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SKF Q1 2018 Results: Record Sales Growth & Performance Insights

Discover SKF's record-breaking start to 2018 with 7.5% organic sales growth and key insights into operating profit, margins, and customer performance. Explore SKF's innovative solutions and strategic partnerships driving value creation in the market. Get an overview of SKF's achievements, such as supplying bearings for Volkswagen's MEB vehicles and LEAP engine success. Uncover the financial highlights and guidance for 2018 along with key metrics and industry changes shaping SKF's competitive edge in today's market landscape.

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SKF Q1 2018 Results: Record Sales Growth & Performance Insights

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  1. SKF Q1 results 2018 Alrik Danielson, President and CEO

  2. A record start to 2018 7.5% Organic sales growth • Record-high sales of 20,560 M, organic growth +7.5% • Record-high reported operating profit 2,625 M (2,295) • Operating margin 12.8% (11.7) • Cash flow 259 M (64) 2,625 MOperating profit 12.8%Operating margin

  3. Improving performance towards our targets Return on capital employed: Organic growth: Net working capital: Operating margin: Net debt / equity: 31.7% 12.8% 7.5% 66% 15.0% Targets set in 2016 and valid over a business cycle: Target: 16% Target: <80% Target: 5% Target: 25% Target: 12%

  4. Sales growth in all marketsOrganic growth in local currency Q1 2018 vs Q1 2017 Europe +7.6% North America +3.2% Asia/Pacific +13.2% Latin America +0.7% Middle East & Africa +11.0%

  5. Rotating equipment performance creates value Customer performance • Connected to customer applications, SKF will create and capture value and deliver functionality • Connections include: • Condition monitoring • Integrated supply chain Application knowhow Foresight Create customer value Product & service Insight Hindsight

  6. Unplanned production stops cost billionsEvery time a machine is stopped and opened for maintenance when not needed drives cost New technology provides radically different tools for SKF to strengthen the competitiveness of our customers

  7. SKF to supply bearings to Volkswagen’s all-electric MEB vehicle powertrain platform

  8. SKF is a development partner in manufacturing, design and testing of main shaft and gearbox bearings • Ceramic hybrid main shaft ball bearings • SKF supports the LEAP program with a global supply chain, with plants in US and Europe. • Key figures • 14,300 total engine orders and commitments as of Feb. 2018 • Sole engine for Boeing 737 and COMAC C919 aircrafts, and 50% market share on Airbus A320neo • SKF has now produced more than 6,000 main shaft bearings LEAP Engine : a success for SKF • SKF selected for all main shaft and most gearbox bearings for the LEAP Engine • SKF has now produced more than 6,000 bearings for the LEAP Engine

  9. 2 Q1 results – the detailsChristian Johansson, CFO

  10. Sales development

  11. Organic sales growth

  12. Operating profit

  13. Operating profit

  14. Industrial • Net sales 14,241 M • Organic sales +8.5% • Operating margin 15.0%, (14.0) • Automotive • Net sales 6,319 M • Organic sales +5.5% • Operating margin 7.7%, (6.8) Performance by customer group

  15. SKF Group – Q1 2018 • 12.8%Operating margin

  16. Cash flow after investments before financing*

  17. Net working capital 31.7% of annual sales

  18. Net debt/equity improved to 66 percent in the quarter

  19. Guidance for 2018* • Q2 2018: • Financial net: around -200 million • Currency impact on the operating profit is expected to be around 160 million negative compared with 2017, based on exchange rates per 31 March, 2018. • 2018: • Tax level: around 29% for 2018, excluding effects from divestments • Additions to property, plant and equipment: around 2,400 million for 2018 * Guidance is approximate and based on current assumptions and exchange rates.

  20. Reporting changes • Segment changes: • Cars & Light trucks has been renamed to Light vehicles and includes two-wheelers • Industrial Heavy and Special has been split in Agriculture, Food and Beverage, Industrial Drives and Marine • Industrial General has been reclassified to Industrial Drives • Other Industry has been renamed to Other Industrial • No adjustment for IAC on operating profit • No sequential demand guidance • Segment definitions have been aligned with industry standard

  21. Summary – Q1 a good start to 2018 7.5% Organic sales growth • Continued growth in Q1 • Record-high sales and operating profit • Expect to see continued growth in Q2 – higher volumes year-over-year 2,625 MOperating profit 12.8%Operating margin

  22. April 2018: SKF demand outlook Q2 2018 • Demand compared to the second quarter 2017 • The demand for SKF’s products and services is expected to be higher for the Group, including Industrial and Automotive. Demand is expected to be higher in Europe, significantly higher in Asia and relatively unchanged in North America and Latin America.

  23. SKF Q1 results 2018Q & A

  24. Financial calendar

  25. 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; “Risk management".

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