Service Division

Vartan

Vartanian

-

President, Service Division

SKF Capital Markets Day10 May 2011

Agenda1.

Business overview and introduction to Service Division

2.

Growth segments and news

3.

Channels to market –

development of Industrial Distribution

4.

SKF Solution Factories and Life Cycle Management

5.

Customer examples

6.

Key business message

Introduction to Service Division

Service Division business

Providing the industrial aftermarket with value added solutions for improved overall customer productivity based on:

•

Advanced services

and technical competence to optimize plant asset efficiency for industrial end users

•

SKF’s

platform products and services through authorized distributor channels

•

Professional supply chain and global reach

The Power of Knowledge Engineering

End-user business issues

1.

Reduce costs

2.

Continuous improvements3.

Safety

4.

Increase productivity

5.

Reliable spare parts

6.

Solve difficult technical problems

7.

Align people & processes with organization strategy

Voice of our customerscustomer survey 2010

SKF sales and Service Division share

Service Division sales 2010 (2009)

Sales SEKm 22,029 (19,599)

Operating margin 13.5% (13.0%)

SKF Group

Service Division out

of SKF Group 37%

SD Net

sales

by geography

North America

13%

Asia33%

Western Europe25%

Latin America12%

Middle East & Africa8%

Eastern Europe

9%

Key achievements

• Sales

growth•

Distribution sales

growth

•

US distributor

destocking

•

Non-bearing

platforms

• Service sales•

Major partnership

value

contracts

with key customers

• 9 SKF Solution Factories

• SKF Economos

integration/growth

• Large

number

of product

and offering

launches

Reliability Systems (RS) revenue development

Reliability

Systems resources

Number

of people

> 2,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

SKF -

Unique

in industry

•

Global presence–

SKF sales

offices

& SKF factories

–

SKF Solution Factory

& Industry

Service Centre’s

–

Certified

distributor

network

–

Authorized

distributor

network

•

The combination of machine

knowledge and asset efficiency

services

–

Asset Life Cycle

management

•

SKF technology platforms

SKF global presence

TianjinQingdao

Beijing

DalianWafangdian

Pinghu

Shanghai

SKF China SD sales and service network

SKF Solution Factory

SKF Asia Reg

Office

SKF China HOSKF College Campus

SKF Solution FactoryJV BaoSteel

Shanghai Domestic & International Warehouse

Global Technical Center

Remanufacturing Dalian

Dalian Domestic & International Warehouse

Chengdu

Guangzhou

Hong Kong

Nanjing

Shenyang

Wuhan

TaiyuanUrumqi

Zhengzhou

Baotou

Changsha

Ningbo

Harbin

Kunming

Chongqing

Xiamen

Xi’an

SKF Wind Industry Service Centre

SKF Machined SealsProduction

centre

Distributor

network

is in addition

Capture

the full potential of the asset life cycle

IndustryOil platforms

Paper millsSteel plants

RailwaysMines

...

Industry ApplicationsGearboxesMachinesConveyers

PumpsFans...

OEM End userStrengthen aftermarket sales

Create OEM sales pull

Evolution of the SKF service offering

•Simple

Condition Monitoring

•Primarily

Vibration

•Data Collector Wizards

•PdM

Services

•Energy Efficiency

•Electric Motor Testing

•Asset Efficiency Optimisation

• Environmental• Safety • Prognostics

•Consulting•Perf. Based

Contracts

(IMS/PRM)•Reman

•Value integration of platform & services

•Automating & Integrating Asset Efficiency Optimization

• Diagnostics• Protection• Oil Sampling

1987 19981990 2007 2008

SKF ReliabilitySystemsSKF Service

Trouble-FreeOperation

(TFO)

SKF ReliabilitySystems

2000

SKF ReliabilitySystems

EnergyEfficiencySolutions

ConditionMonitoring

SKF Solution Factory

2008

Asset Health Management

Next-

Technology platforms

–

growth

comparison

Bearings

Growth

segments and news

Growth segments for Service Division

Oil & Gas

Wind

Marine

Metal Mining

Machine tool Food & Beverage

Pulp & Paper

Traditional energy

Major opportunities

in new segments

Major opportunities in growing markets and segments

Opportunities with technology platforms

Continous

innovation and R&D investments

•

Active

innovation process with customers, industry

consortiums

and through

alliances

•

R&D investments in service products > group average

•

Significant investment in services -

spread throughout our

geographic organization.

SKF Idler Sound Monitor

A tool

for early

detection

of faulty

conveyor

idlers

Customer benefits

•Early detection of faulty conveyor idlers

•Avoid unplanned downtime

•Helps avoid costly belt damage

•Safer & easier inspection

Industry focus

•Mines and quarries

•Cement plants

•Ports

•Power plants

•Steel mills

SKF Alignment Products

SKF’s

own range of alignment products

Customer

benefits:

•

Extensive scope coverage

•

Energy Efficiency

•

Impact

on machine

performance

•

Increase

machinery

uptime

SKF Multilog

On-line System IMx-R

SKF knowledge transfer and customisation

Customer

benefits:

•

Protection against bogie instability, high temperature protection and condition monitoring to train applications

•

Follows industry standards

High speed trains, long-distance

trains, short

distance

trains, freight

locomotives, metros…

SKF Microlog

Inspector system

•

Developed

in close

cooperation

with customers

•

Customer

requirements: connect

wirelessly

•

Customer

benefits: More

effective

work

while

maintaining

plant uptime

and profitability

•

Front line

tool

for operators in an Operator Driven Reliability

(ODR) program

New standards for operations and maintenance

staffEmpowerment

of machine

operators and maintenance

staff

Development of Industrial Distribution

SKF presence

closer

to customers

-

distribution

Industrial Distribution sales

from group

25%

Industrial distributors bring value to SKF by their:

• Core competence in logistic and inventory management

• Broad range of products

• Spare parts supply optimization knowledge• Reduction of working capital

• Flexibility

• Local presence

• 24/7/365

• In-site operations at customer

• and more…

Business scope

of distribution

Bearings Seals Chains

& Sprockets

Clutches

& Couplings

Health and Safety

Gearboxes

Lubricants

Motors

Maintenance

tools

Hydraulics

Belts

& pulleys

Linear

Motion

SKF Distributor College -

Number 100,000

Certificate 100,000: Self-aligning bearing systems

Ronnie Yandle FLORIDA BEARINGS INC ORLANDO

Distribution activities

in focus

•

Extend

and diversify

our

network

•

Grow

platform

sales

•

Enhance

value

selling

•

Actions

to optimize

stock levels

and product

availability

Type

of distributors

Distributor

footprint

example

-

Agriculture

Aftermarket

customers are everywhere

Wide range

of maintenance

products

Documented

value

Documented

Solutions Programme-the

industry

leading

value

calculatorValue

created

with customers:•

related

to increased

availability

and capacity•

attributable

to short

term cost

savings

in the areas of productivity, reduced component usage, reduction of spare parts, reduction of scrap and HSE (Health, Safety & Environmental)

Distributor

Value

Programme-the tool

for SKF Authorized

Distributors

to:•

Identify

and record

the provided

value-added

services

•

Document

the value

of the benefits

provided

•

Support cost

saving

agreements

Documented

value

Documented

Solutions Programme-the

industry

leading

value

calculatorIn 2010 value

created

with customers:•

Xx%

related

to increased

availability

and capacity•

Xx%

attributable

to short

term cost

savings

in the areas of productivity, reduced component usage, reduction of spare parts, reduction of scrap and HSE (Health, Safety & Environmental)

Distributor

Value

Programme-the tool

for SKF Authorized

Distributors

to:•

Identify

and record

the provided

value-added

services

•

Document

the value

of the benefits

provided

•

Support cost

saving

agreements

SEK 2,700 billion documented

customer

savings

2011

SKF Solution Factory and Life Cycle Management

SKF Solution Factory from concept

to reality

–

driving

growth

Business Excellence

17 opened in 24 months

SKF Solution Factories –

next phase

USA (Cleveland)

, Argentina, Singapore, Saudi Arabia, South Korea,

Japan, Australia, The Netherlands

Capture

the full potential of the asset life cycle

Bakeries

The assetThe asset

life cyclelife cycle

Create OEM sales pull

Strengthen aftermarket sales FoodLubrication

Systems

Services

Bearings

Wafer owens

Bakeries

Create OEM sales pull

Strengthen aftermarket sales FoodLubrication

Systems

Services

Bearings

Wafer owens

Idea

Design

Develop

Install

Operate

Monitor

Maintain

Repair

Restore

Redesign

Manufacture

Capture

the full potential of the asset life cycle

Key business message

Key business message

•

Working to improve customers productivity inside all markets and industries

•

A global network of SKF partners –

ease of access

•

Platform growth, supported by SKF Solution Factories Life cycle management

•

Modernised supply chain management

•

Proven value –

driving profitability

•

Enhanced growth targets