SKF Q3 2020 Results

Alrik DanielsonPresident and CEO

• SKF’s transformation into a more customer-focused, innovative and lean business continues

• Net sales of 18,596 M, organic sales -5.1%

• Operating profit* improved to 2,475 M (2,380) and operating margin was 13.3% (11.3%).

• Cash flow improved to 2,266 M (2,120)

Q3 – Strategy implementation drives strong results

Q3 Q4 Q1 Q2 Q3 20

2.5 bn2.4 bn

2,475 MOperating profit*

Organic growth

12m-average

Q3 Q4 Q1 Q2 Q3 20

Organic growth, %

-5.1%

Operating profit*, SEK

* Adjusted

-5.1% Organic sales growth

2,266 MCash flow

Industrial: very good performance on lower sales

• 15.8% operating margin* (13.9), despite 6.9% drop in organic sales

• Higher volumes in Asia and in Latin America, significantly lower volumes in Europe and North America

* Adjusted

Strengthening competitiveness in North America

• SEK 350 M investment for expanding and automating manufacturing in Sumter, South Carolina.

• SEK 200 million investment in localizing manufacturing of Tapered Roller Bearings from China to Mexico.

• Consolidation of the factories in Avon, Ohio and North Charleston, South Carolina into the Sumter factory.

Automotive: 7.4% operating margin*

• High pace in transformation

• Operating margin* 7.4% (4.6), organic sales -0.7%

• Significantly higher sales in Asia, higher sales in Latin America. Lower sales in North America and significantly lower sales in Europe

• Continued growth in Electrical vehicles

* Adjusted

SKF RecondOil – enables a change in how we use oil

DON’T CHANGE – RE-USEOil is an asset, not a consumable

OIL AS A SERVICE…per month, litre or based on performance.

AND GAIN• Reduced oil related costs• Reduced CO2

• Equipment performance with super clean oil

Q3 Results: The detailsNiclas Rosenlew, CFO

Sales developmentSequential improvement in organic sales

2019 2020

Percent y-o-y Q3 Q4 Q1 Q2 Q3

Organic -3.0 -2.9 -8.6 -25.2 -5.1

Structure -2.6 -1.8 +0.1 - -

Currency +4.2 +4.8 +3.0 -1.0 -6.5

Net sales -1.4 +0.1 -5.5 -26.2 -11.6

Q3 Q4 Q1 Q2 Q3 20

Net sales

12 mth

Net sales, SEK bn

18.6

21.0

Strong operating profit despite lower sales

-30,0

-25,0

-20,0

-15,0

-10,0

-5,0

0,0

5,0

10,0

15,0

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

0

2

4

6

8

10

12

0

0,5

1

1,5

2

2,5

3

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

Tho

usa

nd

s

Tho

usa

nd

s

IAC

Op profit

12 mth

Organic growth, % Operating profit*, SEK bn

2.5

2.7

2.22.4

-5.1

+6.9

+8.0

-3.0

2016 2017 2018 2019 2020

2016 2017 2018 2019 2020

* Adjusted Positive one-time items Negative one-time items

2.2

Operating profit*Improved profit despite lower sales and currency headwind – continued performance on structural cost savings

0

500

1 000

1 500

2 000

2 500

3 000

2 475

-624

-376

+1 09502 380

Q3 2019 Q3 2020Cost development

Organic sales &

manufacturing volumes

Income from divested/acquired

companies

Currency impact

Operational performance: + 471

SEKm

* Adjusted

Significantly improved performance for both Industrial and Automotive

Industrial

• Net sales 13,150 M

• Organic sales -6.9%

• Operating margin* 15.8%, (13.9)

Automotive

• Net sales 5,446 M

• Organic sales -0.7%

• Operating margin* 7.4%, (4.6)

Op margin 12 mth avg

IndustrialOperating margin*, %

15.8%

13.9%14.9%

Op margin 12 mth avg

AutomotiveOperating margin*, %

7.4%

4.6%

6.7%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q320

* Adjusted

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q320

Net working capital

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 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2014 2015 2016

Target: 25%

Total NWC 28.7%

Inventories 21.9%

Trade receivables 17.1%

Trade payables 10.3%

2017

%

2018 2019 2020

Strong cash flow – lower reported operating profit offset by improved working capital

-4 000

-2 000

0

2 000

4 000

6 000

8 000

10 000

-1 000

0

1 000

2 000

Cash flow 12 mth

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 2019

Accelerating investments in manufacturing

• 2016 1.9 billion

• 2017 2.2 billion

• 2018 2.6 billion

• 2019 3.4 billion

• 2020e 3.3 billion

2020

Cash flow after investments before financing*

Net debt/equity ratioStrong balance sheet and solid liquidity positions us for the future

Net debt, SEK bn Net debt/equity, %

-35

-30

-25

-20

-15

-10

-5

0

Net fin debt Post-empl. Benefits Leasing

2014 2015 2016

0%

20%

40%

60%

80%

100%

120%

140%

160%

Net debt/equity

Net debt, excl leasing & postempl. benefits/equity

59.8%

8.5%

2017 2018 2019 2014 2015 2016 2017 2018 20192020 2020

Q3 – Strategy implementation drives continued strong operating performanceSKF’s transformation into a more customer-focused, innovative and lean business continues

Improved profit and margins, strong cash flow:

• Improved profit despite lower sales and currency headwind

• Continued performance on structural cost savings

• Operating margin increased to 13.3% (11.3%)

Accelerating our efforts to regionalize, consolidate and modernize our manufacturing footprint

• Record levels of investments in our factories and in new technology

• Q3: Investing in strengthened competitiveness in North America

Next – Capital Markets Day on 4 November – Welcome!

SKF Q3 2020 ResultsQ & A

July 2020: SKF demand outlookThe industries and regions in which SKF operates are being impacted by initiatives by authorities and by SKF's customers related to the spread of the Covid-19 virus.

As a result of this uncertainty, it is not feasible to provide a reliable demand guidance for the fourth quarter.

Guidance for 2020*Q4 2020:

• Financial net: around -200 million

2020:

• Tax level: around 29% for 2020, excluding effects from divestments.

• Additions to property, plant and equipment: around 3,300 million for 2020.

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

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 www.skf.com) under the Administration Report; “Risk management at SKF" and "Sensitivity analysis”.