SKF Year-end results 2012

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SKF Year-end results 2012

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Title: SKF Year-end results 2012


1
SKF Year-end results 2012
  • Tom Johnstone, President and CEO

2
Summary of the quarter
  • Weaker sales in the quarter
  • - lower overall demand
  • - inventory destocking in the market
  • Impact on the operating margin due to
    significantly lower manufacturing
  • Continued reduction on inventories
  • Strong cash flow
  • Accelerated and expanded activities to reduce
    costs by SEK 3 billion by the end of 2015 and
    strengthen growth
  • Acquisition of Blohm Voss Industries

3
Programme to improve efficiency, reduce cost and
strengthen profitable growth
  • Main activities
  • consolidation of production between sites
  • transfer of production from West Europe to serve
    faster growing markets with more local
    production
  • optimization and productivity improvements in
    the manufacturing and demand chain processes
  • consolidation of and efficiency improvements in
    administration and support functions
  • reduction in purchasing cost mainly through
    standardization and rationalization of the
    supplier base.
  • Reducing annual costs by SEK 3 billion by the end
    of 2015
  • Total costs for the programme SEK 1.5 billion for
    the years 2012 to 2015
  • 2,500 people impacted, early retirement and other
    voluntary and agreed reductions

4
Acquisitions in the last 12 months
  • General Bearing Cooperation (GBC)
  • Acquired in August 2012
  • Net sales around USD 155 million
  • Employees around 1,380
  • Customers OEM and end-user in the truck, trailer,
    automotive and industrial transportation
    markets
  • Headquarter North America
  • Factories 3 in China
  • Manufacturing ball bearings, tapered roller
    bearings and precision roller bearings
  • Blohm Voss Industries (BVI)
  • Transaction is subject to relevant regulatory
    approvals
  • Net sales around EUR 100 million
  • Employees around 400
  • Headquarter Germany
  • Manufacturing premium quality equipment for
    critical marine applications, including shaft
    components (seals and bearings), stabilizers,
    and oily water separators

5
BVI strengthening SKFs position as a marine
specialist
  • Strategic fit with SKF Marine growth strategy
  • Complementary product portfolio
  • Secure the leadership with propulsion system OEMs
  • Widen the scope of supply for the application
    life-cycle

Today, SKF sales to the marine industry is around
SEK 1.5 billion. Main applications are propulsion
systems, including thrusters, pods and gearboxes.
6
Some examples of new businesses in 2012
  • Industrial
  • new generation Nautilus bearing to Siemens
  • main shaft solutions to Vestas V112-3.0 MW
    turbine
  • axle boxes and wheel set bearing units to
    Siemens Rail Systems
  • SKF ConRo Compacts to a major metal industry
    customer
  • third strategic partnership agreement with
    Baosteel Group Corporation
  • maintenance services to LKAB
  • integrated maintenance solutions to Fibria
  • two custom-designed SKF spherical roller
    bearings, 8.8 tonnes each, for Caesars High
    Roller observation wheel in Las Vegas
  • Automotive
  • SKF Bus Door Actuator to Volvo Buses
  • rear wheel bearing units and front suspension
    bearing units to Volvo Car Corporation
  • wheel bearing units and clutch bearings to Audi
  • bearing and units to Scania for wheels and
    transmissions
  • bonded piston seals to Mazda Motor Corporation

7
Some highlights from 2012
  • SKF celebrated 100 years of business in China
  • - inaugurated a new bearing and truck hub unit
    factory in Jinan
  • - broke ground on a new regional distribution
    centre in Shanghai
  • - announced the establishment of a new SKF
    Campus in Jiading, Shanghai,
    containing a new factory for automotive and the
    Global Technical Centre China, SKF Solution
    Factory and SKF College
  • New facilities
  • - Railway test centre in Tver, Russia
  • - Five new SKF Solution Factory USA, Romania,
    Italy, Australia and the Netherlands
  • Partnership
  • With Protean Electric for supplying products to
    Proteans in-wheel electric motors for
    electric vehicles and hybrid cars.
  • Documented delivered value
  • SKF provided SEK 4.1 billion in verified savings
    for customers.
  • SKF Distributor College awarded its 170,000th
    certificate
  • Dow Jones Sustainability Indexes and FTSE4Good
  • - member of DJSI indexes for the 13th
    successive year - included for the 12th
    successive year in the FTSE4Good Index Series

8
Some examples of new products in 2012
SKF Compact Wire Steering Bearing
SKF Nautilus range extensions
SKF Speed Sensor Unit
  • SKF ChainLube oil projection system

9
RD main areas and investments in 2012
  • Main areas
  • Environment
  • Core technologies
  • New products
  • Strengthen RD activities in fast growing
    regions
  • Strengthen links with universities and high
    schools

10 2.5 of sales
First filing patent application 30
421
10
Launch of new climate targets
  • SKF launched the SKF BeyondZero 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.

Growth target SEK 2.5 billion to SEK 10 billion
by 2016
11
Key focus areas ahead 2012
  • Managing the uncertain and different demand
    environment
  • - regions and segments
  • Profit and cash flow
  • - inventory management
  • Initiatives and actions to support long-term
    financial targets
  • Continue the integration of Lincoln
  • Business Excellence and competence development
  • Implement the new organization for the
    Industrial market

One SKF and SKF Care as guiding lights
12
Key focus areas ahead 2012
  • .
  • Managing the uncertain and different demand
    environment
  • - regions and segments
  • Profit and cash flow
  • - inventory management
  • Initiatives and actions to support long-term
    financial targets
  • Continue the integration of Lincoln
  • Business Excellence and competence development
  • Implement the new organization for the
    Industrial market

One SKF and SKF Care as guiding lights
13
SKF Group 2012
  • Financial performance 2012 2011
  • Net sales, SEKm 64,575 66,216
  • Operating profit, SEKm 7,333 9,612
  • Operating margin, 11.4 14.5
  • Profit before tax, SEKm 6,511 8,932
  • Cash flow, SEKm 3,555 3,848
  • Organic sales growth in local currency
  • SKF Group -2.5
  • Industrial market, Strategic Industries
    -3.0
  • Regional Sales and Service -1.8
  • Automotive -3.4
  • Key points
  • Sales volumes down by -3.9 y-o-y
  • Manufacturing significantly lower y-o-y
  • Inventories down to 19.9 of sales

Europe -4.7 North America 6.8 Asia -9.5 Lat
in America 11.3
14
Organic sales growth in local currency
change y-o-y
2012
2010
2011
15
Growth development by geography Organic growth
in local currency Q4 2012 vs Q4 2011
Europe-7
North America 2
Asia/Pacific -11
Latin America 9
Middle East Africa -9
16
Growth development by geography Organic growth
in local currency 2012 vs 2011
Europe-5
North America 7
Asia/Pacific -10
Latin America 11
Middle East Africa -2
17
Components in net sales
2010
2011
2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
5.3 16.6 19.0 16.3 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9
0.0 0.0 0.0 0.0 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0
-0.3 -0.5 0.3 0.9 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7
5.0 16.1 19.3 17.2 26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2
-7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6
-2.7 10.9 16.1 11.0 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8
Percent y-o-y

Volume
Structure
Price/mix
Sales in local currency
Currency Net sales

18
Growth in local currency, including structure
y-o-y
16.3
14.2
-2.1
Structure in 2011 4.8 Structure in 2012 0.4
19
Operating profit
SEKm
2010
2011
2012
One-time items
20
Operating margin

2010
2011
2012
One-time items
21
Operating margin

14.7
14.2
12.0
14.5
13.8
11.4
One-time items
Excluding one-time items
22
Operating margin per business area

Regional Sales and Service
Strategic Industries
Automotive
2010
2011
2012
Excluding one-off items(eg. restructuring,
impairments, capital gains)
23
Inventories as of annual sales

2010
2011
2012
24
Return on capital employed

24.0
23.6
16.2
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.
25
Cash flow, after investments before financing
SEKm


2010
2011
2012
SEK 798 million, excluding SEK 6,799 million
for the acquisition of Lincoln. SEK 1,707
million, excluding acquisitions and divestments.
26
Net debt
SEKm
AB SKF, dividend paid (SEKm) 2010 Q2 1,594 2011
Q2 2,277 2012 Q2 2,504
2010
2011
2012
Net debt Loans and net provisions for
post-employment benefits less short-term
financial assets excluding derivatives.
27
Debt structure on 31 December, maturity years
  • Available credit facilities
  • EUR 500 million 2017 SEK 3,000 million 2017
  • No financial covenants nor material adverse
    change clause

EURm
500
500
265
110
100
100
100
0
To adjust the debt structure Redemption of
bonds 2013 - EUR 131 million Early
repayment of loans 2014 - EUR 30 million
28
Fourth quarter 2012
SEKm 2012 2011
Net sales 14,984 16,257
Operating profit 1,227 2,006
Operating margin, 8.2 12.3
Profit before taxes 995 1,823
Net profit 1,011 1,205
Basic earnings per share, SEK 2.16 2.57
Cash flow, after investments before financing 1,076 853
29
Full year 2012
SEKm 2012 2011
Net sales 64,575 66,216
Operating profit 7,333 9,612
Operating margin, 11.4 14.5
Profit before taxes 6,511 8,932
Net profit 4,878 6,224
Basic earnings per share, SEK 10.37 13.29
Cash flow, after investments before financing 3,555 3,848
30
January 2013 SKF demand outlook Q1 2013
Demand compared to the first quarter 2012 The
demand for SKFs products and services is
expected to be lower for the Group. For Europe
it is expected to be significantly lower, for
Asia slightly lower and for North America and
Latin America relatively unchanged. The demand is
expected to be lower for Industrial Market,
Strategic Industries and SKF Automotive, for
Industrial Market, Regional, Sales and Services
it is expected to be slightly lower. Demand
compared to the fourth quarter 2012 The demand
for SKFs products and services is expected to be
relatively unchanged for the Group, for the
business areas and for the regions. Manufacturing
Manufacturing is expected to be lower year over
year and higher compared to fourth quarter.
31
SKF demand outlook Q1 2013, regions(based on
current assumptions)
Share of net sales 2012 Share of net sales 2012
Europe 43
Asia Pacific 24
North America 22
Latin America 8
Total
Q1 2013 vs Q1 2012
---
-


--
Sequential trend for Q1 2013





Previously published shares have been restated
in February 2013.
32
SKF demand outlook Q1 2013, business areas(based
on current assumptions
Share of net sales 2012 Share of net sales 2012
Strategic Industries 31
Regional Sales and Service 39
Automotive 27
Total
Q1 2013 vs Q1 2012
--
-
--
--
Sequential trend for Q1 2013




33
SKF sequential volume trend Q1 2013, main
segments(based on current assumptions)
Share of net sales 2012
6 2 29 13 13 12 10 6 4 5 Aerospace Two-wheelers and Electrical Industrial distribution Industrial, heavy, special and off-highway Cars and light vehicles Industrial, general Vehicle service market Energy Railway Trucks
Previously published shares have been restated
in February 2013.
34
Guidance for the first quarter 2013
  • Tax level around 30
  • Financial net for the first quarterAround SEK
    -200 million
  • Exchange rates on operating profit versus
    2012 Q1 SEK -50 million
  • Full year SEK -250 million
  • Additions to PPE Around SEK 1.7 billion for 2013

Guidance is approximate and based on current
assumptions and exchange rates
35
Dividend proposal
AB SKFs Board proposes an unchanged dividend
ofSEK 5.50 per share to the Annual General
Meeting
36
New IT systems
  • Primarily for Sales/customer relationship,
    Purchasing, Demand chain and Finance
  • New common IT infrastructure for all five
    technology platforms
  • To implement common, best practice processes
    across the SKF Group globally, enabling business
    efficiency, speed and growth
  • Will be implemented over a number of years with
    initial roll-out in 2014

37
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
38
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.

39
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