the skf groupinvestor.skf.com/sites/default/files/report/skf_q2_2014_xversion.pdfrailway off-highway...

The SKF Group

SKF Investor Relations July 2014

© SKF Group Slide 1

SKF - A truly global company

Established: 1907

Sales 2013: SEK 63,597 million

Employees 2013: 48,401

Production sites: around 165 in 28 countries

SKF presence: in over 130 countries

Distributors/dealers: 15,000 locations

Global certificates: ISO 14001 OHSAS 18001 certification

15 July 2014


7%3%

35%

5%

3%24% 24%

Vehicle aftermarket

6%4%3%

5%

11%10%5%

11%

29%

2%

14%

Net sales - 2013

Aerospace Railway Off-highway

Trucks Two-wheelers and Electrical

Industrial, general

Cars and light trucks

Industrial, heavy and

special

Industrial distribution

Energy 9%

Asia/Pacific

Latin America

North America

Middle East & Africa

Western Europe

Eastern Europe

Sweden

* Previously published shares have been restated in February 2013

15 July 2014


North America

Latin America

Western Europe

Eastern Europe

Middle East and Africa

Asia/Pacific

Net sales Average number of employees Tangible asset

% of group total SKF 2013

(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)

15 July 2014


Operating margin as reported

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 July 2014


Return on capital employed

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 July 2014


Growth in local currencies

-25

-20

-15

-10

-5

0

5

10

15

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 July 2014


Financial targets

15% Operating

margin

-20-15-10

-505

101520

07

08

09

10

11

12

13

Q114

0

5

10

15

07 08 09 10 11 12 13Q114

05

1015202530

07 08 09 10 11 12 13Q114

8% Changes in sales in local currency

incl. structure

One-time items

20% Return on capital

employed

One-time items for the individual year


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 capital • Net working capital

Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs

Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility

15 July 2014

© SKF Group 15 July 2014 Slide 9

To equip the world with SKF knowledge

SKF Group Vision


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 targets: • Increase revenue from SKF BeyondZero portfolio from SEK 2.5 billion to SEK 10 billion 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

15 July 2014

© SKF Group

28 SKF Solution Factory – June 2014

Slide 11

Taiwan Taichung Turkey Istanbul UK Luton USA Cleveland USA Houston

Poland Katowice Romania Bucharest Russia Moscow United Arab Emirats Abu Dhabi South Africa Witfield Spain Madrid Sweden Gothenburg

France Montigny Germany Schweinfurt India Pune India Manesar Italy Turin Mexico Monterrey Netherlands Ridderkerk Netherlands Nieuwegein

Australia Perth Brazil Cajamar Canada Edmonton Canada Toronto Columbia Bogota China Shanghai China Tianjin China Urumqi

15 July 2014


SKF Solution Factory

Segments & Application Knowledge Platforms & Technology Competence

Capabilities Sealing Solutions Mechanical Services Lubrication Solutions

Training Center Bearing Service Workshop Condition Monitoring Services Remote Monitoring Center

MaPro/CoMo Product Repair A & MC

SKF Solution Factory

15 July 2014


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

15 July 2014


Wheel-loader – Construction

Central gear Hybrid pinion units

Wheel end • Integrated smart wheel bearing units with sensors • SKF Mudblock cassette seals

Motor hood Electromechanical actuators

Chassis lubrication Centralized lubrication systems

15 July 2014


New pitch bearing design with improved corrosion protection

DRTRB-unit SKF Nautilus with segmented cage for minimized friction

New CRB-design with extra-high carrying capacity for wind-gearboxes.

XL Hybrid bearings with ceramic balls for superior insulation

SKF WindCon 3.0/Webcon Intranet supervised condition monitoring

Automatic centralized lubrication kits for reduced maintenance cost

Wind turbine - Energy

15 July 2014


SKF’s environmentally positive customer solutions

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

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

15 July 2014


SKF energy efficient (E2) bearings

Peru Industria Textil Piura • 60,000 E2 deep

groove ball bearing

India Sangam Group

China Conveyors used in mining industry. 130,000 E2 bearing

Indonesia Leuwijaya Textile • 30,000 E2 bearing • potential 325,000 for

3 different customers

15 July 2014


What is SKF knowledge?

15 July 2014


SKF technology platforms

Bearings and units

15 July 2014



Seals

15 July 2014



Mechatronic

15 July 2014



Lubrication systems

15 July 2014



Service

15 July 2014


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)

BVI (2013)

Kaydon (2013)

Seals Bearings and units

Lubrication systems Services Mechatronics

15 July 2014

SKF Half-year results 2014 Tom Johnstone, President and CEO

15 July 2014

© SKF Group

Examples of new business

• Envision Energy, China Strategic long-term partnership

• A customer in the automation industry Roller screw electromechanical cylinder

• Dongfang Electric New Energy Equipment Main shaft bearings

• Aurizon, Australia Service contract

• A customer in the oil and gas industry Asset management services

• Bosch Service, Brazil SKF’s vehicle aftermarket product range

Slide 26 15 July 2014

© SKF Group

Highlights

• Inauguration of SKF Campus and SKF North East Asia Distribution Centre in Shanghai.

• New SKF Solution Factory in Nieuwegein in the Netherlands.

• Events during the quarter: - SKF Wind Farm Management Conference in Berlin

- SKF Life Cycle Management Conference in Buenos Aires - SKF Asset Management Conference in Prague

Slide 27 15 July 2014

© SKF Group

Customer awards

Slide 28

• Best Technical and Service Award 2013 – Envision Energy, China

• Supplier Excellence Award 2013 – National Oilwell Varco (NOV), USA

• Premium Supplier Award – Joy Global Underground Mining LLC, USA

• Marine Supplier of the year Award 2014 – Rolls-Royce Marine

• Excellent Supplier Award – ABB Marine, China

• Supplier Certification of Appreciation – Nissan, China

• Quality Gold Award 2013 – Yamaha Motor Company

• The Qualitas Award – Fiat/Chrysler, Argentina

15 July 2014

© SKF Group

New products and solutions

Slide 29

SKF Wireless MicroVibe

SKF Wireless Machine Condition

Sensor

SKF @ptitude Connect

SKF Shaft Alignment Tool

Low friction grease for hub bearing units

SKF Gear Bearing Unit

Floating piston

Electric grease transfer pump

SKF Tachometer

Low torque operator valve solution

Turbulo BlueMon emission monitoring system 15 July 2014

© SKF Group

SKF Group – Q2 2014

Slide 30

Financial performance (SEKm) 2014 2013 Net sales 17,955 16,392 Operating profit 2,096 1,837 Operating margin, % 11.7 11.2 Operating margin excl. one-time items, % 12.3 12.4 Profit before tax 1,761 1,627 Basic earnings per share, SEK 2.54 2.36 Cash flow after investments before financing excl. EU payment 1,423 1,147 Cash flow after investments before financing -1,402 1,147

Organic sales growth in local currency: SKF Group 4.6% Europe 1% Strategic Industries 11.1% North America 3% Regional Sales and Service 2.0% Asia 14% Automotive 1.3% Latin America 2%

Middle East and Africa 14% Key points Sales volumes up by 3.6% y-o-y. Manufacturing was slightly higher compared to last year.

15 July 2014

© SKF Group

SKF Group – Half year 2014

Slide 31

Financial performance (SEKm) 2014 2013 Net sales 34,689 31,544 Operating profit 4,120 3,317 Operating margin, % 11.9 10.5 Operating margin excl. one-time items, % 11.9 11.9 Profit before tax 3,548 2,864 Basic earnings per share, SEK 5.26 4.10 Cash flow after investments before financing excl. EU payment 1,164 255 Cash flow after investments before financing -1,661 255

Organic sales growth in local currency: SKF Group 5.2% Europe 3% Strategic Industries 9.0% North America 3% Regional Sales and Service 2.2% Asia 13% Automotive 4.5% Latin America 1%

Middle East and Africa 18% Key points Sales volumes up by 5.0% y-o-y. Manufacturing was higher compared to last year.

15 July 2014

© SKF Group

Organic sales growth in local currency

Slide 32

-10-8-6-4-202468

10

% change y-o-y

2012 2013 2014

15 July 2014

© SKF Group

Organic sales growth in local currency

Slide 33

-4

-2

0

2

4

6

8

2012 2013 YTD 2014

% y-o-y

Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.2%

-2.5%

-0.7%

5.2%

15 July 2014

© SKF Group

Sales development by geography Organic growth in local currency Q2 2014 vs Q2 2013

Slide 34

Europe 1%

Asia/Pacific 14%


14%

Latin America

2%

North America

3%

15 July 2014

© SKF Group

Sales development by geography Organic growth in local currency YTD 2014 vs YTD 2013

Slide 35

Europe 3%

Asia/Pacific 13%


18%

Latin America

1%

North America

3%

15 July 2014

© SKF Group

Components in net sales

Slide 36

2012 2013 2014 Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8

Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0

Sales in local currency 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4

Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1

Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5

15 July 2014

© SKF Group

Operating profit as reported

Slide 37

-2 000-1 500-1 000

-5000

5001 0001 5002 0002 5003 000

SEKm

2012 2013 2014

15 July 2014

© SKF Group

Operating profit excluding one-time items

Slide 38

0

500

1000

1500

2000

2500SEKm

2012 2013 2014

15 July 2014

© SKF Group

Operating margin

Slide 39

0

2

4

6

8

10

12

14

16

2012 2013 YTD 2014

%

5.8

11.3

12.0* 11.9*

One-time items * Excluding one-time items

11.9*

11.9

15 July 2014


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Regional Sales and Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area as reported

Strategic Industries

15 July 2014


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Regional Sales and Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area excl. one-time items

Strategic Industries

15 July 2014

© SKF Group

SKF’s programme to improve efficiency and reduce cost

Slide 42

Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Total

Cost taken 200 250 190 0 50 490 0 100 790

People affected 530 410 320 0 130 860 0 170 1,560

Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 2014

Restructuring 15 35 75 75 200 70 50 120

S&A 50 50 50 50 200 0 0 0

Purchasing 100 100 100 100 400 60 100 160

Total 165 185 225 225 800 130 150 280

Restructuring, SEKm:

Realized gross savings from total programme, SEKm:

Full year gross saving 150 100 80 0 40 220 0 100 470

Giving future gross savings, SEKm:

vs 2012 vs 2013

Note: Run rate Q2 2014 SEK 1,340 million vs 2012. 15 July 2014

© SKF Group

Operating profit bridge, Q2 2014

Slide 43

0

500

1000

1500

2000

2500

3000

+160 1,837 +160 2,096

+134 +150 +70 -120

-295

SEKm

Q2 2013 Q2 2014 Volumes excl.

Specialty Business

Specialty Business

Savings One-time items

Currencies R&D, inflation etc.

Price/mix

15 July 2014

© SKF Group

Operating profit bridge, half year 2014

Slide 44

0500

100015002000250030003500400045005000

+400 3,317

+60 4,120 +240

+280 +440 -220

-397

SEKm

Q2 2013 Q2 2014 Volumes excl.

Specialty Business

Specialty Business

Savings One-time items

Currencies R&D, inflation etc.

Price/mix

15 July 2014

© SKF Group

Net working capital as % of annual sales

Slide 45

2526272829303132333435

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

%

2012 2013 2014

Target: 27%

15 July 2014

© SKF Group

Return on capital employed

Slide 46

0

5

10

15

20

2012 2013 YTD 2014

%

14.6*

7.5 8.7

16.2

17.1* 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.

15 July 2014

© SKF Group

-7 000

-6 000

-5 000

-4 000

-3 000

-2 000

-1 000

0

1 000

2 0001)

2)

3)

Cash flow, after investments before financing

Slide 47

SEKm

2012 2013 2014

Excl. acq. and div.: 1) Q3 2012 SEK 1,707 million 2) Q1 2013 SEK -69 million

3) Q3 2013 SEK 871 million 4) Q4 2013 SEK 1,170 million Excl. EU payment 5) Q2 2014 SEK 1,423 million

4) 5)

15 July 2014

© SKF Group

Net debt

Slide 48

-35 000

-30 000

-25 000

-20 000

-15 000

-10 000

-5 000

0SEKm

2012 2013 2014

AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 2014 Q2 2,530

Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 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

15 July 2014

© SKF Group

Debt structure, maturity years

Slide 49

0

100

200

300

400

500

600

700

800

900

2015 2016 2017 2018 2019 2020 2021

EURm

• Available credit facilities: EUR 500 million 2019 SEK 3,000 million 2016 SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

200

100 100 110

500 500

850

15 July 2014

© SKF Group

July 2014: SKF demand outlook Q3 2014

Slide 50

Demand compared to the third quarter 2013 The demand for SKF’s products and services is expected to be slightly higher for the Group and North America, higher for Asia, relatively unchanged for Europe and slightly lower for Latin America. It is expected to be higher for Strategic Industries and relatively unchanged for Regional Sales and Service and Automotive. Demand compared to the second quarter 2014 The demand for SKF’s products and services is expected to be relatively unchanged for the Group and Europe. It is expected to be slightly higher for North America and Asia and slightly lower for Latin America. For Strategic Industries it is expected to be slightly higher and for Regional Sales and Service and Automotive it is expected to be relatively unchanged. Manufacturing Manufacturing is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.

15 July 2014

© SKF Group

SKF demand outlook Q3 2014, main regions

Share of net sales 2013

Europe 42%

Asia Pacific 24%

North America 24%

Latin America 7%

Total

Q3 2014 vs Q3 2013

+/-

++

+

-

+

Slide 51

Sequential trend for Q3 2014

15 July 2014

© SKF Group

SKF demand outlook Q3 2014, main business areas


Strategic Industries 29%

Regional Sales and Service 39%

Automotive 27%

Total

Q3 2014 vs Q3 2013

++

+/-

+/-

+

Slide 52

Sequential trend for Q3 2014

15 July 2014

© SKF Group

SKF sequential volume trend Q3 2014, Industries

Slide 53

6% Aerospace

5% Energy

4% Railway

2% Two-wheelers and Electrical

29% Industrial distribution

14% Cars and light vehicles

13% Industrial, heavy, special and off-highway

11% Vehicle service market

11% Industrial, general

5% Trucks


15 July 2014

© SKF Group

Guidance for the third quarter 2014*

Slide 54

• Tax level: around 30%

• Financial net for the third quarter: Around SEK -230 million

• Currency impact on operating profit versus 2013 Q3: SEK +50 million

Full year: SEK -70 million

• Additions to PPE: Around SEK 1.6 billion for 2014

* Guidance is approximate and based on current assumptions and exchange rates.

15 July 2014

© SKF Group

SKF’s priorities

Slide 55

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

15 July 2014

© SKF Group

Cautionary statement

Slide 56

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”.

15 July 2014


Welcome to the IR website – www.skf.com > Investors

Investor Relations function: Head: Marita Björk Tel: +46 31 3371994 Mobile: +46 705 181994 E-mail: [email protected]

Investor Relations: Anna Alte Tel: +46 31 3371988 Mobile: +46 705 271988 E-mail: [email protected]

Event and road shows coordinator: Helena Karlsson Tel: +46 31 3372142 Mobile: +46 705 642142 E-mail: [email protected]

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