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SKF Nine-month results 2012

SKF Nine-month results 2012. Tom Johnstone, President and CEO 17 October 2012. Strong performance in a challenging market. Weaker sales during the quarter, impacted by overall economy Significantly lower manufacturing and inventories reduced Good operating margin Strong cash flow

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SKF Nine-month results 2012

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  1. SKF Nine-month results 2012 Tom Johnstone, President and CEO 17 October 2012

  2. Strong performance in a challenging market Weaker sales during the quarter, impacted by overall economy Significantly lower manufacturing and inventories reduced Good operating margin Strong cash flow Further investments to support long-term growth and profitability

  3. Highlights Q3 2012 • Acquisition and divestments completed • - acquisition of General Bearing Corporation (GBC) • - divestment of the SKF distributor businesses in Australia and New Zealand • New businesses • - magnetic bearings to two new major gas projects in Australia • - five-year contract with LKAB for maintenance services • - third strategic partnership agreement with Baosteel Group Corporation • - SKF Bus Door Actuator to Volvo Buses • - SKF’s bonded piston seals to Mazda Motor Corporation • Three new SKF Solution Factories • -USA, Romania and Italy • SKF Distributor College-awarded its 160,000th certificate

  4. Highlights Q3 2012 • SKF celebrated 100 years of business in China • - inaugurated a new bearing and truck hub unit factory in Jinan • - broke ground on a new regional distribution centre in Shanghai • - announced the establishment of a new SKF Campus in Jiading, Shanghai, containing a new factory for automotive and the Global Technical Centre China, SKF Solution Factory and SKF College • Debt structure • - new eurobond of 500m with maturity 2019 • - revolving credit facility of EUR 500m extended to 2017 • Dow Jones Sustainability Indexes and FTSE4Good • - member of DJSI indexes for the 13th successive year - included for the 12th successive year in the FTSE4Good Index Series

  5. Device for monitoring freight car mileage and maintenance history Self powered wireless sensor for railway New range of freight bearings, tapered roller bearing units New products Q3 2012 • SKF ChainLube oil projection system for food processing New temperature monitoring system for railway New low friction bearing seal for railway

  6. SKF Group – Q3 2012 • Financial performance Q3 2012 Q3 2011 • Net sales, SEKm 15,486 16,545 • Operating profit, SEKm 1,913 2,479 • Operating margin, % 12.4 15.0 • Profit before tax, SEKm 1,734 2,345 • Cash flow, SEKm 1,097 1,323 • Organic sales growth in local currency: • SKF Group: -4.5% • Industrial market, Strategic Industries: -5.6% • Regional Sales and Service: -4.7% • Automotive: -3.5% • Key points • Sales volumes down by 5.0% y-o-y • Manufacturing significantly lower y-o-y • Inventories down to 20% of sales Europe: -7% North America: +5% Asia: -11% Latin America: +8%

  7. Organic sales growth in local currency % change y-o-y 2010 2011 2012

  8. Growth development by geographyOrganic growth in local currency Q3 2012 vs Q3 2011 Europe-7% North America 5% Asia/Pacific -11% Latin America 8% Middle East & Africa -4%

  9. Growth development by geographyOrganic growth in local currency YTD 2012 vs YTD 2011 Europe-4% North America 8% Asia/Pacific -9% Latin America 12% Middle East & Africa 0%

  10. Components in net sales 2010 2011 2012 Percent y-o-y

  11. Growth in local currency, including structure % y-o-y 16.3% 14.2% -1.4% Structure in 2011: 4.8% Structure in 2012: 0.2%

  12. Operating profit SEKm 2012 2011 2010 One-time items

  13. Operating margin % 2010 2011 2012 One-time items

  14. Operating margin % 14.7* 14.2* 12.6* 14.5 13.8 12.3 One-time items * Excluding one-time items

  15. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2011 2012 2010 Excluding one-off items(eg. restructuring, impairments, capital gains)

  16. Third quarter 2012

  17. Nine month 2012

  18. Inventories as % of annual sales % 2010 2011 2012

  19. Return on capital employed % 24.0 23.6 18.4 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.

  20. Cash flow, after investments before financing SEKm ** * 2011 2012 2010 * SEK 798 million,excluding SEK 6,799 million for the acquisition of Lincoln. ** SEK 1,707 million,excluding acquisitions and divestments.

  21. Net debt SEKm AB SKF, dividend paid (SEKm): 2010 Q2 1,594 2011 Q2 2,277 2012 Q2 2,504 2011 2012 2010 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  22. Debt structure on 30 September,maturity years EURm 500 500 396 130 110 100 100 0 • Available credit facilities: • EUR 500 million 2017 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  23. October 2012: SKF demand outlook Q4 2012 • Demand compared to the fourth quarter last year • The demand for SKF’s products and services is expected to be lower for the Group and for Europe. For Asia it is expected to be slightly lower and for North America and Latin America relatively unchanged. The demand is expected to be lower for Industrial Strategic Industries and Industrial Regional Sales and Service and relatively unchanged for Automotive. • Demand compared to the third quarter 2012 • The demand for SKF’s products and services is expected to be slightly lower for the Group, for all the business areas and for Europe, Asia and North America. For Latin America demand is expected to be relatively unchanged. • Manufacturing • Manufacturing is expected to be lower year on year and slightly lower compared to third quarter.

  24. SKF demand outlook Q4 2012, regions(based on current assumptions) * Previously published shares have been restated to reflect the total Group business and customer delivery locations.

  25. SKF demand outlook Q4 2012, business areas(based on current assumptions)

  26. SKF sequential volume trend Q4 2012, main segments(based on current assumptions) Share of net sales 2011* * Previously published shares have been restated to reflect the total Group business and customer delivery locations.

  27. Guidance for the fourth quarter 2012 • Tax level: around 30% • Financial net for the fourth quarter:Around SEK 200 million • Exchange rates on operating profit versus 2011 Q4: SEK -50 million • Full year: SEK 200 million • Additions to PPE: Around SEK 2.0 billion for 2012 Guidance is approximate and based on current assumptions and exchange rates

  28. 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

  29. Long-term financial targets 15% Operating margin, level 8% Annual sales growth in local currencies 27% Return on capital employed

  30. 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

  31. 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”.

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