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The SKF Group

Learn about SKF, a global company established in 1907, with sales of SEK 61,029 million in 2010. With over 130 production sites in 32 countries and presence in over 130 countries, SKF is a leader in the automotive, industrial, energy, and heavy industries. Explore their innovative solutions and strong financial performance.

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The SKF Group

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  1. The SKF Group SKF Investor Relations April 2011

  2. SKF - A truly global company • Established: 1907 • Sales 2010: SEK 61,029 million • Employees: 44,742 • 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

  3. Net sales by customer segment 2010 Cars and light trucks Industrial distribution 14% 25% Aerospace 5% Railway Commercial transport 4% Off-highway 3% 4% Trucks 12% 3% Vehicle Service Market Two-wheeler and Electrical 5% 13% 5% Special industrial equipment 7% General industry Energy Heavy industry Industrial business

  4. (1998) (2002) SKF 2010 (44) (53) (48) Net sales (47) (46) (53) Average number of employees Tangible asset (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) (2) (0) (3) (4) (3) (4) (2) (2) (0) North America WesternEurope Eastern Europe Sweden Latin America Middle East and Africa Asia/Pacific % of group total

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

  6. Tver, Russia • Haridwar, India • Ahmedabad, India • 1 • Global Technical Centre in Shanghai New facilities opened in 2010 • 3 • factories • 9 Solution Factories - in total 17

  7. Nordic (Gothenburg) Moscow Edmonton UK France Germany Italy Tianjin Istanbul Shanghai Houston Taiwan Monterrey Mexico Pune Colombia Opened Brasil “IXION” Planned Johannesburg 17 SKF Solution Factories 2010

  8. 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

  9. SKF USA Inc. head office SKF Tver Factory, Russia SKF Jinan Factory, China LEED standard in new building constructions • New factories will be built according to the Leadership in Energy and Environmental Design (LEED) standard: • Jinan, China (tapered roller bearings) • Dalian, China (mainly medium-sized bearings) • Mysore, India (seals)

  10. SKF wind energy industry 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 “Nautilus” with segmented cage for minimized friction Automatic centralized lubrication kits for reduced maintenance cost XL Hybrid bearings with ceramic balls for superior insulation

  11. What is SKF knowledge?

  12. SKF’s platforms Bearings and units

  13. SKF’s platforms Seals

  14. SKF’s platforms Mechatronics

  15. SKF’s platforms Lubrication systems

  16. SKF’s platforms Services

  17. Acquisition 2003-2011Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Macrotech(2006) Macrotech (2009) Jaeger(2005) GLO(2008) S2M(2007) Baker(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)

  18. Cost split, % of total expenses (2010: SEK 52,438 m) • Depreciation & amortization • ~4% • ~20% Raw material (example: bars, tubes and rings) • ~50% Components (example: forged and turned rings) • Material ~34% • Other ~27% • ~30% Other (shop supplies and traded products etc.) • Employees • ~35%

  19. The SKF Group Tom Johnstone, President and CEO 19 April 2011

  20. Key points, Q1 report • Strong performance • Operating profit:SEK 2,504 m (1,702) • Operating margin: 15.0% (11.8) • Profit before tax: SEK 2,318 m (1,504) • Cash flow: SEK 372 m (32) • Strong organic sales growth in local currency: • SKF Group: +21.4% • Europe: +22% Industrial Division: +20.8% • North America: +25% Service Division: +22.5% • Asia: +22% Automotive Division: +19.8% • Latin America: +18% • Lincoln integration is going according to plan. • Outlook for Q2 for SKF Group • Demand • Significantly higher compared to Q2 2010 • Slightly higher sequentially compared to Q1 2011 • Manufacturing level • Significantly higher year over year • Relatively unchanged compared to Q1 2011

  21. Highlights Q1 2011 • New businesses: • SKF was awarded a contract, worth around SEK 500 million, with Goldwind for SKF Nautilus bearings for their new 2.5 MW direct drive turbine. • SKF signed a three-year strategic partnership, worth SEK 335 million, with Sandvik Mining and Construction. • SKF and Konkola Copper Mines Plc in Zambia signed a three-year contract, worth USD 2 million, covering a Predictive Maintenance solution. • SKF signed a strategic partnership agreement with CITIC Pacific Special Steel Co., Ltd, for cooperation in purchasing, new product and technology development and human resources development.

  22. Jinan Highlights Q1 2011 • SKF is building a new factory in Jinan, in the Shandong Province, China. The investment amounts to around SEK 590 million and the factory will initially employ about 500 people. • SKF signed an agreement to remain as the main partner to the Gothia Cup for an additional three years. • SKF will also continue to run the "Meet The World" qualifying tournaments held in around 20 countries globally.

  23. Divestments 2011 • On 1 February 2011, the forging business OMVP, in Villar Perosa, Italy to the German based company Neumayer Tekfor Holding GmbH. OMVP has about 550 employees and net sales of around EUR 100 million, mainly to SKF. • At the beginning of the second quarter the cage factory in Gothenburg to the Japanese component manufacturer Nakanishi Metal Works CO., Ltd. The factory has 130 employees and will continue to supply SKF. SKF completed two agreements in line with its strategy to divest non-core component manufacturing:

  24. Sales volume % change y-o-y 2009 2010 2011

  25. Organic growth in local currencies % change y-o-y 2010 2011 2009

  26. Growth development by geography Organic growth Q1 2011 vs Q1 2010 Europe+22% North America +25% Asia/Pacific +22% Latin America +18% Middle East & Africa +4%

  27. Growth in local currency Long-term target: 8% per annum 14.2% 26.4% -19.0% Total growth % y-o-y Organic growth Acquisitions/Divestments

  28. Components in net sales 2009 2010 2011 Percent y-o-y

  29. Operating profit SEKm 2011 2010 2009 Restructuring and one-time items

  30. Operating margin Long-term target level: 15% % 2009 2010 2011 Restructuring and one-time items

  31. Operating margin Long-term target level: 15% % 15.0 14.2* 13.8 8.0* 5.7 Restructuring and one-time items * Excluding restructuring and one-time items

  32. Operating margin per division % Service Industrial Automotive 2010 2011 2009 Excluding one-off items(eg. restructuring, impairments, capital gains)

  33. First quarter 2011

  34. Inventories as % of annual sales Long-term target level: 18% % 2009 2010 2011

  35. Cash flow, after investments before financing SEKm Cash out from acquisitions (SEKm): 2009 241 2010 6,799 2010 2011 2009

  36. Return on capital employed Long-term target: 27% % 25.6 24.0 9.1 ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.

  37. Net debt(Short-term financial assets minus loans and post-employment benefits) SEKm AB SKF, dividend paid (SEKm): 2009 Q2 1,594 2010 Q2 1,594 Proposal to the Board to be decided in April: 2011 Q2 2,277 Cash out from acquisitions (SEKm): 2009 241 2010 6,799 2010 2011 2009

  38. Debt structure Maturity years, EURm 530 446 400* 100 100 55 130 • Credit facilities: EUR 500 m 2014, whereof EUR 400* m utilized SEK 3,000 m 2017, unutilized • No financial covenants nor material adverse change clause

  39. March 2011:Outlook for the second quarter 2011 Demand compared to the second quarter last year The demand for SKF products and services is expected to be significantly higher for the Group and all geographical regions. It will be significantly higher for Industrial Division and the Service Division and slightly higher for Automotive Division. Demand compared to the first quarter 2011The demand is expected to be slightly higher for the Group, higher in Asia and Latin America, slightly higher in North America and relatively unchanged in Europe. The Industrial Division and the Service Division are expected to be slightly higher and the Automotive Division relatively unchanged. Manufacturing level The manufacturing level will be significantly higher year on year and relatively unchanged compared to the first quarter.

  40. Volume trends, regions(based on current assumptions and adjusted for seasonality)

  41. Volume trends, divisions(based on current assumptions and adjusted for seasonality)

  42. Sequential volume trend main segments Q2 2011(based on current assumptions) Net sales 2010

  43. Guidance for the second quarter 2011 • Tax level: around 30% • Financial net for the second quarter:Around SEK -175 m • Exchange rates on operating profit versus 2010 Q2: SEK -400 m • Full year: SEK -1.2 bn • Additions to PPE: Around SEK 2.3 bn for 2011 Guidance is approximate and based on current assumptions and exchange rates.

  44. Key focus areas ahead 2011 • Profit and cash flow • - manage currency and material headwinds • Manufacturing and suppliers to support growth • Growing segments and geographies • Initiatives and actions to support long term targets • Integration of Lincoln Industrial • Business Excellence and competence development One SKF and SKF Care as guiding lights

  45. 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”.

  46. Investor Relations function: Head: Marita Björk Tel: +46 31 3371994 Mobile: +46 705 181994 E-mail: marita.bjork@skf.com Investor Relations: Anna Alte Tel: +46 31 3371988 Mobile: +46 705 271988 E-mail: anna.alte@skf.com Event coordinator and secretary: Monica Svensson Tel: +46 31 3372452 Fax: +46 31 3371722 E-mail: monica.svensson@skf.com Welcome to the IR website – www.skf.com > Investors

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