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The SKF Group

The SKF Group reports record levels and positive sales growth in their half-year results for 2010. Operating profit is SEK 2,239m, with an operating margin of 14.3%. Sales growth in local currency is significant across all divisions. The outlook for Q3 is positive, with higher demand expected compared to the previous year.

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The SKF Group

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  1. The SKF Group Half-year results 2010 Tom Johnstone, President and CEO

  2. Key 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 • Demand • Significantly higher compared to Q3 2009 • Slightly higher sequentially compared to Q2 2010, adjusted for normal seasonality • Manufacturing level • Significantly higher year over year • Relatively unchanged compared to Q2 2010, adjusted for normal seasonality

  3. Highlights 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.

  4. Highlights 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.

  5. Sales volume % change y-o-y 2008 2009 2010

  6. Sales in local currencies (excl. structural changes) % change y-o-y 2010 2009 2008

  7. Growth in local currency(Organic growth + acquisition/divestments) Long-term target level: 6-8% per annum % y-o-y 10.4% 7.1% -19.0% Organic growth Acquisitions/Divestments

  8. Growth development by geography Local currency Q2 2010 vs Q2 2009 Europe+9% North America +11% Asia/Pacific +36% Latin America +24% Middle East & Africa +9%

  9. Growth development by geography Local currency H1 2010 vs H1 2009 Europe+1% North America +6% Asia/Pacific +35% Latin America +23% Middle East & Africa +10%

  10. Components in net sales 2009 2008 2010 Percent y-o-y

  11. Operating profit SEKm 2010 2009 2008 Restructuring and one-time items

  12. Operating margin Long-term target level: 12% % 2009 2008 2010 Restructuring and one-time items

  13. Operating margin Long-term target level: 12% % 13.4* 12.7* 13.1 12.2 8.0* 5.7 Restructuring and one-time items * Excluding restructuring and one-time items

  14. Operating margin per division % Service Industrial Automotive 2010 2009 2008 Excluding one-off items(eg. restructuring, impairments, capital gains)

  15. Second quarter 2010

  16. Half year 2010

  17. Inventories as % of annual sales Long-term target level: 18% % 2008 2009 2010

  18. Cash flow, after investments before financial items SEKm Cash out from acquisitions* (SEKm): 2008 1,284 2009 241 2008 2010 2009 * including non-controlling interests.

  19. Return on capital employed Long-term target level: 24% % 24.0 16.8 9.1 ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.

  20. Net debt(Short-term financial assets minus loans and post-employment benefits) SEKm AB SKF, dividend paid (SEKm): 2008 Q2 2,277 2009 Q2 1,594 2010 Q2 1,594 Redemption (SEKm): 2008 Q2 2,277 2010 2009 2008

  21. Debt structure Maturity years, EURm 450 130 100 100 55 • 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

  22. June 2010: Outlook for the third quarter 2010 Development compared to third quarter last year The 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 seasonality The 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 Automotive Division it is expected to be relatively unchanged and for the Industrial Division and Service Division it is expected to be slightly higher. Manufacturing level The manufacturing level will be significantly higher year on year and relatively unchanged compared to the second quarter, adjusted for normal seasonality.

  23. Volume trends, regions(based on current assumptions and adjusted for seasonality)

  24. Volume trends, divisions(based on current assumptions and adjusted for seasonality)

  25. Sequential volume trend main segments Q3 2010(based on current assumptions) Net sales 2009

  26. Guidance 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 2009 Q3: +/- 0 • Full 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.

  27. Key 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

  28. SKF Care Business Care Employee Care Operating margin SKF Care BeyondZeroTM Community Care Environmental Care

  29. SKF Group Vision To equip the world with SKF knowledge

  30. 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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