1. Alrik Danielson, President and CEO
SKF Q3 results 2018
Alrik Danielson, President and CEO
Picture: Evolution
9 November, 2018

2. Record result and strong cash flow
6.9% Organic sales growth
Net sales of 21,341 M, organic growth 6.9%
Operating profit 2,597 M (1,964)
Operating margin improved to 12.2% (10.5)
Cash flow 1,626 M (681)
2,597 M Operating profit
12.2% Operating margin
9 November, 2018

3. Industrial business performing well; significantly higher volumes in all three main markets, North America, Europe and Asia 9% organic growth and 14% operating margin
9 November, 2018

4. Automotive; 2% organic growth and 7% operating margin despite slightly lower car volumes in Europe due to new test cycle. Strong demand for trucks outside China
9 November, 2018

5. Improving performance towards our targets
Targets set in 2016 and valid over a business cycle:
6.9%
Organic growth:
Target: 5%
12.2%
Operating margin:
Target: 12%
60%
Net debt / equity:
Target: <80%
29.0%
Net working capital:
Target: 25%
16.5%
Return on capital employed:
Target: 16%
9 November, 2018

6. Continued sales growth in Asia, North America & Europe Organic growth in local currency Q vs Q3 2017
Europe
+6%
North
America
+8%
Asia/Pacific
+11%
Latin
America 0%
9 November, 2018

7. Cooperation on fiber optic sensing systems
9 November, 2018

8. New tapered roller thrust bearings optimised for the most demanding oil & gas applications
9 November, 2018

9. Q3 results – the details Christian Johansson, CFO2
Q3 results – the details Christian Johansson, CFO

10. Sales development 2017 2018 Q3 Q4 Q1 Q2 Organic +8.0 +8.2 +7.5 +9.0
Percent y-o-y Q3 Q4 Q1 Q2
Organic
+8.0
+8.2
+7.5
+9.0
+6.9
Structure
-0.7
-0.6
-0.1
Currency
-3.0
-3.6
-1.9
+3.4
+7.8
Net sales
+4.3
+4.0
+4.9
+11.8
+14.6
9 November, 2018

11. Operating profit
9 November, 2018

12. Operating profit
9 November, 2018

13. Performance by customer group
Industrial
Net sales 15,208 M
Organic sales +9.2%
Operating margin 14.3%, (13.5)
Automotive
Net sales 6,133 M
Organic sales +1.7%
Operating margin 6.8%, (3.9)
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q318
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q318
9 November, 2018

14. 12.2% Operating margin SKF Group – Q3 2018
Financial performance (SEKm)
2018
2017
Net sales
21 341
18 627
Cost of goods sold
Gross profit
5 209
4 561
Gross margin, %
24.4%
24.5%
Selling and administrative expenses
-2 753
-2 583
Other operating income/expense
141
-13
Operating profit
2 597
1 965
Operating margin, %
12.2
10.5
Financial income and expense, net
-253
-273
Profit before taxes
2 344
1 692
Taxes
-753
-586
Net profit
1 591
1 106
Basic earnings per share, SEK
3.35
2.29
12.2% Operating margin
9 November, November, November, November, 2018

15. Cash flow after investments before financing*
9 November, 2018

16. Net working capital – finished goods inventories reduced in the quarter
9 November, 2018

17. Divestment of linear and actuation technology business announced in July
SKF’s linear and actuation technology business had approximately 1,200 employees and sales of SEK 2 billion in The total consideration of the deal is SEK 2.75 billion, on a cash- and debt free basis and it is expected to close during the end of The divestment is subject to regulatory approvals and involves consultation with employee representative bodies.
9 November, 2018

18. Net debt/equity ratio continues to improve
9 November, 2018

19. New EUR-bond issued in September
Extending our maturity profile
7-year bond – matures in 2025
300 million euros
Issued at record low coupon rate of 1.25%
Proceeds used to buy back outstanding bonds - maturing in 2019 and 1.875% and % coupon rates
One time effect of -73 M on financial net in Q3
9 November, 2018

20. Guidance for 2018* Q4 2018: Financial net: around -225 million
Currency impact on the operating profit is expected to be relatively unchanged compared with 2017, based on exchange rates per 30 September, 2018.
2018:
Tax level: around 28% for 2018, excluding effects from divestments
Additions to property, plant and equipment: around 2,600 million for (Previous guidance around 2,400 million).
* Guidance is approximate and based on current assumptions and exchange rates.
9 November, 2018

21. Summary – record result and strong cash flow in Q3
2,597 M Operating profit
Continued growth in Q3
Record-high sales and operating profit
Strong cash flow
Expect to see continued growth in Q4 – slightly higher volumes year-over-year
12.2% Operating margin
1,626 M Cash flow
9 November, 2018

22. October 2018: SKF demand outlook Q4 2018
Demand compared to the fourth quarter 2017 The demand for SKF’s products and services is expected to be slightly higher for the Group, including higher demand for Industrial and slightly lower demand for Automotive. Demand is expected to be significantly higher in North America, higher in Asia, relatively unchanged in Europe and slightly higher in Latin America.
9 November, 2018

23. SKF Q3 results 2018 Q & A
9 November, 2018

24. Financial calendar Q3 report 25 October Virtual roadshow 26 October
Roadshow Asia
6-7 November
Capital Markets Day Germany
29 November
Q4 report
29 January 2019
US Roadshow
February 2019
Annual Report
March 2019
9 November, 2018

25. 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”.

26. 9 November, 2018