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SKF Half-year results 2014

SKF Half-year results 2014. Tom Johnstone, President and CEO. 15 July 2014. Examples of new business. Envision Energy, China Strategic long-term partnership A customer in the automation industry Roller screw electromechanical cylinder

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SKF Half-year results 2014

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  1. SKF Half-year results 2014 Tom Johnstone, President and CEO 15 July 2014

  2. Examples of new business • Envision Energy, China Strategic long-term partnership • A customer in the automation industry Roller screw electromechanical cylinder • Dongfang Electric New Energy Equipment Main shaft bearings • Aurizon, Australia Service contract • A customer in the oil and gas industry Asset management services • Bosch Service, Brazil SKF’s vehicle aftermarket product range

  3. Highlights • Inauguration of SKF Campus and SKF North East Asia Distribution Centre in Shanghai. • New SKF Solution Factory in Nieuwegein in the Netherlands. • Events during the quarter: - SKF Wind Farm Management Conference in Berlin • - SKF Life Cycle Management Conference in Buenos Aires • - SKF Asset Management Conference in Prague

  4. Customer awards • Best Technical and Service Award 2013 – Envision Energy, China • Supplier Excellence Award 2013 – National Oilwell Varco (NOV), USA • Premium Supplier Award – Joy Global Underground Mining LLC, USA • Marine Supplier of the year Award 2014 – Rolls-Royce Marine • Excellent Supplier Award – ABB Marine, China • Supplier Certification of Appreciation – Nissan, China • Quality Gold Award 2013 – Yamaha Motor Company • The Qualitas Award – Fiat/Chrysler, Argentina

  5. New products and solutions SKF Gear Bearing Unit • Turbulo BlueMon emission monitoring system Floating piston SKF Tachometer SKF Shaft Alignment Tool SKF Wireless MicroVibe Electric grease transfer pump Low torque operator valve solution Low friction grease for hub bearing units SKF @ptitude Connect SKF Wireless Machine Condition Sensor

  6. SKF Group – Q2 2014 Key points Sales volumes up by 3.6% y-o-y. Manufacturing was slightly higher compared to last year.

  7. SKF Group – Half year 2014 Key points Sales volumes up by 5.0% y-o-y. Manufacturing was higher compared to last year.

  8. Organic sales growth in local currency % change y-o-y 2012 2013 2014

  9. Organic sales growth in local currency % y-o-y 5.2% -0.7% -2.5% Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 4.2%

  10. Sales development by geographyOrganic growth in local currency Q2 2014 vs Q2 2013 Europe 1% North America 3% Asia/Pacific 14% Latin America 2% Middle East & Africa 14%

  11. Sales development by geographyOrganic growth in local currency YTD 2014 vs YTD 2013 Europe 3% North America 3% Asia/Pacific 13% Latin America 1% Middle East & Africa 18%

  12. Components in net sales

  13. Operating profit as reported SEKm 2012 2013 2014

  14. Operating profit excluding one-time items SEKm 2012 2013 2014

  15. Operating margin One-time items * Excluding one-time items % 12.0* 11.9* 11.9* 11.9 11.3 5.8

  16. Operating margin per business area as reported % Specialty Business Strategic Industries Regional Salesand Service Automotive 2012 2013 2014

  17. Operating margin per business area excl. one-time items % Specialty Business Strategic Industries Regional Salesand Service Automotive 2012 2013 2014

  18. SKF’s programme to improve efficiency and reduce cost Restructuring, SEKm: Giving future gross savings, SEKm: Realized gross savings from total programme, SEKm: vs 2012 vs 2013 Note: Run rate Q2 2014 SEK 1,340 million vs 2012.

  19. Operating profit bridge, Q2 2014 SEKm -120 +70 +150 -295 +134 +160 2,096 +160 1,837 Volumes excl. Specialty Business Savings R&D, inflation etc. Q2 2014 Q2 2013 Price/mix Specialty Business One-time items Currencies

  20. Operating profit bridge, half year 2014 SEKm +440 -220 -397 +280 4,120 +240 +60 +400 3,317 Volumes excl. Specialty Business Savings R&D, inflation etc. Q2 2014 Q2 2013 Price/mix Specialty Business One-time items Currencies

  21. Net working capital as % of annual sales Target: 27% % 2012 2013 2014

  22. Return on capital employed One-time items * Excluding one-time items % 17.1* 15.1* 14.6* 16.2 8.7 7.5 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.

  23. Cash flow, after investments before financing SEKm 5) 4) 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 Excl. EU payment 5) Q2 2014 SEK 1,423 million

  24. Net debt SEKm AB SKF, dividend paid (SEKm): 2012 Q2 2,504 2013 Q2 2,530 2014 Q2 2,530 Cash out from acquisitions (SEKm): 2012 Q3 829 2013 Q1 823 2013 Q4 7,900 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.

  25. Debt structure, maturity years 850 500 500 200 110 100 100 • Available credit facilities: • EUR 500 million 2019 • SEK 3,000 million 2016 • SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  26. July 2014: SKF demand outlook Q3 2014 Demand compared to the third quarter 2013 The demand for SKF’s products and services is expected to be slightly higher for the Group and North America, higher for Asia, relatively unchanged for Europe and slightly lower for Latin America. It is expected to be higher for Strategic Industries and relatively unchanged for Regional Sales and Service and Automotive. Demand compared to the second quarter 2014 The demand for SKF’s products and services is expected to be relatively unchanged for the Group and Europe. It is expected to be slightly higher for North America and Asia and slightly lower for Latin America. For Strategic Industries it is expected to be slightly higher and for Regional Sales and Service and Automotive it is expected to be relatively unchanged. Manufacturing Manufacturing is expected to be slightly higher year over year and relatively unchanged compared to the second quarter.

  27. SKF demand outlook Q3 2014, main regions

  28. SKF demand outlook Q3 2014, main business areas

  29. SKF sequential volume trend Q3 2014, Industries Share of net sales 2013

  30. Guidance for the third quarter 2014* • Tax level: around 30% • Financial net for the third quarter:Around SEK -230 million • Currency impact on operating profit versus 2013 Q3: SEK +50 million Full year: SEK -70 million • Additions to PPE: Around SEK 1.6 billion for 2014 * Guidance is approximate and based on current assumptions and exchange rates.

  31. 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 • Investments & Innovation • New and existing facilities • Research and development • IT systems and mobility • Capital efficiency • Fixed capital • Net working capital • Cost reduction • Business Excellence • Consolidation of manufacturing • Optimization and productivity improvements • Reduction in purchasing costs

  32. 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”.

  33. SKF Capital Markets Day in London on 10 September

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