0 19 October 2011. SKF Nine-month results 2011 Tom Johnstone, President and CEO 19 October 2011.

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Presentation transcript:

0 19 October 2011

SKF Nine-month results 2011 Tom Johnstone, President and CEO 19 October 2011

2 Q Strong performance Operating profit,SEKm2,4792,309 Operating margin, % Profit before tax, SEKm2,3451,950 Cash flow, SEKm1,3231,936 Strong organic sales growth in local currency: SKF Group: +8.2% Europe:+9.7%Industrial Division:+7.1% North America:+9.9%Service Division:+12.5% Asia:+4.9%Automotive Division:+3.2% Latin America:+10.2% Outlook for Q4 for SKF Group Demand Relatively unchanged compared to Q Slightly lower sequentially compared to Q Manufacturing level Lower year over year and compared to Q3 2011

3 19 October 2011 SKF opened regional distribution centre in Montevideo, Uruguay to strengthen the service to customers and distributors in Latin America. inaugurated bearing factory in Dalian, China for medium size bearings. was selected to be a member of Dow Jones’ Sustainability World indexes for the 12th successive year and for the 11th successive year in the FTSEGood Index Series. Highlights Q3 2011

4 19 October 2011 Example of new products A new range of seals for wind turbine drive trains. An upgraded range of SKF Explorer spherical roller bearings which offers at least twice the previous life when operating in a contaminated environment. SKF Solar Linear Actuators designed specifically to meet the solar tracking technical requirements. A new bearing range, mainly developed for industrial fans, textile equipment and conveyors. These energy efficient Y-bearings give a 50% reduction in the bearing frictional torque vs conventional SKF Y-bearings.

5 19 October 2011 Sales volume % change y-o-y

6 19 October 2011 Organic growth in local currencies % change y-o-y

7 19 October 2011 Europe +9.7% Asia/Pacific +4.9% Latin America +10.2% Middle East & Africa +0.2% North America +9.9% Growth development by geography Organic growth Q vs Q3 2010

8 19 October 2011 Europe +15.1% Asia/Pacific +14.0% Latin America +10.1% Middle East & Africa +5.3% North America +16.5% Growth development by geography Organic growth YTD 2011 vs YTD 2010

9 19 October 2011 Growth in local currency % y-o-y Acquisitions/Divestments Organic growth -19.0% 14.2% 19.2% Long-term target: 8% per annum Total growth 4.8% 14.4% 0.0% 14.2% 1.0% -20.0%

10 19 October 2011 Components in net sales Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q Percent y-o-y Volume Structure Price / Mix Sales in local currency Currency Net sales

11 19 October 2011 Operating profit SEKm 2009 Restructuring and one-time items

12 19 October 2011 Operating margin % 2009 Restructuring and one-time items 2010 Long-term target level: 15% 2011

13 19 October 2011 Operating margin % * Restructuring and one-time items * Excluding restructuring and one-time items 15.2 Long-term target level: 15% 14.2* 13.8

14 19 October 2011 Operating margin per division Industrial Service Automotive % Excluding one-off items (eg. restructuring, impairments, capital gains)

15 19 October 2011 SEKm Net sales16,54515,465 Operating profit2,4792,309 Operating margin, % Profit before taxes2,3451,950 Net profit1,6561,425 Basic earnings per share, SEK Cash flow, after investments before financing 1,3231,936 Third quarter 2011

16 19 October 2011 SEKm Net sales49,95945,620 Operating profit7,6066,250 Operating margin, % Profit before taxes7,1095,501 Net profit5,0193,946 Basic earnings per share, SEK Cash flow, after investments before financing 2,9953,128 First nine months 2011

17 19 October 2011 Inventories as % of annual sales % Long-term target level: 18%

18 19 October 2011 Cash flow, after investments before financing SEKm Cash out from acquisitions (SEKm) : , * SEK 798 million, excluding the acquisition of Lincoln Industrial. *

19 19 October 2011 Return on capital employed 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. % Long-term target: 27% 25.1

20 19 October 2011 Net debt (Short-term financial assets minus loans and post-employment benefits) SEKm AB SKF, dividend paid (SEKm) : 2009 Q21, Q21, Q22, Cash out from acquisitions (SEKm) : ,

21 19 October 2011 Debt structure Maturity years, EURm Credit facilities: EUR 500 million 2014 SEK 3,000 million 2017 No financial covenants nor material adverse change clause Changes in Q3 1) EUR 50 million repaid 2) SEK 1 billion raised 1) 2)

22 19 October 2011 October 2011: Outlook for the fourth quarter 2011 Demand compared to the fourth quarter last year The demand for SKF’s products and services is expected to be relatively unchanged for the Group. It is expected to be slightly lower in Europe, relatively unchanged in North America and slightly higher in Asia and Latin America. The demand is expected to be slightly higher for the Industrial Division, higher for the Service Division and lower for the Automotive Division. Demand compared to the third quarter 2011 The demand for SKF’s products and services is expected to be slightly lower for the Group. It is expected to be slightly lower for Europe, relatively unchanged for Asia and North America, and slightly higher for Latin America. The demand is expected to be relatively unchanged for the Industrial Division and the Service Division, and slightly lower for the Automotive Division. Manufacturing level The manufacturing level is expected to be lower year on year and compared to the third quarter.

23 19 October 2011 Demand outlook, regions (based on current assumptions) Sequential trends for: Q Q Share of net sales 2010 Europe46% Asia Pacific27% North America18% Latin America6% Total Q vs Q = + =

24 19 October 2011 Demand outlook, divisions (based on current assumptions) Sequential trends for Q Share of net sales 2010 Industrial32% Service36% Automotive30% Total Q vs Q =

25 19 October % 14% 5% 4% 25% 18% 12% 10% 3% 5% Trucks Cars Energy Railway Industrial distribution Industrial OEM, General+Special Vehicle Service Market Industrial OEM, Heavy + Off-highway Electrical and two-wheeler Aerospace Sequential volume trend main segments Q (based on current assumptions) Share of net sales 2010

26 19 October 2011 SKF today – more robust and more diverse Divesting and outsourcing component manufacturing, reducing fixed cost and invested capital Manufacturing footprint in best cost countries Reducing working capital Customized solutions, value-added products, technology platforms Diversifying growth, faster growing segments and geographies Acquisitions supporting growth and profitability

27 19 October 2011 SKF today - prepared for a changing demand picture Activities already underway The SKF 3C programme has been re-emphasised Customers:- increase customer and distributor contacts - ensure a very good service level - utilise opportunities from our platform/segment approach - maintain strong commitment to R&D – especially energy efficiency Cost:- strict cost control (which has no customer impact) - review further permanent changes to the cost structure Cash:- strong cash flow focus Adjustment of manufacturing output to demand situation use flexibility in the working hours through: - time banks - temporary workers - government supported schemes - short-time working agreements Review of investment plan and timing maintain investment plan for faster growing areas Strong focus on faster growing regions and segments is maintained

28 19 October 2011 Guidance for the fourth quarter 2011 Tax level: around 30% Financial net for the fourth quarter: Around SEK -175 m Exchange rates on operating profit versus 2010 Q4: SEK -100 m Full year: SEK -1.2 bn Additions to PPE: Less than SEK 2.0 bn for 2011 Guidance is approximate and based on current assumptions and exchange rates.

29 19 October 2011 Key focus areas ahead 2011 Profit and cash flow - manage currency and material headwinds Manufacturing and suppliers to support demand Growing segments and geographies Initiatives and actions to support long term targets Integration of Lincoln Industrial Business Excellence and competence development One SKF and SKF Care as guiding lights

30 19 October 2011 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 under the Administration Report; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.

31 19 October 2011