skf half-year results 2012 tom johnstone, president and ceo 18 july 2012
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SKF Half-year results 2012
Tom Johnstone, President and CEO
18 July 2012
18 July 2012 Slide 2© SKF Group
• New businesses- A five-year contract for integrated maintenance solutions with
the Brazilian pulp and paper company Fibria.
- A seven-year contract with Volvo Car Corporation for the delivery of rear wheel bearing units and front suspension bearing units.
- A three-year supply agreement for the new generation NautilusTM bearing with a major wind turbine manufacturer.
• New facilities:- Railway test centre in Tver, Russia
- SKF Solution Factory in Perth, Australia
• New products: • New app:
Highlights Q2 2012
New generation SKF System 24
Shaft sealing solution SKF Seal Select
App
18 July 2012 Slide 3© SKF Group
Highlights Q2 2012
• SKF launched the BeyondZeroTM portfolio with products and solutions, which will both improve energy efficiency and reduce the environmental impact.
• SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme.
• SKF announced the divestment of its distributor businesses in Australia and New Zealand
• SKF renewed its partnership with Scuderia Ferrari.
Growth target:
SEK 2.5 bn to SEK 10 bn by 2016
18 July 2012 Slide 4© SKF Group
SKF Group - Q2 2012
Financial performance Q2 2012 Q2 2011Net sales, SEKm 17,174 16,712Operating profit, SEKm 2,053 2,623Operating margin, % 12.0 15.7Profit before tax, SEKm 1,801 2,446Cash flow, SEKm 686 1,300
SKF took steps to reduce its cost base in Europe. The quarter included one-time costs of around SEK 140 million.
Organic sales growth in local currency:SKF Group: -0.8%Europe: -3.4% Industrial market, Strategic Industries: +0.6% North America: +8.5% Industrial market, Regional Sales and Service:+0.6%Asia: -7.9% Automotive: -4.6%Latin America: +16.6%
Key points Volumes down by 2.8% y-o-yManufacturing level significantly lower y-o-yInventories relatively unchanged
18 July 2012 Slide 5© SKF Group
Organic sales growth in local currency
0
5
10
15
20
25
20122010 2011
% change y-o-y
18 July 2012 Slide 6© SKF Group
Sales volume
-5
0
5
10
15
20
25
% change y-o-y
2010 2011 2012
18 July 2012 Slide 7© SKF Group
Europe-3.4%
Asia/Pacific -7.9%
Latin America +16.6% Middle
East & Africa
+1.7%
NorthAmerica +8.5%
Growth development by geography Organic growth in local currency Q2 2012 vs Q2 2011
18 July 2012 Slide 8© SKF Group
Europe-2.3%
Asia/Pacific -8.0%
Latin America +13.8% Middle
East & Africa
+2.2%
North America +11.6%
Growth development by geography Organic growth in local currency YTD 2012 vs YTD 2011
18 July 2012 Slide 9© SKF Group
-5
0
5
10
15
20
2010 2011 YTD 2012
Growth in local currency
% y-o-y
* whereof acquisition 4.8%
Long-term target: 8% per annum
14.2%
16.3%*
0.1%
18 July 2012 Slide 10© SKF Group
Components in net sales
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
5.3 16.6 19.0 16.3 20.1 12.6 6.2 0.0 -0.8 -2.8
0.0 0.0 0.0 0.0 5.0 4.4 5.1 4.8 -0.1 0.0
-0.3 -0.5 0.3 0.9 1.3 1.6 2.0 2.8 1.9 2.0
5.0 16.1 19.3 17.2 26.4 18.6 13.3 7.6 1.0 -0.8
-7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -2.1 0.4 3.6
-2.7 10.9 16.1 11.0 15.6 6.4 7.0 5.5 1.4 2.8
Percent y-o-y
Volume
Structure
Price/mix
Sales in local currency
Currency
Net sales
2010 2011 2012
18 July 2012 Slide 11© SKF Group
Operating profit
0
300
600
900
1 200
1 500
1 800
2 100
2 400
2 700
SEKm
2010
One-time items
2011 2012
18 July 2012 Slide 12© SKF Group
%
0
2
4
6
8
10
12
14
16
2010
One-time items
2011 2012
Operating margin
Long-term target level: 15%
18 July 2012 Slide 13© SKF Group
0
2
4
6
8
10
12
14
16
2010 2011 YTD 2012
%
One-time items * Excluding one-time items
14.7*
Long-term target level: 15%
14.2*
13.8 14.5 12.7*
Operating margin
12.3
18 July 2012 Slide 14© SKF Group
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
%
2010 2011 2012
Excluding one-off items(eg. restructuring, impairments, capital gains)
18 July 2012 Slide 15© SKF Group
SEKm 2012 2011
Net sales 17,174 16,712
Operating profit 2,053 2,623
Operating margin, % 12.0 15.7
Profit before taxes 1,801 2,446
Net profit 1,260 1,743
Basic earnings per share, SEK 2.67 3.76
Cash flow, after investments before financing
686 1,300
Second quarter 2012
18 July 2012 Slide 16© SKF Group
SEKm 2012 2011
Net sales 34,105 33,414
Operating profit 4,193 5,127
Operating margin, % 12.3 15.3
Profit before taxes 3,782 4,764
Net profit 2,601 3,363
Basic earnings per share, SEK 5.51 7.20
Cash flow, after investments before financing
1,382 1,672
Half year 2012
18 July 2012 Slide 17© SKF Group
18
19
20
21
22
23
24
25
Inventories as % of annual sales
%
Long-term target level: 18%
2010 2011 2012
18 July 2012 Slide 18© SKF Group
Cash flow, after investments before financing
-6 000
-5 000
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
SEKm
2010 2011 2012
* SEK 798 million, excluding SEK 6,799 million for the acquisition of Lincoln.
*
18 July 2012 Slide 19© SKF Group
Return on capital employed
0
5
10
15
20
25
30
2010 2011 YTD 2012
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.
%
20.0
24.0
Long-term target: 27%
23.6
18 July 2012 Slide 20© 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):2010 Q2 1,5942011 Q2 2,2772012 Q2 2,504
2010 2011 2012
Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
Cash out from acquisition (SEKm):2010 6,799
18 July 2012 Slide 21© SKF Group
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018
Debt structure, maturity years
EURm
396
100100
• Credit facilities:EUR 500 million
2014 SEK 3,000 million 2017
• No financial covenants nor material adverse change clause
130
500
110
0
18 July 2012 Slide 22© SKF Group
July 2012: SKF demand outlook Q3 2012
Demand compared to the third quarter last yearThe demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be lower in Europe, relatively unchanged in Asia, higher in North America and slightly higher in Latin America. The demand is expected to be slightly higher for Industrial Strategic Industries and relatively unchanged for Automotive and Industrial Regional Sales and Service.
Demand compared to the second quarter 2012The demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be slightly lower in Europe, relatively unchanged in Asia and North America and higher in Latin America. The demand is expected to be relatively unchanged for Industrial Strategic Industries and Industrial Regional Sales and Service and slightly lower for Automotive.
Manufacturing level The manufacturing level is expected to be lower year on year and slightly lower compared to the second quarter.
18 July 2012 Slide 23© SKF Group
SKF demand outlook Q3 2012, regions
Sequential trends for: Q2 2012 Q3 2012
Share of net sales2011*
Europe44%
Asia Pacific28%
North America
19%
Latin America
8%
Total
Q3 2012 vs Q3 2011
-
+/-
++
+
+/-
* Previously published shares have been restated to reflect the total Group business and customer delivery locations.
18 July 2012 Slide 24© SKF Group
SKF demand outlook Q3 2012, business areas
Sequential trends for Q3 2012
Share of net sales2011
Strategic Industries
31%
Regional Sales and Service
39%
Automotive 27%
Total
Q3 2012 vs Q3 2011
+
+/-
+/-
+/-
18 July 2012 Slide 25© SKF Group
5%
5%
28%
13%
12%
10%
4%
3%
13%
5%
Energy
Aerospace
Industrial distribution
Industrial, general
Industrial, heavy, special and off-highway
Vehicle service market
Railway
Two-wheelers and electrical
Cars and light vehicles
Trucks
SKF sequential demand trend Q3 2012
Share of net sales 2011*
* Previously published shares have been restated to reflect the total Group business and customer delivery locations.
18 July 2012 Slide 26© SKF Group
Guidance for the third quarter 2012
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -180 million
• Exchange rates on operating profit versus 2011Q3: SEK 125 millionFull year: SEK 350 million
• Additions to PPE: Around SEK 2.0 billion for 2012
Guidance is approximate and based on current assumptionsand exchange rates
18 July 2012 Slide 27© SKF Group
Key focus areas ahead 2012
• Managing the uncertain and different demand environment
- regions and segments
• Profit and cash flow- inventory management
• Initiatives and actions to support long-term financial targets
• Continue the integration of Lincoln
• Business Excellence and competence development
• Implement the new organization for the Industrial market
One SKF and SKF Care as guiding lights
18 July 2012 Slide 28© 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”.
18 July 2012 Slide 29© SKF Group
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