The SKF Group

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The SKF Group
Half-year results 2009 Tom Johnstone,
President and CEO
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Key points from Q2 report

• Record quarterly cash flow
• Q2 SEK 2,425 m H1 SEK 2,948 m
• Dramatic drop in sales volume continued
• Q2 -30.8 H1 -28.9
• Strong price/mix
• Q2 5.6 H1 6.3
• Cost reduction efforts in focus and giving
  results
• - new programme announced
• - annualised savings from all programmes, around
  SEK 800 million
• - in addition, significant short-time working
  being utilized
• Demand outlook for Q3
• - significant decline year over year
• - decline levelling off sequentially

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Highlights Q2 2009

• SKF
• inaugurated a new Solution Factory in Turin,
  Italy
• signed a contract with Cambridge University
  Department of Materials Science and Metallurgy
  to set up the SKF University Technology Centre
  on Steels on campus in Cambridge
• won an order to supply Guohua Energy Investment
  Co. Ltd. in China with SKF WindCon online
  condition monitoring systems and other related
  services
• signed a long-term contract with Hero Honda in
  India to supply ball bearings
• acquired the remaining 49 of the shares in
  Macrotech Polyseal Inc., now called SKF Polyseal
  Inc.
• in cooperation with the Czech police,
  confiscated over 30 tons of counterfeit SKF
  bearings.

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Second quarter 2009
Q2 restructuring SEK 500 m Operating profit
excl. restructuring activities SEK 974 m
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Half year 2009
H1 restructuring SEK 675 m Operating profit
excl. restructuring activities SEK 1,917 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
-21.3
Organic growth
Acquisitions/Divestments
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Sales in local currencies (excl. structural
changes)
change y-o-y
2008
2009
2007
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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
6.6
4.3
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 programmes People
  Costs charged to operating profit
• announced Q4 2008 2,500 SEK 340 m
• Q1 2009 500 SEK 175 m
• Q2 2009 900 SEK 500 m
• 3,900 SEK 1,015 m
• At the end of June 2009, around 3,800 people
  have left the Group since H2 2008, of which
  around 2,000 people under the programmes.
• Total savings from these activities SEK 800 m.
• In addition, around 18,000 people in short-time
  working.

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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
13.4
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 223
2007
2008
2009
including non-controlling interests.
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July 2009 Outlook for the third quarter 2009
Compared to last year the demand for SKF products
and services is expected to be significantly
lower in the third quarter compared to the third
quarter last year for the Group in total, for all
the Divisions and for all regions. Compared to
the second quarter and adjusted for seasonality,
demand is expected to be relatively unchanged for
the SKF Group in total. It is expected to be
lower in Europe, relatively unchanged in North
America and slightly higher in Asia and Latin
America. It is expected to be slightly higher for
the Automotive Division, relatively unchanged for
the Service Division and slightly lower for the
Industrial Division. The manufacturing level
will be significantly lower year on year and
relatively unchanged compared to the second
quarter.
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Volume trends(based on current assumptions)
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Sequential volume trend main segments Q3
2009(based on current assumptions)
Net sales 2008
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Guidance for the third quarter 2009

• Tax level around 30
• Financial net for the third quarterAround SEK
  -200 million
• Exchange rates on operating profit versus
  2008 Q3 SEK 260 million
• Full year SEK 900 million
• Additions to PPE Slightly below 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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