SKF Yearend results 2014 Alrik Danielson President and CEO 28 January 2015 Examples of new business in Q4 2014 GE Aviation and Safran Group Mainshaft and gearbox Snecma amp Hispano ID: 769489
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SKF Year-end results 2014Alrik Danielson, President and CEO 28 January 2015
Examples of new business in Q4 2014 GE Aviation and Safran Group, Mainshaft and gearbox (Snecma & Hispano-Suiza) bearingsChongqing Gearbox Co., Ltd, China Bearing setsAndritz Hydro, Germany Special bearing and sealing solution Mazda, Mexico Low-friction wheel bearing unitsDaimler, Germany Wheel hub bearing unitsJiangsu Jintongling Fluid Machinery Co., Ltd, High-speed permanent China magnetic motor unit solutions Slide 2
Examples of new business in Q1 – Q3 2014 Hindustan Aeronautics Ltd, India Customized bearings for helicopter transmission and main rotor Bell Helicopter Textron Inc.,USA Elastomeric bearingsTurbogaz, Ukraina Magnetic bearingsSCA, BillerudKorsnäs, Condition monitoring solutionsVattenfall, Sweden Geely Automobile, China Transmission sealsVolkswagen, Germany Energy efficient tapered roller and ball bearings Envision Energy, China Strategic long-term partnership Slide 3
Examples of new business in Q1 – Q3 2014 Dongfang Electric New Energy, China Main shaft bearings equipment Aurizon, Australia Service contractDoosan Heavy Industries and SKF Supergrip Bolts Construction, South Korea and SKF Nautilus bearing HSD SpA , Italy Super precision bearings and engineering supportTesla Motors, USA Bearing for the gearbox, e-motor and wheelsVolvo Cars, Sweden Wheel hub bearing unitsScania, Sweden Wheel bearing units and high pressure valve stem seals Slide 4
Customer awards Q4 2014Slide 5 Best supplier award – Kirloskar Pneumatic Company Ltd., IndiaBest supplier award – Nanjing Gearbox Company, ChinaTop runner-up ’Best Vendor’ – Tata Steel, IndiaWinner ’Cloud’ category – Software AG Innovation Awards Supplier Quality Excellence awards 2014 – General Motors, USAQuality Silver Award 2014 – Bajaj Auto Limited, India
Slide 6 Examples of new technologies, products and solutions 2014 Compact tapered roller bearing unit for heavy freight PuraBreeze 100 SKF Mudblock cassette seals , MUD 11 SKF @ ptitude Connect Floating piston Tapered roller bearing unit for passenger railway applications SKF Gear Bearing Unit Electric grease transfer pump SKF Wireless Machine Condition Sensor SKF Tachometer SKF Wireless MicroVibe SKF Oil Injection Sets - THKI series
SKF Group – Q4 2014Slide 7 Financial performance (SEKm)2014 2013 Net sales 18 499 16 430 Operating profit 1 608 -1 547 Operating margin , % 8.7 -9.4 Operating margin excl . one-time items, % 11.2 11.0 Profit before tax 1 293 -1 760 Basic earnings per share, SEK 1.84 -4.57 Cash flow after investments before financing 2 053 -6 732 Organic sales growth in local currency : SKF Group 2.8% Europe 1% Strategic Industries 7.4% North America 2% Regional Sales and Service 2.2% Asia 8% Automotive -0.5% Latin America 4% Middle East and Africa -5% Key points Sales volumes up by 1.8% y-o-y. Manufacturing was relatively unchanged compared to last year.
SKF Group – 2014Slide 8 Financial performance (SEKm)2014 2013 Net sales 70 975 63 597 Operating profit 7 801 3 693 Operating margin , % 11.0 5.8 Operating margin excl . one-time items, % 11.7 11.9 Profit before tax 6 668 2 821 Basic earnings per share, SEK 10.10 2.0 Cash flow after investments before financing excl. EU payment 4 693 5 342 Cash flow after investments before financing 1 868 5 342 Organic sales growth in local currency : SKF Group 3.9% Europe 1% Strategic Industries 8.4% North America 3% Regional Sales and Service 1.8% Asia 10% Automotive 2.0% Latin America 1% Middle East and Africa 9% Key points Sales volumes up by 3.3% y-o-y. Manufacturing was slightly higher compared to last year.
Organic sales growth in local currencySlide 9 % changey-o-y201220132014
Organic sales growth in local currencySlide 10 % y-o-yStructure in 2012: 0.4%Structure in 2013: 2.5%Structure in 2014: 3.7%-2.5%-0.7%3.9%
Sales development by geographyOrganic growth in local currency Q4 2014 vs Q4 2013 Slide 11 Europe1%Asia/Pacific8%Middle East& Africa-5%LatinAmerica 4% North America 2%
Sales development by geographyOrganic growth in local currency 2014 vs 2013 Slide 12 Europe1%Asia/Pacific10%Middle East& Africa9%LatinAmerica 1% North America 3%
Components in net salesSlide 13 2012 2013 2014 Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9 1.8 Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9 Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3 1.0 Sales in local currency 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4 8.6 3.7 Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9 Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6
Operating profit as reportedSlide 14 SEKm 201220132014
Operating profit excluding one-time itemsSlide 15 SEKm201220132014
Operating marginSlide 16 % 5.811.312.0*11.9* One-time items * Excluding one-time items 11.0 11.7*
Slide 17 Regional Sales and ServiceSpecialty BusinessAutomotive%2012 2013 2014 Operating margin per business area as reported Strategic Industries
Slide 18 Regional Sales and ServiceSpecialty BusinessAutomotive%2012 2013 2014 Operating margin per business area excl. one-time items Strategic Industries
Operating profit bridge, Q4 2014 excl. One-time items Slide 19 -1 547+75+2 078+165 +23 +110 +300 -398SEKmQ4 2013Q4 2014Volumes excl. Specialty BusinessSpecialty Business Savings CurrenciesOther* Price/mix excl . Specialty Business * R&D, S&A, IT, inflation etc. +1 803 One-time items 2013: - 3 350 2014: -470
Operating profit bridge, 2014 excl. One-time items Slide 20 +7 568+505+8 291+390 +375 +500 +180 -1 227SEKm 20132014Volumeexcl. Specialty BusinessSpecialty Business Savings Currencies Other* Price/mix excl . Specialty Business * R&D, S&A, IT, inflation etc. One-time items 2013: - 3 875 2014: -490
Net working capital as % of annual salesSlide 21 %201220132014 Target: 27%
Return on capital employedSlide 22 % 13.97.516.217.1*15.1* One-time items * Excluding one-time items 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 . 14.8*
Cash flow, after investments before financing Slide 23 SEKm201220132014 Excl. acq. and div.: 1) Q3 2012 SEK 1 707 million 2) Q1 2013 SEK -69 million 3) Q3 2013 SEK 871 million 4) Q4 2013 SEK 1 170 million Excl. EU payment 5) Q2 2014 SEK 1 423 million 4) 5) 1) 3 ) 2)
Net debtSlide 24 SEKm 201220132014 AB SKF, dividend paid ( SEKm): 2012 Q2 2 504 2013 Q2 2 5302014 Q2 2 530 Cash out from major acquisitions ( SEKm ) : 2012 Q3 829 2013 Q1 823 2013 Q4 7 900 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives. EU payment ( SEKm ) : 2014 Q2 2 825
Debt structure, maturity yearsSlide 25 Available credit facilities: EUR 500 million 2019 SEK 3 000 million 2016 EUR 150 million 2017 No financial covenants nor material adverse change clause 200 100 100 110 500 500 850
January 2015: SKF demand outlook Q1 2015Slide 26 Demand compared to the first quarter 2014 The demand for SKF’s products and services are expected to be slightly higher for the Group, higher for Asia and relatively unchanged for Europe, North America and Latin America. It is expected to be relatively unchanged for Automotive Market and Specialty Business and slightly higher for Industrial Market . Demand compared to the fourth quarter 2014The demand for SKF’s products and services are expected to be relatively unchanged for the Group, Europe and Latin America, and slightly higher for Asia and North America. It is expected to be relatively unchanged for Industrial Market and Automotive Market and slightly higher for Specialty Business.ManufacturingManufacturing is expected to be higher year over year and compared to the fourth quarter.
SKF demand outlook Q1 2015, main regions Share of net sales 2014 Europe41% Asia Pacific 25% North America 25% Latin America 6% Total Q1 2015 vs Q1 2014 +/- ++ +/- +/- + Slide 27 Sequential trend for Q1 2015
SKF demand outlook Q1 2015, main business areas Share of net sales 2014 Industrial Market60% Automotive Market 26% Specialty Business 13% Total Q1 2015 vs Q1 2014 + +/- +/- + Slide 28 Sequential trend for Q1 2015
SKF sequential volume trend Q1 2015, IndustriesSlide 29 14%Cars and light vehicles 6% Energy 28% Industrial distribution 14% Industrial, heavy , special and off- highway 11% Industrial, general 9% Vehicle service market 6% Aerospace 5% Railway 5 % Trucks 2 % Two-wheelers and Electrical Share of net sales 2014
Guidance for the first quarter 2015* Slide 30 Tax level: < 30% Financial net: around SEK -250 million Currency impact on operating profit vs 2014 Q1: SEK +300 million Full year: SEK +900 million Additions to PPE: around SEK 1.7 billion for 2015 * Guidance is approximate and based on current assumptions and exchange rates.
SKF’s programme to improve efficiency and reduce cost Q4 12Q1 13Q2 13Q3 13Q4 132013 Q1 14 Q2 14 Q3 14 Q4 142014TotalCost, SEKm 200 2501900 50 490 0 100 20 220 340 1 030 People affected 530 410 320 0 130 860 0 170 30 100 300 1 690 Giving future gross savings : Full year gross savings SEKm150100 800 40220 0 1005100 205 575Slide 31Realized gross savings from total programme, SEKmRestructuringQ1 13Q2 13Q3 13Q4 13 2013Q1 14Q2 14 Q3 14Q4 14 2014Restructuring1535757520070501010140 S&A 5050505020000000Purchasing100100 100100400 60 100 100100 360 Total165185225225800130150 110110500
New productivity improvement programme Main activities:Productivity gain through merging the industrial businesses- merger between Strategic Industries & Regional Sales and Service worldwide- streamlining of supporting country organisations in all main countries General staff optimization and productivity improvements - in Group Headquarters and central staff functions - in the Automotive businessReduction of annual cost by SEK 1.2 billion by the end of 2016 Total cost for the programme around SEK 1.4 billion 1 500 people impacted. Major part of the programme implemented within 2015.
Cautionary statementSlide 33 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”.