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15 July 2010
0
The SKF Group
Half-year results 2010
Tom Johnstone, President and CEO
15 July 2010
2Key points, Q2 report
• Record levels Operating profit: SEK 2,239 m (474). Q209 include SEK 500 m in restructuringOperating margin: 14.3% (3.4)
• Organic sales development in local currency:Industrial Division: +7.1%Service Division: +17.0%Automotive Division: +23.6%
Outlook for Q3
• DemandSignificantly higher compared to Q3 2009Slightly higher sequentially compared to Q2 2010, adjusted for normal seasonality
• Manufacturing levelSignificantly higher year over yearRelatively unchanged compared to Q2 2010, adjusted for normal seasonality
15 July 2010
3Highlights 2010
• SKF inaugurated: − a new factory in Tver, Russia, to produce the new generation of
SKF’s sealed and pre-lubricated compact tapered bearing units for railway customers.
− a Global Technical Centre China in Shanghai.
− three new SKF Solution Factories, one in Schweinfurt, Germany, one in Montigny, France and one in Moscow, Russia.
• SKF signed a framework agreement with the State Forestry Administration in China to plant new forests.
15 July 2010
4Highlights 2010
• SKF has assisted S-OIL, a large South Korean oil refinery, to increase productivity and reduce potential production downtime.
• SKF was awarded an agreement with ZF Sachs Italy to supply 140,000 oil seals and wiper seals for motorcycle forks.
• SKF signed a three-year contract with Valeo to supply SKF Rotor Positioning Bearings for the new i-StARS, Valeos stop-start system.
• SKF received the “Golden Mousetrap” award in the 2010 “Best products awards” for the new SKF Machine Condition Advisor.
15 July 2010
5Sales volume
-35-30-25-20-15-10-505
101520
% change y-o-y
2008 2009 2010
15 July 2010
6Sales in local currencies (excl. structural changes)
-30-25-20-15-10-505
101520
% change y-o-y
2008 2009 2010
15 July 2010
7Growth in local currency(Organic growth + acquisition/divestments)
-20
-15
-10
-5
0
5
10
15
2008 2009 YTD June 2010Organic growth
% y-o-y
Acquisitions/Divestments
Long-term target level: 6-8% per annum
7.1%
-19.0%
10.4%
15 July 2010
8Growth development by geographyLocal currency Q2 2010 vs Q2 2009
Europe+9%
Asia/Pacific +36%
Latin America +24%
Middle East & Africa +9%
North America +11%
15 July 2010
9Growth development by geographyLocal currency H1 2010 vs H1 2009
Europe+1%
Asia/Pacific +35%
Latin America +23%
Middle East & Africa +10%
North America +6%
15 July 2010
10Components in net sales
20092008 2010Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-14.1 5.3
0.0
-0.3
5.0
-7.7
-2.7
0.4
0.3
-13.4
-1.4
-14.8
-24.9
1.2
3.7
-20.0
6.6
-13.4
-30.8
1.1
5.6
-24.1
12.2
-11.9
-26.9
1.4
7.1
-18.4
13.6
-4.8
-13.0
2.4
8.5
-2.1
10.3
8.2
2.7
0.5
6.4
9.6
-0.9
8.7
6.2
1.3
4.0
11.5
-4.1
7.4
4.9
1.0
3.8
9.7
-1.2
8.5
Q2
16.6
0.0
-0.5
16.1
-5.2
10.9
Volume
Structure
Price / Mix
Sales in local currency
Currency
Net sales
15 July 2010
11Operating profit
0200400600800
1 0001 2001 4001 6001 8002 0002 2002 400SEKm
2008 2009 2010
Restructuring and one-time items
15 July 2010
12Operating margin
% Long-term target level: 12%
2008 2009
0
2
4
6
8
10
12
14
16
2010
Restructuring and one-time items
15 July 2010
13Operating margin
0
2
4
6
8
10
12
14
2008 2009 YTD June 2010
%
12.2
Long-term target level: 12%
5.7
12.7*
8.0*
Restructuring and one-time items
* Excluding restructuring and one-time items
13.1
13.4*
15 July 2010
14Operating margin per division
-12-10
-8-6-4-202468
1012141618
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
IndustrialService
Automotive
%
2008
Excluding one-off items(eg. restructuring, impairments, capital gains)
2009 2010
15 July 2010
15Second quarter 2010
SEKm 2010 2009
Net sales 15,709 14,167
Operating margin excl. restructuring, % 14.3% 6.9%
Cash flow after investments before financial items
1,160 2,425
Operating margin, % 14.3% 3.4%
Operating profit 2,239 474
Profit before taxes 2,047 312
Net profit 1,451 323
Basic earnings per share, SEK 3.09 0.69
15 July 2010
16Half year 2010
SEKm 2010 2009
Net sales 30,155 29,016
Operating margin excl. restructuring, % 13.4% 6.6%
Cash flow after investments before financial items
1,192 2,948
Operating margin, % 13.1% 4.3%
Operating profit 3,941 1,242
Profit before taxes 3,551 843
Net profit 2,521 717
Basic earnings per share, SEK 5.36 1.55
15 July 2010
17Inventories as % of annual sales
18
19
20
21
22
23
24
25% Long-term target level: 18%
2008 2009 2010
15 July 2010
18Cash flow, after investments before financial items
-1 000
-500
0
500
1 000
1 500
2 000
2 500SEKm
Cash out fromacquisitions* (SEKm):
2008 1,2842009 241
2008 20102009
* including non-controlling interests.
15 July 2010
19Return on capital employed
0
5
10
15
20
25
30
2008 2009 YTD June 2010
ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.
%Long-term target level: 24%
24.0
9.1
16.8
15 July 2010
20Net debt(Short-term financial assets minus loans and post-employment benefits)
-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):2008 Q2 2,2772009 Q2 1,5942010 Q2 1,594
Redemption (SEKm):2008 Q2 2,277
2008 2009 2010
15 July 2010
21Debt structure
0
100
200
300
400
500
2010 2011 2012 2013 2014 2015 2016
Maturity years, EURm
55
450
130100100
• Repaid eurobond EUR 132 m, due June 2010• Repaid EUR 100 m on loan, due June 2013• New eurobond EUR 100 m, due April 2015
15 July 2010
22June 2010: Outlook for the third quarter 2010
Development compared to third quarter last yearThe demand for SKF products and services is expected to be significantly higher for the Group, the divisions and for the different geographical areas.
Development compared to the second quarter 2010 and adjusted for normal seasonalityThe demand is expected to be slightly higher for the SKF Group in total. It is expected to be unchanged in Europe, slightly higher in North America and higher in Asia and Latin America. For the AutomotiveDivision it is expected to be relatively unchanged and for the Industrial Division and Service Division it is expected to be slightly higher.
Manufacturing levelThe manufacturing level will be significantly higher year on year and relatively unchanged compared to the second quarter, adjusted for normal seasonality.
15 July 2010
23Volume trends, regions(based on current assumptions and adjusted for seasonality)
Daily volume trends for: Q2 2010 Q3 2010
Net sales2009
Europe 51%
North America 17%
Asia Pacific 23%
Latin America 6%
Total
Outlook Q32010 vs 2009
+++
+++
+++
+++
+++
15 July 2010
24Volume trends, divisions(based on current assumptions and adjusted for seasonality)
Daily volume trends for Q3 2010
Net sales2009
Industrial 34%
Service 35%
Automotive 29%
Total
Outlook Q32010 vs 2009
+++
+++
+++
+++
15 July 2010
25Sequential volume trend main segments Q3 2010(based on current assumptions)
14%
7%
7%
5%
22%
16%
12%
11%
3%
3%
Cars
Aerospace
Energy
Railway
Industrial distribution
Industrial OEM, General+Special
Vehicle Service Market
Industrial OEM, Heavy + Off-highway
Electrical and two-wheeler
Trucks
Net sales 2009
15 July 2010
26Guidance for the third quarter 2010
• Tax level: around 30%
• Financial net for the third quarter:Around SEK -175 million
• Exchange rates on operating profit versus 2009Q3: +/- 0Full year: SEK -250 million
• Additions to PPE: Around SEK 1.5 billion for 2010
Guidance is approximate and based on current assumptions and exchange rates.
15 July 2010
27Key focus areas ahead 2010
• Profit and cash flow
• Adjustment of manufacturing output to new demand levels
• Growing segments and geographies
• Strengthening the platform/segment approach
• Competence development
SKF Care and Six Sigma as guiding lights
15 July 2010
28SKF Care
Employee Care
Community CareEnvironmental Care
Business Care
BeyondZeroTM
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008 2009
SKF Care
Operating margin
15 July 2010
29SKF Group Vision
To equip the worldwith SKF knowledge
15 July 2010
30Cautionary 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”.
15 July 2010
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