1 skf first-quarter results 2015 alrik danielson, president and ceo 17 april 2015
TRANSCRIPT
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SKF First-quarter results 2015Alrik Danielson, President and CEO
17 April 2015
© SKF Group 17 April 2015
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Examples of new business in Q1 2015
• Chongqing General Industry (Group) Co and JiangSu High-speed permanent magnetic Jin Tong Ling Fluid Machinery Technology Co, China blower solutions
• Volvo Car Corporation, Sweden Wheel hub bearing units with low friction grease
• Autopartes NAPA, Mexico Agreement to market SKF’sproduct range
• Citroen C4 Cactus, Peugeot 2008 and Fiat 500X Products and solutions
Slide 2
© SKF Group 17 April 2015
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Highlights
Slide 3
• SKF has worked closely with Scuderia Ferrari to produce bearing sets manufactured from specially developed tool steel
• Re-signed the contract as a Ducati Corse Official Technical partner
• Achieved the energy management ISO 50001 certification on a global scale
• SKF will invest SEK 190 million to modernize its spherical roller bearing factory in Gothenburg, Sweden
© SKF Group 17 April 2015
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SKF Generalized Bearing Life Model
Surface vs sub-surface failure modes
Slide 4
internal geometry
load rating
limiting speed
steel composition
surface finish
heat treatmentcontamination resistance
wear resistance
coatings
lubrication
reduced vibration
longer service life
lower noise
reduced friction
reduced vibration
corrosion resistance
Slide 4
© SKF Group 17 April 2015
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Slide 5
Innovations at Hannover Fair
• Two new oil-free bearing solutions for centrifugal compressors in chillers
• A solution to improve the reliability, safety and performance of jack-up gearboxes used in the offshore oil and gas industry and in the renewable energy industry
• A new shaft alignment tool, specifically designed for usage with smartphones or tablets
• A new magnetic bearing control cabinet for turbo-machinery, for onshore, offshore and subsea turbo-machinery
• SKF Enlight, combines a powerful new mobile app with a special Bluetooth-enabled sensor
• SKF Data Collect, a cloud-based solution to record and manage data
© SKF Group 17 April 2015
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Slide 6
Construction of a large-size bearing test centre in Schweinfurt, Germany
The test center will have two large size test rigs, one for wind turbines and one for other industries. The investment will total SEK 360 million, and is expected to be completed during the first half of 2017.
© SKF Group 17 April 2015
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Christian Johansson, new Senior Vice President and CFO
Slide 7
• Bachelor of Science in Business Administration, Stockholm University
• Currently CFO at Gunnebo AB
• Christian has solid executive experience managing global business services.Before joining Gunnebo:-Vice President Region Americas and EMEA for Volvo Business Services-SVP and CFO for Volvo Trucks -Regional Director, Central Eastern Europe within ABB Service World Wide.
• Christian will start his new position inSKF no later than October 2015.
© SKF Group 17 April 2015
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SKF Group – Q1 2015
Slide 8
Financial performance (SEKm) 2015 2014
Net sales 19 454 16 734Operating profit 1 721 2 024Operating margin, % 8.8 12.1Operating margin excl. one-time items, % 12.2 11.4Profit before taxes 1 592 1 787Basic earnings per share, SEK 2.46 2.72Cash flow after investments before financing 988 -63*
Organic sales change y-o-y:
SKF Group 1.4% Europe 1.0%
Industrial Market 1.8% North America -2.4%Automotive Market 0.6% Asia 5.6%
Specialty Business 0.7% Latin America 0.4%Middle East and Africa 14.2%
Manufacturing was higher y-o-y and compared to last year.* Previously published cash flow information is restated
© SKF Group 17 April 2015
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Organic sales growth in local currency
Slide 9
-10
-8
-6
-4
-2
0
2
4
6
8
% changey-o-y
2013 2014 2015
© SKF Group 17 April 2015
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Organic sales growth in local currency
Slide 10
2013 2014 Q1 2015-4
-2
0
2
4
6
% y-o-y
Structure in 2013: 2.5%Structure in 2014: 3.7%Structure in 2015: 0%
1.4%
3.9%
-0.7%
© SKF Group 17 April 2015
11Sales development by geographyOrganic growth in local currency Q1 2015 vs Q1 2014
Slide 11
Europe1.0%
Asia/Pacific5.6%
Middle East& Africa14.2%
LatinAmerica
0.4%
NorthAmerica-2.4%
© SKF Group 17 April 2015
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Components in net sales
Slide 12
2013 2014 2015
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Organic -8.0 -2.2 2.0 6.9 5.8 4.6 3.2 2.8 1.4
Structure 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9 0
Sales in local currency -6.5 0.4 3.1 11.7 10.5 8.4 8.6 3.7 1.4
Currency -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9 14.9
Net sales -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6 16.3
© SKF Group 17 April 2015
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Operating profit as reported
Slide 13
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500SEKm
2013 2014 2015
© SKF Group 17 April 2015
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Operating profit excluding one-time items
Slide 14
0
500
1000
1500
2000
2500SEKm
2013 2014 2015
© SKF Group 17 April 2015
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Operating margin
Slide 15
2013 2014 Q1 20150
2
4
6
8
10
12
14
16
%
5.8
11.9*
One-time items
* Excluding one-time items
8.8
12.2*11.7*
11.0
© SKF Group 17 April 2015
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Slide 16
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1-3
0
3
6
9
12
15
18
Specialty Business*
Automotive Market
%
2013 2014 2015
Operating margin per business area as reported
Industrial Market
* Q4 2013, impacted by cost related to Kaydon acquisition
© SKF Group 17 April 2015
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Slide 17
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1-3
0
3
6
9
12
15
18
Specialty Business
Automotive Market
%
2013 2014 2015
Operating margin per business area excl. one-time items
Industrial Market
© SKF Group 17 April 2015
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Operating profit bridge, Q1 2015
Slide 18
0
500
1000
1500
2000
2500
-1 547
-700
+1 721
+120 0
+450 -173
SEKm
Q1 2014 Q1 2015One-time items at
2014 exchange
rates
Acquisitions/divestments
Currency impact
Other* Organic sales growth in local
currencies
* Includes general inflation, manufacturing and purchasing impacts, IT project and running costs, and R&D..
+2 0240
Savings from
restructuring programme
© SKF Group 17 April 2015
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Restructuring programme
• Main activities:- merging the two industrial businesses- streamlining of supporting country organisations in all main countries
- general staff optimization and productivity improvements
• Reduction of annual cost by SEK 1.2 billion by the end of 2016.Total cost for the programme around SEK 1.4 billion, covering 1 500
people.Major part of the programme expected to be implemented within 2015
• After first quarter 2015 around 40% of planned activities are in progressQ1 2015
Cost, SEKm 535
People affected 575
Cost savings in Q1 -
Annual cost savings, SEKm: 460 effective beginning 2016
Slide 19
© SKF Group 17 April 2015
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Net working capital as % of annual sales
Slide 20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q125
26
27
28
29
30
31
32
33
34
35
%
2013 2014 2015
Target: 27%
© SKF Group 17 April 2015
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Return on capital employed
Slide 21
2013 2014 YTD 20150
5
10
15
20
%
12.6
7.5
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.
14.5*14.8*
13.9
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-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
Cash flow, after investments before financing*
Slide 22
SEKm
2013 2014 2015
Excl. acq. and div.: 1) Q1 2013 SEK -69 million2) Q3 2013 SEK 871 million3) Q4 2013 SEK 1 122 million
Excl. EU payment 4) Q2 2014 SEK 1 423 million
3)
4)
2)
1)
* 2013 and 2014 are restated
© SKF Group 17 April 2015
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Net debt
Slide 23
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0SEKm
2013 2014 2015
AB SKF, dividend paid (SEKm):2013 Q2 2 5302014 Q2 2 530
Cash out from majoracquisitions (SEKm):
2013 Q1 8232013 Q4 7 900
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
EU payment (SEKm):
2014 Q2 2 825
© SKF Group 17 April 2015
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Debt structure, maturity years
Slide 24
2015 2016 2017 2018 2019 2020 20210
100
200
300
400
500
600
700
800
900
EURm
• Available credit facilities:EUR 500 million 2019SEK 3 000 million 2018
EUR 150 million 2017
• No financial covenants nor material adverse change clause
200
100 100 110
500 500
850
© SKF Group 17 April 2015
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April 2015: SKF demand outlook Q2 2015
Slide 25
Demand compared to the second quarter 2014The demand for SKF’s products and services is expected to be relatively unchanged for the Group and for Europe. For Asia it is expected to be higher and for North and Latin America slightly lower. Per business area, for both Industrial Market and Automotive Market it is expected to be relatively unchanged, and for Specialty Business to be slightly higher.
Demand compared to the first quarter 2015The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe and North America. For Asia it is expected to be higher and for Latin America slightly lower. Per business area, for both Industrial Market and Automotive Market it is expected to be relatively unchanged, and for Specialty Business to be slightly higher.
ManufacturingManufacturing is expected to be relatively unchanged year over year and compared to the first quarter.
© SKF Group 17 April 2015
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Guidance for 2015*
Slide 26
Q2 2015:
• Financial net: around SEK -230 million
• Currency impact on operating profit vs 2014Q2: SEK +800 million
2015:
• Tax level: below 30% for 2015
• Additions to PPE: around SEK 1 700 million for 2015
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group 17 April 2015
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Cautionary statement
Slide 27
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”.