The SKF Group · ©SKF Group Slide 1 16 July 2013 SKF - ... Central gear Hybrid pinion units. ... SKF Steering boot kits for cars and light trucks

The SKF Group

SKF Investor Relations

July 2013

© SKF Group 16 July 2013Slide 1

SKF -

A truly global company

Established: 1907

Sales 2012: SEK 64,575 million

Employees 2012: 46,775

Production sites: around 140 in 28 countries

SKF presence: in over 130 countries

Distributors/dealers:

15,000 locations

Global certificates:

ISO 14001OHSAS 18001 certification


Net sales by customer segment* 2012

* Previously

published

shares

have

been

restated

in February

2013

Aerospace

Railway

Off-highway

Trucks

Two-wheelers and Electrical

Industrial, general

Cars and light trucks

Industrial, heavy and

special

Vehicle Service Market

Industrial distribution

Energy

6%

4%

4%

5%

12%9%

6%

10%

29%

2%

6%

4%4%

5%

12%9%

6%

10%

29%

2%

13%


Net

sales

2012, Geographical

distribution*

Asia/Pacific

Latin America

North America

Middle

East & Africa

Western Europe

Eastern Europe

Sweden

7%

3%

35%

5%

3%

24%23%

* Previously

published

shares

have

been

restated

in February

2013


7

35

3

8 9

1

8 710

6

0

24

35

23

26

7

12

37

30

39

North America

Latin America

Western

Europe

Eastern Europe

Middle East and Africa

Asia/Pacifi

c

Net salesAverage number of employees Tangible asset

% of group total SKF 2012

(18)

(8)(13)

(26)(13)

(14)

(2002) (1998)

(25)(14)(19)

(10)(12) (9)

Sweden

(4) (4) (3)(5) (12)(15)

(3) (9) (3)

(2) (2) (0)

(47)(46)(53)

(6) (5) (4)(5)(14)(12)

(3) (9) (3)

(3) (2) (0)

(48)(44)(53)


Operating margin

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

%


Return on capital employed

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

%


Growth in local currencies

-25

-20

-15

-10

-5

0

5

10

15

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

%


Long-term financial targets

27%Return on capital

employed

8%Changes in sales in local currency,

incl. structure

15%Operating

margin, level

-20-15-10

-505

101520

07 08 09 10 11 12H1

13

0

5

10

15

07 08 09 10 11 12H1

13

05

1015202530

07 08 09 10 11 12JU

N13


SKF’s priorities

Sustainable

profitable

growth• Expand

the platform

concept• Exploit

the asset life cycle

approach• Develop

new products

and grow

SKF BeyondZero

portfolio• Extend

and grow

second

brands• Acquisitions

Capital efficiency• Fixed

cost

reduction• Working capital efficiency

Cost

reduction• Consolidation

of manufacturing• Optimization

and productivity

improvements• Reduction

in purchasing

costs

Investments & Innovation• New and existing

facilities• Research and development


To equip the worldwith SKF knowledge

SKF Group Vision


SKF BeyondZero

•

SKF launched

the BeyondZeroTM

portfolio with products

and solutions, which

will

both

improve

energy

efficiency

and reduce

the environmental

impact. •

SKF revised

targets

for its

climate

strategy

and also

partnered

with the WWF in their

Climate

Savers

Programme.

SKF’s climate strategy targets:•

Increase revenue from SKF BeyondZero

portfolio from SEK 2.5 bn

to SEK 10 bn

by 2016

•

Reduce total annual energy use by 5% below the 2006 level by 2016•

Reduce energy use per production output by 5% y-o-y

from 2012 to 2016•

Reduce CO2

emissions per tonne-kilometre by 30% 2016 vs

2011 for transports managed by SKF Logistics Services

•

Major suppliers certified according to ISO 50001 by 2016


OpenedPlanned

Tianjin

TaiwanShangha

iPune

Istanbul

JohannesburgBrasil

“IXION”

Colombia

Moscow

HoustonMonterreyMexico

Edmonton

Nordic (Gothenburg)

UK

GermanyItaly

France

Perth

Rumania

Cleveland Spain

Poland

23 SKF Solution Factories 2013


SKF Solution Factory

Segments & Application Knowledge Platforms

& Technology

Competence

CapabilitiesSealing

Solutions Mechanical

Services Lubrication

Solutions

Training

CenterBearing Service Workshop Condition

Monitoring

Services Remote

Monitoring

CenterMaPro/CoMo

Product

Repair A & MC

SKFSolution Factory


Slab continuous caster –

metal industry

Telescopic actuators for mould adjustment

SKF DryLube Bearings and SNL Housings for roll out table

SKF ConRo Top roll line units

SKF ConRo Low roll line units

SKF sealed self-

aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines

SKF ConRo Compact roll line units

SKF Caster Analyst System for roll lines


Wheel-loader

–

Construction

Central gearHybrid pinion units

Wheel end•

Integrated smart wheel bearing units with sensors

•

SKF Mudblock

cassette seals

Motor hoodElectromechanical actuators

Chassis lubricationCentralized lubrication systems


New pitch bearingdesign with improvedcorrosion protection

DRTRB-unit SKF Nautilus

with segmented cagefor minimized friction

New CRB-design withextra-high carrying capacityfor wind-gearboxes.

XL Hybrid bearingswith ceramic ballsfor superior insulation

SKF WindCon

3.0/WebconIntranet supervisedcondition monitoring

Automatic centralizedlubrication kits for reduced maintenance cost

Wind turbine -

Energy


SKF’s environmentally positive customer solutions

Designed for environment

Designed for environment

A solution that is primarily designed to improve environmental performance by itself

E2 -

30% less energy compared to a standard bearing

SKF’s solutions which realize significant environmental benefits

Applied for environment

Applied for environment

A solution that enables improved environmental performance in a specific application

SKF sensor bearing

Stop-start system

Up to 15% better fuel economy of the car


SKF energy efficient (E2) bearings

PeruIndustria

Textil

Piura•

60,000 E2 deep groove ball bearing

IndiaSangam

GroupChinaConveyors used in mining industry. 130,000 E2 bearing

IndonesiaLeuwijaya

Textile•

30,000 E2 bearing•

potential 325,000 for 3 different customers


What is SKF knowledge?


SKF technology platforms

Bearingsand units



Seals



Mechatronics



Lubrication systems



Services


Acquisition

2003-2013

Identifying

gaps and opportunities

in all platforms

Products

Technologies

Geographies

Industries

SNFA

(2006)

S2M

(2007)

QPM

(2008)

Economos

(2006)

Macrotech

(2006)

Macrotech

(2009)

Baker

(2007)

PMCI

(2007)

PB&A

(2006)

Monitek

(2006)

Safematic

(2006)

Vogel

(2004)

ALS

(2007)

Sommers

(2005)

ABBA

(2007)

Jaeger

(2005)

Peer

(2008)

GLO

(2008)

TCM (2003)

Scandrive

(2003)

Cirval

(2008)

Lincoln Industrial

(2010)

GBC

(2012)

SealsBearingsand units

Lubrication systemsServices Mechatronics

BVI

(2013)

SKF Half-year results 2013Tom Johnstone, President and CEO


New business• 10-year contract

worth

SEK 900 million with Turbomeca• service contracts

worth

SEK 200 million in Latin America•

contract

for wheel

hub

bearing

units

(HBU3) to Volvo Car Corporation

Two

new SKF Solution FactoriesInaugurated

in Madrid, Spain

and Katowice, Poland

Divestment, after quarter

endSKF divested its metallic rods business including the operations

at the SKF sites in St. Vallier

sur

Rhône, France and Monroe, Washington, USA.

Highlights

Q2 2013

Katowice, Poland Madrid, Spain

Thrust

main

shaft

bearing, one

of the bearings

for the ARRANO Engine of TURBOMECA


Highlights

Q2 2013

Research programmeSKF and INSA Lyon started a research programme

to study the behavior

of lubricants

under extreme conditions

for aerospace.

SKF Windfarm

Management ConferenceSKF’s

eighth

SKF Windfarm

Management Conference was

held

in Warsaw, Poland.

Asset Management ConferenceSKF hosted

an Asset Management Conference in Dallas, USA with more

than

160 customers.

SKF Distributor

College awarded

its

180,000th certificate.


New products

-

examples

SKF Steering

boot

kits

for cars and light

trucks.

SKF Telescopic

pillars

series CPMA and CPMB for medical

equipment.


SKF Restructuring

programme

– costs

and expected

savings

Restructuring

activities

launched

in:SEKm Q4 2012 Q1 2013 Q2 2013 Total

One-off

costs 200 250 190 640

Annual

savings

when

fully

implemented 150 100 80 330

The savings

for the second

half

year

2013 will

be around

SEK 150 million, evenly

split between

the third

and the fourth

quarter.


SKF Group –

Q2 2013

Financial performance

2013

2012Net sales, SEKm

16,392

17,174Operating profit, SEKm

1,837 2,049Operating margin, %

11.2

11.9Operating margin excl. restructuring,%

12.4

12.7Profit before tax, SEKm

1,627 1,774Cash flow, SEKm

1,147 686

Organic sales growth in local currency:SKF Group: -2.2%Strategic Industries:

-7.6% Regional Sales

and Service:

-4.8% Automotive:

7.7%

Key points Sales volumes down by -1.6% y-o-yManufacturing relatively unchanged compared to last yearInventories 21.6% of sales

Europe:

-4%North America:

-1%Asia:

-4%Latin America:

14%


Organic sales growth in local currency

-10

-5

0

5

10

15

20

25

20132011 2012

% change y-o-y


Europe

-4%

Asia/Pacific -4%

Latin America

14%Middle East

& Africa -3%

NorthAmerica

-1%

Growth

development

by geography

Organic

growth

in local

currency

Q2 2013 vs Q2 2012


Europe

-7%

Asia/Pacific -5%

Latin America

11%Middle East

& Africa -4%

NorthAmerica

-6%

Growth

development

by geography

Organic

growth

in local

currency

YTD 2013 vs YTD 2012


Components in net sales

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

20.1 12.6 6.2 0.0 -0.8 -2.8 -5.0 -5.9 -8.7 -1.6

5.0 4.4 5.1 4.8 -0.1 0.0 0.8 1.0 1.5 2.6

1.3 1.6 2.0 2.8 1.9 2.0 0.5 0.7 0.7 -0.6

26.4 18.6 13.3 7.6 1.0 -0.8 -3.7 -4.2 -6.5 0.4

-10.8 -12.2 -6.3 -2.1 0.4 3.6 -2.7 -3.6 -4.0 -5.0

15.6 6.4 7.0 5.5 1.4 2.8 -6.4 -7.8 -10.5 -4.6

Percent y-o-y

Volume

Structure

Price/mix

Sales in local currency

Currency

Net sales

2011 2012 2013


-10

-5

0

5

10

15

20

2011 2012 YTD 2013

Growth in local currency, including structure

% y-o-y

Structure in 2011:

4.8%Structure in 2012:

0.4%Structure in YTD 2013:

2.0%

-3.1%

16.3%

-2.1%


Operating profit

0

300

600

900

1 200

1 500

1 800

2 100

2 400

2 700

SEKm

2011

One-time

items

2012 2013


%

0

2

4

6

8

10

12

14

16

2011

One-time

items

2012 2013

Operating margin


0

2

4

6

8

10

12

14

16

2011 2012 YTD 2013

%

One-time

items* Excluding

one-time

items

14.7*

11.9*

10.5

14.5 12.0*

Operating margin

11.4


-3

0

3

6

9

12

15

18

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Operating margin per business area

Strategic Industries

Regional Sales and Service

Automotive

%

2011 2012 2013

Excluding one-off items

(eg. restructuring, impairments, capital gains)


18

19

20

21

22

23

24

25

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Inventories as % of annual sales

%

2011 2012 2013


Return on capital employed

0

5

10

15

20

25

30

2011 2012 YTD 2013

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.

%

16.213.8

23.617.2*

15.3*

23.9*

One-off

costs* Excluding

one-off

costs


Cash flow, after investments before financing

-1 000

-500

0

500

1 000

1 500

2 000

2 500SEKm

2011 2012 2013

*

SEK 1,707 million,

excluding

acquisitions

and divestments.**

SEK -69 million, excluding

acquisitions

and divestments.

*

**


Net debt

-20 000

-18 000

-16 000

-14 000

-12 000

-10 000

-8 000

-6 000

-4 000

-2 000

0

SEKm

AB SKF, dividend paid (SEKm):2011 Q2

2,2772012 Q2

2,5042013 Q2

2,530

2011 2012 2013

Net debt:

Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

Cash out fromacquisitions (SEKm): 2012 Q3

8292013 Q1

823


0

100

200

300

400

500

600

2013 2014 2015 2016 2017 2018 2019 2020

EURm

265

100100100

500

110

500

• Available

credit

facilities:EUR 500 million 2017 SEK 3,000 million 2017

•

No financial

covenants

nor

material adverse

change

clause

Debt structure,

maturity years

100


SEKm 2013 2012

Net sales 16,392 17,174

Operating profit 1,837 2,049

Operating margin, % 11.2 11.9

Operating margin excl. one-offs, % 12.4 12.7

Profit before taxes 1,627 1,774

Net profit 1,104 1,244

Basic earnings per share, SEK 2.36 2.63

Cash flow, after investments before financing 1,147 686

Second quarter 2013


SEKm 2013 2012

Net sales 31,544 34,105

Operating profit 3,317 4,185

Operating margin, % 10.5 12.3

Operating margin excl. one-offs, % 11.9 12.7

Profit before taxes 2,864 3,730

Net profit 1,922 2,570

Basic earnings per share, SEK 4.10 5.44

Cash flow, after investments before financing 255* 1,382*

Half year 2013

*

excluding acquisitions and divestments, SEK 1,078 million (1,401).


July

2013:

SKF demand outlook Q3 2013

Demand compared to the third quarter 2012 The demand for SKF’s

products and services is expected to be slightly higher for the Group, Asia and North America as well as for all the business areas. It is expected to be relatively unchanged for Europe and higher for Latin America.

Demand compared to the second quarter 2013 The demand for SKF’s

products and services is expected to be relatively unchanged for the Group, Europe, Asia and North America as well as for all the business areas. It is expected to be slightly higher for Latin America.

Manufacturing Manufacturing

is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.


Share

of net

sales2012

Europe 43%

Asia

Pacific 24%

North America 23%

Latin America 7%

Total

Q3 2013 vs Q3 2012

+/-

+

+

++

+

Sequential

trend for Q3 2013

SKF demand

outlook

Q3 2013, regions


Sequential

trend for Q3 2013

Share

of net

sales2012

Strategic

Industries 31%

Regional Sales

and Service 39%

Automotive 27%

Total

Q3 2013 vs Q3 2012

+

+

+

+

SKF demand

outlook

Q3 2013, business areas


6%

6%

5%

29%

13%

13%

12%

10%

4%

2%

Aerospace

Energy

Trucks

Industrial distribution

Industrial, heavy, special and off-highwayCars and light

vehicles

Industrial, general

Vehicle

after market

Railway

Two-wheelers

and electrical

Share

of net

sales

2012

SKF sequential

volume

trend Q3 2013, main

segments


Guidance for the third quarter 2013*

•

Tax level: around 30%

•

Financial net for the third quarter:

Around SEK -200 million

•

Currency impact on operating profit versus 2012

Q3: SEK -100 millionFull year: SEK -450 million

•

Additions to PPE: Around SEK 1.7 billion for 2013

*

Guidance is approximate and based on current assumptionsand exchange rates


Key focus areas 2013

• Managing the uncertain and different demand environment-

Profit and cash flow

•

Initiatives and actions to support long-term financial targets

-

New factories in Mysore and Bengaluru

in India

-

New warehouse in Shanghai, China

-

SKF Campus in Shanghai, China, including:

‣

New factory for automotive

‣

Global Technical Centre China

‣

SKF Solution Factory

‣

SKF College

-

Integration of new acquisitions, GBC and BVI

-

Cost reduction and efficiency programme

-

New IT systems

•

Business Excellence and competence development

One SKF and SKF Care as guiding lights


Cost

reduction

–

specific

programme

2012-2015

Main activities:•

Consolidation

of manufacturing

-

merger

between

sites

-

transfer

to faster growing

markets with more

local

production•

Optimization

and productivity

improvements

-

in the manufacturing

and demand

chain

processes

-

in administration and support functions•

Reduction

in purchasing

cost

-

mainly

through

standardization

and rationalization

of the supplier

base.

Reduction

of annual

cost

by SEK 3 billion by the end

of 2015-

Total cost

for the programme

around

SEK 1.5 billion -

2,500 people

impacted,


SKF’s

priorities

Sustainable

profitable

growth• Expand

the platform

concept• Exploit

the asset life cycle

approach• Develop

new products

and grow

SKF BeyondZero

portfolio• Extend

and grow

second

brands• Acquisitions

Capital efficiency• Fixed

cost

reduction• Working capital efficiency

Cost

reduction• Consolidation

of manufacturing• Optimization

and productivity

improvements• Reduction

in purchasing

costs

Investments & Innovation• New and existing

facilities• Research and development


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”.



Welcome

to the IR website

–

www.skf.com

> Investors

Investor Relations function:Head:Marita

BjörkTel: +46 31 3371994Mobile: +46 705 181994E-mail: [email protected]

Investor Relations:Anna AlteTel: +46 31 3371988Mobile: +46 705 271988E-mail: [email protected]

Event and road shows coordinator:Helena KarlssonTel: +46 31 3372142Mobile: +46 705 642142E-mail: [email protected]

Documents

The SKF Group · ©SKF Group Slide 1 16 July 2013 SKF - ... Central gear Hybrid pinion units. ... SKF Steering boot kits for cars and light trucks