the skf group

The SKF Group

SKF Investor Relations

October 2014

© SKF Group Slide 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

15 October 2014


7%3%

35%

5%

3%

24% 24%

Vehicle aftermark

et

6%4%3%

5%

11%10%

5%

11%

29%

2%

14%

Net sales - 2013

Aerospace Railway

Off-highwayTrucks

Two-wheelers and Electrical

Industrial, general

Cars and light

trucks

Industrial, heavy and

special

Industrial distributio

n

Energy

9%

Asia/Pacific

Latin America

North America

Middle East & Africa

Western Europe

Eastern Europe

Sweden

* Previously published shares have been restated in February 2013

15 October 2014


North America

Latin America

WesternEurope

Eastern Europe

Middle East and Africa

Asia/Pacific

Net salesAverage number of employees Tangible asset

% of group total SKF 2013

(18)

(8)(13)

(26)(13)

(14)

(2002) (1998)

(25)(14)(19)

(10)(12) (9)

Sweden

(4) (4) (3)

(5)(12)(15)(3) (9) (3)

(2) (2) (0)

(47)(46)(53)

(6) (5) (4)

(5)(14)(12)(3) (9) (3)

(3) (2) (0)

(48)(44)(53)

15 October 2014


Operating margin as reported

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 October 2014


Return on capital employed

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 October 2014


Growth in local currencies

-25

-20

-15

-10

-5

0

5

10

15

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

15 October 2014


Financial targets

15%Operatingmargin

-20

-15

-10

-5

0

5

10

15

20

0

5

10

15

07 08 09 10 11 12 13

YTD 14

05

1015202530

07 08 09 10 11 12 13 14-09-30

8%Changes in sales in local currency

incl. structure

One-time items

20%Return on capital

employed

One-time items for the individual year

15 October 2014


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

Capital efficiency• Fixed capital• Net working capital

Cost reduction• Business Excellence• Consolidation of manufacturing• Optimization and productivity improvements• Reduction in purchasing costs

Investments & Innovation • New and existing facilities• Research and development• IT systems and mobility

15 October 2014

© SKF Group 15 July 2014Slide 10

To equip the worldwith SKF knowledge

SKF Group Vision


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

15 October 2014

© SKF Group

28 SKF Solution Factory – October 2014

Slide 12

Taiwan TaichungTurkey IstanbulUK LutonUSA ClevelandUSA Houston

Poland KatowiceRomania BucharestRussia MoscowUnited Arab Emirats Abu DhabiSouth Africa WitfieldSpain MadridSweden Gothenburg

France MontignyGermany SchweinfurtIndia PuneIndia ManesarItaly TurinMexico MonterreyNetherlands RidderkerkNetherlands Nieuwegein

Australia PerthBrazil CajamarCanada EdmontonCanada TorontoColumbia BogotaChina ShanghaiChina TianjinChina Urumqi

15 October 2014


SKF Solution Factory

Segments & Application KnowledgePlatforms & Technology Competence

Capabilities

Sealing Solutions Mechanical Services Lubrication Solutions

Training Center

Bearing Service WorkshopCondition Monitoring ServicesRemote Monitoring Center

MaPro/CoMo Product Repair A & MC

SKFSolution Factory

15 October 2014


Slab continuous caster – metal industry

Telescopic actuators for mould adjustment

SKF DryLube Bearings and SNL Housings for roll out table

SKF ConRo Top roll line units

SKF ConRo Low roll line units

SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines

SKF ConRo Compact roll line units

SKF Caster Analyst System for roll lines

15 October 2014


Wheel-loader – Construction

Central gearHybrid pinion units

Wheel end• Integrated smart wheel bearing units with sensors• SKF Mudblock cassette seals

Motor hoodElectromechanical actuators

Chassis lubricationCentralized lubrication systems

15 October 2014


New pitch bearingdesign with improvedcorrosion protection

DRTRB-unit SKF Nautilus with segmented cagefor minimized friction

New CRB-design withextra-high carrying capacityfor wind-gearboxes.

XL Hybrid bearingswith ceramic ballsfor superior insulation

SKF WindCon 3.0/WebconIntranet supervisedcondition monitoring

Automatic centralizedlubrication kits for reduced maintenance cost

Wind turbine - Energy

15 October 2014


SKF’s environmentally positive customer solutions

Designed for environment

Designed for environment

A solution that is primarily designed to improve environmental performance by itself

E2 - 30% less energy compared to a standard bearing

SKF’s solutions which realize significant environmental benefits

Applied for environment

Applied for environment

A solution that enables improved environmental performance in a specific application

SKF sensor bearing

Stop-start system

Up to 15% better fuel economy of the car

15 October 2014


SKF energy efficient (E2) bearings

PeruIndustria Textil Piura• 60,000 E2 deep

groove ball bearing

IndiaSangam Group

ChinaConveyors used in mining industry. 130,000 E2 bearing

IndonesiaLeuwijaya Textile• 30,000 E2 bearing• potential 325,000 for

3 different customers

15 October 2014


What is SKF knowledge?

15 October 2014


SKF technology platforms

Bearingsand units

15 October 2014



Seals

15 October 2014



Mechatronic

15 October 2014



Lubrication systems

15 October 2014



Service

15 October 2014


Acquisition 2003-2014Identifying gaps and opportunities in all platforms

Products

Technologies

Geographies

Industries

SNFA (2006)

S2M (2007)

QPM (2008)

Economos (2006)

Macrotech (2006)

Macrotech (2009)

Baker (2007)

PMCI (2007)

PB&A (2006)

Monitek (2006)

Safematic (2006)

Vogel (2004)

ALS (2007)

Sommers (2005)

ABBA (2007)

Jaeger (2005)

Peer (2008)

GLO (2008)

TCM (2003)

Scandrive (2003)

Cirval (2008)

Lincoln Industrial (2010)

GBC (2012)

BVI (2013)

Kaydon (2013)

SealsBearingsand units

Lubrication systemsServices Mechatronics

15 October 2014

GLOi (2014)

Hofmann Engineering North America (2014)

SKF Nine-month results 2014Tom Johnstone, President and CEO

15 October 2014

© SKF Group

Alrik Danielson, new President and CEO from 1 January 2015

B.Sc in 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 Höganäs AB, President and CEO

Slide 27

© SKF Group

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

Slide 28

© SKF Group

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

Slide 29

© SKF Group

Customer awards

Slide 30

• 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

© SKF Group

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.

Slide 31

© SKF Group

Examples of new products and solutions

SKF Machine Tool Observer MTx

SKF Static Motor Analyzer Baker AWA-IV

Compact tapered roller bearing unit for heavy freight

Tapered roller bearing

unit for passenger railway applications

SKF Multilog On-line System IMx-M

SKF Multilog Online System IMx-B

SKF Mudblock cassette

seals, MUD 11

PuraBreeze 100

http://mediafinder.skf.net/MediaFinder/

© SKF Group

SKF Group – Q3 2014

Slide 33

Financial performance (SEKm) 2014 2013

Net sales 17,787 15,623Operating profit 2,073 1,923Operating margin, % 11.7 12.3Operating margin excl. one-time items, % 11.8 12.9Profit before tax 1,827 1,717Basic earnings per share, SEK 3.01 2.47Cash flow after investments before financing excl. EU payment 1,476 1,135Cash flow after investments before financing 1,476 1,135

Organic sales growth in local currency:

SKF Group 3.3% Europe 0%

Strategic Industries 9.1% North America 3%Regional Sales and Service 0.8% Asia 8%

Automotive -0.5% Latin America 0%Middle East and Africa 7%

Key pointsSales volumes up by 1.9% y-o-y.

Manufacturing was relatively unchanged compared to last year.

© SKF Group

SKF Group – Nine month 2014

Slide 34

Financial performance (SEKm) 2014 2013

Net sales 52,476 47,167Operating profit 6,193 5,240Operating margin, % 11.8 11.1Operating margin excl. one-time items, % 11.8 12.2Profit before tax 5,375 4,581Basic earnings per share, SEK 8.27 6.57Cash flow after investments before financing excl. EU payment 2,640 1,390Cash flow after investments before financing -185 1,390

Organic sales growth in local currency:

SKF Group 4.6% Europe 2%

Strategic Industries 8.7% North America 3%Regional Sales and Service 1.7% Asia 11%

Automotive 2.8% Latin America 1%Middle East and Africa 14%

Key pointsSales volumes up by 3.8% y-o-y.

Manufacturing was slightly higher compared to last year.

© SKF Group

Organic sales growth in local currency

Slide 35

-10

-8

-6

-4

-2

0

2

4

6

8

% changey-o-y

2012 2013 2014

© SKF Group

Organic sales growth in local currency

Slide 36

2012 2013 YTD 2014-4

-2

0

2

4

6

% y-o-y

Structure in 2012: 0.4%Structure in 2013: 2.5%Structure in 2014: 4.7%

-2.5%

-0.7%

4.5%

© SKF Group

Sales development by geographyOrganic growth in local currency Q3 2014 vs Q3 2013

Slide 37

Europe0%

Asia/Pacific8%

Middle East& Africa

7%

LatinAmerica

0%

NorthAmerica

3%

© SKF Group

Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013

Slide 38

Europe2%

Asia/Pacific11%

Middle East& Africa

14%

LatinAmerica

1%

NorthAmerica

3%

© SKF Group

Components in net sales

Slide 39

2012 2013 2014

Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4

Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3

Sales in local currency

1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4 8.6

Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3

Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9

© SKF Group

Operating profit as reported

Slide 40

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500SEKm

2012 2013 2014

© SKF Group

Operating profit excluding one-time items

Slide 41

0

500

1000

1500

2000

2500SEKm

2012 2013 2014

© SKF Group

Operating margin

Slide 42

2012 2013 YTD 20140

2

4

6

8

10

12

14

16

%

5.8

11.3

12.0* 11.9*

One-time items

* Excluding one-time items

11.8


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-3

0

3

6

9

12

15

18

Regional Salesand Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area as reported

Strategic Industries


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-3

0

3

6

9

12

15

18

Regional Salesand Service

Specialty Business

Automotive

%

2012 2013 2014

Operating margin per business area excl. one-time items

Strategic Industries

© SKF Group

SKF’s programme to improve efficiency and reduce cost

Slide 45

Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Q3/14 Total

Cost taken 200 250 190 0 50 490 0 100 20 810

People affected 530 410 320 0 130 860 0 170 30 1,590

Q1/13 Q2/13 Q3/13 Q4/13 2013 Q1/14 Q2/14 Q3/14 2014

Restructuring 15 35 75 75 200 70 50 10 130

S&A 50 50 50 50 200 0 0 0 0

Purchasing 100 100 100 100 400 60 100 100 260

Total 165 185 225 225 800 130 150 110 390

Restructuring, SEKm:

Realized gross savings from total programme, SEKm:

Full year gross saving 150 100 80 0 40 220 0 100 5 475

Giving future gross savings, SEKm:

vs 2012 vs 2013

Note: Run rate Q3 2014 SEK 1,340 million vs 2012.

© SKF Group

Operating profit bridge, Q3 2014

Slide 46

0

500

1000

1500

2000

2500

3000

+301,923+165 2,073

+112+110 +65 +100 -432

SEKm

Q3 2013 Q3 2014Volumes excl.

Specialty

Business

Specialty

Business

Savings One-time items

Currencies Other* Price/mix

* R&D, S&A, IT, inflation etc.

© SKF Group

Operating profit bridge, nine month 2014

Slide 47

0

1000

2000

3000

4000

5000

6000

7000

8000

+4305,240

+225 6,193+352+390

+505 -120 -829

SEKm

Q1-Q3 2013

Q1-Q3 2014

Volumes excl.

Specialty

Business

Specialty

Business

Savings One-time items

Currencies Other* Price/mix

* R&D, S&A, IT, inflation etc.

© SKF Group

Net working capital as % of annual sales

Slide 48

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q325

26

27

28

29

30

31

32

33

34

35

%

2012 2013 2014

Target: 27%

© SKF Group

Return on capital employed

Slide 49

2012 2013 419120

5

10

15

20

%

8.57.5

16.2

17.1*

15.1*

One-time items * Excluding one-time items

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.

13.9*

© SKF Group

-7,000

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

Cash flow, after investments before financing

Slide 50

SEKm

2012 2013 2014

Excl. acq. and div.: 1) Q3 2012 SEK 1,707 million2) Q1 2013 SEK -69 million

3) Q3 2013 SEK 871 million4) Q4 2013 SEK 1,170 million

Excl. EU payment 5) Q2 2014 SEK 1,423 million

4) 5)1)

3)

2)

© SKF Group

Net debt

Slide 51

-35,000

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0SEKm

2012 2013 2014

AB SKF, dividend paid (SEKm):2012 Q2 2,5042013 Q2 2,5302014 Q2 2,530

Cash out from majoracquisitions (SEKm):

2012 Q3 8292013 Q1 8232013 Q4 7,900

Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

EU payment (SEKm):

2014 Q2 2,825

© SKF Group

Debt structure, maturity years

Slide 52

2015 2016 2017 2018 2019 2020 20210

100

200

300

400

500

600

700

800

900

EURm

• Available credit facilities:EUR 500 million 2019SEK 3,000 million 2016

EUR 150 million 2017

• No financial covenants nor material adverse change clause

200

100 100 110

500 500

850

© SKF Group

October 2014: SKF demand outlook Q4 2014

Slide 53

Demand compared to the fourth quarter 2013The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North

America and slightly lower for Latin America. It is expected to be slightly higher for Strategic Industries, relatively unchanged for Regional Sales

and Service and slightly lower for Automotive.

Demand compared to the third quarter 2014The demand for SKF’s products and services are expected to be relatively unchanged for the Group and for Europe, slightly higher for Asia and North America and slightly lower for Latin America. It is expected to be relatively unchanged for Strategic Industries, slightly higher for Regional Sales and

Service and slightly lower for Automotive.

ManufacturingManufacturing is expected to be slightly lower year over year and

compared to the third quarter.

© SKF Group

SKF demand outlook Q4 2014, main regions

Share of net sales 2013

Europe 42%

Asia Pacific 24%

North America 24%

Latin America 7%

Total

Q4 2014 vs Q4 2013

+/-

+

+

-

+/-

Slide 54

Sequential trend for Q4 2014

© SKF Group

SKF demand outlook Q4 2014, main business areas

Share of net sales 2013

StrategicIndustries

29%

Regional Sales and Service

39%

Automotive 27%

Total

Q4 2014 vs Q4 2013

+

+/-

-

+/-

Slide 55

Sequential trend for Q4 2014

© SKF Group

SKF sequential volume trend Q4 2014, Industries

Slide 56

29% Industrial distribution

6% Aerospace

13% Industrial, heavy, special and off-highway

11% Industrial, general

5% Energy

4% Railway

2% Two-wheelers and Electrical

14% Cars and light vehicles

11% Vehicle service market

5% Trucks

Share of net sales

2013

© SKF Group

Guidance for the fourth quarter 2014*

Slide 57

• Tax level: < 30%

• Financial net: around SEK -220 million

• Currency impact on operating profit vs 2013Q4: SEK +230 million

Full year: SEK +110 million

• Additions to PPE: around SEK 1.7 billion for 2014

* Guidance is approximate and based on current assumptions and exchange rates.

© SKF Group

SKF’s priorities

Slide 58

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

Cost reduction• Business Excellence

• Consolidation of manufacturing• Optimization and productivity

improvements• Reduction in purchasing costs

Capital efficiency• Fixed capital

• Net working capital

© SKF Group

Cautionary statement

Slide 59

This presentation contains forward-looking statements that are based on the current expectations of the management of SKF.

Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions, fluctuations in exchange rates and other factors mentioned in SKF's latest annual report (available on www.skf.com) under the Administration Report; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.


Welcome to the IR website – www.skf.com > Investors

Investor Relations function:

Head:Marita BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]

Investor Relations:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]

Event and road shows coordinator:Helena KarlssonTel: +46 31 3372142Mobile: +46 705 642142E-mail: [email protected]

the skf group

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