1. Alrik Danielson, President and CEO
SKF Q2 results 2017
Alrik Danielson, President and CEO
26 April, 2018

2. High pace in transformation – Q2 activities
Digitalisation and connectivity
Collaboration in place with Honeywell
Enlight Centre for Marine launched
SKF Insight, wireless condition monitoring system enabling condition based maintenance for rail operators
Investments
The world’s first test centre for large-size bearings was inaugurated in Schweinfurt, Germany
New production facilities for automotive spare parts in St-Cyr-sur-Loire, France
Structure
Divestment of Reelcraft completed
26 April, 2018

3. Sven Wingquist Test Center
26 April, 2018

4. Solid financial performance in Q2
Sales SEK M, +10.4% compared to Q2 2016, organic sales +7.5%
Adjusted operating profit SEK M (2 020)
Adjusted operating margin 12.0% (11.0)
Items affecting comparability SEK -121 M (-145)
Cash flow SEK M (4 225)
Profit before tax SEK M (1 656)
12.0% Operating margin*
* Adjusted for items affecting comparability
26 April, 2018

5. Improving performance towards our targets
7.5%
Organic growth:
Target: 5%
11.4%
Operating margin:
Target: 12%
86%
Net debt / equity:
Target: <80%
29.8%
Net working capital:
Target: 25%
13.3%
Return on capital employed:
Target: 16%
26 April, 2018

6. Progress towards our financial targets
Five financial targets
Targets are set over a business cycle
Valid from 2016
26 April, April, April, 2018

7. Sales development by geography Organic growth in local currency Q2 2017 vs Q2 2016
Europe
+3.1%
North
America
+10.0%
Asia/Pacific
+11.7%
Latin
America
+9.9%
Middle East
& Africa
+13.3%
26 April, 2018

8. Sales development by Customer Industry
26 April, 2018

9. Q2 results – the details Christian Johansson, CFO

10. Sales development 2016 2017 Q2 Q3 Q4 Q1 Organic -4.4 -0.6 +1.2 +8.0
Percent y-o-y Q2 Q3 Q4 Q1
Organic
-4.4
-0.6
+1.2
+8.0
+7.5
Structure
-2.0
-1.8
Currency
-3.0
+0.1
+3.7
+4.9
Net sales
-8.0
-2.5
+3.1
+10.9
10.4
26 April, 2018

11. Organic sales growth
26 April, 2018

12. Adjusted operating profit*
* Adjusted for items affecting comparability
26 April, 2018

13. Operating profit
26 April, 2018

14. Performance by customer group
Industrial
Net sales SEK
Organic sales +7.7%
Adjusted operating margin* 13.8%
Automotive
Net sales SEK M
Organic sales +7.1%
Adjusted operating margin* 8.1%
* Adjusted for items affecting comparability
26 April, 2018

15. 12.0% Operating margin* SKF Group – Q2 2017
Financial performance (SEKm)
2017
2016
Net sales
20 229
18 319
Cost of goods sold
Gross profit
5 100
4 479
Gross margin, %
25.2
24.5
Selling and administrative expenses
-2 776
-2 583
Other operating expenses -9
-21
Operating profit
2 315
1 875
Items affecting comparability
-121
-145
Adjusted operating profit
2 436
2 020
Operating margin, %
11.4
10.2
Adjusted operating margin, %
12.0
11.0
Financial income and expense, net
-258
-219
Profit before taxes
2 057
1 656
Taxes
-837
-950
Net profit
1 220
706
Basic earnings per share, SEK
2.51
1.44
12.0% Operating margin*
* Adjusted for items affecting comparability
26 April, 2018

16. Cost management
The fixed cost index was 101 at the end of Q2, adjusted for the costs related to the implementation of our new ERP system Unite the index was 99.
The number of employees increased by 732 in the quarter, adjusted for the divestment of Reelcraft, – of which 41 permanent employees, and 691 temporary employees including agency personnel. Staff employees were reduced by 35 people.
Activity-based cost reductions continue with high focus
26 April, 2018

17. Cash flow after investments before financing*
* After investments before financing (excluding acquisitions and divestments and EU payment in Q ) 2013 and 2014 are restated
26 April, 2018

18. Net working capital 29.8% of annual sales
26 April, 2018

19. Reelcraft divested to Madison Industries on 30 June
Reelcraft manufactures hose, cord and cable reels for industrial applications. Reelcraft joined SKF as part of the acquisition of Lincoln Industrial in 2010 and is headquartered in Indiana, USA. Reelcraft’s sales in 2016 amounted to approximately USD 55 million. The total consideration of the divestment is USD 115 million on a cash-free and debt-free basis
Financial effects
Cash flow, net proceeds in Q2 SEK million
Taxes to be paid in coming quarters SEK million
Net income effect in Q2 SEK million
26 April, 2018

20. Net debt increased by 1 billion in the quarter – dividend of 2
Net debt increased by 1 billion in the quarter – dividend of 2.5 billion paid
26 April, 2018

21. Debt structure Average duration of four years
No financial covenants or material adverse change clauses
Credit facilities: - EUR M SEK 3,000 M 2018
Buy back of EUR 300 M of the 2020 bond in Q2 - one time effect in the financial net of -97 M in Q2
26 April, 2018

22. Guidance for 2017* Q3 2017: Financial net: around -200 million
Currency impact on the operating profit is expected to be neutral compared with 2016, based on exchange rates per June 30, 2017.
2017:
Tax level: around 30% for 2017, excluding effects from divestments
Additions to property, plant and equipment: around 2,200 million for
* Guidance is approximate and based on current assumptions and exchange rates.
26 April, 2018

23. July 2017: SKF demand outlook Q3 2017
Demand compared to the third quarter 2016 The demand for SKF’s products and services is expected to be higher for the Group, including Industrial and Automotive. Demand is expected to be higher in Europe, North America and in Asia and significantly higher in Latin America. Demand compared to the second quarter 2017 The demand for SKF’s products and services is expected to be lower for the Group and Industrial and slightly lower for Automotive. Demand is expected to be significantly lower in Europe and relatively unchanged in North America, Asia and in Latin America.
26 April, 2018

24. SKF Q2 results 2017 Q & A
26 April, 2018

25. Financial calendar SEB Conference Stockholm 24 August
SHB Conference Stockholm
21 September
US Roadshow
September
Q3 report
31 October
Goldman Sachs Conference London
November
Q4 report
1 February, 2018
26 April, 2018

26. 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; “Risk management at SKF" and "Sensitivity analysis”.

27. 26 April, 2018