SKF in East Europe

Presented by Marek PrackiArea Director, CEE-MEA

SKF Capital Markets Day 2008

Presentation agenda

Eastern Europe

• SKF’s history

• SKF’s presence

• SKF’s strategy

• SKF’s future

Poland

Czech.Slovakia

Hungary

Belarus

Ukraine

Romania

Croatia

Slovenia

B-H Serbia &Montenegro

Mac.Alb.

Bulgaria

Russia

Kazakhstan

KrasnojarskEkaterinburg

SKF offices (16)SKF branch offices (11)SKF manufacturing (3)SKF industrial service centreMaintenance support centre

LithuaniaLatvia & Estonia

SKF presence in Eastern Europe

History of SKF in Eastern Europe

c

1914 – Establishment of SKF office in Russia.

1919 – Kuličková loziska SKF s.r.o. in Prague (Czechoslovakia inthat time).

1922 – Szwedzkie Łożyska Kulkowe Sp. z o.o. in Warsaw (Poland).

1922 – Head office for Eastern Europe and the Balkans was opened in Prague.

1923 – SKF Zagreb opened in Croatia.

1925 – SKF presence established in Bulgaria.

1928 – SKF Svéd Golyóscsapágy Rt. in Budapest (Hungary).

1920 – First Agent of SKF in Baltic’s ‘Willem Endel’ active from the 1920s, located in Riga.

1930 – 6 branches in Poland and 7 branches in Czechoslovakia.

ˇ

History of SKF in Eastern Europe - Russia

1914 – SKF office in Russia.

1916 – SKF established factory in Moscow, first ball bearing plant in Russia (under SKF management till 1928).

1991 – Re-open SKF office in Russia.

2004 – start-up of sales company SKF ZAO.

2004 – SKF opened Industrial Services Center in Moscow.

2007 – SKF decision to build factory in Russia to produce railway CTBU. SKF factory in Moscow, 1920s

Eastern Europe revenue development

0

500

1 000

1 500

2 000

2 500

3 000

2000 2001 2002 2003 2004 2005 2006 2007

SEKm

SKF strategy in Eastern Europe

SKF Eastern Europe strategies in the 1990s

Presence / sales offices• Proximity to customers• D/D network

Establish infrastructure• Logistics, IT• Service excellence• Quality systems• Grow HR capacity and potential

Strong technical support• Specialists, local language literature, fairs• Support acquisitions

… to be the LEADER amongst western bearing suppliers

Poland

Czech.

SlovakiaHungary

Belarus

Ukraine

Romania

CroatiaSlovenia

B-H Serbia &Montenegro

Mac.

Alb.

Bulgaria

Russia

Kazakhstan

Lithuania

Latvia

11/(43)10/(294)1 LuSy

22(43)/27(27)

12/(40)4/(47)

14/(70)7/(139)

6/(27)4/(8)

5/(11)8/(60)

5/(13)4/(15)

4/(10)/4(4)

8/(23)/4(4)

4(4)/3(3)5(5)/4(4)

1 LuSy 4(8)/4(27)

12(12)/9(9)

16/(55)4/(27)

12/(23)3/(10)

3(5)/4(4)

8/(23)10/(18)

No. of industrial distributors(outlets): 153 (421)No. of VSM distributoroutlets: 116 (703)No. of lubrication systemdistributors: 2

Distributor network in Eastern Europe

CMPs in EE 18

Total Europe 51

Certified Maintenance Partners in Europe

Capture value

...through SKF Documented Solutions Program

A tool that allows our customers to quantify the true value received by using SKF solution products or services; this value is calculated using customer plant information, in conjunction with the industry's best practices andapplied industries benchmarks as well as general plant application Key Performance Indicators (KPI)…

Recorded DSPs in Eastern Europe

No. of approved DSPs: 304

Approved DSP value in TEur: 35,992

SKF Distributor College in Eastern Europe

2,301 distributor employees from Eastern Europe out of 3,786 in all of Europe completed various courses run in SKF Distributor College during 2007.

The 10,000th person who completed one of the courses, was an employee at MD Prema, SKF distributor in Poland.

Mr. Waldemar Orowiecki recieves his certificate

1997 - Lutsk, Ukraine

Acquisition of factories in Eastern Europe

2002 –Sopot, Bulgaria

1995 – Poznan, Poland

SKF Industrial Service Center in Moscow

Reconditioning of rolling bearings for continuous casting machines – steel Industry

Large size bearings for steel, pulp & paper, mining and other industries

Reconditioning and services for machine tool spindles – aerospace, electronics, woodworking industries

SKF Logistics - competitive advantage for EE

• Scheduled door-door deliveries

• In time reliability > 97%

• Well known subcontractors with good reputation

• Global tracking system

• High frequency

e–business in Eastern Europe

817 451 882 685 329 240

Electronic

Traditional

90% of orderlines are e-business.

Pulp & paper customer in Lithuania

Customer needs:Avoidance of unplanned stops due to intermediate gearbox bearings failures (240T€/year). To run their Beloit paper machine (1973) at 600 m/min.

SKF solution:- New bearing arrangement for 20 out of 93 cylinders- Inner (Cylinder) side: NU2310 ECML/C3, new casted housing- Outer side: 22311 EK/C3, new casted housing + shafts- Sealing of the housings - HyPro Filtration unit (15 T€) - Vibration analysis - SKF Microlog Analyser GX sold in 2005 - Bearing sales through distribution

Customer benefits: - Longer service life of the bearings – no unpredictable stops – no

production losses - Easier and quicker exchange of the bearings- Reduced leakages from the housings due to sealing solution

Future challenges

Industry moving from west to eastForeign Direct Investments in CIS and CEEDistributor network development & diversificationOil & gas development in Russia

Political and security volatility in Russia & Balkan Currency risk managementRussian dependence on oil and natural resources pricesFinding and keeping good employees

SKF strategy implemented in Eastern Europe

Creation of VALUE ADDED for our partners based on longterm, mutualy profitable cooperation with:

• Strategic origin equipment manufacturers

• Net of authorised distributors

• End-users of SKF products and services underthree parties agreements: SKF – Distributor – End-user

Opportunities to develop

• Continue to grow CIS* business (and SEE*)

• Support manufacturing initiatives

• Strengthen distributor network

• Expand on Group Engineering Platform opportunities

• Grow with global key accounts

CIS: Russia, Ukraine, Belarus, KazakhstanSEE: South East Europe

Key business message

• EE fast growing market for SKF

• Strong customer base both OEM and distributors

• Same strategy as for Western Europe

• Increasing production capacity (best cost countries)

CIS: Russia, Ukraine, Belarus, KazakhstanSEE: South East Europe