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15 July 2011
SKF Half-year results 2011
Tom Johnstone, President and CEO
15 July 2011
Q2 2011
• Strong performance
Operating profit,SEKm
Operating margin, %
Profit before tax, SEKm
Cash flow, SEKm
2
2011
2010
2,623
15.7
2,446
1,300
2,239
14.3
2,047
1,160
• Strong organic sales growth in local currency:
SKF Group:
+14.2%
Europe:
+14.0%
Industrial Division:
North America: +15.8%
Service Division:
Asia:
+16.9%
Automotive Division:
Latin America:
+2.9%
Outlook for Q3 for SKF Group
• Demand
Significantly higher compared to Q3 2010
Slightly higher sequentially compared to Q2 2011
• Manufacturing level
Significantly higher year over year
Relatively unchanged compared to Q2 2011
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+18.5%
+16.6%
+6.2%
H1 2011
3
• Strong performance
Operating profit, SEKm
Operating margin, %
Profit before tax, SEKm
Cash flow, SEKm
H1 2011
H1 2010
5,127
15.3
4,764
1,672
3,941
13.1
3,551
1,192
• Strong organic sales growth in local currency:
H1 2011
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SKF Group:
+17.6%
Europe:
North America:
Asia:
Latin America:
+17.7%
+20.1%
+19.2%
+10.0%
Industrial Division:
Service Division:
Automotive Division:
+19.7%
+19.3%
+12.6%
Highlights Q2 2011
• SKF and Chalmers University of Technology agreed to establish a
University Technology Centre (UTC) within the area of sustainability
and environment.
• SKF issued a EUR 500 million Eurobond with a maturity of seven years.
• SKF Logistics Services was awarded ”Best service provider” by the
Belgian Shippers’ Council Organization of Traffic Management (OTM).
• SKF awarded and celebrated its 100,000th certificate in the SKF
Distributor College.
• SKF signed a strategic partnership agreement with Maanshan Iron
& Steel (MaSteel) in Nanjing, China.
• SKF Asset Management conference was held in Buenos Aires, Argentina
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New businesses in Q2 2011
SKF:
• entered a long-term contract with Bombardier Aerospace to supply
over 40 different rod assemblies and titanium bearings.
• signed a contract, worth EUR 15 million, with MAN Diesel Turbo for
magnetic bearings and related electronic components to be used in
two sub-sea natural gas sets of compressors.
• entered into a project with Volvo Car Corporation and Volvo Group
aimed at evaluating industrialization of flywheel systems.
• gained new business in Columbia for the remanufacturing of large
size bearings.
• expanded the range of the SKF Hub Knuckle Module. The Ferrari 458
Italia sports car is equipped with this new single nut hub bearing unit.
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Example of new products
SKF DryLube bearings
New series of virtually maintenance free bearings with an extended
service life in extreme temperatures. The main areas for SKF DryLube
is within the metal industry and the food & beverage industry.
SKF Low Weight Hub Bearing Unit
A new wheel-end solution that contributes to a significant weight
reduction and thereby reduces fuel consumption and CO2 emissions.
This hub bearing unit is mainly for larger cars and light trucks
SKF Double Clutch Bearing Set
Provides higher efficiency and reduces fuel consumption and CO2 emissions
for double clutch transmissions compared to standard transmissions.
This bearing set is mainly for cars.
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Sales volume
7
% change y-o-y
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
2009
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2010
2011
Organic growth in local currencies
8
% change y-o-y
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
2009
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2010
2011
Growth development by geography
9
Organic growth Q2 2011 vs Q2 2010
Europe
+14%
North America
+16%
Asia/Pacific
+17%
Latin America
+3%
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Middle East
& Africa
+12%
Growth development by geography
10
Organic growth H1 2011 vs H1 2010
Europe
+18%
North America
+20%
Asia/Pacific
+19%
Latin America
+10%
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Middle East
& Africa +8%
Growth in local currency
11
Long-term target: 8% per annum
Total growth
-19.0%
% y-o-y
20
14.2%
22.3%
17.6%
14.2%
15
10
4.7%
5
1.0%
0
0.0%
-5
-10
-15
-20
-25
-20.0%
2009
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Organic growth
Acquisitions/Divestments
2010
YTD June 2011
Components in net sales
2009
Percent y-o-y
12
2010
2011
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
-26.9
-30.8
-24.9
-14.1
5.3
16.6
19.0
16.3
20.1
12.6
Structure
1.4
1.1
1.2
0.4
0.0
0.0
0.0
0.0
5.0
4.4
Price / Mix
7.1
5.6
3.7
0.3
-0.3
-0.5
0.3
0.9
1.3
1.6
-18.4
-24.1
-20.0
-13.4
5.0
16.1
19.3
17.2
26.4
18.6
Currency
13.6
12.2
6.6
-1.4
-7.7
-5.2
-3.2
-6.2
-10.8
-12.2
Net sales
-4.8
-11.9
-13.4
-14.8
-2.7
10.9
16.1
11.0
15.6
6.4
Volume
Sales in local
currency
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Operating profit
13
SEKm
2 800
2 600
2 400
2 200
2 000
1 800
1 600
1 400
1 200
1 000
800
600
400
200
0
2009
2010
Restructuring and one-time items
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2011
Operating margin
14
Long-term target level: 15%
%
16
14
12
10
8
6
4
2
0
2009
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2010
Restructuring and one-time items
2011
Operating margin
15
Long-term target level: 15%
%
16
14.2*
14
13.8
12
10
15.3
8.0*
8
6
4
5.7
2
0
2009
2010
Restructuring and one-time items
*
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Excluding restructuring and one-time items
YTD June 2011
Operating margin per division
16
%
18
16
14
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
Service
Industrial
Automotive
Q1
Q2
Q3
Q4
Q1
Q2
2010
2009
Excluding one-off items
(eg. restructuring, impairments, capital gains)
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Q3
Q4
Q1
Q2
2011
Second quarter 2011
17
2011
2010
16,712
15,709
2,623
2,239
15.7
14.3
Profit before taxes
2,446
2,047
Net profit
1,743
1,451
3.76
3.09
1,300
1,160
SEKm
Net sales
Operating profit
Operating margin, %
Basic earnings per share, SEK
Cash flow, after investments before financing
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Half year 2011
18
2011
2010
33,414
30,155
5,127
3,941
15.3
13.1
Profit before taxes
4,764
3,551
Net profit
3,363
2,521
7.20
5.36
1,672
1,192
SEKm
Net sales
Operating profit
Operating margin, %
Basic earnings per share, SEK
Cash flow, after investments before financing
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Inventories as % of annual sales
19
Long-term target level: 18%
%
25
24
23
22
21
20
19
18
2009
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2010
2011
Cash flow, after investments before financing
20
SEKm
2 500
2 000
1 500
1 000
500
0
-500
-1 000
-1 500
-2 000
-2 500
-3 000
-3 500
-4 000
-4 500
-5 000
-5 500
-6 000
2009
2010
2011
2009
2010
* SEK 798 million, excluding the acquisition
of Lincoln Industrial.
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Cash out from
acquisitions (SEKm):
*
2011
241
6,799
6
Return on capital employed
21
Long-term target: 27%
%
30
24.0
25
25.9
20
15
10
9.1
5
0
2009
2010
ROCE: Operating profit plus interest income, as a percentage of
twelve months average of total assets less the average of noninterest bearing liabilities.
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YTD June 2011
Net debt
22
(Short-term financial assets minus loans and post-employment benefits)
SEKm
0
AB SKF,
dividend paid (SEKm):
2009 Q2
1,594
2010 Q2
1,594
2011 Q2
2,277
-2 000
-4 000
-6 000
-8 000
-10 000
Cash out from
acquisitions (SEKm):
2009
241
2010
6,799
2011
6
-12 000
-14 000
-16 000
-18 000
2009
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2010
2011
Debt structure
23
Maturity years, EURm
600
500
500
446
400
300
200
130
100
0
0
0
2011
2012
100
0
2013
• Credit facilities:
EUR 500 m 2014
SEK 3,000 m 2017
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100
2014
2015
2016
2017
2018
• No financial covenants nor material
adverse change clause
July 2011: Outlook for the third quarter 2011
Demand compared to the third quarter last year
The demand for SKF’s products and services is expected to be significantly higher for the
Group as well as for Asia and Latin America. For Europe and North America it is expected
to be higher.
It will be significantly higher for the Industrial Division and for the Service Division and
higher for the Automotive Division.
Demand compared to the second quarter 2011 and adjusted for normal seasonality
The demand for SKF’s products and services is expected to be slightly higher for the
Group as well as for North America. It is expected to be relatively unchanged for Europe,
higher in Asia and significantly higher in Latin America. For the Industrial Division and the
Service Division it is expected to be slightly higher and for the Automotive Division
relatively unchanged.
Manufacturing level
The manufacturing level will be significantly higher year on year and relatively unchanged
compared to the second quarter, adjusted for normal seasonality.
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Demand outlook, regions
25
(based on current assumptions and adjusted for normal seasonality)
Share of net sales
2010
Sequential trends for:
Q2 2011
Q3 2011
Q3 2011
vs Q3 2010
Europe
46%
++
North America
18%
++
Asia Pacific
27%
+++
Latin America
6%
+++
Total
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Demand outlook, divisions
26
(based on current assumptions and adjusted for normal seasonality)
Share of net sales
2010
Sequential trends for
Q3 2011
Q3 2011
vs Q3 2010
Industrial
32%
+++
Service
36%
+++
Automotive
30%
++
Total
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Sequential volume trend main segments Q3 2011
(based on current assumptions and adjusted for normal seasonality)
Share of net
sales 2010
14% Cars
12% Vehicle Service Market
5% Energy
25% Industrial distribution
18% Industrial OEM, General+Special
10% Industrial OEM, Heavy + Off-highway
5% Aerospace
4% Railway
4% Trucks
3% Electrical and two-wheeler
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Guidance for the third quarter 2011
• Tax level: around 30%
• Financial net for the third quarter:
Around SEK -175 m
• Exchange rates on operating profit versus 2010
Q3:
SEK -400 m
Full year: SEK -1.3 bn
• Additions to PPE: Around SEK 2.0 bn for 2011
Guidance is approximate and based on current assumptions and exchange rates.
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Key focus areas ahead 2011
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• Profit and cash flow
- manage currency and material headwinds
• Manufacturing and suppliers to support growth
• Growing segments and geographies
• Initiatives and actions to support long term targets
• Integration of Lincoln Industrial
• Business Excellence and competence development
One SKF and SKF Care as guiding lights
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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 forwardlooking 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”.
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