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The SKF Group

The SKF Group. SKF Investor Relations July 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 July 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 – June 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 2003-2013Identifying 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) 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)

  26. SKF Half-year results 2014 Tom Johnstone, President and CEO 15 July 2014

  27. Examples of new business • Envision Energy, China Strategic long-term partnership • A customer in the automation industry Roller screw electromechanical cylinder • Dongfang Electric New Energy Equipment Main shaft bearings • Aurizon, Australia Service contract • A customer in the oil and gas industry Asset management services • Bosch Service, Brazil SKF’s vehicle aftermarket product range

  28. Highlights • Inauguration of SKF Campus and SKF North East Asia Distribution Centre in Shanghai. • New SKF Solution Factory in Nieuwegein in the Netherlands. • Events during the quarter: - SKF Wind Farm Management Conference in Berlin • - SKF Life Cycle Management Conference in Buenos Aires • - SKF Asset Management Conference in Prague

  29. Customer awards • Best Technical and Service Award 2013 – Envision Energy, China • Supplier Excellence Award 2013 – National Oilwell Varco (NOV), USA • Premium Supplier Award – Joy Global Underground Mining LLC, USA • Marine Supplier of the year Award 2014 – Rolls-Royce Marine • Excellent Supplier Award – ABB Marine, China • Supplier Certification of Appreciation – Nissan, China • Quality Gold Award 2013 – Yamaha Motor Company • The Qualitas Award – Fiat/Chrysler, Argentina

  30. New products and solutions SKF Gear Bearing Unit • Turbulo BlueMon emission monitoring system Floating piston SKF Tachometer SKF Shaft Alignment Tool SKF Wireless MicroVibe Electric grease transfer pump Low torque operator valve solution Low friction grease for hub bearing units SKF @ptitude Connect SKF Wireless Machine Condition Sensor

  31. SKF Group – Q2 2014 Key points Sales volumes up by 3.6% y-o-y. Manufacturing was slightly higher compared to last year.

  32. SKF Group – Half year 2014 Key points Sales volumes up by 5.0% y-o-y. Manufacturing was higher compared to last year.

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

  34. Organic sales growth in local currency % y-o-y 5.2% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.2%

  35. Sales development by geographyOrganic growth in local currency Q2 2014 vs Q2 2013 Europe 1% North America 3% Asia/Pacific 14% Latin America 2% Middle East & Africa 14%

  36. Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013 Europe 3% North America 3% Asia/Pacific 13% Latin America 1% Middle East & Africa 18%

  37. Components in net sales

  38. Operating profit as reported SEKm 2012 2013 2014

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

  40. Operating margin One-time items * Excluding one-time items % 12.0* 11.9* 11.9* 11.9 11.3 5.8

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

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

  43. 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 Q2 2014 SEK 1,340 million vs 2012.

  44. Operating profit bridge, Q2 2014 SEKm -120 +70 +150 -295 +134 +160 2,096 +160 1,837 Volumes excl. Specialty Business Savings R&D, inflation etc. Q2 2014 Q2 2013 Price/mix Specialty Business One-time items Currencies

  45. Operating profit bridge, half year 2014 SEKm +440 -220 -397 +280 4,120 +240 +60 +400 3,317 Volumes excl. Specialty Business Savings R&D, inflation etc. Q2 2014 Q2 2013 Price/mix Specialty Business One-time items Currencies

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

  47. Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 14.6* 16.2 8.7 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.

  48. Cash flow, after investments before financing SEKm 5) 4) 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

  49. Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 2014 Q2 2,530 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7,900 EU payment (SEKm): 2014 Q2 2,825 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  50. Debt structure, maturity years 850 500 500 200 110 100 100 • Available credit facilities: • EUR 500 million 2019 • SEK 3,000 million 2016 • SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

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