SKF Group

Tom Johnstone, President and CEO

September 2012

SKF - A truly global company

Established:

1907

Sales 2011:

SEK 66,216 million, (~ USD 10 bn)

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

SKF Group

SKF 2011 (2002) (1998) % of group total

(48)(44)(53)

Net sales*

(47)(46)(53)

Average number of
employees
Tangible asset
(10)(12)(9)
(13)(14)(8)

(25)(14)(19)
(26)(13)(18)
(5)(14)(12)
(6) (5) (4)

(5)(12)(15)

(4) (4) (3)

(3) (9) (3)

(3) (9) (3)

(3) (2) (0)

(2) (2) (0)

North
America

Latin
Americ
a

Western
Europe

Swede
n

* Previously published shares have been restated to reflect customer delivery

SKF Group

Eastern
Europe

Middle
East and
Africa

Asia/
Pacific

Net sales by customer segment 2011

Cars and
light
vehicles

Industrial
distribution

Aerospac
e
Railwa
y
Offhighway
Truck
s
Two-wheeler
and Electrical

Vehicle
Service
Market
Energy
Industrial,
heavy and
special

Industrial
, general

Previously published shares have been restated to reflect the new business structure

SKF Group

Long-term financial targets

15%

Operating
margin, level

SKF Group

8%

Changes in
sales in local
currency

27%
Return on
capital
employed

SKF Group operating margin development

%

SKF Group

How did we get there?

SKF today more robust, more diverse

Divesting and outsourcing component manufacturing,
reducing fixed cost and invested capital

Manufacturing footprint in best cost countries

Reducing working capital
Customized solutions, value added products, technology
platforms

Diversifying growth, faster growing segments and geographies

Acquisitions supporting growth and profitability

SKF Group

Growth development by geography

Local currencies H1 2012 vs H1 2011

Europe
-2.3%
North
America
+11.6%

Asia/Pacifi
c -8.0%
Latin
America
+13.8%

SKF Group

Middle
East &
Africa
+2.2%

SKF demand outlook Q3 2012, regions

Share of net sales

2011*

Sequential trends
for:
Q2 2012
Q3
2012

Q3 2012
vs Q3 2011

Europe

44
%

Asia Pacific

28
%

+/-

North
America

19
%

++

Latin
America

8%

Total

SKF Group

* Previously published shares have been restated to

reflect

+/-

SKF sequential demand trend Q3 2012

Share of net
sales 2011*

5% Energy
5% Aerospace

28% Industrial distribution

13% Industrial, general
12% Industrial, heavy, special and off-highway
10% Vehicle service market
4% Railway
3% Two-wheelers and electrical
13% Cars and light vehicles
5% Trucks

SKF Group

* Previously published shares have been restated to

reflect

Main initiatives going forward

Accelerate profitable growth

Reduce cost and eliminate waste
Invest in Growth

SKF Group

Main initiatives going forward

Accelerate profitable growth
-

intensify the platform and industry approach

launch more new offerings green and BZ portfolio
strengthen the service business
focus on faster growing regions/ industries
develop other brands

Reduce cost and eliminate waste

- Business Excellence throughout the Group
- BCC manufcaturing and sourcing
- integrated cost reduction activities (ICR)

Invest in growth
SKF Group

Sales and engineering resources

Factories in growth markets
Solution factories
R&D
Acquisitions
New IT systems

SKF platforms managing and reducing

friction/energy
Market SEK 75 bn Market SEK 320 bn
~ USD 12 bn
~ USD 50 bn

Market SEK 30 bn
~ USD 5 bn

PT

Market SEK 70 bn
~ USD 11 bn

Market > SEK 40 bn

~ USD 6 bn
Market SEK 100 bn
~ USD 16 bn

SKF Group

SKF platforms managing and reducing

friction/energy

D
S
U
>
t
e
k
ar

Market SEK 75 bn Market SEK 320 bn

~ USD 12 bn
~ USD 50 bn

m
e
l
b
a
PT
s
s
e
r
d
d
A
Market SEK 70 bn
~ USD 11 bn

Market > SEK 40 bn

~ USD 6 bn
Market SEK 100 bn
~ USD 16 bn

SKF Group

Market SEK 30 bn
~ USD 5 bn

0
0
1

R&D investments and main areas

SKF Group

Investments

Main areas

2008

+30%

2009

Same

2010

+10%

Environment
Core technologies
New products

2011

+20%

Patents

+30%

2012

+10%

Strengthen R&D
activities in fast
growing regions
Strengthen links with
universities and high
schools

Examples of new products launched in

2012
Servo Actuator for
industrial
applications

A hand-held,
18-volt,
lithium-ion
grease gun

SKF Thruster
Monitoring
SKF Bus Door
Actuator

Next generation
SNL, SE housings

SKF
Compact
Wire
Steering
Bearing
Integrated
monotube seal

SKF Solar Hub

SKF Speed
Sensor Unit

SKF
Nautilus
range
extensions

SKF Group

Investing for the future

Dalian, China

Mysore, India

SKF Group

Jinan, China

Bengaluru, India

Acquisitions 2003-2012
Identifying gaps and opportunities in all platforms
Bearings
and units

Technologie
s/ Products

SNFA

Seals

Services

Economos

(2006)

Baker

(2007)

(2006)

GLO

(2008)

S2M

(2007)

Macrotech

Lubrication Mechatronics
systems

Vogel

(2004)

Safematic

(2006)

ABBA

(2007)

Jaeger

(2005)

(2006)

Lincoln
Industrial
(2010)

Geographie
s

QPM

(2008)

Scandrive

(2003)

PMCI
PB&A

(2007)
(2006)

Monitek

Segments

PEER
GBC

(2008)

(2012)

Focus on industrial and aftermarket business.

SKF Group

ALS

(2007)

Sommers

(2005)

(2006) Cirval (2008)

TCM

(2003)

General Bearing Corporation

Established in 1955, headquarter in West Nyack, NY, USA.
Four factories in China, one ball bearing factory,
two tapered roller bearing factories and
one precision roller factory.
1,750 employees, 140 are located in USA and 1,610 in
China.
Sales in 2011: around USD 155 million
Focused to serve OEM and end-user customers within the
transportation markets: Truck, Trailer, Automotive, and
Industrial.
Brands:

SKF Group

Strategy for second brands

Capture mid-market growth

Lower cost manufacturing
Global market approach
Segment focus

- PEER, Industrial segments

- GBC, Auto, HD segments

SKF Group

Branding strategy to address the market

High

Middle

Knowledge
engineering
Documented value
Cost reduction
Brand

Application specific products

Low

Second brands

Strong cost focus

Peer/General/Hyatt brands

SKF Group

BeyondZero

TM

+
Reduce the negative environmental
impact from our own operations
and
those of our suppliers.

Customers:
SKF BeyondZero
portfolio

BeyondZero

0
Suppliers

SKF
Manufacturing

Transportation

Scope 2

SKF Group

Scope 1

Scope 3

Innovate and offer our customers

new technologies, products and
services with enhanced
environmental
performance characteristics.

BeyondZero portfolio how it works

DESIGNED FOR

Criteria
Life cycle trade offs
Base line comparison
CO2 / environmental
savings

Total direct CO2

savings
Total revenue
APPLIED FOR

Total enabled CO2 savings

Total revenue

SKF Group

BeyondZero portfolio - Industrial

SKF Energy Monitoring Service for

pump systems helped reduce 1,700
tonnes of CO2 emission per year.

SKF ConRo reduced CO2

emissions with 1.5 tonne per unit
and year.

SKF Solar Linear Actuator contributes to

increasing the energy production from
one solar panel which 4.4 tonnes CO
/year
2

SKF Group

BeyondZero portfolio - Industrial

Replacement of hydraulic lifts with two
SKF CASM electric cylinders produced
a CO2 savings of 4.9 tonnes per year for one
machine.

SKF products and solutions for

renewable energy help display CO2

If SKF were to equip all new motors

ranging from sizes 1-50 HP with its
current SKF E2 bearing range, a yearly
290,000 tonnes of CO2 emissions would
be avoided.

SKF Group

BeyondZero portfolio - Automotive

SKF bus door actuator saves 1,900
kg CO2/year compared using
pressurized air for operating the
doors.

SKF Rotor Positioning bearing

reduces fuel consumption and CO2
emissions up to 15%.

SKF StopGo for two-wheelers

Reduces CO2 emissions by 5 g per
kilometre.

SKF Group

BeyondZero portfolio - Automotive

SKF Low Friction Seal reduces friction

by up to 55%, which provides a CO2
savings of over 1 g per kilometre.

A light commercial vehicle with four

SKF Low Weight Hub Bearing Units
reduces CO2 by 5.0 kg CO2 per year.

SKF products and solutions for

electric vehicles

SKF Group

Climate strategy BeyondZero Targets

Customer
solutions

SKFs own
operations

Transport and
distribution

Raw material and

components

SKF Group

Quadruple (x4) the revenue from the BeyondZero portfolio

from 2.5
Billion SEK in 2011 to 10 Billion SEK by 2016.
Reduce the total annual energy use of the SKF Group by 5
% below the
2006 level by 2016.
Reduce the energy use per production output (value
added) by 5% yearover-year CO2
during
the period
(2012-2016). for all
Reducing
emissions/
tonne-kilometre
transports managed
by SKF Logistics Services by 30% compared to 2011 by
the end of
2016.
100% of SKF's energy intensive suppliers certified according
to ISO 50001
Energy Management Standard by 2016.

Key focus areas ahead 2012

Managing the uncertain and different demand environment

- regions and segments

Profit and cash flow

- inventory management

Initiatives and actions to support long-term financial targets

Continue the integration of Lincoln
Business Excellence and competence development
Implement the new organization for the Industrial market

One SKF and SKF Care as guiding lights

SKF Group

 SKF Group