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The SKF Group

The SKF Group. SKF Investor Relations April 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 April 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. Net sales 2012, Geographical distribution* Middle East & Africa North America Asia/Pacific Latin America Eastern Europe Sweden Western Europe * 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 Tangible asset (47) (46) (53) (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 15 November, 2014

  19. SKF technology platforms Bearings and units Slide 18 15 November, 2014

  20. SKF technology platforms Seals Slide 19 15 November, 2014

  21. SKF technology platforms Mechatronics Slide 20 15 November, 2014

  22. SKF technology platforms Lubrication systems Slide 21 15 November, 2014

  23. SKF technology platforms Services Slide 22 15 November, 2014

  24. Acquisition 2003-2013Identifying 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) BVI(2013) GBC(2012)

  25. SKF First-quarter results 2013 Tom Johnstone, President and CEO

  26. Highlights Q1 2013 • Acquisitions and divestments • completed acquisition of German-based ship components provider Blohm + Voss Industries (BVI) • agreement signed to divest the aerospace metallic rods business • Programme to improve efficiency, reduce cost and strengthen profitable growth continues • one-off costs of around SEK 250 million • annual savings of around SEK 100 million • Organizational changes • Henrik Lange, President SKF Industrial Market, Strategic Industries was appointed Executive Vice President and CFO succeeding Tore Bertilsson who is retiring from SKF. • Rakesh Makhija, was appointed President Industrial Market, Strategic Industries. • Tore Bertilsson continues as Executive Vice President, up until his retirement later this year. Henrik Lange Rakesh Makhija Tore Bertilsson

  27. Highlights Q1 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 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 SKF was included in the FTSE4Good Index Series for the 13th successive year. SKF’s factory in Ahmedabad, India was awarded the covetedLEED Gold certification.

  28. SKF InsightTM - The brain, as well as the heart of rotating machinery SKF InsightTM–internally powered sensors and data acquisition electronics sensing directly on the bearing • Control over the life cycle of the machinery • Lower total costs with higher reliability and machinery uptime • Wirelessly communication of the condition of the bearing and machinery at any time Pilot projects in progress within wind energy, railways and metals industries.

  29. New products included in the SKF BeyondZero portfolio SKF Extended Life spherical plain bearing An energy efficient high speed permanent magnet solution SKF extreme temperature bearings

  30. SKF Group – Q1 2013 • Financial performance 2013 2012 • Net sales, SEKm 15,152 16,931 • Operating profit, SEKm 1,480 2,136 • Operating margin, % 9.8 12.6 • Operating margin excl. restructuring, % 11.4 12.6 • Profit before tax, SEKm 1,237 1,956 • Cash flow, SEKm -892 696 • Cash flow excl. acquisitions, SEKm -69 715 • Organic sales growth in local currency: • SKF Group: -8.0% • Industrial market, Strategic Industries: -12.2% • Regional Sales and Service: -7.7% • Automotive: -3.7% • Key points • Sales volumes down by 8.7% y-o-y • Manufacturing lower y-o-y • Inventories 20.3% of sales Europe: -10% North America: -10% Asia: -7% Latin America: 8%

  31. Organic sales growth in local currency % change y-o-y 2011 2012 2013

  32. Growth development by geographyOrganic growth in local currency Q1 2013 vs Q1 2012 Europe-10% North America -10% Asia/Pacific -7% Latin America 8% Middle East & Africa -6%

  33. Components in net sales 2013 2011 2012 Percent y-o-y

  34. Growth in local currency, including structure % y-o-y 16.3% -2.1% -6.5% Structure in 2011: 4.8% Structure in 2012: 0.4% Structure in Q1 2013: 1.5%

  35. Operating profit SEKm 2013 2012 2011 One-time items

  36. Operating margin % 2011 2012 2013 One-time items

  37. Operating margin % 14.7* 12.0* 14.5 11.4* 11.4 9.8 One-time items * Excluding one-time items

  38. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2012 2013 2011 Excluding one-off items(eg. restructuring, impairments, capital gains)

  39. Inventories as % of annual sales % 2011 2012 2013

  40. Return on capital employed One-off costs * Excluding one-off costs % 23.9* 23.6 17.2* 16.0* 16.2 14.5 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.

  41. Cash flow, after investments before financing SEKm * ** 2012 2013 2011 * SEK 1,707 million,excluding acquisitions and divestments. ** SEK -69 million, excluding acquisitions and divestments.

  42. Net debt SEKm AB SKF, dividend paid (SEKm): 2011 Q2 2,277 2012 Q2 2,504 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2012 2013 2011 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  43. Debt structure, maturity years EURm 500 500 265 110 100 100 100 • Available credit facilities: • EUR 500 million 2017 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  44. First quarter 2013 * excluding acquisitions and divestments, SEK -69 million

  45. April 2013: SKF demand outlook Q2 2013 Demand compared to the second quarter 2012 The demand for SKF’s products and services is expected to be lower for the Group and for Europe. It is expected to be relatively unchanged for Asia and North America and slightly higher for Latin America. The demand is expected to be lower for Industrial Market, Strategic Industries and Industrial Market Regional, Sales and Service and slightly lower for SKF Automotive. Demand compared to the first quarter 2013 The demand for SKF’s products and services is expected to be relatively unchanged for the Group, for Europe, Asia and North America. It is expected to be slightly higher for Latin America. The demand is expected to be relatively unchanged for the business areas. Manufacturing Manufacturing is expected to be lower year over year and relatively unchanged compared to the first quarter.

  46. SKF demand outlook Q2 2013, regions * Previously published percent of sales have been restated.

  47. SKF demand outlook Q2 2013, business areas

  48. SKF sequential volume trend Q2 2013, main segments Share of net sales 2012* * Previously published percent of sales have been restated.

  49. Guidance for the second quarter 2013 • Tax level: around 30% • Financial net for the second quarter:Around SEK -200 million • Exchange rates on operating profit versus 2012 Q2: SEK -200 million • Full year: SEK -550 million • Additions to PPE: Around SEK 1.7 billion for 2013 Guidance is approximate and based on current assumptions and exchange rates

  50. Key focus areas 2013 • Managing the uncertain and different demand environment • - Profit and cash flow • Initiatives and actions to support long-term financial targets- New factories in Mysore and Bengaluru in India - New warehouse in Shanghai, China - SKF Campus in Shanghai, China, including:‣ New factory for automotive‣ Global Technical Centre China‣ SKF Solution Factory‣ SKF College - Integration of new acquisitions, GBC and BVI - Cost reduction and efficiency programme - New IT systems • Business Excellence and competence development One SKF and SKF Care as guiding lights

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