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SKF First-quarter results 2012

SKF First-quarter results 2012. Tom Johnstone, President and CEO 19 April 2012. Highlights Q1 2012. SKF signed an agreement to acquire the US-based General Bearing Corporation for around USD 125 million on a cash and debt free basis.

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SKF First-quarter results 2012

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  1. SKF First-quarter results 2012 Tom Johnstone, President and CEO 19 April 2012

  2. Highlights Q1 2012 • SKF signed an agreement to acquire the US-based General Bearing Corporation for around USD 125 million on a cash and debt free basis. • SKF received an order worth around SEK 350 million from Vestas for the delivery of main shaft solutions to the Vestas V112-3.0 MW turbine. • SKF was awarded two contracts totaling around SEK 50 million from Siemens Rail Systems for railway projects in Europe. SKF will deliver axle boxes and wheel set bearing units. • SKF received orders from one major metal industry customer for SKF ConRo Compacts worth EUR 1.8 million. • SKF signed a three-year contract with Scania. The contract includes bearings for truck wheel end units and transmissions to Scania production facilities in Brazil. • Acquisition: • New businesses:

  3. Highlights Q1 2012 • inaugurated two SKF University Technology Centres: • held the SKF North American Distributor convention in Florida, and participated in a maintenance fair in Sweden. • awarded the 140,000 certificate from the SKF Distributor College • launched a range of informational and calculation-focused apps for iPhone and iPad. • SKF: Chalmers University of Technology, for sustainability and environment Luleå University of Technology, for condition monitoring and asset management Foto: Karl William Foto: Robin Olsson

  4. 4 Examples of new products launched in 2012 A hand-held, 18-volt, lithium-ion grease gun Next generation SNL, SE housings SKF Solar Hub Servo Actuator for industrial applications SKF Speed Sensor Unit SKF Compact Wire Steering Bearing SKF Thruster Monitoring Integrated monotube seal SKF Nautilus range extensions SKF Bus Door Actuator

  5. SKF Group Q1 2012 • Financial performance Q1 2012 Q1 2011 • Net sales, SEKm 16,931 16,702 • Operating profit,SEKm 2,140 2,504 • Operating margin, % 12.6 15.0 • Profit before tax, SEKm 1,981 2,318 • Cash flow, SEKm 696 372 • Organic sales growth in local currency: • SKF Group: +1.1% • Europe: -1.2% Industrial market, Strategic Industries: +2.5% • North America: +14.7% Industrial market, Regional Sales and Service: +3.0% • Asia: -8.1% Automotive: -4.2% • Latin America: +11.1% • Key points • Sales were relatively unchanged y-o-y • Manufacturing was significantly lower y-o-y • Inventories were reduced to 20.5% of sales

  6. Organic sales growth in local currency % change y-o-y 2010 2011 2012

  7. Sales volume % change y-o-y 2010 2011 2012

  8. Growth development by geography Organic growth in local currency Q1 2012 vs Q1 2011 Europe-1.2% North America +14.7% Asia/Pacific -8.1% Latin America +11.1% Middle East & Africa +2.5%

  9. Growth in local currency Long-term target: 8% per annum 14.2% 16.3% 1.0% Total growth % y-o-y 14.2% 11.5% 4.8% 1.1% 0.0% -0.1% Organic growth Acquisitions/Divestments

  10. Components in net sales 2010 2011 2012 Percent y-o-y

  11. Operating profit SEKm 2012 2011 2010 Restructuring and one-time items

  12. Operating margin Long-term target level: 15% % 2010 2011 2012 Restructuring and one-time items

  13. Operating margin Long-term target level: 15% % 14.7* 14.2* 12.6 14.5 13.8 Restructuring and one-time items * Excluding restructuring and one-time items

  14. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2011 2012 2010

  15. First quarter 2012

  16. Inventories as % of annual sales Long-term target level: 18% % 2010 2011 2012

  17. Cash flow, after investments before financing SEKm * 2011 2012 2010 * SEK 798 million,excluding SEK 6,799 million for the acquisition of Lincoln.

  18. Return on capital employed Long-term target: 27% % 24.0 23.6 21.9 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.

  19. Net debt SEKm AB SKF, dividend paid (SEKm): 2010 Q2 1,594 2011 Q2 2,277 Cash out from acquisitions (SEKm): 2010 6,799 2011 2012 2010 Net debt: Loans and net provisions for post- employment benefits less short-term financial assets excluding derivatives.

  20. Debt structure Maturity years, EURm 500 396 130 110 100 100 0 • Credit facilities: EUR 500 million 2014 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  21. Dividend proposal • AB SKF’s Board proposes to the Annual General Meeting an increase of the dividend by 10%, giving a dividend of SEK 5.50 (5.00) per share. • The Annual General Meeting will be held on 25 April.

  22. April 2012: Outlook for the second quarter 2012 Demand compared to the second quarter last year The demand for SKF’s products and services is expected to be slightly higher for the Group. It is expected to be relatively unchanged in Europe and Asia, and significantly higher in North America and Latin America. The demand is expected to be slightly higher for Strategic Industries and Regional Sales and Service and relatively unchanged for the Automotive. Demand compared to the first quarter 2012 The demand for SKF’s products and services is expected to be slightly higher for the Group. It is expected to be relatively unchanged in Europe, slightly higher in North America and higher in Asia and Latin America. The demand is expected to be slightly higher for all business areas. Manufacturing level The manufacturing level is expected to be lower year on year but higher compared to the first quarter.

  23. Demand outlook Q2 2012, regions (based on current assumptions)

  24. Demand outlook Q2 2012, business areas (based on current assumptions)

  25. Sequential volume trend Q2 2012, main segments (based on current assumptions) Share of net sales 2011* * excluding Lincoln

  26. Guidance for the second quarter 2012 • Tax level: around 30% • Financial net for the second quarter:Around SEK -175 million • Exchange rates on operating profit versus 2011 Q2: SEK 125 million • Full year: SEK 200 million • Additions to PPE: Around SEK 2.0 billion for 2012 Guidance is approximate and based on current assumptions and exchange rates

  27. 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

  28. 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”.

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