Transcript Result for the half year

The SKF Group
Half-year result 2003
Tom Johnstone
President and CEO
SKF Group
Key issues Q2 2003
Solid financial performance
- maintained operating margin
- reduced inventories
- positive cash flow
Structure activities continuing
- two acquisitions
- one divestment
SKF Group
Second quarter 2003
MSEK
2003
2002
10 532
11 053
-4.7%
945
1 048
-9.8%
9.0%
9.5%
Profit before taxes
815
925
Net profit
569
636
Earnings per share, SEK
4.99
5.58
Cash flow*
510
829
Net sales
Operating profit
Operating margin
*after investments before financing
-11.9%
-10.6%
SKF Group
Half-year result
MSEK
2003
2002
21 073
21 718
-3.0%
Operating profit
1 889
1 951
-3.2%
Operating margin
9.0%
9.0%
Profit before taxes
1 617
1 686
Net profit
1 131
1 165
Earnings per share, SEK
9.93
10.22
Cash flow*
557
717
Net sales
*after investments before financing
-4.1%
-2.8%
SKF Group
Profit before taxes
MSEK
1 000
900
800
700
600
500
400
300
200
100
0
2001
2002
2003
SKF Group
Earnings per share
SEK
7
6
5
4
3
2
1
0
2001
2002
2003
SKF Group
Net sales
MSEK
12 000
10 000
8 000
6 000
4 000
2 000
0
2001
2002
2003
SKF Group
Sales in local currency
% change y-o-y
10
8
6
4
2
0
-2
-4
-6
2001
2002
2003
SKF Group
Net sales development per quarter
2001
2003
2002
Percent
y-o-y
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Structure
0.3
0.4
0.4
1.0
1.4
1.9
2.0
1.4
0.7
0.1
Volume
1.1
- 2.7
- 3.2
- 3.8
- 7.3
-0.5
3.3
3.9
6.2
3.2
Price / Mix
1.9
1.9
1.6
2.1
1.5
1.4
1.2
1.7
1.2
0.6
Sales in local 3.3
currency
- 0.4
- 1.2
- 0.7
- 4.4
2.8
6.5
7.0
8.1
3.9
Currency
7.7
11.1
8.9
6.7
2.2
-3.7
-8.3 -10.8
-9.3 -8.6
Net sales
11.0
10.7
7.7
6.0
- 2.2
-0.9
-1.8
-1.2 -4.7
-3.8
SKF Group
Operating margin
%
11
10
9
8
7
6
5
4
3
2
1
0
2001
2002
2003
SKF Group
Operating margin per division
%
14
12
10
Service
Industrial
8
6
Electrical
Automotive
4
2
Aero and
Steel
0
Q4
Q1
2001
Q2
Q3
Q4
Q1
2002
Q2
Q3
Q4
Q1
2003
Q2
SKF Group
Accumulated change in the number of employees
Employees
5 000
4 000
3 000
acquisitions
2 000
1 000
0
-1 000
-2 000
-3 000
-4 000
-5 000
capacity adjustment
and restructuring
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2000
2001
2002
2003
SKF Group
Cash flow after investments before financing
MSEK
1 600
1 400
1 200
1 000
800
600
400
200
0
-200
2001
2002
2003
SKF Group
%
Inventories as % of annual sales
25
24
23
22
21
Target:
20 %
20
19
18
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
SKF Group
Additions to tangible assets
Depreciation according to plan
MSEK
2 000
1 500
1 000
500
0
2001
2002
YTD June
2003
SKF Group
Net cash*
MSEK
4000
Dividend paid:
2003 Q2, MSEK 911
2002 Q2, MSEK 683
2001 Q2, MSEK 598
3000
2000
1000
0
-1000
-2000
2001
2002
* Short-term financial assets - Loans
2003
SKF Group
Number of acquisitions Jan 2000 - June 2003
Europe
Industrial
Eastern
Europe
5+1
North
Americ
a
Australia
Latin
America
3+1
+1
2000-2002
Number: 16
Investment:MSEK
1 015
+ =acquisitions made
during 2003
Automotive
1
Electrical
Service
4
Aero
1
1
1
SKF Group
Acquisition strategy
Acquisitions are an integral part of the profitable growth strategy.
A systematic acquisition process has been established.
Management and financial resources are available.
Acquisition criteria:
strategic fit with clear potential synergies and ability to exploit
these in a reasonable timeframe
strong commitment and ownership by acquiring Division
cash flow and EPS accretive in the first full year.
Including goodwill amortization.
positive TVA effect (covering full cost of capital) in two to
three years. Including goodwill amortization.
SKF Group
Target
10 % operating margin level
10 BSEK additional annual net sales
To be reached within the 2005/2006 time period
SKF Group
Focused areas:
Drive operational excellence
Grow new markets and segments
Introduce new products and solutions
Develop our people and competencies
SKF Group
Volume trend
External
sales 2002
Europe
55%
North America
26%
Asia Pacific
13%
Latin America
Total
4%
April 2003
July 2003
SKF Group
Volume trend
External
sales 2002
Industrial
23%
Automotive
32%
Electrical
Service
Aero (excl.forging and steel)
4%
32%
5%
April 2003
July 2003
SKF Group
Outlook July 2003
The market demand for the Group’s products and
services is expected to be somewhat lower during
the third quarter, with Europe slightly weaker, North
America relatively unchanged and continued strong
growth in Asia.
Manufacturing will be reduced during the quarter in
order to continue the reduction of inventory levels.
SKF Group
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".