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SKF Nine-month results 2014 Tom Johnstone, President and CEO 15 October 2014
© SKF Group 15 October 2014 Alrik Danielson, new President and CEO from 1 January 2015 B.Sc in Business Administration and International Economics from the University of Gothenburg Previous positions within SKF: Financial controller in Gothenburg President, Industrial Division in Spain and Portugal President, SKF do Brazil President, Industrial Division and several other managerial positions Höganäs AB, President and CEO Slide 2
© SKF Group 15 October 2014 Examples of new business Doosan Heavy Industries and Construction, SKF Supergrip Bolts South KoreaSKF Nautilus bearing A leading Chinese locomotive manufacturerTraction motor bearings HSD SpA, ItalySuper precision bearings and engineering support A major Australian customerMaintenance contract in the agriculture industry Medical device manufacturer in California, Slewing ring bearings USA Slide 3
© SKF Group 15 October 2014 Examples of new business Tesla MotorsBearing for the gearbox, e-motor and wheels Volvo CarsWheel hub bearing units ScaniaWheel bearing units and high pressure valve stem seals Slide 4
© SKF Group 15 October 2014 Customer awards Slide 5 Supplier Performance Award – Snecma, Safran Group, France Best Supplier Award – Weg Electric Motor Manufacturing Co., Ltd, China Best Supplier Award – Shanghai Hanbell Precise Machinery Co. Ltd., China Excellent Engineering Development Award – Shanghai Automobile Gear Works (SAGW), China Fiat Qualitas Award – Fiat, Argentina Certificate of Appreciation for quality and delivery performance – Honda, India
© SKF Group 15 October 2014 Highlights New Kaydon factory at the SKF Campus in Cajamar, Brazil. New Global Technical Center in the greater Chicago area, US. For the 15th year in a row, one of the world’s most sustainable companies by the Dow Jones Sustainability World Index (DJSI). For the 14th consecutive year, a constituent of the FTSE4Good Index Series. Slide 6
© SKF Group 15 October 2014 Examples of new products and solutions SKF Machine Tool Observer MTx SKF Static Motor Analyzer Baker AWA-IV Compact tapered roller bearing unit for heavy freight Tapered roller bearing unit for passenger railway applications SKF Multilog On-line System IMx-M SKF Multilog Online System IMx-B SKF Mudblock cassette seals, MUD 11 PuraBreeze 100
© SKF Group 15 October 2014 SKF Group – Q Slide 8 Financial performance (SEKm) Net sales17,78715,623 Operating profit2,0731,923 Operating margin, % Operating margin excl. one-time items, % Profit before tax1,8271,717 Basic earnings per share, SEK Cash flow after investments before financing excl. EU payment1,4761,135 Cash flow after investments before financing1,4761,135 Organic sales growth in local currency: SKF Group3.3%Europe0% Strategic Industries9.1%North America3% Regional Sales and Service0.8%Asia8% Automotive-0.5%Latin America0% Middle East and Africa7% Key points Sales volumes up by 1.9% y-o-y. Manufacturing was relatively unchanged compared to last year.
© SKF Group 15 October 2014 SKF Group – Nine month 2014 Slide 9 Financial performance (SEKm) Net sales52,47647,167 Operating profit6,1935,240 Operating margin, % Operating margin excl. one-time items, % Profit before tax5,3754,581 Basic earnings per share, SEK Cash flow after investments before financing excl. EU payment2,6401,390 Cash flow after investments before financing-1851,390 Organic sales growth in local currency: SKF Group4.6%Europe2% Strategic Industries8.7%North America3% Regional Sales and Service1.7%Asia11% Automotive2.8%Latin America1% Middle East and Africa14% Key points Sales volumes up by 3.8% y-o-y. Manufacturing was slightly higher compared to last year.
© SKF Group 15 October 2014 Organic sales growth in local currency Slide 10 % change y-o-y
© SKF Group 15 October 2014 Organic sales growth in local currency Slide 11 % y-o-y Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.7% -2.5% -0.7% 4.5%
© SKF Group 15 October 2014 Sales development by geography Organic growth in local currency Q vs Q Slide 12 Europe 0% Asia/Pacific 8% Middle East & Africa 7% Latin America 0% North America 3%
© SKF Group 15 October 2014 Sales development by geography Organic growth in local currency YTD 2014 vs YTD 2013 Slide 13 Europe 2% Asia/Pacific 11% Middle East & Africa 14% Latin America 1% North America 3%
© SKF Group 15 October 2014 Components in net sales Slide Percent y-o-y Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Volume Structure Price/mix Sales in local currency Currency Net sales
© SKF Group 15 October 2014 Operating profit as reported Slide 15 SEKm
© SKF Group 15 October 2014 Operating profit excluding one-time items Slide 16 SEKm
© SKF Group 15 October 2014 Operating margin Slide 17 % * 11.9* One-time items * Excluding one-time items 11.8
© SKF Group 15 October 2014 Slide 18 Regional Sales and Service Specialty Business Automotive % Operating margin per business area as reported Strategic Industries
© SKF Group 15 October 2014 Slide 19 Regional Sales and Service Specialty Business Automotive % Operating margin per business area excl. one-time items Strategic Industries
© SKF Group 15 October 2014 SKF’s programme to improve efficiency and reduce cost Slide 20 Q4/12Q1/13Q2/13Q3/13Q4/132013Q1/14Q2/14Q3/14Total Cost taken People affected ,590 Q1/13Q2/13Q3/13Q4/132013Q1/14Q2/14Q3/ Restructuring S&A Purchasing Total Restructuring, SEKm : Realized gross savings from total programme, SEKm : Full year gross saving Giving future gross savings, SEKm : vs 2012 vs 2013 Note: Run rate Q SEK 1,340 million vs 2012.
© SKF Group 15 October 2014 Operating profit bridge, Q Slide , , SEKm Q Q Volumes excl. Specialty Business Specialty Business Savings One-time items Currencies Other* Price/mix * R&D, S&A, IT, inflation etc.
© SKF Group 15 October 2014 Operating profit bridge, nine month 2014 Slide , , SEKm Q1-Q Q1-Q Volumes excl. Specialty Business Specialty Business Savings One-time items Currencies Other* Price/mix * R&D, S&A, IT, inflation etc.
© SKF Group 15 October 2014 Net working capital as % of annual sales Slide 23 % Target: 27%
© SKF Group 15 October 2014 Return on capital employed Slide 24 % * 15.1* One-time items * Excluding one-time items ROCE: Operating profit plus interest income, as a percentage of twelve months rolling average of total assets less the average of non-interest bearing liabilities. 13.9*
© SKF Group 15 October 2014 Cash flow, after investments before financing Slide 25 SEKm Excl. acq. and div.:1)Q3 2012SEK 1,707 million 2)Q1 2013SEK -69 million 3)Q3 2013SEK 871 million 4)Q4 2013SEK 1,170 million Excl. EU payment5) Q2 2014SEK 1,423 million 4) 5) 1) 3)3) 2)
© SKF Group 15 October 2014 Net debt Slide 26 SEKm AB SKF, dividend paid (SEKm) : 2012 Q22, Q22, Q22,530 Cash out from major acquisitions (SEKm) : 2012 Q Q Q47,900 Net debt:Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives. EU payment (SEKm) : 2014 Q22,825
© SKF Group 15 October 2014 Debt structure, maturity years Slide 27 Available credit facilities: EUR 500 million 2019 SEK 3,000 million 2016 EUR 150 million 2017 No financial covenants nor material adverse change clause
© SKF Group 15 October 2014 October 2014: SKF demand outlook Q Slide 28 Demand compared to the fourth quarter 2013 The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be slightly higher for Strategic Industries, relatively unchanged for Regional Sales and Service and slightly lower for Automotive. Demand compared to the third quarter 2014 The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be relatively unchanged for Strategic Industries, slightly higher for Regional Sales and Service and slightly lower for Automotive. Manufacturing Manufacturing is expected to be slightly lower year over year and compared to the third quarter.
© SKF Group 15 October 2014 SKF demand outlook Q4 2014, main regions Share of net sales 2013 Europe42% Asia Pacific24% North America24% Latin America7% Total Q vs Q / Slide 29 Sequential trend for Q4 2014
© SKF Group 15 October 2014 SKF demand outlook Q4 2014, main business areas Share of net sales 2013 Strategic Industries 29% Regional Sales and Service 39% Automotive27% Total Q vs Q /- - Slide 30 Sequential trend for Q4 2014
© SKF Group 15 October 2014 SKF sequential volume trend Q4 2014, Industries Slide 31 29%Industrial distribution 6%Aerospace 13%Industrial, heavy, special and off-highway 11%Industrial, general 5%Energy 4%Railway 2%Two-wheelers and Electrical 14%Cars and light vehicles 11%Vehicle service market 5%Trucks Share of net sales 2013
© SKF Group 15 October 2014 Guidance for the fourth quarter 2014* Slide 32 Tax level: < 30% Financial net: around SEK -220 million Currency impact on operating profit vs 2013 Q4: SEK +230 million Full year: SEK +110 million Additions to PPE: around SEK 1.7 billion for 2014 * Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group 15 October 2014 SKF’s priorities Slide 33 Sustainable profitable growth Expand the platform concept Exploit the asset life cycle approach Develop new products and grow SKF BeyondZero portfolio Extend and grow second brands Acquisitions Investments & Innovation New and existing facilities Research and development IT systems and mobility Cost reduction Business Excellence Consolidation of manufacturing Optimization and productivity improvements Reduction in purchasing costs Capital efficiency Fixed capital Net working capital
© SKF Group 15 October 2014 Cautionary statement Slide 34 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 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 annual report (available on under the Administration Report; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.
© SKF Group1 June 2014Slide 0 Industrial Market, Strategic Industries.
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