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The SKF Group

The SKF Group. SKF Investor Relations October 2014. SKF - A truly global company. Established: 1907 Sales 2013: SEK 63,597 million Employees 2013: 48,401 Production sites: around 165 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 October 2014

  2. SKF - A truly global company • Established: 1907 • Sales 2013: SEK 63,597 million • Employees 2013: 48,401 • Production sites: around 165 in 28 countries • SKF presence: in over 130 countries • Distributors/dealers: 15,000 locations • Global certificates: ISO 14001 • OHSAS 18001 certification

  3. Net sales - 2013 Middle East & Africa Cars and light trucks North America Industrial distribution Asia/Pacific Aerospace Railway Latin America Off-highway Eastern Europe Trucks Sweden Two-wheelers and Electrical Vehicle aftermarket Energy Industrial, general 9% Western Europe Industrial, heavy and special * Previously published shares have been restated in February 2013

  4. (1998) (2002) % of group total SKF 2013 Net sales Average number of employees (44) (53) (48) 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

  5. Operating margin as reported %

  6. Return on capital employed %

  7. Growth in local currencies %

  8. Financial targets 8% Changes in sales in local currency incl. structure 20% Return on capital employed 15% Operatingmargin One-time items One-time items for the individual year

  9. SKF’s priorities • Sustainable profitable growth • Expand the platform concept • Exploit the asset life cycle approach • Develop new products and grow SKF BeyondZero portfolio • Extend and grow second brands • Acquisitions • Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility • Capital efficiency • Fixed capital • Net working capital • Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs

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

  11. 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 targets: • Increase revenue from SKF BeyondZero portfolio from SEK 2.5 billion to SEK 10 billion 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

  12. 28 SKF Solution Factory – October 2014 France Montigny Germany SchweinfurtIndia Pune India Manesar Italy Turin Mexico Monterrey Netherlands RidderkerkNetherlands Nieuwegein Australia Perth Brazil Cajamar Canada Edmonton Canada Toronto Columbia Bogota China Shanghai China TianjinChina Urumqi Poland Katowice Romania Bucharest Russia Moscow United Arab Emirats Abu Dhabi South Africa Witfield Spain Madrid Sweden Gothenburg Taiwan Taichung Turkey Istanbul UK Luton USA Cleveland USA Houston

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. What is SKF knowledge?

  20. SKF technology platforms Bearings and units

  21. SKF technology platforms Seals

  22. SKF technology platforms Mechatronic

  23. SKF technology platforms Lubrication systems

  24. SKF technology platforms Service

  25. Acquisition 2003-2014Identifying gaps and opportunities in all platforms Bearings and units Lubrication systems Mechatronics Services Seals Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Baker(2007) Jaeger(2005) Macrotech(2006) Macrotech (2009) GLO(2008) S2M(2007) Kaydon(2013) GLOi(2014) Vogel(2004) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) Sommers(2005) PB&A(2006) Scandrive(2003) Monitek(2006) Cirval(2008) Hofmann Engineering North America(2014) Peer(2008) BVI(2013) GBC(2012)

  26. SKF Nine-month results 2014 Tom Johnstone, President and CEO 15 October 2014

  27. Alrik Danielson, new President and CEO from 1 January 2015 • B.Scin Business Administration and International Economics from the University of Gothenburg • 1987-2005 Previous positions within SKF: • Financial controller in Gothenburg • President, Industrial Division in Spain and Portugal • President, SKF do Brazil • President, Industrial Division • and several other managerial positions. • 2005-2014 HöganäsAB, President and CEO

  28. Examples of new business • Doosan Heavy Industries and Construction, SKF Supergrip BoltsSouth Korea SKF Nautilus bearing • A leading Chinese locomotive manufacturer Traction motor bearings • HSD SpA, Italy Super precision bearings and engineering support • A major Australian customer Maintenance contractin the agriculture industry • Medical device manufacturer in California, Slewing ring bearingsUSA

  29. Examples of new business • Tesla Motors Bearing for the gearbox, e-motor and wheels • Volvo Cars Wheel hub bearing units • Scania Wheel bearing units and high pressure valve stem seals

  30. Customer awards • Supplier Performance Award – Snecma, Safran Group, France • Best Supplier Award – Weg Electric Motor Manufacturing Co., Ltd, China • Best Supplier Award – Shanghai Hanbell Precise Machinery Co. Ltd., China • Excellent Engineering Development Award – Shanghai Automobile Gear Works (SAGW), China • Fiat Qualitas Award – Fiat, Argentina • Certificate of Appreciation for quality and delivery performance – Honda, India

  31. Highlights • New Kaydon factory at the SKF Campus in Cajamar, Brazil. • New Global Technical Center in the greater Chicago area, US. • For the 15th year in a row, one of the world’s most sustainable companies by the Dow Jones Sustainability World Index (DJSI). • For the 14th consecutive year, a constituent of the FTSE4Good Index Series.

  32. Examples of new products and solutions SKF Multilog Online System IMx-B Tapered roller bearing unit for passenger railway applications Compact tapered roller bearing unit for heavy freight SKF Mudblock cassette seals, MUD 11 SKF Machine Tool Observer MTx SKF Multilog On-line System IMx-M SKF Static Motor Analyzer Baker AWA-IV PuraBreeze 100

  33. SKF Group – Q3 2014 Keypoints Sales volumes up by 1.9% y-o-y. Manufacturing was relatively unchanged compared to last year.

  34. SKF Group – Ninemonth 2014 Keypoints Sales volumes up by 3.8% y-o-y. Manufacturing wasslightly higher compared to last year.

  35. Organic sales growth in local currency % change y-o-y 2012 2013 2014

  36. Organic sales growth in local currency % y-o-y 4.5% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.7%

  37. Sales development by geographyOrganic growth in local currency Q3 2014 vs Q3 2013 Europe 0% North America 3% Asia/Pacific 8% Latin America 0% Middle East & Africa 7%

  38. Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013 Europe 2% North America 3% Asia/Pacific 11% Latin America 1% Middle East & Africa 14%

  39. Components in net sales

  40. Operating profit as reported SEKm 2012 2013 2014

  41. Operating profit excluding one-time items SEKm 2012 2013 2014

  42. Operating margin One-time items * Excludingone-timeitems % 12.0* 11.9* 11.8 11.3 5.8

  43. Operating margin per business area as reported % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  44. Operating margin per business area excl. one-time items % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  45. SKF’s programme to improve efficiency and reduce cost Restructuring, SEKm: Giving future gross savings, SEKm: Realized gross savings from total programme, SEKm: vs 2012 vs 2013 Note: Run rate Q3 2014 SEK 1,340 million vs 2012.

  46. Operating profit bridge, Q3 2014 SEKm +100 -432 +65 +110 +112 +165 2,073 +30 1,923 Volumes excl. Specialty Business Savings Other* Q3 2014 Q3 2013 Price/mix Specialty Business One-time items Currencies * R&D, S&A, IT, inflation etc.

  47. Operating profit bridge, ninemonth 2014 SEKm -120 +505 -829 +390 +352 6,193 +225 +430 5,240 Volumes excl. Specialty Business Savings Other* Q1-Q3 2014 Q1-Q3 2013 Price/mix Specialty Business One-time items Currencies * R&D, S&A, IT, inflation etc.

  48. Net working capital as % of annual sales Target: 27% % 2012 2013 2014

  49. Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 13.9* 16.2 8.5 7.5 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.

  50. Cash flow, after investments before financing SEKm 1) 5) 4) 3) 2) 2012 2013 2014 Excl. acq. and div.: 1) Q3 2012 SEK 1,707 million 2) Q1 2013 SEK -69 million 3) Q3 2013 SEK 871 million 4) Q4 2013 SEK 1,170 million Excl. EU payment 5) Q2 2014 SEK 1,423 million

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