AB SKF : SKF programme to improve efficiency, reduce cost and strengthen profitable growth

Regulatory News:

SKF (STO:SKFB)(STO:SKFA)(Pink Sheets:SKFRY)(LSE:SKFB):

The strategy and the long-term financial targets which were launched by the SKF Group in 2010 were based on initiatives for profitable growth and cost reductions in the business. Based on today's more challenging business environment the SKF Group has decided to expand and accelerate the programme for cost reduction activities aiming at reducing its annual cost by SEK 3 billion by the end of 2015.

The cornerstones of the programme for cost reduction activities are:

• consolidation of production between sites
• transfer of production from West Europe to East Europe, Asia, Latin America in order to serve these faster growing markets with more local production
• optimization and productivity improvements in the manufacturing and demand chain processes
• consolidation of and efficiency improvements in administration and support functions
• reduction in purchasing cost mainly through standardization and rationalization of the supplier base.

The total cost for this programme will be approximately SEK 1.5 billion for the years 2012 to 2015 and will be recorded as projects are finally approved and implemented during the period. This will impact some 2,500 people primarily through early retirement and other voluntary and agreed reductions.

"When we launched our financial targets in the autumn of 2010 we identified cost reduction as one of the key initiatives and the activities we have now announced and those which are underway are part of this. We will also continue to aggressively drive our initiatives focussed on profitable growth which can be seen for example with the new investments we are making in faster growing regions and industries, our increased investment in research and development and the acquisitions which we have made," says Tom Johnstone, President and CEO.

"Demand weakened as we went through the fourth quarter and we expect it to continue at this lower level at the beginning of this year. Manufacturing was therefore reduced more than planned to reflect this, resulting in inventories being lowered by over 600 MSEK," Tom Johnstone continues.

In the fourth quarter 2012 SKF will report restructuring cost of SEK 200 million as the first step of the programme and in addition SEK 100 million for impairments and write down of assets. The annual savings from this first step will be SEK 150 million when fully implemented in the second half of 2013. Some 550 people are affected primarily in Ukraine, Italy, Sweden and USA.

Gothenburg, 14 January 2013

Aktiebolaget SKF (publ)

AB SKF is required to disclose the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 08:30 on 14 January 2013.

SKF is a leading global supplier of bearings (http://www.skf.com/portal/skf/home/products?contentId=876709&lang=en), seals (http://www.skf.com/portal/skf/home/products?contentId=238358&lang=en), mechatronics (http://www.skf.com/portal/skf/home/products?contentId=447144&lang=en), lubrication systems (http://www.skf.com/portal/skf_lub?lang=en), and services (http://www.skf.com/portal/skf_lub/home/services?contentId=867934&lang=en) which include technical support, maintenance and reliability services, engineering consulting and training. SKF is represented in more than 130 countries and has 15,000 distributor locations worldwide. Annual sales in 2011 were SEK 66,216 million and the number of employees was 46,039. www.skf.com

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