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SKF Nine-month results 2011. Tom Johnstone, President and CEO 19 October 2011. Q3 2011. Strong performance 2011 2010 Operating profit, SEKm2,479 2,309 Operating margin, % 15.0 14.9 Profit before tax, SEKm2,345 1,950 Cash flow, SEKm1,323 1,936 - PowerPoint PPT Presentation
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19 October 2011
SKF Nine-month results 2011
Tom Johnstone, President and CEO
19 October 2011
3
19 October 2011
Q3 2011
Strong performance 2011 2010Operating profit,SEKm 2,479 2,309Operating margin, % 15.0 14.9Profit before tax, SEKm 2,345 1,950Cash flow, SEKm 1,323 1,936
Strong organic sales growth in local currency:SKF Group: +8.2%Europe: +9.7% Industrial Division: +7.1% North America:+9.9% Service Division: +12.5%Asia: +4.9% Automotive Division: +3.2%Latin America:+10.2%
Outlook for Q4 for SKF GroupDemandRelatively unchanged compared to Q4 2010Slightly lower sequentially compared to Q3 2011
Manufacturing levelLower year over year and compared to Q3 2011
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19 October 2011
SKF
•opened regional distribution centre in Montevideo, Uruguay to strengthen the service to customers and distributors in Latin America.
• inaugurated bearing factory in Dalian, China for medium size bearings.
• was selected to be a member of Dow Jones’ Sustainability World indexes for the 12th successive year and for the 11th successive year in the FTSEGood Index Series.
Highlights Q3 2011
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19 October 2011
Example of new products
A new range of seals for wind turbine drive trains.
An upgraded range of SKF Explorer spherical roller bearings which offers at least twice the previous life when operating in a contaminated environment.SKF Solar Linear Actuators designed
specifically to meet the solar tracking technical requirements.
A new bearing range, mainly developed for industrial fans, textile equipment and conveyors. These energy efficient Y-bearings give a 50% reduction in the bearing frictional torque vs conventional SKF Y-bearings.
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19 October 2011
Sales volume
-35-30-25-20-15-10-505
10152025
% change y-o-y
2009 2010 2011
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19 October 2011
Organic growth in local currencies
-30-25-20-15-10-505
10152025
% change y-o-y
2009 2010 2011
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Europe+9.7%
Asia/Pacific
+4.9%
Latin America +10.2% Middle
East & Africa
+0.2%
North America +9.9%
Growth development by geography Organic growth Q3 2011 vs Q3 2010
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19 October 2011
Europe+15.1%
Asia/Pacific
+14.0%
Latin America +10.1% Middle
East & Africa
+5.3%
North America +16.5%
Growth development by geography Organic growth YTD 2011 vs YTD 2010
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19 October 2011
-25
-20
-15
-10
-5
0
5
10
15
20
2009 2010 YTD September2011
Growth in local currency
% y-o-y
Acquisitions/DivestmentsOrganic growth
-19.0% 14.2% 19.2%
Long-term target: 8% per annum
Total growth
4.8%
14.4%
0.0%
14.2%
1.0%
-20.0%
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19 October 2011
Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-26.9 -30.8 -24.9 -14.1 5.3 16.6 19.0 16.3 20.1 12.6 6.2
1.4 1.1 1.2 0.4 0.0 0.0 0.0 0.0 5.0 4.4 5.1
7.1 5.6 3.7 0.3 -0.3 -0.5 0.3 0.9 1.3 1.6 2.0
-18.4 -24.1 -20.0 -13.4 5.0 16.1 19.3 17.2 26.4 18.6 13.3
13.6 12.2 6.6 -1.4 -7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3
-4.8 -11.9 -13.4 -14.8 -2.7 10.9 16.1 11.0 15.6 6.4 7.0
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency
Currency
Net sales
2009 2010 2011
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19 October 2011
Operating profit
0200400600800
1 0001 2001 4001 6001 8002 0002 2002 4002 6002 800SEKm
2009
Restructuring and one-time items
2010 2011
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19 October 2011
Operating margin
%
0
2
4
6
8
10
12
14
16
2009
Restructuring and one-time items
2010
Long-term target level: 15%
2011
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19 October 2011
Operating margin
0
2
4
6
8
10
12
14
16
2009 2010 YTD September2011
%
5.7
8.0*
Restructuring and one-time items* Excluding restructuring and one-time
items
15.2
Long-term target level: 15%
14.2*
13.8
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19 October 2011
-12-10-8-6-4-202468
1012141618
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Operating margin per division
Industrial
Service
Automotive
%
Excluding one-off items(eg. restructuring, impairments, capital gains)
2009 2010 2011
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SEKm 2011 2010
Net sales 16,545 15,465
Operating profit 2,479 2,309
Operating margin, % 15.0 14.9
Profit before taxes 2,345 1,950
Net profit 1,656 1,425
Basic earnings per share, SEK 3.52 3.05
Cash flow, after investments before financing
1,323 1,936
Third quarter 2011
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SEKm 2011 2010
Net sales 49,959 45,620
Operating profit 7,606 6,250
Operating margin, % 15.2 13.7
Profit before taxes 7,109 5,501
Net profit 5,019 3,946
Basic earnings per share, SEK 10.72 8.41
Cash flow, after investments before financing
2,995 3,128
First nine months 2011
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18
19
20
21
22
23
24
25
Inventories as % of annual sales
% Long-term target level: 18%
2009 2010 2011
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Cash flow, after investments before financing
-6 000-5 500-5 000-4 500-4 000-3 500-3 000-2 500-2 000-1 500-1 000
-5000
5001 0001 5002 0002 500
SEKm
2009 2010
Cash out fromacquisitions (SEKm):
2009 2412010 6,7992011 6
2011
* SEK 798 million, excluding the acquisition of Lincoln Industrial.
*
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19 October 2011
Return on capital employed
0
5
10
15
20
25
30
2009 2010 YTD September2011
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.
%
9.1
24.0
Long-term target: 27%
25.1
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Net debt (Short-term financial assets minus loans and post-employment benefits)
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0SEKm
AB SKF, dividend paid (SEKm):2009 Q2 1,5942010 Q2 1,5942011 Q2 2,277
2009 2010
Cash out fromacquisitions (SEKm):
2009 2412010 6,7992011 6
2011
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0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2018
Debt structure
Maturity years, EURm
396
100100
• Credit facilities:EUR 500 million
2014 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
130
500
110
00
• Changes in Q31) EUR 50 million repaid 2) SEK 1 billion
raised
1)
2)
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19 October 2011
October 2011: Outlook for the fourth quarter 2011
Demand compared to the fourth quarter last yearThe demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be slightly lower in Europe, relatively unchanged in North America and slightly higher in Asia and Latin America. The demand is expected to be slightly higher for the Industrial Division, higher for the Service Division and lower for the Automotive Division.
Demand compared to the third quarter 2011The demand for SKF’s products and services is expected to be slightly lower for the Group. It is expected to be slightly lower for Europe, relatively unchanged for Asia and North America, and slightly higher for Latin America. The demand is expected to be relatively unchanged for the Industrial Division and the Service Division, and slightly lower for the Automotive Division.
Manufacturing level The manufacturing level is expected to be lower year on year and
compared to the third quarter.
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19 October 2011
Demand outlook, regions(based on current assumptions)
Sequential trends for: Q3 2011 Q4 2011
Share of net sales2010
Europe46%
Asia Pacific27%
North America
18%
Latin America
6%
Total
Q4 2011 vs Q4 2010
-
+
=
+
=
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Demand outlook, divisions(based on current assumptions)
Sequential trends for Q4 2011
Share of net sales2010
Industrial32%
Service36%
Automotive30%
Total
Q4 2011 vs Q4 2010
+
++
--
=
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19 October 2011
4%
14%
5%
4%
25%
18%
12%
10%
3%
5%
Trucks
Cars
Energy
Railway
Industrial distribution
Industrial OEM,
General+Special
Vehicle Service Market
Industrial OEM, Heavy + Off-
highway
Electrical and two-wheeler
Aerospace
Sequential volume trend main segments Q4 2011(based on current assumptions)
Share of net sales 2010
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19 October 2011
SKF today – more robust and more diverse
• Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital
• Manufacturing footprint in best cost countries
• Reducing working capital
• Customized solutions, value-added products, technology platforms
• Diversifying growth, faster growing segments and geographies
• Acquisitions supporting growth and profitability
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19 October 2011
SKF today - prepared for a changing demand picture
Activities already underway• The SKF 3C programme has been re-emphasised
Customers: - increase customer and distributor contacts- ensure a very good service level- utilise opportunities from our platform/segment approach
- maintain strong commitment to R&D – especially energy efficiency Cost: - strict cost control (which has no customer impact)
- review further permanent changes to the cost structureCash: - strong cash flow focus
• Adjustment of manufacturing output to demand situationuse flexibility in the working hours through:
- time banks- temporary workers- government supported schemes- short-time working agreements
• Review of investment plan and timingmaintain investment plan for faster growing areas
• Strong focus on faster growing regions and segments is maintained
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19 October 2011
Guidance for the fourth quarter 2011
• Tax level: around 30%
• Financial net for the fourth quarter:Around SEK -175 m
• Exchange rates on operating profit versus 2010Q4: SEK -100 mFull year: SEK -1.2 bn
• Additions to PPE: Less than SEK 2.0 bn for 2011
Guidance is approximate and based on current assumptions and exchange rates.
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Key focus areas ahead 2011
• Profit and cash flow- manage currency and material headwinds
• Manufacturing and suppliers to support demand
• 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
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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”.
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