SKF Group Tom Johnstone, President and CEO September 2012.

SKF Group

Tom Johnstone, President and CEO

September 2012

Slide 2© SKF Group

SKF - A truly global company

Established: 1907

Sales 2011: SEK 66,216 million, (~ USD 10 bn)

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 3© SKF Group

8

3 4

1

8 9

1

86

10

6

0

28

37

19

24

7

13

38

28

42

North America

Latin Americ

a

WesternEurope

Eastern Europe

Middle East and

Africa

Asia/Pacific

Net sales*

Average number of employees Tangible asset

% of group total SKF 2011

(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)

* Previously published shares have been restated to reflect customer delivery locations.

Slide 4© 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 5© 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 6© SKF Group

SKF Group – operating margin development

-6

-4

-2

0

2

4

6

8

10

12

14

16%

Slide 7© 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 8© SKF Group

Europe-2.3%

Asia/Pacific -8.0%

Latin America +13.8% Middle

East & Africa

+2.2%

North America +11.6%

Growth development by geography Local currencies H1 2012 vs H1 2011

Slide 9© 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 10© 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.


Main initiatives going forward

• Accelerate profitable growth

• Reduce cost and eliminate waste

• Invest in Growth


• 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


Market SEK 320 bn~ USD 50 bn




Market > SEK 40 bn~ USD 6 bn

PT


SKF platforms – managing and reducing friction/energy






Market > SEK 40 bn~ USD 6 bn

PT


SKF platforms – managing and reducing friction/energy

Addressable market > USD 100 bn

Addressable market > USD 100 bn


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


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


Investing for the future

Mysore, India

Dalian, China Jinan, China

Bengaluru, India


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.


General Bearing Corporation

•Established in 1955, headquarter in West Nyack, NY, USA.

•Four factories in China, one ball bearing factory, two tapered roller bearing factories andone precision roller factory.

•1,750 employees, 140 are located in USA and 1,610 in China.

•Sales in 2011: around USD 155 million

•Focused to serve OEM and end-user customers within the transportation markets: Truck, Trailer, Automotive, and Industrial.

•Brands:


Strategy for second brands

• Capture mid-market growth

• Lower cost manufacturing

• Global market approach

• Segment focus- PEER, Industrial segments- GBC, Auto, HD segments


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


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


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


BeyondZero portfolio - Industrial

SKF Solar Linear Actuator contributes to increasing the energy production from one solar panel which 4.4 tonnes CO2 /year

SKF Energy Monitoring Service for pump systems helped reduce 1,700 tonnes of CO2 emission per year.

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


BeyondZero portfolio - Industrial

Replacement of hydraulic lifts with two SKF CASM electric cylinders produced a CO2 savings of 4.9 tonnes per year for one machine.

SKF products and solutions for renewable energy help display CO2

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.


BeyondZero portfolio - Automotive

SKF bus door actuator saves 1,900 kg CO2/year compared using pressurized air for operating the doors.

SKF StopGo for two-wheelersReduces CO2 emissions by 5 g per kilometre.

SKF Rotor Positioning bearing reduces fuel consumption and CO2 emissions up to 15%.


BeyondZero portfolio - Automotive

SKF products and solutions for electric vehicles

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

SKF Low Friction Seal reduces friction by up to 55%, which provides a CO2 savings of over 1 g per kilometre.


Climate strategy – BeyondZero – Targets

Transport anddistribution

Raw material and components

SKF’s own operations

Customer solutions

• 100% of SKF's energy intensive suppliers certified according to ISO 50001 Energy Management Standard by 2016.

• Reduce the total annual energy use of the SKF Group by 5 % below the 2006 level by 2016. • Reduce the energy use per production output (value added) by 5% year- over-year during the period (2012-2016). • Reducing CO2 emissions/ tonne-kilometre for all transports managed by SKF Logistics Services by 30% compared to 2011 by the end of 2016.

• Quadruple (x4) the revenue from the BeyondZero portfolio from 2.5 Billion SEK in 2011 to 10 Billion SEK by 2016.


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

One SKF and SKF Care as guiding lights


SKF Group Tom Johnstone, President and CEO September 2012.

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