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SKF Nine-month results 2013

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Title: SKF Nine-month results 2013


1
SKF Nine-month results 2013
  • Tom Johnstone, President and CEO

2
Highlights Q3 2013
  • Acquisition of Kaydon Corporation announced.
  • New business
  • Agreements with Fiat, worth SEK 1 billion for
    the delivery of wheel hub bearing units.
  • Agreements with Great Wall Motors in China for
    high pressure valve stem seals and bearing
    retainers. SKF and Great Wall Motors also signed
    a strategic partnership for developing
    sustainable solutions in energy efficient
    vechicles.
  • A supply agreement with Goldwind, worth SEK 100
    million for SKF Nautilus bearing units.
  • Major orders from Tangshan Loco and Changchun
    Railway Co for wheel set bearings for high
    speed trains.
  • Order from a Chinese customer, worth SEK 22
    million for bearings for upgrading local coal
    power plants.
  • An order from an European customer, worth SEK 21
    million for cryogenic bearings.

3
Highlights Q3 2013
  • A three-year service contract, worth SEK 43
    million with a major oil and gas company in
    Latin America.
  • An agreement with Wuhan Iron Steel Heavy
    Industry Group Co, Ltd (WISCO Heavy) to
    establish a remanufacturing centre in Wuhan,
    China.
  • SKF opened a gearbox remanufacturing centre in
    Tianjin, China.
  • SKF Distributor College awarded its 190,000th
    certificate.

SKFs factory in Dalian, China was awarded LEED
Gold certification.
SKF was included in the Dow Jones Sustainability
Indexes for the 14th successive year.
4
Kaydon Corporation
  • Key facts and figures - 2012
  • Headquarters in Ann Arbor, Michigan U.S.
  • Established 1941
  • USD 475 million in sales
  • 2,187 employees

Friction control 54
Specialty products 23
Velocity control 23
5
Kaydon net sales 2012
Industries
Geographies
Other
Automation Robotics
Asia
Other
Power Generation
Europe
Semicond.
Petroleum Processing
North America
Medical Equipment
Aerospace
Heavy Equipment
Military
6
New products - examples
Sealed SKF single row angular contact ball
bearings
Reinforced all-rubber HSS seals
Super precisions bearings for wood-working
applications
SKF Axial excluder seal
SKF Condition Based Lubrication
Maintenance products
Grid and gear coupling grease
Oil storage station
Digital oil pressure gauge
7
SKF Group Q3 2013
  • Financial performance 2013 2012
  • Net sales, SEKm 15,623 15,486
  • Operating profit, SEKm 1,923 1,908
  • Operating margin, 12.3 12.3
  • Operating margin excl. restructuring, 12.9
    12.3
  • Profit before tax, SEKm 1,717 1,709
  • Cash flow, SEKm 1,135 1,097
  • Organic sales growth in local currency
  • SKF Group 2.0
  • Strategic Industries -0.9
  • Regional Sales and Service 0.3
  • Automotive 7.5
  • Key points
  • Sales volumes up by 2.2 y-o-y
  • Manufacturing slightly higher compared to last
    year
  • Inventories 21.3 of sales

Europe 1 North America -2 Asia 5 Latin
America 9
8
Organic sales growth in local currency
change y-o-y
2011
2013
2012
9
Growth development by geography Organic growth
in local currency Q3 2013 vs Q3 2012
Europe 1
North America -2
Asia/Pacific 5
Latin America 9
Middle East Africa 8
10
Growth development by geography Organic growth
in local currency YTD 2013 vs YTD 2012
Europe -4
North America -4
Asia/Pacific -3
Latin America 10
Middle East Africa 0
11
Components in net sales
2013
2011
2012
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2
Structure 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6 1.1
Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2
Sales in local currency 26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1
Currency -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2
Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9
12
Growth in local currency, including structure
y-o-y
16.3
-1.2
-2.1
Structure in 2011 4.8 Structure in
2012 0.4 Structure in YTD 2013 1.8
13
Operating profit
SEKm
2012
2011
2013
One-time items
14
Operating margin

2011
2012
2013
One-time items
15
Operating margin

14.7
12.2
12.0
14.5
11.4
11.1
One-time items
Excluding one-time items
16
Operating margin per business area

Regional Sales and Service
Strategic Industries
Automotive
2012
2011
2013
Excluding one-off items (eg. restructuring,
impairments, capital gains)
17
Inventories as of annual sales

2011
2012
2013
18
Return on capital employed
One-off costs
Excluding one-off costs

23.9
23.6
17.2
15.2
16.2
13.5
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.
19
Cash flow, after investments before financing
SEKm



2011
2012
2013
SEK 1,707 million, excluding acquisitions
and divestments. SEK -69 million, excluding
acquisitions and divestments. SEK 871
million, excluding acquisitions and divestments.
20
Net debt
SEKm
AB SKF, dividend paid (SEKm) 2011 Q2 2,277 2012
Q2 2,504 2013 Q2 2,530
Cash out from acquisitions (SEKm) 2012
Q3 829 2013 Q1 823
2012
2011
2013
Net debt Loans and net provisions for
post-employment benefits less short-term
financial assets excluding derivatives.
21
Debt structure, maturity years
EURm
500
500
265
110
100
100
100
100
  • Available credit facilities
  • EUR 500 million 2017 SEK 3,000 million 2017
  • No financial covenants nor material adverse
    change clause

22
Third quarter 2013
SEKm 2013 2012
Net sales 15,623 15,486
Operating profit 1,923 1,908
Operating margin, 12.3 12.3
Operating margin excl. one-offs, 12.9 12.3
Profit before taxes 1,717 1,709
Net profit 1,165 1,251
Basic earnings per share, SEK 2.47 2.67
Cash flow, after investments before financing 1,135 1,097
23
Nine-month 2013
SEKm 2013 2012
Net sales 47,167 49,591
Operating profit 5,240 6,093
Operating margin, 11.1 12.3
Operating margin excl. one-offs, 12.2 12.6
Profit before taxes 4,581 5,439
Net profit 3,087 3,821
Basic earnings per share, SEK 6.57 8.11
Cash flow, after investments before financing 1,390 2,479
excluding acquisitions and divestments, SEK
1,947 million (3,112).
24
October 2013 SKF demand outlook Q4 2013
Demand compared to the fourth quarter 2012 The
demand for SKFs products and services is
expected to be slightly higher for the Group,
Asia and Europe and relatively unchanged for
North America and Latin America. It is expected
to be slightly higher for Strategic Industries
and Regional Sales and Service and higher for
Automotive. Demand compared to the third quarter
2013 The demand for SKFs products and services
is expected to be relatively unchanged for the
Group, Europe, North America and Latin America as
well as for all the business areas. It is
expected to be slightly higher for
Asia. Manufacturing Manufacturing is expected
to be higher year over year and relatively
unchanged compared to the third quarter.
25
SKF demand outlook Q4 2013, regions
Share of net sales 2012 Share of net sales 2012
Europe 43
Asia Pacific 24
North America 23
Latin America 7
Total
Q4 2013 vs Q4 2012


/-
/-

Sequential trend for Q4 2013





26
SKF demand outlook Q4 2013, business areas
Share of net sales 2012 Share of net sales 2012
Strategic Industries 31
Regional Sales and Service 39
Automotive 27
Total
Q4 2013 vs Q4 2012




Sequential trend for Q4 2013




27
SKF sequential volume trend Q4 2013, main segments
Share of net sales 2012
6 5 4 2 29 13 13 12 10 6 Aerospace Trucks Railway Two-wheelers and electrical Industrial distribution Industrial, heavy, special and off-highway Cars and light vehicles Industrial, general Vehicle after market Energy
28
Guidance for the fourth quarter 2013
  • Tax level a little above 30
  • Financial net for the fourth quarter Around SEK
    210 million excluding Kaydon acquisition
  • Currency impact on operating profit versus
    2012 Q4 SEK 120 million
  • Full year SEK 630 million
  • Additions to PPE Around SEK 1.7 billion for 2013

Guidance is approximate and based on current
assumptions and exchange rates
29
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
30
SKFs 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
  • Investments Innovation
  • New and existing facilities
  • Research and development
  • Cost reduction
  • Consolidation of manufacturing
  • Optimization and productivity improvements
  • Reduction in purchasing costs

31
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,

32
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.

33
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