the skf group half-year result, 2005 tom johnstone, president and ceo
TRANSCRIPT
The SKF GroupHalf-year result, 2005
Tom Johnstone, President and CEO
MSEK 2005 2004
Net sales 12 739 11 417
Operating profit 1 383 1 159
Operating margin 10.9% 10.2%
Profit before taxes 1 319 1 049
Net profit 905 733
Earning per share, SEK 1.95 1.49
Cash flow after investments before
financing* 262 559
Second quarter 2005
* MSEK 718, before the acquisition of Jaeger Industrial Ltd. and the purchase of minority shareholding in previously acquired companies.
MSEK 2005 2004
Net sales 24 610 22 106
Operating profit 2 571 2 062
Operating margin 10.4% 9.3%
Profit before taxes 2 443 1 864
Net profit 1 684 1 402
Earning per share, SEK 3.60 2.80
Cash flow after investments before
financing
406 1 094
Half-year 2005
Areas in focus 2005 Performance Q2 2005
• Operating margin level
Maintain a positive price/mix
Recovery of raw material cost increase
• Continued sales growth
Maintain organic growth pace
Structure
• Strengthen the platform/segment offer
• Cash flow before financingand acquisitions
In line with net profit, annual basis
3.6%
Ongoing
11.2%
0.2%
Ongoing
MSEK 718
Major events during the quarter
• Merger of long-steel operations, Oy Ovako Ab
• Share split and redemption
• Launch of a 350 million euro dual-tranche bond
• Acquisition of Jaeger Industrial Ltd.
• Announcement of the closure of two plants in the USA
Operating margin*
%
2002 2003 2004
0
1
2
3
4
5
6
7
8
9
10
11
* excluding restructuring and impairment in Q4 2003
2005
0
2
4
6
8
10
12
14
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Operating margin per division*
Industrial
Service
Aero and Steel excl. Ovako
Electrical
Automotive
%
2003 2004
* excl. restructuring and impairment in Q4, 2003 and in Q2, 2005
2005
Sales in local currency
-6-4-2024681012141618
% change y-o-y
2002 2003 2004 2005
Growth development / local currency10 BSEK additional sales = 6 % annual growth rate
% Y-o-Y
0246810121416
2002 2003 2004 2005
Growth by acquisitions
Organic growth
6% total growth
4% organic growth
Up to June
Net sales development per quarter
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
6.2 3.2 4.2 3.1 4.8 8.9 9.6 10.2 8.3 7.6
0.7 0.1 0.2 0.3 0.1 0.0 2.2 2.0 2.3 0.2
1.2 0.6 1.2 0.1 1.1 1.8 2.3 4.2 3.6 3.6
8.1 3.9 5.6 3.5
6.0 10.7 14.1 16.4 14.2 11.4
-9.3 -8.6 -5.5 -7.4
-4.6 -2.3 -2.9 -3.8 -3.2 0.2
-1.2 -4.7 0.1 -3.9
1.4 8.4 11.2 12.6 11.0 11.6
Percent y-o-y
2003 2004
Volume
Structure
Price / Mix
Sales in local currency Currency
Net sales
2005
Inventories as % of annual sales
%
2002 2003 2004
18
19
20
21
22
23
24
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2005
Cash flow, after investments before financing
-200
0
200
400
600
800
1 000
1 200
1 400MSEK
2002 2003 2004 2005
Net debt
-1500
-500
500
1500
2500
3500
4500
5500
MSEK
2001 2002 2003
Dividend paid:
2001 Q2, MSEK 598
2002 Q2, MSEK 683
2003 Q2, MSEK 911
2004 Q2, MSEK 1 138
2005 Q2, MSEK 1 366
2004 Q2, Pension: MSEK 3 100
2005 Q2, Redemption, MSEK 2 846
2004
(Short-term financial assets - loans)
2005
Net interest bearing liabilities
-6000
-5000
-4000
-3000
-2000
-1000
0
1000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
MSEK
(Short-term financial assets - loans - net postemployment benefits)
2003 2004 2005
Share split and distribution to shareholders
Number of shares as per June 30, 2005
SKF A 63 876 892SKF B 391 474 176Total 455 351 068
MSEK 1 366Dividend
MSEK 2 846Redemption
MSEK 4 212Distributed to shareholders
SKF issued during the second quarter: A 350 million euro dual-tranche bond - a 100 million euro three-year floating-rate bond - a 250 million euro five-year fixed rate bond
Jaeger Industrial Co Ltd.
• Leading supplier in Asia-Pacific
• Complete range of actuation systems
• Low cost manufacturing and high volume capabilities
• Own sales units plus sales through specialized dealers
• Manufacturing plants both in Taiwan and China
• Turnover year 2004,MSEK 320
• 750 employees
• ~50% sales volume in Asia
• Founded 1982
• Five business units (Taiwan, China & USA)
• ISO 9001
Jaeger market segments
• Satellite disc positioning
• Gate openers
• General industry
• Health care & Ergonomics
-8000
-6000
-4000
-2000
0
2000
4000
6000
2000 2001
Accumulated change in the number of employees
2002
acquisitions
capacity adjustmentand restructuring
Employees
2003 2004 2005
Fixed assets / Sales
20
22
24
26
28
30
32
34
36
38
40
98 99 00 01 02 03 04 05
%%
Up to June
SKF Group targets
• 10% Operating margin level
• 6% Growth per annum
• 20% ROCE
• 18% Inventory / sales
2006
2007
July 2005: Outlook for the third quarter
The market demand for SKF’s products and services in the third quarter, compared to the previous quarter, is expected to remain on a high level in Europe, to be slightly higher in North America, higher in Latin America and significantly higher in Asia. However, the third quarter is seasonally lower than the second quarter.
The manufacturing level will be unchanged during the third quarter, compared to the second quarter, while lower in absolute terms due to normal seasonality.
Volume trend for the third quarter 2005
Europe 57%
20%
15%
5%
North America
Asia Pacific
Latin America
Net sales 2004 July 2005
Total
April 2005
Note: This is the sequentialdevelopment
Cautionary statement
This report 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 20-F report on file with the SEC (United States Securities and Exchange Commission) under "Forward-Looking Statements" and "Risk Factors".