The SKF Group
SKF Investor Relations
July 2013
© SKF Group 16 July 2013Slide 1
SKF -
A truly global company
Established: 1907
Sales 2012: SEK 64,575 million
Employees 2012: 46,775
Production sites: around 140 in 28 countries
SKF presence: in over 130 countries
Distributors/dealers:
15,000 locations
Global certificates:
ISO 14001OHSAS 18001 certification
© SKF Group 16 July 2013Slide 2
Net sales by customer segment* 2012
* Previously
published
shares
have
been
restated
in February
2013
Aerospace
Railway
Off-highway
Trucks
Two-wheelers and Electrical
Industrial, general
Cars and light trucks
Industrial, heavy and
special
Vehicle Service Market
Industrial distribution
Energy
6%
4%
4%
5%
12%9%
6%
10%
29%
2%
6%
4%4%
5%
12%9%
6%
10%
29%
2%
13%
© SKF Group 16 July 2013Slide 3
Net
sales
2012, Geographical
distribution*
Asia/Pacific
Latin America
North America
Middle
East & Africa
Western Europe
Eastern Europe
Sweden
7%
3%
35%
5%
3%
24%23%
* Previously
published
shares
have
been
restated
in February
2013
© SKF Group 16 July 2013Slide 4
7
35
3
8 9
1
8 710
6
0
24
35
23
26
7
12
37
30
39
North America
Latin America
Western
Europe
Eastern Europe
Middle East and Africa
Asia/Pacifi
c
Net salesAverage number of employees Tangible asset
% of group total SKF 2012
(18)
(8)(13)
(26)(13)
(14)
(2002) (1998)
(25)(14)(19)
(10)(12) (9)
Sweden
(4) (4) (3)(5) (12)(15)
(3) (9) (3)
(2) (2) (0)
(47)(46)(53)
(6) (5) (4)(5)(14)(12)
(3) (9) (3)
(3) (2) (0)
(48)(44)(53)
© SKF Group 16 July 2013Slide 5
Operating margin
0
2
4
6
8
10
12
14
16
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%
© SKF Group 16 July 2013Slide 6
Return on capital employed
0
5
10
15
20
25
30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%
© SKF Group 16 July 2013Slide 7
Growth in local currencies
-25
-20
-15
-10
-5
0
5
10
15
20
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%
© SKF Group 16 July 2013Slide 8
Long-term financial targets
27%Return on capital
employed
8%Changes in sales in local currency,
incl. structure
15%Operating
margin, level
-20-15-10
-505
101520
07 08 09 10 11 12H1
13
0
5
10
15
07 08 09 10 11 12H1
13
05
1015202530
07 08 09 10 11 12JU
N13
© SKF Group 16 July 2013Slide 9
SKF’s priorities
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
Capital efficiency• Fixed
cost
reduction• Working capital efficiency
Cost
reduction• Consolidation
of manufacturing• Optimization
and productivity
improvements• Reduction
in purchasing
costs
Investments & Innovation• New and existing
facilities• Research and development
© SKF Group 16 July 2013Slide 10
To equip the worldwith SKF knowledge
SKF Group Vision
© SKF Group 16 July 2013Slide 11
SKF BeyondZero
•
SKF launched
the BeyondZeroTM
portfolio with products
and solutions, which
will
both
improve
energy
efficiency
and reduce
the environmental
impact. •
SKF revised
targets
for its
climate
strategy
and also
partnered
with the WWF in their
Climate
Savers
Programme.
SKF’s climate strategy targets:•
Increase revenue from SKF BeyondZero
portfolio from SEK 2.5 bn
to SEK 10 bn
by 2016
•
Reduce total annual energy use by 5% below the 2006 level by 2016•
Reduce energy use per production output by 5% y-o-y
from 2012 to 2016•
Reduce CO2
emissions per tonne-kilometre by 30% 2016 vs
2011 for transports managed by SKF Logistics Services
•
Major suppliers certified according to ISO 50001 by 2016
© SKF Group 16 July 2013Slide 12
OpenedPlanned
Tianjin
TaiwanShangha
iPune
Istanbul
JohannesburgBrasil
“IXION”
Colombia
Moscow
HoustonMonterreyMexico
Edmonton
Nordic (Gothenburg)
UK
GermanyItaly
France
Perth
Rumania
Cleveland Spain
Poland
23 SKF Solution Factories 2013
© SKF Group 16 July 2013Slide 13
SKF Solution Factory
Segments & Application Knowledge Platforms
& Technology
Competence
CapabilitiesSealing
Solutions Mechanical
Services Lubrication
Solutions
Training
CenterBearing Service Workshop Condition
Monitoring
Services Remote
Monitoring
CenterMaPro/CoMo
Product
Repair A & MC
SKFSolution Factory
© SKF Group 16 July 2013Slide 14
Slab continuous caster –
metal industry
Telescopic actuators for mould adjustment
SKF DryLube Bearings and SNL Housings for roll out table
SKF ConRo Top roll line units
SKF ConRo Low roll line units
SKF sealed self-
aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines
SKF ConRo Compact roll line units
SKF Caster Analyst System for roll lines
© SKF Group 16 July 2013Slide 15
Wheel-loader
–
Construction
Central gearHybrid pinion units
Wheel end•
Integrated smart wheel bearing units with sensors
•
SKF Mudblock
cassette seals
Motor hoodElectromechanical actuators
Chassis lubricationCentralized lubrication systems
© SKF Group 16 July 2013Slide 16
New pitch bearingdesign with improvedcorrosion protection
DRTRB-unit SKF Nautilus
with segmented cagefor minimized friction
New CRB-design withextra-high carrying capacityfor wind-gearboxes.
XL Hybrid bearingswith ceramic ballsfor superior insulation
SKF WindCon
3.0/WebconIntranet supervisedcondition monitoring
Automatic centralizedlubrication kits for reduced maintenance cost
Wind turbine -
Energy
© SKF Group 16 July 2013Slide 17
SKF’s environmentally positive customer solutions
Designed for environment
Designed for environment
A solution that is primarily designed to improve environmental performance by itself
E2 -
30% less energy compared to a standard bearing
SKF’s solutions which realize significant environmental benefits
Applied for environment
Applied for environment
A solution that enables improved environmental performance in a specific application
SKF sensor bearing
Stop-start system
Up to 15% better fuel economy of the car
© SKF Group 16 July 2013Slide 18
SKF energy efficient (E2) bearings
PeruIndustria
Textil
Piura•
60,000 E2 deep groove ball bearing
IndiaSangam
GroupChinaConveyors used in mining industry. 130,000 E2 bearing
IndonesiaLeuwijaya
Textile•
30,000 E2 bearing•
potential 325,000 for 3 different customers
© SKF Group 16 July 2013Slide 19
What is SKF knowledge?
© SKF Group 16 July 2013Slide 20
SKF technology platforms
Bearingsand units
© SKF Group 16 July 2013Slide 21
SKF technology platforms
Seals
© SKF Group 16 July 2013Slide 22
SKF technology platforms
Mechatronics
© SKF Group 16 July 2013Slide 23
SKF technology platforms
Lubrication systems
© SKF Group 16 July 2013Slide 24
SKF technology platforms
Services
© SKF Group 16 July 2013Slide 25
Acquisition
2003-2013
Identifying
gaps and opportunities
in all platforms
Products
Technologies
Geographies
Industries
SNFA
(2006)
S2M
(2007)
QPM
(2008)
Economos
(2006)
Macrotech
(2006)
Macrotech
(2009)
Baker
(2007)
PMCI
(2007)
PB&A
(2006)
Monitek
(2006)
Safematic
(2006)
Vogel
(2004)
ALS
(2007)
Sommers
(2005)
ABBA
(2007)
Jaeger
(2005)
Peer
(2008)
GLO
(2008)
TCM (2003)
Scandrive
(2003)
Cirval
(2008)
Lincoln Industrial
(2010)
GBC
(2012)
SealsBearingsand units
Lubrication systemsServices Mechatronics
BVI
(2013)
SKF Half-year results 2013Tom Johnstone, President and CEO
© SKF Group 16 July 2013Slide 27
New business• 10-year contract
worth
SEK 900 million with Turbomeca• service contracts
worth
SEK 200 million in Latin America•
contract
for wheel
hub
bearing
units
(HBU3) to Volvo Car Corporation
Two
new SKF Solution FactoriesInaugurated
in Madrid, Spain
and Katowice, Poland
Divestment, after quarter
endSKF divested its metallic rods business including the operations
at the SKF sites in St. Vallier
sur
Rhône, France and Monroe, Washington, USA.
Highlights
Q2 2013
Katowice, Poland Madrid, Spain
Thrust
main
shaft
bearing, one
of the bearings
for the ARRANO Engine of TURBOMECA
© SKF Group 16 July 2013Slide 28
Highlights
Q2 2013
Research programmeSKF and INSA Lyon started a research programme
to study the behavior
of lubricants
under extreme conditions
for aerospace.
SKF Windfarm
Management ConferenceSKF’s
eighth
SKF Windfarm
Management Conference was
held
in Warsaw, Poland.
Asset Management ConferenceSKF hosted
an Asset Management Conference in Dallas, USA with more
than
160 customers.
SKF Distributor
College awarded
its
180,000th certificate.
© SKF Group 16 July 2013Slide 29
New products
-
examples
SKF Steering
boot
kits
for cars and light
trucks.
SKF Telescopic
pillars
series CPMA and CPMB for medical
equipment.
© SKF Group 16 July 2013Slide 30
SKF Restructuring
programme
– costs
and expected
savings
Restructuring
activities
launched
in:SEKm Q4 2012 Q1 2013 Q2 2013 Total
One-off
costs 200 250 190 640
Annual
savings
when
fully
implemented 150 100 80 330
The savings
for the second
half
year
2013 will
be around
SEK 150 million, evenly
split between
the third
and the fourth
quarter.
© SKF Group 16 July 2013Slide 31
SKF Group –
Q2 2013
Financial performance
2013
2012Net sales, SEKm
16,392
17,174Operating profit, SEKm
1,837 2,049Operating margin, %
11.2
11.9Operating margin excl. restructuring,%
12.4
12.7Profit before tax, SEKm
1,627 1,774Cash flow, SEKm
1,147 686
Organic sales growth in local currency:SKF Group: -2.2%Strategic Industries:
-7.6% Regional Sales
and Service:
-4.8% Automotive:
7.7%
Key points Sales volumes down by -1.6% y-o-yManufacturing relatively unchanged compared to last yearInventories 21.6% of sales
Europe:
-4%North America:
-1%Asia:
-4%Latin America:
14%
© SKF Group 16 July 2013Slide 32
Organic sales growth in local currency
-10
-5
0
5
10
15
20
25
20132011 2012
% change y-o-y
© SKF Group 16 July 2013Slide 33
Europe
-4%
Asia/Pacific -4%
Latin America
14%Middle East
& Africa -3%
NorthAmerica
-1%
Growth
development
by geography
Organic
growth
in local
currency
Q2 2013 vs Q2 2012
© SKF Group 16 July 2013Slide 34
Europe
-7%
Asia/Pacific -5%
Latin America
11%Middle East
& Africa -4%
NorthAmerica
-6%
Growth
development
by geography
Organic
growth
in local
currency
YTD 2013 vs YTD 2012
© SKF Group 16 July 2013Slide 35
Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6
5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6
1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6
26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4
-10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0
15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6
Percent y-o-y
Volume
Structure
Price/mix
Sales in local currency
Currency
Net sales
2011 2012 2013
© SKF Group 16 July 2013Slide 36
-10
-5
0
5
10
15
20
2011 2012 YTD 2013
Growth in local currency, including structure
% y-o-y
Structure in 2011:
4.8%Structure in 2012:
0.4%Structure in YTD 2013:
2.0%
-3.1%
16.3%
-2.1%
© SKF Group 16 July 2013Slide 37
Operating profit
0
300
600
900
1 200
1 500
1 800
2 100
2 400
2 700
SEKm
2011
One-time
items
2012 2013
© SKF Group 16 July 2013Slide 38
%
0
2
4
6
8
10
12
14
16
2011
One-time
items
2012 2013
Operating margin
© SKF Group 16 July 2013Slide 39
0
2
4
6
8
10
12
14
16
2011 2012 YTD 2013
%
One-time
items* Excluding
one-time
items
14.7*
11.9*
10.5
14.5 12.0*
Operating margin
11.4
© SKF Group 16 July 2013Slide 40
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2011 2012 2013
Excluding one-off items
(eg. restructuring, impairments, capital gains)
© SKF Group 16 July 2013Slide 41
18
19
20
21
22
23
24
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Inventories as % of annual sales
%
2011 2012 2013
© SKF Group 16 July 2013Slide 42
Return on capital employed
0
5
10
15
20
25
30
2011 2012 YTD 2013
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.
%
16.213.8
23.617.2*
15.3*
23.9*
One-off
costs* Excluding
one-off
costs
© SKF Group 16 July 2013Slide 43
Cash flow, after investments before financing
-1 000
-500
0
500
1 000
1 500
2 000
2 500SEKm
2011 2012 2013
*
SEK 1,707 million,
excluding
acquisitions
and divestments.**
SEK -69 million, excluding
acquisitions
and divestments.
*
**
© SKF Group 16 July 2013Slide 44
Net debt
-20 000
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0
SEKm
AB SKF, dividend paid (SEKm):2011 Q2
2,2772012 Q2
2,5042013 Q2
2,530
2011 2012 2013
Net debt:
Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
Cash out fromacquisitions (SEKm): 2012 Q3
8292013 Q1
823
© SKF Group 16 July 2013Slide 45
0
100
200
300
400
500
600
2013 2014 2015 2016 2017 2018 2019 2020
EURm
265
100100100
500
110
500
• Available
credit
facilities:EUR 500 million 2017 SEK 3,000 million 2017
•
No financial
covenants
nor
material adverse
change
clause
Debt structure,
maturity years
100
© SKF Group 16 July 2013Slide 46
SEKm 2013 2012
Net sales 16,392 17,174
Operating profit 1,837 2,049
Operating margin, % 11.2 11.9
Operating margin excl. one-offs, % 12.4 12.7
Profit before taxes 1,627 1,774
Net profit 1,104 1,244
Basic earnings per share, SEK 2.36 2.63
Cash flow, after investments before financing 1,147 686
Second quarter 2013
© SKF Group 16 July 2013Slide 47
SEKm 2013 2012
Net sales 31,544 34,105
Operating profit 3,317 4,185
Operating margin, % 10.5 12.3
Operating margin excl. one-offs, % 11.9 12.7
Profit before taxes 2,864 3,730
Net profit 1,922 2,570
Basic earnings per share, SEK 4.10 5.44
Cash flow, after investments before financing 255* 1,382*
Half year 2013
*
excluding acquisitions and divestments, SEK 1,078 million (1,401).
© SKF Group 16 July 2013Slide 48
July
2013:
SKF demand outlook Q3 2013
Demand compared to the third quarter 2012 The demand for SKF’s
products and services is expected to be slightly higher for the Group, Asia and North America as well as for all the business areas. It is expected to be relatively unchanged for Europe and higher for Latin America.
Demand compared to the second quarter 2013 The demand for SKF’s
products and services is expected to be relatively unchanged for the Group, Europe, Asia and North America as well as for all the business areas. It is expected to be slightly higher for Latin America.
Manufacturing Manufacturing
is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.
© SKF Group 16 July 2013Slide 49
Share
of net
sales2012
Europe 43%
Asia
Pacific 24%
North America 23%
Latin America 7%
Total
Q3 2013 vs Q3 2012
+/-
+
+
++
+
Sequential
trend for Q3 2013
SKF demand
outlook
Q3 2013, regions
© SKF Group 16 July 2013Slide 50
Sequential
trend for Q3 2013
Share
of net
sales2012
Strategic
Industries 31%
Regional Sales
and Service 39%
Automotive 27%
Total
Q3 2013 vs Q3 2012
+
+
+
+
SKF demand
outlook
Q3 2013, business areas
© SKF Group 16 July 2013Slide 51
6%
6%
5%
29%
13%
13%
12%
10%
4%
2%
Aerospace
Energy
Trucks
Industrial distribution
Industrial, heavy, special and off-highwayCars and light
vehicles
Industrial, general
Vehicle
after market
Railway
Two-wheelers
and electrical
Share
of net
sales
2012
SKF sequential
volume
trend Q3 2013, main
segments
© SKF Group 16 July 2013Slide 52
Guidance for the third quarter 2013*
•
Tax level: around 30%
•
Financial net for the third quarter:
Around SEK -200 million
•
Currency impact on operating profit versus 2012
Q3: SEK -100 millionFull year: SEK -450 million
•
Additions to PPE: Around SEK 1.7 billion for 2013
*
Guidance is approximate and based on current assumptionsand exchange rates
© SKF Group 16 July 2013Slide 53
Key focus areas 2013
• Managing the uncertain and different demand environment-
Profit and cash flow
•
Initiatives and actions to support long-term financial targets
-
New factories in Mysore and Bengaluru
in India
-
New warehouse in Shanghai, China
-
SKF Campus in Shanghai, China, including:
‣
New factory for automotive
‣
Global Technical Centre China
‣
SKF Solution Factory
‣
SKF College
-
Integration of new acquisitions, GBC and BVI
-
Cost reduction and efficiency programme
-
New IT systems
•
Business Excellence and competence development
One SKF and SKF Care as guiding lights
© SKF Group 16 July 2013Slide 54
Cost
reduction
–
specific
programme
2012-2015
Main activities:•
Consolidation
of manufacturing
-
merger
between
sites
-
transfer
to faster growing
markets with more
local
production•
Optimization
and productivity
improvements
-
in the manufacturing
and demand
chain
processes
-
in administration and support functions•
Reduction
in purchasing
cost
-
mainly
through
standardization
and rationalization
of the supplier
base.
Reduction
of annual
cost
by SEK 3 billion by the end
of 2015-
Total cost
for the programme
around
SEK 1.5 billion -
2,500 people
impacted,
© SKF Group 16 July 2013Slide 55
SKF’s
priorities
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
Capital efficiency• Fixed
cost
reduction• Working capital efficiency
Cost
reduction• Consolidation
of manufacturing• Optimization
and productivity
improvements• Reduction
in purchasing
costs
Investments & Innovation• New and existing
facilities• Research and development
© SKF Group 16 July 2013Slide 56
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 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 www.skf.com) under the Administration Report; “Important factors influencing the financial results", "Financial
risks" and "Sensitivity analysis”.
© SKF Group 16 July 2013Slide 57
© SKF Group 16 July 2013Slide 58
Welcome
to the IR website
–
www.skf.com
> Investors
Investor Relations function:Head:Marita
BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]
Investor Relations:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]
Event and road shows coordinator:Helena KarlssonTel: +46 31 3372142Mobile: +46 705 642142E-mail: [email protected]