1. Tom Johnstone President and CEO
SKF Capital Markets Day ● 10 September 2014
7 December 2018

2. SKF Capital Markets Day 2014 – Main topics
Business update Group and Business Areas
Activities/actions to support strategic priorities and financial targets growth, operating margin, net working capital, ROCE
Development in Asia and particularly China
Specific industry/area focus renewable energy, marine and lubrication
Asset life cycle and mobility
Customer view on SKF

3. Agenda 10.00 Group overview Tom Johnstone Finance Henrik Lange 11.00
Strategic Industries incl. Q&A
Rakesh Makhija Bernd Stephan Robert Law
12.15
Coffee break
12.35
Regional Sales and Service incl. Q&A
Vartan Vartanian Thomas Fröst Christian Gill
13.50
Guest speaker
Bruno van den Heuvel, RWE Power AG
14.20
Lunch
16.00
Automotive incl. Q&A
Tryggve Sthen Luc Graux Ulrich Selig
17.15
17.35
Summary and Q&A
Tom Johnstone Henrik Lange
18.30
Cocktail reception
CMD 2014

4. Alrik Danielson, Designated CEO
New President and CEO
as of 1 January 2015
Born: 1962
B.Sc in Business Administration and International Economics from the University of Gothenburg
Previous positions within SKF:
Financial controller in Gothenburg
President, Industrial Division in Spain and Portugal
President, SKF do Brazil
President, Industrial Division
and several other managerial positions.
Höganäs AB, President and CEO
CMD 2014

5. Half year performance and outlook for Q3
Key topics
Half year performance and outlook for Q3
SKF Group financial targets and priorities
Specific focus - purchasing - inventory reduction - UNITE - Kaydon
CMD 2014
7 December 2018

6. Half year performance and outlook for Q3
Key topics
Half year performance and outlook for Q3
SKF Group financial targets and priorities
Specific focus - purchasing - inventory reduction - UNITE - Kaydon
CMD 2014
7 December 2018

7. SKF Group – Half year 2014 Financial performance (SEKm) 2014 2013
Net sales
34,689
31,544
Operating profit
4,120
3,317
Operating margin, %
11.9
10.5
Operating margin excl. one-time items, %
Profit before tax
3,548
2,864
Basic earnings per share, SEK
5.26
4.10
Cash flow after investments before financing excl. EU payment
1,164
255
Cash flow after investments before financing
-1,661
Organic sales growth in local currency:
SKF Group
5.2%
Europe 3%
Strategic Industries
9.0%
North America
Regional Sales and Service
2.2%
Asia
13%
Automotive
4.5%
Latin America 1%
Middle East and Africa
18%
Key points
Sales volumes up by 5.0% y-o-y.
Manufacturing was higher compared to last year.
CMD 2014

8. Sales development by geography Organic growth in local currency YTD 2014 vs YTD 2013
Europe 3%
North
America 3%
Asia/Pacific
13%
Latin
America 1%
Middle East
& Africa
18%
CMD 2014

9. Components in net sales
2012
2013
2014
Percent y-o-y Q1 Q2 Q3 Q4
Volume
-0.8
-2.8
-5.0
-5.9
-8.7
-1.6
2.2
7.1
6.2
3.6
Structure
-0.1
0.0
0.8
1.0
1.5
2.6
1.1
4.8
4.7
3.8
Price/mix
1.9
2.0
0.5
0.7
-0.6
-0.2
-0.4
Sales in local currency
-3.7
-4.2
-6.5
0.4
3.1
11.7
10.5
8.4
Currency
-2.7
-3.6
-4.0
-2.2
-2.1
Net sales
1.4
2.8
-6.4
-7.8
-10.5
-4.6
0.9
9.6
10.4
9.5
CMD 2014

10. SKF demand outlook Q3 2014, main regions
Share of net sales 2013
Europe
42%
Asia Pacific
24%
North America
Latin America 7%
Total
Sequential trend for Q3 2014
Q3 2014
vs Q3 2013
+/- ++ + -
CMD 2014

11. SKF demand outlook Q3 2014, main business areas
Share of net sales 2013
Strategic
Industries
29%
Regional Sales and Service
39%
Automotive
27%
Total
Sequential trend for Q3 2014
Q3 2014
vs Q3 2013 ++
+/- +
CMD 2014

12. Half year performance and outlook for Q3
Key topics
Half year performance and outlook for Q3
SKF Group financial targets and priorities
Specific focus - purchasing - inventory reduction - UNITE - Kaydon
CMD 2014
7 December 2018

13. 15% 8% 20% Financial targets Operating margin
Changes in sales in local currency incl. structure
20%
Return on capital employed
One-time item
One-time item for the individual year
CMD 2014
7 December 2018

14. SKF’s priorities Sustainable profitable growth
Expand the platform concept
Exploit the asset life cycle approach
Develop new products and grow SKF BeyondZero portfolio
Extend and grow second brands
Acquisitions
Capital efficiency
Fixed capital
Net working capital
Investments & Innovation
New and existing facilities
Research and development
IT systems
Mobility
Cost reduction
Business Excellence
Consolidation of manufacturing
Optimization and productivity improvements
Reduction in purchasing costs
CMD 2014

15. SKF’s priorities Sustainable profitable growth
Expand the platform concept
Exploit the asset life cycle approach
Develop new products and grow SKF BeyondZero portfolio
Extend and grow second brands
Acquisitions
Capital efficiency
Fixed capital
Net working capital
Investments & Innovation
New and existing facilities
Research and development
IT systems
Mobility
Cost reduction
Business Excellence
Consolidation of manufacturing
Optimization and productivity improvements
Reduction in purchasing costs
CMD 2014

16. Half year performance and outlook for Q3
Key topics
Half year performance and outlook for Q3
SKF Group financial targets and priorities
Specific focus - purchasing - inventory reduction - UNITE - Kaydon
CMD 2014
7 December 2018

17. Purchasing in SKF

18. SKF Global Spend 18% 44% 38% SEK 17.7 billion 8% 12% 27% 13% 18% Total
Total SKF spend 2013
Direct Material
18%
Steel Raw Material & Rolling Elements
Total SKF spend is SEK 36 billion – direct and indirect representing ~ 50% respectively
44%
Rings & Subcontracting
Components
38%
SEK 17.7 billion
19 119
Indirect Material & CAPEX 8%
MRO
12%
27%
Facility Management
Professional Services
13%
Logistics
18% IT
Total
Material
Material
21%
CAPEX
SEK 15.6 billion
CMD 2014
Source: Spend cube

19. The foundation is in place
7 December December 2018
The foundation is in place
Current state & opportunity assessment
Vision, strategy & future state
New process framework
New competence framework
How are we performing today?
What should purchasing be doing?
Which processes are necessary to execute the role?
Which competencies are required to execute the processes?
New job roles
New organizational design
Operational set-up
New governance model
These are the building blocks the program have developed, the next step will be detailing and implementation.
(Starting from top left…)
Current state & opportunity assessment
We have done a thorough assessment on how SKF Purchasing performs today
We have a benchmark how we perform relative other companies and competitors
Interviews has been performed and summarized with key issues to solve in the new organization
A spend and opportunity analysis has been performed – we now have the prioritized areas going forward
Vision, strategy & future state
We have defined what the future role of purchasing should be, the role of Purchasing is not only to negotiate price but to play a role in the full internal value chain
Processes
We have clarified which processes are necessary to execute the future role of Purchasing
In the new process framework management, strategic, operational and transactional processes are clearly separated
Competences
We have clarified which competencies are required to execute the processes
This is the foundation for a professional purchasing organization and will be strengthened through a competence development program
New job roles
What job roles do you then need to perform the processes
The new framework defines all job roles in SKF Group Purchasing for the new organization
All job roles has a detailed description of the responsibilities for the role as well as how the performance will be measured
A career path has been developed to clarify the possible career opportunities within SKF Purchasing
Organization design
What organisational design will then in the best way ensure we matches processes, competencies and roles?
We will have a category driven organization with BU Purchasing reporting into GPU
A Sourcing Centre will provide support with key competences that can be leveraged globally and cross categories
Operational set-up
To have the most efficient way of working giving our resource base, we will have a new way of working, for example how we execute sourcing projects and utilizing the new Sourcing center.
Governance model
We will have a new decision matrix clearly defining who is responsible for what decision in the processes. The RAPID is agreed with top management and will be a key enabler to secure we are working according to the new set-up.
More information of these building blocks will follow in subsequent trainings and information packs.
What titles and job roles do we need to perform the processes?
What organizational design best ensure we match processes, competencies and roles?
What is the most efficient way of delivering the processes with minimum cost?
Who is responsible for what decision in the processes?

20. Our global presence Sourcing centres in Chicago Gothenburg Pune
7 December, 2018
Our global presence
Sourcing centres in
Chicago
Gothenburg
Pune
Shanghai
International purchasing offices in
Japan
Korea
Turkey
Russia
Ukraine
Slovakia
Mexico
CMD 2014

21. Responsible sourcing
SKF Care in action – integrated part of purchasing strategy
CMD 2014

22. AGILE – ADAPTIVE & ALIGNED
Purchasing Strategic Direction
AGILE – ADAPTIVE & ALIGNED
Regional supplier base
Supplier Rationalization
Strategic supplier relationships
Supply Chain Agility
People development
UNITE
TCO – Q C D I M – Cash
CMD 2014

23. Transactional Suppliers
7 December, 2018
Supplier relationship Management - Consolidation
Strategic Suppliers
Preferred Suppliers
Transactional Suppliers
Developing Suppliers
DIRECT MATERIAL
Target 14 -1,000 suppliers
INDIRECT & SERVICES
Target 14 -5,000 suppliers
CMD 2014 22

24. Sourcing localization 2012  2013
Supplier relationship management – Localization
77%  80%
90%
85%  85%
90%
80%  85%
90%
75%  80%
90%
13%  15%
25%
70%  75%
75%
10%  10%
Sourcing localization  2013
Target 2014
CMD 2014

25. Strategic Sourcing projects – Components
Potential savings
Strategic sourcing projects are addressing a purchasing spend of ~ SEK 1,275 million
Potential annual reduction of TCO (Total Cost of Ownership) of >15%
Supplier consolidation potential estimated to ~ 250 suppliers
Sheet Metal Parts
Started Q3 2014
Castings
Started Q2 2014
Electronics
Started Q2 2014
Fasteners
Started Q1 2014
Implementation
CMD 2014

26. Strategic Sourcing projects – Indirect material
7 December 2018
Strategic Sourcing projects – Indirect material
Strategic sourcing projects 2014 addressing a spend of SEK 1.3 billion
Potential savings
Under implementation
Packaging / Lubrication / Printing/Car Lease
Addressable spend SEK 550 million with >230 suppliers
95.000
90.000
85.000
RFx ongoing
Office Supply /Tool to drawing/ Metal Cutting tools / Abrasives / Gifts and Sales promotion
Addressable spend SEK 703 million with >900 suppliers
80.000
75.000
70.000
65.000
60.000
55.000
50.000
45.000
40.000
35.000
Lubricants
30.000
25.000
Packaging Plastics
20.000
Packaging Corrugated
15.000
10.000
M&S Printing project
5.000
Company cars Sweden
Implementation 1 2 3 4 5 6 7 8 9 10
CMD 2014

27. Strategic sourcing projects bringing down TCO
 TCO down 15 % on total spend for lubricants
 no of suppliers from 215 to 16
 TCO down 10% on total spend for plastic & corrugated packaging  no of suppliers from 160 to 30
CMD 2014

28. Purchasing ramp up and saving plan (vs 2012)
2013
2014 Fcst
2015
High Performance Purchasing organization
One SKF in Purchasing for full leverage of all spend in SKF
Category and business driven organization fully leveraging SKF’s purchasing power
Global job roles and decision matrix (RAPID) clarifying responsibilities and decision making
GPU supporting the full internal value chain (R&D/PD, After market)
Focus on Total Cost of Ownership (TCO)
Strong alignment with the business through a clear target setting process
Highly competent purchasing professionals
Reduced supply chain risk and costs through top performing suppliers in Q C D I M
SEK 800 m
SEK 400 m
Separation of strategic tasks from transactional tasks
Sourcing waves and continued Speed Sourcing activities
Supplier Innovation Forums with strategic suppliers
Strategic Partnership Agreements
Common purchasing processes
Competence mapping and competence development program
Supplier consolidation through increased sourcing leverage
New GPU org. in operation
New process framework
New competence framework, role descriptions and career path model
Sourcing waves 1 / Speed sourcing started to leverage spend across all BUs
Integration of BU Purchasing
Localization of the strategic supplier base
Speaker’s notes:
2.0
The journey to reach our desired state is not something that can be done in one step. Therefore is the purchasing transformation plan is laid out in phases. On Sept 1 we will are taking the first step in rolling out the new organization, SKF Purchasing 2.0.
Although the new organization will be implemented Sept 1, people will move with their titles and continue to tend to their old responsibilities until a formal hand over is made.
3.0
The 3.0 step will begin in late The key content of 3.0 is the separation of strategic tasks from transactional tasks. This is achieved by incorporating relevant BU employees working with strategic purchasing into the GPU BU organization. The exact size and structure of each BU organization will be developed during the autumn by the BU Purchasing manager and the organization will be launched at the end of 2013 (exact date TBD). Step 3.0 will also mean that all GPU personnel will get new titles and will start working according to the new operational model. Since this require a comprehensive competence mapping, this will be reached during 2014.
The exact timing and content of the latter phases need to be confirmed during the remaining part of this year. But a full integration of SAP will be one key activity to reach the targeted end state.
7 December 2018

29. Inventory reduction activities

30. Focus areas to reduce inventory
Suppliers
Manufacturing
Distribution
Customers
Forecasting and planning
Supply structure and flexibility
Business mix and demand variations
Inventory
Product range and service policies
CMD 2014

31. Program cornerstones and objectives
Increase supply flexibility
Reduce lead times from supplier to customer
Reduce manufacturing set up times and increase frequency
Balance regional manufacturing/ supply/ regional demand
Optimize product range and service policies
Review/reduce product assortment
Review number of stocking points and stocking policies
Eliminate duplication of inventory across stocking points
Improve forecasting and end-to-end planning
Improve forecasting and planning process to drive entire demand chain end-to-end
CMD 2014

32. Program timeplan Increase supply flexibility
2014
2015
2016
2017
Increase supply flexibility
Pilots in selected product lines and regions
Rollout to all product lines and regions
Optimize product range and service policies
Improve forecasting and end-to-end planning
Implement improved process (global roll out)
CMD 2014

33. UNITE
UNITE

34. Background
Current systems landscape is fragmented and partly based on old mainframe solutions that need to be replaced
Strategy to become the Knowledge Engineering Company puts new requirements on our processes and systems support
CMD 2014

35. What we want to achieve Suppliers Purcha- sing Manufac- turing Distri-
bution
Sales
Customers
Leverage SKF full global scale in sourcing
Improve forecasting and end-to-end planning
Streamline processes to reduce waste
Easy for customers to do business with SKF – One coherent interface across all platforms
Standardize processes and master data globally
One modern, integrated systems landscape
CMD 2014

36. Dedicated development and roll out organization
UNITE – our approach
A business led program
Dedicated development and roll out organization
SAP as main software partner
Scope is sales, supply chain, purchasing and finance processes/systems
Gradual design and testing of new processes/systems in a series of pilots before fullscale rollout
CMD 2014

37. UNITE rollout plan
Rollout phase
AMERICAS
ASIA-PACIFIC
Italy
Design phase
Country pilot 3
Germany , France
Template
EMEA
Country pilot 2
Finland pilot
Purchasing pilot
CMD 2014

38. Kaydon update

39. Kaydon Corporation Net sales: around USD 475 million
Employees: around 2,180
Headquarter: USA
Manufacturing: Friction control products (primarily bearings), velocity control products and specialty products, including environmental services.
CMD 2014

40. Kaydon brands in the SKF Family
CMD 2014

41. Kaydon integration - Synergies
Cost synergies
Finance and legal
Purchasing
Logistics
Target – USD 30 million by end 2016
Status – USD 12 million fcst for 2014
Sales synergies:
Renewable energy
Medical
Aerospace
Industrial aftermarket
Target – additional sales of USD 50 million by 2018
Status – new business agreed, new wind order for USD 200 million (50% synergy?)
CMD 2014

42. Kaydon integration – Financial performance
Sales development
growth is 7% in local currencies
good growth in both velocity control and friction control
Operating margin
Excluding PPA it has improved by approx. 300 basis points
PPA impact is some 500 basis points
Outlook Q3
Continued good growth
Integration work continues
- increased focus on sales synergies
- continue activities on cost synergies
CMD 2014

43. SKF’s priorities
CMD 2014