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The SKF Group

The SKF Group. SKF Investor Relations October 2012. SKF - A truly global company. Established: 1907 Sales 2011: SEK 66,216 million Employees 2011: 46,039 Production sites: around 130 in 32 countries SKF presence: in over 130 countries Distributors/dealers: 15,000 locations

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The SKF Group

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  1. The SKF Group SKF Investor Relations October 2012

  2. SKF - A truly global company • Established: 1907 • Sales 2011: SEK 66,216 million • Employees 2011: 46,039 • Production sites: around 130 in 32 countries • SKF presence: in over 130 countries • Distributors/dealers: 15,000 locations • Global certificates: ISO 14001 • OHSAS 18001 certification

  3. Net sales by customer segment 2011 Cars and light vehicles Industrial distribution Aerospace Railway Off-highway Trucks Two-wheeler and Electrical Vehicle Service Market Industrial, general Energy Industrial, heavy and special Previously published shares have been restated to reflect the new business structure from 2012.

  4. (1998) (2002) % of group total SKF 2011 Net sales* (44) (53) (48) Average number of employees (47) (46) (53) Tangible asset (10) (9) (12) (14) (13) (8) (14) (25) (19) (26) (13) (18) (14) (12) (5) (9) (3) (3) (6) (5) (4) (5) (12) (15) (3) (9) (3) (4) (3) (4) (2) (0) (3) (2) (2) (0) North America WesternEurope Eastern Europe Sweden Latin America Middle East and Africa Asia/Pacific * Previously published shares have been restated to reflect customer delivery locations.

  5. Operating margin %

  6. Return on capital employed %

  7. Growth in local currencies %

  8. SKF Group Vision To equip the world with SKF knowledge

  9. SKF BeyondZero • SKF launched the BeyondZeroTM portfolio with products and solutions, which will both improve energy efficiency and reduce the environmental impact. • SKF revised targets for its climate strategy and also partnered with the WWF in their Climate Savers Programme. SKF’s climate strategy targets: • Increase revenue from SKF BeyondZero portfolio from SEK 2.5 bn to SEK 10 bn by 2016 •Reduce total annual energy use by 5% below the 2006 level by 2016 • Reduce energy use per production output by 5% y-o-y from 2012 to 2016 • Reduce CO2 emissions per tonne-kilometre by 30% 2016 vs 2011 for transports managed by SKF Logistics Services • Major suppliers certified according to ISO 50001 by 2016

  10. Nordic (Gothenburg) Moscow Edmonton UK Rumania France Germany Italy Tianjin Cleveland Istanbul Shanghai Houston Taiwan Monterrey Mexico Pune Colombia Opened Brasil “IXION” Planned Johannesburg Perth 20 SKF Solution Factories 2012

  11. SKF Solution Factory Platforms & Technology Competence Segments & Application Knowledge SKF Solution Factory Capabilities Sealing Solutions Lubrication Solutions Mechanical Services Remote Monitoring Center Bearing Service Workshop Condition Monitoring Services A & MC MaPro/CoMo Product Repair Training Center

  12. Slab continuous caster – metal industry Telescopic actuators for mould adjustment SKF ConRo Compact roll line units SKF ConRo Low roll line units SKF ConRo Top roll line units SKF DryLube Bearings and SNL Housings for roll out table SKF sealed self-aligning bearing system (CARB and spherical roller bearings) and centralized lubrication system for roll lines SKF Caster Analyst System for roll lines

  13. Wheel-loader – Construction Chassis lubrication Centralized lubrication systems Central gear Hybrid pinion units Motor hood Electromechanical actuators Wheel end • Integrated smart wheel bearing units with sensors • SKF Mudblock cassette seals

  14. Wind turbine - Energy 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 SKF Nautiluswith segmented cage for minimized friction Automatic centralized lubrication kits for reduced maintenance cost XL Hybrid bearings with ceramic balls for superior insulation

  15. SKF’s environmentally positive customer solutions SKF’s solutions which realize significant environmental benefits Designed for environment Applied for environment Up to 15% better fuel economy of the car Stop-start system SKF sensor bearing E2 - 30% less energy compared to a standard bearing A solution that enables improved environmental performance in a specific application A solution that is primarily designed to improve environmental performance by itself

  16. SKF energy efficient (E2) bearings Peru Industria Textil Piura 60,000 E2 deep groove ball bearing • Indonesia • Leuwijaya Textile • 30,000 E2 bearing • potential 325,000 for 3 different customers • China • Conveyors used in mining industry. 130,000 E2 bearing • India • Sangam Group

  17. What is SKF knowledge? Slide 16 26 October, 2014

  18. SKF technology platforms Bearings and units Slide 17 26 October, 2014

  19. SKF technology platforms Seals Slide 18 26 October, 2014

  20. SKF technology platforms Mechatronics Slide 19 26 October, 2014

  21. SKF technology platforms Lubrication systems Slide 20 26 October, 2014

  22. SKF technology platforms Services Slide 21 26 October, 2014

  23. Acquisition 2003-2012Identifying gaps and opportunities in all platforms Seals Services Bearings and units Lubrication systems Mechatronics Safematic(2006) ABBA(2007) Economos(2006) SNFA(2006) Baker(2007) Jaeger(2005) Macrotech(2006) Macrotech (2009) GLO(2008) S2M(2007) Vogel(2004) Lincoln Industrial(2010) PMCI(2007) ALS(2007) QPM(2008) TCM (2003) Sommers(2005) PB&A(2006) Scandrive(2003) Monitek(2006) Cirval(2008) Peer(2008) GBC(2012)

  24. SKF Nine-month results 2012 Tom Johnstone, President and CEO 17 October 2012

  25. Strong performance in a challenging market Weaker sales during the quarter, impacted by overall economy Significantly lower manufacturing and inventories reduced Good operating margin Strong cash flow Further investments to support long-term growth and profitability

  26. Highlights Q3 2012 • Acquisition and divestments completed • - acquisition of General Bearing Corporation (GBC) • - divestment of the SKF distributor businesses in Australia and New Zealand • New businesses • - magnetic bearings to two new major gas projects in Australia • - five-year contract with LKAB for maintenance services • - third strategic partnership agreement with Baosteel Group Corporation • - SKF Bus Door Actuator to Volvo Buses • - SKF’s bonded piston seals to Mazda Motor Corporation • Three new SKF Solution Factories • -USA, Romania and Italy • SKF Distributor College-awarded its 160,000th certificate

  27. Highlights Q3 2012 • SKF celebrated 100 years of business in China • - inaugurated a new bearing and truck hub unit factory in Jinan • - broke ground on a new regional distribution centre in Shanghai • - announced the establishment of a new SKF Campus in Jiading, Shanghai, containing a new factory for automotive and the Global Technical Centre China, SKF Solution Factory and SKF College • Debt structure • - new eurobond of 500m with maturity 2019 • - revolving credit facility of EUR 500m extended to 2017 • Dow Jones Sustainability Indexes and FTSE4Good • - member of DJSI indexes for the 13th successive year - included for the 12th successive year in the FTSE4Good Index Series

  28. Device for monitoring freight car mileage and maintenance history Self powered wireless sensor for railway New range of freight bearings, tapered roller bearing units New products Q3 2012 • SKF ChainLube oil projection system for food processing New temperature monitoring system for railway New low friction bearing seal for railway

  29. SKF Group – Q3 2012 • Financial performance Q3 2012 Q3 2011 • Net sales, SEKm 15,486 16,545 • Operating profit, SEKm 1,913 2,479 • Operating margin, % 12.4 15.0 • Profit before tax, SEKm 1,734 2,345 • Cash flow, SEKm 1,097 1,323 • Organic sales growth in local currency: • SKF Group: -4.5% • Industrial market, Strategic Industries: -5.6% • Regional Sales and Service: -4.7% • Automotive: -3.5% • Key points • Sales volumes down by 5.0% y-o-y • Manufacturing significantly lower y-o-y • Inventories down to 20% of sales Europe: -7% North America: +5% Asia: -11% Latin America: +8%

  30. Organic sales growth in local currency % change y-o-y 2010 2011 2012

  31. Growth development by geographyOrganic growth in local currency Q3 2012 vs Q3 2011 Europe-7% North America 5% Asia/Pacific -11% Latin America 8% Middle East & Africa -4%

  32. Growth development by geographyOrganic growth in local currency YTD 2012 vs YTD 2011 Europe-4% North America 8% Asia/Pacific -9% Latin America 12% Middle East & Africa 0%

  33. Components in net sales 2010 2011 2012 Percent y-o-y

  34. Growth in local currency, including structure % y-o-y 16.3% 14.2% -1.4% Structure in 2011: 4.8% Structure in 2012: 0.2%

  35. Operating profit SEKm 2012 2011 2010 One-time items

  36. Operating margin % 2010 2011 2012 One-time items

  37. Operating margin % 14.7* 14.2* 12.6* 14.5 13.8 12.3 One-time items * Excluding one-time items

  38. Operating margin per business area % Regional Sales and Service Strategic Industries Automotive 2011 2012 2010 Excluding one-off items(eg. restructuring, impairments, capital gains)

  39. Third quarter 2012

  40. Nine month 2012

  41. Inventories as % of annual sales % 2010 2011 2012

  42. Return on capital employed % 24.0 23.6 18.4 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.

  43. Cash flow, after investments before financing SEKm ** * 2011 2012 2010 * SEK 798 million,excluding SEK 6,799 million for the acquisition of Lincoln. ** SEK 1,707 million,excluding acquisitions and divestments.

  44. Net debt SEKm AB SKF, dividend paid (SEKm): 2010 Q2 1,594 2011 Q2 2,277 2012 Q2 2,504 2011 2012 2010 Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

  45. Debt structure on 30 September,maturity years EURm 500 500 396 130 110 100 100 0 • Available credit facilities: • EUR 500 million 2017 SEK 3,000 million 2017 • No financial covenants nor material adverse change clause

  46. October 2012: SKF demand outlook Q4 2012 • Demand compared to the fourth quarter last year • The demand for SKF’s products and services is expected to be lower for the Group and for Europe. For Asia it is expected to be slightly lower and for North America and Latin America relatively unchanged. The demand is expected to be lower for Industrial Strategic Industries and Industrial Regional Sales and Service and relatively unchanged for Automotive. • Demand compared to the third quarter 2012 • The demand for SKF’s products and services is expected to be slightly lower for the Group, for all the business areas and for Europe, Asia and North America. For Latin America demand is expected to be relatively unchanged. • Manufacturing • Manufacturing is expected to be lower year on year and slightly lower compared to third quarter.

  47. SKF demand outlook Q4 2012, regions(based on current assumptions) * Previously published shares have been restated to reflect the total Group business and customer delivery locations.

  48. SKF demand outlook Q4 2012, business areas(based on current assumptions)

  49. SKF sequential volume trend Q4 2012, main segments(based on current assumptions) Share of net sales 2011* * Previously published shares have been restated to reflect the total Group business and customer delivery locations.

  50. Guidance for the fourth quarter 2012 • Tax level: around 30% • Financial net for the fourth quarter:Around SEK -200 million • Exchange rates on operating profit versus 2011 Q4: SEK -50 million • Full year: SEK 200 million • Additions to PPE: Around SEK 2.0 billion for 2012 Guidance is approximate and based on current assumptions and exchange rates

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