SKF Group Tom Johnstone, President and CEO September 2012
SKF - A truly global company • Established: 1907 • Sales 2011: SEK 66,216 million, (~ USD 10 bn) • 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
(1998) (2002) % of group total SKF 2011 Net sales* (44) (53) (48) Average number of employees (47) (46) (53) Tangible asset (10) (9) (12) (14) (13) (8) (14) (25) (19) (26) (13) (18) (14) (12) (5) (9) (3) (3) (6) (5) (4) (5) (12) (15) (3) (9) (3) (4) (3) (4) (2) (0) (3) (2) (2) (0) North America WesternEurope Eastern Europe Sweden Latin America Middle East and Africa Asia/Pacific * Previously published shares have been restated to reflect customer delivery locations.
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.
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
Growth development by geographyLocal currencies H1 2012 vs H1 2011 Europe-2.3% North America +11.6% Asia/Pacific -8.0% Latin America +13.8% Middle East & Africa +2.2%
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.
Main initiatives going forward Accelerate profitable growth Reduce cost and eliminate waste Invest in Growth
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
SKF platforms – managing and reducing friction/energy Market SEK 75 bn ~ USD 12 bn Market SEK 320 bn ~ USD 50 bn Market SEK 30 bn ~ USD 5 bn PT Market SEK 70 bn ~ USD 11 bn Market > SEK 40 bn ~ USD 6 bn Market SEK 100 bn ~ USD 16 bn
SKF platforms – managing and reducing friction/energy Market SEK 75 bn ~ USD 12 bn Market SEK 320 bn ~ USD 50 bn Market SEK 30 bn ~ USD 5 bn Addressable market > USD 100 bn PT Market SEK 70 bn ~ USD 11 bn Market > SEK 40 bn ~ USD 6 bn Market SEK 100 bn ~ USD 16 bn
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
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.
General Bearing Corporation • Established in 1955, headquarter in West Nyack, NY, USA. • Four factories in China, one ball bearing factory, two tapered roller bearing factories andone precision roller factory. • 1,750 employees, 140 are located in USA and 1,610 in China. • Sales in 2011: around USD 155 million • Focused to serve OEM and end-user customers within the transportation markets: Truck, Trailer, Automotive, and Industrial. • Brands:
Strategy for second brands Capture mid-market growth Lower cost manufacturing Global market approach Segment focus - PEER, Industrial segments - GBC, Auto, HD segments
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
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
BeyondZero portfolio - Industrial • SKF Solar Linear Actuator contributes to increasing the energy production from one solar panel which 4.4 tonnes CO2 /year • SKF Energy Monitoring Service for pump systems helped reduce 1,700 tonnes of CO2 emission per year. • SKF ConRo reduced CO2 emissions with 1.5 tonne per unit and year.
BeyondZero portfolio - Industrial • Replacement of hydraulic lifts with two SKF CASM electric cylinders produced a CO2 savings of 4.9 tonnes per year for one machine. • SKF products and solutions for renewable energy help display CO2 • 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.
SKF bus door actuator saves 1,900 kg CO2/year compared using pressurized air for operating the doors. • SKF Rotor Positioning bearing reduces fuel consumption and CO2 emissions up to 15%. • SKF StopGo for two-wheelersReduces CO2 emissions by 5 g per kilometre. BeyondZero portfolio - Automotive
SKF Low Friction Seal reduces friction by up to 55%, which provides a CO2 savings of over 1 g per kilometre. • A light commercial vehicle with four SKF Low Weight Hub Bearing Units reduces CO2 by 5.0 kg CO2 per year. • SKF products and solutions for electric vehicles BeyondZero portfolio - Automotive
Climate strategy – BeyondZero – Targets • Quadruple (x4) the revenue from the BeyondZero portfolio from 2.5 Billion SEK in 2011 to 10 Billion SEK by 2016. Customer solutions • Reduce the total annual energy use of the SKF Group by 5 % below the 2006 level by 2016. • Reduce the energy use per production output (value added) by 5% year- over-year during the period (2012-2016). SKF’s own operations • Reducing CO2 emissions/ tonne-kilometre for all transports managed by SKF Logistics Services by 30% compared to 2011 by the end of 2016. Transport and distribution Raw material and components • 100% of SKF's energy intensive suppliers certified according to ISO 50001 Energy Management Standard by 2016.
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 One SKF and SKF Care as guiding lights