SKF Year-end results 2014

Alrik Danielson, President and CEO

28 January 2015
Examples of new business in Q4 2014

• GE Aviation and Safran Group, Mainshaft and gearbox

(Snecma & Hispano-Suiza) bearings
• Chongqing Gearbox Co., Ltd, China Bearing sets
• Andritz Hydro, Germany Special bearing and sealing
solution
• Mazda, Mexico Low-friction wheel bearing
units
• Daimler, Germany Wheel hub bearing units
• Jiangsu Jintongling Fluid Machinery Co., Ltd, High-speed permanent
China magnetic motor unit solutions

© SKF Group Slide 2 28 January 2015

Examples of new business in Q1 – Q3 2014

• Hindustan Aeronautics Ltd, India Customized bearings for helicopter

transmission and main rotor
• Bell Helicopter Textron Inc.,USA Elastomeric bearings

• Turbogaz, Ukraina Magnetic bearings

• SCA, BillerudKorsnäs, Condition monitoring solutions

Vattenfall, Sweden

• Geely Automobile, China Transmission seals

• Volkswagen, Germany Energy efficient tapered roller and ball
bearings
• Envision Energy, China Strategic long-term partnership

© SKF Group Slide 3 28 January 2015

Examples of new business in Q1 – Q3 2014

• Dongfang Electric New Energy, China Main shaft bearings

equipment
• Aurizon, Australia Service contract
• Doosan Heavy Industries and SKF Supergrip Bolts
Construction, South Korea and SKF Nautilus bearing

• HSD SpA, Italy Super precision bearings

and engineering support
• Tesla Motors, USA Bearing for the gearbox, e-motor
and wheels
• Volvo Cars, Sweden Wheel hub bearing units
• Scania, Sweden Wheel bearing units and high
pressure valve stem seals

© SKF Group Slide 4 28 January 2015

Customer awards Q4 2014

• Best supplier award – Kirloskar Pneumatic Company Ltd., India

• Best supplier award – Nanjing Gearbox Company, China

• Top runner-up ’Best Vendor’ – Tata Steel, India

• Winner ’Cloud’ category – Software AG Innovation Awards

• Supplier Quality Excellence awards 2014 – General Motors, USA

• Quality Silver Award 2014 – Bajaj Auto Limited, India

© SKF Group Slide 5 28 January 2015

Examples of new technologies, products and solutions 2014

SKF Gear SKF Wireless SKF Mudblock

Bearing Unit Machine SKF Wireless cassette seals,
Condition MicroVibe MUD 11
Sensor

Compact tapered roller

bearing unit for heavy
Tapered roller bearing unit freight
Electric grease for passenger railway
transfer pump applications

SKF Oil Injection

SKF SKF @ptitude Sets - THKI
Floating
Tachometer Connect series
piston
PuraBreeze
100

© SKF Group Slide 6 28 January 2015

SKF Group – Q4 2014

Financial performance (SEKm) 2014 2013

Net sales 18 499 16 430
Operating profit 1 608 -1 547
Operating margin, % 8.7 -9.4
Operating margin excl. one-time items, % 11.2 11.0
Profit before tax 1 293 -1 760
Basic earnings per share, SEK 1.84 -4.57
Cash flow after investments before financing 2 053 -6 732

Organic sales growth in local currency:

SKF Group 2.8% Europe 1%
Strategic Industries 7.4% North America 2%
Regional Sales and Service 2.2% Asia 8%
Automotive -0.5% Latin America 4%
Middle East and Africa -5%
Key points
Sales volumes up by 1.8% y-o-y.
Manufacturing was relatively unchanged compared to last year.
© SKF Group Slide 7 28 January 2015
SKF Group – 2014

Financial performance (SEKm) 2014 2013

Net sales 70 975 63 597
Operating profit 7 801 3 693
Operating margin, % 11.0 5.8
Operating margin excl. one-time items, % 11.7 11.9
Profit before tax 6 668 2 821
Basic earnings per share, SEK 10.10 2.0
Cash flow after investments before financing excl. EU payment 4 693 5 342
Cash flow after investments before financing 1 868 5 342

Organic sales growth in local currency:

SKF Group 3.9% Europe 1%
Strategic Industries 8.4% North America 3%
Regional Sales and Service 1.8% Asia 10%
Automotive 2.0% Latin America 1%
Middle East and Africa 9%
Key points
Sales volumes up by 3.3% y-o-y.
Manufacturing was slightly higher compared to last year.
© SKF Group Slide 8 28 January 2015
Organic sales growth in local currency

% change
y-o-y
8
6
4
2
0
-2
-4
-6
-8
-10
2012 2013 2014

© SKF Group Slide 9 28 January 2015

Organic sales growth in local currency

% y-o-y
6

3.9%
4

-0.7%
-2
-2.5%
-4
2012 2013 2014

Structure in 2012: 0.4%

Structure in 2013: 2.5%
Structure in 2014: 3.7%
© SKF Group Slide 10 28 January 2015
 Sales development by geography
Organic growth in local currency Q4 2014 vs Q4 2013

Europe
1%

North
America
2%
Asia/Pacific
8%

Latin
America
4% Middle East
& Africa
-5%

© SKF Group Slide 11 28 January 2015

 Sales development by geography
Organic growth in local currency 2014 vs 2013

Europe
1%

North
America
3%
Asia/Pacific
10%

Latin
America
1% Middle East
& Africa
9%

© SKF Group Slide 12 28 January 2015

Components in net sales

2012 2013 2014

Percent y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Volume -0.8 -2.8 -5.0 -5.9 -8.7 -1.6 2.2 7.1 6.2 3.6 1.9 1.8

Structure -0.1 0.0 0.8 1.0 1.5 2.6 1.1 4.8 4.7 3.8 5.4 0.9

Price/mix 1.9 2.0 0.5 0.7 0.7 -0.6 -0.2 -0.2 -0.4 1.0 1.3 1.0
Sales in
local 1.0 -0.8 -3.7 -4.2 -6.5 0.4 3.1 11.7 10.5 8.4 8.6 3.7
currency
Currency 0.4 3.6 -2.7 -3.6 -4.0 -5.0 -2.2 -2.1 -0.1 1.1 5.3 8.9

Net sales 1.4 2.8 -6.4 -7.8 -10.5 -4.6 0.9 9.6 10.4 9.5 13.9 12.6

© SKF Group Slide 13 28 January 2015

Operating profit as reported

SEKm
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
2012 2013 2014

© SKF Group Slide 14 28 January 2015

Operating profit excluding one-time items

SEKm
2500

2000

1500

1000

500

0
2012 2013 2014

© SKF Group Slide 15 28 January 2015

Operating margin

One-time items
% * Excluding one-time items
16

14
12.0* 11.9* 11.7*
12

10 11.3 11.0

6
5.8
4

0
2012 2013 2014

© SKF Group Slide 16 28 January 2015

Operating margin per business area as reported

%
18

15
Regional Sales
and Service
12 Specialty Business
Strategic Industries
9

3 Automotive

-3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014

© SKF Group Slide 17 28 January 2015

Operating margin per business area excl. one-time items

%
18

15
Regional Sales
and Service
12
Specialty Business
Strategic Industries
9

3 Automotive

-3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014

© SKF Group Slide 18 28 January 2015

 Operating profit bridge, Q4 2014 excl. One-time items

SEKm
3000

+300 -398
2500
+110
+165 +23 +2 078
2000 +75
+1 803

1500 -1 547

1000

500

0
Q4 2013 Volumes Price/mix Specialty Savings Currencies Other* Q4 2014
excl. excl. Business
Specialty Specialty
Business Business * R&D, S&A, IT, inflation etc.
One-time items
2013: - 3 350
2014: -470
© SKF Group Slide 19 28 January 2015
 Operating profit bridge, 2014 excl. One-time items

SEKm
10000 +500 +180 -1 227
+375
9000 +390
+505 +8 291
8000 +7 568
7000
6000
5000
4000
3000
2000
1000
0
2013 Volume Price/mix Specialty Savings Currencies Other* 2014
excl. excl. Business
Specialty Specialty
Business Business * R&D, S&A, IT, inflation etc.
One-time items
2013: - 3 875
© SKF Group Slide 20 28 January 2015
2014: -490
Net working capital as % of annual sales

Target: 27%
%
35
34
33
32
31
30
29
28
27
26
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014

© SKF Group Slide 21 28 January 2015

Return on capital employed

One-time items
* Excluding one-time items
%

20
17.1*
15.1*
15 14.8*
16.2
13.9
10

7.5
5

0
2012 2013 31 December 2014

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.

© SKF Group Slide 22 28 January 2015

Cash flow, after investments before financing

SEKm
2,000 1)
5)
4)
1,000 3)

0 2)

-1,000
-2,000
-3,000
-4,000
-5,000
-6,000
-7,000
2012 2013 2014
Excl. acq. and div.: 1) Q3 2012 SEK 1 707 million
2) Q1 2013 SEK -69 million
3) Q3 2013 SEK 871 million
4) Q4 2013 SEK 1 170 million
© SKF Group Slide 23 28 January 2015
Excl. EU payment 5) Q2 2014 SEK 1 423 million
Net debt

SEKm
0
AB SKF,
-5,000 dividend paid (SEKm):
2012 Q2 2 504
-10,000 2013 Q2 2 530
2014 Q2 2 530
-15,000
Cash out from major
-20,000 acquisitions (SEKm):
2012 Q3 829
-25,000
2013 Q1 823
-30,000 2013 Q4 7 900

-35,000 EU payment (SEKm):

2014 Q2 2 825
2012 2013 2014

Net debt: Loans and net provisions for post-employment benefits

less short-term financial assets excluding derivatives.
© SKF Group Slide 24 28 January 2015
Debt structure, maturity years

EURm
900 850
800
700
600
500 500
500
400
300
200
200
100 100 110
100
0
2015 2016 2017 2018 2019 2020 2021

• Available credit facilities: • No financial covenants nor material

EUR 500 million 2019 adverse change clause
SEK 3 000 million 2016
EUR 150 million 2017
© SKF Group Slide 25 28 January 2015
January 2015: SKF demand outlook Q1 2015

Demand compared to the first quarter 2014

The demand for SKF’s products and services are expected to be slightly
higher for the Group, higher for Asia and relatively unchanged for Europe,
North America and Latin America. It is expected to be relatively unchanged for
Automotive Market and Specialty Business and slightly higher for Industrial
Market.

Demand compared to the fourth quarter 2014

The demand for SKF’s products and services are expected to be relatively
unchanged for the Group, Europe and Latin America, and slightly higher for
Asia and North America. It is expected to be relatively unchanged for Industrial
Market and Automotive Market and slightly higher for Specialty Business.

Manufacturing
Manufacturing is expected to be higher year over year and compared to the
fourth quarter.

© SKF Group Slide 26 28 January 2015

SKF demand outlook Q1 2015, main regions

Share of net sales Sequential trend Q1 2015

2014 for Q1 2015 vs Q1 2014

Europe 41% +/-

Asia Pacific 25% ++

North America 25% +/-

Latin America 6% +/-

Total +

© SKF Group Slide 27 28 January 2015

SKF demand outlook Q1 2015, main business areas

Share of net sales Sequential trend Q1 2015

2014 for Q1 2015 vs Q1 2014
Industrial
60% +
Market
Automotive
26% +/-
Market
Specialty
13% +/-
Business
Total +

© SKF Group Slide 28 28 January 2015

SKF sequential volume trend Q1 2015, Industries

Share of net
sales 2014

14% Cars and light vehicles

6% Energy
28% Industrial distribution
14% Industrial, heavy, special and off-highway
11% Industrial, general
9% Vehicle service market
6% Aerospace
5% Railway
5% Trucks
2% Two-wheelers and Electrical

© SKF Group Slide 29 28 January 2015

Guidance for the first quarter 2015*

• Tax level: < 30%

• Financial net: around SEK -250 million

• Currency impact on operating profit vs 2014

Q1: SEK +300 million
Full year: SEK +900 million

• Additions to PPE: around SEK 1.7 billion for 2015

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

© SKF Group Slide 30 28 January 2015

SKF’s programme to improve efficiency and reduce cost
Restructuring
Q4 Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Total
12 13 13 13 13 14 14 14 14
Cost, SEKm 200 250 190 0 50 490 0 100 20 220 340 1 030

People affected 530 410 320 0 130 860 0 170 30 100 300 1 690
Giving future gross
savings:
Full year gross 150 100 80 0 40 220 0 100 5 100 205 575
savings SEKm

Realized gross savings from total programme, SEKm

Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014
13 13 13 13 14 14 14 14

Restructuring 15 35 75 75 200 70 50 10 10 140

S&A 50 50 50 50 200 0 0 0 0 0

Purchasing 100 100 100 100 400 60 100 100 100 360

Total 165 185 225 225 800 130 150 110 110 500

© SKF Group Slide 31 28 January 2015

New productivity improvement programme

• Main activities:
Productivity gain through merging the industrial businesses
- merger between Strategic Industries & Regional Sales and Service
worldwide
- streamlining of supporting country organisations in all main countries

General staff optimization and productivity improvements

- in Group Headquarters and central staff functions
- in the Automotive business

• Reduction of annual cost by SEK 1.2 billion by the end of 2016

Total cost for the programme around SEK 1.4 billion
1 500 people impacted.
Major part of the programme implemented within 2015.

© SKF Group 28 January 2015

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”.

© SKF Group Slide 33 28 January 2015