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The SKF Group

Discover the key points of SKF Group's Q1 2011 report, including strong performance, profit figures, sales growth, strategic partnerships, and more. Get insights on the manufacturing level and outlook for Q2.

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The SKF Group

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

  2. 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

  3. 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.

  4. 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.

  5. 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:

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

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

  8. 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%

  9. 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

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

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

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

  13. 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

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

  15. First quarter 2011

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

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

  18. 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.

  19. 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

  20. 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

  21. 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.

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

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

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

  25. 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.

  26. 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

  27. 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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