SKF Half-year results 2012

SKF Half-year results 2012

Tom Johnstone, President and CEO

18 July 2012

18 July 2012 Slide 2© SKF Group

• New businesses- A five-year contract for integrated maintenance solutions with

the Brazilian pulp and paper company Fibria.

- A seven-year contract with Volvo Car Corporation for the delivery of rear wheel bearing units and front suspension bearing units.

- A three-year supply agreement for the new generation NautilusTM bearing with a major wind turbine manufacturer.

• New facilities:- Railway test centre in Tver, Russia

- SKF Solution Factory in Perth, Australia

• New products: • New app:

Highlights Q2 2012

New generation SKF System 24

Shaft sealing solution SKF Seal Select

App


Highlights Q2 2012

• SKF launched the BeyondZeroTM portfolio with products and solutions, which will both improve energy efficiency and reduce the environmental impact.

• SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme.

• SKF announced the divestment of its distributor businesses in Australia and New Zealand

• SKF renewed its partnership with Scuderia Ferrari.

Growth target:

SEK 2.5 bn to SEK 10 bn by 2016


SKF Group - Q2 2012

Financial performance Q2 2012 Q2 2011Net sales, SEKm 17,174 16,712Operating profit, SEKm 2,053 2,623Operating margin, % 12.0 15.7Profit before tax, SEKm 1,801 2,446Cash flow, SEKm 686 1,300

SKF took steps to reduce its cost base in Europe. The quarter included one-time costs of around SEK 140 million.

Organic sales growth in local currency:SKF Group: -0.8%Europe: -3.4% Industrial market, Strategic Industries: +0.6% North America: +8.5% Industrial market, Regional Sales and Service:+0.6%Asia: -7.9% Automotive: -4.6%Latin America: +16.6%

Key points Volumes down by 2.8% y-o-yManufacturing level significantly lower y-o-yInventories relatively unchanged


Organic sales growth in local currency

0

5

10

15

20

25

20122010 2011

% change y-o-y


Sales volume

-5

0

5

10

15

20

25

% change y-o-y

2010 2011 2012


Europe-3.4%

Asia/Pacific -7.9%

Latin America +16.6% Middle

East & Africa

+1.7%

NorthAmerica +8.5%

Growth development by geography Organic growth in local currency Q2 2012 vs Q2 2011


Europe-2.3%

Asia/Pacific -8.0%

Latin America +13.8% Middle

East & Africa

+2.2%

North America +11.6%

Growth development by geography Organic growth in local currency YTD 2012 vs YTD 2011


-5

0

5

10

15

20

2010 2011 YTD 2012

Growth in local currency

% y-o-y

* whereof acquisition 4.8%

Long-term target: 8% per annum

14.2%

16.3%*

0.1%


Components in net sales

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

5.3 16.6 19.0 16.3 20.1 12.6 6.2 0.0 -0.8 -2.8

0.0 0.0 0.0 0.0 5.0 4.4 5.1 4.8 -0.1 0.0

-0.3 -0.5 0.3 0.9 1.3 1.6 2.0 2.8 1.9 2.0

5.0 16.1 19.3 17.2 26.4 18.6 13.3 7.6 1.0 -0.8

-7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -2.1 0.4 3.6

-2.7 10.9 16.1 11.0 15.6 6.4 7.0 5.5 1.4 2.8

Percent y-o-y

Volume

Structure

Price/mix

Sales in local currency

Currency

Net sales

2010 2011 2012


Operating profit

0

300

600

900

1 200

1 500

1 800

2 100

2 400

2 700

SEKm

2010

One-time items

2011 2012


%

0

2

4

6

8

10

12

14

16

2010

One-time items

2011 2012

Operating margin

Long-term target level: 15%


0

2

4

6

8

10

12

14

16

2010 2011 YTD 2012

%

One-time items * Excluding one-time items

14.7*


14.2*

13.8 14.5 12.7*

Operating margin

12.3


0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2010 2011 2012

Excluding one-off items(eg. restructuring, impairments, capital gains)


SEKm 2012 2011

Net sales 17,174 16,712

Operating profit 2,053 2,623

Operating margin, % 12.0 15.7

Profit before taxes 1,801 2,446

Net profit 1,260 1,743

Basic earnings per share, SEK 2.67 3.76

Cash flow, after investments before financing

686 1,300

Second quarter 2012


SEKm 2012 2011

Net sales 34,105 33,414

Operating profit 4,193 5,127

Operating margin, % 12.3 15.3

Profit before taxes 3,782 4,764

Net profit 2,601 3,363

Basic earnings per share, SEK 5.51 7.20


1,382 1,672

Half year 2012


18

19

20

21

22

23

24

25

Inventories as % of annual sales

%


2010 2011 2012



-6 000

-5 000

-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

SEKm

2010 2011 2012

* SEK 798 million, excluding SEK 6,799 million for the acquisition of Lincoln.

*


Return on capital employed

0

5

10

15

20

25

30

2010 2011 YTD 2012

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.

%

20.0

24.0

Long-term target: 27%

23.6


Net debt

-20 000

-18 000

-16 000

-14 000

-12 000

-10 000

-8 000

-6 000

-4 000

-2 000

0

SEKm

AB SKF, dividend paid (SEKm):2010 Q2 1,5942011 Q2 2,2772012 Q2 2,504

2010 2011 2012

Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

Cash out from acquisition (SEKm):2010 6,799


0

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018

Debt structure, maturity years

EURm

396

100100

• Credit facilities:EUR 500 million

2014 SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

130

500

110

0


July 2012: SKF demand outlook Q3 2012

Demand compared to the third quarter last yearThe demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be lower in Europe, relatively unchanged in Asia, higher in North America and slightly higher in Latin America. The demand is expected to be slightly higher for Industrial Strategic Industries and relatively unchanged for Automotive and Industrial Regional Sales and Service.

Demand compared to the second quarter 2012The demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be slightly lower in Europe, relatively unchanged in Asia and North America and higher in Latin America. The demand is expected to be relatively unchanged for Industrial Strategic Industries and Industrial Regional Sales and Service and slightly lower for Automotive.

Manufacturing level The manufacturing level is expected to be lower year on year and slightly lower compared to the second quarter.


SKF demand outlook Q3 2012, regions

Sequential trends for: Q2 2012 Q3 2012

Share of net sales2011*

Europe44%

Asia Pacific28%

North America

19%

Latin America

8%

Total

Q3 2012 vs Q3 2011

-

+/-

++

+

+/-

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.


SKF demand outlook Q3 2012, business areas

Sequential trends for Q3 2012

Share of net sales2011

Strategic Industries

31%

Regional Sales and Service

39%

Automotive 27%

Total

Q3 2012 vs Q3 2011

+

+/-

+/-

+/-


5%

5%

28%

13%

12%

10%

4%

3%

13%

5%

Energy

Aerospace

Industrial distribution

Industrial, general

Industrial, heavy, special and off-highway

Vehicle service market

Railway

Two-wheelers and electrical

Cars and light vehicles

Trucks

SKF sequential demand trend Q3 2012

Share of net sales 2011*

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.


Guidance for the third quarter 2012

• Tax level: around 30%

• Financial net for the third quarter:Around SEK -180 million

• Exchange rates on operating profit versus 2011Q3: SEK 125 millionFull year: SEK 350 million

• Additions to PPE: Around SEK 2.0 billion for 2012

Guidance is approximate and based on current assumptionsand exchange rates


Key focus areas ahead 2012

• Managing the uncertain and different demand environment

- regions and segments

• Profit and cash flow- inventory management

• Initiatives and actions to support long-term financial targets

• Continue the integration of Lincoln

• Business Excellence and competence development

• Implement the new organization for the Industrial market

One SKF and SKF Care as guiding lights


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”.


Documents

SKF Half-year results 2012