The SKF Group SKF Investor Relations April 2014. © SKF GroupSlide 1 SKF - A truly global company...

The SKF Group

SKF Investor Relations

April 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


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


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)


Operating margin as reported

%


Return on capital employed

%


Growth in local currencies

%


Long-term financial targets

20%Return on capital

employed

15%Operating

margin, level

-20

-15

-10

-5

0

5

10

15

20

07 08 09 10 11 12 130

5

10

15

07 08 09 10 11 12 13

0

5

10

15

20

25

30

07 08 09 10 11 12 13

8%Changes in sales in local currency,

incl. structure


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

© SKF Group 15 October 2013Slide 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 strategy targets:

• Increase revenue from SKF BeyondZero portfolio from SEK 2.5 bn to SEK 10 bn 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

© SKF Group

Opened

Planned

Tianjin

Taiwan

Shanghai

Pune

Istanbul

JohannesburgBrasil “IXION”

Colombia

Moscow

HoustonMonterreyMexico

Edmonton

Nordic (Gothenburg)

UK

Germany

ItalyFrance

Perth

Rumania

Cleveland Spain

PolandToronto

UrumquiThe Netherlands

Abu Dhabi

Manesar

Slide 12

27 SKF Solution Factories 2013


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


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


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


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


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


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


What is SKF knowledge?


SKF technology platforms

Bearingsand units



Seals



Mechatronic



Lubrication systems



Service


Acquisition 2003-2013Identifying 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

SKF First-quarter results 2014Tom Johnstone, President and CEO

15 April 2014

© SKF Group 15 April 2014

Highlights Q1 2014

Examples of new business

•Hindustan Aeronautics Ltd, India: customized bearings for helicopter transmission and main rotor

•Bell Helicopter Textron Inc.,USA: elastomeric bearings

•Turbogaz, Ukraina: magnetic bearings

•SCA, BillerudKorsnäs, Vattenfall, Sweden: condition monitoring solutions

•Geely Automobile, China: transmission seals

•Volkswagen, Germany: energy efficient tapered roller and ball bearings

•One of the largest cement producers major service contractin Latin America:

Slide 27

Examples of new products:

•Extended range of infrared thermometers


Awards received in Q1 2014

Customer awards

•Technical Cooperation Award, Goldwind

•Supplier of the Year Award, Varian Medical Systems

•Volvo Cars Quality Excellence (VQE) Award

•Excellent Supplier Award, Geely

•Excellent Quality Supplier Award, Hino Motors

•Supplier of the Year Award, General Motors

Slide 28

Golden Mousetrap Awards

Best Product of the Yearfor Electronics & Test, Editors of Design News


SKF Group – Q1 2014

Slide 29

Financial performance 2014 2013

Net sales, SEKm 16,734 15,152Operating profit, SEKm 2,024 1,480Operating margin, % 12.1 9.8Operating margin excl. one-time items, % 11.4 11.4Profit before tax, SEKm 1,787 1,237

Cash flow after investments before financing, SEKm -259 -892

Cash flow from operations, SEKm 314 403

Organic sales growth in local currency:

SKF Group: 5.8% Europe: 4%

Strategic Industries: 6.5% North America: 3%Regional Sales and Service: 3.0% Asia: 11%

Automotive: 8.1% Latin America: 4%

Key pointsSales volumes up by 6.2% y-o-yManufacturing higher compared to last year


Organic sales growth in local currency

Slide 30

% changey-o-y

2012 2013 2014


Organic sales growth in local currency

Slide 31

% y-o-y

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

-2.5%

-0.7%

5.8%


Growth development by geographyOrganic growth in local currency Q1 2014 vs Q1 2013

Slide 32

Europe4%

Asia/Pacific11%

Middle East& Africa

21%

LatinAmerica

4%

NorthAmerica

3%


Components in net sales

Slide 33

2012 2013 2014

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

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

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7

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

Sales in local currency

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

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

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


Operating profit as reported

Slide 34

SEKm

2012 2013 2014


Operating profit excluding one-time items

Slide 35

SEKm

2012 2013 2014


Operating margin

Slide 36

%

5.8

11.3

12.0* 11.9*

One-time items

* Excluding one-time items

12.1

11.4*

© SKF Group 15 April 2014Slide 37

Regional Salesand Service

Specialty Business

Automotive

%

2012 2013 2014

Excluding one-time items(eg. restructuring, impairments, capital gains)

Operating margin per business area

Strategic Industries


Net working capital as % of annual sales

Slide 38

%

2012 2013 2014


Return on capital employed

Slide 39

%

14.6*

7.5 8.4

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.


Cash flow, after investments before financing

Slide 40

SEKm

2012 2013 2014

Excl. acquisitions and divestments:* Q3 2012 SEK 1,707 million** Q1 2013 SEK -69 million*** Q3 2013 SEK 871 million**** Q4 2013 SEK 1,170 million

****


Net debt

Slide 41

SEKm

2012 2013 2014

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

Cash out fromacquisitions (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.


Debt structure, maturity years

Slide 42

• Available credit facilities:EUR 500 million 2017SEK 3,000 million 2016

SEK 3,000 million 2017

• No financial covenants nor material adverse change clause

200

100 100 110

500 500

850


First quarter 2014

Slide 43

SEKm 2014 2013

Net sales 16,734 15,152

Operating profit 2,024 1,480

Operating margin, % 12.1 9.8

Operating margin excl. one-time items % 11.4 11.4

Profit before taxes 1,787 1,237

Net profit 1,275 818

Basic earnings per share, SEK 2.72 1.74

Cash flow, after investments before financing -259 -892

Cash flow from operations 314 403


April 2014: SKF demand outlook Q2 2014

Slide 44

Demand compared to the second quarter 2013

The demand for SKF’s products and services is expected to be slightly higher for

the Group, North America and Asia. It is expected to be relatively unchanged for

Europe and slightly lower for Latin America. For Strategic Industries and

Automotive it is expected to be slightly higher and for Regional Sales and Service

relatively unchanged.

Demand compared to the first quarter 2014

The demand for SKF’s products and services is expected to be slightly higher for

the Group, for North America and Asia. It is expected to be relatively unchanged

for Latin America. For Strategic Industries and Automotive it is expected to be

slightly higher and for Regional Sales and Service relatively unchanged.

Manufacturing

Manufacturing is expected to be higher year over year and slightly higher

compared to the first quarter.


SKF demand outlook Q2 2014, main regions

Share of net sales 2013

Europe 42%

Asia Pacific 24%

North America 24%

Latin America 7%

Total

Q2 2014 vs Q2 2013

+/-

+

+

-

+

Slide 45

Sequential trend for Q2 2014


SKF demand outlook Q2 2014, main business areas


StrategicIndustries

29%

Regional Sales and Service

39%

Automotive 27%

Total

Q2 2014 vs Q2 2013

+

+/-

+

+

Slide 46

Sequential trend for Q2 2014


SKF sequential volume trend Q2 2014, Industries

Slide 47

5% Energy

14% Cars and light vehicles

11% Vehicle service market

6% Aerospace

4% Railway

2% Two-wheelers and Electrical

29% Industrial distribution

13% Industrial, heavy, special and off-highway

11% Industrial, general

5% Trucks



Guidance for the second quarter 2014*

Slide 48

• Tax level: around 30%

• Financial net for the second quarter:Around SEK -230 million

• Currency impact on operating profit versus 2013Q2: SEK -125 millionFull year: SEK -350 million

• Additions to PPE: Around SEK 1.6 billion for 2014

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


SKF’s priorities

Slide 49

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


Cautionary statement

Slide 50

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 SKF Investor Relations April 2014. © SKF GroupSlide 1 SKF - A truly global company...

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