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The SKF Group

The SKF Group. Half-year results 2008 Tom Johnstone, President and CEO. Highlights during the second quarter 2008.

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The SKF Group

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  1. The SKF Group Half-year results 2008 Tom Johnstone, President and CEO

  2. Highlights during the second quarter 2008 • SKF signed an agreement with PEER Bearing Company to acquire its manufacturing operations in China and Thailand. The acquisition is subject to certain conditions to closing and requires approvals by relevant authorities. • SKF announced that the railway bearing plant in Russia will be located in Tver. The facility will be in operation in January 2010. • SKF will increase the manufacturing capacity for large and medium size bearings at the new SKF factory in Dalian, China. • SKF sold the operating assets of Roller Bearing Industries, Inc., USA, to Greenbrier Companies, USA. The company has an annual sales of around SEK 60 million, some 50 employees and was acquired by SKF in 2001.

  3. Highlights during the second quarter 2008 • SKF and Nestlé established a global training programme to improve and define best practices related to maintenance and reliability for reducing unplanned mechanical failures. • The SKF Certified Rebuilder programme for electric motors was launched in Europe and Latin America. • SKF distributed to shareholders a total of SEK 4,554 million in dividend and redemption. • SKF arranged new long-term financing of SEK 1,500 million and EUR 250 million.

  4. Second quarter 2008

  5. First half year 2008

  6. Operating margin Long-term target level: 12% % 2006 2007 2008

  7. Operating margin Long-term target level: 12% % 13.2 12.9 12.6 11.3* * excluding income from the jointly controlled company Oy Ovako Ab

  8. Operating margin per division % Service Industrial Automotive 2007 2008 2006 Excluding one-time items (eg. restructuring, impairments, capital gains)

  9. Sales in local currencies (excl. structural changes) % change y-o-y 2007 2008 2006

  10. Growth development in local currency Acquisitions/Divestments Long-term target level: 6-8% per annum Organic growth % Y-o-Y 13.2 10.7 7.5* * Excluding effect from Ovako: 2006 10.1%

  11. Net sales development per quarter 2007 2006 2008 Percent y-o-y

  12. Cash flow, after operating investments before financial items SEKm Cash out from acquisitions (SEKm): 2006 2,129 2007 1,209 2008 YTD 62 Cash in from Ovako (SEKm): 2006 Q4 1,217 2007 Q2 46 2006 2007 2008

  13. Net debt(Short-term financial assets minus loans and post-employment benefits) SEKm AB SKF, dividend paid (SEKm): 2006 Q2 1,821 2007 Q2 2,049 2008 Q2 2,277 Redemption (SEKm): 2007 Q2 4,554 2008 Q2 2,277 2006 2007 2008

  14. Inventories as % of annual sales Long-term target level: 18% % 2006 2007 2008

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

  16. July 2008: Outlook for the third quarter 2008(compared to the second quarter 2008 and adjusted for seasonality ) The market demand for SKF’s products and services in the third quarter of 2008 is expected to be higher for the Group. The demand is expected to be higher in Europe, slightly lower in North America and significantly higher in both Asia and Latin America. The demand is expected to be higher in the Industrial Division and the Service Division and relatively unchanged for the Automotive Division. The manufacturing level for the third quarter 2008 will be relatively unchanged compared to the second quarter 2008, and slightly higher than the third quarter 2007.

  17. Volume development

  18. Guidance for the third quarter 2008 • Tax level: 32% • Financial net for third quarter:minus SEK 200 million • Exchange rates on operating profit versus 2007 Q3: minus SEK 130 million • Full year: minus SEK 500 million • Additions to PPE: slightly above SEK 2 billion Guidance is approximate and based on current assumptions and exchange rates

  19. Solid, flexible debt structure and liquidity Maturity years, SEK 4,600 2,300 1,500 1,400 900 1) 2) 250 3) 1) New bond loan 2) New 5 year term-loan, repayment option, assumed to 2012 3) New private placement, 8 years, repayment option for SKF from 2010

  20. Key focus areas ahead • Strengthen the platform/segment approach • Maintain a positive price/mix • Focus on fast growing segments and geographies • Drive operational efficiency and Six Sigma • Manage material costs and supply • Attract and retain the best people Use sustainability as a guiding light

  21. SKF Corporate Sustainability Employee Care Business Care Operating margin SKF Care BeyondZeroTM Environment Care Community Care

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

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