SKF Annual Report 2020 Our Future Is Digital, Electric and Clean
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Annual Report 2020 We enable a world of reliable and sustainable rotation Our products and services are found everywhere in society. In fact, wherever there is movement, SKF’s solutions may be used. This means that we are an important part of the everyday lives of people and companies around the world. When have you relied on reliable rotation today? Early failure Cleaner predictions oceans using AI PAGE 48 PAGE 14 Safe and Unique offshore sustainable land industry solution transports PAGE 54 PAGE 38 SKF OVERVIEW This is the SKF Group ............................................................. 4 President’s letter .................................................................. 10 Why invest in SKF ................................................................. 16 VALUE CREATION AND STRATEGY How SKF creates value ........................................................ 18 Trends and drivers ............................................................... 20 CONTENTS SKF and climate changes ..................................................... 22 Objectives and results, financial, climate and social ...... 24 SKF strategic focus areas .................................................... 26 Digital sales ............................................................................ 26 New business models .......................................................... 28 Innovation .............................................................................. 30 World-class manufacturing ............................................... 32 Future workforce .................................................................. 34 Cleantech ................................................................................ 36 SKF’S GLOBAL PRESENCE A leader on the world bearing market .............................. 40 SKF’s global presence 2020 ............................................... 42 Europe .................................................................................... 43 North America ...................................................................... 44 Asia and Pacific...................................................................... 45 Latin America ........................................................................ 46 Middle East and Africa ......................................................... 47 Risk management ................................................................. 50 The SKF share ........................................................................ 52 Nomination of Board members and notice of Annual General Meeting ...................................... 56 Financial position and dividend policy .............................. 56 FINANCIAL STATEMENTS ............................................ 57 Consolidated income statements ...................................... 58 Consolidated statements of comprehensive income ................................................... 58 Consolidated balance sheets ...............................................60 Consolidated statements of cash flow ...............................62 Consolidated statements of changes in equity ............... 65 Notes to the consolidated financial statements ............. 66 FINANCIAL STATEMENTS, PARENT COMPANY Parent Company, AB SKF ................................................... 98 Parent Company income statements ............................... 98 Parent Company statements of comprehensive income ....................................................... 98 Parent Company balance sheets ....................................... 99 Parent Company statements of cash flow .................... 100 ADMINISTRATION REPORT Parent Company statements of changes in equity .......101 Notes to the financial statements The Administration Report has been audited by SKF’s external auditors. of the Parent Company ..................................................... 102 See the Auditor’s Report on pages 137–140. Proposed distribution of surplus ................................... 109 SUSTAINABILITY STATEMENTS ............................ 110 General disclosures ........................................................... 111 SUSTAINABILITY REPORT SKF’s material topics ........................................................ 117 Economic category ............................................................. 117 Sustainability disclosures in the Annual Report have undergone limited Environmental category .................................................. 119 assurance engagement by SKF’s auditors. See the Independent Auditor’s Social category ................................................................... 125 Limited Assurance Report on Sustainability Report and Report on the Independent auditor’s Limited Assurance Statutory Sustainability Report on page 136. Report on Sustainability Report and Report The definition of the Statutory Sustainability Report is presented on page 110. on the Statutory Sustainability Report .......................... 136 Auditor’s Report ................................................................. 137 CORPORATE GOVERNANCE REPORT .................. 141 CORPORATE GOVERNANCE REPORT Board of Directors ............................................................. 146 Auditor’s Report on the The Corporate Governance Report examined by the auditors can be found Corporate Governance Report ........................................ 149 on pages 141–148. The Auditor’s Report on the Corporate Governance Report Group Management .......................................................... 150 can be found on page 149. SKF GROUP ...................................................................... 152 Seven-year review ............................................................. 152 Three-year review ............................................................ 153 REMUNERATION REPORT Per-share data ................................................................... 153 Distribution of shareholding ........................................... 153 The Remuneration Report can be found on pages 156–158. Definitions ........................................................................... 154 General information .......................................................... 155 REMUNERATION REPORT ........................................ 156 A leading global supplier of reliable rotation Our customers want assets that run faster, longer, cleaner and more safely. Solving this in the most effective and sustain able way by reducing friction contributes to our vision of a world of reliable rotation. Our mission is to become the undisputed leader in the bearing business, and we are today one of the world’s largest supplier of bearings. 2020 in brief SKF’s long-term targets • Significant negative impact The long-term targets were updated on 4 November 2020 on demand from end of and shall be achieved over a business cycle. March as a result of the 2020 2020 COVID-19 pandemic. TARGET OUTCOME TARGET OUTCOME Focus on ensuring the Operating margin1) Revenue growth2) safety and wellbeing of employees and on imple- menting measures to 14 % 12.3% 5% –10% reduce costs and increase Net debt3)/equity ROCE1) flexibility. • Continued transformation <40% 9% 16% 12.7% of manufacturing with investments in Property, Dividend pay-out ratio Carbon neutral by 2030 Plant and Equipment of around SEK 3.3 billion. 50% 66% zero –35% 4) • Updated long-term targets introduced at SKF’s Capital Markets Day in November. • Already operating two Net sales Operating margin1) Cash flow 5) carbon neutral factories, 100 SEK billion 15% 10 SEK billion 85.7 86.0 SKF announced the aim 80 77.9 75.0 12 11.7 12.2 11.8 12.3 8 8.3 to achieve a fully carbon 60 9 6 4.8 5.0 5.3 neutral manu facturing 40 6 4 footprint by 2030. 20 3 2 0 0 0 17 18 19 20 17 18 19 20 17 18 19 20 1) Adjusted for items affecting comparability 4) Absolute reduction in scope 1 and 2 emissions 2) Including acquisitions, adjusted for divestments since 2015 base year 3) Excluding pension liabilities 5) Net cash flow after investments before financing SKF OVERVIEW This is the SKF Group The rotating shaft, with all its associated techno logies, We are experts is probably the most common application in the world. SKF is a leading global supplier of solutions around the rotating shaft including bearings, seals, lubrication around the management, condition monitoring and maintenance services. SKF provides reliable rotation by combining hands- rotating shaft on industry experience with a vast product portfolio and in-depth knowledge across the SKF techno logy areas. One of our strengths is the ability to keep developing new technologies that are used to create value-adding solutions. This gives competitive advantages to customers, and at the same time, contributes to a sustainable global society. We are everywhere SKF’s products and services may be used wherever there is movement. This means that they are used all over the world and in a large variety of applications, 40,963 ranging from heavy industries, such as mining and EMPLOYEES metal working and pulp and paper, to renewable energy such as wind, as well as cars and commercial vehicles. 91 SKF’s global presence page 42 MANUFACTURING UNITS Europe page 43 North America page 44 Asia and Pacific page 45 Latin America page 46 15 Middle East and Africa page 47 TECHNOLOGY CENTERS 4 SKF Annual Report 2020 Our future is digital, electric and clean The SKF strategy is the foundation from of digitalization, climate crisis and the which we work towards our vision