Transcript Slide 0

0
18 July 2007
The SKF Group
Half-year results 2007
Tom Johnstone, President and CEO
Major events during the second quarter 2007
• Businesses acquired:
- ABBA Linear Tech Co., Ltd., Taiwan
- Baker Instruments Company, USA
- 40% shareholding in SKF (Shanghai) Bearing Company Ltd.
• Announced investment in two new factories in India:
- one for ball bearings
- one for large size bearings.
• Sold the forging business in Lüchow, Germany.
• Distributed to shareholders a total of SEK 6.6 billion in dividend
and redemption.
• Established a partnership for condition based maintenance with
Aker Kvaerner for the oil and gas industry.
• Created a maintenance and service joint venture with BaoSteel.
18 July 2007
2
Second quarter 2007
MSEK
3
2007
2006
14,963
13,373
Operating profit
2,019
1,702
Operating margin
13.5%
12.7%*
Profit before taxes
1,957
1,520
Net profit
1,274
1,071
2.71
2.30
888
563
1,414
708
Net sales
Basic earnings per share, SEK
Cash flow after operating investments before
financial items
Cash flow after operating investments before
financial items, excluding acquisitions
* 11.9% excluding Ovako
18 July 2007
Half year 2007
MSEK
4
2007
2006
29,334
26,662
Operating profit
3,905
3,311
Operating margin
13.3%
12.4%*
Profit before taxes
3,782
3,119
Net profit
2,488
2,209
5.28
4.75
235
740
975
885
Net sales
Basic earnings per share, SEK
Cash flow after operating investments before
financial items
Cash flow after operating investments before
financial items, excluding acquisitions
* 11.7% excluding Ovako
18 July 2007
Operating margin
5
%
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
2005
18 July 2007
2006
2007
6
Operating margin
%
14
12
10
8
12.6
13.3
10.8
10.4*
11.3*
6
4
2
0
2005
* excluding income from the jointly
controlled company Oy Ovako Ab
18 July 2007
2006
YTD June 2007
7
Operating margin per division
%
14
Service
Industrial
12
10
8
Automotive
6
4
2
0
Q1
2005
18 July 2007
Q2
Q3
Q4
Q1
2006
Q2
Q3
Q4
Q1
2007
Q2
Sales in local currencies (excl. structural changes)
% change y-o-y
16
14
12
10
8
6
4
2
0
2005
18 July 2007
2006
2007
8
Growth development / local currency
9
Acquisitions / Divestments
Organic growth
% Y-o-Y
14
12
10
8
6
4
2
0
14.0
7.3*
7.5*
2005
2006
* Excluding effect from Ovako: 2005
2006
18 July 2007
10.4%
10.1%
YTD June 2007
10
Net sales development per quarter
2005
2006
2007
Percent y-o-y
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Volume
8.3
7.6
5.1
1.3
6.0
2.5
3.3
8.8
7.9
6.9
Structure
2.3
0.2
-2.9
-3.7
-4.9
-0.5
1.1
4.6
4.0
4.6
Price / Mix
3.6
3.6
2.1
2.6
2.9
2.0
2.0
2.3
1.8
2.7
Sales in local
currency
14.2
11.4
4.3
0.2
4.0
4.0
6.4
15.7
13.7
14.2
Currency
-3.2
0.2
3.2
9.4
8.0
1.0
-2.1
-5.8
-5.6
-2.3
11.0
11.6
7.5
9.6
12.0
5.0
4.3
9.9
8.1
11.9
Net sales
18 July 2007
Cash flow, after operating investments before financial items
11
MSEK
1 700
1 500
1 300
1 100
900
700
500
300
100
-100
-300
-500
-700
Cash out from
acquisitions (MSEK):
2005
419
2006
2,129
YTD June 2007
740
Cash in from Ovako
(MSEK):
2006 Q4
1,217
2007 Q2
46
2005
18 July 2007
2006
2007
12
Net cash (Short-term financial assets - loans)
MSEK
AB SKF,
dividend paid (MSEK):
3 000
2 000
2005 Q2
2006 Q2
2007 Q2
1 000
0
-1 000
2005 Q2,
redemption
2007 Q2,
redemption
-2 000
-3 000
-4 000
-5 000
-6 000
2005
18 July 2007
2006
2007
1,366
1,821
2,049
2,846
4,554
13
Inventories as % of annual sales
%
23
Target, end 2007: 18%
22
21
20
19
18
2005
18 July 2007
2006
2007
14
Return on capital employed
%
26
25
24
23
22
21
20
2005
2006
ROCE: Operating profit plus interest income, as a
percentage of twelve months average of total assets
less the average of non interest bearing liabilities.
18 July 2007
YTD June 2007
July 2007: Outlook for the third quarter 2007
(compared to the second quarter 2007)
The market demand for SKF's products and services in the
third quarter of 2007 is expected to be higher for the Group.
The demand is expected to be higher in Europe and Latin
America, significantly higher in Asia and relatively unchanged
in North America. The demand is expected to be higher in the
Industrial and Service Division and slightly higher in the
Automotive Division.
The manufacturing level for the third quarter 2007 will be
unchanged compared to the second quarter 2007, while lower
in absolute terms due to normal seasonality, and significantly
higher than the third quarter 2006.
18 July 2007
15
16
Volume development
Net sales
2006
Daily volume trend for:
Q2 2007
Q3 2007
Outlook Q3
2007 vs 2006
Europe
54%
++
North America
20%
=
Asia Pacific
18%
+++
Latin America
5%
++
Total
18 July 2007
++
17
Financial targets – long term
Operating margin, level
12%
Growth in local currencies, per annum
Return on capital employed
Gearing
Inventories, by end 2007
18 July 2007
6-8%
24%
around 50%
18%
Guidance 2007
18
• Tax level: around 32-33%
• Financial net
Around minus SEK 125 million per quarter
• Exchange rates on operating profit versus 2006
Q3: a negative effect of approximately SEK 100 million
Full year: a negative effect of approximately SEK 600 million
• Additions to property, plant and equipment:
slightly above SEK 2 billion
Guidance based on current assumptions and exchange rates
18 July 2007
Acquisition – ABBA Linear Tech Co., Ltd.
• Annual turnover: SEK 250 million
• 400 employees
• A leading Asian manufacturer
of profile rail guides.
• Price: SEK 400 million for 90%
shareholding
18 July 2007
19
Acquisition – Baker Instruments Company
• Yearly sales: USD 11 million
• 62 employees
• A leading manufacturer of test
and diagnostic instruments for
electric motor assessment.
• Price: USD 14 million
18 July 2007
20
20
Joint venture with Baosteel
SKF has together with one of
Chinas leading steel manufacturer,
Baosteel Iron & Steel Group in
Shanghai, created a joint venture
where SKF holds 60% and the
management responsibility.
The joint venture will be
responsible for maintenance and
repair operations related to
bearings at the Baosteel Group. The
company will employ some 30
people.
18 July 2007
21
21
Value propositions for steel mills
SKF Caster Analyst System –
On-line monitoring of
continuous casters for
process optimization.
• Engineering pre-study & system test
• Installation and data collection
• Reporting and interpretation of results
18 July 2007
SKF ConRo Low/Compact –
Re-lubrication free roll unit
for the lower stages of
continuous casting machines.
22
Partnership with Aker Kvaerner
SKF and Aker Kvaerner have established
a partnership for condition based
maintenance for the offshore and
onshore oil and gas industry.
The agreement includes SKF’s expertise
in rotating equipment, bearing and
lubrication technologies, condition
monitoring, integration and analysis.
18 July 2007
23
23
New businesses in Automotive Division
Solid Oil ball cage
Piaggio
Wheel bearing solutions
Renault
Chery
18 July 2007
24
24
SKF Wheel End Monitor
Hendrickson
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".
18 July 2007
25
26
18 July 2007