skf q3 results 2017 · skf simpro quick –an easier and faster bearing evaluation tool for shaft...

SKF Q3 results 2017

Alrik Danielson, President and CEO

© SKF Group

Digitalisation and connectivity

SKF SimPro Quick – an easier and faster bearing

evaluation tool for shaft analysis

IMx-8 remote condition monitoring solution selected by

Sirius Shipping

Investments

New European aeronautical test centre dedicated to

high-speed aeronautical bearings in France

Investments in increased automation in the US and in

Germany

Structure

Decision to consolidate seals manufacturing in the US

Key events in the third quarter

New line of spherical roller bearings for the wind industry

Sven Wingquist Test CentreBearing being mounted in the test rig

© SKF Group

Sales SEK 18 627 M, organic sales +8.0% compared to Q3 2016

Adjusted operating profit SEK 2 211 M (1 811)

Adjusted operating margin 11.9% (10.1)

Items affecting comparability SEK -246 M (+380)

Cash flow SEK 681 M (1 554)

Profit before tax SEK 1 692 M (2 049)

Continued organic growth and margin improvement in Q3

Q3 Q4 Q1 Q2 Q3 17

Net sales, SEK18.6 bn

17.9 bn

Q3 Q4 Q1 Q2 Q3 17

Operating profit*, SEK2.2 bn

1.8 bn

11.9%Operating margin*

* Adjusted for items affecting

comparability

© SKF Group

Industrial distribution

- price increases implemented in all markets

Industrial Original Equipment Manufacturers and end users

- prices have been increased where contractual terms allow

Automotive vehicle aftermarket

- price increases implemented

Automotive Original Equipment Manufacturers

- relatively unchanged prices

Pricing

© SKF Group

Sales development by geographyOrganic growth in local currency Q3 2017 vs Q3 2016

Europe

+6.3%

Asia/Pacific

+11.8%

Middle East

& Africa

+23.3%

Latin

America

+14.1%

North

America

+3.3%

Q3 results – the detailsChristian Johansson, CFO

© SKF Group

Sales development

Q3 Q4 Q1 Q2 Q3 17

Net sales, SEK bn

18.6

17.9

2016 2017

Percent y-o-y Q3 Q4 Q1 Q2 Q3

Organic -0.6 +1.2 +8.0 +7.5 +8.0

Structure -2.0 -1.8 -2.0 -2.0 -0.7

Currency +0.1 +3.7 +4.9 +4.9 -3.0

Net sales -2.5 +3.1 +10.9 +10.4 4.3

© SKF Group

Organic sales growth

-10

-8

-6

-4

-2

0

2

4

6

8

10

% change

y-o-y

2013 2014 2015 2016 2017

© SKF Group

Adjusted operating profit*

0

2

4

6

8

10

12

0

0,5

1

1,5

2

2,5

3

Th

ou

san

ds

Th

ou

san

ds

2014 2015 2016

2.2

1.82.1

2.0

2017

* Adjusted for items affecting comparability

SEK bnSEK bn, 12m

moving

© SKF Group

Operating profit

0

500

1 000

1 500

2 000

2 500

-641

1 965

+778

-105

-201

-24

2 191

Q3 2016 Q3 2017Items affecting

comparability

at 2016

exchange

rates

ERP

system

Unite

Cost

development

Organic sales

&

manufacturing

volumes

Divested/

acquired

companies

Currency

impact

-33

Operational performance:

+544

SEKm

© SKF Group

Industrial

Net sales SEK 12 960

Organic sales +9.5%

Adjusted operating margin* 13.8%

Automotive

Net sales SEK 5 667 M

Organic sales +4.9%

Adjusted operating margin* 7.6%

Performance by customer groupIndustrialAdjusted operating margin*, %

13.8%

11.7%12.8%

AutomotiveAdjusted operating margin*, %

7.6%

6.6%5.8%

* Adjusted for items affecting comparability

© SKF Group

SKF Group – Q3 2017

Q3 Q4 Q1 Q2 Q3 17

Gross profit margin, excl IAC

25.7%23.7%

Q3 Q4 Q1 Q2 Q3 17

Taxes, SEK

34.6%-660

11.9%Operating margin*

* Adjusted for items affecting

comparability

Financial performance (SEKm) 2017 2016

Net sales 18 627 17 862

Cost of goods sold -14 066 -13 373

Gross profit 4 561 4 489

Gross margin, % 24.5 25.1

Gross margin, excluding IAC, % 25.7% 23.7%

Selling and administrative expenses -2 583 -2 310

Other operating expenses -13 -12

Operating profit 1 965 2 191

Items affecting comparability -246 +380

Adjusted operating profit 2 211 1 811

Operating margin, % 10.5 12.2

Adjusted operating margin, % 11.9 10.1

Financial income and expense, net -273 -142

Profit before taxes 1 692 2 049

Taxes -586 -660

Net profit 1 106 1 389

Basic earnings per share, SEK 2.29 2.97

-586

The fixed cost index was 99 at the end of Q3, adjusted for the costs related to the

implementation of our new ERP system Unite the index was 95.

The number of employees increased by 680 in the quarter, adjusted for the divestment of

Reelcraft, – of which 538 permanent employees, and 142 temporary employees including

agency personnel.

Activity-based cost reductions continue with high focus

Cost management

80

85

90

95

100

105

110Fixed cost index

4042444648505254

Th

ou

san

ds

Employees, including agency and temporary personnel

51,72949,721

© SKF Group

Cash flow after investments before financing*

-4 000

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

-1 000

0

1 000

2 000

3 000

SEKm

2013 2014 2015

* After investments before financing (excluding acquisitions and divestments and EU payment in Q2 2014.)

2013 and 2014 are restated

2016 2017

© SKF Group

Net working capital 29.4% of annual sales

0

5

10

15

20

25

30

35

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2014 2015 2016

Target: 25%

Total NWC 29.4%

Inventories 21.6%

Trade receivables 17.5%

Trade payables 9.7%

30.3%

21.0%

18.3%

9.0%

2017

%

© SKF Group

Net debt, SEK bn Net debt/equity, %

Net debt decreased by 1.3 billion in the quarter

-35

-30

-25

-20

-15

-10

-5

0

Net fin debt Post-empl. benefits

2013 2014 2015 2016

0%

20%

40%

60%

80%

100%

120%

140%

160%

Net debt/equity

Net debt, excl post empl.benefits/equity

79%

2013 2014 2015 2016

37%

2017 2017

© SKF Group

Q4 2017:

Financial net: around -225 million

Currency impact on the operating profit is expected to around 300 million negative

compared with 2016, based on exchange rates per September 30, 2017.

2017:

Tax level: around 30% for 2017, excluding effects from divestments

Additions to property, plant and equipment: around 2,200 million for

2017

Guidance for 2017*

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

© SKF Group

Demand compared to the fourth quarter 2016

The demand for SKF’s products and services is expected to be higher for the Group,

including Industrial and Automotive. Demand is expected to be higher in Europe, North

America and in Asia and significantly higher in Latin America.

Demand compared to the third quarter 2017

The demand for SKF’s products and services is expected to be relatively unchanged for the

Group including Industrial and Automotive. Demand is expected to be slightly higher in

Europe and relatively unchanged in North America, Asia and in Latin America.

October 2017: SKF demand outlook Q4 2017

© SKF Group

Financial calendar

Q3 report 31 October

London-Paris Roadshow 7-8 November

Goldman Sachs Conference London 27 November

Roadshow Asia 29-30 November

SKF in China 1 December

Q4 report 1 February, 2018

SKF Q3 results 2017Q & A

© SKF Group

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;

“Risk management at SKF" and "Sensitivity analysis”.

Cautionary statement