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Discover SKF - an established company with global sales across various industries. Explore SKF's innovative solutions, manufacturing sites, and strategic acquisitions.
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The SKF Group SKF Investor Relations February 2011
SKF - A truly global company • Established: 1907 • Sales 2010: SEK 61,029 million • Employees: 44,742 • Production sites: around 130 in 32 countries • SKF presence: in over 130 countries • Distributors/dealers: 15,000 locations • Global certificates: ISO 14001 • OHSAS 18001 certification
Net sales by customer segment 2010 Cars and light trucks Industrial distribution 14% 25% Aerospace 5% Railway Commercial transport 4% Off-highway 3% 4% Trucks 12% 3% Vehicle Service Market Two-wheeler and Electrical 5% 13% 5% Special industrial equipment 7% General industry Energy Heavy industry Industrial business
(1998) (2002) SKF 2010 Net sales Average number of employees Tangible asset (12) (9) (10) (14) (13) (8) (25) (14) (26) (19) (13) (18) North America WesternEurope Eastern Europe Sweden Latin America Middle East and Africa Asia/Pacific % of group total
SKF Group Vision To equip the world with SKF knowledge
Investing in new factories Ahmedabad, India • Haridwar, India Tver, Russia Dalian, China
SKF Solution Factory Platforms & Technology Competence Segments & Application Knowledge SKF Solution Factory Capabilities Sealing Solutions Lubrication Solutions Mechanical Services Remote Monitoring Center Bearing Service Workshop Condition Monitoring Services A & MC MaPro/CoMo Product Repair Training Center
Nordic (Gothenburg) Moscow Edmonton UK France Germany Italy Tianjin Istanbul Shanghai Houston Taiwan Monterrey Mexico Pune Colombia Opened Brasil “IXION” Planned Johannesburg 17 SKF Solution Factories 2010
SKF wind energy industry New CRB-design with extra-high carrying capacity for wind-gearboxes. New pitch bearing design with improved corrosion protection SKF WindCon 3.0/Webcon Intranet supervised condition monitoring DRTRB-unit “Nautilus” with segmented cage for minimized friction Automatic centralized lubrication kits for reduced maintenance cost XL Hybrid bearings with ceramic balls for superior insulation
SKF’s platforms Bearings and units
SKF’s platforms Seals
SKF’s platforms Mechatronics
SKF’s platforms Lubrication systems
SKF’s platforms Services
Acquisition 2003-2010Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Macrotech(2006) Macrotech (2009) Jaeger(2005) GLO(2008) S2M(2007) Baker(2007) Vogel(2004) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) Sommers(2005) PB&A(2006) Scandrive(2003) Monitek(2006) Cirval(2008) Peer(2008)
Cost split, % of total expenses (2010: SEK 52,438 m) Depreciation & amortization ~4% ~20% Raw material (example: bars, tubes and rings) ~50% Components (example: forged and turned rings) Material ~34% Other ~27% ~30% Other (shop supplies and traded products etc.) Employees ~35%
The SKF Group Tom Johnstone, President and CEO 1 February 2011
Key points, Q4 report • Strong performance • Operating profit:SEK 2,202 m (1,004). Operating margin:14.3% (7.2) • Profit before tax: SEK 2,048 m (765) • Cash flow: SEK -5,966 m (1,445), • Cash flow excl. acquisition of Lincoln Industrial SEK 798 m • Strong organic sales development in local currency: • SKF Group: +17.2% • All divisions and regions showed very good growth • Completed acquisition of Lincoln Industrial • Outlook for Q1 for SKF Group • Demand • Significantly higher compared to Q1 2010 • Slightly higher sequentially compared to Q4 2010, adjusted for normal seasonality • Manufacturing level • Significantly higher year over year • Slightly higher compared to Q4 2010, adjusted for normal seasonality
Acquisition of Lincoln Industrial, Q4 2010 • A leading supplier of lubrication systems and tools • Headquarter in St. Louis, Missouri, USA • Sales of around USD 400 m in 2010 • About 2,000 employees • Total purchase price net: around SEK 6.8 bn • Financing: around SEK 3.2 bn cash (net) and SEK 3.6 bn debt
Tver, Russia Haridwar, India Ahmedabad, India 1 Global Technical Centre in Shanghai New facilities opened in 2010 • 3 • factories 9 Solution Factories - in total 17
Examples of new product launches in 2010 Low friction X-Tracker Four-row tapered roller bearing SKF Engineering Simulation Services SKF Commutation Sensor-Bearing Unit SKF Overrunning Alternator Pulley Unit SKF Hydraulic driven lubricator SKF Crane Asset Management SKF MetroCon – CBM for elevators and escalators SKF Drum Support Unit SKF Cam Follower Unit SKF solutions for special pumps SKF SPEEDI-SLEEVE High performance seal SKF Low Friction Engine Seal SKF One Way Clutch 2010: 251 first filings of patent applications
2010 status: 463 Black Belts 2,059 Green Belts 1,155 projects closed Six Sigma Hard savings 2005: SEK 150 m 2006: SEK 200 m 2007: SEK 302 m 2008: SEK 462 m 2009: SEK 430 m 2010: SEK 468 m 4 dimensions: ”Standard” Six Sigma, Design for Six Sigma, Lean Six Sigma and Six Sigma for Growth
Sales volume % change y-o-y 2008 2009 2010
Sales in local currencies (excl. structural changes) % change y-o-y 2010 2009 2008
Growth in local currency(Organic growth + acquisition/divestments) % y-o-y 14.2% 7.1% -19.0% Organic growth Acquisitions/Divestments
Growth development by geography Local currency Q4 2010 vs Q4 2009 Europe+17% North America +17% Asia/Pacific +20% Latin America +16% Middle East & Africa +8%
Growth development by geography Local currency 2010 vs 2009 Europe+7% North America +13% Asia/Pacific +31% Latin America +20% Middle East & Africa +10%
Components in net sales 2009 2008 2010 Percent y-o-y
Operating profit SEKm 2010 2009 2008 Restructuring and one-time items
Operating margin % 2009 2008 2010 Restructuring and one-time items
Operating margin % 14.2* 12.7* 13.8 12.2 8.0* 5.7 Restructuring and one-time items * Excluding restructuring and one-time items
Operating margin per division % Service Industrial Automotive 2010 2009 2008 Excluding one-off items(eg. restructuring, impairments, capital gains)
Fourth quarter 2010 *after investments before financing
Full year 2010 *after investments before financing
Inventories as % of annual sales Long-term target level: 18% % Excluding acquisition of Lincoln Industrial X 2008 2009 2010
Cash flow, after investments before financial items SEKm Excluding acquisition of Lincoln Industrial X Cash out from acquisitions (SEKm): 2008 1,284 2009 241 2010 6,799 2008 2010 2009
Return on capital employed % 24.0 24.0 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.
Net debt(Short-term financial assets minus loans and post-employment benefits) AB SKF, dividend paid (SEKm): 2008 Q2 2,277 2009 Q2 1,594 2010 Q2 1,594 Redemption (SEKm): 2008 Q2 2,277 SEKm Cash out from acquisitions (SEKm): 2008 1,284 2009 241 2010 6,799 2010 2009 2008
Debt structure Maturity years, EURm 530 446 400* 400* 100 100 130 55 130 • Credit facilities: EUR 500 m 2014, whereof EUR 400* m utilized SEK 3,000 m 2017, unutilized • No financial covenants nor material adverse change clause
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
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
Dividend proposal AB SKF’s Board proposes the Annual General Meeting an increase in the dividend of 43%, giving a dividend of SEK 5.00 (3.50) per share
December 2010:Outlook for the first quarter 2011 Development compared to the first 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 fourth quarter 2010 and adjusted for normal seasonality The demand is expected to be slightly higher for the Group and for the different geographical areas. The Industrial Division and the Service Division are expected to be slightly higher and the Automotive Division higher. Manufacturing level The manufacturing level will be significantly higher year on year and slightly higher compared to the fourth quarter, adjusted for normal seasonality.
Volume trends, regions(based on current assumptions and adjusted for seasonality)
Volume trends, divisions(based on current assumptions and adjusted for seasonality)
Sequential volume trend main segments Q1 2011(based on current assumptions) Net sales 2010
Guidance for the first quarter 2011 • Tax level: around 30% • Financial net for the first quarter:Around SEK -200 m • Exchange rates on operating profit versus 2010 Q1: SEK -150 m • Full year: SEK -900 m • Additions to PPE: Around SEK 2.3 bn for 2011 Guidance is approximate and based on current assumptions and exchange rates.
Long-term financial targets • Targets • Operating margin level 15% • Annual sales growth in local currencies 8% • ROCE 27% • Inventory to sales 18%
Main initiatives going forward • Accelerate profitable growth • Reduce cost and eliminate waste • Invest for growth One SKF and SKF Care as guiding lights