Industrial Market, Strategic Industries

Speakers

• Rakesh Makhija
President
Industrial Market, Strategic Industries

• Bernd Stephan
Director
Business unit Renewable Energy

• Robert Law
Director
Business unit Lubrication

© SKF Group CMD 2014

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

© SKF Group CMD 2014

1
Strategic Industries overview
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
23% Europe
50%

North America
27%

© SKF Group CMD 2014

2
Strategy and market direction
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

© SKF Group CMD 2014

Value & cost leadership
“Market leadership &
profitable growth” through speed & innovation”
• Asset life cycle per industry
• Service business
• Strategic customer relationship
• Customer service levels
• China, India, USA and Germany
• Geographic expansion
• Acquisitions
© SKF Group CMD 2014
“Meet customer needs
• New market offers
• Application specific offers
• New technologies
• Position technology
leadership
• New processes
• SKF BeyondZero
“Cost leadership
& flexibility”
• Cost reduction
• Integrated cost reduction
and manufacturing supply
optimization
• Asset utilization
• Manufacturing footprint
• Business Excellence/Lean
• Quality
• Safety
3
Significant news
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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

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

© SKF Group CMD 2014

4
Growth drivers
- Asset life cycle and service
- China
Customer testimonial

Seakeeper

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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 is to ensure that SKF provides sustainable

customer value now and in the future!

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.

© SKF Group CMD 2014

Sustainable profitable growth
Optimizing the asset life cycle with SKF solutions
Specification
Close cooperation with
regulatory bodies, institutes
and agencies, enables support
in defining and meeting
standards and requirements
Maintain and repair
A range of maintenance
engineering and consulting
services to boost asset
uptime
© SKF Group CMD 2014
Design and develop
Engineering services to
enable new design and
minimize risk of machinery
failures and warranty costs
Operate and monitor
Safer and more profitable
operations with increased
availability through class
approved solutions for
condition-based maintenance
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
 Asset life cycle management
Example: Pinion stand concept

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) Non-locating
bearing
Condition monitoring
• The pinion stand selection and for pinion bearings
CARB
Lubrication
delivery is seen as a necessity system
outside many of the gearbox
OEMs core competence Locating
bearing
SRB

Tomorrow:
• SKF is a full pinion stand
supplier with additional upgrade
services SNL
housing
Sealing

© SKF Group CMD 2014

 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

© SKF Group CMD 2014

New Industrial Market SKF BeyondZero market launches

High speed permanent magnet

SEK 4 billion motor solutions
(Industrial Market forecast 2014)
• 10 to 40% lower energy use
35 Solutions • Improved service life and reliability
30% of new offers • Oil-free environment with no contamination
• Up to 30% lower noise levels

Extended life plain bearings Telescopic pillar for infant care

• Greased-for-life product • Lower noise level
• Up to 90% grease reduction • Reduced energy use by 80%
• Increased uptime • Higher load carrying capacity
• Reduced total cost of ownership • Higher stability
• Eliminate grease leakage to environment • Greater comfort, smoother operation

SKF BeyondZero solutions and launches 2012–2013

Spherical roller SKF Energy Efficient

LubriLean for Titanium bearings High endurance bearings + CARB SKF solar linear (E2) deep groove
cutting process Food line Cylinder for aerospace slewing bearings SKF Solar Hub actuator ball bearings
Y-bearings lubrication unit toroidal roller bearings

Active magnetic Sour gas compressor Dry lubrications CTBU low friction
SKF ConRo systems bearings SKF Flowline for conveyor belts seal SKF Nautilus Servo actuator SKF Agri-HUB

© SKF Group CMD 2014

Customer testimonial

Envision Energy

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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

© SKF Group CMD 2014

China footprint

Railway & Off-highway

Beijing Nankou SKF Renewable Energy
SKF (Dalian)
Large Size
Bearing Factory
Harbin

Shenyang
Lubrication
Urumqi
Reelcraft Wafangdian
(Changzhou) Baotou
Beijing
Lincoln Lubrication Dalian
Tianjin
Equipment Taiyuan
(Changshu) Qingdao
Jinan

Xi’an Nanjing
Zhenzhou
Wuhu Changzhou
Chengdu
Changshu
Wuhan Pinghu Shanghai
Ningbo
Changsha
Precision Xiamen Industrial Drives
SKF Actuation Kunming Guangzhou Taipei SKF (Dalian)
System (Pinghu) Medium Size
Hongkong
Pinghu ABBA Shenzhen Bearing Factory

© SKF Group CMD 2014

 China strategic direction

Accelerate China development

Asset life cycle Accelerating market- Improved

growth based offerings competitiveness

● 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

© SKF Group CMD 2014

5
Manufacturing
- Cost reduction programs
- Footprint
- Application specific offers
Manufacturing

Lean
manufacturing

Manufacturing Manufacturing Manufacturing Integrated cost

processes & footprint supply reduction
benchmarking optimization

• Technology review • Balanced to demand • Flexibility • Design review

• Review core KPIs • Better service • Value added • Purchasing
• Benchmark • Cost efficiency • Lean • Application specific
performance

© SKF Group CMD 2014

Manufacturing footprint

Americas
2012 2016 Europe
Asia
3 1
6% 0 3
14% %
%

79%
5
7
%
Example: Spherical roller bearings

• Balancing the global manufacturing footprint based on

growth and demand is an ongoing exercise
• This covers all major product lines – bearings, lubrication
and mechatronics

© SKF Group CMD 2014

Manufacturing supply optimization program
Objectives 2016

Improved service
< 5% availability failures

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competitiveness
Im

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Standardize best-practices
Reduce inventory Reduce manufacturing cost

© SKF Group CMD 2014

Application specific performance market
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

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

Pulleys in elevators
Adapted sealing and lifetime

Attachment in agriculture
Medium deep groove ball bearing ISO-dimension Improved sealing and adapted grease

Screws in air compressor

Optimized design

Cylindrical roller bearing ISO-dimension