skf half-year results 2013
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SKF Half-year results 2013. Tom Johnstone, President and CEO. Highlights Q2 2013. New business 10-year contract worth SEK 900 million with Turbomeca service contracts worth SEK 200 million in Latin America contract for wheel hub bearing units (HBU3) to Volvo Car Corporation - PowerPoint PPT PresentationTRANSCRIPT
SKF Half-year results 2013Tom Johnstone, President and CEO
16 July 2013Slide 2© SKF Group
Highlights Q2 2013
Katowice, Poland Madrid, Spain
New business
• 10-year contract worth SEK 900 million with Turbomeca
• service contracts worth SEK 200 million in Latin America
• contract for wheel hub bearing units (HBU3) to Volvo Car Corporation
Two new SKF Solution Factories Inaugurated in Madrid, Spain and Katowice, Poland
Divestment, after quarter end
SKF divested its metallic rods business including the operations at the SKF sites in St. Vallier sur Rhône, France and Monroe, Washington, USA.
16 July 2013Slide 3© SKF Group
Highlights Q2 2013
Research programme
SKF and INSA Lyon started a research programme to study the behavior of lubricants under extreme conditions for aerospace.
SKF Windfarm Management Conference
SKF’s eighth SKF Windfarm Management Conference was held in Warsaw, Poland.
Asset Management ConferenceSKF hosted an Asset Management Conference in Dallas, USA with more than 160 customers.
SKF Distributor College awarded its 180,000th certificate.
16 July 2013Slide 4© SKF Group
New products - examples
SKF Steering boot kits for cars and light trucks.
SKF Telescopic pillars series CPMA and CPMB for medical equipment.
16 July 2013Slide 5© SKF Group
SKF Restructuring programme – costs and expected savings
Restructuring activities launched in:
SEKm Q4 2012 Q1 2013 Q2 2013 Total
One-off costs 200 250 190 640
Annual savings when fully implemented 150 100 80 330
The savings for the second half year 2013 will be around SEK 150 million, evenly split between the third and the fourth quarter.
16 July 2013Slide 6© SKF Group
SKF Group – Q2 2013
Financial performance 2013 2012
Net sales, SEKm 16,392 17,174Operating profit, SEKm 1,837 2,049Operating margin, % 11.2 11.9Operating margin excl. restructuring,% 12.4 12.7Profit before tax, SEKm 1,627 1,774Cash flow, SEKm 1,147 686
Organic sales growth in local currency:
SKF Group: -2.2%Strategic Industries: -7.6% Regional Sales and Service: -4.8% Automotive: 7.7%
Key points
Sales volumes down by -1.6% y-o-yManufacturing relatively unchanged compared to last yearInventories 21.6% of sales
Europe: -4%North America: -1%Asia: -4%Latin America: 14%
16 July 2013Slide 7© SKF Group
Organic sales growth in local currency
-10
-5
0
5
10
15
20
25
20132011 2012
% change y-o-y
16 July 2013Slide 8© SKF Group
Europe-4%
Asia/Pacific -4%
Latin America
14%Middle East
& Africa -3%
NorthAmerica
-1%
Growth development by geography Organic growth in local currency Q2 2013 vs Q2 2012
16 July 2013Slide 9© SKF Group
Europe-7%
Asia/Pacific -5%
Latin America
11%Middle East
& Africa -4%
NorthAmerica
-6%
Growth development by geography Organic growth in local currency YTD 2013 vs YTD 2012
16 July 2013Slide 10© SKF Group
Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6
5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6
1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6
26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4
-10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0
15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6
Percent y-o-y
Volume
Structure
Price/mix
Sales in local currency
Currency
Net sales
2011 2012 2013
16 July 2013Slide 11© SKF Group
-10
-5
0
5
10
15
20
2011 2012 YTD 2013
Growth in local currency, including structure
% y-o-y
Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in YTD 2013: 2.0%
-3.1%
16.3%
-2.1%
16 July 2013Slide 12© SKF Group
Operating profit
0
300
600
900
1 200
1 500
1 800
2 100
2 400
2 700
SEKm
2011
One-time items
2012 2013
16 July 2013Slide 13© SKF Group
%
0
2
4
6
8
10
12
14
16
2011
One-time items
2012 2013
Operating margin
16 July 2013Slide 14© SKF Group
0
2
4
6
8
10
12
14
16
2011 2012 YTD 2013
%
One-time items * Excluding one-time items
14.7*
11.9*
10.5
14.5 12.0*
Operating margin
11.4
16 July 2013Slide 15© SKF Group
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2011 2012 2013
Excluding one-off items(eg. restructuring, impairments, capital gains)
16 July 2013Slide 16© SKF Group
18
19
20
21
22
23
24
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Inventories as % of annual sales
%
2011 2012 2013
16 July 2013Slide 17© SKF Group
Return on capital employed
0
5
10
15
20
25
30
2011 2012 YTD 2013
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.
%
16.213.8
23.617.2*
15.3*
23.9*
One-off costs
* Excluding one-off costs
16 July 2013Slide 18© SKF Group
Cash flow, after investments before financing
-1 000
-500
0
500
1 000
1 500
2 000
2 500SEKm
2011 2012 2013
* SEK 1,707 million, excluding acquisitions and divestments.
** SEK -69 million, excluding acquisitions and divestments.
*
**
16 July 2013Slide 19© SKF Group
Net debt
-20 000
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0
SEKm
AB SKF, dividend paid (SEKm):2011 Q2 2,2772012 Q2 2,5042013 Q2 2,530
2011 2012 2013
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
Cash out fromacquisitions (SEKm):
2012 Q3 8292013 Q1 823
16 July 2013Slide 20© SKF Group
0
100
200
300
400
500
600
2013 2014 2015 2016 2017 2018 2019 2020
EURm
265
100100100
500
110
500
• Available credit facilities:EUR 500 million 2017 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
Debt structure, maturity years
100
16 July 2013Slide 21© SKF Group
SEKm 2013 2012
Net sales 16,392 17,174
Operating profit 1,837 2,049
Operating margin, % 11.2 11.9
Operating margin excl. one-offs, % 12.4 12.7
Profit before taxes 1,627 1,774
Net profit 1,104 1,244
Basic earnings per share, SEK 2.36 2.63
Cash flow, after investments before financing 1,147 686
Second quarter 2013
16 July 2013Slide 22© SKF Group
SEKm 2013 2012
Net sales 31,544 34,105
Operating profit 3,317 4,185
Operating margin, % 10.5 12.3
Operating margin excl. one-offs, % 11.9 12.7
Profit before taxes 2,864 3,730
Net profit 1,922 2,570
Basic earnings per share, SEK 4.10 5.44
Cash flow, after investments before financing 255* 1,382*
Half year 2013
* excluding acquisitions and divestments, SEK 1,078 million (1,401).
16 July 2013Slide 23© SKF Group
July 2013: SKF demand outlook Q3 2013
Demand compared to the third quarter 2012 The demand for SKF’s products and services is expected to be slightly higher for the Group, Asia and North America as well as for all the business areas. It is expected to be relatively unchanged for Europe and higher for Latin America.
Demand compared to the second quarter 2013 The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe, Asia and North America as well as for all the business areas. It is expected to be slightly higher for Latin America.
Manufacturing Manufacturing is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.
16 July 2013Slide 24© SKF Group
Share of net sales2012
Europe 43%
Asia Pacific 24%
North America 23%
Latin America 7%
Total
Q3 2013 vs Q3 2012
+/-
+
+
++
+
Sequential trend for Q3 2013
SKF demand outlook Q3 2013, regions
16 July 2013Slide 25© SKF Group
Sequential trend for Q3 2013
Share of net sales2012
Strategic Industries
31%
Regional Sales and Service
39%
Automotive 27%
Total
Q3 2013 vs Q3 2012
+
+
+
+
SKF demand outlook Q3 2013, business areas
16 July 2013Slide 26© SKF Group
6%
6%
5%
29%
13%
13%
12%
10%
4%
2%
Aerospace
Energy
Trucks
Industrial distribution
Industrial, heavy, special and off-highway
Cars and light vehicles
Industrial, general
Vehicle after market
Railway
Two-wheelers and electrical
Share of net sales 2012
SKF sequential volume trend Q3 2013, main segments
16 July 2013Slide 27© SKF Group
Guidance for the third quarter 2013*
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -200 million
• Currency impact on operating profit versus 2012Q3: SEK -100 millionFull year: SEK -450 million
• Additions to PPE: Around SEK 1.7 billion for 2013
* Guidance is approximate and based on current assumptions and exchange rates
16 July 2013Slide 28© SKF Group
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
16 July 2013Slide 29© SKF Group
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,
16 July 2013Slide 30© SKF Group
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 cost reduction• Working capital efficiency
Cost reduction• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs
Investments & Innovation • New and existing facilities• Research and development
16 July 2013Slide 31© SKF Group
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”.
16 July 2013Slide 32© SKF Group