Industrial Market, Strategic Industries

1. Industrial Market, Strategic Industries

2. Speakers 25 minRakesh MakhijaPresident Strategic Industries 15 min Rutger Barrdahl DirectorRailway and Off-highway 15 min Ole K Jødahl Director Industrial Drives 5 min Key business message & Summary 15 min Q&A CMD 2013

3. Agenda Strategic Industries agenda & overview Significant news Strategy and market direction Value and Cost leadership Asset Life Cycle – ‘every business must have a service business’ SKF BeyondZero Outlook and key business message CMD 2013

4. Industrial Market, Strategic Industries Net Sales 2012 = SEK 20,204 million No. of employees = 19,096 Full responsibility for sales to both OEM and end users, as well as business development, manufacturing, and engineering % of net sales by geographical area (2012): Middle East, Africa Asia, Pacific Europe North America CMD 2013

5. Film

6. Voice of the Customer – what is important to them • Energy efficiency • Reliability • Cost reduction • Uptime • Partnership CMD 2013

7. Significant news

8. Aerospace Significant news • Long-term contract worth SEK 900 million with Turbomeca • Awarded key bearing programs with the industry leaders (Pratt GTF, Bell 525, Eurocopter X4, Safran LEAP X) • Renewed long-term agreements with major partners such as GE and Agusta- Westland • SKF Aerospace Innovation Centers with Penn State Erie, The Behrend College, and a co-Chair with INSA Lyon dedicated to the study of lubricated interfaces in aerospace CMD 2013

9. Railway Significant news • Start up of production and global launch of a new range of Tapered Roller Bearing units (AAR) for freight cars, strengthening our role in the large freight wagon markets. • Major orders of wheel set bearings (TBU) for very high speed trains (>300 km/h) in China, with the customers Tangshan Loco and Changchun Railway Co. • Very strong overall growth in our Chinese railway business for passenger train applications. CMD 2013

10. Renewable Energy Significant news • Three-year agreement signed with Siemens Windpower for supply of the new generation SKF Nautilus bearings • Success with SKF WindCon systems to Vestas Services in multiple markets • Supplier and development partner to David Brown Wind for gearbox developmentfor a multi-megawatt offshore wind turbine model • SKF in forefront development in the ocean energy market with supply agreements with several manufacturers of wave and tidal turbine devices • Launch of the SKF Wind Industry Quality Standard CMD 2013

11. Traditional Energy Significant news • Extended service contract with two major oil producers on the Norwegian shelf, SEK 40 million over 5 years • Service contract with major USA oil & gas pipeline (20,000km) in the US, 3 years SEK 20 million • Contracts for condition monitoring, bearings and maintenance services with a major Latin American oil company for SEK 20 million over 3 years • Supplying Magnetic Bearing technology for two new major off shore projects in Australia for the Ichthys Gas Field CMD 2013

12. Industrial Drives Significant news • Received large prototype orders from major Chinese and American air-blower customers for our new high speed permanent magnet motors using magnetic bearings • Tripled seal sales to a leading German gearbox producer. We are the main seal supplier to several of their manufacturing locations • New product start of Full Complement Cylinder Roller Bearings in a market that was traditionally dominated by our competitors in Germany CMD 2013

13. Precision Significant news • Large order achieved in material joining applications for Automotive industry, to supply SKF Electromechanical Cylinders (based on SKF superior roller screw technology) • Global launch of new telescopic pillar for ophthalmic and infant care devices • Initiated Super Precision bearings production in Charleston, US to better serve the North America machine tool market • Machine Tool Competence Centre in Shanghai CMD 2013

14. Lubrication Significant news Photo: BEUMER Group GmbH & Co. KG • Equipped BEUMER belt conveyer complex for unloading iron ore vessels in Malaysia with 100 SKF automatic lubrication systems • Secured Oil Circulation System and Grease lubrication systems for three new machines at Metso Paper Sweden AB • Supplying 25 Automatic Lubrication System including installation, testing and documentation to the Norwegian Public Roads Administration CMD 2013

15. Strategy and market direction

16. SI agenda – short to medium term • Making growth happen – profitably • Every business must have a service business • Manufacturing Development – cost, quality, and safety • Execute SI organization efficiency programs – footprint, stock optimization, and cost reduction • China, Germany, USA, and India • M&A • SKF BeyondZero portfolio • Building a great SI organization – meritocracy, excitement and vibrancy Value and Cost Leadership – the road to sustained leadership CMD 2013

17. Capture the full potential of the asset life cycle • Concept evaluation& simulation • Detailed calculations & virtual testing • Design validation & real testing • Series production • Factory Acceptance Test> OEM Asset Idea Design Develop Manufacture OEM Supply End User Install End User Install • Commissioning > Site Acceptance Test • Asset Register development & spare parts plan • Maintenance strategy deployment Operate Monitor Maintain Repair Restore • Operator Inspections (technology & processes) • Condition Monitoring & prognostics • Remote Diagnostics & Onsite Investigations • - Maintenance & Reliability Engineering • Mechanical Services / Troubleshooting • Root Cause Failure Analysis • Reliability analysis & improvement assessment CMD 2013

18. Asset life cycle management for wind industry • Design and develop • Engineering Consultancy Services • Calculation and simulation tools • Design development partnership with turbine manufacturers • R&D and testing activities • Manufacturing and testing • Customized mainshaft solutions • (Nautilus, Self aligning / CARB and rigid) • Industry specific gearbox offerings; • (HC-CRB, separable HC-CRB, black-oxidized) • Generator solutions;(XL-hybrid bearings, Insocoat bearings) • Sealing solutions, Lubrication systems Specifications (Active involvement in standardization committees and other industry bodies) • Installation • Alignment services • Bearing mounting services • Maintenance & Repairs • Bearings & seals replacement parts • Gearbox Spare part kits • Gearbox refurbishment services • Logistic services • Operate and Monitor • WindCon monitoring system • Remote monitoring services • Lubricants • Mechanical & Training services • Asset Efficiency programs CMD 2013

19. Value built around Asset Life Cycle Management END USER OEM Idea Design Develop Manufacture Install Operate Monitor Maintain Repair Redesign CMD 2013

20. Value propositions for wind aftermarket Spare parts Driveline services Condition based maintenance Remote monitoring & Asset Management Services CMD 2013

21. Availability – Spare Parts Management Program for wind SKF Spare Parts Management • As wind farms age, the O&M cost increase • In order to maintain turbine performance and reliability, a Spare Parts Program is needed to ensure • Availability of key and critical components • Short lead times and committed service levels • Spare parts for gearboxes, main bearings, generators,… • Bearings • Housings • Seals • Lubrication systems Lead time Availability CMD 2013

22. Levellized Cost of Energy (LCOE) - Driveline services for wind SKF driveline services Actively develop and implement new, efficient solutions and services Root cause failure analysis on large drive train components like main shaft and gearbox Development of upgrade packages Wind turbines specific improvement programs LCOE reduction by early involvement! Offer • Drive line service offers: • Upgrading instead of replacing • Bearing remanufacturing • Application analysis • Training CMD 2013

23. Reduce maintenance – Condition Based Maintenance for wind Condition Based Maintenance Clear industry trend to equip multi MW WTGs with condition monitoring systems Large utilities upgrade their wind farms with CMS Market focus still on hardware Values lies in the efficient remote diagnostic capabilities and expertise. WindCon + Active WindCon Vattenfall – Vestas V80 – Esbjerg Sweden • CBM enables value positioning in terms of: • Upgrading customer assets • Increasing power output • Increasing uptime Maintenance cost Availability CMD 2013

24. 1 3 Business impact 2 4 Maintenance complexity Oil and gas services Advanced Diagnostics Turbomachinery & Pumps Electrical Motor Monitoring Condition Monitoring Mechanical Support Alignment, Balancing Maintenance strategy CMD 2013

25. Magnetic Systems services • Installed base: • Large installed base and growing • Worldwide organization • Activities: • Field support service (tuning, commissioning, assistance) • Spare parts • Retrofit and upgrades • Maintenance & training • Success factors: • Short lead time and service level commitment • Competent service organization • New Collaborative Business Model

26. Traditional Power services • Probabilistic risk assessment (PRA) is a systematic and comprehensive methodology used to evaluate risks associated with complex engineered systems and facilities. In a PRA, risk is characterized by two quantities: • the magnitude (severity) of the possible adverse consequences, and • the likelihood (probability) of occurrence of each consequence. • SKF (ERIN) has established a proven track record as the leading provider of Probabilistic Risk Assessment (PRA) consulting services to the power industry. CMD 2013

27. Lubrication - service Rautaruukki Steel Mill, Raahe, Finland 20,000 lubrication points automated by SKF “Ruukki Metals OY has signed a lubrication service contract with SKF in Finland. The service covers several areas of the mill and is worth 500,000 euro” Ruukki CMD 2013

28. Lubrication – Top of Rail (TOR) Conditioning Systems We undertake full responsibility for installation, commissioning, including civil works. CMD 2013

29. The SKF BeyondZero portfolio

30. SKF Nautilus SKF Solar Hub SKF Flowline Active magnetic systems SRB + CARB The SKF BeyondZero portfolio – Strategic Industries ELI spherical plain bearing Cylinder lubrication unit Titanium bearings for Aerospace Food line Y-bearings SKF solar linear actuator Servo actuator SKF E2DGBB High endurance Slewing bearings Energy efficient blowers Dry lubrications for conveyor belts Sour gas compressor bearings CTBU low friction seal CMD 2013

31. Business Unit presentations

32. Outlook and key business message

33. Performance 2011 – 2013 YTD Half year 2013 Half year 2012 2011 2012 20 807 SEKm 9 348 SEKm 10 792 SEKm 20 093 SEKm Net sales 9.2% (11.2%) 9.8% (10.7%) 13.9% (14%) restated 9.8% (10.2%) Operating margin CMD 2013

34. Market trend per industry SI overall outlook: • Modest improvement in overall business environment • Speed of change will differ between segments • China growth expected to improve • Drive life cycle growth strategy Aerospace: • Strong demand driven by single aisle demand, Boeing and Airbus, supporting a stable, high, build rate • Continuing growth in RIC Railway & Off-highway: • Railways: Asia coming back on growth track, Europe and USA in stable mode • SKF: Continued strong Agri business • Contraction in mining related business Renewable energy: • SKF: Renewable Energy in a phase of business recovery, positive projections • Ongoing quick globalization of industry, with new emerging markets developing • Trend of expanding turbine sizes and wind industry going offshore CMD 2013

35. Market trend per industry Traditional energy: • Deepwater and subsea exploration & production continue to be growth areas • Natural gas boom impacting future investments in transportation (pipelines) • Hydraulic fracturing technology now being implemented in UK and China Industrial Drives: • Modest global business growth • Energy efficiency importance increases - The BeyondZero portfolio and our new launches supports the growth • SKF: New range of application specific performance solutions Precision: • Moderate business recovery with higher growth in USA, China and India • SKF: Increase regional manufacturing footprint • SKF: Ongoing product cost reduction programs Lubrication: • SKF: Increased focus on key developing segments (Agriculture, Oil & Gas) • SKF: Integration and synergy-building continue according to plan • SKF: Focused on key growth markets (Russia, Asia, and Latin America) CMD 2013

36. Key business message – Strategic Industries Growth drivers • Every business must have a service business • China, Germany, USA, and India • The SKF BeyondZero portfolio Competitive advantage • Life cycle management • Five technology platforms • Global footprint with local competence Cost efficiency • Manufacturing Development – cost, quality, and safety • Execute SI organization efficiency programs – footprint, stock optimization, and cost reduction • Business Excellence across SI CMD 2013

37. 1930 Oil & Gas Journal ad The Value and Cost Leadership Equation valued CMD 2013