0 15 july 2008. the skf group half-year results 2008 tom johnstone, president and ceo
TRANSCRIPT
15 July 2008
1
The SKF Group
Half-year results 2008
Tom Johnstone, President and CEO
15 July 2008
3Highlights during the second quarter 2008
• SKF signed an agreement with PEER Bearing Company to acquire its manufacturing operations in China and Thailand. The acquisition is subject to certain conditions to closing and requires approvals by relevant authorities.
• SKF announced that the railway bearing plant in Russia will be located in Tver. The facility will be in operation in January 2010.
• SKF will increase the manufacturing capacity for large and medium size bearings at the new SKF factory in Dalian, China.
• SKF sold the operating assets of Roller Bearing Industries, Inc., USA, to Greenbrier Companies, USA. The company has an annual sales of around SEK 60 million, some 50 employees and was acquired by SKF in 2001.
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• SKF and Nestlé established a global training programme to improve and define best practices related to maintenance and reliability for reducing unplanned mechanical failures.
• The SKF Certified Rebuilder programme for electric motors was launched in Europe and Latin America.
• SKF distributed to shareholders a total of SEK 4,554 million in dividend and redemption.
• SKF arranged new long-term financing of SEK 1,500 million and EUR 250 million.
Highlights during the second quarter 2008
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SEKm 2008 2007
Net sales 16,077 14,963
Operating profit 2,135 2,019
Operating margin 13.3% 13.5%
Profit before taxes 1,978 1,957
Net profit 1,369 1,274
Basic earnings per share, SEK 2.95 2.71
Cash flow after operating investments before financial items 872 888
Cash flow after operating investments before financial items, excluding acquisitions
880 1,414
Second quarter 2008
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SEKm 2008 2007
Net sales 31,673 29,334
Operating profit 4,175 3,905
Operating margin 13.2% 13.3%
Profit before taxes 3,902 3,782
Net profit 2,665 2,488
Basic earnings per share, SEK 5.72 5.28
Cash flow after operating investments before financial items 741 235
Cash flow after operating investments before financial items, excluding acquisitions
803 975
First half year 2008
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7Operating margin
%
0123456789
1011121314
2006 2007
Long-term target level: 12%
2008
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8Operating margin
0
2
4
6
8
10
12
14
2006 2007 YTD June 2008
%
* excluding income from the jointly controlled company Oy Ovako Ab
12.6 12.9
11.3*
13.2
Long-term target level: 12%
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9
0
2
4
6
8
10
12
14
16
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per division
IndustrialService
Automotive
%
2006 2007 2008
Excluding one-time items (eg. restructuring, impairments, capital gains)
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10Sales in local currencies (excl. structural changes)
0
2
4
6
8
10
12
14
16% change y-o-y
2006 2007 2008
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02468
101214
2006 2007 YTD J une 2008
Growth development in local currency
% Y-o-Y
Acquisitions/DivestmentsOrganic growth
7.5*
13.2
* Excluding effect from Ovako:2006 10.1%
Long-term target level: 6-8% per annum
10.7
15 July 2008
12Net sales development per quarter
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
6.0 2.5 3.3 8.8 7.9 6.9 9.0 6.3 4.9 6.2
-4.9 -0.5 1.1 4.6 4.0 4.6 3.7 1.0 1.0 1.3
2.9 2.0 2.0 2.3 1.8 2.7 2.0 3.2 3.8 4.0
4.0 4.0 6.4 15.7 13.7 14.2 14.7 10.5 9.7 11.5
8.0 1.0 -2.1 -5.8 -5.6 -2.3 -1.9 -2.0 -1.2 -4.1
12.0 5.0 4.3 9.9 8.1 11.9 12.8 8.5 8.5 7.4
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency Currency
Net sales
2006 2007 2008
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13Cash flow, after operating investments before financial items
-700
-500-300
-100
100
300500
700
9001 100
1 300
1 500
1 700
2006 2007
SEKm
Cash out fromacquisitions (SEKm): 2006 2,1292007 1,2092008 YTD 62
Cash in from Ovako (SEKm):2006 Q4 1,2172007 Q2 46
2008
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14Net debt (Short-term financial assets minus loans and post-employment benefits)
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0
SEKm
AB SKF, dividend paid (SEKm):2006 Q2 1,8212007 Q2 2,0492008 Q2 2,277
Redemption (SEKm):
2007 Q2 4,5542008 Q2 2,277
2006 2007 2008
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18
19
20
21
22
23
Inventories as % of annual sales
%
2006 2007
Long-term target level: 18%
2008
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16Return on capital employed
23
24
25
26
27
2006 2007 YTD June 2008
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%
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17July 2008: Outlook for the third quarter 2008(compared to the second quarter 2008 and adjusted for seasonality )
The market demand for SKF’s products and services in the third quarter of 2008 is expected to be higher for the Group. The demand is expected to be higher in Europe, slightly lower in North America and significantly higher in both Asia and Latin America. The demand is expected to be higher in the Industrial Division and the Service Division and relatively unchanged for the Automotive Division.
The manufacturing level for the third quarter 2008 will be relatively unchanged compared to the second quarter 2008, and slightly higher than the third quarter 2007.
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18Volume development
Daily volume trend for: Q2 2008 Q3 2008
Net sales2007
Europe 56%
North America
18%
Asia Pacific 18%
Latin America
5%
Total
Outlook Q32008 vs
2007
++
-
+++
+++
++
15 July 2008
19Guidance for the third quarter 2008
• Tax level: 32%
• Financial net for third quarter:minus SEK 200 million
• Exchange rates on operating profit versus 2007Q3: minus SEK 130 million
Full year: minus SEK 500 million
• Additions to PPE: slightly above SEK 2 billion
Guidance is approximate and based on current assumptions and exchange rates
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20Solid, flexible debt structure and liquidity
0
1000
2000
3000
4000
5000
2008 2009 2010 2011 2012 2013 2014
Maturity years, SEK
250
2,300
1,500 1,400
4,600
9001) 2)3)
1) New bond loan2) New 5 year term-loan, repayment option, assumed to 20123) New private placement, 8 years, repayment option for SKF
from 2010
15 July 2008
21Key focus areas ahead
• Strengthen the platform/segment approach
• Maintain a positive price/mix
• Focus on fast growing segments and geographies
• Drive operational efficiency and Six Sigma
• Manage material costs and supply
• Attract and retain the best people
Use sustainability as a guiding light
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Community CareCommunity Care
Business CareBusiness Care
SKF Corporate Sustainability
Environment CareEnvironment Care
BeyondZeroTM
SKF CareSKF Care
Operating margin
Employee CareEmployee Care
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007
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23SKF Group Vision
To equip the worldwith SKF
knowledge
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