Service Division

Presented by Phil KnightsPresident, Service Division

Service Division Business

Service Division Business

Providing platform-based and segment-focused solutions to industrial end-users for improved productivity with:

• Bearings and related products and services through authorized distributors

• Knowledge-based products, systems and services to optimize plant asset efficiency

• Global e-enabled logistics services to external and internal customers

Service Division Sales portion of SKF Group

ServiceDivision

1Q 05 Net Sales: 3 418 MSEK (3 300) Operating Margin: 10.5% (9.5%)

Net Sales Growth: 6.8%

Service Division net sales by geography, 2004

Asia26%

Latin America8%

Middle East &Africa

Central & Eastern Europe

10%

WesternEurope

32%

4%

North America20%

Service Division sales, 2004

Services andService products

16%

Bearing &Related

Products

Service Division – Services and service products

Logistics ServicesMaintenance Products

Reliability Systems Complementary Products

Slide 8 [Code] 2005-05-26 ©SKF SKF [Organisation]

Customer needs

Customers want more…

Delivery service is the most important

Quality is a pre-condition

Wide product assortment is essential

“Right price, availability and reliability”

TCO more important than unit priceDemand for value added services

Technical support expected

Growth in e-business

Facing the Forces of Change Distribution Research and Education FoundationPembroke Consulting

SKF [Organisation]Slide 10 [Code] 2005-05-26 ©SKF

Business strategy

To equip the worldwith SKF knowledgeTo equip the worldwith SKF knowledge

Vision for the SKF Group

SKF Platforms for Service Division

The Industrial Market –Platform to customer process

Segment Value

Proposition

Products +

Knowledge +

Capital Efficiency

BusinessOpportunities

Siebel Funnel

Priority Actions

• Profit potential

• Customer readiness

Sales

• By channel for maximum profit and cost effectiveness

• Bearings• Seals• Mechatronics• Services • Lubrication

Systems

Platforms

CustomerValue Acceptance

Service Division core strategies

End User Needs -TCO

Pricing DistributorConsolidation

Internet

SellValue AddedSolutions

TFO PRM IMS AEORELIABILITY SYSTEMS

Manage Our Channels And

Our Pricing

SKF PRICE LEADERSHIPGROUP CHANNEL/PRICING STRATEGY

Grow WithOur Distributor

Partners

MARKET SHARE GROWTH D/D DEVELOPMENT

Optimize Supply

Channel Efficiency

E-BUSINESS/LOGISTICS

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

Service Division core strategies

End User Needs -TCO

Pricing DistributorConsolidation

Internet

SellValue AddedSolutions

TFO PRM IMS AEORELIABILITY SYSTEMS

Manage Our Channels And

Our Pricing

SKF PRICE LEADERSHIPGROUP CHANNEL/PRICING STRATEGY

Grow WithOur Distributor

Partners

MARKET SHARE GROWTH D/D DEVELOPMENT

Optimize Supply

Channel Efficiency

E-BUSINESS/LOGISTICS

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

Reliability Systems value proposition per segment

Foundation Technology

CoMo Products•Surveillance•Protection

Service Categories

Systems/Installation Reliability ServicesMechanical/Re-eng.Strategy & Consulting

RS Proposition

Documented value-added

Performance based contracts

From Trouble-Free Operation

to Integrated Maintenance Solutions

Assi Domain Frovi

Customer partnerships

Baosteellargest fully-integrated steel producer in China

China, TFO ContractMAIN FEATURES

TFO Agreement signed in Dec. '98

Established “Long Term Strategic Partnership” in June '99

SKF TFO extended to Baosteel Group members since March '03.

The agreement of ‘More Closer Cooperation between Baosteel Intl. & SKF’ was reached in Feb. '04.

Strategic Partnership Agreement signed March 15th '05

RESULTS

‘Zero Stock Management’ for spares

Supported 20% production growth

Efficiency of 2050 HRM improved dramatically

Bearing inventory reduced 80%

SKF market share increased to 50% of Baosteel group.

SKF executes root cause failure analysis and achieved good result.

Baosteellargest fully-integrated steel producer in China

What this means for SKF per platform

• Bearings/ Units• Seals• Lubricants• Services• Mechatronics

CVRD World's largest Iron Ore company

Bearing supply was dominated by competitionRailway bearings is biggest demand• 35,000 wagons and 47,000+ TBUs/year

SKF value-added solution: • Joint design with MWL for an assembly of wheel/axle/TBUs

– Total cost reduction– Added safety features - less risk of derailment – Longer life - refurbishment by SKF Brazil ISC

• SKF awarded 40% share = 15,000 TBUs for 2005Next Steps : • Offering that incorporate RS services with general bearings business• COMO project in pipeline for $1,200,000 + Copperhead

Coca-Cola IMS beverage contract in Brazil

5 year contractJundiai, near Sao Paulo (second largest Coke bottling plant in the world)1.1 billion litres p.a.12 bottling channelsBearings, condition monitoring, maintenance products, training, Pdm and Lubrication services, reliability and application engineering.

Pilot IMS for Coke worldwide !

Reliability Systems key actions, 2005

•Value Propositions per priority segment•Key Account approach•Life Cycle management program LSB's

Priority SegmentsA B1. Pulp & Paper 1. Food & Beverage2. HPI 2. Cement & Mining3. Power 3. Metal Working

2005-05-26 ©SKF Slide 23 [Code] SKF Service Division

Service Division core strategies

End User Needs -TCO

Pricing DistributorConsolidation

Internet

SellValue AddedSolutions

TFO PRM IMS AEORELIABILITY SYSTEMS

Manage Our Channels And

Our Pricing

SKF PRICE LEADERSHIPGROUP CHANNEL/PRICING STRATEGY

Grow WithOur Distributor

Partners

MARKET SHARE GROWTH D/D DEVELOPMENT

Optimize Supply

Channel Efficiency

E-BUSINESS/LOGISTICS

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

Gross price list increases

AprSepMarAsia

Pacific

JanMayNorth

America

DecAprEurope

2005 Q2

2005 Q1

2004 Q4

2004 Q3

2004 Q2

2004 Q1

PRICELIST

Service Division core strategies

End User Needs -TCO

Pricing DistributorConsolidation

Internet

SellValue AddedSolutions

TFO PRM IMS AEORELIABILITY SYSTEMS

Manage Our Channels And

Our Pricing

SKF PRICE LEADERSHIPGROUP CHANNEL/PRICING STRATEGY

Grow WithOur Distributor

Partners

MARKET SHARE GROWTH D/D DEVELOPMENT

Optimize Supply

Channel Efficiency

E-BUSINESS/LOGISTICS

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

Industrial distribution development programmes

Creates a sustainable business model for SKF and Distributors

Strengthens distributor value by providing new “high skilled" entry level reliability services

Markets Distributors’ and SKF’s capabilities to increase end-users’ uptime and productivity

Distributor growth path

SKF brand associationLow High

Prod

uct

dive

rsif

icat

ion

Brg

s on

lyFu

ll M

RO

We want to promotethe Journey North East

•Maximize SKF brand•Full MRO product

range•Added value services

More value-generating programmes

SKF Distributor College

More Profits Business Calculator

SKF Documented Solutions

Service Division core strategies

End User Needs -TCO

Pricing DistributorConsolidation

Internet

SellValue AddedSolutions

TFO PRM IMS AEORELIABILITY SYSTEMS

Manage Our Channels And

Our Pricing

SKF PRICE LEADERSHIPGROUP CHANNEL/PRICING STRATEGY

Grow WithOur Distributor

Partners

MARKET SHARE GROWTH D/D DEVELOPMENT

Optimize Supply

Channel Efficiency

E-BUSINESS/LOGISTICS

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

PLATFORMSBearings Seals Mechatronics Services Lubrication Systems

Service Division e-orders

± 80% of all order lines are received electronically

All regions (except some Asian countries) have very high utilisation

Countries where e-order lines are more than 90% of the total

Sweden FinlandGermany PortugalCzech SpainHungary BelgiumPoland BrazilGreece USA

Summary

• The industrial market - new approach

• Developing markets:50% of Service Division's sales

• Reliability systems business opportunities

• Healthy core bearing business supported bysuperior logistics

• Synergy opportunities from acquired competence