SKF Q1 results 2018

Alrik Danielson, President and CEO

Record-high sales of 20,560 M, organic growth +7.5%

Record-high reported operating profit 2,625 M (2,295)

Operating margin 12.8% (11.7)

Cash flow 259 M (64)

A record start to 2018

12.8%Operating margin

2,625 MOperating profit

7.5% Organic sales growth

© SKF Group

Improving performance towards our targets

12.8%

Operating margin:

Target: 12%

66%

Net debt / equity:

Target: <80%

31.7%

Net working capital:

Target: 25%

15.0%

Return on capital employed:

Target: 16%

7.5%

Organic growth:

Target: 5%

Targets set in 2016 and valid over a business cycle:

© SKF Group

Sales growth in all marketsOrganic growth in local currency Q1 2018 vs Q1 2017

Europe

+7.6%

Asia/Pacific

+13.2%

Middle East

& Africa

+11.0%

Latin

America

+0.7%

North

America

+3.2%

© SKF Group

Rotating equipment performance creates value

Product

& service

Application

knowhow

Customer

performance Connected to customer

applications, SKF will

create and capture value

and deliver functionality

Connections include:• Condition monitoring

• Integrated supply chain

Hindsight

Foresight

Insight

Cre

ate

cu

sto

me

r va

lue

Unplanned production stops cost billions

Every time a machine is stopped and opened for maintenance when not needed drives cost

New technology provides radically different tools for SKF to strengthen the competitiveness of our customers

© SKF Group

SKF to supply bearings to Volkswagen’s all-electric MEB vehicle powertrain platform

© SKF Group

SKF selected for all main

shaft and most gearbox

bearings for the LEAP

Engine

SKF has now produced

more than 6,000 bearings

for the LEAP Engine

SKF is a development partner in manufacturing, design and testing of

main shaft and gearbox bearings

Ceramic hybrid main shaft ball bearings

SKF supports the LEAP program with a global supply chain, with plants

in US and Europe.

Key figures

14,300 total engine orders and commitments as of Feb. 2018

Sole engine for Boeing 737 and COMAC C919 aircrafts, and 50%

market share on Airbus A320neo

SKF has now produced more than 6,000 main shaft bearings

LEAP Engine : a success for SKF

Q1 results – the detailsChristian Johansson, CFO

© SKF Group

Sales development

2017 2018

Percent y-o-y Q1 Q2 Q3 Q4 Q1

Organic +8.0 +7.5 +8.0 +8.2 +7.5

Structure -2.0 -2.0 -0.7 -0.6 -0.7

Currency +4.9 +4.9 -3.0 -3.6 -1.9

Net sales +10.9 +10.4 +4.3 +4.0 +4.9

© SKF Group

Organic sales growth

© SKF Group

Operating profit

© SKF Group

Operating profit

© SKF Group

Industrial

Net sales 14,241 M

Organic sales +8.5%

Operating margin 15.0%, (14.0)

Automotive

Net sales 6,319 M

Organic sales +5.5%

Operating margin 7.7%, (6.8)

Performance by customer group

© SKF Group

SKF Group – Q1 2018

12.8%Operating margin

Financial performance (SEKm) 2018 2017

Net sales 20 560 19 601

Cost of goods sold -15 312 -14 627

Gross profit 5 248 4 974

Gross margin, % 25.5% 25.4%

Selling and administrative expenses -2 700 -2 691

Other operating income/expense 77 12

Operating profit 2 625 2 295

Operating margin, % 12.8 11.7

Financial income and expense, net -200 -170

Profit before taxes 2 425 2 125

Taxes -638 -654

Net profit 1 787 1 471

Basic earnings per share, SEK 3.77 3.09

© SKF Group

Cash flow after investments before financing*

© SKF Group

Net working capital 31.7% of annual sales

© SKF Group

Net debt/equity improved to 66 percent in the quarter

© SKF Group

Q2 2018:

Financial net: around -200 million

Currency impact on the operating profit is expected to be around 160 million negative

compared with 2017, based on exchange rates per 31 March, 2018.

2018:

Tax level: around 29% for 2018, excluding effects from divestments

Additions to property, plant and equipment: around 2,400 million for

2018

Guidance for 2018*

* Guidance is approximate and based on current assumptions and exchange rates.

© SKF Group

No adjustment for IAC on operating profit

No sequential demand guidance

Segment definitions have been aligned

with industry standard

Segment changes:

Cars & Light trucks has been renamed to

Light vehicles and includes two-wheelers

Industrial Heavy and Special has been

split in Agriculture, Food and Beverage,

Industrial Drives and Marine

Industrial General has been reclassified to

Industrial Drives

Other Industry has been renamed to Other

Industrial

Reporting changes

Continued growth in Q1

Record-high sales and operating profit

Expect to see continued growth in Q2 – higher

volumes year-over-year

Summary – Q1 a good start to 2018

12.8%Operating margin

2,625 MOperating profit

7.5% Organic sales growth

© SKF Group

Demand compared to the second quarter 2017

The demand for SKF’s products and services is expected to be higher for the Group,

including Industrial and Automotive. Demand is expected to be higher in Europe,

significantly higher in Asia and relatively unchanged in North America and Latin

America.

April 2018: SKF demand outlook Q2 2018

SKF Q1 results 2018Q & A

© SKF Group

Financial calendar

Q1 report 26 April

Virtual Roadshow 15 May

JP Morgan Capital Goods

Conference London

15 June

Q2 report 19 July

SEB Industrial & Technology

Seminar Stockholm

23 August

SHB Nordic Large Cap Seminar

Stockholm

12 September

Q3 report 25 October

Capital Markets Day November

© SKF Group

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;

“Risk management".

Cautionary statement