SKF SHB Nordic Large Cap Seminar Stockholm September 12, 2018 Christian Johansson, Chief Financial Officer and Senior Vice President

Transcription

1 SKF 2018 SHB Nordic Large Cap Seminar Stockholm September 12, 2018 Christian Johansson, Chief Financial Officer and Senior Vice President

2 SKF more fit than ever! Agility and customer focus Net debt / equity: 67% Target: <80% Refocused on the core business (7 divestments in 3 years) Strong financial position (from ~150% to sub 70% net debt/equity) Lowered cost level => market share growth & record high profit Organic growth: 9.0% Target: 5% Operating margin: 12.9% Target: 12% 31.1% Net working capital: Target: 25% Return on capital employed: 15.8% Target: 16%

3 The future is digital! (and electric )

4 Unplanned production stops cost billions Every time a machine is stopped and opened for maintenance when not needed drives cost New technology provides radically different tools for SKF to strengthen the competitiveness of our customers

5 Digitalisation supports our focus on rotating machinery Modern technology is an enabler: We can detect exactly what needs to be attended to and when before it fails Digitalisation creates savings: Unpredictability drives cost Condition monitoring makes it possible to replace parts only when actually needed; not based on a maintenance schedule

6 Create customer value Providing performance requires foresight Customer performance Connected to customer applications, SKF will create and capture value and deliver functionality Product & service Application knowhow Insight Foresight Connections include: Condition monitoring Process data Failure statistics Integrated supply chain Predictability becomes more important than longer life Hindsight

7 Outstanding value delivered to LKAB Customer need Lower cost per produced ton Increased availability of critical equipment Service contract by SKF covering Remote diagnostics, reporting and decision support for measuring points on assets Detecting and solving mechanical and lubrication issues Spares and supply chain management of bearing/housings, seals and power transmission products.

8 Enlight Centre: Web based software for condition based maintenance Saves time and money for our customers

9 Why do we believe in CBM/CM? SHIP Owners or Operators INFORMATION about machines: Avoid surprises, causing the ship not to be able to perform her major function Fix the problems on time Better management of maintenance budget Deferral of machinery class surveys SKF INFORMATION about customers: Find new business opportunities Extend contact network different level of engagement (from spare part supplier to advisor and solution provider) Drives sales of SKF core products 24M Rolling Bearings 4M Replaced every year TSEK per ship and year CM Condition Monitoring CBM Condition-Based Maintenance

10 SKF Enlight Centre with marine customers Collect Manual data collection by onboard crew Analyze - Enlight Centre used by RDCs to analyze and provide information for maintenance activities Enlight Centre pilot projects Customers test properly managed CM/CBM contracts and SKF learns from customers and get opportunities and feedback for developers Remote diagnostics Ship engineer Fleet management We monitor above >2000 machines on board 50 ships 15+ shipping companies The shipping companies involved in the project have above >1000 ships

11 Electric and hybrid-vehicles future drive-trains Solutions for electric and hybrid vehicles The trend is clear: Electrification Smart vehicles (autonomous, sharing) SKF is well positioned Ceramic ball bearing SKF bearing with sensor E-Drive Ball bearing

12 SKF to supply bearings to Volkswagen s all-electric MEB vehicle powertrain platform

13 Manufacturing entering a new era Investments: SRB Göteborg CRB Schweinfurt LSB Schweinfurt SRB Hanover/Flowery Branch SRB Nilai Consolidation: US Seals manufacturing - Seneca Salt Lake City Lubrication - St Louis San Diego & Baltimore,

14 Transformation two streams forward SKF smart manufacturing World class investments: 900 MSEK SRB Goteborg - Inaugurated April , PR April 2015 (190 MSEK) CRB Schweinfurt - PR November 2016 (150 MSEK) LSB Schweinfurt - PR January 2017 (145 MSEK) SRB Hanover/Flowery Branch - PR June 2016 (150 MSEK, technology step-up as part of consolidation) Smart refurbishing of legacy technology Established Machine Center of Excellence network for smart refurbishing of equipments Existing machines into new technology with readiness for IoT and I4.0 connections Driving machine standardization First 15 machines under smart refurbishing EDC Tongeren, Belgium - Inaugurated May 2016 IDC Pune, India - Inaugurated December 2016 (225 MSEK, including stocking location consolidation) Automation in Automotive manufacturing - Airasca, Italy

15 A record second quarter Record-high sales of 22,620 M, organic growth 9.0% 9.0% Organic sales growth Record-high reported operating profit 2,925 M (2,315) Operating margin 12.9% (11.4) Cash flow 2,182 M (1,412) 2,925 M Operating profit Net sales, SEK 20.2 bn 22.6 bn Operating profit, SEK 2.3 bn 2.9 bn 12.9% Operating margin Q2 Q3 Q4 Q1 Q2 18 Q2 Q3 Q4 Q1 Q2 18

16 Improving performance towards our targets Targets set in 2016 and valid over a business cycle: Organic growth: 9.0% Target: 5% Operating margin: 12.9% Target: 12% Net debt / equity: 67% Target: <80% Net working capital: 31.1% Target: 25% Return on capital employed: 15.8% Target: 16%

17 Industrial business performing well; growth also picking up in North America 11% organic growth and 15% operating margin

18 Automotive business outperforming the market, margin continues to strengthen 5% organic growth and operating margin 9%

19 Transforming for the future Technology upgrade & digitalization of our factories Optimize our industrial footprint Grow our rotating equipment performance business Grow through application specific value propositions

20 Questions?

21 SKF Q2 results 2018

22 Sales growth in all markets Organic growth in local currency Q vs Q Europe +8.7% North America +5.3% Asia/Pacific +17.2% Latin America -3.2% Middle East & Africa +5.6%

23 Sales development Net sales, SEK bn Percent y-o-y Q2 Q3 Q4 Q1 Q2 Organic Structure Currency Net sales Q2 Q3 Q4 Q1 Q2 18

24 Organic sales growth % change y-o-y

25 Operating profit 3 SEK bn 2.9 SEK bn, 12m moving 12 2, , ,

26 Operating profit SEKm Operational performance: Divested/ acquired companies Q Currency Organic sales Cost Q impact & manufacturing volumes development

27 Performance by customer group Industrial Operating margin, % 11.8% 13.7% 14.6% Industrial Net sales 15,930 M Organic sales +10.7% Operating margin 14.6%, (13.7) Automotive Operating margin, % 8.9% Automotive Net sales 6,690 M Organic sales +5.2% Operating margin 8.9%, (6.4) 6.6% 6.4%

28 SKF Group Q Operating margin, % 11.4% 12.9% Financial performance (SEKm) Net sales Cost of goods sold Gross profit Gross margin, % 25.3% 25.2% Selling and administrative expenses Other operating income/expense 29-9 Operating profit Operating margin, % Financial income and expense, net Profit before taxes Taxes Net profit Basic earnings per share, SEK Q2 Q3 Q4 Q1 Q2 18 Earnings per share, SEK 2.51 Q2 Q3 Q4 Q1 Q % Operating margin 4.25

29 Cash flow after investments before financing* SEKm * After investments before financing (excluding acquisitions and divestments and EU payment in Q ) 2013 and 2014 are restated

30 Net working capital finished goods inventories reduced in the quarter % Total NWC 31.1% Target: 25% Inventories 22.8% Trade receivables 18.7% Trade payables 10.4% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q

31 Net debt/equity ratio stable, despite dividend payment Net debt, SEK bn Net debt/equity, % 0 160% % Net debt/equity 20% Net debt, excl post empl. Net fin debt Post-empl. benefits 0% benefits/equity % 100% 80% 60% 40% 67% 30%

32 Guidance for 2018* Q3 2018: Financial net: around -200 million Currency impact on the operating profit is expected to be around 180 million positive compared with 2017, based on exchange rates per 30 June, : Tax level: around 28% for 2018, excluding effects from divestments Additions to property, plant and equipment: around 2,400 million for 2018 * Guidance is approximate and based on current assumptions and exchange rates.

33 Summary Q2 a record quarter Continued growth in Q2 Record-high sales and operating profit Good cash flow Expect to see continued growth in Q3 higher volumes year-over-year 2,925 M Operating profit 12.9% Operating margin Net sales, SEK 22.6 bn Operating profit, SEK 2.9 bn 20.2 bn 2.3 bn 2,182 M Cash flow Q2 Q3 Q4 Q1 Q2 18 Q2 Q3 Q4 Q1 Q2 18

34 July 2018: SKF demand outlook Q Demand compared to the third quarter 2017 The demand for SKF s products and services is expected to be higher for the Group, including Industrial and Automotive. Demand is expected to be significantly higher in Asia, higher in Europe and North America, and slightly lower in Latin America.

35 Financial calendar SEB Industrial & Technology Seminar Stockholm SHB Nordic Large Cap Seminar Stockholm Roadshow Paris Roadshow Germany & the Netherlands US Roadshow Q3 report Capital Markets Day 23 August 12 September 5 September September 2-4 October 25 October 29 November

36 Cautionary statement This presentation contains forward-looking statements that are based on the current expectations of the management of SKF. 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 under the Administration Report; Risk management at SKF" and "Sensitivity analysis.