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The SKF Group

The SKF Group. Year-end results 2009 Tom Johnstone, President and CEO. Key points, full-year report. Strong cash flow Q4: SEK 1,445 m Full year: SEK 5,752 m Dramatic volume drop year over year Improving trend sequentially during second half Q4: -14.1% Full year: -24.3%

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The SKF Group

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  1. The SKF Group Year-end results 2009 Tom Johnstone, President and CEO

  2. Key points, full-year report • Strong cash flow • Q4: SEK 1,445 m Full year: SEK 5,752 m • Dramatic volume drop year over year Improving trend sequentially during second half • Q4: -14.1% Full year: -24.3% • Positive price/mix • Q4: 0.3% Full year: 4.3% • Capacity adjustments and cost reduction efforts giving results • - significant short-time working being utilized, December 13,000 people • - reduction of 4,900 people since Q3 2008 (whereof 3,800 in 2009) • - annualised savings from all programmes, around SEK 1,050 million • Demand outlook for Q1 • - year over year:slightly higher • - sequentially: slightly higher

  3. New businesses, some examples • A Memorandum of Understanding for strategic partnership signed with Sinovel Wind Co. Ltd. • A five year condition based maintenance contract with Total E&P UK for providing condition based maintenance services. • A service contract with Transocean that covers asset reliability services for 59 of Transocean's drilling rigs. • A long-term contract for the supply of bearings to Hero Honda of India. • An order for axleboxes and drive system bearings • to CSR Zhuzhou Electric Locomotive Co., Ltd. ZELC.

  4. Investing in knowledge 2009 • Agreement with Ricardo to develop energy-efficient solutions. • Contract signed with Cambridge University to set up a SKF University Technology Centre (UTC) on steels and also with Imperial College London to set up a SKF UTC on tribology. • Seven new SKF Solution Factories opened around the world. • A SKF Global Testing Centre inaugurated in Bengaluru, India. • Expanded range of sealed spherical roller bearings. • More than 20 new market offers.

  5. Sales volume % change y-o-y 2008 2009 2007

  6. Sales in local currencies (excl. structural changes) % change y-o-y 2009 2008 2007

  7. Growth in local currency(Organic growth + acquisition/divestments) Long-term target level: 6-8% per annum % y-o-y 13.2% 7.1% -19.0% Organic growth Acquisitions/Divestments

  8. Growth development by geography Local currency 2009 vs 2008 EasternEurope -20% Western Europe-26% North America -18% Asia/Pacific -6% Latin America -2% Middle East & Africa +3%

  9. Components in net sales 2007 2009 2008 Percent y-o-y

  10. Operating profit SEKm 2009 2007 2008 Restructuring and one-time items

  11. Operating margin Long-term target level: 12% % 2009 2007 2008 Restructuring and one-time items

  12. Operating margin Long-term target level: 12% % 13.3* 12.7* 12.9 12.2 8.0* 5.7 Restructuring and one-time items * Excluding restructuring and one-time items

  13. Operating margin per division % Service Industrial Automotive 2009 2007 2008 Excluding one-off items (eg. restructuring, impairments, capital gains)

  14. Activities to adapt to lower demand • Cost and restructuring programmes People Costs charged to operating profit • Q4 2008 2,500 SEK 340 m • Q1 2009 500 SEK 175 m • Q2 2009 900 SEK 500 m • Q3 2009 70 SEK 200 m • Q4 2009 450 SEK 400 m • 4,420 SEK 1,615 m • December 2009, around 4,900 people had left the Group since the third quarter 2008, of which around 2,800 people under the programmes. • When fully, implemented total savings from these activities will be • around SEK 1,050 m. • Around 13,000 people in short-time working December 2009.

  15. Fourth quarter 2009 * Q4 restructuring around SEK 400 m Operating profit excl. restructuring activities SEK 1,404 m

  16. Full year 2009 * 2009 restructuring around SEK 1,275 m Operating profit excl. restructuring activities SEK 4,478 m

  17. Inventories as % of annual sales Long-term target level: 18% % 2007 2008 2009

  18. Cash flow, after investments before financial items SEKm Cash out from acquisitions* (SEKm): 2007 1,209 2008 1,284 2009 241 2009 2007 2008 * including non-controlling interests.

  19. Return on capital employed Long-term target level: 24% % 24.9 24.0 9.1 ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.

  20. 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 2009 2007 2008

  21. Debt structure Amount in million Maturity Euro Bond EUR 132 2010-06 SEK Bond SEK 556 *) 2011-06 Term loan in euro EUR 150 2013-06 Euro Bond EUR 400 **) 2013-12 Euro loans EUR 130 2014-03 Euro loan EUR 100 2016-06 After early repurchase in Q4 2009 of: *) SEK 944 million **) EUR 100 million

  22. 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

  23. 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

  24. SKF capital structure • a dividend of SEK 3.50 per share • a mandate to the Board to repurchase • a maximum of 5% of the company's own shares • The AB SKF Board proposes the Annual General Meeting to decide on:

  25. Volume trends(based on current assumptions)

  26. Sequential volume trend main segments Q1 2010(based on current assumptions) Net sales 2009

  27. Volume trends, Divisions(based on current assumptions)

  28. December 2009: Outlook for the first quarter 2010 Sales development compared to first quarter last year The demand for SKF products and services is expected to be slightly higher for the Group in total. In Europe and North America it is expected to be slightly lower and in Asia and Latin America significantly higher. It is expected to be significantly lower for the Industrial Division, slightly higher for the Service Division and significantly higher for the Automotive Division. Sales development compared to the fourth quarter 2009 The demand is expected to be slightly higher for the SKF Group in total. It is expected to be slightly higher in Europe, Asia and Latin America and relatively unchanged in North America. For the Industrial Division it is expected to be relatively unchanged, and slightly higher for both the Service Division and Automotive Division. Manufacturing level The manufacturing level will be higher year on year and slightly higher compared to the fourth quarter 2009.

  29. Guidance for the first quarter 2010 • Tax level: around 30% • Financial net for the first quarter:Around SEK -175 million • Exchange rates on operating profit versus 2009 Q1: SEK -175 million • Full year: SEK -400 million • Additions to PPE: Around SEK 1.5 billion for 2010 Guidance is approximate and based on current assumptions and exchange rates.

  30. Key focus areas ahead 2010 • Profit and cash flow • Adjustment of manufacturing output to new demand levels • Growing segments and geographies • Strengthening the platform/segment approach • Competence development SKF Care and Six Sigma as guiding lights

  31. SKF Care Business Care Employee Care Operating margin SKF Care BeyondZeroTM Community Care Environmental Care

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

  33. 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; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.

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