28 January 2010

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The SKF Group

Year-end results 2009

Tom Johnstone, President and CEO

28 January 2010

2Key points, full-year report

• Strong cash flow

Q4: SEK 1,445 m Full year: SEK 5,752 m

• Dramatic volume drop year over yearImproving 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

28 January 2010

3New businesses, some examples

• A Memorandum of Understanding for strategic partnership signed with Sinovel Wind Co. Ltd.

• A five year condition based maintenance contract with TotalE&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.

28 January 2010

4Investing 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 withImperial 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.

28 January 2010

5Sales volume

-35-30-25

-20-15-10-5

05

10% change y-o-y

2008 20092007

28 January 2010

6Sales in local currencies (excl. structural changes)

-30-25-20

-15-10-50

51015

% change y-o-y

2007 2008 2009

28 January 2010

7Growth in local currency(Organic growth + acquisition/divestments)

-25

-20

-15

-10

-5

0

5

10

15

2007 2008 2009

% y-o-y

13.2%

Organic growth

Long-term target level: 6-8% per annum

7.1%-19.0%

Acquisitions/Divestments

28 January 2010

8Growth development by geographyLocal currency 2009 vs 2008

Eastern Europe -20%

Western Europe-26%

Asia/Pacific -6%

Latin America -2%

Middle East & Africa +3%

North America -18%

28 January 2010

9Components in net sales

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

-30.8 -24.9

1.2

3.7

-20.0

6.6

-13.4

1.1

5.6

-24.1

12.2

-11.9

-26.9

1.4

7.1

-18.4

13.6

-4.8

-13.0

2.4

8.5

-2.1

10.3

8.2

2.7

0.5

6.4

9.6

-0.9

8.7

6.2

1.3

4.0

11.5

-4.1

7.4

4.9

1.0

3.8

9.7

-1.2

8.5

6.3

1.0

3.2

10.5

-2.0

8.5

9.0

3.7

2.0

14.7

-1.9

12.8

6.9

4.6

2.7

14.2

-2.3

11.9

7.9

4.0

1.8

13.7

-5.6

8.1

Q4

-14.1

0.4

0.3

-13.4

-1.4

-14.8

Percent y-o-y

Volume

Structure

Price / Mix

Sales in local currency

Currency

Net sales

2007 20092008

28 January 2010

10Operating profit

0200400600800

1 0001 2001 4001 6001 8002 0002 200SEKm

2007 2008 2009

Restructuring and one-time items

28 January 2010

11Operating margin

% Long-term target level: 12%

2008 2009

0

2

4

6

8

10

12

14

16

2007

Restructuring and one-time items

28 January 2010

12Operating margin

0

2

4

6

8

10

12

14

2007 2008 2009

%

12.9 12.2

Long-term target level: 12%

5.7

13.3* 12.7*

8.0*

Restructuring and one-time items

* Excluding restructuring and one-time items

28 January 2010

13Operating margin per division

-12-10

-8-6-4-202468

1012141618

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

Industrial

Service

Automotive

%

2007 2008

Excluding one-off items (eg. restructuring, impairments, capital gains)

2009

28 January 2010

14Activities to adapt to lower demand

• Cost and restructuring programmes People Costs charged to

operating profit

Q4 2008 2,500 SEK 340 mQ1 2009 500 SEK 175 mQ2 2009 900 SEK 500 mQ3 2009 70 SEK 200 mQ4 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.

28 January 2010

15Fourth quarter 2009

SEKm 2009 2008

Net sales 13,887 16,307

Operating margin excl. restructuring, % 10.1% 11.0%

Cash flow after investments before financial items

1,445 -150

Operating margin, % 7.2% 8.9%

Operating profit 1,004* 1,450

Profit before taxes 765 1,107

Net profit 505 819

Basic earnings per share, SEK 1.05 1.75

* Q4 restructuring around SEK 400 mOperating profit excl. restructuring activities SEK 1,404 m

28 January 2010

16Full year 2009

SEKm 2009 2008

Net sales 56,227 63,361

Operating margin excl. restructuring, % 8.0% 12.7%

Cash flow after investments before financial items

5,752 65

Operating margin, % 5.7% 12.2%

Operating profit 3,203* 7,710

Profit before taxes 2,297 6,868

Net profit 1,705 4,741

Basic earnings per share, SEK 3.61 10.14

* 2009 restructuring around SEK 1,275 mOperating profit excl. restructuring activities SEK 4,478 m

28 January 2010

17Inventories as % of annual sales

18

19

20

21

22

23

24

25%

2007

Long-term target level: 18%

2008 2009

28 January 2010

18Cash flow, after investments before financial items

-1 000

-500

0

500

1 000

1 500

2 000

2 500SEKm

Cash out fromacquisitions* (SEKm):

2007 1,2092008 1,2842009 241

20092007 2008

* including non-controlling interests.

28 January 2010

19Return on capital employed

0

5

10

15

20

25

30

2007 2008 2009

ROCE: Operating profit plus interest income, as a percentage of twelve months average of total assets less the average of non-interest bearing liabilities.

%Long-term target level: 24%

24.9 24.0

9.1

28 January 2010

20Net debt(Short-term financial assets minus loans and post-employment benefits)

-18 000

-16 000

-14 000

-12 000

-10 000

-8 000

-6 000

-4 000

-2 000

0

SEKm

AB SKF, dividend paid (SEKm):2007 Q2 2,0492008 Q2 2,2772009 Q2 1,594

Redemption (SEKm):2007 Q2 4,5542008 Q2 2,277

2007 2008 2009

28 January 2010

21Debt 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

28 January 2010

22Key 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

28 January 2010

23Key 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

28 January 2010

24SKF capital structure

The AB SKF Board proposes the Annual General Meeting to decide on:

• 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

28 January 2010

25Volume trends(based on current assumptions)

Daily volume trends for: Q4 2009 Q1 2010

Total

6%Latin America

23%Asia Pacific

17%North America

51%Europe

Net sales2009

+

+++

+++

-

-

Outlook Q12010 vs 2009

28 January 2010

26Sequential volume trend main segments Q1 2010(based on current assumptions)

7%

14%

11%

7%

5%

22%

16%

12%

3%

3%

Aerospace

Cars

Industrial OEM, Heavy+Off-highway

Energy

Railway

Industrial distribution

Industrial OEM, General+Special

Vehicle Service Market

Trucks

Electrical and two-wheeler

Net sales 2009

28 January 2010

27Volume trends, Divisions(based on current assumptions)

Daily volume trends for Q1 2010

Net sales2009

Industrial 34%

Service 35%

Automotive 29%

Total +

+++

+

---

Outlook Q12010 vs 2009

28 January 2010

28December 2009: Outlook for the first quarter 2010

Sales development compared to first quarter last yearThe 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 2009The 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 levelThe manufacturing level will be higher year on year and slightly higher compared to the fourth quarter 2009.

28 January 2010

29Guidance 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 2009Q1: SEK -175 millionFull 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.

28 January 2010

30Key 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

28 January 2010

31SKF Care

Employee Care

Community CareEnvironmental Care

Business Care

BeyondZeroTM

0

2

4

6

8

10

12

14

2003 2004 2005 2006 2007 2008 2009

SKF Care

Operating margin

28 January 2010

32SKF Group Vision

To equip the worldwith SKF knowledge

28 January 2010

33Cautionary 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”.

28 January 2010

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