SKF Q4 results 2018

Alrik Danielson, President and CEO

▪ Net sales of 21,192 M, organic growth 5.0%

▪ Operating profit 2,902 M (2,017)

▪ Operating margin improved to 13.7% (10.4)

▪ Cash flow 4,259 M (1,704)

▪ Proposed dividend of SEK 6.00

Q4 – excellent result and strong cash flow

13.7%Operating margin

2,902 MOperating profit

5.0% Organic sales growth

Q4 Q1 Q2 Q3 Q418

Net sales, SEK21.2 bn

19.5 bn

Operating profit, SEK

Q4 Q1 Q2 Q3 Q4 18

2.9 bn

2.0 bn

Industrial business performing well; increased volumes in all three main markets, North America, Europe and Asia8.8% organic growth in Q4 and 9.4% for the full year

Automotive; organic sales in Q4 declined due to lower car volumes in Europe and to lower sales in Asia. -3.7% organic growth in Q4 and +2.1% for the full year

© SKF Group

Improving performance towards our targets in 2018

12.9%Operating margin:

Target: 12%

49%Net debt / equity:

Target: <80%

27.8%Net working capital:

Target: 25%

17.6%Return on capital employed:

Target: 16%

7.1%Organic growth:

Target: 5%

Targets set in 2016 and valid over a business cycle:

© SKF Group

Continued sales growth in Asia, North America & EuropeOrganic growth in local currency Q4 2018 vs Q4 2017

Europe

+1.5%

Asia/Pacific

+8.1%

Latin

America

0%

North

America

+10.8%

© SKF Group

New investment in automated Aerospace production

▪ SKF Aeroengine site in Valenciennes,

France

▪ Fully automated production line

▪ Dedicated to the production of

SAFRAN's LEAP engine components

Q4 results – the detailsChristian Johansson, CFO

© SKF Group

Sales development

Q4 Q1 Q2 Q3 Q4 18

Net sales, SEK bn 21.2

19.5 2017 2018

Percent y-o-y Q4 Q1 Q2 Q3 Q4

Organic +8.2 +7.5 +9.0 +6.9 +5.0

Structure -0.6 -0.7 -0.6 -0.1 -1.0

Currency -3.6 -1.9 +3.4 +7.8 +4.8

Net sales +4.0 +4.9 +11.8 +14.6 +8.8

© SKF Group

Operating profit

0

2

4

6

8

10

12

0

0,5

1

1,5

2

2,5

3

Th

ou

san

ds

Th

ou

san

ds

2015 2016

2.9

2.0

1.0

1.6

2017

SEK bnSEK bn, 12m

moving

2018

© SKF Group

Operating profit

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2 902

+639

+26

-5651 261

2 017

Q4 2017 Q4 2018Cost

development

Organic sales

&

manufacturing

volumes

Divested/

acquired

companies

Currency

impact

Operational performance:

-402

SEKm

* Impairment of

assets & customer

settlements -282,

restructuring -194-476*

© SKF Group

Industrial

▪ Net sales 15,214 M

▪ Organic sales +9%

▪ Operating margin 18.3%, (12.8)

Automotive

▪ Net sales 5,978 M

▪ Organic sales -3.6%

▪ Operating margin 2.1%, (5.0)

Performance by customer groupIndustrialOperating margin, %

18.3%

12.8%

10.2%

AutomotiveOperating margin, %

2.1%

5.0%4.6%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q418

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q418

© SKF Group

SKF Group – Q4 2018

Q4 Q1 Q2 Q3 18 Q4 18

Operating margin, %13.7%

10.4%

Earnings per share, SEK

13.7%Operating margin

Q4 Q1 Q2 Q3 Q4 18

4.63

4.12

Q4 18 Q4 17 2018 2017

▪ Financial net -266 -233 -861 -934

▪ Taxes -453 179 -2,603 -1,898

▪ EPS 4.63 4.12 16.00 12.02

© SKF Group

Cash flow after investments before financing*

-4 000

-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

-1 000

0

1 000

2 000

3 000

SEKm

2013 2014 2015

* After investments before financing (excluding acquisitions and divestments and EU payment in Q2 2014.)

2013 and 2014 are restated

2016 2017 2018

© SKF Group

Net working capital – finished goods inventories reduced in the quarter

0

5

10

15

20

25

30

35

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

Target: 25%

Total NWC 27.8%

Inventories 20.8%

Trade receivables 16.1%

Trade payables 9.1%

2017

%

2018

© SKF Group

Net debt, SEK bn Net debt/equity, %

Net debt/equity ratio continues to improve

-35

-30

-25

-20

-15

-10

-5

0

Net fin debt Post-empl. benefits

2013 2014 2015 2016

0%

20%

40%

60%

80%

100%

120%

140%

160%

Net debt/equity

Net debt, excl post empl.benefits/equity

49%

2013 2014 2015 2016

13%

2017 2017 20182018

© SKF Group

Q1 2019:

▪ Financial net: around -200 million

▪ Currency impact on the operating profit is expected to be positive by 140 million

compared with 2018, based on exchange rates per 31 December, 2018.

2019:

▪ Tax level: around 28% for 2019, excluding effects from divestments

▪ Additions to property, plant and equipment: around 2,800 million for

2019.

Guidance for 2019*

* Guidance is approximate and based on current assumptions and exchange rates.

Q4 Q1 Q2 Q3 Q4 18Q4 Q1 Q2 Q3 Q418

8,326 MCash flow

12.9%Operating margin

11,049 M Operating profit

Net sales, SEK21.2 bn

19.5 bn

Operating profit, SEK 2.9 bn

2.0 bn

▪ Organic growth of 7.1%

▪ Record-high sales and operating profit

▪ Strong cash flow

▪ Proposed dividend of SEK 6.00

▪ Expect to see relatively unchanged

volumes in Q1

Summary – 2018 a record year for SKF

© SKF Group

Demand compared to the first quarter 2018

The demand for SKF’s products and services is expected to be relatively unchanged

for the Group, including slightly higher demand for Industrial and lower demand for

Automotive. Demand is expected to be higher in North America, slightly higher in

Asia, relatively unchanged in Latin America and slightly lower in Europe.

January 2019: SKF demand outlook Q1 2019

SKF Q4 results 2018Q & A

© SKF Group

Financial calendar

Q4 report 29 January

Roadshow Stockholm 30 January

Roadshow US 4-6 February

Carnegie Capital Goods Seminar 7 March

Annual Report March 2019

BAML London Conference 20 March

Annual General Meeting 28 March

Q1 Report 25 April

© SKF Group

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;

“Risk management at SKF" and "Sensitivity analysis”.

Cautionary statement