Industrial Market, Strategic Industries

1. Industrial Market, Strategic Industries

2. Speakers • Rakesh MakhijaPresidentIndustrial Market, Strategic Industries • Bernd StephanDirectorBusiness unit Renewable Energy • Robert LawDirectorBusiness unit Lubrication CMD 2014

3. Agenda • Strategic Industries overview • Strategy and market direction • Significant news • Growth drivers • Asset life cycle and service • China • Manufacturing • Cost reduction programs • Footprint • Application specific offers • Renewable Energy business unit • Lubrication business unit • Outlook and key business message CMD 2014

4. 1 Strategic Industries overview

5. Strategic Industries Net sales 2013 = SEK 18,929 million Number of employees = 17,628 Full responsibility for sales to both OEM and end users, as well as business development, manufacturing and engineering % of net sales by geographical area (2013): Asia, Pacific Europe North America CMD 2014

6. 2 Strategy and market direction

7. Our mission – “clear leadership” • Leadership in everything we do • Value • Innovation • Cost • Strong financial performance • Profit • Cash flow • Customers are first priority • An entrepreneurial culture – seeking new horizons • Execution with speed CMD 2014

8. Value & cost leadership “Market leadership & profitable growth” “Meet customer needs through speed & innovation” “Cost leadership & flexibility” • Asset life cycle per industry • Service business • Strategic customer relationship • Customer service levels • China, India, USA and Germany • Geographic expansion • Acquisitions • New market offers • Application specific offers • New technologies • Position technology leadership • New processes • SKF BeyondZero • Cost reduction • Integrated cost reduction and manufacturing supply optimization • Asset utilization • Manufacturing footprint • Business Excellence/Lean • Quality • Safety CMD 2014

9. 3 Significant news

10. Aerospace • SAFRAN announced the award of the strategic LEAP program to SKF • Renewed long-term agreements with major partners such as GE Avio SrL, Rolls-Royce, AgustaWestland, HAL and Techspace Aero • Reinforced partnering with Boeing with a new contract for advanced sealing solutions • SKF Aerospace Innovation Centers: Falconer (US) and INSA Lyon (France) on major topics such as condition monitoring and next generation of airframe and aero engine bearings CMD 2014

11. Renewable Energy • Strategic partnerships in China with Envision Energy, a global leading provider of wind turbines, and with Longyuan, the largest IPP wind farm owner and operator in China • Gained several significant supply agreements with Goldwind • Received the Best Technical and Service Award 2013 from Envision Energy, Technical Cooperation Award from Goldwind and the Supplier of the Year 2013 from Nanjing Gearbox China CMD 2014

12. Precision • Inauguration of a super-precision bearings manufacturing channel in Pinghu, China • Increased number of orders in the automation industry, including an order worth of SEK 33 million • Launched a new pillar CPMT (SKF Telescopic pillar for medical procedure equipment) with great market response CMD 2014

13. Railway & Off-highway Photo: BEUMER Group GmbH & Co. KG • Order for 40,000 compact tapered bearing units for Russian freight car OEM, Tikhvin Freight Car Assembly Plant (TVSZ) • Continued very strong development of the passenger train segment business in China • Ongoing tests of SKF Insight with three European railway customers • Slewing bearing orders from several major OEMs in China and strengthened SKF position for tunnel boring applications CMD 2014

14. Lubrication • Secured a 70% share for automatic lubrication systems from a major European wind turbine producer (2014 & 2015) • Secured SEK 16 million order for firefighting reels • Secured a major contract from TPC Wire & Cable (US) for storage reels (supply power to nuclear sites in the event of a natural disaster) • Secured significant business for automatic lubricating screw jacks for marine industry CMD 2014

15. Traditional Energy • SKF magnetic bearings installed its 1,000th system in an oil & gas application, which is the largest installed base in the industry • Received an order for SKF super grip bolts for turbine couplings for seven power plants in three countries from Doosan Heavy Industries valued at SEK 18 million • Integrated condition monitoring and protection system commissioned at a large Asian petrochemical complex and received letter of intent for similar system for new refinery in Middle East • A new low torque operator valve concept was introduced with several significant prototype orders received from key manufacturers of subsea valves used in the offshore oil & gas industry CMD 2014

16. Industrial Drives • Received a large order of bearings and condition monitoring from a major Chinese fan and blower manufacturer • Landed a three-year contract with a major global compressor manufacturer, which increased market share and secured SKF’s role as their major bearing supplier • Won an order of 72 slewing bearings for seismic isolation system in ship to shore cranes from a leading Indian crane manufacturer CMD 2014

17. 4 Growth drivers- Asset life cycle and service- China

18. Customer testimonial • Seakeeper CMD 2014

19. Customers create and capture value • Rule 1:Customers pay for what they value • Rule 2: Value is a moving target, what they value today may not be valued tomorrow • Rule 3: Value must be tangible and measurable Our responsibility is to ensure that SKF provides sustainable customer value now and in the future! Customers derive as much, if not more value from HOW they interact with SKF, and this results in a more sustainable basis for competitive advantage. CMD 2014

20. Design and develop Manufacture and test Sustainable profitable growth Optimizing the asset life cycle with SKF solutions Specification A one-stop source for proven, world-class products, delivered and available worldwide Close cooperation with regulatory bodies, institutes and agencies, enables support in defining and meeting standards and requirements Engineering services to enable new design and minimize risk of machinery failures and warranty costs Install and commission Maintain and repair A range of maintenance engineering and consulting services to boost asset uptime Optimized operational performance through best practice installation services Operate and monitor Safer and more profitable operations with increased availability through class approved solutions for condition-based maintenance CMD 2014

21. Asset life cycle managementExample: Pinion stand concept Pinion stands used for rotary drums with major focus on rolling mills & kilns. Today’s situation: Gearbox OEMs are responsible for delivering major part of the driveline (including the pinion stand) The pinion stand selection and delivery is seen as a necessity outside many of the gearbox OEMs core competence Tomorrow: SKF is a full pinion stand supplier with additional upgrade services Non-locating bearing CARB Condition monitoring for pinion bearings Lubrication system Locating bearing SRB SNL housing Sealing CMD 2014

22. Asset life cycle managementExample: Fan upgrade services in Nordic region • Increased performance and reliability for critical industrial fans and blowers. • Reference cases: • Renova Göteborg (Refuse disposal unit) • Reduced maintenance cost with SEK 125 thousand/year • Reduced downtime and increased lifetime for bearings and oil • US paper mill • ROI 483% in 16 months. Verified by SKF Documented Solution Program (DSP) Renova Göteborg CMD 2014

23. New Industrial Market SKF BeyondZero market launches • High speed permanent magnet motor solutions • 10 to 40% lower energy use • Improved service life and reliability • Oil-free environment with no contamination • Up to 30% lower noise levels SEK 4 billion (Industrial Market forecast 2014) 35 Solutions 30% of new offers • Extended life plain bearings • Greased-for-life product • Up to 90% grease reduction • Increased uptime • Reduced total cost of ownership • Eliminate grease leakage to environment • Telescopic pillar for infant care • Lower noise level • Reduced energy use by 80% • Higher load carrying capacity • Higher stability • Greater comfort, smoother operation SKF BeyondZero solutions and launches 2012–2013 Spherical roller bearings + CARB toroidal roller bearings SKF Energy Efficient (E2) deep groove ball bearings LubriLean for cutting process Titanium bearings for aerospace SKF solar linear actuator High endurance slewing bearings Cylinder lubrication unit Food line Y-bearings SKF Solar Hub CTBU low friction seal Sour gas compressor bearings Active magnetic systems Dry lubrications for conveyor belts SKF Nautilus SKF ConRo SKF Flowline Servo actuator SKF Agri-HUB CMD 2014

24. Customer testimonial • Envision Energy

25. China overview • Strong development in passenger rail and wind segments • Stable demand in key segments – e.g. industrial electric motor, fluid power and machine tools • Increased local production acceptance • Value selling works in a tough environment • Increasing manufacturing CMD 2014

26. China footprint Railway & Off-highway Beijing Nankou SKF Renewable Energy SKF (Dalian)Large Size Bearing Factory Harbin Lubrication Shenyang Urumqi Reelcraft (Changzhou) Wafangdian Beijing Baotou Lincoln Lubrication Equipment (Changshu) Dalian Tianjin Taiyuan Jinan Qingdao Nanjing Xi’an Changzhou Zhenzhou Wuhu Chengdu Changshu Pinghu Wuhan Shanghai Ningbo Changsha Precision Industrial Drives Xiamen SKF Actuation System (Pinghu) SKF (Dalian) Medium Size Bearing Factory Guangzhou Kunming Taipei Hongkong Pinghu ABBA Shenzhen CMD 2014 2014年9月12日星期五

27. China strategic direction Accelerate China development Asset life cycle growth Accelerating market-based offerings Improved competitiveness • Localize sourcing and production of key components • Enhance engineering capabilities - product and application engineering • Strengthen “local for local” product offerings • Develop segment-specific platform offerings • Enhance local service expertise and market coverage • Utilize SKF Solution Factory infrastructure CMD 2014

28. 5 Manufacturing- Cost reduction programs- Footprint- Application specific offers

29. Manufacturing Lean manufacturing Manufacturing processes & benchmarking Manufacturing supply optimization Manufacturing footprint Integrated cost reduction • Technology review • Review core KPIs • Benchmark • Balanced to demand • Better service • Cost efficiency • Flexibility • Value added • Lean • Design review • Purchasing • Application specific • performance CMD 2014

30. Manufacturing footprint Example: Spherical roller bearings • Balancing the global manufacturing footprint based on growth and demand is an ongoing exercise • This covers all major product lines – bearings, lubrication and mechatronics CMD 2014

31. Manufacturing supply optimization program Objectives 2016 Improved service< 5% availability failures Sustainable competitiveness Improve agility & flexibility Build sustainable capability Standardize best-practices Reduce inventory Reduce manufacturing cost CMD 2014

32. Application specific performance market New optimised designs that enable cost efficient solutions and deliver the right performance. Penetrate the “mid-market” with top quality products, best adapted to customers’ application specific performance needs Electrical motor High performance in noise & vibration (internal geometry and grease) Pulleys in elevators Adapted sealing and lifetime Attachment in agriculture Improved sealing and adapted grease Medium deep groove ball bearing ISO-dimension Screws in air compressor Optimized design Cylindrical roller bearing ISO-dimension