the skf group
DESCRIPTION
The SKF Group. Year-end results 2007 Tom Johnstone, President and CEO. Strong Q4, strong full-year, positive outlook. Major events during the fourth quarter 2007. Acquisition completed of S2M, magnetic bearings - PowerPoint PPT PresentationTRANSCRIPT
31 January 2008
3Strong Q4, strong full-year, positive outlook
• Strong sales growth
• Operating profit, excl. one-time items, up with
around 20%
• Strong cash flow
• Continued good volume growth for the first
quarter 2008
• Proposed distribution to shareholders of SEK
4,554 million
31 January 2008
4Major events during the fourth quarter 2007
• Acquisition completed of S2M, magnetic bearings
• SKF and GE Aviation agreed to establish a company for the manufacture and refurbish of bearings for GE's engines for large aircraft
• Announced to build a factory in Russia for tapered bearing units to supply the Russian railway market
• Announced to close the manufacturing facility in Glasgow, United States, and reduce the number of employees at the Fontenay-le-Comte facility in France
• New business:
Started a joint project with Knorr-Bremse to develop condition monitoring of brake control systems
Signed a long-term service contract to supply ArcelorMittal
Gained business on new hybrid pinion unit solution for automotive, provides 30% friction reduction
31 January 2008
5Highlights previous quarters 2007
Main acquisitions:• ABBA Linear Tech Co., Ltd., Taiwan
• Three service companies in North America
Other highlights:
•announced investments for two new factories in India
• announced significant investments in Sweden
• announced the development of energy-efficient
bearings
and a number of other energy-efficient solutions
• distributed SEK 6,603 million to shareholders
• was included in the DJSI World and DJSI STOXX
indexes for the
eighth year in succession, and in the FTSE4Good
Index for the
seventh year in succession
31 January 2008
6
SEKm 2007 2006
Net sales 15,070 13,895
Operating profit 1,831 1,858
Operating margin 12.1% 13.4%*
Profit before taxes 1,710 1,846
Net profit 1,105 1,257
Basic earnings per share, SEK 2.33 2.67
Cash flow after operating investments before financial items 617 1,561
Cash flow after operating investments before financial items, excluding acquisitions
1,123 2,022
Fourth quarter 2007
* 9.9% excluding Ovako
31 January 2008
7
SEKm 2007 2006
Net sales 58,559 53,101
Operating profit 7,539 6,707
Operating margin 12.9% 12.6%*
Profit before taxes 7,138 6,387
Net profit 4,767 4,432
Basic earnings per share, SEK 10.09 9.48
Cash flow after operating investments before financial items 2,126 2,158
Cash flow after operating investments before financial items, excluding acquisitions
3,335 4,287
Year-end results 2007
* 11.3% excluding Ovako
31 January 2008
8Operating margin
%
0123456789
1011121314
2005 2006 2007
Long-term target: 12% operating margin level
31 January 2008
9Operating margin
0
2
4
6
8
10
12
14
2005 2006 2007
%
* excluding income from the jointly controlled company Oy Ovako Ab
12.6
10.8
12.9
10.4*11.3*
Long-term target: 12% operating margin level
31 January 2008
10
0
2
4
6
8
10
12
14
16
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Operating margin per division
Industrial
Service
Automotive
%
2005 2006 2007
31 January 2008
11Sales in local currencies (excl. structural changes)
0
2
4
6
8
10
12
14
16% change y-o-y
2005 2006 2007
31 January 2008
12
02468101214
2005 2006 2007
Growth development in local currency
% Y-o-Y
Acquisitions/DivestmentsOrganic growth
7.3* 7.5*
13.2
* Excluding effect from Ovako: 2005 10.4%
2006 10.1%
Long-term target: 6-8% growthin local currencies, per annum
31 January 2008
13Net sales development per quarter
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
8.3 7.6 5.1 1.3 6.0 2.5 3.3 8.8 7.9 6.9 9.0 6.3
2.3 0.2 -2.9 -3.7 -4.9 -0.5 1.1 4.6 4.0 4.6 3.7 1.0
3.6 3.6 2.1 2.6 2.9 2.0 2.0 2.3 1.8 2.7 2.0 3.2
14.2 11.4 4.3 0.2 4.0 4.0 6.4 15.7 13.7 14.2 14.7 10.5
-3.2 0.2 3.2 9.4 8.0 1.0 -2.1 -5.8 -5.6 -2.3 -1.9 -2.0
11.0 11.6 7.5 9.6 12.0 5.0 4.3 9.9 8.1 11.9 12.8 8.5
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency Currency
Net sales
2005 2006 2007
31 January 2008
14Growth development by geography
Europe 15%
North America 7%
Asia 15%
Latin America 11%
Local currency 2007 vs 2006
31 January 2008
15Industrial Division
Acquisitions
• ABBA Linear Tech Co., Ltd.
• S2M
SEKm 2007 2006
Net sales 19,266
17,176
Sales incl. intra-Group sales
29,318
26,698
Operating profit 3,430 3,027
Operating margin 11.7% 11.3%
Net sales growth 12.2%
organic growth 10.0% structure 5.0%currency effects -2.8%
Major investments
• New factory for large size bearings in India• Increased investments in Sweden• New factory for tapered roller bearing in Russia
• In Q4 2006, SEK 210 m in restructuring charges, impairments and write-offs• In Q4 2007, SEK 30 m in restructuring activities and other one-time items
31 January 2008
16Highlights Industrial Division
• SKF will supply the tapered roller bearing units to the Île de France suburban trains manufactured by Bombardier Transportation
• A long term supply agreement with Suzlon Energy Ltd
• SKF and Caterpillar forged a strategic partnership
• SKF Agri Hub, a relubrication free solution for agricultural implements
• Developed a lubrication system for machine tool spindles
• SKF Conro Low, a relubrication free roll unit for the lower
segments in continuous slab casters
Photo: Bombardier Transportation
31 January 2008
17Service Division
Acquisitions
• Preventive Maintenance Company Inc. (PMCI)
• Baker Instruments Company
• Automatic Lubrication Systems (ALS)
SEKm 2007 2006
Net sales 19,597
17,984
Sales incl. intra-Group sales
21,393
19,761
Operating profit 2,846 2,362
Operating margin 13.3% 12.0%
• In Q4 2006, SEK 20 million in restructuring charges and write-offs
Net sales growth 9.0%
organic growth 12.0% structure 0.8%currency effects -3.8%
31 January 2008
18Highlights Service Division
• A partnership with Aker Kvaerner for condition based maintenance for the offshore and onshore oil and gas industry
• A two-year IMS contract signed with the world's leading producer of bleached eucalyptus pulp, Brazilian company Aracruz
• An agreement with Meridium, Inc. granting SKF non-exclusive rights to license and distribute Meridium Asset Performance Management System software
• Expansion of SKF’s 360° Solution programme
• Expansion of SKF power transmission products into the European market
• Introduction of the SKF Certified Rebuilder programme for electric motors
• SKF Caster Analyst System, load and temperature measurement for slab casters
• New important tools: The @ptitude Monitoring Suite and SKF Client Needs Analysis for Energy and Sustainability
31 January 2008
19Automotive Division
Acquisitions
• the remaining 40% shareholding in SKF (Shanghai) Bearing Company Ltd.
SEKm 2007 2006
Net sales 19,617
17,869
Sales incl. intra-Group sales
23,795
21,807
Operating profit 1,154 946
Operating margin 4.8% 4.3%Major investments
• expansion of the seal manufacturing facility in Judenburg, Austria• Haridwar, Uttarakhand in India – ball bearings
Net sales growth 9.8%
organic growth 8.3% structure 3.8%currency effects -2.3%
• In Q4 2006, SEK 170 m in restructuring charges, impairments and write-offs• In Q4 2007, SEK 270 m in restructuring activities and other one-time items
31 January 2008
20Highlights Automotive Division
• business for the steering column bearing with Piaggio in India
• business for wheel hub units for a four-wheeler light vehicle with Piaggio in India
• business with Hendrickson in the USA for the recently launched SKF Wheel End Monitor, which helps track possible damage and wear to trailer wheel bearings
• a wheel bearing solution to be manufactured in Spain for the new Renault Master platform
• wheel bearings for the new Ford Focus generation in North America, with the Chinese company Shanghai Automotive Industry Corporation for a new car platform and for a new Alfa Romeo platform
• additional business in China for two Chery models
• SKF and Haldex have jointly developed an integrated truck hub unit with a dual disc brake and fixed caliper
31 January 2008
21Six Sigma
• 4 dimensions:
”Standard” Six Sigma, Design for Six Sigma, Lean Six Sigma and Six Sigma for Growth
• 2007 status:
16 Master Black Belts
378 Black Belts
1,614 Green Belts
704 projects closed, whereof 145 replicated
915 projects ongoing
• Hard savings in 2007: SEK 302 m (up >50% from 2006)
31 January 2008
22Cash flow, after operating investments before financial items
-700
-500-300
-100
100
300500
700
9001 100
1 300
1 500
1 700
2005 2006 2007
SEKm
Cash out from acquisitions (SEKm): 2005 4192006 2,1292007 1,209
Cash in from Ovako (SEKm):2006 Q4 1,2172007 Q2 46
31 January 2008
23Net debt (Short-term financial assets minus loans)
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
SEKm
AB SKF, dividend paid (SEKm):
2005 Q2 1,3662006 Q2 1,8212007 Q2 2,049
2005 Q2, redemption 2,8462007 Q2,redemption 4,554
2005 2006 2007
31 January 2008
24Net debt (Short-term financial assets minus loans and post-employment benefits)
-9000
-7000
-5000
-3000
-1000
1000
2005 2006 2007
SEKm
31 January 2008
25
18
19
20
21
22
23
Inventories as % of annual sales
%
2005 2006 2007
Long-term target: 18%
31 January 2008
26Return on capital employed
20
21
22
23
24
25
26
2005 2006 2007
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: 24%
31 January 2008
27SKF capital structure
1.a 11.1% increase in the dividend,SEK 5.00 per share
2.a share split 2:1 combined with anautomatic redemption procedureof one share for SEK 5.00
3.a mandate to the Board to repurchase the company's own shares
Adding up to a total distribution to shareholders ofSEK 4,554 million
The AB SKF Board proposes the AGM to decide on:
31 January 2008
28January 2008: Outlook for the first quarter 2008(compared to the fourth quarter 2007)
The market demand for SKF's products and services in the first quarter of 2008 is expected to be higher for the Group. The demand is expected to be higher in Europe, significantly higher in Asia and Latin America and relatively unchanged in North America. The demand is expected to be higher in all divisions.
The manufacturing level for the first quarter 2008 will be unchanged compared to the fourth quarter 2007, and higher than the first quarter 2007.
31 January 2008
29Volume development
Daily volume trend for: Q4 2007 Q1 2008
Net sales2007
Europe 56%
North America
18%
Asia Pacific 18%
Latin America
5%
Total
Outlook Q12008 vs
2007
++
=
+++
+++
++
31 January 2008
31Key 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
31 January 2008
32
Employee CareEmployee Care
Community CareCommunity Care
Business CareBusiness Care
SKF Corporate Sustainability
Environment CareEnvironment Care
BeyondZeroTM SKF CareSKF Care
Operating margin
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 YTDQ3