skf in brief_2009_en

SKF in brief 2009

Drivers• Profitability• Quality• Innovation• Speed• Sustainability

Values• Empowerment• High ethics• Openness• Teamwork

This is SKFSKF Group is the leading global supplier of products, solutions and services within rolling bearings, seals, mechatronics, services and lubrication systems. Services include technical support, maintenance services, condition monitoring and training.

The SKF GroupSKF was founded in 1907 and grew at a rapid rate to become a global company. As early as 1920, the company was well established in Europe, North and Latin America, Asia and Africa. Today, SKF is represented in more than 130 countries. The company has more than 100 manufacturing sites and also sales com-panies supported by about 15,000 distributor locations. SKF also has a widely used e-business marketplace and an efficient global distribution system.

Three divisions, 40 segmentsSKF does business mainly through three divisions: Industrial Division and Service Division, servicing industrial original equipment manufacturers (OEMs) and aftermarket customers respectively, and Automotive Division, servicing automotive OEMs and aftermarket customers. SKF operates in around 40 customer segments, whereof examples include cars and light trucks, wind energy, railway, machine tool, medical, food and beverage and paper industries.

CertificationThe Group has global certification to IS0 14001 (environmental management systems) and OHSAS 18001 (health and safety) standards. Its operations are also certified to either ISO 9001 or applicable customer industry standards, e.g. ISO/TS 16949 (automotive), AS9100 (aviation) or IRIS (railway) for quality management systems.

Geographic distributions 2009 of net sales, average number of employees and property, plant and equipment (per cent)

Key data2009 2008

Net sales, SEKm 56,227 63,361

Operating profit, SEKm 3,203 7,710

Profit before taxes, SEKm 2,297 6,868

Basic earnings per share, SEK 3.61 10.14

Diluted earnings per share, SEK 3.61 10.13

Dividend per share, SEK 3.501) 3.50

Cash flow after operating investments before financial items, SEKm 5,752 65

Return on capital employed, % 2) 9.1 24.0

Equity/assets ratio, % 2) 35.8 35.1

Additions to tangible assets, SEKm 1,975 2,531

Registered number of employees, 31 December 41,172 44,799

Number of shares 31 December 2009: 455,351,068, of which 45,421,004 A shares and 409,930,064 B shares.1) Dividend according to the Board’s proposed distribution of surplus.2) 2008 has been restated for change in accounting principle IAS 19 ”Employee benefits”.

Research and developmentTechnical development, quality and marketing have been in focus at SKF since the very start. The Group’s efforts in research and development have resulted in numerous innovations, forming bases for new standards, products and solutions in the bearing world. In 2009, the number of first filings of patent applications was 218.

SKF CareSKF defines sustainability as SKF Care, compris-ing Business Care, Environmental Care, Employee Care and Community Care. Within each of these four cornerstones, key focus areas and targets are defined to drive continuous performance improvement.

VisionTo equip the world with SKF knowledge

MissionTo strengthen SKF’s global leadership and sustain profitable growth by being the preferred company: • for our customers, distributors

and suppliers• for our employees• for our shareholders

North America

17810

Latin America

6 56

Western Europe

43 4351

Net sales

Average number of employees

Property, plant and equipment

3108

Sweden

3 01

Middle East and Africa

23 2124

Asia / Pacific

5 58

Eastern Europe

SKF – the knowledge engineering company The SKF vision is “To equip the world with SKF knowledge”. To take the knowledge from over 100 years of operation to develop and deliver products, services and solutions which enable customers to develop their business successfully and profitably. SKF knowledge can be defined as the combination of the following three dimensions.

The geographic dimension – global and local presenceSKF is a global company with a local presence which has primarily been in place since the early years of the SKF Group. Wherever customers are located local expertise, supported by global industrial specialists and technical experts, combine the required SKF skills to be able to make a specific offer for customers which meets their local needs. The global experts draw upon knowledge and successes from similar industries worldwide.

The customer dimension – industries and segmentsSKF’s customers can be found in very many industries and industry segments, currently defined as around 40 specialized segments. Each customer and segment has different tech nical and commercial challenges. Working in so many different industries enables SKF to develop specific products and services for each industry and take knowledge from one industry and apply it to another industry.

The competence dimension – technology platformsSKF’s five technology platforms are Bearings and units, Seals, Mechatronics, Services, and Lubrication Systems. SKF’s specialist teams in each platform work closely with the segments and sales organization to provide advanced integrated solutions for meeting the customers’ needs in developing new products, to improve their production efficiency and improve their competitiveness and profitability.

Using all three dimensions to build customer value is what SKF call “The power of knowledge engineering”.

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10

15

20

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7.5*

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Aquisitions/DivestmentsOrganic growth

% Y-o-Y

Changes in salesin local currency

Operating margin

* Excluding income from the previously jointly controlled company Oy Ovako Ab

* Excluding effect from sale of Oy Ovako Ab 2005: 10.4% 2006: 10.1%

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5

10

15

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10.4*

11.3*

Return on capital employed

% %

Financial objectives and strategy Financial targetsSKF’s long-term financial targets are:•operating margin level of 12%•annual sales growth in local currencies of 6-8%•return on capital employed of 24%

StrategySKF’s business strategy for achieving long-term profitable growth and attaining financial targets includes:•keeping a clear and dedicated customer focus•developing new products, solutions and services with higher

added value which enable customers to improve their efficiency and performance while lowering their total cost

•improving price quality by applying the SKF platform and segment approach to deliver value to customers

•strengthening the product portfolio through greater investment in R&D and through acquisitions

•focusing on rapidly expanding segments and regions•reducing capital employed and fixed costs•attracting, retaining and developing the right people

Shares and shareholders SKF’s A and B shares have been quoted on the NASDAQ OMX Stockholm AB since 1914. The total number of shares traded in 2009 was 1,151,265,590. SKF’s ADRs are traded on the OTC market.

A shares, unrestricted 45,421,004B shares, unrestricted 409,930,064

Total 455,351,068

The five largest shareholdersas of 31 December 2009 In percent of

voting rightsIn percent of share capital

Foundation Asset Management 28.5 12.0Skandia 4.8 1.3Alecta 4.6 4.3Swedbank Robur Funds 4.5 3.7AFA Sickness Insurance 2.2 1.5

2009

Europe excl. Sweden

USA

Rest of the world

Sweden

Geographic ownershipSKF

160140120

100

80

60

40

SEK

05 06 07 08 09 © NASDAQ OMX

200,000

150,000

100,000

50,000

B share A share OMX Stockholm_PINumber of A shares traded, thousands Number of B shares traded, thousands

Price trend of SKF’s shares

Net sales by customer segment Industrial distribution 22%

Vehicle service market 12%Special industrial machinery 5%

Heavy industry 8%

General industry 11%

Aerospace 7%

Railway 5%

Cars and lighttrucks 14%

Off-highway 3%

Trucks 3%

Two-wheelers and Electrical 3%

Energy 7%

SKF’s divisionsSKF’s business is mainly divided into three divisions, each focusing on specific customer groups worldwide. The divisions are inter dependent and provide each other with products, services and know-how, so that each division can fully serve its final customers.

Industrial Division The Industrial Division serves industrial Original Equipment Manufacturer (OEM) customers in some 30 global industry customer segments with a wide range of energy-efficient offerings. These solutions and know-how are also based on the manufacturing of a wide range of bearings – such as spherical and cylindrical roller bearings, angular contact ball bearings, medium deep groove ball bearings and super-precision bearings – as well as lubrication systems, linear motion products, magnetic bearings, by-wire systems and couplings.

Service Division The Service Division serves the global industrial aftermarket providing products and knowledge-based services to increase customers’ plant asset efficiency. Solutions are based on SKF’s knowledge of bearings, seals, lubrication systems, mechatronics and services, and customers are served by SKF and its network of over 7,000 authorized distributors. The division runs three Condition Monitoring Centres, who design and produce world-leading hardware and software. Service Division is also responsible for all SKF’s sales in certain markets. The expanding network of SKF Solution Factories will be the future infra-structure for delivering complete, integrated solutions incorporating all SKF’s technology platforms.

Automotive Division The Automotive Division serves manufacturers of cars, light trucks, heavy trucks, buses, two-wheelers and the vehicle service market, supporting them in bringing innovative and sustainable solutions to global markets. In addition, the division provides energy-saving solutions for home appliances, power tools and electric motors. Within the Automotive Division, SKF develops and manufactures bearings, seals and related products and services. Products include wheel hub bearing units, tapered roller bearings, small deep groove ball bearings, seals, and automotive specialty products for engine, steering and drive line applications. For the vehicle service market, the division provides complete repair kits, including a range of drive shafts and constant velocity joints.

Net sales by customer segment

Special industrial machinery 11%Energy 16%General industry 18%

Off-highway 7%

Railway 11%Heavy industrial machinery 10%Aerospace 20%Other 7%



Service and service-related products 17%

Bearings and units,power transmission products, seals, lubrication systems,linear motion andactuation systems 83%


Other 9%

Vehicle service market 33%

Cars 45%

Trucks 9%

Two-wheelers 4%



2009 2008


Net sales incl. intra-Group sales, SEKm 28,368 33,730


Operating margin* 5.5% 12.0%

Assets and liabilities, net, SEKm 15,825 18,098

Registered number of employees 17,604 19,166

* Operating margin is calculated on sales incl. intra-Group sales.

2009 2008


Net salesincl. intra-Group sales, SEKm 20,190 22,318


Operating margin* 12.9% 14.9%




2009 2008


Net sales incl. intra-Group sales, SEKm 19,279 21,850

Operating profit, SEKm -809 546

Operating margin* -4.2% 2.5%




CommunityCare

Employee CareBusiness Care

BeyondZero

Environmental Care

SKF Care

Sustainability Sustainability is one of SKF’s key business drivers together with Profitability, Quality, Innovation and Speed. SKF’s approach to sustaining growth while meeting environmental and social challenges is to work determinedly to integrate the long-term sustainable development approach into its business practices, processes as well as product and solution offerings to the market and industry.

Sustainability at SKF centres on the SKF Care approach to business, the environment, employees and the community.

Business Care•SKF endorses the Global Compact Ten Principles.

The SKF Code of Conduct is applicable to all employees worldwide and compliance audit is carried out biennially at all units.

•The SKF Code of Conduct for Suppliers and Sub-Contractors as well as the SKF Code of Conduct for Authorized Distributors have been released with the aim to enforce an ethical demand chain.

•In continuing its launch of new bearing famlies offering energy-efficient solutions, SKF released the SKF Energy Efficient (E2) spherical and cylindrical roller bearings. The SKF E2 bearing family outperforms standard ISO products, providing a minimum 30% energy saving for customers, and is intended for a wide range of applications, such as industrial and wind energy transmissions.

Environmental Care•The SKF Group-wide ISO 14001 Environmental

Management certificate comprised 97 sites in 28 countries at the end of 2009.

•As a result of SKF’s drive in reducing energy intensity at manufacturing operations and the carbon intensity of the energy used, an absolute reduction of Scope 1 and 2 carbon dioxide emissions (according to the GHG Protocol) of 90,000 tonnes was achieved. This is equivalent to a 18% reduction compared to the 2008 total, surpassing the Group’s target by some 13 percentage points.

•A new target for solvent reduction was defined, to achieve an absolute 50% reduction by 2012, compared to 2007. A total of 25% reduction was achieved in 2009.

•SKF also aims for a minimum 80% recycling rate for grinding swarf by 2012. The 2009 recycling percentage of grinding swarf Group-wide was at 70%.

Employee Care•120 out of 211 SKF units worldwide achieved

zero recordable accidents for four quarters or more in 2009 and the number of recordable accidents has fallen by 89% per working hour since the Zero Accidents target was established

in 2000. Apart from that, health and fitness, HIV/Aids programmes, skills and competence training continued to be a focus area under Employee Care.

•SKF employees provide their feedback on SKF’s performance in relation to company values and key focus areas annually through the global Working Climate Analysis. The analysis also measures the working climate in different departments and individual teams in terms of trust, co-operation, personal development and continuous improvement.

Community Care•SKF encourages its local management to be

actively involved in communities not only by providing financial means but also commitment through viable voluntary work and sports activ-ities, education, training, and helping under-privileged society. SKF has more than 200 Community Care activities in forty countries around the world. Please visit www.skf.com for more information.

Management Tom Johnstone* President and Chief Executive OfficerTore Bertilsson* Executive Vice President and Chief Financial OfficerHenrik Lange* President, Industrial DivisionVartan Vartanian* President, Service DivisionTryggve Sthen* President, Automotive DivisionAlan Begg Senior Vice President, Group Technology Development and QualityCarina Bergfelt General CounselGiuseppe Donato Senior Vice President and AdvisorEva Hansdotter Senior Vice President, Group Human Resources and SustainabilityMagnus Johansson Senior Vice President, Group Business Development and Government RelationsPhil Knights Senior Vice President, Global RelationsRakesh Makhija President, AsiaManfred Neubert President, SKF GmbH Bo-Inge Stensson Senior Vice President, Group Demand Chain and ITIngalill Östman Senior Vice President, Group Communications

* member of the Group Executive Committee

Board of Directors Elected by the Annual General MeetingLeif Östling, ChairmanTom Johnstone, President and CEOUlla LitzénWinnie Kin Wah FokHans-Olov OlssonLena Treschow TorellPeter GrafonerLars WedenbornJoe Loughrey

Employee representativesKennet Carlsson Lennart Larsson Jeanette Stenborg Marie Petersson

The following topics related to the SKF Annual Report 2009 including Sustainability Report are to be found at www.skf.com, choose Investors and Reports.

•Articles of Association•SKF Code of Conduct •The SKF Environmental, Health and Safety (EHS) Policy •Carbon dioxide emission data

•Environmental performance data •Zero Accidents awards •Productions sites as of 31 December 2009 •The compliance table to GRI G3 Guidelines (GRI Index Table).

skf in brief_2009_en

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