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SKF Year-end results 2014 Alrik Danielson, President and CEO 28 January 2015.

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Presentation on theme: "SKF Year-end results 2014 Alrik Danielson, President and CEO 28 January 2015."— Presentation transcript:

1 SKF Year-end results 2014 Alrik Danielson, President and CEO 28 January 2015

2 © SKF Group 28 January 2015 Examples of new business in Q GE Aviation and Safran Group, Mainshaft and gearbox (Snecma & Hispano-Suiza)bearings Chongqing Gearbox Co., Ltd, ChinaBearing sets Andritz Hydro, Germany Special bearing and sealing solution Mazda, MexicoLow-friction wheel bearing units Daimler, GermanyWheel hub bearing units Jiangsu Jintongling Fluid Machinery Co., Ltd,High-speed permanent Chinamagnetic motor unit solutions Slide 2

3 © SKF Group 28 January 2015 Examples of new business in Q1 – Q Hindustan Aeronautics Ltd, India Customized bearings for helicopter transmission and main rotor Bell Helicopter Textron Inc.,USA Elastomeric bearings Turbogaz, UkrainaMagnetic bearings SCA, BillerudKorsnäs, Condition monitoring solutions Vattenfall, Sweden Geely Automobile, ChinaTransmission seals Volkswagen, GermanyEnergy efficient tapered roller and ball bearings Envision Energy, ChinaStrategic long-term partnership Slide 3

4 © SKF Group 28 January 2015 Examples of new business in Q1 – Q Dongfang Electric New Energy, ChinaMain shaft bearings equipment Aurizon, AustraliaService contract Doosan Heavy Industries and SKF Supergrip Bolts Construction, South Koreaand SKF Nautilus bearing HSD SpA, ItalySuper precision bearings and engineering support Tesla Motors, USABearing for the gearbox, e-motor and wheels Volvo Cars, SwedenWheel hub bearing units Scania, SwedenWheel bearing units and high pressure valve stem seals Slide 4

5 © SKF Group 28 January 2015 Customer awards Q Slide 5 Best supplier award – Kirloskar Pneumatic Company Ltd., India Best supplier award – Nanjing Gearbox Company, China Top runner-up ’Best Vendor’ – Tata Steel, India Winner ’Cloud’ category – Software AG Innovation Awards Supplier Quality Excellence awards 2014 – General Motors, USA Quality Silver Award 2014 – Bajaj Auto Limited, India

6 © SKF Group 28 January 2015 Slide 6 Examples of new technologies, products and solutions 2014 Compact tapered roller bearing unit for heavy freight PuraBreeze 100 SKF Mudblock cassette seals, MUD 11 Connect Floating piston Tapered roller bearing unit for passenger railway applications SKF Gear Bearing Unit Electric grease transfer pump SKF Wireless Machine Condition Sensor SKF Tachometer SKF Wireless MicroVibe SKF Oil Injection Sets - THKI series

7 © SKF Group 28 January 2015 SKF Group – Q Slide 7 Financial performance (SEKm) Net sales Operating profit Operating margin, % Operating margin excl. one-time items, % Profit before tax Basic earnings per share, SEK Cash flow after investments before financing Organic sales growth in local currency: SKF Group2.8%Europe1% Strategic Industries7.4%North America2% Regional Sales and Service2.2%Asia8% Automotive-0.5%Latin America4% Middle East and Africa-5% Key points Sales volumes up by 1.8% y-o-y. Manufacturing was relatively unchanged compared to last year.

8 © SKF Group 28 January 2015 SKF Group – 2014 Slide 8 Financial performance (SEKm) Net sales Operating profit Operating margin, % Operating margin excl. one-time items, % Profit before tax Basic earnings per share, SEK Cash flow after investments before financing excl. EU payment Cash flow after investments before financing Organic sales growth in local currency: SKF Group3.9%Europe1% Strategic Industries8.4%North America3% Regional Sales and Service1.8%Asia10% Automotive2.0%Latin America1% Middle East and Africa9% Key points Sales volumes up by 3.3% y-o-y. Manufacturing was slightly higher compared to last year.

9 © SKF Group 28 January 2015 Organic sales growth in local currency Slide 9 % change y-o-y

10 © SKF Group 28 January 2015 Organic sales growth in local currency Slide 10 % y-o-y Structure in 2012: 0.4% Structure in 2013: 2.5% Structure in 2014: 3.7% -2.5% -0.7% 3.9%

11 © SKF Group 28 January 2015 Sales development by geography Organic growth in local currency Q vs Q Slide 11 Europe 1% Asia/Pacific 8% Middle East & Africa -5% Latin America 4% North America 2%

12 © SKF Group 28 January 2015 Sales development by geography Organic growth in local currency 2014 vs 2013 Slide 12 Europe 1% Asia/Pacific 10% Middle East & Africa 9% Latin America 1% North America 3%

13 © SKF Group 28 January 2015 Components in net sales Slide Percent y-o-y Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Volume Structure Price/mix Sales in local currency Currency Net sales

14 © SKF Group 28 January 2015 Operating profit as reported Slide 14 SEKm

15 © SKF Group 28 January 2015 Operating profit excluding one-time items Slide 15 SEKm

16 © SKF Group 28 January 2015 Operating margin Slide 16 % * 11.9* One-time items * Excluding one-time items *

17 © SKF Group 28 January 2015 Slide 17 Regional Sales and Service Specialty Business Automotive % Operating margin per business area as reported Strategic Industries

18 © SKF Group 28 January 2015 Slide 18 Regional Sales and Service Specialty Business Automotive % Operating margin per business area excl. one-time items Strategic Industries

19 © SKF Group 28 January 2015 Operating profit bridge, Q excl. One-time items Slide SEKm Q4 2013Q4 2014Volumes excl. Specialty Business Specialty Business SavingsCurrenciesOther*Price/mix excl. Specialty Business * R&D, S&A, IT, inflation etc One-time items 2013: : -470

20 © SKF Group 28 January 2015 Operating profit bridge, 2014 excl. One-time items Slide SEKm Volume excl. Specialty Business Specialty Business Savings Currencies Other* Price/mix excl. Specialty Business * R&D, S&A, IT, inflation etc. One-time items 2013: : -490

21 © SKF Group 28 January 2015 Net working capital as % of annual sales Slide 21 % Target: 27%

22 © SKF Group 28 January 2015 Return on capital employed Slide 22 % * 15.1* One-time items * Excluding one-time items 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. 14.8*

23 © SKF Group 28 January 2015 Cash flow, after investments before financing Slide 23 SEKm Excl. acq. and div.:1)Q3 2012SEK million 2)Q1 2013SEK -69 million 3)Q3 2013SEK 871 million 4)Q4 2013SEK million Excl. EU payment5) Q2 2014SEK million 4) 5) 1) 3)3) 2)

24 © SKF Group 28 January 2015 Net debt Slide 24 SEKm AB SKF, dividend paid (SEKm) : 2012 Q Q Q Cash out from major acquisitions (SEKm) : 2012 Q Q Q Net debt:Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives. EU payment (SEKm) : 2014 Q22 825

25 © SKF Group 28 January 2015 Debt structure, maturity years Slide 25 Available credit facilities: EUR 500 million 2019 SEK million 2016 EUR 150 million 2017 No financial covenants nor material adverse change clause

26 © SKF Group 28 January 2015 January 2015: SKF demand outlook Q Slide 26 Demand compared to the first quarter 2014 The demand for SKF’s products and services are expected to be slightly higher for the Group, higher for Asia and relatively unchanged for Europe, North America and Latin America. It is expected to be relatively unchanged for Automotive Market and Specialty Business and slightly higher for Industrial Market. Demand compared to the fourth quarter 2014 The demand for SKF’s products and services are expected to be relatively unchanged for the Group, Europe and Latin America, and slightly higher for Asia and North America. It is expected to be relatively unchanged for Industrial Market and Automotive Market and slightly higher for Specialty Business. Manufacturing Manufacturing is expected to be higher year over year and compared to the fourth quarter.

27 © SKF Group 28 January 2015 SKF demand outlook Q1 2015, main regions Share of net sales 2014 Europe41% Asia Pacific25% North America25% Latin America6% Total Q vs Q /- ++ +/- + Slide 27 Sequential trend for Q1 2015

28 © SKF Group 28 January 2015 SKF demand outlook Q1 2015, main business areas Share of net sales 2014 Industrial Market 60% Automotive Market 26% Specialty Business 13% Total Q vs Q /- + Slide 28 Sequential trend for Q1 2015

29 © SKF Group 28 January 2015 SKF sequential volume trend Q1 2015, Industries Slide 29 14%Cars and light vehicles 6%Energy 28%Industrial distribution 14%Industrial, heavy, special and off-highway 11%Industrial, general 9%Vehicle service market 6%Aerospace 5%Railway 5%Trucks 2%Two-wheelers and Electrical Share of net sales 2014

30 © SKF Group 28 January 2015 Guidance for the first quarter 2015* Slide 30 Tax level: < 30% Financial net: around SEK -250 million Currency impact on operating profit vs 2014 Q1: SEK +300 million Full year: SEK +900 million Additions to PPE: around SEK 1.7 billion for 2015 * Guidance is approximate and based on current assumptions and exchange rates.

31 © SKF Group 28 January 2015 SKF’s programme to improve efficiency and reduce cost Q4 12 Q1 13 Q2 13 Q3 13 Q Q1 14 Q2 14 Q3 14 Q Total Cost, SEKm People affected Giving future gross savings: Full year gross savings SEKm Slide 31 Realized gross savings from total programme, SEKm Restructuring Q1 13 Q2 13 Q3 13 Q Q1 14 Q2 14 Q3 14 Q Restructuring S&A Purchasing Total

32 © SKF Group 28 January 2015 New productivity improvement programme Main activities: Productivity gain through merging the industrial businesses - merger between Strategic Industries & Regional Sales and Service worldwide - streamlining of supporting country organisations in all main countries General staff optimization and productivity improvements - in Group Headquarters and central staff functions - in the Automotive business Reduction of annual cost by SEK 1.2 billion by the end of 2016 Total cost for the programme around SEK 1.4 billion people impacted. Major part of the programme implemented within 2015.

33 © SKF Group 28 January 2015 Cautionary statement Slide 33 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 under the Administration Report; “Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis”.

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