Industrial Market, Strategic Industries

© SKF Group

Speakers

• Rakesh Makhija President Industrial Market, Strategic Industries

• Bernd Stephan Director Business unit Renewable Energy

• Robert Law

Director Business unit Lubrication

CMD 2014

© SKF Group

Agenda

1. Strategic Industries overview

2. Strategy and market direction

3. Significant news

4. Growth drivers • Asset life cycle and service • China

5. Manufacturing • Cost reduction programs • Footprint • Application specific offers

6. Renewable Energy business unit

7. Lubrication business unit

8. Outlook and key business message

CMD 2014

1 Strategic Industries overview

© SKF Group

50%

27%

23%

Strategic Industries

Net sales 2013 = SEK 18,929 million

Number of employees = 17,628

Full responsibility for sales to both OEM and end users, as well as business development, manufacturing and engineering

% of net sales by geographical area (2013):

Asia, Pacific

North America

Europe

CMD 2014

Strategy and market direction

2

© SKF Group

Our mission – “clear leadership”

• Leadership in everything we do – Value – Innovation – Cost

• Strong financial performance – Profit – Cash flow

• Customers are first priority

• An entrepreneurial culture – seeking new horizons

• Execution with speed

CMD 2014

© SKF Group

• Asset life cycle per industry • Service business • Strategic customer relationship • Customer service levels • China, India, USA and Germany • Geographic expansion • Acquisitions

• New market offers • Application specific offers • New technologies • Position technology

leadership • New processes • SKF BeyondZero

• Cost reduction • Integrated cost reduction

and manufacturing supply optimization

• Asset utilization • Manufacturing footprint • Business Excellence/Lean • Quality • Safety

“Market leadership & profitable growth”

“Meet customer needs through speed & innovation”

“Cost leadership & flexibility”

Value & cost leadership

CMD 2014

Significant news

3

© SKF Group

Aerospace

• SAFRAN announced the award of the strategic LEAP program to SKF

• Renewed long-term agreements with major partners such as GE Avio SrL, Rolls-Royce, AgustaWestland, HAL and Techspace Aero

• Reinforced partnering with Boeing with a new contract for advanced sealing solutions

• SKF Aerospace Innovation Centers: Falconer (US) and INSA Lyon (France) on major topics such as condition monitoring and next generation of airframe and aero engine bearings

CMD 2014

© SKF Group

Renewable Energy

• Strategic partnerships in China with Envision

Energy, a global leading provider of wind turbines, and with Longyuan, the largest IPP wind farm owner and operator in China

• Gained several significant supply agreements

with Goldwind • Received the Best Technical and Service

Award 2013 from Envision Energy, Technical Cooperation Award from Goldwind and the Supplier of the Year 2013 from Nanjing Gearbox China

CMD 2014

© SKF Group

Precision

• Inauguration of a super-precision bearings

manufacturing channel in Pinghu, China

• Increased number of orders in the automation industry, including an order worth of SEK 33 million

• Launched a new pillar CPMT (SKF Telescopic pillar for medical procedure equipment) with great market response

CMD 2014

© SKF Group

Railway & Off-highway

Photo: BEUMER Group GmbH & Co. KG

• Order for 40,000 compact tapered bearing units for Russian freight car OEM, Tikhvin Freight Car Assembly Plant (TVSZ)

• Continued very strong development of the passenger train segment business in China

• Ongoing tests of SKF Insight with three European railway customers

• Slewing bearing orders from several major OEMs in China and strengthened SKF position for tunnel boring applications

CMD 2014

© SKF Group

Lubrication

• Secured a 70% share for automatic lubrication systems from a major European wind turbine producer (2014 & 2015)

• Secured SEK 16 million order for firefighting reels

• Secured a major contract from TPC Wire & Cable (US) for storage reels (supply power to nuclear sites in the event of a natural disaster)

• Secured significant business for automatic lubricating screw jacks for marine industry

CMD 2014

© SKF Group

Traditional Energy

• SKF magnetic bearings installed its 1,000th system in an oil & gas application, which is the largest installed base in the industry

• Received an order for SKF super grip bolts for turbine couplings for seven power plants in three countries from Doosan Heavy Industries valued at SEK 18 million

• Integrated condition monitoring and protection system commissioned at a large Asian petrochemical complex and received letter of intent for similar system for new refinery in Middle East

• A new low torque operator valve concept was introduced with several significant prototype orders received from key manufacturers of subsea valves used in the offshore oil & gas industry

CMD 2014

© SKF Group

Industrial Drives

Received a large order of bearings and condition monitoring from a major Chinese fan and blower manufacturer

Landed a three-year contract with a major global compressor manufacturer, which increased market share and secured SKF’s role as their major bearing supplier

Won an order of 72 slewing bearings for seismic isolation system in ship to shore cranes from a leading Indian crane manufacturer

CMD 2014

4 Growth drivers - Asset life cycle and service - China

© SKF Group

Customer testimonial

Seakeeper

CMD 2014

© SKF Group

Customers create and capture value

• Rule 1: Customers pay for what they value • Rule 2: Value is a moving target, what they value today

may not be valued tomorrow • Rule 3: Value must be tangible and measurable

Our responsibility

Customers derive as much, if not more value from HOW they interact with SKF, and this results in a more sustainable basis for competitive advantage.

is to ensure that SKF provides sustainable customer value now and in the future!

CMD 2014

© SKF Group

Sustainable profitable growth Optimizing the asset life cycle with SKF solutions

Specification

Design and develop

Operate and monitor

Maintain and repair

Close cooperation with regulatory bodies, institutes and agencies, enables support in defining and meeting standards and requirements

Engineering services to enable new design and minimize risk of machinery failures and warranty costs

Manufacture and test A one-stop source for proven, world-class products, delivered and available worldwide

Install and commission Optimized operational performance through best practice installation services

Safer and more profitable operations with increased availability through class approved solutions for condition-based maintenance

A range of maintenance engineering and consulting services to boost asset uptime

CMD 2014

© SKF Group

Pinion stands used for rotary drums with major focus on rolling mills & kilns. Today’s situation: • Gearbox OEMs are responsible

for delivering major part of the driveline (including the pinion stand)

• The pinion stand selection and delivery is seen as a necessity outside many of the gearbox OEMs core competence

Tomorrow: • SKF is a full pinion stand

supplier with additional upgrade services

Locating bearing SRB

Non-locating bearing CARB

SNL housing

Sealing

Lubrication system

Condition monitoring for pinion bearings

Asset life cycle management Example: Pinion stand concept

CMD 2014

© SKF Group

Asset life cycle management Example: Fan upgrade services in Nordic region

Increased performance and reliability for critical industrial fans and blowers. Reference cases: Renova Göteborg (Refuse disposal unit) • Reduced maintenance cost with

SEK 125 thousand/year • Reduced downtime and increased lifetime

for bearings and oil

US paper mill • ROI 483% in 16 months. Verified by SKF

Documented Solution Program (DSP)

Renova Göteborg

CMD 2014

© SKF Group

New Industrial Market SKF BeyondZero market launches

Servo actuator Active magnetic systems

CTBU low friction seal

SKF solar linear actuator

SKF Nautilus

SKF Solar Hub

SKF Flowline

LubriLean for cutting process

SKF Agri-HUB

Extended life plain bearings • Greased-for-life product • Up to 90% grease reduction • Increased uptime • Reduced total cost of ownership • Eliminate grease leakage to environment

High speed permanent magnet motor solutions • 10 to 40% lower energy use • Improved service life and reliability • Oil-free environment with no contamination • Up to 30% lower noise levels

Telescopic pillar for infant care • Lower noise level • Reduced energy use by 80% • Higher load carrying capacity • Higher stability • Greater comfort, smoother operation

SKF BeyondZero solutions and launches 2012–2013

SEK 4 billion (Industrial Market forecast 2014)

35 Solutions 30% of new offers

Food line Y-bearings

High endurance slewing bearings

Dry lubrications for conveyor belts

Sour gas compressor bearings

Cylinder lubrication unit

Titanium bearings for aerospace

SKF ConRo

Spherical roller bearings + CARB toroidal roller bearings

SKF Energy Efficient (E2) deep groove ball bearings

CMD 2014

© SKF Group

Customer testimonial

Envision Energy

© SKF Group

China overview

• Strong development in passenger rail and wind segments

• Stable demand in key segments – e.g. industrial electric motor, fluid power and machine tools

• Increased local production acceptance

• Value selling works in a tough environment

• Increasing manufacturing

CMD 2014

© SKF Group

Tianjin

Qingdao

Beijing

Dalian

Wuhu

Wafangdian

Pinghu Shanghai

Taipei

Chengdu

Guangzhou

Hongkong

Nanjing

Shenyang

Wuhan

Taiyuan

Urumqi

Zhenzhou

Baotou

Changsha Ningbo

Harbin

Kunming

Xiamen

Xi’an

Changzhou Changshu

Jinan

China footprint

Shenzhen

SKF (Dalian) Large Size Bearing Factory

Lubrication

Reelcraft (Changzhou) Lincoln Lubrication Equipment (Changshu)

Industrial Drives SKF (Dalian) Medium Size Bearing Factory

Renewable Energy

Precision SKF Actuation System (Pinghu) Pinghu ABBA

Railway & Off-highway Beijing Nankou SKF

CMD 2014

© SKF Group

China strategic direction

Improved competitiveness

Accelerating market-based offerings

Asset life cycle growth

● Enhance local service expertise and market coverage

● Utilize SKF Solution Factory infrastructure

● Strengthen “local for local” product offerings

● Develop segment-specific platform offerings

● Localize sourcing and production of key components

● Enhance engineering capabilities - product and application engineering

Accelerate China development

CMD 2014

Manufacturing - Cost reduction programs - Footprint - Application specific offers

5

© SKF Group

Manufacturing

Manufacturing processes &

benchmarking

Manufacturing footprint

Manufacturing supply

optimization

Integrated cost reduction

• Design review • Purchasing • Application specific performance

• Flexibility • Value added • Lean

• Balanced to demand • Better service • Cost efficiency

Lean manufacturing

• Technology review • Review core KPIs • Benchmark

CMD 2014

© SKF Group

Manufacturing footprint

14%

79%

6%

2012

13%

57%

30%

2016 AmericasEuropeAsia

• Balancing the global manufacturing footprint based on growth and demand is an ongoing exercise

• This covers all major product lines – bearings, lubrication and mechatronics

Example: Spherical roller bearings

CMD 2014

© SKF Group

Sustainable competitiveness

Improved service < 5% availability failures

Reduce inventory

Reduce manufacturing cost

Standardize best-practices

Manufacturing supply optimization program Objectives 2016

CMD 2014

Electrical motor High performance in noise & vibration (internal geometry and grease)

Attachment in agriculture Improved sealing and adapted grease

Pulleys in elevators Adapted sealing and lifetime

Application specific performance market

Screws in air compressor Optimized design

New optimised designs that enable cost efficient solutions and deliver the right performance. Penetrate the “mid-market” with top quality products, best adapted to customers’ application specific performance needs

Medium deep groove ball bearing ISO-dimension

Cylindrical roller bearing ISO-dimension