skf nine-month results 2012

SKF Nine-month results 2012

Tom Johnstone, President and CEO

17 October 2012

© SKF Group 17 October 2012Slide 2

Strong performance in a challenging market

• Weaker sales during the quarter, impacted by overall economy

• Significantly lower manufacturing and inventories reduced

• Good operating margin

• Strong cash flow

• Further investments to support long-term growth and profitability


• Acquisition and divestments completed

- acquisition of General Bearing Corporation (GBC)

- divestment of the SKF distributor businesses in Australia and New Zealand

• New businesses - magnetic bearings to two new major gas projects in Australia - five-year contract with LKAB for maintenance services - third strategic partnership agreement with Baosteel Group Corporation - SKF Bus Door Actuator to Volvo Buses - SKF’s bonded piston seals to Mazda Motor Corporation

• Three new SKF Solution Factories - USA, Romania and Italy

• SKF Distributor College - awarded its 160,000th certificate

Highlights Q3 2012


Highlights Q3 2012

• SKF celebrated 100 years of business in China

- inaugurated a new bearing and truck hub unit factory in Jinan

- broke ground on a new regional distribution centre in Shanghai

- announced the establishment of a new SKF Campus in Jiading, Shanghai, containing a new factory for automotive and the Global Technical Centre China, SKF Solution Factory and SKF College

• Debt structure - new eurobond of 500m with maturity 2019 - revolving credit facility of EUR 500m extended to 2017

• Dow Jones Sustainability Indexes and FTSE4Good - member of DJSI indexes for the 13th successive year - included for the 12th successive year in the FTSE4Good Index Series


New products Q3 2012

SKF ChainLube oil projection system for food processing

New low friction

bearing seal for railway

New temperature monitoring system for railway

Self powered wireless sensor for railway

New range of freight bearings, tapered roller bearing units

Device for monitoring freight car mileage and

maintenance history


SKF Group – Q3 2012

Financial performance Q3 2012Q3 2011Net sales, SEKm 15,486 16,545Operating profit, SEKm 1,913 2,479Operating margin, % 12.4 15.0Profit before tax, SEKm 1,734 2,345Cash flow, SEKm 1,097 1,323

Organic sales growth in local currency:

SKF Group: -4.5%Industrial market, Strategic Industries: -5.6% Regional Sales and Service:-4.7% Automotive: -3.5% Key points Sales volumes down by 5.0% y-o-yManufacturing significantly lower y-o-yInventories down to 20% of sales

Europe: -7%North America: +5%Asia: -11%Latin America: +8%


Organic sales growth in local currency

-5

0

5

10

15

20

25

20122010 2011

% change y-o-y


Europe-7%

Asia/Pacific -11%

Latin America

8%Middle East & Africa -4%

NorthAmerica

5%

Growth development by geography Organic growth in local currency Q3 2012 vs Q3 2011


Europe-4%

Asia/Pacific -

9%

Latin America

12%Middle East &

Africa 0%

North America

8%

Growth development by geography Organic growth in local currency YTD 2012 vs YTD 2011


Components in net sales

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

5.3 16.6 19.0 16.3 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0

0.0 0.0 0.0 0.0 5.0 4.4 5.1 4.8 -0.1 0.0 0.8

-0.3 -0.5 0.3 0.9 1.3 1.6 2.0 2.8 1.9 2.0 0.5

5.0 16.1 19.3 17.2 26.4 18.6 13.3 7.6 1.0 -0.8 -3.7

-7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7

-2.7 10.9 16.1 11.0 15.6 6.4 7.0 5.5 1.4 2.8 -6.4

Percent y-o-y

Volume

Structure

Price/mix

Sales in local currency

Currency

Net sales

2010 2011 2012


-5

0

5

10

15

20

2010 2011 YTD 2012

Growth in local currency, including structure

% y-o-y

Structure in 2011: 4.8%Structure in 2012: 0.2%

14.2%

16.3%

-1.4%


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


%

0

2

4

6

8

10

12

14

16

2010

One-time items

2011 2012

Operating margin


0

2

4

6

8

10

12

14

16

2010 2011 YTD 2012

%

One-time items * Excluding one-time items

14.7*14.2*

13.8 14.5 12.6*

Operating margin

12.3


0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2010 2011 2012

Excluding one-off items(eg. restructuring, impairments, capital gains)


SEKm 2012 2011

Net sales 15,486 16,545

Operating profit 1,913 2,479

Operating margin, % 12.4 15.0

Profit before taxes 1,734 2,345

Net profit 1,266 1,656

Basic earnings per share, SEK 2.71 3.52

Cash flow, after investments before financing

1,097 1,323

Third quarter 2012


SEKm 2012 2011

Net sales 49,591 49,959

Operating profit 6,106 7,606

Operating margin, % 12.3 15.2

Profit before taxes 5,516 7,109

Net profit 3,867 5,019

Basic earnings per share, SEK 8.22 10.72


2,479 2,995

Nine month 2012


18

19

20

21

22

23

24

25

Inventories as % of annual sales

%

2010 2011 2012


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.

%

18.4

24.0 23.6



-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.

**SEK 1,707 million, excluding acquisitions and divestments.

*

**


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.


0

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018 2019

EURm

396

100100130

500

110

0

500

• Available credit facilities:

EUR 500 million 2017 SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

Debt structure on 30 September, maturity years


October 2012: SKF demand outlook Q4 2012

Demand compared to the fourth quarter last yearThe demand for SKF’s products and services is expected to be lower for the Group and for Europe. For Asia it is expected to be slightly lower and for North America and Latin America relatively unchanged. The demand is expected to be lower for Industrial Strategic Industries and Industrial Regional Sales and Service and relatively unchanged for Automotive.

Demand compared to the third quarter 2012

The demand for SKF’s products and services is expected to be slightly lower for the Group, for all the business areas and for Europe, Asia and North America. For Latin America demand is expected to be relatively unchanged.

Manufacturing

Manufacturing is expected to be lower year on year and slightly lower compared to third quarter.


SKF demand outlook Q4 2012, regions(based on current assumptions)

Share of net sales2011*

Europe 44%

Asia Pacific 28%

North America

19%

Latin America 8%

Total

Q4 2012 vs Q4 2011

--

-

+/-

+/-

--

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.

Sequential trend for Q4

2012


Sequential trend for Q4 2012

Share of net sales2011

Strategic Industries

31%

Regional Sales and Service

39%

Automotive 27%

Total

Q4 2012 vs Q4 2011

--

--

+/-

--

SKF demand outlook Q4 2012, business areas(based on current assumptions)


5%

13%

4%

28%

13%

12%

10%

5%

5%

3%

Aerospace

Cars and light vehicles

Railway

Industrial distribution

Industrial, general

Industrial, heavy, special and off-highway

Vehicle service market

Energy

Trucks

Two-wheelers and electrical

Share of net sales 2011*

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.

SKF sequential volume trend Q4 2012, main segments(based on current assumptions)


Guidance for the fourth quarter 2012

• Tax level: around 30%

• Financial net for the fourth quarter:Around SEK 200 million

• Exchange rates on operating profit versus 2011Q4: SEK -50 millionFull year: SEK 200 million

• Additions to PPE: Around SEK 2.0 billion for 2012

Guidance is approximate and based on current assumptionsand exchange rates


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


Long-term financial targets

27% Return on capital employed

8% Annual sales growth in local

currencies

15% Operating margin, level


• Accelerate profitable growth- intensify the platform and industry approach- launch more new offerings – green and BZ

portfolio- strengthen the service business- focus on faster growing regions/ industries- develop other brands

• Reduce cost and eliminate waste- Business Excellence throughout the Group- BCC manufcaturing and sourcing- integrated cost reduction activities (ICR)

• Invest in growth- Sales and engineering resources- Factories in growth markets- Solution factories- R&D- Acquisitions- New IT systems

Main initiatives going forward


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”.

skf nine-month results 2012

Documents

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