The SKF Group

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The SKF Group

• SKF Investor Relations
• 1 November 2009

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SKF - A truly global company

• Established 1907
• Sales 2008 SEK 63,361 million
• Employees 44,799
• Production sites 110 in 28 countries
• SKF presence in over 130 countries
• Distributors/dealers 15,000 locations
• Global certificates ISO 14001
• OHSAS 18001 certification

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Net sales by customer segment
Cars and light trucks
Industrial distribution
Aerospace
Railway
Commercial transport
Off-highway
Vehicle Service Market
Trucks
Special industrial equipment
Two-wheeler and Electrical
General industry
Energy
Heavy industry
Industrial business
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(2002)
(1998)
SKF 2008
Net sales
Average number of employees
Tangible asset
(12)
(25)
(9)
(10)
(14)
(14)
(13)
(26)
(8)
(19)
(13)
(18)
North America
Latin America
WesternEurope
Eastern Europe
Middle East and Africa
Asia
Sweden
of group total
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SKF Group Vision
To equip the world with SKF knowledge
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Platforms investing in the future
Organic Investments in PPE SEK 2.5 billion in
2008 around SEK 2 billion in 2009 around SEK
1-1.5 billion in 2010 Acquisitions 5
acquisitions during 2008 SEK 1.3 billion R
D - New energy efficient bearings and
solutions - New market offers/products SEK
1.2 billion 2008
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Investing in new factories in Russia and India
Haridwar, India
Tver, Russia
Ahmedebad, India
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SKF Solution Factory competences
Examples of capabilities



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SKF Solution Factories 2009
Sweden
Alberta
Russia
UK Germany Italy
Tianjin
Turkey
Shanghai
Texas
Taiwan
India
Mexico
Colombia
Australia
Brazil
Johannesburg
Opened
Planned
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SKF wind energy industry
New CRB-design with extra-high carrying
capacity for wind-gearboxes.
New pitch bearing design with improved corrosion
protection
SKF WindCon 3.0/Webcon Intranet
supervised condition monitoring
DRTRB-unit Nautilus with segmented cage for
minimized friction
Automatic centralized lubrication kits for
reduced maintenance cost
XL Hybrid bearings with ceramic balls for
superior insulation
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What is SKF knowledge?
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SKFs platforms
Bearings and units
13
SKFs platforms
Seals
14
SKFs platforms
Mechatronics
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SKFs platforms
Lubrication systems
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SKFs platforms
Services
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Acquisition 2003-2009Identifying gaps and
opportunities in all platforms
Seals
Bearings and units
Lubrication systems
Services
Mechatronics
Economos (2006)
Safematic (2006)
ABBA (2007)
SNFA (2006)
Macrotech (2006) Macrotech (2009)
Jaeger (2005)
GLO (2008)
S2M (2007)
Baker (2007)
Vogel (2004)
PMCI (2007)
ALS (2007)
QPM (2008)
TCM (2003)
PBA (2006)
Sommers (2005)
Scandrive (2003)
Monitek (2006)
Cirval (2008)
Peer (2008)

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Investing in RD for staying in the forefront

• Main areas
• Environment
• Core technologies
• New products
• Strengthen RD activities in fast growing
  regions
• Strengthen links with universities and high
  schools.

• gt30 increase in RD spending
• in 2008

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Six Sigma

• 2009 Q2 status
• 18 Master Black Belts
• 421 Black Belts
• 2,165 Green Belts
• 452 projects closed whereof 17 replicated
• 1,131 projects ongoing

Hard savings 2005 SEK 150 m 2006 SEK
200 m 2007 SEK 302 m 2008 SEK 462 m
2009 Ytd SEK 184 m
4 dimensions Standard Six Sigma, Design for
Six Sigma, Lean Six Sigma and Six Sigma for
Growth
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Financial performance
Sales growth in local currency
Operating margin


13.2
12.9
12.6
11.8
12.2
10.8
7.3
7.5
7.1
9.9
5.2
8.0
5.2
-20.8
Excl. effects from sale of Ovako 2005 10.4
2006 10.1
Return on capital employed

24.9
24.0
23.0
21.9

• Long-term targets
• 12 Operating margin, level
• 6-8 Growth per annum (local)
• 24 Return on capital employed

19.0
14.0
10.2
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Breakdown - COGS and SA (2008 SEK 55,618 m)

• Raw material 25

• Semi-finished components 15

• Finished components, shop supplies, products
  etc 60

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The SKF Group

• Nine-month results 2009

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Key points from Q3 report

• Strong cash flow
• Q3 SEK 1,359 m YTD September SEK 4,307 m
• Dramatic volume drop year over year. Trend
  indicates levelling off.
• Q3 -24.9 YTD September -27.6
• Continued strong price/mix
• Q3 3.7 YTD September 5.5
• Cost reduction efforts in focus and giving
  results
• - annualised savings from all programmes, around
  SEK 800 million
• - significant short-time working being utilized.
  Now 14,000 people.
• Demand outlook for Q4
• - year over year significantly lower
• - sequentially slightly higher

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Highlights Q3 2009

• SKF
• inaugurated its additional investment in the
  factory for large size bearings in Dalian, China,
  which doubles the manufacturing capacity.
• signed a Memorandum of Understanding with Sinovel
  Wind Co. Ltd for strategic partnership, and a
  series of contracts with a value exceeding SEK
  330 m for main shaft bearings and sealing systems
  for 3MW wind turbines.
• signed a service contract with Transocean. The
  contract is worth SEK 10 m and covers asset
  reliability services for 59 of Transocean's
  drilling rigs.
• was selected as the sector leader for the IEQ
  Industrial Engineering sector in the 2009 Dow
  Jones Sustainability Indexes (DJSI). SKF was also
  included in the FTSE4Good Index Series, for the
  ninth year in succession.

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Highlights Q3 2009

• SKF launched 11 new solutions to help customers
  increase equipment reliability, reduce
  maintenance costs and environmental impact

Super precision bearings
Sealed spherical roller bearings
Y-bearings
Wind turbine blade bearing grease
Telescopic pillar system
Sealing solutions for screw compressors
Large diameter sealing solutions
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Third quarter 2009
Q3 restructuring around SEK 200 m Operating
profit excl. restructuring activities SEK 1,157 m
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First nine months 2009
YTD September restructuring around SEK 875
m Operating profit excl. restructuring
activities SEK 3,074 m
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Growth in local currency(Organic growth
Acquisition/Divestments)
Long-term target level 6-8 per annum
y-o-y
13.2
7.1
-20.8
Organic growth
Acquisitions/Divestments
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Sales in local currencies (excl. structural
changes)
change y-o-y
2008
2009
2007
30
Sales volume
change y-o-y
2008
2009
2007
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Components in net sales
2007
2008
2009

Percent y-o-y
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Operating margin
Long-term target level 12

13.3
12.7
12.9
12.2
7.3
5.2
Restructuring and one-time items
Excluding restructuring and one-time items
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Operating margin
Long-term target level 12

2007
2008
2009
Restructuring and one-time items
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Operating margin per division

Service
Industrial
Automotive
2007
2008
2009
Excluding one-off items (eg. restructuring,
impairments, capital gains)
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Activities to adapt to lower demand

• Restructuring/impairment activities People
  Costs charged to operating profit
• Q4 2008 2,500 SEK 340 m
• Q1 2009 500 SEK 175 m
• Q2 2009 900 SEK 500 m
• Q3 2009 70 SEK 200 m
• 3,970 SEK 1,215 m
• At the end of September 2009, around 4,400
  people have left the Group since the third
  quarter last year, of which around 2,500 people
  under the programmes.
• Total savings from these activities around SEK
  800 m.
• In addition, around 14,000 people in short-time
  working end of September 2009.

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Inventories as of annual sales
Long-term target level 18

2007
2008
2009
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Return on capital employed
Long-term target level 24

24.9
24.0
10.2
ROCE Operating profit plus interest income, as a
percentage of twelve months average of total
assets less the average of non-interest bearing
liabilities.
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Net debt (Short-term financial assets minus
loans and post-employment benefits)
SEKm
AB SKF, dividend paid (SEKm) 2007 Q2
2,049 2008 Q2 2,277 2009 Q2 1,594 Redemption
(SEKm) 2007 Q2 4,554 2008 Q2 2,277
2007
2008
2009
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AB SKF, debt structure
Amount in million Maturity Euro Bond EUR
132 2010-06 SEK Bond SEK 1,500 2011-06 Term loan
in euro EUR 150 2013-06 Euro Bond EUR
500 2013-12 Euro loans EUR 130 2014-03 Euro loan
EUR 100 2016-06
Was EUR 250 million, reduced by EUR 118 million
in Q2.
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Cash flow, after investments before financial
items
SEKm
Cash out from acquisitions (SEKm)
2007 1,209 2008 1,284 2009 239
2007
2008
2009
including non-controlling interests.
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October 2009 Outlook for the fourth quarter 2009
Sales development compared to fourth quarter last
year The demand for SKF products and services is
expected to be significantly lower for the Group
in total and in Europe and North America. In Asia
it is expected to be unchanged and in Latin
America slightly higher. It is expected to be
unchanged for the Automotive Division but
significantly lower for the Industrial Division
and Service Division. Sales development compared
to the third quarter this year The demand is
expected to be slightly higher for the SKF Group
in total. It is expected to be relatively
unchanged in Europe and North America and
slightly higher in Asia and Latin America. It is
expected to be relatively unchanged for the
Automotive Division and slightly higher for both
the Service Division and the Industrial Division.
Manufacturing level The manufacturing level will
be significantly lower year on year and slightly
higher compared to the third quarter.
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Volume trends(based on current assumptions)
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Sequential volume trend main segments Q4
2009(based on current assumptions)
Net sales 2008
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Guidance for the fourth quarter 2009

• Tax level around 30
• Financial net for the fourth quarterAround SEK
  -200 million
• Exchange rates on operating profit versus
  2008 Q4 0
• Full year SEK 750 million
• Additions to PPE Around SEK 2 billion for 2009

-
Guidance is approximate and based on current
assumptions and exchange rates.
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Key focus areas ahead 2009

• Profit and cash flow
• - maintain positive price/mix
• - drive operational efficiency and cost
  reduction
• - reduce working capital and investments
• Adjustment of manufacturing output to new demand
  levels
• - restructuring
• - short-time working
• Growing segments and geographies
• Strengthening the platform/segment approach
• Competence development

SKF Care and Six Sigma as guiding lights
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SKF Care
Business Care
Employee Care
Operating margin
SKF Care
BeyondZeroTM
Community Care
Environmental Care
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SKF Group Vision
To equip the world with SKF knowledge
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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 "Most important factors
  influencing the financial results", "Financial
  risks" and "Sensitivity analysis.

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Welcome to the IR website www.skf.com gt
Investors
Investor Relations function Head Marita
Björk Tel [phone] Mobile 46 705
181994 E-mail marita.bjork_at_skf.com
Assistant Anna Alte Tel [phone] Mobile
46 705 271988 E-mail anna.alte_at_skf.com
Event coordinator and secretary Monica
Svensson Tel [phone] Fax 46 31
3371722 E-mail monica.svensson_at_skf.com
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