SKF Q2 results 2019

Alrik Danielson, President and CEO

▪ Net sales of 22,488 M, organic growth -1.6%

▪ Operating profit 2,539 M (2,925)Including restructuring costs and impairments of 317 M (21)

▪ Operating margin of 11.3% (12.9)

▪ Cash flow from operations in line with last year

Q2 – strong operating performance on lower volumes

11.3%Operating margin** including restructuring costs and impairments

2,539 MOperating profit** including restructuring costs and impairments

-1.6% Organic sales growth

Q2 Q3 Q4 Q1 Q2 19

Net sales, SEK22.5 bn22.6 bn

Operating profit*, SEK

Q2 Q3 Q4 Q1 Q2 19

2.5 bn2.9 bn

Industrial; strong quarter with improved operational performance on flat sales. 0.6% organic growth in Q2, relatively unchanged volumes in all three main markets, North America, Europe and Asia

Automotive; 5% operating margin in Q2 on a 6.8% organic sales drop.Significantly lower sales volumes North America and Asia, lower sales volumes in Europe and significantly higher sales in Latin America

© SKF Group

Improving performance towards our targets- Targets set in 2016 and valid over a business cycle:

Organic growth 12m-average Target

2016 2017 2018 2019

Organic growth:

Op. margin 12m-average Target

2016 2017 2018 2019

Operating margin*:

Net debt/eq 12m-average Target

2016 2017 2018 2019

Net debt* / equity:

NW capital 12m-average Target

2016 2017 2018 2019

Net working capital:

ROCE 12m-average Target

2016 2017 2018 2019

Return on capital employed*:

* Including restructuring cost & impairments * Including leasing as of 2019

* Including restructuring cost & impairments

© SKF Group

Revenues in line with guidanceOrganic growth in local currency Q2 2019 vs Q2 2018

Europe

-2%

Asia/Pacific

-2%

Latin

America

+9%

North

America

-3%

© SKF Group

Realizing the circular economy- Substantially reduce cost and environmental impact with improved efficiency

Enablers

Digitalisation

Business model:From transactional

to fee based + bonus

Striving for green

© SKF Group

Acquisition of RecondOil- Gives SKF the ability to recondition oil and lubricants

▪ Perfect addition to SKF’s REP offer and brings

lubricants to the circular economy

Investments within production of ball bearings in Italy and China

▪ SEK 450 million investment

▪ New plant in Xinchang, China

▪ New highly automated production in Bari, Italy

Q2 results – the detailsNiclas Rosenlew, CFO

© SKF Group

Sales development

Q2 Q3 Q4 Q1 Q2 19

Net sales, SEK bn

22.522.6

2018 2019

Percent y-o-y Q2 Q3 Q4 Q1 Q2

Organic +9.0 +6.9 +5.0 +0.3 -1.6

Structure -0.6 -0.1 -1.0 -2.5 -2.6

Currency +3.4 +7.8 +4.8 +5.7 +3.5

Net sales +11.8 +14.6 +8.8 +3.5 -0.7

© SKF Group

Operating profit*

0

2

4

6

8

10

12

0

0,5

1

1,5

2

2,5

3

Th

ou

san

ds

Th

ou

san

ds

2016

2.5

2.3

1.9

2017

SEK bnSEK bn, 12m

moving

2018

2.9

2019

* Including restructuring cost & impairments

© SKF Group

Operating profit

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2 539-60

+112

-74

-68

2 925

Q2 2018 Q2 2019Cost

development

Organic sales

&

manufacturing

volumes

Divested/

acquired

companies

Currency

impact

Operational performance:

-430

SEKm

* Restructuring and

impairment of assets -296*

© SKF Group

Industrial

▪ Net sales 16,061 M

▪ Organic sales +0.6%

▪ Operating margin 13.9%*, (14.7)

Automotive

▪ Net sales 6,665 M

▪ Organic sales -6.8%

▪ Operating margin 4.8*%, (8.7)

Performance by customer groupIndustrialOperating margin*, %

13.9%14.7%

13.7%

AutomotiveOperating margin*, %

4.8%

8.9%

6.4%

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q219

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q219

* Including restructuring cost & impairments

© SKF Group

Q2 Q3 Q4 Q1 Q2 19

Q2 Q3 Q4 Q1 Q2 19

SKF Group – Q2 2019Operating margin*, %

Earnings per share, SEK

Financial performance (SEKm) 2019 2018

Net sales 22 488 22 620

Cost of goods sold -16 841 -16 895

Gross profit 5 647 5 725

Gross margin, % 25.1% 25.3%

Selling and administrative expenses -3 103 -2 829

Other operating income/expense -5 29

Operating profit 2 539 2 925

Operating margin, % 11.3 12.9

Financial income and expense, net -278 -142

Profit before taxes 2 261 2 783

Taxes -682 -759

Net profit 1 579 2 024

Basic earnings per share, SEK 3.32 4.25

3.324.25

12.9% 11.3%

11.3%Operating margin** including restructuring and impairments

© SKF Group

Cash flow after investments before financing*

-4 000

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

-1 000

0

1 000

2 000

3 000

SEKm

2013 2014 2015

* After investments before financing (excluding acquisitions and divestments and EU payment in Q2 2014.)

2013 and 2014 are restated

2016 2017 2018 2019

© SKF Group

Net working capital

0

5

10

15

20

25

30

35

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2

2014 2015 2016

Target: 25%

Total NWC 30.1%

Inventories 21.8%

Trade receivables 18.1%

Trade payables 9.8%

2017

%

2018 2019

© SKF Group

Net debt, SEK bn Net debt/equity, %

Net debt/equity ratio well below target

-35

-30

-25

-20

-15

-10

-5

0

Net fin debt Post-empl. Benefits Leasing

2013 2014 2015 2016

0%

20%

40%

60%

80%

100%

120%

140%

160%

Net debt/equity

Net debt, excl leasing & postempl. benefits/equity

68%

17%

2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

© SKF Group

Q3 2019:

▪ Financial net: around -245 million

▪ Currency impact on the operating profit is expected to be positive by 130 million

compared with 2018, based on exchange rates per 30 June, 2019.

2019:

▪ Tax level: around 28% for 2019, excluding effects from divestments

▪ Additions to property, plant and equipment: around 2,800 million for

2019.

Guidance for 2019*

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

▪ Net sales of 22,488 M, organic growth -1.6%

▪ Operating profit 2,539 M (2,925)Including restructuring costs and impairments of 317 M (21)

▪ Operating margin of 11.3% (12.9)

▪ Expect to see slightly lower volumes in Q3

Summary – strong operating performance on lower volumes

11.3%Operating margin** including restructuring cost and impairments

2,539 MOperating profit** including restructuring cost and impairments

-1.6% Organic sales growth

Q2 Q3 Q4 Q1 Q2 19

Net sales, SEK22.5 bn22.6 bn

Operating profit*, SEK

Q2 Q3 Q4 Q1 Q2 19

2.5 bn2.9 bn

SKF Q2 results 2019Q & A

© SKF Group

Demand compared to the third quarter 2018

The demand for SKF’s products and services is expected to be slightly lower for the

Group, including relatively unchanged demand for Industrial and lower demand for

Automotive. Demand is expected to be relatively unchanged in Asia, slightly lower in

Europe and North America and slightly higher in Latin America.

July 2019: SKF demand outlook Q3 2019

© SKF Group

Financial calendar

Q2 report 17 July

SEB Technology seminar 29 August

SHB Large Cap Seminar September

US roadshow September

Q3 report 22 October

UBS London conference 13 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 at SKF" and "Sensitivity analysis”.

Cautionary statement