The SKF Group SKF Investor Relations October 2013.

The SKF Group

SKF Investor Relations

October 2013

© SKF Group 15 October 2013Slide 2

SKF - A truly global company

Established: 1907

Sales 2012: SEK 64,575 million

Employees 2012: 46,775

Production sites: around 140 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% 23%

Vehicle aftermark

et

6%

4%4%

5%

12%9%

6%

10%

29%

2%

13%

Net sales - 2012

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


7

35

3

8 9

1

8 7

10

6

0

24

35

23

26

7

12

37

30

39

North America

Latin America

WesternEurope

Eastern Europe

Middle East and Africa

Asia/Pacific

Net salesAverage number of employees Tangible asset

% of group total SKF 2012

(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

%


Return on capital employed

%


Growth in local currencies

%

© SKF Group

Long-term financial targets

27%Return on capital

employed

8%Changes in sales in local currency,

incl. structure

15%Operating

margin, level

-20

-15

-10

-5

0

5

10

15

20

0

5

10

15

05

1015202530

07 08 09 10 1120

12

YTD13

September 2013September 2013


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 cost reduction•Working capital efficiency

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

Investments & Innovation •New and existing facilities•Research and development


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


Opened

Planned

Tianjin

Taiwan

Shanghai

Pune

Istanbul

JohannesburgBrasil “IXION”

Colombia

Moscow

HoustonMonterreyMexico

Edmonton

Nordic (Gothenburg)

UK

Germany

Italy

France

Perth

Rumania

Cleveland Spain

Poland

23 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



Mechatronics



Lubrication systems



Services


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)

SealsBearingsand units

Lubrication systemsServices Mechatronics

BVI (2013)

SKF Nine-month results 2013Tom Johnstone, President and CEO


Highlights Q3 2013

• Acquisition of Kaydon Corporation announced.

New business

• Agreements with Fiat, worth SEK 1 billion for the delivery of wheel hub bearing units.

• Agreements with Great Wall Motors in China for high pressure valve stem seals and bearing retainers. SKF and Great Wall Motors also signed a strategic partnership for developing sustainable solutions in energy efficient vechicles.

• A supply agreement with Goldwind, worth SEK 100 million for SKF Nautilus bearing units.

• Major orders from Tangshan Loco and Changchun Railway Co for wheel set bearings for high speed trains.

• Order from a Chinese customer, worth SEK 22 million for bearingsfor upgrading local coal power plants.

• An order from an European customer, worth SEK 21 million for cryogenic bearings.


• A three-year service contract, worth SEK 43 million with a major oil and gas company in Latin America.

• An agreement with Wuhan Iron & Steel Heavy Industry Group Co, Ltd (WISCO Heavy) to establish a remanufacturing centre in Wuhan, China.

• SKF opened a gearbox remanufacturing centre in Tianjin, China.

• SKF Distributor College awarded its 190,000th certificate.

Highlights Q3 2013

SKF’s factory in Dalian, China was awarded LEED Gold certification.

SKF was included in the Dow Jones Sustainability Indexes for the 14th successive year.


Kaydon Corporation

Key facts and figures - 2012

• Headquarters in Ann Arbor, Michigan U.S.

• Established 1941

Friction control 54%Friction control 54% Specialty products 23%Specialty products 23%Velocity control 23%Velocity control 23%

• USD 475 million in sales

• 2,187 employees

Ring & SealBearing


Kaydon net sales – 2012

Industries Geographies

13%

6%10%

5%3%

27%

13%

18%

5%

Automation & Robotics

PowerGeneration

Aerospace

MilitaryHeavyEquipment

MedicalEquipment

PetroleumProcessing

Other

Semicond.24%

12%2%

62%North

America

Europe

AsiaOther


New products - examples

Maintenance products:

SKF Axial excluder seal

SKF Condition Based Lubrication

Sealed SKF single row angular contact ball bearings

Reinforced all-rubber HSS seals

Oil storage station

Grid and gear coupling grease

Digital oil pressure gauge

Super precisions bearings for wood-working applications


SKF Group – Q3 2013

Financial performance 2013 2012

Net sales, SEKm 15,623 15,486Operating profit, SEKm 1,923 1,908Operating margin, % 12.3 12.3Operating margin excl. restructuring,% 12.9 12.3Profit before tax, SEKm 1,717 1,709Cash flow, SEKm 1,135 1,097

Organic sales growth in local currency:

SKF Group: 2.0%Strategic Industries: -0.9% Regional Sales and Service: 0.3% Automotive: 7.5%

Key points

Sales volumes up by 2.2% y-o-yManufacturing slightly higher compared to last yearInventories 21.3% of sales

Europe: 1%North America: -2%Asia: 5%Latin America: 9%


Organic sales growth in local currency

-10

-5

0

5

10

15

20

25

20132011 2012

% change y-o-y


Europe1%

Asia/Pacific 5%

Latin America

9%Middle East

& Africa 8%

NorthAmerica

-2%

Growth development by geography Organic growth in local currency Q3 2013 vs Q3 2012


Europe-4%

Asia/Pacific -3%

Latin America

10%Middle East

& Africa 0%

NorthAmerica

-4%

Growth development by geography Organic growth in local currency YTD 2013 vs YTD 2012


Components in net sales

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

Volume 20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2

Structure 5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6 1.1

Price/mix 1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2

Sales in local currency

26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1

Currency -10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2

Net sales 15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9

2011 2012 2013


-10

-5

0

5

10

15

20

2011 2012 YTD 2013

Growth in local currency, including structure

% y-o-y

Structure in 2011: 4.8%Structure in 2012: 0.4%Structure in YTD 2013: 1.8%

-1.2%

16.3%

-2.1%


Operating profit

0

300

600

900

1 200

1 500

1 800

2 100

2 400

2 700

SEKm

2011

One-time items

2012 2013


%

0

2

4

6

8

10

12

14

16

2011

One-time items

2012 2013

Operating margin


0

2

4

6

8

10

12

14

16

2011 2012 YTD 2013

%

One-time items * Excluding one-time items

14.7*

12.2*

11.1

14.5 12.0*

Operating margin

11.4


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2011 2012 2013

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


18

19

20

21

22

23

24

25

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Inventories as % of annual sales

%

2011 2012 2013


Return on capital employed

0

5

10

15

20

25

30

2011 2012 YTD 2013

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.

%

16.213.5

23.617.2*

15.2*

23.9*

One-off costs

* Excluding one-off costs


Cash flow, after investments before financing

-1 000

-500

0

500

1 000

1 500

2 000

2 500SEKm

2011 2012 2013

* SEK 1,707 million, excluding acquisitions and divestments.** SEK -69 million, excluding acquisitions and divestments.*** SEK 871 million, excluding acquisitions and divestments.

*

**

***


Net debt

-20 000

-18 000

-16 000

-14 000

-12 000

-10 000

-8 000

-6 000

-4 000

-2 000

0

SEKm

AB SKF, dividend paid (SEKm):2011 Q2 2,2772012 Q2 2,5042013 Q2 2,530

2011 2012 2013

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

Cash out fromacquisitions (SEKm):

2012 Q3 8292013 Q1 823


0

100

200

300

400

500

600

2013 2014 2015 2016 2017 2018 2019 2020

EURm

265

100100100

500

110

500

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

• No financial covenants nor material adverse change clause

Debt structure, maturity years

100


SEKm 2013 2012

Net sales 15,623 15,486

Operating profit 1,923 1,908

Operating margin, % 12.3 12.3

Operating margin excl. one-offs, % 12.9 12.3

Profit before taxes 1,717 1,709

Net profit 1,165 1,251

Basic earnings per share, SEK 2.47 2.67

Cash flow, after investments before financing 1,135 1,097

Third quarter 2013


SEKm 2013 2012

Net sales 47,167 49,591

Operating profit 5,240 6,093

Operating margin, % 11.1 12.3

Operating margin excl. one-offs, % 12.2 12.6

Profit before taxes 4,581 5,439

Net profit 3,087 3,821

Basic earnings per share, SEK 6.57 8.11

Cash flow, after investments before financing 1,390* 2,479*

Nine-month 2013

* excluding acquisitions and divestments, SEK 1,947 million (3,112).


October 2013: SKF demand outlook Q4 2013

Demand compared to the fourth quarter 2012The demand for SKF’s products and services is expected to be slightly higher for the Group, Asia and Europe and relatively unchanged for North America and Latin America. It is expected to be slightly higher for Strategic Industries and Regional Sales and Service and higher for Automotive.

Demand compared to the third quarter 2013The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe, North America and Latin America as well as for all the business areas. It is expected to be slightly higher for Asia.

Manufacturing Manufacturing is expected to be higher year over year and relatively unchanged compared to the third quarter.


Share of net sales2012

Europe 43%

Asia Pacific 24%

North America 23%

Latin America 7%

Total

Q4 2013 vs Q4 2012

+

+

+/-

+/-

+

Sequential trend for Q4 2013

SKF demand outlook Q4 2013, regions


Sequential trend for Q4 2013

Share of net sales2012

Strategic Industries

31%

Regional Sales and Service

39%

Automotive 27%

Total

Q4 2013 vs Q4 2012

+

+

++

+

SKF demand outlook Q4 2013, business areas


6%

5%

4%

2%

29%

13%

13%

12%

10%

6%

Aerospace

Trucks

Railway

Two-wheelers and electrical

Industrial distribution

Industrial, heavy, special and off-highway

Cars and light vehicles

Industrial, general

Vehicle after market

Energy

Share of net sales 2012

SKF sequential volume trend Q4 2013, main segments


Guidance for the fourth quarter 2013*

• Tax level: a little above 30%

• Financial net for the fourth quarter:Around SEK 210 million excluding Kaydon acquisition

• Currency impact on operating profit versus 2012Q4: SEK 120 millionFull year: SEK 630 million

• Additions to PPE: Around SEK 1.7 billion for 2013

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


Key focus areas 2013

• Managing the uncertain and different demand environment

- Profit and cash flow

• Initiatives and actions to support long-term financial targets - New factories in Mysore and Bengaluru in India

- New warehouse in Shanghai, China

- SKF Campus in Shanghai, China, including:‣ New factory for automotive‣ Global Technical Centre China‣ SKF Solution Factory‣ SKF College

- Integration of new acquisitions, GBC and BVI

- Cost reduction and efficiency programme

- New IT systems

• Business Excellence and competence development

One SKF and SKF Care as guiding lights


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 cost reduction• Working capital efficiency

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

Investments & Innovation • New and existing facilities• Research and development


Cost reduction – specific programme 2012-2015

Main activities:

• Consolidation of manufacturing- merger between sites- transfer to faster growing markets with more local production

• Optimization and productivity improvements- in the manufacturing and demand chain processes- in administration and support functions

• Reduction in purchasing cost- mainly through standardization and rationalization

of the supplier base.

Reduction of annual cost by SEK 3 billion by the end of 2015

- Total cost for the programme around SEK 1.5 billion

- 2,500 people impacted,


Cautionary statement

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 October 2013.

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Transcript of The SKF Group SKF Investor Relations October 2013.