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The SKF Group

The SKF Group. SKF Investor Relations January 2013. SKF - A truly global company. Established: 1907 Sales 2012: SEK 64,575 million Employees 2012: 46,775 Production sites: around 140 in 28 countries SKF presence: in over 130 countries Distributors/dealers: 15,000 locations

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The SKF Group

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  1. The SKF Group SKF Investor Relations January 2013

  2. SKF - A truly global company • Established: 1907 • Sales 2012: SEK 64,575 million • Employees 2012: 46,775 • Production sites: around 140 in 28 countries • SKF presence: in over 130 countries • Distributors/dealers: 15,000 locations • Global certificates: ISO 14001 • OHSAS 18001 certification

  3. Cars and light trucks Industrial distribution Aerospace 29% 6% Railway 4% Off-highway 4% 5% Trucks 2% 10% Two-wheelers and Electrical Vehicle Service Market 6% 12% 9% Industrial, general Energy Industrial, heavy and special Net sales by customer segment* 2012 * Previously published shares have been restated in February 2013

  4. Middle East & Africa North America Asia/Pacific Latin America Eastern Europe Sweden Western Europe Net sales 2012, Geographical distribution* * Previously published shares have been restated in February 2013

  5. (1998) (2002) % of group total SKF 2012 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

  6. Operating margin %

  7. Return on capital employed %

  8. Growth in local currencies %

  9. SKF Group Vision To equip the world with SKF knowledge

  10. SKF BeyondZero • SKF launched the BeyondZeroTM portfolio with products and solutions, which will both improve energy efficiency and reduce the environmental impact. • SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme. SKF’s climate strategy targets: • Increase revenue from SKF BeyondZero portfolio from SEK 2.5 bn to SEK 10 bn by 2016 •Reduce total annual energy use by 5% below the 2006 level by 2016 • Reduce energy use per production output by 5% y-o-y from 2012 to 2016 • Reduce CO2 emissions per tonne-kilometre by 30% 2016 vs 2011 for transports managed by SKF Logistics Services • Major suppliers certified according to ISO 50001 by 2016

  11. Nordic (Gothenburg) Moscow Edmonton UK Rumania France Germany Italy Tianjin Cleveland Istanbul Shanghai Houston Taiwan Monterrey Mexico Pune Colombia Opened Brasil “IXION” Planned Johannesburg Perth 21 SKF Solution Factories 2012

  12. SKF Solution Factory Platforms & Technology Competence Segments & Application Knowledge SKF Solution Factory Capabilities Sealing Solutions Lubrication Solutions Mechanical Services Remote Monitoring Center Bearing Service Workshop Condition Monitoring Services A & MC MaPro/CoMo Product Repair Training Center

  13. Slab continuous caster – metal industry Telescopic actuators for mould adjustment SKF ConRo Compact roll line units SKF ConRo Low roll line units SKF ConRo Top roll line units SKF DryLube Bearings and SNL Housings for roll out table SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines SKF Caster Analyst System for roll lines

  14. Wheel-loader – Construction Chassis lubrication Centralized lubrication systems Central gear Hybrid pinion units Motor hood Electromechanical actuators Wheel end • Integrated smart wheel bearing units with sensors • SKF Mudblock cassette seals

  15. Wind turbine - Energy New CRB-design with extra-high carrying capacity for wind-gearboxes. New pitch bearing design with improved corrosion protection SKF WindCon 3.0/Webcon Intranet supervised condition monitoring DRTRB-unit SKF Nautiluswith segmented cage for minimized friction Automatic centralized lubrication kits for reduced maintenance cost XL Hybrid bearings with ceramic balls for superior insulation

  16. SKF’s environmentally positive customer solutions SKF’s solutions which realize significant environmental benefits Designed for environment Applied for environment Up to 15% better fuel economy of the car Stop-start system SKF sensor bearing E2 - 30% less energy compared to a standard bearing A solution that enables improved environmental performance in a specific application A solution that is primarily designed to improve environmental performance by itself

  17. SKF energy efficient (E2) bearings Peru Industria Textil Piura 60,000 E2 deep groove ball bearing • Indonesia • Leuwijaya Textile • 30,000 E2 bearing • potential 325,000 for 3 different customers • China • Conveyors used in mining industry. 130,000 E2 bearing • India • Sangam Group

  18. What is SKF knowledge? Slide 17 4 January, 2020

  19. SKF technology platforms Bearings and units Slide 18 4 January, 2020

  20. SKF technology platforms Seals Slide 19 4 January, 2020

  21. SKF technology platforms Mechatronics Slide 20 4 January, 2020

  22. SKF technology platforms Lubrication systems Slide 21 4 January, 2020

  23. SKF technology platforms Services Slide 22 4 January, 2020

  24. Acquisition 2003-2012Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Baker(2007) Jaeger(2005) Macrotech(2006) Macrotech (2009) GLO(2008) S2M(2007) Vogel(2004) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) Sommers(2005) PB&A(2006) Scandrive(2003) Monitek(2006) Cirval(2008) Peer(2008) GBC(2012)

  25. SKF Year-end results 2012 Tom Johnstone, President and CEO

  26. Summary of the quarter Weaker sales in the quarter - lower overall demand - inventory destocking in the market Impact on the operating margin due to significantly lower manufacturing Continued reduction on inventories Strong cash flow Accelerated and expanded activities to reduce costs by SEK 3 billion by the end of 2015 and strengthen growth Acquisition of Blohm + Voss Industries

  27. Programme to improve efficiency, reduce cost and strengthen profitable growth • Main activities: • consolidation of production between sites • transfer of production from West Europe to serve faster growing markets with more local production • optimization and productivity improvements in the manufacturing and demand chain processes • consolidation of and efficiency improvements in administration and support functions • reduction in purchasing cost mainly through standardization and rationalization of the supplier base. • Reducing annual costs by SEK 3 billion by the end of 2015 • Total costs for the programme SEK 1.5 billion for the years 2012 to 2015 • 2,500 people impacted, early retirement and other voluntary and agreed reductions

  28. Acquisitions in the last 12 months • General Bearing Cooperation (GBC) • Acquired in August 2012 • Net sales around USD 155 million • Employees around 1,380 • Customers OEM and end-user in the truck, trailer, automotive and industrial transportation markets • Headquarter North America • Factories 3 in China • Manufacturing ball bearings, tapered roller bearings and precision roller bearings • Blohm + Voss Industries (BVI) • Transaction is subject to relevant regulatory approvals • Net sales around EUR 100 million • Employees around 400 • Headquarter Germany • Manufacturing premium quality equipment for critical marine applications, including shaft components (seals and bearings), stabilizers, and oily water separators

  29. BVI strengthening SKF’s position as a marine specialist • Strategic fit with SKF Marine growth strategy • Complementary product portfolio • Secure the leadership with propulsion system OEMs • Widen the scope of supply for the application life-cycle • Today, SKF sales to the marine industry is around SEK 1.5 billion. Main applications are propulsion systems, including thrusters, pods and gearboxes.

  30. Some examples of new businesses in 2012 • Industrial • new generation Nautilus bearing to Siemens • main shaft solutions to Vestas V112-3.0 MW turbine • axle boxes and wheel set bearing units to Siemens Rail Systems • SKF ConRo Compacts to a major metal industry customer • third strategic partnership agreement with Baosteel Group Corporation • maintenance services to LKAB • integrated maintenance solutions to Fibria • two custom-designed SKF spherical roller bearings, 8.8 tonnes each, for Caesars High Roller observation wheel in Las Vegas • Automotive • SKF Bus Door Actuator to Volvo Buses • rear wheel bearing units and front suspension bearing units to Volvo Car Corporation • wheel bearing units and clutch bearings to Audi • bearing and units to Scania for wheels and transmissions • bonded piston seals to Mazda Motor Corporation

  31. Some highlights from 2012 • SKF celebrated 100 years of business in China • - inaugurated a new bearing and truck hub unit factory in Jinan • - broke ground on a new regional distribution centre in Shanghai • - announced the establishment of a new SKF Campus in Jiading, Shanghai, containing a new factory for automotive and the Global Technical Centre China, SKF Solution Factory and SKF College • New facilities • - Railway test centre in Tver, Russia • - Five new SKF Solution Factory: USA, Romania, Italy, Australia and the Netherlands • Partnership • With Protean Electric for supplying products to Protean’s in-wheel electric motors for electric vehicles and hybrid cars. • Documented delivered value • SKF provided SEK 4.1 billion in verified savings for customers. • SKF Distributor Collegeawarded its 170,000th certificate • Dow Jones Sustainability Indexes and FTSE4Good • - member of DJSI indexes for the 13th successive year - included for the 12th successive year in the FTSE4Good Index Series

  32. New temperature monitoring system for railway SKF Solar Hub A hand-held, 18-volt, lithium-ion grease gun SKF Low Friction Hub Bearing Unit Shaft sealing solutions SKF Machine Condition Indicator SKF Bus Door Actuator Some examples of new products in 2012 • SKF ChainLube oil projection system SKF Compact Wire Steering Bearing SKF Nautilus range extensions SKF Speed Sensor Unit

  33. R&D – main areas and investments in 2012 • Main areas • Environment • Core technologies • New products • Strengthen R&D activities in fast growing regions • Strengthen links with universities and high schools +10% 2.5% of sales First filing patent application +30% 421

  34. Launch of new climate targets • SKF launched the SKF BeyondZero portfolio with products • and solutions, which will both improve energy efficiency and reduce the environmental impact. • SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme. Growth target: SEK 2.5 billion to SEK 10 billion by 2016

  35. 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

  36. 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

  37. SKF Group – 2012 • Financial performance 2012 2011 • Net sales, SEKm 64,575 66,216 • Operating profit, SEKm 7,333 9,612 • Operating margin, % 11.4 14.5 • Profit before tax, SEKm 6,511 8,932 • Cash flow, SEKm 3,555 3,848 • Organic sales growth in local currency: • SKF Group: -2.5% • Industrial market, Strategic Industries: -3.0% • Regional Sales and Service: -1.8% • Automotive: -3.4% • Key points • Sales volumes down by -3.9% y-o-y • Manufacturing significantly lower y-o-y • Inventories down to 19.9% of sales Europe: -4.7% North America: 6.8% Asia: -9.5% Latin America: 11.3%

  38. Organic sales growth in local currency % change y-o-y 2010 2011 2012

  39. Growth development by geographyOrganic growth in local currency Q4 2012 vs Q4 2011 Europe-7% North America 2% Asia/Pacific -11% Latin America 9% Middle East & Africa -9%

  40. Growth development by geographyOrganic growth in local currency 2012 vs 2011 Europe-5% North America 7% Asia/Pacific -10% Latin America 11% Middle East & Africa -2%

  41. Components in net sales 2010 2011 2012 Percent y-o-y

  42. Growth in local currency, including structure % y-o-y 16.3% 14.2% -2.1% Structure in 2011: 4.8% Structure in 2012: 0.4%

  43. Operating profit SEKm 2012 2011 2010 One-time items

  44. Operating margin % 2010 2011 2012 One-time items

  45. Operating margin % 14.7* 14.2* 12.0* 14.5 13.8 11.4 One-time items * Excluding one-time items

  46. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2011 2012 2010 Excluding one-off items(eg. restructuring, impairments, capital gains)

  47. Inventories as % of annual sales % 2010 2011 2012

  48. Return on capital employed % 24.0 23.6 16.2 ROCE: Operating profit plus interest income, as a percentage of twelve months rolling average of total assets less the average of non-interest bearing liabilities.

  49. Cash flow, after investments before financing SEKm ** * 2011 2012 2010 * SEK 798 million,excluding SEK 6,799 million for the acquisition of Lincoln. ** SEK 1,707 million,excluding acquisitions and divestments.

  50. Net debt SEKm AB SKF, dividend paid (SEKm): 2010 Q2 1,594 2011 Q2 2,277 2012 Q2 2,504 2011 2012 2010 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

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