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SKF Nine -month results 2014

SKF Nine -month results 2014. Tom Johnstone , President and CEO. 15 October 2014. Alrik Danielson , new President and CEO from 1 January 2015. B.Sc in Business Administration and International Economics from the University of Gothenburg 1987-2005 Previous positions within SKF :

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SKF Nine -month results 2014

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  1. SKF Nine-month results 2014 Tom Johnstone, President and CEO 15 October 2014

  2. Alrik Danielson, new President and CEO from 1 January 2015 • B.Scin Business Administration and International Economics from the University of Gothenburg • 1987-2005 Previous positions within SKF: • Financial controller in Gothenburg • President, Industrial Division in Spain and Portugal • President, SKF do Brazil • President, Industrial Division • and several other managerial positions. • 2005-2014 HöganäsAB, President and CEO

  3. Examples of new business • Doosan Heavy Industries and Construction, SKF Supergrip BoltsSouth Korea SKF Nautilus bearing • A leading Chinese locomotive manufacturer Traction motor bearings • HSD SpA, Italy Super precision bearings and engineering support • A major Australian customer Maintenance contractin the agriculture industry • Medical device manufacturer in California, Slewing ring bearingsUSA

  4. Examples of new business • Tesla Motors Bearing for the gearbox, e-motor and wheels • Volvo Cars Wheel hub bearing units • Scania Wheel bearing units and high pressure valve stem seals

  5. Customer awards • Supplier Performance Award – Snecma, Safran Group, France • Best Supplier Award – Weg Electric Motor Manufacturing Co., Ltd, China • Best Supplier Award – Shanghai Hanbell Precise Machinery Co. Ltd., China • Excellent Engineering Development Award – Shanghai Automobile Gear Works (SAGW), China • Fiat Qualitas Award – Fiat, Argentina • Certificate of Appreciation for quality and delivery performance – Honda, India

  6. Highlights • New Kaydon factory at the SKF Campus in Cajamar, Brazil. • New Global Technical Center in the greater Chicago area, US. • For the 15th year in a row, one of the world’s most sustainable companies by the Dow Jones Sustainability World Index (DJSI). • For the 14th consecutive year, a constituent of the FTSE4Good Index Series.

  7. Examples of new products and solutions SKF Multilog Online System IMx-B Tapered roller bearing unit for passenger railway applications Compact tapered roller bearing unit for heavy freight SKF Mudblock cassette seals, MUD 11 SKF Machine Tool Observer MTx SKF Multilog On-line System IMx-M SKF Static Motor Analyzer Baker AWA-IV PuraBreeze 100

  8. SKF Group – Q3 2014 Keypoints Sales volumes up by 1.9% y-o-y. Manufacturing was relatively unchanged compared to last year.

  9. SKF Group – Ninemonth 2014 Keypoints Sales volumes up by 3.8% y-o-y. Manufacturing wasslightly higher compared to last year.

  10. Organic sales growth in local currency % change y-o-y 2012 2013 2014

  11. Organic sales growth in local currency % y-o-y 4.5% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.7%

  12. Sales development by geographyOrganic growth in local currency Q3 2014 vs Q3 2013 Europe 0% North America 3% Asia/Pacific 8% Latin America 0% Middle East & Africa 7%

  13. Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013 Europe 2% North America 3% Asia/Pacific 11% Latin America 1% Middle East & Africa 14%

  14. Components in net sales

  15. Operating profit as reported SEKm 2012 2013 2014

  16. Operating profit excluding one-time items SEKm 2012 2013 2014

  17. Operating margin One-time items * Excludingone-timeitems % 12.0* 11.9* 11.8 11.3 5.8

  18. Operating margin per business area as reported % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  19. Operating margin per business area excl. one-time items % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  20. SKF’s programme to improve efficiency and reduce cost Restructuring, SEKm: Giving future gross savings, SEKm: Realized gross savings from total programme, SEKm: vs 2012 vs 2013 Note: Run rate Q3 2014 SEK 1,340 million vs 2012.

  21. Operating profit bridge, Q3 2014 SEKm +100 -432 +65 +110 +112 +165 2,073 +30 1,923 Volumes excl. Specialty Business Savings Other* Q3 2014 Q3 2013 Price/mix Specialty Business One-time items Currencies * R&D, S&A, IT, inflation etc.

  22. Operating profit bridge, ninemonth 2014 SEKm -120 +505 -829 +390 +352 6,193 +225 +430 5,240 Volumes excl. Specialty Business Savings Other* Q1-Q3 2014 Q1-Q3 2013 Price/mix Specialty Business One-time items Currencies * R&D, S&A, IT, inflation etc.

  23. Net working capital as % of annual sales Target: 27% % 2012 2013 2014

  24. Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 13.9* 16.2 8.5 7.5 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.

  25. Cash flow, after investments before financing SEKm 1) 5) 4) 3) 2) 2012 2013 2014 Excl. acq. and div.: 1) Q3 2012 SEK 1,707 million 2) Q1 2013 SEK -69 million 3) Q3 2013 SEK 871 million 4) Q4 2013 SEK 1,170 million Excl. EU payment 5) Q2 2014 SEK 1,423 million

  26. Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 2014 Q2 2,530 Cash out from major acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7,900 EU payment (SEKm): 2014 Q22,825 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  27. Debt structure, maturity years 850 500 500 200 110 100 100 • Availablecreditfacilities: • EUR 500 million 2019 • SEK 3,000 million 2016 • EUR 150 million 2017 • No financialcovenants nor material adversechangeclause

  28. October 2014: SKF demand outlook Q4 2014 Demand compared to the fourth quarter 2013 The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be slightly higher for Strategic Industries, relatively unchanged for Regional Sales and Service and slightly lower for Automotive. Demand compared to the third quarter 2014 The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be relatively unchanged for Strategic Industries, slightly higher for Regional Sales and Service and slightly lower for Automotive. Manufacturing Manufacturing is expected to be slightly lower year over year and compared to the third quarter.

  29. SKF demand outlook Q4 2014, main regions

  30. SKF demand outlook Q4 2014, main business areas

  31. SKF sequential volume trend Q4 2014, Industries Share of net sales 2013

  32. Guidance for the fourth quarter 2014* Tax level: < 30% Financial net: around SEK -220 million Currency impact on operating profit vs 2013 Q4: SEK +230 million Full year: SEK +110 million Additions to PPE: around SEK 1.7 billion for 2014 * Guidance is approximate and based on current assumptions and exchange rates.

  33. SKF’s priorities • Sustainable profitable growth • Expand the platform concept • Exploit the asset life cycle approach • Develop new products and grow SKF BeyondZero portfolio • Extend and grow second brands • Acquisitions • Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility • Capital efficiency • Fixed capital • Net working capital • Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs

  34. 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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