19  October 2011
SKF Nine-month results 2011 Tom Johnstone, President and CEO 19 October 2011
Q3 2011  <ul><li>Strong performance  2011 2010 </li></ul><ul><li>Operating profit, SEKm 2,479 2,309 </li></ul><ul><li>Oper...
<ul><li>SKF </li></ul><ul><li>opened regional distribution centre in Montevideo, Uruguay  to strengthen the service to cus...
Example of new products <ul><li>A new range of seals for wind turbine drive trains.  </li></ul>19  October 2011 An upgrade...
19  October 2011 Sales volume  % change y-o-y 2009 2010 2011
19  October 2011 Organic growth in local currencies % change y-o-y 2009 2010 2011
Growth development by geography  Organic growth Q3 2011 vs Q3 2010 19  October 2011 Europe +9.7%  Asia/Pacific +4.9%  Lati...
Growth development by geography  Organic growth YTD 2011 vs YTD 2010 19  October 2011 Europe +15.1%  Asia/Pacific +14.0%  ...
Growth in local currency 19  October 2011 % y-o-y Acquisitions/Divestments Organic growth -19.0% 14.2% 19.2% Long-term tar...
Components in net sales 19  October 2011 Percent y-o-y 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -26.9 -30.8 -24.9 -...
Operating profit 19  October 2011 SEKm  2009 Restructuring and one-time items 2010 2011
Operating margin 19  October 2011 %  2009 Restructuring and one-time items 2010 Long-term target level: 15% 2011
Operating margin   19  October 2011 % 5.7 8.0* Restructuring and one-time items *  Excluding restructuring and one-time it...
Operating margin per division 19  October 2011 Industrial Service Automotive % Excluding one-off items (eg. restructuring,...
Third quarter 2011 19  October 2011 SEKm 2011 2010 Net sales  16,545 15,465 Operating profit  2,479 2,309 Operating margin...
First nine months 2011 19  October 2011 SEKm 2011 2010 Net sales  49,959 45,620 Operating profit  7,606 6,250 Operating ma...
Inventories as % of annual sales 19  October 2011 % Long-term target level: 18%  2009 2010 2011
Cash flow,  after investments before financing 19  October 2011 SEKm 2009 2010 Cash out from acquisitions  (SEKm) :  2009 ...
Return on capital employed 19  October 2011 ROCE: Operating profit plus interest income, as a percentage of twelve months ...
Net debt   (Short-term financial assets minus loans and post-employment benefits) 19  October 2011 SEKm AB SKF,  dividend ...
19  October 2011 Debt structure  Maturity years, EURm 396 100 100 <ul><li>Credit facilities: EUR 500 million 2014    SEK 3...
October 2011:  Outlook for the fourth quarter 2011 19  October 2011 <ul><ul><ul><ul><ul><li>Demand compared to the fourth ...
Demand outlook, regions (based on current assumptions) 19  October 2011 Sequential trends for:  Q3 2011  Q4 2011   Share o...
Demand outlook, divisions (based on current assumptions) 19  October 2011 Sequential trends for Q4 2011 Share of net sales...
Sequential volume trend main segments Q4 2011 (based on current assumptions)   19  October 2011 Share of net sales 2010 4%...
SKF today – more robust and more diverse  <ul><li>Divesting and outsourcing component manufacturing,  </li></ul><ul><li>re...
SKF today - prepared for a changing demand picture <ul><li>Activities already underway </li></ul><ul><li>The SKF 3C progra...
Guidance for the fourth quarter 2011 <ul><li>Tax level: around 30% </li></ul><ul><li>Financial net for the fourth quarter:...
Key focus areas ahead 2011 <ul><li>Profit and cash flow </li></ul><ul><li>- manage currency and material headwinds </li></...
Cautionary statement <ul><li>This presentation contains forward-looking statements that are based on the current expectati...
19  October 2011
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Skf q3 2011_presentation

  1. 1. 19 October 2011
  2. 2. SKF Nine-month results 2011 Tom Johnstone, President and CEO 19 October 2011
  3. 3. Q3 2011 <ul><li>Strong performance 2011 2010 </li></ul><ul><li>Operating profit, SEKm 2,479 2,309 </li></ul><ul><li>Operating margin, % 15.0 14.9 </li></ul><ul><li>Profit before tax, SEKm 2,345 1,950 </li></ul><ul><li>Cash flow, SEKm 1,323 1,936 </li></ul><ul><li>Strong organic sales growth in local currency: </li></ul><ul><li>SKF Group: +8.2% </li></ul><ul><li>Europe: +9.7% Industrial Division: +7.1% </li></ul><ul><li>North America: +9.9% Service Division: +12.5% </li></ul><ul><li>Asia: +4.9% Automotive Division: +3.2% </li></ul><ul><li>Latin America: +10.2% </li></ul><ul><li>Outlook for Q4 for SKF Group </li></ul><ul><li>Demand </li></ul><ul><li>Relatively unchanged compared to Q4 2010 </li></ul><ul><li>Slightly lower sequentially compared to Q3 2011 </li></ul><ul><li>Manufacturing level </li></ul><ul><li>Lower year over year and compared to Q3 2011 </li></ul>19 October 2011
  4. 4. <ul><li>SKF </li></ul><ul><li>opened regional distribution centre in Montevideo, Uruguay to strengthen the service to customers and distributors in Latin America. </li></ul><ul><li>• inaugurated bearing factory in Dalian, China for medium size bearings. </li></ul><ul><li>• was selected to be a member of Dow Jones’ Sustainability World indexes for the 12th successive year and for the 11th successive year in the FTSEGood Index Series. </li></ul>Highlights Q3 2011 19 October 2011
  5. 5. Example of new products <ul><li>A new range of seals for wind turbine drive trains. </li></ul>19 October 2011 An upgraded range of SKF Explorer spherical roller bearings which offers at least twice the previous life when operating in a contaminated environment. SKF Solar Linear Actuators designed specifically to meet the solar tracking technical requirements. A new bearing range, mainly developed for industrial fans, textile equipment and conveyors. These energy efficient Y-bearings give a 50% reduction in the bearing frictional torque vs conventional SKF Y-bearings.
  6. 6. 19 October 2011 Sales volume % change y-o-y 2009 2010 2011
  7. 7. 19 October 2011 Organic growth in local currencies % change y-o-y 2009 2010 2011
  8. 8. Growth development by geography Organic growth Q3 2011 vs Q3 2010 19 October 2011 Europe +9.7% Asia/Pacific +4.9% Latin America +10.2% Middle East & Africa +0.2% North America +9.9%
  9. 9. Growth development by geography Organic growth YTD 2011 vs YTD 2010 19 October 2011 Europe +15.1% Asia/Pacific +14.0% Latin America +10.1% Middle East & Africa +5.3% North America +16.5%
  10. 10. Growth in local currency 19 October 2011 % y-o-y Acquisitions/Divestments Organic growth -19.0% 14.2% 19.2% Long-term target: 8% per annum Total growth 4.8% 14.4% 0.0% 14.2% 1.0% -20.0%
  11. 11. Components in net sales 19 October 2011 Percent y-o-y 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -26.9 -30.8 -24.9 -14.1 5.3 16.6 19.0 16.3 20.1 12.6 6.2 1.4 1.1 1.2 0.4 0.0 0.0 0.0 0.0 5.0 4.4 5.1 7.1 5.6 3.7 0.3 -0.3 -0.5 0.3 0.9 1.3 1.6 2.0 -18.4 -24.1 -20.0 -13.4 5.0 16.1 19.3 17.2 26.4 18.6 13.3 13.6 12.2 6.6 -1.4 -7.7 -5.2 -3.2 -6.2 -10.8 -12.2 -6.3 -4.8 -11.9 -13.4 -14.8 -2.7 10.9 16.1 11.0 15.6 6.4 7.0 Volume Structure Price / Mix Sales in local currency Currency Net sales
  12. 12. Operating profit 19 October 2011 SEKm 2009 Restructuring and one-time items 2010 2011
  13. 13. Operating margin 19 October 2011 % 2009 Restructuring and one-time items 2010 Long-term target level: 15% 2011
  14. 14. Operating margin 19 October 2011 % 5.7 8.0* Restructuring and one-time items * Excluding restructuring and one-time items 15.2 Long-term target level: 15% 14.2* 13.8
  15. 15. Operating margin per division 19 October 2011 Industrial Service Automotive % Excluding one-off items (eg. restructuring, impairments, capital gains) 2009 2010 2011
  16. 16. Third quarter 2011 19 October 2011 SEKm 2011 2010 Net sales 16,545 15,465 Operating profit 2,479 2,309 Operating margin, % 15.0 14.9 Profit before taxes 2,345 1,950 Net profit 1,656 1,425 Basic earnings per share, SEK 3.52 3.05 Cash flow, after investments before financing 1,323 1,936
  17. 17. First nine months 2011 19 October 2011 SEKm 2011 2010 Net sales 49,959 45,620 Operating profit 7,606 6,250 Operating margin, % 15.2 13.7 Profit before taxes 7,109 5,501 Net profit 5,019 3,946 Basic earnings per share, SEK 10.72 8.41 Cash flow, after investments before financing 2,995 3,128
  18. 18. Inventories as % of annual sales 19 October 2011 % Long-term target level: 18% 2009 2010 2011
  19. 19. Cash flow, after investments before financing 19 October 2011 SEKm 2009 2010 Cash out from acquisitions (SEKm) : 2009 241 2010 6,799 2011 6 2011 * SEK 798 million, excluding the acquisition of Lincoln Industrial. *
  20. 20. Return on capital employed 19 October 2011 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. % 9.1 24.0 Long-term target: 27% 25.1
  21. 21. Net debt (Short-term financial assets minus loans and post-employment benefits) 19 October 2011 SEKm AB SKF, dividend paid (SEKm) : 2009 Q2 1,594 2010 Q2 1,594 2011 Q2 2,277 2009 2010 Cash out from acquisitions (SEKm) : 2009 241 2010 6,799 2011 6 2011
  22. 22. 19 October 2011 Debt structure Maturity years, EURm 396 100 100 <ul><li>Credit facilities: EUR 500 million 2014 SEK 3,000 million 2017 </li></ul><ul><li>No financial covenants nor material adverse change clause </li></ul>130 500 110 0 0 <ul><li>Changes in Q3 </li></ul><ul><li>1) EUR 50 million repaid 2) SEK 1 billion raised </li></ul>1) 2)
  23. 23. October 2011: Outlook for the fourth quarter 2011 19 October 2011 <ul><ul><ul><ul><ul><li>Demand compared to the fourth quarter last year </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The demand for SKF’s products and services is expected to be relatively unchanged </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>for the Group. It is expected to be slightly lower in Europe, relatively unchanged in North America and slightly higher in Asia and Latin America. The demand is expected </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>to be slightly higher for the Industrial Division, higher for the Service Division </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>and lower for the Automotive Division. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Demand compared to the third quarter 2011 </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The demand for SKF’s products and services is expected to be slightly lower for the Group. It is expected to be slightly lower for Europe, relatively unchanged for Asia </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>and North America, and slightly higher for Latin America. The demand is expected </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>to be relatively unchanged for the Industrial Division and the Service Division, and slightly lower for the Automotive Division. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Manufacturing level </li></ul></ul></ul></ul></ul><ul><li>The manufacturing level is expected to be lower year on year and compared to the third quarter. </li></ul>
  24. 24. Demand outlook, regions (based on current assumptions) 19 October 2011 Sequential trends for: Q3 2011 Q4 2011 Share of net sales 2010 Europe 46% Asia Pacific 27% North America 18% Latin America 6% Total Q4 2011 vs Q4 2010 - + = + =
  25. 25. Demand outlook, divisions (based on current assumptions) 19 October 2011 Sequential trends for Q4 2011 Share of net sales 2010 Industrial 32% Service 36% Automotive 30% Total Q4 2011 vs Q4 2010 + ++ -- =
  26. 26. Sequential volume trend main segments Q4 2011 (based on current assumptions) 19 October 2011 Share of net sales 2010 4% 14% 5% 4% 25% 18% 12% 10% 3% 5% Trucks Cars Energy Railway Industrial distribution Industrial OEM, General+Special Vehicle Service Market Industrial OEM, Heavy + Off-highway Electrical and two-wheeler Aerospace
  27. 27. SKF today – more robust and more diverse <ul><li>Divesting and outsourcing component manufacturing, </li></ul><ul><li>reducing fixed cost and invested capital </li></ul><ul><li>Manufacturing footprint in best cost countries </li></ul><ul><li>Reducing working capital </li></ul><ul><li>Customized solutions, value-added products, technology platforms </li></ul><ul><li>Diversifying growth, faster growing segments and geographies </li></ul><ul><li>Acquisitions supporting growth and profitability </li></ul>19 October 2011
  28. 28. SKF today - prepared for a changing demand picture <ul><li>Activities already underway </li></ul><ul><li>The SKF 3C programme has been re-emphasised C ustomers: - increase customer and distributor contacts </li></ul><ul><li>- ensure a very good service level </li></ul><ul><li>- utilise opportunities from our platform/segment approach </li></ul><ul><li>- maintain strong commitment to R&D – especially energy efficiency </li></ul><ul><li>C ost: - strict cost control (which has no customer impact) </li></ul><ul><li>- review further permanent changes to the cost structure </li></ul><ul><li>C ash: - strong cash flow focus </li></ul><ul><li>Adjustment of manufacturing output to demand situation </li></ul><ul><li>use flexibility in the working hours through: </li></ul><ul><li>- time banks </li></ul><ul><li>- temporary workers </li></ul><ul><li>- government supported schemes </li></ul><ul><li>- short-time working agreements </li></ul><ul><li>Review of investment plan and timing maintain investment plan for faster growing areas </li></ul><ul><li>Strong focus on faster growing regions and segments is maintained </li></ul>19 October 2011
  29. 29. Guidance for the fourth quarter 2011 <ul><li>Tax level: around 30% </li></ul><ul><li>Financial net for the fourth quarter: Around SEK -175 m </li></ul><ul><li>Exchange rates on operating profit versus 2010 Q4: SEK -100 m </li></ul><ul><li>Full year: SEK -1.2 bn </li></ul><ul><li>Additions to PPE: Less than SEK 2.0 bn for 2011 </li></ul>19 October 2011 Guidance is approximate and based on current assumptions and exchange rates.
  30. 30. Key focus areas ahead 2011 <ul><li>Profit and cash flow </li></ul><ul><li>- manage currency and material headwinds </li></ul><ul><li>Manufacturing and suppliers to support demand </li></ul><ul><li>Growing segments and geographies </li></ul><ul><li>Initiatives and actions to support long term targets </li></ul><ul><li>Integration of Lincoln Industrial </li></ul><ul><li>Business Excellence and competence development </li></ul>19 October 2011 One SKF and SKF Care as guiding lights
  31. 31. Cautionary statement <ul><li>This presentation contains forward-looking statements that are based on the current expectations of the management of SKF. </li></ul><ul><li>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&quot;, &quot;Financial risks&quot; and &quot;Sensitivity analysis”. </li></ul>19 October 2011
  32. 32. 19 October 2011
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