: • a 33% increase in the dividend, SEK 4 per share, in total SEK 1.8 billion • a mandate to the Board to repurchase up to 5% of the company's share 23 2006-01-26
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".
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