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19 April 2011
The SKF Group
Tom Johnstone, President and CEO
19 April 2011
Key points, Q1 report
• Strong performance
Operating profit:
SEK 2,504 m (1,702)
Operating margin: 15.0% (11.8)
Profit before tax:
SEK 2,318 m (1,504)
Cash flow:
SEK 372 m (32)
• Strong organic
SKF Group:
Europe:
North America:
Asia:
Latin America:
sales growth in local currency:
+21.4%
+22%
Industrial Division: +20.8%
+25%
Service Division:
+22.5%
+22%
Automotive Division: +19.8%
+18%
• Lincoln integration is going according to plan.
Outlook for Q2 for SKF Group
• Demand
Significantly higher compared to Q2 2010
Slightly higher sequentially compared to Q1 2011
• Manufacturing level
Significantly higher year over year
Relatively unchanged compared to Q1 2011
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Highlights Q1 2011
New businesses:
• SKF was awarded a contract, worth around SEK 500 million, with
Goldwind for SKF Nautilus bearings for their new 2.5 MW direct
drive turbine.
• SKF signed a three-year strategic partnership, worth SEK 335
million, with Sandvik Mining and Construction.
• SKF and Konkola Copper Mines Plc in Zambia signed a three-year
contract, worth USD 2 million, covering a Predictive Maintenance
solution.
• SKF signed a strategic partnership agreement with CITIC Pacific
Special Steel Co., Ltd, for cooperation in purchasing, new product
and technology development and human resources development.
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Highlights Q1 2011
• SKF is building a new factory in Jinan, in the
Shandong Province, China. The investment
amounts to around SEK 590 million and the
factory will initially employ about 500 people.
• SKF signed an agreement to remain as the main
partner to the Gothia Cup for an additional three
years.
SKF will also continue to run the "Meet The World"
qualifying tournaments held in around 20 countries
globally.
19 April 2011
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Jinan
Divestments 2011
SKF completed two agreements in line with its strategy to divest
non-core component manufacturing:
•
On 1 February 2011, the forging business OMVP, in
Villar Perosa, Italy to the German based company
Neumayer Tekfor Holding GmbH. OMVP has about 550
employees and net sales of around EUR 100 million,
mainly to SKF.
•
At the beginning of the second quarter the cage
factory in Gothenburg to the Japanese component
manufacturer Nakanishi Metal Works CO., Ltd. The
factory has 130 employees and will continue to supply
SKF.
19 April 2011
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Sales volume
6
% change y-o-y
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
2009
19 April 2011
2010
2011
Organic growth in local currencies
7
% change y-o-y
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
2009
19 April 2011
2010
2011
Growth development by geography
8
Organic growth Q1 2011 vs Q1 2010
Europe
+22%
North America
+25%
Asia/Pacific
+22%
Latin America
+18%
19 April 2011
Middle East
& Africa +4%
Growth in local currency
9
Long-term target: 8% per annum
Total growth
% y-o-y
25
20
15
10
5
0
-5
-10
-15
-20
-25
-19.0%
26.4%
21,4
14,2
1,0
5,0
0,0
-20,0
2009
Organic growth
Acquisitions/Divestments
19 April 2011
14.2%
2010
YTD March
2011
Components in net sales
2009
Percent y-o-y
10
2010
2011
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
-26.9
-30.8
-24.9
-14.1
5.3
16.6
19.0
16.3
20.1
Structure
1.4
1.1
1.2
0.4
0.0
0.0
0.0
0.0
5.0
Price / Mix
7.1
5.6
3.7
0.3
-0.3
-0.5
0.3
0.9
1.3
-18.4
-24.1
-20.0
-13.4
5.0
16.1
19.3
17.2
26.4
Currency
13.6
12.2
6.6
-1.4
-7.7
-5.2
-3.2
-6.2
-10.8
Net sales
-4.8
-11.9
-13.4
-14.8
-2.7
10.9
16.1
11.0
15.6
Volume
Sales in local
currency
19 April 2011
Operating profit
11
SEKm
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
12
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
13
Long-term target level: 15%
%
16
14.2*
14
13.8
12
10
8
6
4
15.0
8.0*
5.7
2
0
2009
2010
Restructuring and one-time items
*
19 April 2011
Excluding restructuring and one-time items
YTD March
2011
Operating margin per division
14
%
18
16
14
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
Service
Industrial
Automotive
Q1
Q2
Q3
Q4
Q1
2010
2009
Excluding one-off items
(eg. restructuring, impairments, capital gains)
19 April 2011
Q2
Q3
Q4
Q1
2011
First quarter 2011
15
2011
2010
16,702
14,446
2,504
1,702
Operating margin, %
15.0
11.8
Operating margin excl. restructuring, %
15.0
12.4
Profit before taxes
2,318
1,504
Net profit
1,620
1,070
Basic earnings per share, SEK
3.44
2.27
Cash flow, after investments before financing
372
32
SEKm
Net sales
Operating profit
19 April 2011
Inventories as % of annual sales
16
Long-term target level: 18%
%
25
24
23
22
21
20
19
18
2009
19 April 2011
2010
2011
Cash flow, after investments before financing
17
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
Cash out from
acquisitions (SEKm):
2009
2010
2009
19 April 2011
2010
2011
241
6,799
Return on capital employed
18
Long-term target: 27%
%
30
24.0
25
25.6
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.
19 April 2011
YTD March 2011
Net debt
19
(Short-term financial assets minus loans and post-employment benefits)
SEKm
AB SKF,
dividend paid (SEKm):
2009 Q2
1,594
2010 Q2
1,594
0
-2 000
-4 000
Proposal to the Board to
be decided in April:
-6 000
-8 000
2011 Q2
-10 000
-12 000
Cash out from
acquisitions (SEKm):
2009
241
2010
6,799
-14 000
-16 000
-18 000
2009
19 April 2011
2,277
2010
2011
Debt structure
20
Maturity years, EURm
600
530
500
446
400*
400
300
200
100
55
100
100
2015
2016
130
0
2011
2012
2013
• Credit facilities:
EUR 500 m 2014, whereof EUR 400* m utilized
SEK 3,000 m 2017, unutilized
19 April 2011
2014
• No financial covenants nor material
adverse change clause
March 2011:
Outlook for the second quarter 2011
Demand compared to the second quarter last year
The demand for SKF products and services is expected to be significantly higher for
the Group and all geographical regions. It will be significantly higher for Industrial
Division and the Service Division and slightly higher for Automotive Division.
Demand compared to the first quarter 2011
The demand is expected to be slightly higher for the Group, higher in Asia and Latin
America, slightly higher in North America and relatively unchanged in Europe. The
Industrial Division and the Service Division are expected to be slightly higher and the
Automotive Division relatively unchanged.
Manufacturing level
The manufacturing level will be significantly higher year on year and relatively
unchanged compared to the first quarter.
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Volume trends, regions
22
(based on current assumptions and adjusted for seasonality)
Net sales
2010
Daily volume trends for:
Q1 2011
Q2 2011
Outlook Q2
2011 vs 2010
Europe
46%
+++
North America
18%
+++
Asia Pacific
27%
+++
Latin America
6%
+++
Total
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+++
Volume trends, divisions
23
(based on current assumptions and adjusted for seasonality)
Net sales
2010
Daily volume trends
for Q2 2011
Outlook Q2
2011 vs 2010
Industrial
32%
+++
Service
36%
+++
Automotive
30%
+++
Total
19 April 2011
+++
Sequential volume trend main segments Q2 2011
(based on current assumptions)
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 second quarter 2011
• Tax level: around 30%
• Financial net for the second quarter:
Around SEK -175 m
• Exchange rates on operating profit versus 2010
Q2:
SEK -400 m
Full year: SEK -1.2 bn
• Additions to PPE: Around SEK 2.3 bn for 2011
Guidance is approximate and based on current assumptions and exchange rates.
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Key focus areas ahead 2011
26
• 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
19 April 2011
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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19 April 2011