SKF First-quarter results 2014. Tom Johnstone, President and CEO. 15 April 2014. Highlights Q1 2014. Examples of new business Hindustan Aeronautics Ltd, India: customized bearings for helicopter transmission and main rotor Bell Helicopter Textron Inc .,USA: elastomeric bearings
SKF First-quarter results 2014 Tom Johnstone, President and CEO 15 April 2014
Highlights Q1 2014 • Examples of new business • Hindustan Aeronautics Ltd, India: customized bearings for helicopter transmission and main rotor • Bell Helicopter Textron Inc.,USA: elastomeric bearings • Turbogaz, Ukraina: magnetic bearings • SCA, BillerudKorsnäs, Vattenfall, Sweden: condition monitoring solutions • Geely Automobile, China: transmission seals • Volkswagen, Germany: energy efficient tapered roller and ball bearings • One of the largest cement producers major service contractin Latin America: • Examples of new products: • Extended range of infrared thermometers
Awards received in Q1 2014 • Customer awards • Technical Cooperation Award, Goldwind • Supplier of the Year Award, Varian Medical Systems • Volvo Cars Quality Excellence (VQE) Award • Excellent Supplier Award, Geely • Excellent Quality Supplier Award, Hino Motors • Supplier of the Year Award, General Motors Golden Mousetrap Awards Best Product of the Yearfor Electronics & Test, Editors of Design News
SKF Group – Q1 2014 Key points Sales volumes up by 6.2% y-o-y Manufacturing higher compared to last year
Organic sales growth in local currency % change y-o-y 2012 2013 2014
Organic sales growth in local currency % y-o-y 5.8% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.7%
Growth development by geographyOrganic growth in local currency Q1 2014 vs Q1 2013 Europe 4% North America 3% Asia/Pacific 11% Latin America 4% Middle East & Africa 21%
Operating profit as reported SEKm 2012 2013 2014
Operating profit excluding one-time items SEKm 2012 2013 2014
Operating margin One-time items * Excluding one-time items % 12.0* 12.1 11.9* 11.3 11.4* 5.8
Operating margin per business area % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014 Excluding one-time items(eg. restructuring, impairments, capital gains)
Net working capital as % of annual sales % 2012 2013 2014
Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 14.6* 16.2 8.4 7.5 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.
Cash flow, after investments before financing SEKm **** 2012 2013 2014 Excl. acquisitions and divestments: * Q3 2012 SEK 1,707 million ** Q1 2013 SEK -69 million *** Q3 2013 SEK 871 million **** Q4 2013 SEK 1,170 million
Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7,900 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.
Debt structure, maturity years 850 500 500 200 110 100 100 • Available credit facilities: • EUR 500 million 2017 • SEK 3,000 million 2016 • SEK 3,000 million 2017 • No financial covenants nor material adverse change clause
April 2014: SKF demand outlook Q2 2014 Demand compared to the second quarter 2013 The demand for SKF’s products and services is expected to be slightly higher for the Group, North America and Asia. It is expected to be relatively unchanged for Europe and slightly lower for Latin America. For Strategic Industries and Automotive it is expected to be slightly higher and for Regional Sales and Service relatively unchanged. Demand compared to the first quarter 2014 The demand for SKF’s products and services is expected to be slightly higher for the Group, for North America and Asia. It is expected to be relatively unchanged for Latin America. For Strategic Industries and Automotive it is expected to be slightly higher and for Regional Sales and Service relatively unchanged. Manufacturing Manufacturing is expected to be higher year over year and slightly higher compared to the first quarter.
SKF sequential volume trend Q2 2014, Industries Share of net sales 2013
Guidance for the second quarter 2014* • Tax level: around 30% • Financial net for the second quarter:Around SEK -230 million • Currency impact on operating profit versus 2013 Q2: SEK -125 million Full year: SEK -350 million • Additions to PPE: Around SEK 1.6 billion for 2014 * Guidance is approximate and based on current assumptions and exchange rates.
SKF’s priorities • Sustainable profitable growth • Expand the platform concept • Exploit the asset life cycle approach • Develop new products and grow SKF BeyondZero portfolio • Extend and grow second brands • Acquisitions • Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility • Capital efficiency • Fixed capital • Net working capital • Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs
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”.