The SKF Group

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The SKF Group

• SKF Investor Relations
• 1 September 2009

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SKF - A truly global company

• Established 1907
• Sales 2008 SEK 63,361 million
• Employees 44,799
• Production sites 110 in 28 countries
• SKF presence in over 130 countries
• Distributors/dealers 15,000 locations
• Global certificates ISO 14001
• OHSAS 18001 certification

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Net sales by customer segment
Cars and light trucks
Industrial distribution
Aerospace
Railway
Commercial transport
Off-highway
Vehicle Service Market
Trucks
Special industrial equipment
Two-wheeler and Electrical
General industry
Energy
Heavy industry
Industrial business
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(2002)
(1998)
SKF 2008
Net sales
Average number of employees
Tangible asset
(12)
(25)
(9)
(10)
(14)
(14)
(13)
(26)
(8)
(19)
(13)
(18)
North America
Latin America
WesternEurope
Eastern Europe
Middle East and Africa
Asia
Sweden
of group total
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SKF Group Vision
To equip the world with SKF knowledge
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Platforms investing in the future
Organic Investing above depreciation 9 new
factories (6 opened already, 3 under
development) Significant investment in
existing operations (e.g. Sweden,
Germany) Acquisitions Over SEK 5.2 billion
invested 20 acquisitions all
platforms RD AE New energy efficient
bearings and solutions New market
offers/products
SEK 24 billion (USD 3.5 billion) invested since
2003
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Investing in new factories in Russia and India
Haridwar, India
Tver, Russia
Ahmedebad, India
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SKF Solution Factory competences
Examples of capabilities



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SKF Solution Factories 2009
Sweden
Alberta
Russia
UK Germany Italy
Turkey
Tianjin Shanghai
Texas
Taiwan
India
Mexico
Colombia
Australia
Brazil
Johannesburg
Opened
Planned
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SKF wind energy industry
New CRB-design with extra-high carrying
capacity for wind-gearboxes.
New pitch bearing design with improved corrosion
protection
SKF WindCon 3.0/Webcon Intranet
supervised condition monitoring
DRTRB-unit Nautilus with segmented cage for
minimized friction
Automatic centralized lubrication kits for
reduced maintenance cost
XL Hybrid bearings with ceramic balls for
superior insulation
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What is SKF knowledge?
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SKFs platforms
Bearings and units
13
SKFs platforms
Seals
14
SKFs platforms
Mechatronics
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SKFs platforms
Lubrication systems
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SKFs platforms
Services
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Acquisition 2003-2009Identifying gaps and
opportunities in all platforms
Seals
Bearings and units
Lubrication systems
Services
Mechatronics
Economos (2006)
Safematic (2006)
ABBA (2007)
SNFA (2006)
Macrotech (2006) Macrotech (2009)
Jaeger (2005)
GLO (2008)
S2M (2007)
Baker (2007)
Vogel (2004)
PMCI (2007)
ALS (2007)
QPM (2008)
TCM (2003)
PBA (2006)
Sommers (2005)
Scandrive (2003)
Monitek (2006)
Cirval (2008)
Peer (2008)

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Investing in RD for staying in the forefront

• Main areas
• Environment
• Core technologies
• New products
• Strengthen RD activities in fast growing
  regions
• Strengthen links with universities and high
  schools.

• gt30 increase in RD spending
• in 2008

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Six Sigma

• 2009 Q2 status
• 18 Master Black Belts
• 421 Black Belts
• 2,165 Green Belts
• 452 projects closed whereof 17 replicated
• 1,131 projects ongoing

Hard savings 2005 SEK 150 m 2006 SEK
200 m 2007 SEK 302 m 2008 SEK 462 m
2009 Ytd SEK 184 m
4 dimensions Standard Six Sigma, Design for
Six Sigma, Lean Six Sigma and Six Sigma for
Growth
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Financial performance
Operating margin
Sales growth in local currency


13.2
12.9
12.6
11.8
12.2
10.8
7.3
7.5
7.1
9.9
5.2
8.0
4.3 (6.6 ex. rest)
-21.3
Excluding effect from sale of Ovako 2005
10.4 2006 10.1
Return on capital employed

25.4
24.7
24.2

• Long-term targets
• 12 Operating margin level
• 6-8 Growth per annum (local)
• 24 Return on capital employed

21.8
19.0
13.9
13.4
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The SKF Group

• Half-year results 2009

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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
27
Sales in local currencies (excl. structural
changes)
change y-o-y
2008
2009
2007
28
Sales volume
change y-o-y
2008
2009
2007
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Components in net sales
2007
2008
2009

Percent y-o-y
30
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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Welcome to the IR website www.skf.com gt
Investors
Investor Relations function Head Marita
Björk Tel [phone] Mobile 46 705
181994 E-mail marita.bjork_at_skf.com
Assistant Anna Alte Tel [phone] Mobile
46 705 271988 E-mail anna.alte_at_skf.com
Event coordinator and secretary Monica
Svensson Tel [phone] Fax 46 31
3371722 E-mail monica.svensson_at_skf.com
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