0 15 july 2010. the skf group half-year results 2010 tom johnstone, president and ceo
TRANSCRIPT
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15 July 2010
The SKF Group
Half-year results 2010
Tom Johnstone, President and CEO
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Key points, Q2 report
• Record levels Operating profit: SEK 2,239 m (474). Q209 include SEK 500 m in restructuringOperating margin: 14.3% (3.4)
• Organic sales development in local currency:Industrial Division: +7.1%Service Division: +17.0%Automotive Division:+23.6%
Outlook for Q3
• DemandSignificantly higher compared to Q3 2009Slightly higher sequentially compared to Q2 2010, adjusted for normal
seasonality
• Manufacturing levelSignificantly higher year over yearRelatively unchanged compared to Q2 2010, adjusted for normal seasonality
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• SKF inaugurated: a new factory in Tver, Russia, to produce the new
generation of SKF’s sealed and pre-lubricated compact tapered bearing units for railway customers.
a Global Technical Centre China in Shanghai.
three new SKF Solution Factories, one in Schweinfurt, Germany, one in Montigny, France and one in Moscow, Russia.
Highlights 2010
• SKF signed a framework agreement with the State Forestry Administration in China to plant new forests.
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• SKF has assisted S-OIL, a large South Korean oil refinery, to increase productivity and reduce potential production downtime.
• SKF was awarded an agreement with ZF Sachs Italy to supply 140,000 oil seals and wiper seals for motorcycle forks.
• SKF signed a three-year contract with Valeo to supply SKF Rotor Positioning Bearings for the new i-StARS, Valeos stop-start system.
• SKF received the “Golden Mousetrap” award in the 2010 “Best products awards” for the new SKF Machine Condition Advisor.
Highlights 2010
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Sales volume
-35-30-25-20-15-10-505
101520
% change y-o-y
2008 2009 2010
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Sales in local currencies (excl. structural changes)
-30-25-20-15-10-505
101520
% change y-o-y
2008 2009 2010
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-20
-15
-10
-5
0
5
10
15
2008 2009 YTD J une 2010
Growth in local currency(Organic growth + acquisition/divestments)
% y-o-y
Acquisitions/Divestments
Organic growth
Long-term target level: 6-8% per annum
7.1%
-19.0%
10.4%
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Europe+9%
Asia/Pacific +36%
Latin America +24% Middle
East & Africa +9%
North America +11%
Growth development by geography Local currency Q2 2010 vs Q2 2009
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Europe+1%
Asia/Pacific +35%
Latin America +23% Middle East
& Africa +10%
North America
+6%
Growth development by geography Local currency H1 2010 vs H1 2009
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Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
4.9 6.2 2.7 -13.0 -26.9 -30.8 -24.9 -14.1 5.3 16.6
1.0 1.3 0.5 2.4 1.4 1.1 1.2 0.4 0.0 0.0
3.8 4.0 6.4 8.5 7.1 5.6 3.7 0.3 -0.3 -0.5
9.7 11.5 9.6 -2.1 -18.4 -24.1 -20.0 -13.4 5.0 16.1
-1.2 -4.1 -0.9 10.3 13.6 12.2 6.6 -1.4 -7.7 -5.2
8.5 7.4 8.7 8.2 -4.8 -11.9 -13.4 -14.8 -2.7 10.9
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency
Currency
Net sales
2008 2009 2010
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Operating profit
0200400600800
1 0001 2001 4001 6001 8002 0002 2002 400SEKm
2008 2009
Restructuring and one-time items
2010
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Operating margin
%
0
2
4
6
8
10
12
14
16
Long-term target level: 12%
2008 2009
Restructuring and one-time items
2010
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Operating margin
0
2
4
6
8
10
12
14
2008 2009 YTD June 2010
%
12.2
Long-term target level: 12%
5.7
12.7*
8.0*
Restructuring and one-time items* Excluding restructuring and one-time
items
13.1
13.4*
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-12-10-8-6-4-202468
1012141618
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per division
IndustrialService
Automotive
%
2008
Excluding one-off items(eg. restructuring, impairments, capital gains)
2009 2010
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SEKm 2010 2009
Net sales 15,709 14,167
Operating profit 2,239 474
Operating margin, % 14.3% 3.4%
Operating margin excl. restructuring, %
14.3% 6.9%
Profit before taxes 2,047 312
Net profit 1,451 323
Basic earnings per share, SEK 3.09 0.69
Cash flow after investments before financial items
1,160 2,425
Second quarter 2010
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SEKm 2010 2009
Net sales 30,155 29,016
Operating profit 3,941 1,242
Operating margin, % 13.1% 4.3%
Operating margin excl. restructuring, %
13.4% 6.6%
Profit before taxes 3,551 843
Net profit 2,521 717
Basic earnings per share, SEK 5.36 1.55
Cash flow after investments before financial items
1,192 2,948
Half year 2010
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18
19
20
21
22
23
24
25
Inventories as % of annual sales
% Long-term target level: 18%
2008 2009 2010
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Cash flow, after investments before financial items
-1 000
-500
0
500
1 000
1 500
2 000
2 500SEKm
Cash out fromacquisitions* (SEKm):
2008 1,2842009 241
2008 2009
* including non-controlling interests.
2010
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Return on capital employed
0
5
10
15
20
25
30
2008 2009 YTD June 2010
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.
%
Long-term target level: 24%
24.0
9.1
16.8
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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):2008 Q2 2,2772009 Q2 1,5942010 Q2 1,594
Redemption (SEKm): 2008 Q2 2,277
2008 2009 2010
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Debt structure
0
100
200
300
400
500
2010 2011 2012 2013 2014 2015 2016
Maturity years, EURm
55
450
130100100
• Repaid eurobond EUR 132 m, due June 2010• Repaid EUR 100 m on loan, due June 2013• New eurobond EUR 100 m, due April 2015
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June 2010: Outlook for the third quarter 2010
Development compared to third quarter last yearThe demand for SKF products and services is expected to be significantly higher for the Group, the divisions and for the different geographical areas.
Development compared to the second quarter 2010 and adjusted for normal seasonalityThe demand is expected to be slightly higher for the SKF Group in total. It is expected to be unchanged in Europe, slightly higher in North America and higher in Asia and Latin America. For the Automotive Division it is expected to be relatively unchanged and for the Industrial Division and Service Division it is expected to be slightly higher.
Manufacturing levelThe manufacturing level will be significantly higher year on year and relatively unchanged compared to the second quarter, adjusted for normal seasonality.
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Volume trends, regions(based on current assumptions and adjusted for seasonality)
Daily volume trends for: Q2 2010 Q3 2010
Net sales2009
Europe51%
North America
17%
Asia Pacific23%
Latin America
6%
Total
Outlook Q32010 vs
2009
+++
+++
+++
+++
+++
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Volume trends, divisions(based on current assumptions and adjusted for seasonality)
Daily volume trends for Q3
2010
Net sales2009
Industrial34%
Service35%
Automotive29%
Total
Outlook Q32010 vs
2009
+++
+++
+++
+++
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14%
7%
7%
5%
22%
16%
12%
11%
3%
3%
Cars
Aerospace
Energy
Railway
Industrial distribution
Industrial OEM,
General+Special
Vehicle Service Market
Industrial OEM, Heavy + Off-
highway
Electrical and two-wheeler
Trucks
Sequential volume trend main segments Q3 2010(based on current assumptions)
Net sales 2009
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Guidance for the third quarter 2010
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -175 million
• Exchange rates on operating profit versus 2009Q3: +/- 0Full year: SEK -250 million
• Additions to PPE: Around SEK 1.5 billion for 2010
Guidance is approximate and based on current assumptions and exchange rates.
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Key focus areas ahead 2010
• Profit and cash flow
• Adjustment of manufacturing output to new demand levels
• Growing segments and geographies
• Strengthening the platform/segment approach
• Competence development
SKF Care and Six Sigma as guiding lights
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SKF Care
Employee Care
Community CareEnvironmental Care
Business Care
BeyondZeroT
M
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008 2009
SKF Care
Operating margin
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SKF Group Vision
To equip the worldwith SKF
knowledge
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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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