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© SKF Group 17 April 2015
2
Examples of new business in Q1 2015
• Chongqing General Industry (Group) Co and JiangSu High-speed permanent magnetic
Jin Tong Ling Fluid Machinery Technology Co, China blower solutions
• Volvo Car Corporation, Sweden Wheel hub bearing units with
low friction grease
• Autopartes NAPA, Mexico Agreement to market SKF’s
product range
• Citroen C4 Cactus, Peugeot 2008 and Fiat 500X Products and solutions
Slide 2
© SKF Group 17 April 2015
3
Highlights
Slide 3
• SKF has worked closely with Scuderia Ferrari to produce bearing sets manufactured from specially developed tool steel
• Re-signed the contract as a Ducati Corse Official Technical partner
• Achieved the energy management ISO 50001 certification on a global scale
• SKF will invest SEK 190 million to modernize its spherical roller bearing factory in Gothenburg, Sweden
© SKF Group 17 April 2015
4
SKF Generalized Bearing Life Model
Surface vs sub-surface failure modes
Slide 4
internal geometry
load rating
limiting speed
steel composition
surface finish
heat treatment
contamination resistance
wear resistance
coatings
lubrication
reduced vibration
longer service life
lower noise
reduced friction
reduced vibration
corrosion resistance
Slide 4
© SKF Group 17 April 2015
5
Slide 5
Innovations at Hannover Fair
• Two new oil-free bearing solutions for centrifugal compressors in chillers
• A solution to improve the reliability, safety and performance
of jack-up gearboxes used in the offshore oil and gas
industry and in the renewable energy industry
• A new shaft alignment tool, specifically designed for usage
with smartphones or tablets
• A new magnetic bearing control cabinet for turbo-machinery,
for onshore, offshore and subsea turbo-machinery
• SKF Enlight, combines a powerful new mobile app with a special
Bluetooth-enabled sensor
• SKF Data Collect, a cloud-based solution to record and manage data
© SKF Group 17 April 2015
6
Slide 6
Construction of a large-size bearing test centre in Schweinfurt, Germany
The test center will have two large size test rigs, one for wind turbines
and one for other industries. The investment will total SEK 360 million,
and is expected to be completed during the first half of 2017.
© SKF Group 17 April 2015
7
Christian Johansson, new Senior Vice President and CFO
Slide 7
• Bachelor of Science in Business
Administration, Stockholm University
• Currently CFO at Gunnebo AB
• Christian has solid executive experience
managing global business services.
Before joining Gunnebo:
-Vice President Region Americas and EMEA
for Volvo Business Services
-SVP and CFO for Volvo Trucks
-Regional Director, Central Eastern Europe
within ABB Service World Wide.
• Christian will start his new position in
SKF no later than October 2015.
© SKF Group 17 April 2015
8
SKF Group – Q1 2015
Slide 8
Financial performance (SEKm) 2015 2014
Net sales 19 454 16 734
Operating profit 1 721 2 024
Operating margin, % 8.8 12.1
Operating margin excl. one-time items, % 12.2 11.4
Profit before taxes 1 592 1 787
Basic earnings per share, SEK 2.46 2.72
Cash flow after investments before financing 988 -63*
Organic sales change y-o-y:
SKF Group 1.4% Europe 1.0%
Industrial Market 1.8% North America -2.4%
Automotive Market 0.6% Asia 5.6%
Specialty Business 0.7% Latin America 0.4%
Middle East and Africa 14.2%
Manufacturing was higher y-o-y and compared to last year.
* Previously published cash flow information is restated
© SKF Group 17 April 2015
9
Organic sales growth in local currency
Slide 9
-10
-8
-6
-4
-2
0
2
4
6
8
% change
y-o-y
2013 2014 2015
© SKF Group 17 April 2015
10
Organic sales growth in local currency
Slide 10
-4
-2
0
2
4
6
2013 2014 Q1 2015
% y-o-y
Structure in 2013: 2.5%
Structure in 2014: 3.7%
Structure in 2015: 0%
1.4%
3.9%
-0.7%
© SKF Group 17 April 2015
11 Sales development by geography Organic growth in local currency Q1 2015 vs Q1 2014
Slide 11
Europe
1.0%
Asia/Pacific
5.6%
Middle East
& Africa
14.2%
Latin
America
0.4%
North
America
-2.4%
© SKF Group 17 April 2015
12
Components in net sales
Slide 12
2013 2014 2015
Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Organic -8.0 -2.2 2.0 6.9 5.8 4.6 3.2 2.8 1.4
Structure 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9 0
Sales in local
currency -6.5 0.4 3.1 11.7 10.5 8.4 8.6 3.7 1.4
Currency -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9 14.9
Net sales -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6 16.3
© SKF Group 17 April 2015
13
Operating profit as reported
Slide 13
-2 000
-1 500
-1 000
-500
0
500
1 000
1 500
2 000
2 500
SEKm
2013 2014 2015
© SKF Group 17 April 2015
14
Operating profit excluding one-time items
Slide 14
0
500
1000
1500
2000
2500
SEKm
2013 2014 2015
© SKF Group 17 April 2015
15
Operating margin
Slide 15
0
2
4
6
8
10
12
14
16
2013 2014 Q1 2015
%
5.8
11.9*
One-time items
* Excluding one-time items
8.8
12.2* 11.7*
11.0
© SKF Group 17 April 2015
16
Slide 16
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Specialty Business*
Automotive Market
%
2012 2013 2014
Operating margin per business area as reported
Industrial Market
* Q4 2013, impacted by cost related to Kaydon acquisition
© SKF Group 17 April 2015
17
Slide 17
-3
0
3
6
9
12
15
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Specialty Business
Automotive Market
%
2012 2013 2014
Operating margin per business area excl. one-time items
Industrial Market
© SKF Group 17 April 2015
18
Operating profit bridge, Q1 2015
Slide 18
0
500
1000
1500
2000
2500
-1 547
-700
+1 721
+120 0
+450 -173
SEKm
Q1 2014 Q1 2015 One-time
items at
2014
exchange
rates
Acquisitions/
divestments
Currency
impact
Other* Organic sales
growth in local
currencies
* Includes general inflation, manufacturing and purchasing
impacts, IT project and running costs, and R&D..
+2 024 0
Savings
from
restructuring
programme
© SKF Group 17 April 2015
19
Restructuring programme
• Main activities:
- merging the two industrial businesses
- streamlining of supporting country organisations in all main countries
- general staff optimization and productivity improvements
• Reduction of annual cost by SEK 1.2 billion by the end of 2016.
Total cost for the programme around SEK 1.4 billion, covering 1 500 people.
Major part of the programme expected to be implemented within 2015
• After first quarter 2015 around 40% of planned activities are in progress
Q1 2015
Cost, SEKm 535
People affected 575
Cost savings in Q1 -
Annual cost savings, SEKm: 460 effective beginning 2016
Slide 19
© SKF Group 17 April 2015
20
Net working capital as % of annual sales
Slide 20
25
26
27
28
29
30
31
32
33
34
35
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
%
2013 2014 2015
Target: 27%
© SKF Group 17 April 2015
21
Return on capital employed
Slide 21
0
5
10
15
20
2013 2014 YTD 2015
%
12.6
7.5
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.
14.5* 14.8*
13.9
© SKF Group 17 April 2015
22
-7 000
-6 000
-5 000
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
Cash flow, after investments before financing*
Slide 22
SEKm
2013 2014 2015
Excl. acq. and div.: 1) Q1 2013 SEK -69 million
2) Q3 2013 SEK 871 million
3) Q4 2013 SEK 1 122 million
Excl. EU payment 4) Q2 2014 SEK 1 423 million
3)
4)
2)
1)
* 2013 and 2014 are restated
© SKF Group 17 April 2015
23
Net debt
Slide 23
-35 000
-30 000
-25 000
-20 000
-15 000
-10 000
-5 000
0
SEKm
2013 2014 2015
AB SKF,
dividend paid (SEKm):
2013 Q2 2 530
2014 Q2 2 530
Cash out from major acquisitions (SEKm):
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
© SKF Group 17 April 2015
24
Debt structure, maturity years
Slide 24
0
100
200
300
400
500
600
700
800
900
2015 2016 2017 2018 2019 2020 2021
EURm
• Available credit facilities:
EUR 500 million 2019
SEK 3 000 million 2018
EUR 150 million 2017
• No financial covenants nor material
adverse change clause
200
100 100 110
500 500
850
© SKF Group 17 April 2015
25
April 2015: SKF demand outlook Q2 2015
Slide 25
Demand compared to the second quarter 2014
The demand for SKF’s products and services is expected to be relatively
unchanged for the Group and for Europe. For Asia it is expected to be
higher and for North and Latin America slightly lower. Per business area, for
both Industrial Market and Automotive Market it is expected to be relatively
unchanged, and for Specialty Business to be slightly higher.
Demand compared to the first quarter 2015
The demand for SKF’s products and services is expected to be relatively
unchanged for the Group, Europe and North America. For Asia it is
expected to be higher and for Latin America slightly lower. Per business
area, for both Industrial Market and Automotive Market it is expected to be
relatively unchanged, and for Specialty Business to be slightly higher.
Manufacturing
Manufacturing is expected to be relatively unchanged year over year and
compared to the first quarter.
© SKF Group 17 April 2015
26
Guidance for 2015*
Slide 26
Q2 2015:
• Financial net: around SEK -230 million
• Currency impact on operating profit vs 2014
Q2: SEK +800 million
2015:
• Tax level: below 30% for 2015
• Additions to PPE: around SEK 1 700 million for 2015
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group 17 April 2015
27
Cautionary statement
Slide 27
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”.