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The SKF Group

Established in 1907, SKF is a leading global company with sales of SEK 64,575 million in 2012. With presence in over 130 countries and more than 140 production sites, SKF is a reliable provider of industrial solutions in various sectors including cars, trucks, aerospace, railway, and more. This text is in English.

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The SKF Group

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  1. The SKF Group SKF Investor Relations July 2013

  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

  3. Cars and light trucks Industrial distribution Aerospace 29% 6% Railway 4% Off-highway 4% 5% Trucks 2% 10% Two-wheelers and Electrical Vehicle Service Market 6% 12% 9% Industrial, general Energy Industrial, heavy and special Net sales by customer segment* 2012 * Previously published shares have been restated in February 2013

  4. Net sales 2012, Geographical distribution* Middle East & Africa North America Asia/Pacific Latin America Eastern Europe Sweden Western Europe * Previously published shares have been restated in February 2013

  5. (1998) (2002) % of group total SKF 2012 Net sales (44) (53) (48) Average number of employees Tangible asset (47) (46) (53) (10) (9) (12) (14) (13) (8) (14) (25) (19) (26) (13) (18) (14) (12) (5) (9) (3) (3) (6) (5) (4) (5) (12) (15) (3) (9) (3) (4) (3) (4) (2) (0) (3) (2) (2) (0) North America WesternEurope Eastern Europe Sweden Latin America Middle East and Africa Asia/Pacific

  6. Operating margin %

  7. Return on capital employed %

  8. Growth in local currencies %

  9. Long-term financial targets • 27% • Return on capital employed • 8% • Changes in sales in local currency, incl. structure • 15% • Operating margin, level

  10. 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 • Investments & Innovation • New and existing facilities • Research and development • Capital efficiency • Fixed cost reduction • Working capital efficiency • Cost reduction • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs

  11. SKF Group Vision To equip the world with SKF knowledge

  12. 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

  13. Nordic (Gothenburg) Moscow Edmonton UK Poland Rumania France Germany Spain Italy Tianjin Cleveland Istanbul Shanghai Houston Taiwan Monterrey Mexico Pune Colombia Brasil “IXION” Johannesburg Perth Opened Planned 23 SKF Solution Factories 2013

  14. SKF Solution Factory Platforms & Technology Competence Segments & Application Knowledge SKF Solution Factory Capabilities Sealing Solutions Lubrication Solutions Mechanical Services Remote Monitoring Center Bearing Service Workshop Condition Monitoring Services A & MC MaPro/CoMo Product Repair Training Center

  15. Slab continuous caster – metal industry Telescopic actuators for mould adjustment SKF ConRo Compact roll line units SKF ConRo Low roll line units SKF ConRo Top roll line units SKF DryLube Bearings and SNL Housings for roll out table SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines SKF Caster Analyst System for roll lines

  16. Wheel-loader – Construction Chassis lubrication Centralized lubrication systems Central gear Hybrid pinion units Motor hood Electromechanical actuators Wheel end • Integrated smart wheel bearing units with sensors • SKF Mudblock cassette seals

  17. Wind turbine - Energy New CRB-design with extra-high carrying capacity for wind-gearboxes. New pitch bearing design with improved corrosion protection SKF WindCon 3.0/Webcon Intranet supervised condition monitoring DRTRB-unit SKF Nautiluswith segmented cage for minimized friction Automatic centralized lubrication kits for reduced maintenance cost XL Hybrid bearings with ceramic balls for superior insulation

  18. SKF’s environmentally positive customer solutions SKF’s solutions which realize significant environmental benefits Designed for environment Applied for environment Up to 15% better fuel economy of the car Stop-start system SKF sensor bearing E2 - 30% less energy compared to a standard bearing A solution that enables improved environmental performance in a specific application A solution that is primarily designed to improve environmental performance by itself

  19. SKF energy efficient (E2) bearings Peru Industria Textil Piura 60,000 E2 deep groove ball bearing • Indonesia • Leuwijaya Textile • 30,000 E2 bearing • potential 325,000 for 3 different customers • China • Conveyors used in mining industry. 130,000 E2 bearing • India • Sangam Group

  20. What is SKF knowledge?

  21. SKF technology platforms Bearings and units

  22. SKF technology platforms Seals

  23. SKF technology platforms Mechatronics

  24. SKF technology platforms Lubrication systems

  25. SKF technology platforms Services

  26. Acquisition 2003-2013Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Baker(2007) Jaeger(2005) Macrotech(2006) Macrotech (2009) GLO(2008) S2M(2007) Vogel(2004) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) Sommers(2005) PB&A(2006) Scandrive(2003) Monitek(2006) Cirval(2008) Peer(2008) BVI(2013) GBC(2012)

  27. SKF Half-year results 2013 Tom Johnstone, President and CEO

  28. Highlights Q2 2013 • New business • 10-year contract worth SEK 900 million with Turbomeca • service contracts worth SEK 200 million in Latin America • contract for wheel hub bearing units (HBU3) to Volvo Car Corporation • Two new SKF Solution Factories • Inaugurated in Madrid, Spain and Katowice, Poland • Divestment, after quarter end • SKF divested its metallic rods business including the operations at the SKF sites in St. Vallier sur Rhône, France and Monroe, Washington, USA. Thrust main shaft bearing, one of the bearings for the ARRANO Engine of TURBOMECA Madrid, Spain Katowice, Poland

  29. Highlights Q2 2013 • Research programme • SKF and INSA Lyon started a research programme to study the behavior of lubricants under extreme conditions for aerospace. • SKF Windfarm Management Conference • SKF’s eighth SKF Windfarm Management Conference was held in Warsaw, Poland. • Asset Management Conference • SKF hosted an Asset Management Conference in Dallas, USA with more than 160 customers. • SKF Distributor College awarded its 180,000th certificate.

  30. New products - examples SKF Steering boot kits for cars and light trucks. SKF Telescopic pillars series CPMA and CPMB for medical equipment.

  31. SKF Restructuring programme – costs and expected savings The savings for the second half year 2013 will be around SEK 150 million, evenly split between the third and the fourth quarter.

  32. SKF Group – Q2 2013 • Financial performance 2013 2012 • Net sales, SEKm 16,392 17,174 • Operating profit, SEKm 1,837 2,049 • Operating margin, % 11.2 11.9 • Operating margin excl. restructuring,% 12.4 12.7 • Profit before tax, SEKm 1,627 1,774 • Cash flow, SEKm 1,147 686 • Organic sales growth in local currency: • SKF Group: -2.2% • Strategic Industries: -7.6% • Regional Sales and Service: -4.8% • Automotive: 7.7% • Key points • Sales volumes down by -1.6% y-o-y • Manufacturing relatively unchanged compared to last year • Inventories 21.6% of sales Europe: -4% North America: -1% Asia: -4% Latin America: 14%

  33. Organic sales growth in local currency % change y-o-y 2011 2012 2013

  34. Growth development by geographyOrganic growth in local currency Q2 2013 vs Q2 2012 Europe-4% North America -1% Asia/Pacific -4% Latin America 14% Middle East & Africa -3%

  35. Growth development by geographyOrganic growth in local currency YTD 2013 vs YTD 2012 Europe-7% North America -6% Asia/Pacific -5% Latin America 11% Middle East & Africa -4%

  36. Components in net sales 2013 2011 2012 Percent y-o-y

  37. Growth in local currency, including structure % y-o-y 16.3% -2.1% -3.1% Structure in 2011: 4.8% Structure in 2012: 0.4% Structure in YTD 2013: 2.0%

  38. Operating profit SEKm 2012 2011 2013 One-time items

  39. Operating margin % 2011 2012 2013 One-time items

  40. Operating margin % 14.7* 12.0* 14.5 11.9* 11.4 10.5 One-time items * Excluding one-time items

  41. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2012 2013 2011 Excluding one-off items(eg. restructuring, impairments, capital gains)

  42. Inventories as % of annual sales % 2011 2012 2013

  43. Return on capital employed One-off costs * Excluding one-off costs % 23.9* 23.6 17.2* 15.3* 16.2 13.8 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.

  44. Cash flow, after investments before financing SEKm * ** 2012 2013 2011 * SEK 1,707 million,excluding acquisitions and divestments. ** SEK -69 million, excluding acquisitions and divestments.

  45. Net debt SEKm AB SKF, dividend paid (SEKm): 2011 Q2 2,277 2012 Q2 2,504 2013 Q2 2,530 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2012 2013 2011 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  46. Debt structure, maturity years EURm 500 500 265 110 100 100 100 100 • Available credit facilities: • EUR 500 million 2017 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  47. Second quarter 2013

  48. Half year 2013 * excluding acquisitions and divestments, SEK 1,078 million (1,401).

  49. July 2013: SKF demand outlook Q3 2013 Demand compared to the third quarter 2012 The demand for SKF’s products and services is expected to be slightly higher for the Group, Asia and North America as well as for all the business areas. It is expected to be relatively unchanged for Europe and higher for Latin America. Demand compared to the second quarter 2013 The demand for SKF’s products and services is expected to be relatively unchanged for the Group, Europe, Asia and North America as well as for all the business areas. It is expected to be slightly higher for Latin America. Manufacturing Manufacturing is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.

  50. SKF demand outlook Q3 2013, regions

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