SKF Group

Tore Bertilsson, Executive Vice President and CFO

September 2012

Slide 2© SKF Group

Agenda

• SKF Group overview

• Strategic direction and initiatives

• Business update

Slide 3© SKF Group

SKF - A truly global company

Established: 1907

Sales 2011: SEK 66,216 million

Employees 2011: 46,039

Production sites: around 130 in 32 countries

SKF presence: in over 130 countries

Distributors/dealers: 15,000 locations

Global certificates: ISO 14001

OHSAS 18001 certification

Slide 4© SKF Group

Net sales 2011

Asia/Pacific28%

Latin America8%

North America19%

Middle East & Africa 1%

Western Europe37%

Eastern Europe 4%

Sweden 3%

Previously published shares have been restated to reflect the new business structure from 2012.

Slide 5© SKF Group

5%

4%

4%

5%

13%8%

5%

10%

28%

3%

13%

Net sales by customer segment 2011

Aerospace

Railway

Off-highway

Trucks

Two-wheeler and Electrical

Industrial, general

Cars and light

vehicles

Industrial, heavy and

special

Vehicle Service Market

Industrial distribution

Energy

Previously published shares have been restated to reflect the new business structure from 2012.

Slide 6© SKF Group

SKF platforms

Managing and reducing friction/energy

Slide 7© SKF Group

Long-term financial targets

27%Return on

capital employed

8%Changes in sales in local currency

15%Operating

margin, level

-20

-15

-10

-5

0

5

10

15

20

0

5

10

15

05

1015202530

07 08 09 10 11

H1/12

Slide 8© SKF Group

SKF Group – operating margin development

-6

-4

-2

0

2

4

6

8

10

12

14

16%

Slide 9© SKF Group

How did we get there?

• Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital

• Manufacturing footprint in best cost countries

• Reducing working capital

• Customized solutions, value added products, technology platforms

• Diversifying growth, faster growing segments and geographies

• Acquisitions supporting growth and profitability

SKF today – more robust, more diverse

Slide 10© SKF Group

• Accelerate profitable growth- intensify the platform and industry approach- launch more new offerings – green and BZ portfolio- strengthen the service business- focus on faster growing regions/ industries- develop other brands

• Reduce cost and eliminate waste- Business Excellence throughout the Group- BCC manufcaturing and sourcing- integrated cost reduction activities (ICR)

• Invest in growth- Sales and engineering resources- Factories in growth markets- Solution factories- R&D- Acquisitions- New IT systems

Main initiatives going forward

Slide 11© SKF Group

R&D – investments and main areas

Investments

2008 +30%

2009 Same

2010 +10%

2011 +20%

Patents +30%

2012 +10%

Main areas

• Environment

• Core technologies

• New products

• Strengthen R&D activities in fast growing regions

• Strengthen links with universities and high schools

Slide 12© SKF Group

Examples of new products launched in 2012

SKF Nautilus

rangeextensions

Servo Actuator for industrial applications

Next generation SNL, SE housings

A hand-held, 18-volt,

lithium-ion grease gun

SKF SpeedSensor Unit

Integrated monotube seal

SKF Compact

Wire Steering Bearing

SKF Solar Hub

SKF Thruster Monitoring

SKF Bus Door Actuator

Slide 13© SKF Group

Investing for the future

Mysore, India

Dalian, China Jinan, China

Bengaluru, India

Slide 14© SKF Group

Acquisition strategy for profitable growth

• Acquisitions are seen as one important driver for growth and value creation.

• Lincoln integration is going well so SKF is able to make additional larger acquisitions

• SKF has the financial means and acquisition project resources in place to continue to pursue relevant acquisitions.

• Increasing activity and opportunities in M&A market

Slide 15© SKF Group

Acquisitions 2003-2012Identifying gaps and opportunities in all platforms

SealsBearingsand units

Lubrication systemsServices Mechatronics

Technologies/ Products

Geographies

Segments

SNFA (2006)

S2M (2007)

QPM (2008)

Economos (2006)

Macrotech (2006)

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)

Focus on industrial and aftermarket business.

Slide 16© SKF Group

Branding strategy – to address the market

Second brands•Strong cost focus• Peer/General/Hyatt brands

• Application specific products

• Knowledge engineering• Documented value• Cost reduction• Brand

High

Middle

Low

• Capture mid market growth - lower cost manufacturing

Slide 17© SKF Group

BeyondZeroTM

0

-

+BeyondZero

Customers:SKF BeyondZero

portfolio

Innovate and offer our customersnew technologies, products andservices with enhanced environmentalperformance characteristics.

Suppliers TransportationSKF

Manufacturing

Reduce the negative environmentalimpact from our own operations andthose of our suppliers.

Scope 2 Scope 1 Scope 3

Slide 18© SKF Group

BeyondZero portfolio – how it works

DESIGNED FOR

• Total direct CO2 savings• Total revenue

APPLIED FOR

• Total enabled CO2 savings• Total revenue

Criteria• Life cycle trade off’s• Base line comparison• CO2 / environmental savings

Slide 19© SKF Group

BeyondZero portfolio, examples

SKF ConRo reduced CO2 emissions with 1.5 tonne per unit and year.

If SKF were to equip all new motors ranging from sizes 1-50 HP with its current SKF E2 bearing range, a yearly 290,000 tonnes of CO2 emissions would be avoided.

A light commercial vehicle with four SKF Low Weight Hub Bearing Units reduces CO2 by 5.0 kg CO2 per year.

Slide 20© SKF Group

0

2

4

6

8

10

12

14

16

2010 2011 YTD 2012

%

One-time items * Excluding one-time items

14.7*

Long-term target level: 15%

14.2*

13.8 14.5 12.7*

Operating margin

12.3

Slide 21© SKF Group

SKF demand outlook Q3 2012, regions

Sequential trends for: Q2 2012 Q3 2012

Share of net sales2011*

Europe44%

Asia Pacific28%

North America

19%

Latin America

8%

Total

Q3 2012 vs Q3 2011

-

+/-

++

+

+/-

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.

Slide 22© SKF Group

5%

5%

28%

13%

12%

10%

4%

3%

13%

5%

Energy

Aerospace

Industrial distribution

Industrial, general

Industrial, heavy, special and off-highway

Vehicle service market

Railway

Two-wheelers and electrical

Cars and light vehicles

Trucks

SKF sequential demand trend Q3 2012

Share of net sales 2011*

* Previously published shares have been restated to reflect the total Group business and customer delivery locations.

Slide 23© SKF Group

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018

Debt structure, maturity years

EURm

396

100100

• Credit facilities:EUR 500 million

2017 SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

130

500

110

0

Slide 24© SKF Group

Key focus areas ahead 2012

• Managing the uncertain and different demand environment- regions and segments

• Profit and cash flow- inventory management

• Initiatives and actions to support long-term financial targets

• Continue the integration of Lincoln

• Business Excellence and competence development

• Implement the new organization for the Industrial market

Slide 25© SKF Group