skf year-end results 2013
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SKF Year-end results 2013. Tom Johnstone, President and CEO. Key achievements 2013. Acquisitions and divestments: acquisition of German-based ship components provider Blohm + Voss Industries (BVI) acquisition of US-based Kaydon Corporation - PowerPoint PPT PresentationTRANSCRIPT
SKF Year-end results 2013Tom Johnstone, President and CEO
© SKF Group
Key achievements 2013
28 January 2014Slide 2
Bearing
Acquisitions and divestments:
• acquisition of German-based ship components provider Blohm + Voss Industries (BVI)
• acquisition of US-based Kaydon Corporation
• divestment of the aerospace metallic rods business
New facilities:
• lubrication systems laboratory in SKF Global Technical Centre, India
• manufacturing unit in Pune in India for producing housings for bearings
• gearbox remanufacturing centre in Tianjin, China
• SKF opened six new SKF Solution Factories: in Toronto, Canada,in Manesar, India, in Urumqi, China and in Abu Dhabi, United Arab
Emirates. There are now 27 SKF Solution Factories worldwide.
© SKF Group Slide 3
Key achievements 2013
• In 2013, SKF provided around SEK 4 billion in verified savings for customers and since 2003 the accumulated figure is over SEK 27 billion.
• SKF Distributor College awarded its 200,000th certificate. The recipient is Yang Chunxiao, an employee of Shandong Jiarui Industry Develop Co, Ltd, one of SKF’s Certified Maintenance Partners in China, who completed a course on ”selling value”.
28 January 2014
SKF was included in the FTSE4Good Index Series for the 13th successive year
SKF was included in the Dow Jones Sustainability Indexes for the 14th successive year
• SKF’s factories in Ahmedabad, India and in Dalian, China was awarded LEED Gold certification.
© SKF Group
Examples of new business in Q4 2013
• SKF is providing bearings, lubrication systems and engineering support for a US-based pump producer for London’s Lee Tunnel Project is building its largest-ever waste water pump, which will contribute to London’s storm water and sewage overflow issues.
• SKF received an order for compact tapered bearing unit from Tikhvin Freight Car Building Plant, affiliated to United Wagon Company LLC. The value of the order is around SEK 120 million.
• SKF was awarded by CSR ZHUZHOU ELECTRIC CO., LTD in China a contract for locomotive bearings for a value of SEK 76 million.
• SKF gained lubrication business worth SEK 38 million from a heavy industry customer in Peru.
Slide 4 28 January 2014
• SKF started deliveries of wheel hub bearing units and MacPherson suspension bearing units to Volvo Car Corporation in their new factory in Chengdu, China for the delivery of the newly launched Volvo S60L car model.
• SKF received an order from Hyundai Motors as a supplier of the recently launched robust MacPherson suspension bearing unit. The value of the order is around SEK 370 million.
© SKF Group
Examples of new business in Q1 – Q3 2013
New business
• with Pratt & Whitney, to supply engine main shaft bearings
• with Nordex for delivery of main shaft bearings and lubrication systems
• for automated lubrication systems installed in the MSC Home Terminal cranes in Belgium’s Port of Antwerp
• with Turbomeca a 10-year contract worth SEK 900 million
• with Fiat for the delivery of wheel hub bearing units, worth SEK 1 billion
• with Great Wall Motors in China for high pressure valve stem seals, hub bearing units and bearing retainers. SKF and Great Wall Motors also signed a strategic partnership for developing sustainable solutions in energy efficient vehicles.
• with Goldwind for SKF Nautilus bearing units, worth SEK 100 million
• with Tangshan Loco and Changchun Railway Co for wheel set bearings for high speed trains
• with Wuhan Iron & Steel Heavy Industry Group Co, Ltd (WISCO Heavy) to establish a remanufacturing centre in Wuhan, China.
Slide 5 28 January 2014
© SKF Group 28 January 2014Slide 6
Examples of new technologies, products and solutions 2013
High pressure valve stem seal with lower friction
SKF Extended Life spherical plain bearing
An energy efficient high speed permanent magnet solution
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
SKF extreme temperature
bearings
SKF Telescopic pillars series CPMA and CPMB
for medical equipment
Robust angular steering column bearing
SKF InsightTM Internally powered sensors and data acquisition electronics sensing directly on the bearing
© SKF Group Slide 7
SKF Group – Q4 2013
Financial performance 2013 2012
Net sales, SEKm 16,430 14,984Operating profit, SEKm -1,547 1,221Operating margin, % -9.4 8.1Operating margin excl. one-time costs,% 11.0 10.2Profit before tax, SEKm -1,760 969Cash flow, SEKm -6,732 1,076
Organic sales growth in local currency:
SKF Group: 6.9%Strategic Industries: 6.5% Regional Sales and Service: 4.6% Automotive: 10.8%
Key points
Sales volumes up by 7.1% y-o-yManufacturing higher compared to last yearInventories 21.5% of sales (20.9% excluding Kaydon)
Europe: 3%North America: 4%Asia: 15%Latin America: 11%
28 January 2014
© SKF Group April 21, 2023Slide 8
SKF Group – 2013
Financial performance 2013 2012
Net sales, SEKm 63,59764,575Operating profit, SEKm 3,6937,314Operating margin, % 5.811.3Operating margin excl. one-time costs,% 11.9 12.0Profit before tax, SEKm 2,8216,408Cash flow, SEKm -5,3423,555
Organic sales growth in local currency:
SKF Group: -0.7%Strategic Industries: -4.1% Regional Sales and Service: -2.1% Automotive: 5.3% Key points
Sales volumes down by -0.7% y-o-yManufacturing relatively unchanged compared to last yearInventories 21.5% of sales (20.9% excluding Kaydon)
Europe: -3%North America: -3%Asia: 2%Latin America: 10%
28 January 2014
© SKF Group
Operating profit excluding one-time costs
SEKm Q4 2013 2013
Reported operating loss/profit -1,547 3,693
Reported operating margin -9.4% 5.8%
One-time costs:
European Commission provision -3,000 -3,000
Kaydon -260 -260
Other -90 -615
Total one-time costs -3,350 -3,875
Operating profit excl. one-time costs 1,803 7,568
Operating margin excl. one-time costs 11.0% 11.9%
Slide 9 28 January 2014
© SKF Group
Adjusted 2013 key figures
% Reported 2013Excl. EC
provisionExcl.
Kaydon
Inventories of annual sales 21.5 - 20.9
Net working capital of sales 31.7 - 30.6
ROCE 7.5 13.4 -
ROE 4.6 17.7 -
Equity/assets ratio 29.8 34.0 -
Gearing 52.9 56.0 -
Net debt/equity 117.3 102.7 -
Slide 10 28 January 2014
© SKF Group Slide 11
Organic sales growth in local currency
20132011 2012
% change y-o-y
28 January 2014
© SKF Group Slide 12
Europe3%
Asia/Pacific 15%
Latin America
11%Middle East
& Africa 16%
NorthAmerica
4%
Growth development by geography Organic growth in local currency Q4 2013 vs Q4 2012
28 January 2014
© SKF Group Slide 13
Europe-3%
Asia/Pacific 2%
Latin America
10%Middle East
& Africa 3%
NorthAmerica
-3%
Growth development by geography Organic growth in local currency 2013 vs 2012
28 January 2014
© SKF Group Slide 14
Components in net sales
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1
Structure 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8
Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -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 11.7
Currency -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1
Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6
2011 2012 2013
28 January 2014
© SKF Group Slide 15
Growth in local currency, including structure
% y-o-y
Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in 2013: 2.5%
1.8%
16.3%
-2.1%
28 January 2014
© SKF Group Slide 16
Operating profit as reported
SEKm
2011 2012 2013
28 January 2014
© SKF Group Slide 17
Operating profit excluding one-time items
SEKm
2011 2012 2013
28 January 2014
© SKF Group Slide 18
0
2
4
6
8
10
12
14
16
2011 2012 2013
%
One-time items * Excluding one-time items
14.7*
11.9*
5.8
14.5 12.0*
Operating margin
11.4
28 January 2014
© SKF Group Slide 19
Operating margin per business area
Strategic Industries
Regional Sales and Service
Automotive
%
2011 2012 2013
Excluding one-time items(eg. restructuring, impairments, capital gains)
28 January 2014
© SKF Group Slide 20
Inventories as % of annual sales
%
2011 2012 2013
28 January 2014
excl. Kaydon
© SKF Group Slide 21
Return on capital employed
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.
%
16.2
7.5
23.617.2*
15.1*
23.9*
One-time costs
* Excluding one-time costs
28 January 2014
© SKF Group
New ROCE and Net working capital targets
28 January 2014Slide 22
SKF financial targets Previous targets New targets
Operating margin level 15% 15%
Annual sales growth in local currencies
8% 8%
ROCE 27% 20%
Net working capital of sales - 27%
Inventories of sales 18% -
© SKF Group
Key elements of capital efficiency
18
20
22
24
26
28
30
02 03 04 05 06 07 08 09 10 11 12 13 *
-8 percentage points in 11 years
25
26
27
28
29
30
31
32
33
34
35
02 03 04 05 06 07 08 09 10 11 12 13 *
Flat over 11 years
Plant and property as % of sales Net working capital as % of sales
Main actions
•Continue PPE and sales ratio going forward
•Step-up activities to: - work with flexibility in our factories to reduce inventory - improve collection of accounts receivables - get effects on A/P from new purchasing activities
* Excluding Kaydon * Excluding Kaydon
28 January 2014Slide 23
© SKF Group Slide 24
Cash flow, after investments before financing
SEKm
2011 2012 2013
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
*
**
***
28 January 2014
****
© SKF Group Slide 25
Net debt
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 8232014 Q4 7,900
28 January 2014
© SKF Group
Debt structure, maturity years
28 January 2014Slide 26
EURm
100100100
500
110
500
850
• Available credit facilities:EUR 500 million 2017SEK 3,000 million 2016
SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
© SKF Group Slide 27
SEKm 2013 2012
Net sales 16,430 14,984
Operating loss/profit -1,547 1,221
Operating profit excl. one-time costs 1,803 1,521
Operating margin, % -9.4 8.1
Operating margin excl. one-time costs, % 11.0 10.2
Loss/profit before taxes -1,760 969
Net loss/profit -2,043 995
Basic earnings per share, SEK -4.57 2.12
Cash flow, after investments before financing -6,732 1,076
Fourth quarter 2013
28 January 2014
© SKF Group Slide 28
SEKm 2013 2012
Net sales 63,597 64,575
Operating profit 3,693 7,314
Operating profit excl. one-time costs 7,568 7,754
Operating margin, % 5.8 11.3
Operating margin excl. one-time costs, % 11.9 12.0
Profit before taxes 2,821 6,408
Net profit 1,044 4,816
Basic earnings per share, SEK 2.00 10.23
Cash flow, after investments before financing -5,342* 3,555*
Full year 2013
* excluding acquisitions and divestments, SEK 3,117 million (4,188). 28 January 2014
© SKF Group Slide 29
January 2014: SKF demand outlook Q1 2014
Demand compared to the first quarter 2013The demand for SKF’s products and services is expected to be slightly higher for the Group, Europe and North America. It is expected to be slightly lower in Latin America and higher in Asia Pacific. For Strategic Industries it is expected to be relatively unchanged, for Regional Sales and Service slightly higher and for Automotive higher.
Demand compared to the fourth quarter 2013The demand for SKF’s products and services is expected to be slightly higher for the Group, Europe and North America. It is expected to be relatively unchanged in Asia Pacific and slightly lower in Latin America. For Regional Sales and Service and Automotive it is expected to be slightly higher and for Strategic Industries relatively unchanged.
Manufacturing Manufacturing is expected to be higher year over year and slightly higher compared to the fourth quarter.
28 January 2014
© SKF Group Slide 30
Share of net sales2013
Europe 42%
Asia Pacific 24%
North America 24%
Latin America 7%
Total
Q1 2014 vs Q1 2013
+
++
+
-
+
Sequential trend for Q1 2014
SKF demand outlook Q1 2014, regions
28 January 2014
© SKF Group Slide 31
Sequential trend for Q1 2014
Share of net sales2013
Strategic Industries
29%
Regional Sales and Service
39%
Automotive 27%
Total
Q1 2014 vs Q1 2013
+/-
+
++
+
SKF demand outlook Q1 2014, business areas
28 January 2014
© SKF Group Slide 32
29%
14%
11%
11%
12%
5%
5%
3%
5%
5%
Industrial distribution
Cars and light vehicles
Vehicle service market
Industrial, general
Industrial, heavy, special and off-highway
Energy
Aerospace
Two-wheelers and Electrical
Railway
Trucks
Share of net sales 2013
SKF sequential volume trend Q1 2014, main segments
28 January 2014
© SKF Group Slide 33
Guidance for the first quarter 2014*
• Tax level: around 30%
• Financial net for the first quarter:Around SEK -250 million
• Currency impact on operating profit versus 2013Q1: SEK -90 millionFull year: SEK -300 million
• Additions to PPE: Around SEK 1.6 billion for 2014
* Guidance is approximate and based on current assumptions and exchange rates
28 January 2014
© SKF Group Slide 34
Dividend proposal
AB SKF’s Board proposes an
unchanged dividend of
SEK 5.50 per share
to the Annual General Meeting
28 January 2014
© SKF Group Slide 35
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 capital• Net working capital
Cost reduction• Business Excellence• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs
Investments & Innovation • New and existing facilities• Research and development• IT systems and mobility
28 January 2014
© SKF Group Slide 36
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,
28 January 2014
© SKF Group
SKF cost reduction programme - restructuring status
SEKmQ4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013 2013 Total
Cost 200 250 190 15 50 505 705
Full year saving 150 100 80 5 40 225 375
People 530 410 320 15 130 875 1,405
© SKF Group Slide 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”.
28 January 2014
© SKF Group 15 October 2013Slide 39