Transcript Slide 0
29 January 2009 0
The SKF Group
Year-end results 2008
Tom Johnstone, President and CEO
Summary
• • • • • • • • • Record sales and profit full-year 2008.
Weakening markets by the end of the year.
Acquired: Cirval S.A., GLO s.r.I., PEER Bearing company, QPM Aerospace’s metallic rod business.
Announced two new energy efficient roller bearing types.
Signed a new contract in China with the world’s largest trailer axle manufacturer, Guangdong Fuwa Engineering Manufacturing Co. Ltd Announced investments for the first SKF factory in Russia and for expanding the capacity for manufacturing of large size bearings in China, Sweden and Germany.
Distributed SEK 4,554 m to shareholders.
Six Sigma, annualized savings SEK 462 m (up >50% from 2007) Included in Dow Jones Sustainability Indexes for the ninth year in succession.
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Fourth quarter 2008
SEKm Net sales Operating profit Operating margin Profit before taxes Net profit Basic earnings per share, SEK Cash flow after operating investments before financial items Cash flow after operating investments before financial items, excluding acquisitions 29 January 2009 2008 16,307 1,450 8.9% 1,107 819 1.75
-150 18 2007 15,070 1,831 12.1% 1,710 1,105 2.33
617 1,123 3
Full year 2008
SEKm Net sales Operating profit Operating margin Profit before taxes Net profit Basic earnings per share, SEK Cash flow after operating investments before financial items Cash flow after operating investments before financial items, excluding acquisitions 29 January 2009 2008 63,361 7,710 12.2% 6,868 4,741 10.14
65 1,349 2007 58,559 7,539 12.9% 7,138 4,767 10.09
2,126 3,335 4
Growth development by geography
Local currency 2008 vs 2007 Europe 2008 +5% NA 2008 +5% LA 2008 +12% 5 Asia 2008 +15% 29 January 2009
Growth in local currency
Acquisitions/Divestments Organic growth
Long-term target level: 6-8% per annum % Y-o-Y 14 12 10 8 6 4 2 0 7.5* 13.2
2006 2007
29 January 2009 * Excluding effect from Ovako: 2006 10.1% 7.1
2008
6
Sales in local currencies (excl. structural changes)
7 % change y-o-y
2006 29 January 2009 2007 2008
Components in net sales
8 Percent y-o-y Q1 2006 Q2 Q3 Q4 Q1 2007 Q2 Q3 Q4 Q1 2008 Q2 Q3
Q4
Volume 6.0
2.5
3.3
8.8
7.9
6.9
9.0
6.3
4.9
6.2
2.7
-13.0
Structure -4.9
-0.5
Price / Mix 2.9
Sales in local currency Currency 4.0
8.0
2.0
4.0
1.1
2.0
4.6
2.3
4.0
1.8
4.6
2.7
3.7
2.0
1.0
3.2
6.4
15.7 13.7
14.2 14.7 10.5
1.0
3.8
1.3
4.0
9.7
11.5
0.5
6.4
2.4
8.5
9.6
-2.1
1.0
-2.1
-5.8
-5.6
-2.3
-1.9
-2.0
-1.2
-4.1
-0.9
10.3
Net sales 12.0
5.0
4.3
9.9
8.1
11.9 12.8
8.5
8.5
7.4
8.7
8.2
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Operating margin
%
14 12 10 8 6 4 12.6
11.3* 12.9
2
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0 2006 2007
* excluding income from the jointly controlled company Oy Ovako Ab Long-term target level: 12%
12.2
9
2008
Operating margin
%
14 13 12 11 10 9 8 7 6 5 4 3 2 1 0
2006 29 January 2009 2007 Long-term target level: 12% 10 2008
Operating margin per division
11 % 18 13 8
Service Industrial
3 -2 -7 -12 Q1 2006 Q2 Q3 Q4 Q1 2007 Q2 Q3 Q4 Q1 2008 Q2 Q3 Q4 Excluding one-off items (eg. restructuring, impairments, capital gains) 29 January 2009
Automotive
Industrial Division
12
SEKm
Net sales Sales incl. intra-Group sales Operating profit Operating margin
2008
22,748 33,260 3,929 11.8%
2007
19,693 29,157 3,434 11.8%
Net sales growth
organic growth structure currency effects
Q4 23.1%
6.8% 2.3% 14.0%
2008 15.5%
10.2% 3.0% 2.3%
Acquisitions
• QPM Aerospace’s metallic rod business
Major investments
• • • • New factory in Ahmedabad, India New factory in Tver, Russia Increase the manufacturing capacity in Dalian, China Investments in large size bearings in Sweden and Germany • In Q4 2007, SEK 30 m in restructuring activities and other one-time items.
• In Q4 2008, SEK 80 m in restructuring activities and other one-time items.
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Service Division
13
SEKm
Net sales Sales incl. intra-Group sales Operating profit Operating margin
Acquisitions
• Cirval S.A.
2008
21,529 23,670 3,444 14.6%
2007
19,339 21,136 2,860 13.5%
Net sales growth
organic growth structure currency effects
Q4 11.3%
2.0% 0% 9.3%
2008 11.3%
10.9% 0.3% 0.1%
New activities
• • • Established the first SKF Solution Factory in Shanghai.
Launched the SKF Certified Rebuilder programme for electric motors in Europe and South Africa.
Launched the Distributor Value Program to support SKF authorized distributors in documenting the value they bring to customers. 29 January 2009
Automotive Division
14
SEKm
Net sales Sales incl. intra-Group sales Operating profit Operating margin
2008
18,727 23,215 627 2.7%
2007
19,449 23,703 1,135 4.8%
Q4 Net sales growth -16.3%
organic growth structure currency effects -22.9% 0.2% 6.4%
2008 -3.7%
-3.8% -0.5% 0.6%
Acquisitions
• • GLO s.r.l
SKF Automotive Bearings Company Ltd.
Major investments
• • Opened a new factory in China Established new technology centre in China and expanded centre in India. • In Q4 2007, SEK 270 m in restructuring activities and other one-time items.
• In Q4 2008, SEK 250 m in restructuring activities and other one-time items.
29 January 2009
Activities to adapt to lower demand
Announced in Q4 2008:
• Short-time working: 2,400 employees Reduction: 2,500 employees (whereof: 1,300 temporary and 1,200 registered) • Restructuring and impairment costs of SEK 470 m, whereof SEK 340 m in Q4 2008. Full-year benefit SEK 250 m in 2010 15
Implemented in 2008:
• Reduction of temporary workers: • Reduction of registered employees: 200 during Q3 550 during Q4 500 during Q4 .
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Currency effects on the balance sheet
16 The currency effects on working capital and fixed assets were around 10% for the fourth quarter and 12% for the year.
This has had an impact on ratios.
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Inventories as % of annual sales
17 Long-term target level: 18% %
25 24 23 22 21 20 19 18
2006 29 January 2009 2007 2008
x
excl. currency effects
Return on capital employed
%
26 25 24 23 2006 2007
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.
29 January 2009 Long-term target level: 24%
2008
18
Net debt
(Short-term financial assets minus loans and post-employment benefits)
19 SEKm
0 -2,000 -4,000 -6,000 -8,000 -10,000 -12,000 -14,000 -16,000
2006 2007 2008 29 January 2009 AB SKF, dividend paid (SEKm) : 2006 Q2 1,821 2007 Q2 2008 Q2 2,049 2,277 Redemption (SEKm) : 2007 Q2 4,554 2008 Q2 2,277
Cash flow,
after operating investments before financial items
20 SEKm
1,700 1,500 1,300 1,100 900 700 500 300 100 -100 -300 -500 -700
2006 29 January 2009 2007 2008 Cash out from acquisitions (SEKm) : 2006 2007 2008 2,129 1,209 1,284 Cash in from Ovako (SEKm) : 2006 Q4 1,217 2007 Q2 46
SKF capital structure
The AB SKF Board proposes the AGM to decide on: • a dividend of SEK 3.50 per share • a mandate to the Board to repurchase a maximum of 5% of the company's own shares 21 29 January 2009
2009 – external environment
• Global, deep and very fast downturn in demand • Financial markets are not stable yet • Government incentives still to take effect • Consumer and business confidence low • Good demand continues in some areas Uncertain business environment - difficult to forecast 22 29 January 2009
Vehicle production outlook
Light vehicles
Western Europe North America
Heavy vehicles
Western Europe: North America of which Class 8
Q408 Estimated Q109 Forecast
-28% -24% -27% -42% Source: Global Insight 28 January 2009
Q408 Estimated Q109 Forecast
-14% -33% 8% -2% -28% -33% Source: JD Power, December 2008 23 29 January 2009
January 2009: Outlook for the first quarter 2009
24 The demand for SKF products and services is expected to be significantly lower for the Group in total and for all regions. It is also expected to be significantly lower for the Automotive and Service Divisions and lower for the Industrial Division.
The manufacturing level will be significantly lower to reflect both the new demand situation and to reduce inventory.
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Volume trends
(based on current assumptions) Europe Net sales 2008 56% North America 17% Asia Pacific Latin America Total 19% 5% Daily volume trends for: Q4 2008 Q1 2009 Outlook Q1 2009 vs 2008 -- -- - -- -- 25 29 January 2009
Expected demand by main segment – Q1 2009
(based on current assumptions) Net sales 2008 13% Cars 5% Trucks 20% Industrial OEM, General+Special 3% Electrical and two-wheeler 9% VSM 23% Industrial distribution 12% Industrial OEM, Heavy+Off-highway 5% Aerospace 3% Railway 6% Energy 29 January 2009 26
Guidance for the first quarter 2009
• Tax level: 31-32% • Financial net for first quarter: SEK -200 million • Exchange rates on operating profit versus 2008 Q1: SEK 200 million Full year: SEK 1 billion • Additions to PPE: Around SEK 2 billion for 2009 Guidance is approximate and based on current assumptions and exchange rates 29 January 2009 27
Key focus areas ahead - 2009
• Profit and cash flow - maintain positive price/mix - drive operational efficiency and cost reduction - reduce working capital and investments • Adjustment of manufacturing output to new demand levels - restructuring - short-time working • Growing segments and geographies • Strengthening the platform/segment approach • Competence development SKF Care and Six Sigma as guiding lights 28 29 January 2009
SKF Care
Business Care
6 4 2 0 14 12 10 8 2003 2004 2005 2006 2007 Operating margin 2008
BeyondZero TM
SKF Care Employee Care
29 29 January 2009
Environmental Care Community Care
SKF Group Vision
To equip the world with SKF knowledge
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