SKF Group Tore Bertilsson, Executive Vice President and CFO September 2012
Agenda • SKF Group overview • Strategic direction and initiatives • Business update
SKF - A truly global company • Established: 1907 • Sales 2011: SEK 66,216 million • Employees 2011: 46,039 • 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 2011 Sweden 3% Eastern Europe 4% Asia/Pacific 28% Western Europe 37% Latin America 8% Middle East & Africa 1% North America 19% Previously published shares have been restated to reflect the new business structure from 2012.
Net sales by customer segment 2011 Cars and light vehicles Industrial distribution Aerospace Railway Off-highway Trucks Two-wheeler and Electrical Vehicle Service Market Industrial, general Energy Industrial, heavy and special Previously published shares have been restated to reflect the new business structure from 2012.
SKF platforms Managing and reducing friction/energy
Long-term financial targets • 27% • Return on capital employed • 8% • Changes in sales in local currency • 15% • Operating margin, level
How did we get there? Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital Manufacturing footprint in best cost countries Reducing working capital Customized solutions, value added products, technology platforms Diversifying growth, faster growing segments and geographies Acquisitions supporting growth and profitability SKF today – more robust, more diverse
Accelerate profitable growth - intensify the platform and industry approach - launch more new offerings –green and BZ portfolio - strengthen the service business - focus on faster growing regions/ industries - develop other brands Reduce cost and eliminate waste - Business Excellence throughout the Group - BCC manufcaturing and sourcing - integrated cost reduction activities (ICR) Invest in growth - Sales and engineering resources - Factories in growth markets - Solution factories - R&D - Acquisitions - New IT systems Main initiatives going forward
R&D – investments and main areas • Investments • +30% • Same • +10% • +20% • Patents +30% • 2012 +10% • Main areas • Environment • Core technologies • New products • Strengthen R&D activities in fast growing regions • Strengthen links with universities and high schools
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
Investing for the future Dalian, China Jinan, China Mysore, India Bengaluru, India
Acquisition strategy for profitable growth Acquisitions are seen as one important driver for growth and value creation. Lincoln integration is going well so SKF is able to make additional larger acquisitions SKF has the financial means and acquisition project resources in place to continue to pursue relevant acquisitions. Increasing activity and opportunities in M&A market
Acquisitions 2003-2012Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics ABBA(2007) Economos(2006) SNFA(2006) Vogel(2004) Baker(2007) Safematic(2006) Macrotech(2006) Jaeger(2005) GLO(2008) S2M(2007) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) PB&A(2006) Sommers(2005) Scandrive(2003) Monitek(2006) Cirval(2008) PEER(2008) GBC (2012) Focus on industrial and aftermarket business.
Branding strategy – to address the market • Knowledge engineering • Documented value • Cost reduction • Brand High Middle • Application specific products Low • Second brands • Strong cost focus • Peer/General/Hyatt brands • Capture mid market growth - lower cost manufacturing
Customers: SKF BeyondZero portfolio Reduce the negative environmental impact from our own operations and those of our suppliers. SKF Manufacturing Innovate and offer our customers new technologies, products and services with enhanced environmental performance characteristics. Suppliers Transportation Scope 2 Scope 1 Scope 3 BeyondZeroTM + BeyondZero 0 -
DESIGNED FOR • Total direct CO2 savings • Total revenue APPLIED FOR • Total enabled CO2 savings • Total revenue BeyondZero portfolio – how it works • Criteria • Life cycle trade off’s • Base line comparison • CO2 / environmental savings
SKF ConRo reduced CO2 emissions with 1.5 tonne per unit and year. • A light commercial vehicle with four SKF Low Weight Hub Bearing Units reduces CO2 by 5.0 kg CO2 per year. • If SKF were to equip all new motors ranging from sizes 1-50 HP with its current SKF E2 bearing range, a yearly 290,000 tonnes of CO2 emissions would be avoided. BeyondZero portfolio, examples
Operating margin Long-term target level: 15% % 14.7* 14.2* 12.7* 14.5 13.8 12.3 One-time items * Excluding one-time items
SKF demand outlook Q3 2012, regions * Previously published shares have been restated to reflect the total Group business and customer delivery locations.
SKF sequential demand trend Q3 2012 Share of net sales 2011* * Previously published shares have been restated to reflect the total Group business and customer delivery locations.
Debt structure,maturity years EURm 500 396 130 110 100 100 0 • Credit facilities: EUR 500 million 2017 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause
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