skf first-quarter results 2014

SKF First-quarter results 2014Tom Johnstone, President and CEO

15 April 2014

© SKF Group 15 April 2014

Highlights Q1 2014

Examples of new business

•Hindustan Aeronautics Ltd, India: customized bearings for helicopter transmission and main rotor

•Bell Helicopter Textron Inc.,USA: elastomeric bearings

•Turbogaz, Ukraina: magnetic bearings

•SCA, BillerudKorsnäs, Vattenfall, Sweden: condition monitoring solutions

•Geely Automobile, China: transmission seals

•Volkswagen, Germany: energy efficient tapered roller and ball bearings

•One of the largest cement producers major service contractin Latin America:

Slide 2

Examples of new products:

•Extended range of infrared thermometers


Awards received in Q1 2014

Customer awards

•Technical Cooperation Award, Goldwind

•Supplier of the Year Award, Varian Medical Systems

•Volvo Cars Quality Excellence (VQE) Award

•Excellent Supplier Award, Geely

•Excellent Quality Supplier Award, Hino Motors

•Supplier of the Year Award, General Motors

Slide 3

Golden Mousetrap Awards

Best Product of the Yearfor Electronics & Test, Editors of Design News


SKF Group – Q1 2014

Slide 4

Financial performance 2014 2013

Net sales, SEKm 16,734 15,152Operating profit, SEKm 2,024 1,480Operating margin, % 12.1 9.8Operating margin excl. one-time items, % 11.4 11.4Profit before tax, SEKm 1,787 1,237

Cash flow after investments before financing, SEKm -259 -892

Cash flow from operations, SEKm 314 403

Organic sales growth in local currency:

SKF Group: 5.8% Europe: 4%

Strategic Industries: 6.5% North America: 3%Regional Sales and Service: 3.0% Asia: 11%

Automotive: 8.1% Latin America: 4%

Key pointsSales volumes up by 6.2% y-o-yManufacturing higher compared to last year


Organic sales growth in local currency

Slide 5

% changey-o-y

2012 2013 2014


Organic sales growth in local currency

Slide 6

% y-o-y

Structure in 2012: 0.4%Structure in 2013: 2.5%Structure in 2014: 4.7%

-2.5%

-0.7%

5.8%


Growth development by geographyOrganic growth in local currency Q1 2014 vs Q1 2013

Slide 7

Europe4%

Asia/Pacific11%

Middle East& Africa

21%

LatinAmerica

4%

NorthAmerica

3%


Components in net sales

Slide 8

2012 2013 2014

Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

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

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7

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

Sales in local currency

1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5

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

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


Operating profit as reported

Slide 9

SEKm

2012 2013 2014


Operating profit excluding one-time items

Slide 10

SEKm

2012 2013 2014


Operating margin

Slide 11

%

5.8

11.3

12.0* 11.9*

One-time items

* Excluding one-time items

12.1

11.4*

© SKF Group 15 April 2014Slide 12

Regional Salesand Service

Specialty Business

Automotive

%

2012 2013 2014

Excluding one-time items(eg. restructuring, impairments, capital gains)

Operating margin per business area

Strategic Industries


Net working capital as % of annual sales

Slide 13

%

2012 2013 2014


Return on capital employed

Slide 14

%

14.6*

7.5 8.4

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.


Cash flow, after investments before financing

Slide 15

SEKm

2012 2013 2014

Excl. acquisitions and divestments:* Q3 2012 SEK 1,707 million** Q1 2013 SEK -69 million*** Q3 2013 SEK 871 million**** Q4 2013 SEK 1,170 million

****


Net debt

Slide 16

SEKm

2012 2013 2014

AB SKF, dividend paid (SEKm):2012 Q2 2,5042013 Q2 2,530

Cash out fromacquisitions (SEKm):

2012 Q3 8292013 Q1 8232013 Q4 7,900

Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.


Debt structure, maturity years

Slide 17

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

SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

200

100 100 110

500 500

850


First quarter 2014

Slide 18

SEKm 2014 2013

Net sales 16,734 15,152

Operating profit 2,024 1,480

Operating margin, % 12.1 9.8

Operating margin excl. one-time items % 11.4 11.4

Profit before taxes 1,787 1,237

Net profit 1,275 818

Basic earnings per share, SEK 2.72 1.74

Cash flow, after investments before financing -259 -892

Cash flow from operations 314 403


April 2014: SKF demand outlook Q2 2014

Slide 19

Demand compared to the second quarter 2013

The demand for SKF’s products and services is expected to be slightly higher for

the Group, North America and Asia. It is expected to be relatively unchanged for

Europe and slightly lower for Latin America. For Strategic Industries and

Automotive it is expected to be slightly higher and for Regional Sales and Service

relatively unchanged.

Demand compared to the first quarter 2014

The demand for SKF’s products and services is expected to be slightly higher for

the Group, for North America and Asia. It is expected to be relatively unchanged

for Latin America. For Strategic Industries and Automotive it is expected to be

slightly higher and for Regional Sales and Service relatively unchanged.

Manufacturing

Manufacturing is expected to be higher year over year and slightly higher

compared to the first quarter.


SKF demand outlook Q2 2014, main regions

Share of net sales 2013

Europe 42%

Asia Pacific 24%

North America 24%

Latin America 7%

Total

Q2 2014 vs Q2 2013

+/-

+

+

-

+

Slide 20

Sequential trend for Q2 2014


SKF demand outlook Q2 2014, main business areas


StrategicIndustries

29%

Regional Sales and Service

39%

Automotive 27%

Total

Q2 2014 vs Q2 2013

+

+/-

+

+

Slide 21

Sequential trend for Q2 2014


SKF sequential volume trend Q2 2014, Industries

Slide 22

5% Energy

14% Cars and light vehicles

11% Vehicle service market

6% Aerospace

4% Railway

2% Two-wheelers and Electrical

29% Industrial distribution

13% Industrial, heavy, special and off-highway

11% Industrial, general

5% Trucks



Guidance for the second quarter 2014*

Slide 23

• Tax level: around 30%

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

• Currency impact on operating profit versus 2013Q2: SEK -125 millionFull year: SEK -350 million

• Additions to PPE: Around SEK 1.6 billion for 2014

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


SKF’s priorities

Slide 24

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


Cautionary statement

Slide 25

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”.

skf first-quarter results 2014

Documents

skf group q1

operating profit

year award

local currency q1

sekm314403organic sales

local currencyslide

operating marginslide

geographyorganic growth