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SKF Year-End Results 2014

This report highlights SKF's new business examples, customer awards, and new technologies, products, and solutions in 2014. It also presents sales volumes, organic growth, operating profit, return on capital employed, and cash flow.

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SKF Year-End Results 2014

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  1. SKF Year-end results 2014Alrik Danielson, President and CEO 28 January 2015

  2. Examples of new business in Q4 2014 • GE Aviation and Safran Group, Mainshaft and gearbox (Snecma & Hispano-Suiza) bearings • Chongqing Gearbox Co., Ltd, China Bearing sets • Andritz Hydro, Germany Special bearing and sealing solution • Mazda, MexicoLow-frictionwheelbearingunits • Daimler, Germany Wheel hubbearingunits • Jiangsu Jintongling Fluid Machinery Co., Ltd, High-speed permanent China magnetic motor unit solutions

  3. Examples of new business in Q1 – Q3 2014 • Hindustan Aeronautics Ltd, India Customized bearings for helicopter transmission and main rotor • Bell Helicopter Textron Inc.,USA Elastomeric bearings • Turbogaz, UkrainaMagnetic bearings • SCA, BillerudKorsnäs, Condition monitoring solutionsVattenfall, Sweden • Geely Automobile, ChinaTransmission seals • Volkswagen, GermanyEnergy efficient tapered roller and ball bearings • Envision Energy, China Strategic long-term partnership

  4. Examples of new business in Q1 – Q3 2014 • DongfangElectric New Energy, China Main shaft bearings equipment • Aurizon, Australia Service contract • Doosan Heavy Industries and SKF Supergrip Bolts Construction, South Korea and SKF Nautilus bearing • HSD SpA, Italy Super precision bearings and engineering support • Tesla Motors, USABearingfor the gearbox, e-motor and wheels • Volvo Cars, Sweden Wheel hubbearingunits • Scania, Sweden Wheel bearingunits and highpressurevalvestemseals

  5. Customer awards Q4 2014 • Best supplieraward – KirloskarPneumatic Company Ltd., India • Best supplieraward – Nanjing Gearbox Company, China • Top runner-up ’Best Vendor’ – Tata Steel, India • Winner ’Cloud’ category – Software AG Innovation Awards • SupplierQualityExcellenceawards 2014 – General Motors, USA • Quality Silver Award 2014 – Bajaj Auto Limited, India

  6. Examplesof new technologies, products and solutions 2014 SKF Mudblockcassetteseals, MUD 11 SKF Wireless Machine Condition Sensor SKF Gear Bearing Unit SKF Wireless MicroVibe Compact tapered roller bearing unit for heavy freight Tapered roller bearing unit for passenger railway applications Electric grease transfer pump SKF Oil Injection Sets - THKI series SKF @ptitude Connect SKF Tachometer Floating piston PuraBreeze 100

  7. SKF Group – Q4 2014 Keypoints Sales volumes up by 1.8% y-o-y. Manufacturing wasrelativelyunchangedcompared to last year.

  8. SKF Group – 2014 Keypoints Sales volumes up by 3.3% y-o-y. Manufacturing wasslightlyhighercompared to last year.

  9. Organic sales growth in local currency % change y-o-y 2012 2013 2014

  10. Organic sales growth in local currency % y-o-y 3.9% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 3.7%

  11. Sales development by geographyOrganic growth in local currency Q4 2014 vs Q4 2013 Europe 1% North America 2% Asia/Pacific 8% Latin America 4% Middle East & Africa -5%

  12. Sales development by geographyOrganic growth in local currency 2014 vs 2013 Europe 1% North America 3% Asia/Pacific 10% Latin America 1% Middle East & Africa 9%

  13. Components in net sales

  14. Operating profit as reported SEKm 2012 2013 2014

  15. Operating profit excluding one-time items SEKm 2012 2013 2014

  16. Operating margin One-time items * Excludingone-timeitems % 12.0* 11.7* 11.9* 11.3 11.0 5.8

  17. Operating margin per business area as reported % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  18. Operating margin per business area excl. one-time items % Regional Salesand Service Specialty Business Strategic Industries Automotive 2012 2013 2014

  19. Operating profit bridge, Q4 2014 excl. One-timeitems SEKm +300 -398 +110 +23 +2 078 +165 +75 +1 803 -1 547 Q4 2013 Volumes excl. Specialty Business Price/mix excl. Specialty Business Specialty Business Savings Currencies Other* Q4 2014 * R&D, S&A, IT, inflation etc. One-timeitems 2013: - 3 350 2014: -470

  20. Operating profit bridge, 2014 excl. One-timeitems SEKm +180 -1 227 +500 +375 +390 +8 291 +505 +7 568 2013 Volume excl. Specialty Business Price/mix excl. Specialty Business Savings Other* 2014 Specialty Business Currencies * R&D, S&A, IT, inflation etc. One-timeitems 2013: - 3 875 2014: -490

  21. Net working capital as % of annual sales Target: 27% % 2012 2013 2014

  22. Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 14.8* 16.2 13.9 7.5 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.

  23. Cash flow, after investments before financing SEKm 1) 5) 4) 3) 2) 2012 2013 2014 Excl. acq. and div.: 1) Q3 2012 SEK 1 707 million 2) Q1 2013 SEK -69 million 3) Q3 2013 SEK 871 million 4) Q4 2013 SEK 1 170 million Excl. EU payment 5) Q2 2014 SEK 1 423 million

  24. Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2 504 2013 Q2 2 530 2014 Q2 2 530 Cash out from major acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7 900 EU payment (SEKm): 2014 Q22 825 2012 2013 2014 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  25. Debt structure, maturity years 850 500 500 200 110 100 100 • Availablecreditfacilities: • EUR 500 million 2019 • SEK 3 000 million 2016 • EUR 150 million 2017 • No financialcovenants nor material adversechangeclause

  26. January 2015: SKF demand outlook Q1 2015 Demand compared to the first quarter 2014 The demand for SKF’s products and services are expected to be slightly higher for the Group, higher for Asia and relatively unchanged for Europe, North America and Latin America. It is expected to be relatively unchanged for Automotive Market and Specialty Business and slightly higher for Industrial Market. Demand compared to the fourth quarter 2014 The demand for SKF’s products and services are expected to be relatively unchanged for the Group, Europe and Latin America, and slightly higher for Asia and North America. It is expected to be relatively unchanged for Industrial Market and Automotive Market and slightly higher for Specialty Business. Manufacturing Manufacturing is expected to be higher year over year and compared to the fourth quarter.

  27. SKF demand outlook Q1 2015, main regions

  28. SKF demand outlook Q1 2015, main business areas

  29. SKF sequential volume trend Q1 2015, Industries Share of net sales 2014

  30. Guidance for the first quarter 2015* • Tax level: < 30% • Financial net: around SEK -250 million • Currency impact on operating profit vs 2014 Q1: SEK +300 million Full year: SEK +900 million • Additions to PPE: around SEK 1.7 billion for 2015 * Guidance is approximate and based on current assumptions and exchange rates.

  31. SKF’s programme to improve efficiency and reduce cost Restructuring Realized gross savings from total programme, SEKm

  32. New productivity improvement programme • Main activities:Productivitygainthroughmerging the industrialbusinesses- mergerbetweenStrategicIndustries & Regional Sales and Service worldwide- streamliningofsupporting country organisations in all maincountries • General staffoptimization and productivityimprovements - in Group Headquarters and central stafffunctions - in the Automotive business • Reductionofannualcost by SEK 1.2 billion by the end of 2016 • Total cost for the programmearound SEK 1.4 billion • 1 500 peopleimpacted. • Major part of the programmeimplementedwithin 2015.

  33. 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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