SKF Q4 results Alrik Danielson, President and CEO. SKF Group

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1 SKF Q4 results 2015 Alrik Danielson, President and CEO

2 Q4 Summary Alrik Danielson, CEO

3 Q4 summary Net sales 18.5 bn 18.2 bn Net sales and earnings affected by lower demand Q4 Q1 Q2 Q3 Q4 15 Sales SEK M, -1.5% yoy Organic sales -5.2% Operating profit* 2.1 bn 1.7bn Operating profit* SEK M (2 078) Operating margin* 9.5% (11.2) Profit before tax SEK 653 M (1 293) Q4 Q1 Q2 Q3 Q % Operating margin* * Excluding one-time items

4 Strong cash flow balance sheet in focus Cash flow** 2.2 bn 2.0 bn Cash flow after investments before financing SEK M (2 126) Successful reduction of inventories and trade receivables Net debt decreased by more than SEK 3 bn Proposed dividend SEK 5.50 per share (5.50) ** After net investments before financing, excluding acquisitions and divestments and EU payment in 2014 Q4 Q1 Q2 Q3 Q4 15 Net debt/equity 140% 120% 100% 80% 60% 40% 20% 0% Q4 Q1 Q2 Q3 Q % 27.1% Net working capital as % of sales

Sales development by geography Organic growth in local currency Q4 2015 vs Q4 2014 Europe

5 Sales development by geography Organic growth in local currency Q vs Q Europe +0.3% North America -12.7% Asia/Pacific -8.7% Latin America -0.5% Middle East & Africa +10.8%

6 Sales development by Customer Industry

7 Highlights - examples of new business in Q China Oilfield Services Limited, China The Åsgard gas field, Norway U.S. Steel, USA Propulsion shaft components and application engineering services Magnetic bearings for the world s first sub-sea compression system Integrated seals, lubrication and bearings solution

Highlights As an example of activities to enhance our cost

packaging business in the US will be consolidated.

transferred to the distribution and packaging facility in

The 7-year bond carries a fixed coupon interest rate of 1.

New products: - The new SKF Agri Hub unit enables deeper,

8 Highlights As an example of activities to enhance our cost competitiveness, SKF s vehicle service market distribution and packaging business in the US will be consolidated. As a consequence, the business in Hebron, Kentucky will be transferred to the distribution and packaging facility in Crossville, Tennessee. SKF s issued a new EUR 500 million bond. The 7-year bond carries a fixed coupon interest rate of 1.625%, a record low rate for SKF. New products: - The new SKF Agri Hub unit enables deeper, heavier and faster operations in challenging soil conditions. - SKF introduced a new series of food industry compliant bearings.

9 Q4 results the details Christian Johansson, CFO

10 Sales development Net sales, SEK bn Percent y-o-y Q1 Q2 Q3 Q4 Organic Structure Currency Net sales Q4 Q1 Q2 Q3 Q4 15

11 Organic sales growth % change y-o-y

12 Operating profit excluding one-time items , , ,

13 Operating profit Q One-time Organic sales Currency Savings from Divested/ Other* Q items at 2014 exchange rates impact cost-reduction programme aquired companies * Includes, manufacturing development costs for the UNITE IT project and general inflation.

14 Operating performance per business area Net sales SEK M Organic sales -8.6% Operating margin declined to 11.3% Net sales SEK M Organic sales -1.6% Operating margin declined to 13.6% Industrial Market, Operating margin* 14.7% Specialty Business, Operating margin* 14.1% 11.3% 13.6% Net sales SEK M Organic sales +1.2% Operating margin improved to 3.3% Automotive Market, Operating margin* 1.5% 3.3% * Excluding one-time items

15 Cost reduction programme from December 2014 Cost reduction programme Q Q Q Q Target Restructuring cost in the quarter Full year savings from people that will leave SKF Number of people that will leave Savings included in the 2015 Operating profit

16 SKF Group Q Financial performance (SEKm) Net sales Cost of goods sold Gross profit Gross margin, % Selling and administrative expenses Other operating expenses Operating profit One-time items Operating profit excl. one-time items Operating margin, % Operating margin excl. one-time items, % Financial income and expense, net Profit before taxes Taxes Net profit Basic earnings per share, SEK

17 Strong cash flow after investments before financing Full year improved to SEK 5.7 bn* SEKm * After investments before financing (excluding acquisitions and divestments and EU payment in Q ) 2013 and 2014 are restated

18 Net working capital as % of annual sales Total NWC 27.1% Target: 27% Inventories 19.1% Trade receivables 15.5% Trade payables 7.4% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

19 Net debt decreased SEK 4.6 bn in Net debt SEK bn Net debt/equity % 160% % % 100% 80% 60% 40% 20% 100% % Net debt: Loans and net provisions for post-employment benefits less short-term financial assets excluding derivatives.

20 Improved debt structure with extended maturity EURm Available credit facilities: - EUR 500 million SEK million EUR 150 million 2017 No financial covenants nor material adverse change clause

21 SKF issued EUR 500 million bond SKF issued a new EUR 500 million bond. The senior, unsecured bond matures on 2 December 2022 and carries a fixed coupon interest rate of 1.625%, an historically low rate for SKF. The proceeds of the issue were used for the refinancing of existing debt through the buy-back of parts of two outstanding bonds, maturing in 2018 and 2019, with coupon rates of 3.875% and 1.875%, respectively. The buy-backs had a one-time negative impact of SEK 276 million on the Group s financial net for Q The new bond has been listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Luxembourg Stock Exchange's regulated market % Record low coupon rate 7 year Maturity EUR 500 M

22 Guidance for 2016* Q1 2016: Financial net: around -250 million Limited currency impact on operating profit vs 2015 Q1 based on exchange rates per December : Tax level: below 30% for 2016 Additions to PPE: around million for 2016 * Guidance is approximate and based on current assumptions and exchange rates.

23 SKF demand outlook - Definition The demand outlook for SKFs products and services represents management's best estimate based on current information about the future demand from our customers. The demand outlook is the expected volume development in the markets where our customers operate.

24 February 2015: SKF demand outlook Q Demand compared to the first quarter 2015 The demand for SKF s products and services is expected to be slightly lower for the Group. Demand for the Automotive Market and Specialty Business is expected to be relatively unchanged, while demand for the Industrial Market is expected to be lower. Demand is expected to be relatively unchanged in Europe, slightly lower in Asia and Latin America and significantly lower in North America. Demand compared to the fourth quarter 2015 The demand for SKF s products and services is expected to be relatively unchanged for the Group. Demand for the Automotive Market is expected to be higher, demand for Specialty Business to be slightly higher and demand for Industrial Market is expected to be relatively unchanged. Demand is expected to be higher in Europe, slightly lower in North America and lower in Latin America and Asia.

25 Financial calendar Annual Report 2015 March 8 Annual General Meeting March 31 Report on the first quarter 2016 April 28

26 New financial targets

27 New financial targets Valid from 2016 Changed targets for: Sales growth Operating margin Return on capital employed, ROCE Net working capital 5% Annual organic sales growth in local currencies 12% reported Operating margin 16% Return on capital employed 25% Net working capital as % of sales 80% Net debt as % of equity

28 SKF Q4 results 2015 Q & A

29 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 under the Administration Report; Important factors influencing the financial results", "Financial risks" and "Sensitivity analysis.

Earnings conference call. Q4 and Full year 2014

Earnings conference call. Q4 and Full year 2014 Earnings conference call Q4 and Full year 2014 Bo Annvik, CEO / Andreas Ekberg, CFO 12 February 2015 1 Agenda Business Highlights Market Update Sales Financials Restructuring Outlook 2 Business Highlights