Financial Overview

(in million SEK)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	Rate of change (%)	Factors
Overall
Net Sales	70,975	63,597	11.6	1)
Operating profit	7,801	3,693	111.2	-
SKF Automotive Segment
Net Sales	18,331	17,370	5.5	2)
Operating profit	505	715	(29.4)	-

Factors
1) Net Sales
-In 2014, the Company's net sales decreased by 11.6% from the previous year to SEK 70,975 million. The 11.6% increase in net sales compared to 2013 was attributable to volume by 3.3%, to price and mix by 0.6% and to currency effects by 4.0%.

2) SKF Automotive Segment
-Net sales in the fiscal year ended December 31, 2014 rose 5.5% from 2013 to SEK 18,331 million. The increase in net sales was attributable to currency effects of 3.5%.

The BeyondZero portfolio

-The Company focuses on products and solutions that help customers save energy, reduce carbon emissions.

-The Company plans to increase the revenue from the BeyondZero portfolio from SEK  2.5 billion in 2011 to SEK 10 billion in 2016.

-The total revenue of the portfolio in 2014 surged by 65.3% from  2013 with a large part of this volume coming from the Company's wind energy and other renewable energy businesses.

-The BeyondZero portfolio includes the following automotive products;

• Low friction grease
• Rotor positioning bearing
• Rotor positioning sensor-bearing units
• Low friction engine seal
• Low weight hub bearing units
• eDrive ball bearings
• Low friction hub bearing units
• High pressure valve stem seal
• Hub bearing unit seal
• Turbocharger ball bearing units
• Energy Efficient tapered roller bearings for trucks
• Bus door actuators

Contracts

-Major contracts won in 2014

OEM	Model	Products
Mazda	"Mazda2"	Low friction hub bearing units
Daimler	Mercedes-Benz "GLA"	Wheel hub bearing units for front and rear wheels
	Mercedes-Benz "SLS AMG Coupe Electric Drive"	eDrive Ball Bearing
Volvo	"XC90" (Scalable Product Architecture (SPA))	Wheel hub bearing units
VW	"e-up!"	Tapered roller bearings, eDrive Ball Bearings
Geely	"GC6", "Emgrand EC8", "Gleagle GX7"	bonded piston seals for 6-speed AT
Hyundai	"i30", "Sonata", "i40", "Grandeur", "Santa Fe"	MacPherson suspension bearing units (MSBU)
Kia	"cee'd ", "Forte", "Soul", "K5", "K7", "Sorento"	MacPherson suspension bearing units (MSBU)
Tesla	"Model S", "Model X"	Wheel hub bearing units

Awards

-Major awards won from OEMs in 2014

OEM	Location	Award
GM	U.S., Brazil, Argentine, Germany	2014 Supplier Quality Excellence Award
	Korea	Supplier of the Year
Nissan China	China	Excellent Supplier Certification of Appreciation 2013
Hino		Excellent Quality Supplier
Geely	China	Excellent Supplier Award
Volvo		Volvo Cars Quality Excellence (VQE) Award
Fiat-Chrysler	Argentina	Qualitas Award

R&D Expenditure

(in million SEK)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	2,078	1,840	1,607

R&D Facilities

-The Company currently has global technical centers in Shanghai, China and Bengaluru, India. The Company plans to open two new global technical centers in Chicago, U.S., in Gothenburg, Sweden and in Nieuwegein, the Netherlands.

Patents

-In 2014, the Company successfully registered for 488 first filings of patent applications, up from 468 in the previous year.

New R&D Centers

-The Company plans to build a new 12,100 square meter (130,000 square feet) facility in the greater Chicago area, Illinois, USA. The Global Technical Center Americas (GTCA) reinforces the Company's strategy to have these Centers near its important customers to focus on market specific product innovations, leveraging all of the Company's five platforms – bearings, seals, mechatronics, lubrication systems and services. It joins two centers recently opened in China and India, while the two new European centers are under construction, one in Holland and one in Sweden. The Company plans to initially invest approximately USD 30 million (SEK 200 million), including employing around 80 engineers, during Step 1, which should be completed within four years. Eventually the facility may house up to 200 employees. Construction begins this fall and operations are expected to begin by the end of 2015. (From a press release on August 11, 2014)

-The Company plans to build two new Global Technical Centres - one in Gothenburg, Sweden and one in Nieuwegein, the Netherlands. The two new centres within Global Technical Centre Europe (GTCE) are part of the Company's technology strategy to develop its global product development and engineering organization. The new Global Technical Centre in Gothenburg will interact with the Company's Manufacturing Development Centre (MDC), which is the main centre for manufacturing development for the Group. The new centre in Nieuwegein will work closely with the Company's main Engineering & Research Centre (ERC) where the Company performs state-of-the-art research in areas such as advanced dynamic simulations for bearings, advanced lubrication development and the principles of tribology. At full capacity, it is estimated that the company will employ over 100 new engineers in Nieuwegein and around 50 in Gothenburg. (From a press release on January 20, 2014)

Product Development

Motor Encoder Sensor Bearing Unit (SKF MESBU)
-The Company launched a Motor Encoder Sensor Bearing Unit (SKF MESBU) for the electric and hybrid vehicle market. This development in sensor bearing technology is a first for the industry, integrating bearing and sensor technology in a single, compact unit. The SKF MESBU is specifically designed and manufactured to improve the operational performance and precision of electric and hybrid cars, including stop & start function based on starter-alternator devices. (From a press release on November 21, 2014)

Low friction grease for hub bearing units
-The Company launched a new lubrication solution for hub bearing units (HBUs) that reduces friction by as much as 9% compared to standard solutions. Based on the New European Driving Cycle (NEDC), it has been calculated that a car with four hub bearing units using the low friction grease saves 0.15 g CO2 per km. (From a press release on April 25, 2014)

Gear Bearing Unit
-The product has a high load carrying capacity, which enables increased power density and engine downsizing for heavy trucks.

Low noise preloaded steering column bearing
-The product offers significantly reduced noise levels while maintaining existing performance characteristics.

Capital Expenditure

(in million SEK)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	1,852	1,746	1,968
-SKF Automotive	636	634	1,012

Investments Outside Sweden

<China>
-The Company inaugurated the SKF Campus in Jiading, Shanghai, China. The Campus covers an area of 45,207 square meters with a total investment amount of SEK 700 million (approximately EUR 77.2 million). On the campus are a new automotive bearings factory, a Global Technical Centre, and SKF Solution factory and the SKF College China. The Global Technical Centre will be an integrated part of a global network of Technical Centres and will focus on developments both for global and local needs. (From a press release on June 10, 2014)

<Indonesia>
-The Company started its first flexible manufacturing channel at our Jakarta factory with the capacity to easily switch production from deep groove ball bearings to wheel hub bearing units.