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SKF Half-year results 2011

SKF Half-year results 2011. Tom Johnstone, President and CEO 15 July 2011. Q2 2011. Strong performance 2011 2010 Operating profit, SEKm 2,623 2,239 Operating margin, % 15.7 14.3 Profit before tax, SEKm 2,446 2,047 Cash flow, SEKm 1,300 1,160

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SKF Half-year results 2011

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  1. SKF Half-year results 2011 Tom Johnstone, President and CEO 15 July 2011

  2. Q2 2011 • Strong performance • 2011 2010 • Operating profit,SEKm 2,623 2,239 • Operating margin, % 15.7 14.3 • Profit before tax, SEKm 2,446 2,047 • Cash flow, SEKm 1,300 1,160 • Strong organic sales growth in local currency: • SKF Group: +14.2% • Europe: +14.0% Industrial Division: +18.5% • North America: +15.8% Service Division: +16.6% • Asia: +16.9% Automotive Division: +6.2% • Latin America: +2.9% • Outlook for Q3 for SKF Group • Demand • Significantly higher compared to Q3 2010 • Slightly higher sequentially compared to Q2 2011 • Manufacturing level • Significantly higher year over year • Relatively unchanged compared to Q2 2011

  3. H1 2011 • Strong performance • H1 2011 H1 2010 • Operating profit, SEKm5,127 3,941 • Operating margin, % 15.3 13.1 • Profit before tax, SEKm 4,764 3,551 • Cash flow, SEKm 1,672 1,192 • Strong organic sales growth in local currency: • H1 2011 • SKF Group: +17.6% • Europe: +17.7% • North America: +20.1% • Asia: +19.2% • Latin America: +10.0% • Industrial Division: +19.7% • Service Division: +19.3% • Automotive Division: +12.6%

  4. Highlights Q2 2011 • SKF and Chalmers University of Technology agreed to establish a University Technology Centre (UTC) within the area of sustainability and environment. • SKF issued a EUR 500 million Eurobond with a maturity of seven years. • SKF Logistics Services was awarded ”Best service provider” by the Belgian Shippers’ Council Organization of Traffic Management (OTM). • SKF awarded and celebrated its 100,000th certificate in the SKF Distributor College. • SKF signed a strategic partnership agreement with Maanshan Iron & Steel (MaSteel) in Nanjing, China. • SKF Asset Management conference was held in Buenos Aires, Argentina

  5. New businesses in Q2 2011 • SKF: • entered a long-term contract with Bombardier Aerospace to supply over 40 different rod assemblies and titanium bearings. • signed a contract, worth EUR 15 million, with MAN Diesel Turbo for magnetic bearings and related electronic components to be used in two sub-sea natural gas sets of compressors. • entered into a project with Volvo Car Corporation and Volvo Group aimed at evaluating industrialization of flywheel systems. • gained new business in Columbia for the remanufacturing of large size bearings. • expanded the range of the SKF Hub Knuckle Module. The Ferrari 458 Italia sports car is equipped with this new single nut hub bearing unit.

  6. Example of new products • SKF DryLube bearings • New series of virtually maintenance free bearings with an extended service life in extreme temperatures. The main areas for SKF DryLube is within the metal industry and the food & beverage industry. SKF Low Weight Hub Bearing Unit A new wheel-end solution that contributes to a significant weight reduction and thereby reduces fuel consumption and CO2 emissions. This hub bearing unit is mainly for larger cars and light trucks SKF Double Clutch Bearing Set Provides higher efficiency and reduces fuel consumption and CO2 emissions for double clutch transmissions compared to standard transmissions. This bearing set is mainly for cars.

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

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

  9. Growth development by geography Organic growth Q2 2011 vs Q2 2010 Europe+14% North America +16% Asia/Pacific +17% Latin America +3% Middle East & Africa +12%

  10. Growth development by geography Organic growth H1 2011 vs H1 2010 Europe+18% North America +20% Asia/Pacific +19% Latin America +10% Middle East & Africa +8%

  11. Growth in local currency Long-term target: 8% per annum 14.2% 22.3% -19.0% Total growth % y-o-y 17.6% 14.2% 4.7% 1.0% 0.0% -20.0% Organic growth Acquisitions/Divestments

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

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

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

  15. Operating margin Long-term target level: 15% % 15.3 14.2* 13.8 8.0* 5.7 Restructuring and one-time items * Excluding restructuring and one-time items

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

  17. Second quarter 2011

  18. Half year 2011

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

  20. Cash flow, after investments before financing SEKm Cash out from acquisitions (SEKm): 2009 241 2010 6,799 2011 6 * 2010 2011 2009 * SEK 798 million,excluding the acquisition of Lincoln Industrial.

  21. Return on capital employed Long-term target: 27% % 25.9 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.

  22. 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 2011 Q2 2,277 Cash out from acquisitions (SEKm): 2009 241 2010 6,799 2011 6 2010 2011 2009

  23. Debt structure Maturity years, EURm 500 446 130 100 100 0 0 0 • Credit facilities: EUR 500 m 2014 SEK 3,000 m 2017 • No financial covenants nor material adverse change clause

  24. July 2011: Outlook for the third quarter 2011 Demand compared to the third quarter last year The demand for SKF’s products and services is expected to be significantly higher for the Group as well as for Asia and Latin America. For Europe and North America it is expected to be higher. It will be significantly higher for the Industrial Division and for the Service Division and higher for the Automotive Division. Demand compared to the second quarter 2011 and adjusted for normal seasonality The demand for SKF’s products and services is expected to be slightly higher for the Group as well as for North America. It is expected to be relatively unchanged for Europe, higher in Asia and significantly higher in Latin America. For the Industrial Division and the Service Division it is expected to be slightly higher and for the Automotive Division relatively unchanged. Manufacturing level The manufacturing level will be significantly higher year on year and relatively unchanged compared to the second quarter, adjusted for normal seasonality.

  25. Demand outlook, regions(based on current assumptions and adjusted for normal seasonality)

  26. Demand outlook, divisions(based on current assumptions and adjusted for normal seasonality)

  27. Sequential volume trend main segments Q3 2011(based on current assumptions and adjusted for normal seasonality) Share of net sales 2010

  28. Guidance for the third quarter 2011 • Tax level: around 30% • Financial net for the third quarter:Around SEK -175 m • Exchange rates on operating profit versus 2010 Q3: SEK -400 m • Full year: SEK -1.3 bn • Additions to PPE: Around SEK 2.0 bn for 2011 Guidance is approximate and based on current assumptions and exchange rates.

  29. 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

  30. 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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