Tom Johnstone, President and CEO
CMD 2013
Key items
• H1 summary and outlook • SKF priorities • Specific focus - IT investment (UNITE) - Cost reduction and Purchasing
© SKF Group
CMD 2013
Highlights H1 2013 Acquisitions and divestments • SKF completed the acquisition of German-based ship components provider Blohm + Voss Industries (BVI) • SKF divested the aerospace metallic rods business New facilities in India • a new lubrication systems laboratory in SKF Global Technical Centre • a new manufacturing unit in Pune for producing housings for bearings Two new SKF Solution Factories Inaugurated in Madrid, Spain and Katowice, Poland Katowice, Poland
Programme to improve efficiency, reduce cost and strengthen profitable growth continues • one-off costs of around SEK 440 million • annual savings of around SEK 180 million © SKF Group
CMD 2013
Madrid, Spain
Highlights H1 2013 Some examples of new business • with Pratt & Whitney, to supply engine main shaft bearings • with Nordex for delivery of mainshaft bearings and lubrication systems • for automated lubrication systems installed in the MSC Home Terminal cranes in Belgium’s Port of Antwerp • with a steel and mining company for industrial bearings and units, seals, mechatronics, and services • with Öhlins Racing AB for SKF’s integrated monotube seal • with the Chinese customer Great Wall for hub bearing units • 10-year contract worth SEK 900 million with Turbomeca • service contracts worth SEK 200 million in Latin America • contract for wheel hub bearing units (HBU3) to Volvo Car Corporation Thrust main shaft bearing, one of the bearings for the ARRANO Engine of TURBOMECA
© SKF Group
CMD 2013
Half year 2013 2013
2012
31,544
34,105
3,317
4,185
Operating margin, %
10.5
12.3
Operating margin excl. one-offs, %
11.9
12.7
Profit before taxes
2,864
3,730
Net profit
1,922
2,570
Basic earnings per share, SEK
4.10
5.44
Cash flow, after investments before financing
255
1,382
SEKm
Net sales Operating profit
© SKF Group
CMD 2013
Growth development by geography and by business area Organic growth in local currency YTD 2013 vs YTD 2012
Europe -7% North America -6%
Asia/Pacific -5% Latin America 11%
SKF Group: -5.1% Strategic Industries: -9.9% Regional Sales and Service -6.3% Automotive 2.0% © SKF Group
CMD 2013
Middle East & Africa -4%
SKF demand outlook Q3 2013, regions
Share of net sales 2012
Sequential trend for Q3 2013
Q3 2013 vs Q3 2012
Europe
43%
+/-
Asia Pacific
24%
+
North America
23%
+
Latin America
7%
++
Total
© SKF Group
CMD 2013
+
SKF demand outlook Q3 2013, business areas
Share of net sales 2012
Sequential trend for Q3 2013
Q3 2013 vs Q3 2012
Strategic Industries
31%
+
Regional Sales and Service
39%
+
Automotive
27%
+
Total
© SKF Group
CMD 2013
+
Key items
• H1 summary and outlook • SKF priorities • Specific focus - IT investment (UNITE) - Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF priorities
© SKF Group
CMD 2013
Growth and operating margin 2002 - 2012
SEKm
+51%
70 000
-12%
60 000
+17%
50 000
-4%
40 000
Operating margin 11.4%, excl. one-time costs 12.0%
30 000 Operating margin 9.5%
20 000 10 000
© SKF Group
CMD 2013
20 12 S al es
C ur re nc y
D iv es tm en ts O rg an ic gr ow th
si tio ns A cq ui
S al es
20 02
0
Key elements of Sustainable Profitable Growth
S2M QPM PEER Cirval Lincoln ABBA GLO Baker ALS GBC BVI Macrotech
Acquisitions
Platforms
2nd brands
Asset life cycle + service
New products © SKF Group
CMD 2013
SKF BeyondZero portfolio
Key items
• H1 summary and outlook • SKF priorities • Specific focus - IT investment (UNITE) - Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF investment in IT – UNITE programme Preferred by customers, employees and partners. Strong in purchasing and operations.
Customers
Employees
Knowledge Engineering Company Operations
One SKF
UNITE © SKF Group
CMD 2013
Suppliers
UNITE - One End-to-End Process 1. Go To Market
© SKF Group
CMD 2013
2. Manage opportunities
3. Process order & confirmation
10. Deliver & customer Follow‐up + Payment
9. Production execution
4. Sales & Operations Planning
8. Production scheduling
Customer to Cash
Forecast-to-Fulfill
Purchase-to-Pay
Record-to-Report
SKF investment in IT – UNITE programme Multi year programme • New Demand Chain systems • New Finance system First main installations • Sales unit in Q2 2014 • Sales & Manufacturing unit in Q4 2014 Estimated cost • SEK ~500 m in 2013 (of which SEK ~300 m capitalised) • SEK ~900 m in 2014
© SKF Group
CMD 2013
Key items
• H1 summary and outlook • SKF priorities • Specific focus - IT investment - Cost reduction and Purchasing
© SKF Group
CMD 2013
SKF Restructuring programme – costs and expected savings
Restructuring activities launched in: Q4 2012
Q1 2013
Q2 2013
Total
One-off costs
200
250
190
640
Annual savings when fully implemented
150
100
80
330
SEKm
•The savings for the second half 2013 from these programmes will be around SEK 150 million, evenly split between the third and the fourth quarter.
© SKF Group
CMD 2013
SKF Global Spend Total SKF spend
Direct Material
18% Total SKF spend is SEK 36 billion – direct and indirect representing ~ 50% respectively
44%
Rings & Subcontracting
40 000 36 153
38%
35 000 30 000
20 000
Components
SEK 17.7 billion
19 119
25 000
Steel Raw Material & Rolling Elements
17 034
Indirect Material & CAPEX
15 000
8%
10 000
12%
27%
5 000
Logistics
0
Direct Material
Indirect Material
18% 21% SEK 15.6 billion
© SKF Group
CMD 2013
Facility Management Professional Services
13% Total
MRO
IT CAPEX
Challenges in the global supply chain – many factors Natural disasters
Geopolitical Risk
Supply Chain Disruptions
Market demand variations and volatility
Price and currency volatility
Effective sourcing strategy
Global & Local Supplier Relationships
© SKF Group
CMD 2013
Supplier Innovations
Sustainable and Responsible Sourcing
Key initiatives to achieve savings
• Category and business driven purchasing • Supplier consolidation and localization • Leverage of all purchasing power across all businesses • Product, process & system standardization • Total cost approach and leading purchasing practices applied
© SKF Group
CMD 2013
Success Story – localization of cages in China
Target: •
China supplier development to secure capacity and Q C D I M targets
SKF benefits: •
Access to a supplier base in China close to Dalian
•
100% localization
•
2 suppliers fully approved in China
•
Worldwide supplier market base fitting with new SKF manufacturing footprint
•
Development of a Chinese suppliers base with export capacity
© SKF Group
CMD 2013
Contract Status: 2012/2013
Savings: -40/50% vs Import in China
Success Story Packaging – Cross platform leverage Corrugated & Anti-counterfeit packaging Activity Combine purchasing of packaging materials across a number of units Total Savings: USD 760,000 – 30% savings SKF benefits • Reduction in supply base • Cost savings • Standardized packaging from one supplier
© SKF Group
CMD 2013
Supplier reduction: 14
3
Success Story Standardization of capital equipment • Equipment for Grinding, Honing, Laser marking and Assembly
• HBU3 channel standardization
SEK 280 million of total cost savings • Clear business requirements • Improved sourcing process • Standardization of equipment • Cross business leverage • Regional Asian supplier base developed with global capabilities © SKF Group
CMD 2013
Purchasing ramp up and saving plan 2013
2014
2015
2016 SEK SEK 1,500 1,500 m m
•• Separation Separation of of strategic strategic tasks tasks from transactional tasks from transactional tasks •• New New Group Group Purchasing Purchasing organization organization in in operation operation •• New New process process framework framework •• Sourcing Sourcing waves waves 11 // Speed Speed sourcing sourcing started started to to leverage leverage spend across all BUs spend across all BUs
•• Sourcing Sourcing waves waves 22 and and continued continued Speed Speed Sourcing Sourcing activities activities •• Supplier Supplier Innovation Innovation Programmes Programmes on on stream stream •• Strategic Strategic Partnership Partnership Agreements Agreements with with key key suppliers suppliers
•• Integration Integration of of BU BU Purchasing Purchasing
•• Common Common purchasing purchasing processes processes
•• Localization Localization of of the the strategic strategic supplier base supplier base
•• Supplier Supplier consolidation consolidation
© SKF Group
CMD 2013
•• Category Category and and business business driven driven organization fully leveraging organization fully leveraging SKF’s SKF’s purchasing purchasing power power •• Purchasing Purchasing supporting supporting the the full full internal internal value value chain chain •• Focus Focus on on Total Total Cost Cost of of Ownership (TCO) Ownership (TCO) •• Strong Strong alignment alignment with with the the business through a clear business through a clear target target setting setting process process •• Highly Highly competent competent purchasing purchasing professionals professionals •• Reduced Reduced supply supply chain chain risk risk and and costs through top performing costs through top performing suppliers suppliers in in Q QC CD D II M M
SKF priorities
© SKF Group
CMD 2013
Key business message
• No change in demand outlook for Q3 • SKF priorities in focus – good progress in H1 • New IT investment (UNITE) and purchasing programmes going according to plan
© SKF Group
CMD 2013
