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SKF Q4 results 2019
Alrik Danielson, President and CEO
▪ Net sales of 21,208 M, organic growth -2.9%
▪ Underlying operating profit 2,181 M (2,197)Reported operating profit SEK 1,910 M (2,902)
▪ Underlying operating margin of 10.3% (10.4)Reported operating margin 9.0% (13.7)
▪ Investments 3.4 billion (2.6)
▪ Proposed dividend SEK 6.25 (6.00)
Q4 – strong performance on lower sales
3.4 bnInvestments
-2.9% Organic sales growth
2,181 MUnderlying operating profit
Industrial - Good operational performance on lower sales 13.3% operating margin* (12.9), despite 1.2% drop in organic sales. Volumes significantly higher in Asia, relatively unchanged in Europe and significantly lower in North America
* Underlying operating margin
Automotive - 7% drop in organic sales, good order intakeSignificantly lower sales volumes North America and Europe, lower sales volumes in Asia and significantly higher sales in Latin America. Operating margin* of 2.4%.
* Underlying operating margin
© SKF Group
Europe
-3.0%
Asia/Pacific
+4.3%
Latin
America
+8.2%
North
America
-15.9%
Growth in Asia, slowing demand in North AmericaOrganic growth in local currency Q4 2019 vs Q4 2018
Fee-based contract with Gerdau to improve productivity of Brazilian steel millsFee-based agreement aimed at increasing productivity and reducing unplanned downtime at Gerdau’s Charqueadas and Araçariguama steel mills in Brazil.
Extending bearing life with the SKF Sensor roller systemThe sensor roller technology of load sensing allows SKF to measure bearing life – an important input for performance based contracts
Q4 results – the detailsNiclas Rosenlew, CFO
© SKF Group
Sales developmentSlowing organic growth, offset by currency impact
2018 2019
Percent y-o-y Q4 Q1 Q2 Q3 Q4
Organic +5.0 +0.3 -1.6 -3.0 -2.9
Structure -1.0 -2.5 -2.6 -2.6 -1.8
Currency +4.8 +5.7 +3.5 +4.2 +4.8
Net sales +8.8 +3.5 -0.7 -1.4 +0.1
© SKF Group
Stable operating profit on lower sales
© SKF Group
Operating profitContinued strong performance on cost savings
© SKF Group
Industrial
▪ Net sales 15,362 M
▪ Organic sales -1.2%
▪ Underlying operating margin 13.3%, (12.9)Reported operating margin 12.4%, (18.3)
Automotive
▪ Net sales 5,847 M
▪ Organic sales -7.3%
▪ Underlying operating margin 2.4%, (3.8)
Reported operating margin 0.2%, (1.8)
Performance by customer group
* Underlying operating margin
© SKF Group
Cash flow after investments before financing*
Strong cash flow despite increased investments
Accelerating
investments in
manufacturing
▪ 2016 1.9 billion
▪ 2017 2.2 billion
▪ 2018 2.6 billion
▪ 2019 3.4 billion
▪ 2020e 3.3 billion
© SKF Group
Net working capital
© SKF Group
Net debt/equity ratioStrong balance sheet positions us for the future
© SKF Group
GFF launched in Oct 2019
First Green Bond launched in November
▪ Among the first issued by an industrial
company
▪ Very well received in the market
▪ 10 year maturity, 300 M EUR @ a record
low interest rate
Green Finance Framework (GFF): connecting funding strategy with climate objectives
SKF’s Green finance framework can be found at: https://www.skf.com/group/investors/green-finance-framework
© SKF Group
Accelerating the ERP implementation
▪ Quicker roll-out; implementation in
stages during 2020-2025
▪ Fit-for-purpose approach to solutions
for sales, finance, logistics and
manufacturing
▪ Lower cost, expected annual spend
about 400-500 M
New structure for support functions
▪ Regional centres of excellence for HR,
communications and finance
▪ More efficient working practices through
digitalization
▪ Being implemented during 2020-2021
Continued operational improvements
© SKF Group
Demand compared to the first quarter 2019
The demand for SKF’s products and services is expected to be lower for the Group,
including slightly lower demand for Industrial and lower demand for Automotive.
Demand is expected to be slightly higher in Asia, lower in Europe, significantly lower
in North America and significantly higher in Latin America.
February 2020: SKF demand outlook Q1 2020
© SKF Group
Q1 2020:
▪ Financial net: around -225 million
▪ Currency impact on the operating profit is expected to be positive by 60 million
compared with 2018, based on exchange rates per 31 December, 2019.
2020:
▪ Tax level: around 28% for 2020, excluding effects from divestments.
▪ Additions to property, plant and equipment: around 3,300 million for
2020.
Guidance for 2020*
* Guidance is approximate and based on current assumptions and exchange rates.
© SKF Group
Delivering solid results despite softer markets:
▪ Stable underlying operating margin
▪ Cost savings continue to offset cost inflation
We are investing for the future:
▪ Record levels of investments in our factories
Looking into Q1:
▪ Strong financial position; increased proposed dividend
▪ Expect lower volumes; uncertainty driven in part by impact from Coronavirus
Q4 2019: continued strong performance on lower sales
SKF Q4 results 2019Q & A
© SKF Group
Financial calendar
Q4 report 4 February
Stockholm Roadshow 4-5 February
US Roadshow 24-28 February
Annual report 4 March
Carnegie Conference Stockholm 6 March
BAML London Conference March
Annual General Meeting 26 March
Q1 report 23 April
© SKF Group
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 www.skf.com) under the Administration Report;
“Risk management at SKF" and "Sensitivity analysis”.
Cautionary statement
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