Annual Report
2021
When have you
relied on rotation today?
Our products and services are found everywhere
in society. In fact, wherever there’s movement,
SKF’s solutions may be used. This means that
we’re an important part of the everyday lives
of people and companies around the world.
CONTENTS
SUSTAINABILITY REPORT
Sustainability disclosures in the Annual Report have undergone limited
assurance engagement by SKF’s auditors. See the Auditor’s Limited
Assurance Report on the Sustainability Report and statement
regarding the Statutory Sustainability Report on page 138.
The definition of the Statutory Sustainability Report is presented on
page110.
CORPORATE GOVERNANCE REPORT
The Corporate Governance Report examined by the auditors can be found
onpages 139–146. TheAuditor’s Report on the Corporate Governance
Report can be found on page 147.
REMUNERATION REPORT
The Remuneration Report can be found on pages 156–158.
ADMINISTRATION REPORT
The Administration Report has been audited by SKF’s external auditors.
Seethe Auditor’s Report on pages 106–109.
It’s about the business. However, we
also see it as a moral obligation to help
our customers move away from fossil
fuel dependency and into the world of
clean technology.
By making products lighter, more
efficient and with a smaller environ-
mental footprint, we’re striving for
asmarter and better industry.
SKF OVERVIEW
This is the SKF Group ............................................................. 4
President’s letter .................................................................. 10
STRATEGY AND VALUE CREATION
Strategy, Intelligent and clean growth ............................. 14
Why invest in SKF ................................................................. 20
How SKF creates value ........................................................ 22
Trends and drivers ............................................................... 22
Long-term targets ................................................................ 24
Sustainability targets ........................................................... 26
Sustainability framework ................................................... 28
SKF’S GLOBAL PRESENCE
A leader on the world bearing market .............................. 32
The bearing market ............................................................. 34
SKF in the markets ............................................................... 38
Risk management including sustainability risks ............ 42
The SKF share ........................................................................ 46
The Board of Directors’ proposal for a resolution on
principles of remuneration for Group Management .......48
Nomination of Board members and
notice of Annual General Meeting ...................................... 52
Capital structure, financing, credit rating and
dividend policy ....................................................................... 52
FINANCIAL STATEMENTS .............................................. 53
Consolidated income statements ...................................... 54
Consolidated statements
of comprehensive income ................................................... 54
Consolidated balance sheets ...............................................56
Consolidated statements of cash flow ...............................58
Consolidated statements of changes in equity ............... 61
Notes to the consolidated financial statements ............. 62
FINANCIAL STATEMENTS, PARENT COMPANY
Parent Company, AB SKF ................................................... 94
Parent Company income statements ............................... 94
Parent Company statements of
comprehensive income ....................................................... 94
Parent Company balance sheets ....................................... 95
Parent Company statements of cash flow ....................... 96
Parent Company statements of changes in equity ..........97
Notes to the financial statements
of the Parent Company ........................................................ 98
Proposed distribution of surplus ................................... 105
Auditor’s Report ................................................................. 106
SUSTAINABILITY STATEMENTS .............................. 110
General disclosures ........................................................... 111
SKF’s material topics ........................................................ 117
Economic category ............................................................. 117
Environmental category .................................................. 119
Social category ................................................................... 126
The EU Taxonomy .............................................................. 137
Auditor’s Limited Assurance Report on the
Sustainability Report and statement regarding
the Statutory Sustainability Report ............................... 138
CORPORATE GOVERNANCE REPORT ..................... 139
Board of Directors ............................................................. 144
Auditor’s Report on the
Corporate Governance Report ........................................ 147
Group Management .......................................................... 148
SKF GROUP ....................................................................... 152
Seven-year review ............................................................. 152
Three-year review ............................................................ 153
Per-share data ................................................................... 153
Distribution of shareholding ........................................... 153
Definitions ........................................................................... 154
General information .......................................................... 155
REMUNERATION REPORT .......................................... 156
• 2021 was a strong year with
solid growth and improved
margins, especially during
thefirst half of the year.
• Continued investments in
world-class manufacturing
with, among others, SEK 400
million invested in expanding
and modernizing the manufac-
turing facility in Airasca, Italy.
2021 in brief
SKF’s long-term targets
The long-term targets shall be achieved over a business cycle.
TARGET TARGET
202 1
OUTCOME
202 1
OUTCOME
Operating margin
1)
13.3%14%
Revenue growth
2)
12.6%5%
50% 42%
Dividend pay-out ratio
zero
–
37%
5)
Net zero by 2030
4)
<40% 12.5%
Net debt
3)
/equity
16% 14.9%
ROCE
1)
To be updated
To be updated
To be updated
1) Adjusted for items affecting comparability. 2) Including acquisitions, adjusted for divestments.
3)Excluding pension liabilities. 4) Own operations scope 1 and 2. 5) Absolute reduction in scope 1
and2 emissions since 2015 base year. 6) Net cash flow after investments before financing.
• Rickard Gustafson joined
SKFas President and CEO
on 1June 2021.
• In addition to the net zero
objective for SKF’s operations
by 2030, we announced
our commitment to have
asupply chain with net zero
greenhouse gas emissions
by2050.
0
20
40
100 SEK billion
60
80
201918 21
81.7
86.0
75.0
85.7
Net sales
0
3
6
15 %
9
12
21201918
11.8
12.3
12.2
13.3
Operating margin
1)
0
6
4
2
8
201918 21
Cash flow
6)
1.4
8.3
5.3
5.0
10 SEK billion
4
SKF Annual Report 2021
SKF OVERVIEW
One of our strengths is the ability to keep developing
new technologies that offer competitive advantages
to customers, and at the same time, contribute to
asustainable society.
SKF’s products are used all over the world and in a
large variety of rotating applications, ranging from
renewable energy, such as wind and ocean power,
toheavy industries like mining, metal, and pulp and
paper. Our products are also used in cars and com-
mercial vehicles, as well as in bicycles, skateboards
and household appliances.
This is the SKF Group
World-leading experts on rotation
87
MANUFACTURING
UNITS
15
TECHNOLOGY
CENTERS
42,602
EMPLOYEES
>17,000
DISTRIBUTORS
40
CUSTOMER
INDUSTRIES
130
COUNTRIES
5
SKF Annual Report 2021
A strategy for intelligent
and clean growth
In the beginning of 2022, we presented a new strategic
framework based on two concepts: intelligent and clean.
These concepts will guide us on our journey to become
an even more focused, innovative and profitable indus-
trial player.
Our broad business reach gives us a platform to drive
profitable growth, as it allows us to continuously target
High growth
segments
Services &
Aftermarket
New
technologies
Accelerate technology development
Portfolio
management
GROWTH AREAS GROWTH ENABLERS
Digitalize the full value chain
Regionalized and competitive
supply chain
Operate more efficiently
– closer to customers
A DIFFERENT SKF 2030
Intelligent and clean growth
the most attractive opportunities. Within these growth
areas, strong market demand matches our ability to
differentiate and provide customer value. This means
that we are well positioned to accelerate profitable
growth.
Read more on pages 14–17.
6
SKF Annual Report 2021
72%
SHARE OF
NET SALES
87%
SHARE OF
OPERATING PROFIT
1)
SKF’S OFFERING
MARKET DRIVERS MARKET CHARACTERISTICS
SKF’S POSITION
• A leading position in industries such as railway,
heavy industries and industrial distribution
market, and a prominent position in other
industries.
0
6
18
12
202120202019
%
Net sales and operating profit
1)
Net sales
MSEK
Operating margin
1)
0
20,000
60,000
40,000
1) Adjusted for items affecting comparability 2) Total value of accessible bearings market
• Supplying more than 40 industries globally with
products and services, both directly and indirectly
through a network of more than 7,000 distributors.
• Broad product range of bearings, seals and
lubricationsystems.
• Rotating shaft services and solutions for machine
health assessment, reliability engineering and
remanufacturing.
• Reliable rotation is crucial for many industries.
• Climate change and the actions to address it influence
most of SKF’s customer industries.
• Other drivers vary from application to application,
e.g.low friction, low energy use, maintenance-free
solutions and total cost of ownership.
• Digitalization enables monitoring and predictive
maintenance throughout the product life cycle.
• Fragmented global industrial OEM (Original
Equipment Manufacturer) market, but in some
industries, e.g. renewable energy and railway,
arelatively small number of OEMs account for
alargepart of the market.
• The distributor channel is also globally frag-
mentedand varies from country to country.
275
–
295
MARKET VALUE
2)
SEK BILLION
12% to 14%
BEARINGS MARKET
DEVELOPMENT
2021
MAIN COMPETITORS
Schaeffler Group, Timken, NSK, NTN, Iljin,
JTEKT, Rothe Erde, Wafangdian Bearing
Group, Minebea Mitsumi and C&U.
SKF OVERVIEW
Industrial
7
SKF Annual Report 2021
28%
SHARE OF
NET SALES
13%
SHARE OF
OPERATING PROFIT
1)
SKF’S OFFERING
MARKET DRIVERS MARKET CHARACTERISTICS
SKF’S POSITION
• One of the leaders in e.g. the development of
components for auto motive electrification and
wheel-end solutions.
• Strong position in application-driven
powertrainsolutions.
• Strong global position in the aftermarket
withanextensive distribution network.
Automotive
0
3
9
6
%
202120202019
MSEK
Net sales
Operating margin
1)
0
10,000
30,000
20,000
1) Adjusted for items affecting comparability 2) Total value of accessible bearings market
• Customized bearings, seals and related products
forwheel-end, driveline, e-powertrain, engine,
suspension and steering applications to manufacturers
of cars, light and heavy trucks, trailers, buses and
two-wheelers.
• Supplying the vehicle aftermarket with spare parts,
both directly and indirectly through a network of
morethan 10,000 distributors.
• The light vehicle market: electrification, energy
efficiency and reductionof emissions.
• The truck market: total cost of ownership,
connect ivity and integrated systems.
• The aftermarket: changing buying patterns,
newchannels, product performance and cost
optimization.
• Consolidated automotive OEM market with a small
number of large companies.
• Fragmented vehicle aftermarket.
• OEM manufacturers account for about 80% of the
total bearings market, while the independent
vehicle aftermarket accounts for the remainder.
125
–
145
MARKET VALUE
2)
SEK BILLION
5% to
7%
BEARINGS MARKET
DEVELOPMENT
2021
MAIN COMPETITORS
Schaeffler Group, Timken, NSK, NTN,
JTEKT, Iljin, C&U and Wanxiang Qianchao.
8
SKF Annual Report 2021
SKF OVERVIEW
AUTOMOTIVE
Meeting the tough demands of commercial vehicles
In 2021, SKF introduced the Truck Hub Unit (THU) 2nd
Generation on the commercial vehicle market in China.
This is the most compact and lightweight wheel end
bearing technology, and it has been developed to meet
the tough demands of commercial vehicles and to match
vehicle service life.
Due to the compact design, there is no need for disassembling from the
axleduring brake maintenance. This makes the THU 2nd Generation the most
reliable wheel end bearing concept on the market.
SKF REMANUFACTURING
Reduced costs and carbon emissions
with remanufacturing
SKF has remanufactured more than
39,000 bearings, weighing more than 400
tonnes, for steelmaker Severstal over the
last 10 years. Remanufacturing has
helped the company reduce carbon emis-
sions by more than 65 tonnes per year.
In addition, the service-based partnership
has helped Severstal to reduce costs and
improve its equipment reliability.
SKF RECONDOIL
SKF’s oil regeneration service
available in Mexico
Molecular Oil Technology is licensed
to operate with a RecondOil Double
Separation Technology (DST)
stand-alone unit from SKF. The
DST system removes particulates
from industrial oil, allowing it to be
regenerated rather than replaced.
This will improve the environmental
performance and reduce costs for
industrial end-users in Mexico.
INDUSTRIAL
Saving millions with
preventive maintenance
Preventive maintenance solutions from
SKF enable the steelmaker company,
Ovako, to identify problems early and fix
them immediately, thereby avoiding
bearing failures and machine downtime.
Constant monitoring equipment gen-
erates more data. This has led to Ovako
being able to see trends and patterns
that can be acted on early. The savings
in maintenance have amounted to
around SEK 8 million per year.
9
SKF Annual Report 2021
Daria Naboichenko
Business Services Project
Manager, Moscow, Russia
“At SKF you feel like your work
is an extension of who you are.
Together with my colleagues
all over the world we con-
sciously produce value.”
Malonie Guha
Global Quality Manager,
Gothenburg, Sweden
“As a department, we’re envi-
sioned to be at the forefront
ofinnovation. Powered by
automation and modern tools,
delivering future focused
solutions is our main priority.”
Jakub Duszczak
Digital Deployment
Champion, Poznan, Poland
“I support our factories in their
digitalization journey. Making
sure they understand benefits
and challenges, and how to
solve their pain points in the
best possible way.”
Renato Neves
Global Manager, Head of
Digital Eco systems &
Partner ships,
Gothenburg, Sweden
“I enjoy my work the most
when learning from my col-
leagues. Applying this in real
life and generating customer
value motivates me a lot.”
Maya Chaudhari
Cleantech Director,
Lansdale, USA
“My role is to focus on Clean-
tech, helping our customers
reduce their environmental
impact and to seize business
opportunities for SKF that
contribute towards addressing
the climate change challenge.”
Harshali Patil
Operator in Maintenance
Department, Pune, India
“SKF’s strategy to focus on the
future workforce by develop-
ing and involving them in the
journey of lean manufacturing
and digitalization is critical to
create a culture of innovation.”
Jorge Yanez
R2R Chief Accountant,
Madrid, Spain
“I joined SKF one year ago and
I’m happy. I feel as part of a
team with a lot of opportuni-
ties to continue growing within
the company in the future.”
Yijun Zhu
Sales Manager,
EV & OEM Customers,
Shanghai, China
“SKF entitles employees to
have self-decision power,
which enables SKF’s leading
position in cutting-edge tech-
nology. A win-win situation for
both SKF and employees.”
We are SKF
10
SKF Annual Report 2021
PRESIDENT’S LETTER
11
SKF Annual Report 2021
“ Our broad knowledge
and reach provide a
great platform to drive
profitable growth”
CEO Rickard Gustafson
In 2021, we saw solid growth and improved margins.
Now, we are focused on delivering on our ambitious
plans, accelerating our journey to become an even
more innovative, growth focused and profitable
industrial player.
12
SKF Annual Report 2021
PRESIDENT’S LETTER
Personally, I’m also very pleased that we’ve recently
announced two important milestones in our future work with
regards to our own operations: achieving net zero emissions
from our own operations by 2030 as well as achieving a
netzero supply chain by 2050. We of course also continue
tosupport the UN Global Compact initiative and its principles
and the Global Goals for 2030.”
How would you describe SKF’s development in2021?
“I think it has really been about continuing to deliver on the
things we said we would do. We’ve continued to invest in
making our factories more automated, more digitalized.
We’vealso continued the transformation of our engineering
and manufacturing capability, putting more competence
closerto our customers inboth Americas and Asia.
The people I’ve met and
stakeholders I’ve engaged
with have really reinforced
the strength of SKF: lead-
ing technical capabilities,
relentless customer focus
and passionate people.
How would you summarize your first year as President
and CEO of SKF? What are your impressions sofar?
“For the business in general, it’s been a year with challenges,
but also a lot of opportunities. We saw continued sharp
rebound in post-pandemic demand within Industrial, but also
exceptional pressures throughout the supply chain, logistics
constraints and significant cost inflation. The team really man-
aged the situation in a good way, and we’ve been able to keep
delivering to our customers. Automotive saw many of the same
challenges, but also had to deal with the added uncertainty of
large OEM customers cancelling orders with very short notice.
On a personal level, it’s been a pleasure and joy getting to
know this fantastic company. The people I’ve met and stake-
holders I’ve engaged with have really reinforced the strength
ofSKF: leading technical capabilities, relentless customer
focusand passionate people.
13
SKF Annual Report 2021
Financially, 2021 was strong for us with solid growth and
improved margins. Our operating margin was 13.3% and we
delivered an organic sales growth of 13%. The performance
in the first half of the year was especially strong.
Externally, two of our largest challenges have been supply
chain constraints and sharp cost inflation during the second
half of the year. Quite simply put, we could have delivered even
more to our customers, had it not been for component short-
ages and logistics bottle necks. On the cost inflation side of
things, steel prices were the first to move, followed by logistics
and energy prices. We’ve worked hard to compensate but the
increases were higher and sharper than I believe anyone could
have predicted. We’ll continue to pull all available levers to
compensate for the steep cost inflation.”
What will be important for SKF to achieve in 2022?
“Starting to deliver on the ambitious plans set out in our new
strategic framework (see pages 14–17). Putting the enablers
inplace and making sure that we really get the organization
working in the way that we want it to. Our broad knowledge
andreach provides a great platform to drive profitable growth,
which we are now going to accelerate.”
In what ways are SKF’s products and solutions enabling
amore sustainable industrial development?
“By far, our largest contribution lies in what we can do with,
and for, our customers. We offer products, solutions and
services that help machines run smoother, with less emissions,
as well as enabling the growth of clean technologies, such as
renewable energy and electric vehicles. We will continue to
invest more into the development of solutions for these indus-
tries, growing hand in hand with our customers.
We can also enable significant energy and carbon savings for
our customers by making our products lighter, more efficient,
longer lasting and repairable. Whether it’s about lubrication
management, condition monitoring or bearing remanufactur-
ing, our service offering is fundamentally about the removal of
waste from customer processes and value chains.
With a combination of these approaches, we have the poten-
tial to make a profound contribution to the transition to a
cleaner world, whilst driving innovation and growth for SKF.”
In 2021 you launched a new target to have a net zero
supply chain by 2050. How are you going to do it?
“We have a proven track record in this field and are confident
that, by 2030, our own facilities will have net zero greenhouse
gas emissions. This gives us the conviction that achieving a fully
net zero supply chain by 2050 is possible. More challenging,
butalso more exciting!
Achiveing this will require focus and commitment from
people not only within our own operations, but also from those
working in other parts of the value chain. We’re in this together:
colleagues, suppliers and customers. When it comes to steel
which, by far, is the biggest source of scope 3 emissions for us,
we’re already working with academia, suppliers and other
stakeholders to speed up the development of fossil- free steel.
Everyone in SKF is committed to this change. I’m convinced
that together with our partners across the entire value chain,
we have the determination needed to get it done.”
How would you describe the difference that the
employees make at SKF?
“I think the proof lies in what we have achieved. 2021 was
atough year, with lots of external factors working against us.
Butthis didn’t deter us. So much hard work and commitment
was shown across all parts of the business. People got the
jobdone, using their passion and knowledge to serve and help
our customers. They did this at the same time as they also
needed to put extra care and attention towards taking care of
themselves and their colleagues. For all of this, I’m extremely
grateful and they deserve appreciation for all their efforts
during 2021.”
We have the potential to make a profound
contribution to the transition to a cleaner
world, whilst driving innovation and
growth for SKF.
14
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
A strategic framework for
accelerating profitable growth
Rickard Gustafson on the
new strategicframework
What are you looking forward to most in 2022?
“I’m really looking forward to kicking off our work tobecome an
even more innovative, growth focused and profitable industrial
player.
We will accelerate profitable growth by targeting segments
and products where we can provide significant value to our
customers. This is a really exciting journey and one which will
involve every single one of our colleagues around the world.”
What will SKF look like in 2030?
“A successful execution of our strategy will result in a different
SKF than today. By 2030, we will strive to grow faster and
double the business, at improved margins. We will be more
focused and efficient. We will be the technical partner of choice
among our customers and lead the development of sustainable
solutions.”
How are you going to achieve this?
“We have defined a strategic framework based on two concepts:
intelligent and clean. Intelligent means providing connected
and tailored offerings for our customers, as well asusing tech-
nology to make our operations more efficient. Clean reflects our
ability to enable a more sustainable industry, whilst running
our own business in a transparent and responsible manner.
These concepts will guide us as we embark on an exciting
journey to become a more focused, innovative and profitable
industrial player.”
When we say
intelligent and
clean growth
Intelligent …
• Customer offerings and solutions
• Portfolio management
• Digital value chain and processes
• Capital allocation and resource
deployment
Clean …
• Tech applications
• Industries: minimize friction and waste
• Value chain: net zero emissions and
hightransparency
• Business practice and high ethics
15
SKF Annual Report 2021
High growth
segments
Services &
Aftermarket
New
technologies
Accelerate technology development
Portfolio
management
GROWTH AREAS GROWTH ENABLERS
A DIFFERENT SKF 2030
Intelligent and
clean growth
Digitalize the full value chain
Regionalized and competitive
supply chain
Operate more efficiently
– closer to customers
Double the business
at improved margins
More focused
and efficient
Technical partner
ofchoiceamong
customers
Leading development
of sustainable
solutions
16
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
Prioritized growth areas where
weadd significant customer value
SKF has something that very few industrial companies have:
a deep understanding of almost all industrial applications.
Everywhere there is rotation, there is a good chance that SKF
products, capabilities and skilled employees are providing value
in the form of improved operational performance and reduced
emissions.
SKF’s ability to master the complexity of meeting customer
needs across a wide range of industries and numerous geo-
graphies, is our greatest strength and a key to our success.
Ourbroad business reach gives us a platform to drive profitable
growth, as it allows us to continuously target the most attrac-
tive opportunities.
Key megatrends and increased investments in sustainability,
digitalization, regionalization and electrification will also pro-
vide profitable growth opportunities for SKF.
All in all, SKF is well positioned to accelerate profitable
growth by targeting opportunities where strong market
demand matches our ability to differentiate and provide
customer value.
We will accelerate profitable growth, with emphasis on:
• Targeting industries with high growth potential, where SKF
has a strong market position and competitive edge, e.g.
high-speed machinery, electric drives, agriculture, wind,
railway, food & beverage and robotics & automation.
• Re-positioning the automotive business to profitable and
growing segments where SKF has the lead, including electric
vehicles, commercial vehicles and aftermarket parts.
• Developing offers for emerging industries such as hydrogen
processing and carbon capture, where SKF is already well
positioned through existing technologies such as magnetic
bearings.
• Strengthening the foundation for recurring revenues by
simplifying our service offering, addressing a wider market.
New technology and partnerships will provide scale and
easy access to our data analysis and machine performance
competence.
Being selective in our investments also implies that we will deal
with the parts of our business that are not generating sufficient
returns. Here, we will either improve the performance or trim
them from the portfolio.
“ Condition monitoring
anddata collection will
increase in the future.
Our vision is to go
towards a maintenance
model where you change
components only when
needed and not based
ona fixed interval.”
Kimmo Soini
CEO, VR Fleetcare
17
SKF Annual Report 2021
Enablers to deliver on
our growth agenda
To deliver on our growth agenda, we have identified four main
enablers:
1. Accelerate technology development
Focus on developing technologies and solutions that help our
customers improve their operations and reduce emissions.
We will use insights from connected products to speed up
development of new customer offerings and solutions. Over
time, we plan to increase R&D expenditure by around 50%,
helping us capture more growth opportunities.
2. Digitalize our full value chain
Significant progress has been made in digitalizing SKF’s
manufacturing operations. As part of our journey to become
even more relevant for our customers, investments will be
made in connecting the value chain: customers, sales, logis-
tics, manufacturing, supply chain and R&D. This to improve
ease of doing business with us and enabling more intelligent
decisions in our own operations.
3. Regionalized and competitive supply chain
We will continue to increase our investments in property,
plant and equipment, supporting our growth ambitions.
Through these investments, regionalization in Asia will grow
from around 60% to more than 85%, and for Americas from
around 40% to around 60%, further improving our competi-
tiveness and ability to capture profitable growth.
The increased investments will be funded by actions to
improve our net working capital and continued cost reduc-
tion. These efforts will be supported by a new operating
structure and a more regionalized value chain.
4. Operate more efficiently – closer to customers
SKF’s new operating model and organizational structure
places end-to-end operational and financial accountability
as close to our customers as possible.
• Four industrial regions Americas, EMEA, India & South-
east Asia and China & Northeast Asia, further enhancing
the ability of our largest and most profitable businesses to
serve customers with increased speed and responsiveness.
• One global automotive business Creating the accounta-
bility and transparency needed to improve profitability and
re-focus the portfolio. The increased autonomy will also,
over time, provide enhanced strategic flexibility.
• Six independent and emerging businesses Seals, Lubri-
cation, Aerospace, Marine, Magnetic Bearings, RecondOil,
creating the focus needed for these to continue to develop
profitably and seek growth opportunities also beyond the
rotating shaft.
• In addition, a lean central function, providing global
support.
“ Sustainability is a
paramount part of our
strategy, also in our supply
chain, and we areworking
closely with our strategic
partners, like SKF, to act
on the challenge jointly.”
Ville Rimpilä
SVP Supply Chain and Global Operations,
Kongsberg Maritime – Propulsion & Engines
18
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
19
SKF Annual Report 2021
SKF has been working with solutions to climate issues for many
years. We have a proven track record, and we are confident that
we will succeed in reaching net zero greenhouse gas emissions
in our production facilities. We already source or generate about
half of the electricity we use from renewable sources. By 2030,
this will be 100% in every location across the SKF world.
In October, merely weeks before the UN Climate Change
Conference in Glasgow, we launched another challenging goal.
By 2050, our entire supply chain, from raw materials to the
delivered products, will be net zero. Net zero is an ambitious
goal and we’re approaching this task like we always do – with
determination, competence and skills.
All our targets will be aligned with the Science Based Targets
initiative and cover all relevant greenhouse gases (GHG). SKF’s
annual GHG emissions from scope 1, 2 and 3 (upstream)
amounts to around 1.8 million tonnes of CO
2
e.
In our upstream supply chain, steel is by far the biggest
source of CO
2
emissions. Therefore, to go net zero, a massive
change is needed in the current steel production process.
Reaching a goal that not only involves our own operations
but concerns the full value chain will require a strong commit-
ment and determination from everyone who is a part of this
chain. One approach is working with industry partners in initia-
tives such as SteelZero and ResponsibleSteel, another is
ensuring full traceability through the entire chain.
Decarbonizing is in strong progress; all the way from our
world-class manufacturing to the millions of bearings being
used every day in machines and vehicles around the world.
Decarbonizing
in progress
Accelerating the
electric vehicle
momentum.
More on page 31.
Accelerating
the circular
economy of oil.
More on page 41.
Accelerating the
next industrial
revolution.
More on page 51.
20
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
Why invest in SKF
An investment in SKF is an investment in intelligent and clean growth.
Intelligent means providing connected and tailored offerings for our
customers, as well as using technology to make our operations more
efficient. Clean reflects our ability to enable a more sustainable
industry, as well as to running our own business in a transparent
andresponsible manner.
DIVESTED CAPITAL
SINCE 2015, SEK
7. 2 billion
SALES 2021, SEK
82 billion
ADJUSTED OPERATING
MARGIN 2021
13.3%
• Optimization of the business portfolio.
• Divestments of non-core assets.
• Prioritizing customer focus.
• From cyclical to non-cyclical, focusing on 40 global
customer segments, and delivering stable margins
regardless of the business climate.
• From industrial heavyweight to agile cleantech.
• To offer our customers new products and services
andnew ways of working.
2021 was a strong year for us
We have managed to adapt production to meet customer
demands in one of the most challenging global supply chain
constraints ever. In this dynamic environment, SKF still
managed to deliver very strong growth and opera ting
margin. Another hallmark of margin resilience.
The changes made since 2015 …
… have transformed the company ...
… successfully put to the test
inextraordinary times.
21
SKF Annual Report 2021
We will accelerate profitable growth with an
increased emphasis on:
• Targeting existing industries with high
growth potential.
• Re-positioning the automotive business.
• Developing offers for emerging industries
such as hydrogen processing and carbon
capture.
• Strengthening the foundation for recurring
revenues.
• Delivering both economic and environmental
value is key to SKF’s strategy. SKF will grow and
gain market shares by offering superior value and
making smart acquisitions.
• SKF leads the way for circular business models,
underlining the Group’s strong commitment to
asustainable economy.
• By creating and capturing customer value
through the productivity of reliable rotation, SKF
and customers strive towards the same goals
–reducing costs, waste, risks, and environmental
impacts.
• Altogether, this will make SKF even stronger,
aresilient high margin cleantech business.
Successful execution of our strategy will
result in a different SKF than today. By
2030, we will strive to:
• Grow faster and double the business,
at improved margins.
• Be more focused and efficient.
• Be the technical partner of choice among
our customers.
• Lead the development of sustainable
solutions.
SKF’s ability to master the complexity of meeting
customer needs across a wide range of industries
and numerous geographies, is one of our greatest
strengths and key to our success.
Key megatrends and increasing investments in
electrification, digitalization and regionalization
provide growth opportunities for SKF, amplifying
demand for our capabilities and offerings.
All in all, SKF is well positioned to accelerate profit-
able growth by targeting opportunities where we see
a strong market demand, matching our ability to
differentiate and provide customer value.
SKF in pole position to
further scale intelligent and
clean growth …
… and we will now accelerate
profitable growth …
… bringing higher shared value
–to SKF, customers and the
environment …
… and make SKF a very different
company in 2030.
TARGE T
OPERATING MARGIN
14.0%
22
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
Trends and drivers
How SKF creates value
Sustainability
The climate change crises call for industries to adopt
new and efficient business models, which are less
dependent on physical resources. SKF helps customers
move towards a circular economy by providing products
and solutions, condition monitoring, Rotation as a
Service, and remanufacturing services. We are also
reducing CO
2
emissions from our factories and supply
chain.
Electrification
Electrification is a strong trend in many industries,
especially in the automotive industry. Electric vehicles
can bring many benefits to societies, for example,
energy security, urban air quality, greenhouse gas
reductions and noise mitigation. SKF has a portfolio of
innovative solutions that enable robust and efficient
E-powertrain drives where bearings are essential.
Financial
• Assets SEK 99.6 billion
• New investments SEK 3.8 billion
• R&D investments SEK 2.8 billion
Social
• Customers in 40 industries
• More than 17,000 distributors
• 42,602 employees
• 700 application engineers
• 2,200 service engineers
Environmental
• 1,772 GWh energy
• 582,000 tonnes metal
Physical
• 87 manufacturing units
• 15 technology centres
• 29 industrial service centres
• 16 REP centres
• 13 remanufacturing centres
Resources
Digitalization
Digital transformation affects all parts of the value
chain. Shorter lead times, faster development cycles,
smaller inventories and significant opportunities for
resource efficiency. SKF is investing in connecting the
value chain to improve ease of doing business with us
and enabling more intelligent decisions in our own
operations.
Regionalization
With global trade under pressure, connectivity and
information flows rapidly increasing, and a continued
shift in economic power, a region-for-region approach
with manufacturing, sales and technical knowledge close
to customers is needed. SKF continues to invest in auto-
mation and regionalization of our manufacturing foot-
print and product development to further improve our
competitiveness and ability to capture profitable growth.
23
SKF Annual Report 2021
Financial
• Operating profit SEK 10.8 billion
• Cash flow SEK 2.1 billion
1)
• Corporate income taxes SEK 2.5 billion
• Dividends SEK 3 billion
• Reinvested
in SKF SEK 4.4 billion
2)
Social
• Employee benefit expenses
SEK 24 billion
3)
Environmental
• CO
2
e reduction 12,000 tonnes
(scope 1 and 2, 2021 v. 2020)
• Revenues from cleantech industries
SEK 6.8 billion
Physical
• 275 Registered invention disclosures
• 246 First filings of patents
Value created
Customer value
• Lower environmental impact
• Safer operations
• Higher productivity
• Improved financial performance
SKF’s business model and strategy are designed to
maximize value creation for our stakeholders. Every-
where there is rotation, there is a good chance that
our products, capabilities and skilled colleagues are
providing value in the form of improved operational
performance and reduced emissions.
Through performance-based business models
with incentives based on Key Performance Indicators
such as uptime and productivity, the interests of SKF
and our customers are aligned to reduce cost, waste,
safety risk and environmental impact.
Reducing cost and
environmental impact
Asset
Supply
chain 4.0
Remanu -
facturing
Application
(re)engineering
Data analytics &
Machine learning
Remote
monitoring
Lubrication
management
R
e
d
u
c
e
R
e
u
s
e
R
e
c
y
c
l
e
Redesign
and
improve
More about SKF’s strategic
framework on
pages 14–17.
1) After investments before financing. 2) Net profit less proposed dividends. 3) Including social charges.
24
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
Operating margin
1)
Revenue growth
2)
Net debt
3)
/equity
WHY IS THIS IMPORTANT?
Improved flexibility, automation,
and fixed cost leverage.
HOW TO REACH THE GOAL
• Acceleration of footprint
optimizations, automation and
regionalization supported by
newways of working.
• Cost competitiveness.
WHY IS THIS IMPORTANT?
Faster than market growth.
HOW TO REACH THE GOAL
• Increasing value for customer,
cost competitiveness.
• New businesses: e.g. cleantech,
RecondOil, electrification.
• Select acquisitions.
WHY IS THIS IMPORTANT?
• Manage operations through
economic cycles.
• Flexibility to act.
HOW TO REACH THE GOAL
• Strong cash generation.
2021 TURN-OUT
The operating margin was 13.3%,
an increase of 1 percentage point
compared to lastyear.
Positive effects from higher sales
and manufacturing volumes while
currency and general cost inflation
had a negative effect.
2021 TURN-OUT
Organic sales increased by 13%
compared to 2020.
Strong customer demand across
all geographies. Industrial sales
grewby 12% and Automotive
salesgrew by 14%.
2021 TURN-OUT
Net debt/equity increased from 9%
to 13% in 2021.
Financial liabilities increased net
by SEK 1 billion due to the issuance
of a new EUR 300 million bond and
the maturity of the EUR 200 million
bond. Financial assets decreased
by SEK 1 billion driven by low cash
flow.
8
4
0
12
16
20191817 21
5
0
–10
–5
10
15
20191817 21
20
10
0
30
40
50
20191817 21
12.2%
2017–2021
AVERAGE
3.18%
2017–2021
AVERAGE
19.8%
2017–2021
AVERAGE
>14%
TARGET
>5%
TARGET
<40%
TARGET
13.3%
2021
OUTCOME
12.6%
2021
OUTCOME
12.5%
2021
OUTCOME
Long-term targets
1) Adjusted for items affecting comparability. 2) Including acquisitions, adjusted for divestments. 3) Excluding pension liabilities.
SKF’s long-term targets shall be achieved
over a business cycle.
25
SKF Annual Report 2021
ROCE
1)
Dividend pay-out ratio
Net zero by2030
4)
WHY IS THIS IMPORTANT?
Focus on capital efficiency as
invest ments in competitiveness
are accelerated.
HOW TO REACH THE GOAL
• Automation and increasing
regionalization.
• Working capital management.
WHY IS THIS IMPORTANT?
The dividend should reflect the
earnings and cash flow trends, while
considering the Group’s development
potential and financial position.
HOW TO REACH THE GOAL
The ordinary dividend should
amount to around one half of SKF’s
average net profit.
WHY IS THIS IMPORTANT?
• Need to act on climate change.
• Reduces risk and increases-
resilience in operations.
HOW TO REACH THE GOAL
• Process improvements
• Energy efficient machinery
• Usage of renew able energy.
2021 TURN-OUT
Return on capital employed
increased to 14.9% in 2021.
Capital employed was relatively
unchanged while the Adjusted
operating result increased by
SEK1.6 billion.
2021 TURN-OUT
The pay-out ratio in 2021 was
42%and the five-year average
wasalso 42%.
2021 TURN-OUT
A continued reduction in absolute
total scope 1 and 2 CO
2
e emissions
was achieved, keeping SKF on track
for its net zero 2030 ambition. This
result was delivered despite a sig-
nificant upturn in production activ-
ity and has been achieved through
improved energy efficiency and a
significant increase in the percent-
age of renewable electricity use.
10
5
0
15
20
20191817 21
40
20
0
60
80
20191817 21
14.7%
2017–2021
AVERAGE
42%
2017–2021
AVERAGE
>16%
TARGET
50%
TARGET
14.9%
2021
OUTCOME
42%
2021
OUTCOME
5)
4) In SKF’s own operations scope 1 and 2, versus 2015 base year. 5) According to the Board’s proposal for the year 2021.
-20
-60
-100
20
19181716 20 24232221 25 29282726 30
–37%
2021 OU TCOME
zero
2030 TARGET
CO
2
26
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
For more information please visit skf.com/sustainability.
1) 2021 was reduced due to increased scope of reporting
and is not comparable versus previous years.
2) More information on page 123.
Climate targets
Social target
Raw material
Goods transportation
Bearing manufacturing
Customer solutions
Safety
% of major energy intensive suppliers
certified according to ISO50001.
42global suppliers in scope.
WHY Raw materials have a significant
impact from alifecycle perspective.
HOW Systematic energy management
to reduce scope3 emissions from the
supply chain.
% CO
2
reduction (scope 3) per tonne
of transported products compared to
2015.
WHY Reduce emissions and at the
same time improve cost efficiency.
HOW Shorter transports, higher fill
rates and more CO
2
effective tran-
sport modes.
Accident rate per 200,000 worked
hours.
WHY Safety always comes first and
SKF is convinced thatallwork-related
accidents can be prevented.
HOW Global management system and
focus on risk elimination and right
safety behaviors.
% CO
2
(scope 1 and 2) reduction per
tonne of sold bearings.
WHY Energy use and related emissions
are among the most significant ways
that SKF can reduce its environmental
impact.
HOW Increased energy efficiency,
increased share of renewable energy,
consolidation of manufacturing footprint.
Revenues from key areas such as
renew able energy, electricvehicles, the
recycling industry and remanufacturing.
WHY Life cycle studies show that the
greatest impact iswithin the use phase
of SKF’s solutions.
HOW Strategic focus on cleantech
growth.
40
20
0
60
80
100
191817 20 21
–40
–20
–30
–10
0
20
10
30
191817 20 21
0.25
0
0.50
0.75
1.00
191817 20 21
–40
–60
–20
0
191817 20 21
4
2
0
6
8 SEKbn
1918 20 21
100%
–40%
TARGET
–40%
TARGET
zero
TARGET
56%
2021
OUTCOME
1)
24%
2021
OUTCOME
2)
–50%
2021
OUTCOME
6.8 SEKbn
2021
OUTCOME
0.67
2021
OUTCOME
Sustainability targets
TARGET
27
SKF Annual Report 2021
Enabling circular economy
through new technology
Additive manufacturing will play an important
role to support our customers’ future application
needs. By acquiring the Belgian company Laser
Cladding Venture n.v. (LCV) SKF has increased its
additive manufacturing skills and capabilities.
LCV is a niche engineering start-up specialized in
various laser cladding technologies and processes
which can be applied to support SKF’s service and
remanufacturing offering.
Laser cladding is one of several additive manu-
facturing technologies and is used to create thin
metallic coatings on metallic substrates. This
technology works by mixing metal powder with
inert gas in a laser beam, which melts the powder
and welds it onto the surface.
Laser cladding makes it possible to repair metal
surfaces and to mix various types of metals for
tailored surface layers. For example, the technol-
ogy makes it possible to apply a stainless-steel
coating, to prevent corrosion – a common cause
of bearing failure in many applications. The tech-
nology will also strengthen SKF’s ability to repair
bearings and other products, enabling a more cir-
cular use. By repairing a damaged surface with a
new metallic layer, there is no need to replace the
whole bearing.
28
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
SKF continually works to identify and understand the mate-
rial issues and find integrated ways to effectively manage them
–creating and protecting customer, investor, and other stake-
holder value as we do so.
SKF Care is our sustainability framework and helps us to
structure and communicate the various integrated ways in
which we drive sustainability. Covering the business, environ-
ment, employee, and community dimensions. It provides rules,
principles, and guidance on how we shall act as a global corpo-
ration over the short, medium, and long term.
For decades, SKF Care has been the foundation of who we
are, and it is reflected in the SKF Care framework with its four
interdependent dimensions.
Business Care Assuring customer focus, financial performance,
and shareholder returns – with the highest standards of ethical
behaviour.
Environmental Care Continually reducing the environmental
impact from SKF’s operations, and those of suppliers and
customers.
Employee Care Ensuring a safe working environment and
promoting health, personal development, and well-being
ofemployees at SKF, as well as people in the supply chain.
Community Care Making positive contributions to the
communities in which SKF operates.
Sustainability framework
BeyondZero was first launched in 2005 and describes our
ambition to reduce negative environmental impacts from our
own operations, and in our supply chain, while at the same
timehelping our customers to improve their environmental
performance through the products, solutions, and services
weprovide to them, here below we describe the BeyondZero
approach applied to climate change.
As illustrated with several examples in this report, SKF
hasa sharpened strategic focus on increasing revenues from
solutions which reduce energy and material use, increase cir-
cularity or enables clean technologies such as renewable
energy and electrification. The growth of this part of the busi-
ness, and the subsequent improvement in CO
2
performance,
which it enables for our customers and society, represents the
positive part of the BeyondZero approach. With this positive
impact, in parallel to growing we aim to reduce and eventually
eliminate the CO
2
emissions which occur as a result of our own
operations and those inour extended upstream supply chain.
For more information see page 19.
As well as being an ethical prerequisite, sustainability presents SKF
with a complex set of interrelated challenges and opportunities. There
are many material sustainability issues for SKF and these range from
environmental issues such as climate change and resource depletion
to social issues such as human rights and employee wellbeing as well
as economic and governance issues.
29
SKF Annual Report 2021
SKF Gothenburg
SKF’s 3rd net zero factory
From 2022, SKF’s manufacturing site in
Gothenburg, Sweden has reached net zero
status. This has been achieved through a num-
ber of actions to optimize energy efficiency and,
at the same time, switching to 100% renewable
energy sources. Investments in heat recovery
and efficiency have led to a lower overall energy
demand and the factory now runs on 100%
renewable electricity and used biogas instead of
fossil based gas. Even the emissions associated
with the in-factory transport of materials have
been eliminated by switching to full electric
vehicles that runs on renewable electricity.
SKF in collaboration to speed up
development of fossil-free bearing steel
SKF is supporting the development of fossil- free
bearing steel through a collaboration with Luleå
University of Technology’s Center for Hydrogen
Energy Systems Sweden (CH2ESS) initiative.
Aspart of the collaboration, SKF will participate
in and fund research within hydrogen use in
industrial processes and energy systems,
speeding up the development of fossil- free
bearing steel. Research areas will include hybrid
ceramic bearings, electric vehicles and other
applications, andthe development and commer-
cialization offossil- freebearing steel production.
SKF’s expertise influid machinery, material
science, production technology and IoT solutions
will actively contribute to the work.
Hydrogen is the key to a fossil-free energy
system and CH2ESS is focusing on hydrogen
useinindustrial processes and energy systems,
in closecollaboration with Swedish industry.
30
SKF Annual Report 2021
STRATEGY AND VALUE CREATION
45%
SKF has developed low-friction tapered
roller bearings shown to reduce power
losses by up to 45% compared with
conven tional bearings.
50 million
Industry analyst Bloomberg New Energy
Finance expects sales to reach 8.5 million
electric vehicles (EV) by 2025, and exceed
50 million before 2040.
500,000 km
Manufacturers need reliable rotation for
the design-life of the vehicle; around ten
years or 300,000 km today, and up to
500,000 km or more in a near future.
31
SKF Annual Report 2021
Bearing solutions that meet
electric traction motor require-
ments, and ceramic hybrid Deep
Groove Ball Bearings for high
performance EV powertrains.
Around the world, the electrification of passenger transport
ispicking up momentum. As part of their commitments to
theParis agreement on climate change, a growing number
ofcountries are set to phase out the production of new com-
bustion engine vehicles over the next two decades. This also
means that the global automotive industry faces its most
significant transformation ever.
SKF has been helping the automotive industry to meet
different challenges since the beginning of the EV revolution.
For EVs to work efficiently, the motors that drive them must
run at very high speeds. This places enormous strain on the
bearings they employ. We are developing designs for bearings
–and their associated polymer cages and lubricants – that
ensure they can withstand the higher speeds, acceleration,
temperatures, and electric currents generated
by these motors.
Today, we are partnering with key OEM and Tier1 pioneers
for the launch of full EVs, for example, by providing a complete
package offering of bearings and seals featuring high speed,
thin sections and electric current insulation options.
Carmakers are set to launch around 450 new battery and
plug-in-hybrid vehicle models over the next two years. We
havethe technical, manufacturing and supply chain capabilities
needed to support the sector’s accelerating growth. Our leading
low friction solutions for EV motors, drivetrains, and wheel
bearings are a key enabler to increased vehicle range, a tech-
nology transformation towards a CO
2
neutral vehicle market.
DECARBONIZING IN PROGRESS
Accelerating the electric
vehicle momentum
As a long-term partner, SKF
supplies GM with bearings for
both E-drivetrains and chassis,
including the world’s first all-
electric supertruck – Hummer EV.
32
SKF Annual Report 2021
SKF’S GLOBAL PRESENCE
A leader on the
world bearing market
The global bearing market has an estimated value of
between SEK 410 and 430 billion. SKF has become a world
market leader by providing first-class products and solutions
for customers in 40 different industries across the globe.
Like most global industries, SKF’s industry is exposed
tofierce competition. We are a leader on the world bearing
market, together with other major international companies
including the Schaeffler group, Timken, NSK, NTN, and
JTEK T.
SKF estimates that the top six world bearing manufac-
turers represent about 55% of the global rolling bearing
market. The group of Chinese bearing companies, including
smaller and larger ones, represents around 25%, with the
main part of their sales in Asia. The remaining 20% includes
many smaller regional and niche bearing competitors.
The bearing market
The global bearing market is generally defined
as the worldwide sales of rolling bearings, com-
prising ball and roller bearing assemblies of
various designs. SKF estimates that the global
bearing market grew by 10 to 12% in 2021.
The growth was mainly seen in the industrial
market, but also in the automotive market. The
global market growth is partly a recovery from
the large decline in 2020, when it was heavily
impacted by the pandemic.
SKF was founded in 1907 and rapidly grew to become
a global company. As early as the 1920s, we were well-
established on all five continents.
The trend in today’s global industry is towards fewer,
larger and more international manufacturers and distribu-
tors, meaning that global brands and products are ever
more important. SKF is a trusted and well-known global
industrial brand, which is a strong advantage in the bear-
ing industry.
To maintain competitiveness, we are focused on lever-
aging global and regional economies of scale. The strate-
gic direction is based on a region-for-region approach.
Market value by
customer industries
1)
Global competition
Market value by customer industries
1)
Distribution business ~30%
Industrial distribution and
vehicle independent aftermarket.
Automotive OEM ~30%
Industrial original equipment
bearing markets ~40%
Including manufacturers of
light and heavy industrial
machines and equipment, as
well as aerospace, off-highway
and railway vehicles.
1) Total world demand of bearings 2021.
33
SKF Annual Report 2021
Asia’s share of the world bearing market
has continued to grow rapidly and now
accounts for around 55%, compared with
less than 40% almost 20 years ago.
Region
Approximate share of the
total world bearing market
Market value,
SEK billion
2021 market
development
Europe 20% of which Germany accounts
for ~31% of the European market.
80–90 High growth
North
America
19% 75–85 High growth
Asia and
Pacific
56% where China has a share of
~34% of the total world market.
220–240 High growth
Latin
America
2% of which Brazil accounts
for ~50% of the latinamerican
market.
8–12 High growth
Middle East
and Africa
3% 8–12 High growth
Market value by
region and growth
20212001
Latin America
North America
Europe
Middle East and Africa
Asia and Pacific
Market value by region and growth
VALUE,
SEK billion
410–430
34
SKF Annual Report 2021
SKF’S GLOBAL PRESENCE
EUROPE NORTH AMERICA ASIA AND PACIFIC LATIN AMERICA MIDDLE EAST
AND AFRICA
The bearing market
Population
748 million
Urbanization 74%
GDP growth 5.1%
GDP/capita
35,557 USD
Population
369 million
Urbanization 83%
GDP growth 5.6%
GDP/capita
65,630 USD
Population
4,497 million
Urbanization 51%
GDP growth 7.0 %
GDP/capita
7,367 USD
Population
654 million
Urbanization 82%
GDP growth 6.5%
GDP/capita
9,312 USD
Population
1,627 million
Urbanization 49%
GDP growth
Middle East 3.0%
Africa 3.4%
GDP/capita
Middle East
12,430 USD
Africa 2,212 USD
Western Europe
dominates the region
by size and still grows
but at a slow pace.
Eastern Europe has
showed the highest
growth.
LARGEST MARKETS
Germany, France,
Italy
Highly dependent
on the U.S. market
– the second largest
bearing market in the
world. Relies on key
industries, e.g. light
vehicles, off-highway
and industrial
distri bution.
LARGEST MARKETS
USA
High growth market,
driven by the devel-
opment in China and
India. The single most
important market for
electrical (China) and
two- wheelers (India,
Japan, Indonesia)
segments, as well as
for deep groove ball
bearings demand. The
highest global bearing
demand for light vehi-
cles, trucks, railway,
lift and escalators.
LARGEST MARKETS
China, Japan, India
Growth rates differ
strongly between
the countries. Brazil
makes up more than
50% of regional
demand. The depend-
ency on the industrial
and automotive after-
market is large since
there are few global
OEMs present.
LARGEST MARKETS
Brazil, Argentina
Recent decline is due to
the sanctions imposed
on Iran and a weaker
development in Turkey.
Turkey is the largest
market with 1/3 of the
total demand. The Mid-
dle East and Africa each
represent 1/3 of the
region. Large depend-
ency on industrial
and automotive after-
markets since there
are few global OEMs.
LARGEST MARKETS
Turkey, South Africa
MARKET CHARACTERISTICS
Light vehicles,
industrial distribution,
vehicle aftermarket,
industrial drives,
renewable
Light vehicles,
industrial distribution,
vehicle aftermarket,
off-highway
Light vehicles,
industrial distribution,
industrial drives,
electrical
Light vehicles,
industrial distribution,
vehicle aftermarket,
heavy industries
Industrial distribution,
vehicle aftermarket,
heavy industries,
lightvehicles
LARGEST CUSTOMER INDUSTRIES
Source: United Nations, World Bank and IMF, World Economic Outlook October 2021
35
SKF Annual Report 2021
EUROPE
12,000 bearings to 1,500 rail
carriages for 32 years
In 2021, SKF signed an agreement with
Stadler Rail to equip and service rolling
stock for the Berlin underground (U-Bahn)
in Germany. The service contract aims to
help improve the reliability and uptime of
trains on the U-Bahn.
The 32-year contract includes several
SKF solutions ranging from the design of
new wheel set bearings to axle boxes and
lubrication systems. The contract is cov-
ered by a performance agreement, which
is measured against a set of KPIs to ensure
high customer confidence.
Under the agreement, SKF will service
more than 600 rail carriages, which may
be extended to a total of 1,500 carriages.
The contract will involve the supply and
servicing of more than 12,000 wheelset
bearings, among other services.
36
SKF Annual Report 2021
SKF’S GLOBAL PRESENCE
NORTH AMERICA
SKF bearings help NASA collect samples
on Mars
NASA’s Mars Perseverance rover is collecting
or handling rock and regolith samples during
its multiple-year mission on the surface of the
red planet. Kaydon Reali-Slim thin-section ball
bearings are the key components from SKF
that will ensure that those core operations
in the harsh environment on Mars take place
successfully.
The bearings are designed and manufac-
tured at SKF’s global, thin-section bearing
engineering center in Muskegon, MI, and our
recently expanded manufacturing hub in
Sumter, SC. These highly engineered compo-
nents ensure that the rover’s main robotic arm,
sample collecting turret, tool bit carousel and
sample handling assembly survive a months-
long trip through space and function on the
surface of Mars.
ASIA & PACIFIC
Powerful cooperation enables
market leadership
SKF and SF Holding, the largest
integrated logistics service pro-
vider in China, formed a strategic
partnership to construct a green
supply chain. Taking advantage of
both companies’ strengths, the
partnership will explore ecological
cooperation to reduce waste and
improve operation efficiency. SF
provides SKF with smart supply
chain and logistic services.
With leading edge know-how on
rotation equipment performance,
we will contribute to SF’s oper-
ating asset performance, such
ascondition monitoring of Un-
manned Aerial Vehicles, wheel-
end solutions to avoid unplanned
stops of vehicles and lubrication
management to ensure logistic
equipment efficiency. The cooper-
ation will further contri bute to an
upgrade of the supply chain eco-
system.
Courtesy NASA/JPL-Caltech
37
SKF Annual Report 2021
LATIN AMERICA
Supporting clean energy production
To avoid and eliminate potential failure
on the bearings in a new wind turbine
generator platform, WEG, the global
electric-electronic equipment company,
demanded a reliable technology. SKF
offered a complete hardware solution,
including condition monitoring through
SKF REP Center and main shaft seals for
all new wind turbines, to validate a new
pitch bearing design to this platform.
Together with local steel producers,
we devoted more than a thousand engi-
neering hours on the project. By inte-
grating condition monitoring and sealing
solutions, we reinforced our presence
and proved to be a credible partner for
the delivery of pitch bearings, condition
monitoring and seals, supporting the
production of clean energy.
MIDDLE EAST & AFRICA
Turnkey solutions improve uptime
Housings support bearings and protect them from
contaminants while keeping in lubricant. This helps
maximize the performance, service life and cost-
efficient maintenance of the incorporated bearing.
SKF was approached to assist with the design and
supply of housing assemblies by one of the most
important project houses in Africa servicing a gold
mine in West Africa.
We delivered a turnkey solution of bearings,
housings with upgraded sealing arrangements and
services. This improved the customer’s bearing and
sealing arrangements resulting in extended mean-
time between failure, as well as simplified and better
controlled installation procedures. By delivering
reconditioned housings, cost and environmental
savings were achieved.
38
SKF Annual Report 2021
SKF’S GLOBAL PRESENCE
2021
2020
2019
2018
2017
2021
2020
2019
2018
2017
2021
2020
2019
2018
2017
2021
2020
2019
2018
2017
SKF in the markets
EUROPE, MIDDLE
EAST AND AFRICA
NORTH AMERICA ASIA AND PACIFIC LATIN AMERICA
2021 33,603 MSEK
Change +10.9%
2021 17,377 MSEK
Change +1.3%
2021 25,416 MSEK
Change +8.2%
2021 5,336 MSEK
Change +9.2%
Strong position inmost
industry segments;
industrial distribution,
vehicle aftermarket,
industrial drives, aero-
space, renewable energy,
off- highway.
Strong position with a
strong presence in most
industry segments, espe-
cially inindustrial distribu-
tion, renewable energy,
railway, heavy industries,
trucks and two- wheelers.
A leading position in the
larger industry segments,
especially in industrial
distribution, renewable
energy, heavy industries,
off- highway, light vehicles,
vehicle aftermarket and
trucks.
A leading position with
strong presence in all
industry segments,
especially in industrial
distribution, railway,
off-highway, heavy
industries.
SKF’S POSITION
NET SALES
41% 31%21% 7%
SHARE OF GROUP NET SALES
EMPLOYEES
1)
20,816 5,518 11,224 3,303
Men Women
30%70% 27%73% 22%78% 12%88%
Men Women Men Women Men Women
47 16 21 3
MANUFACTURING UNITS
1) Average, full time employees.
39
SKF Annual Report 2021
• Several lubrication solutions
introduced, for example, the
launch of a customer self-
service portal, to improve
customer experience.
• Commercialization of the
sensor roller bearing offer,
which gathers load data from
wind turbines, under real
conditions, to lower levelized
cost of energy.
• Innovation and integration
ofhigh-end designed thin
section ball bearings for
Presezzi, a world wide leader
for extrusion metal processing.
EUROPE
• General Motors names SKF Sup-
plier of the Year for the ninth time.
Hummer EV utilizes SKF hybrid
ceramic wheel bearings, and
a majority of the powertrain
bearings.
• By committing to quality and
sustaina bility for customers, we
are expanding our market share
ofbearings in the US battery EV
market at a rapid pace.
• An SEK 935 million investment in
North American manufacturing,
technology, and engineering ex -
pertise brings SKF closer to indus-
trial and automotive customers,
providing reduced lead times,
lower transportation and logistics
costs for a more efficient supply
chain. Together, this results in
areduced carbon footprint.
NORTH AMERICA
• Accelerated competency build-up
including online digitalized technol-
ogies merging offline service to
simplify interaction with distribu-
tors, as well as production capacity
and R&D footprint activities in
Dalian and Xinchang.
• Launch of newly innovated, high-
speed and hybrid ceramic ball
bearings forEVs to enable industry
breakthrough in ever rising motor
speed, while resolving currency
leakage problems.
• Accelerated REP business
growth across Asia. RecondOil
technologies installed in
SKF factories and
at customers.
ASIA AND PACIFIC
• Reduced CO
2
emissions through
bearing remanufacturing and
installation of solar panels in our
new premises in South Africa.
• Solutions within digitalization
capabilities in industrial main-
tenance increased uptime for
Stevens Lumber Mills.
• First railway bearings refurbish-
ment center for SKF in Africa
opened in South Africa.
MIDDLE EAST AND AFRICA
Important activities 2021
• 3.7 million bearings monitored
and 15,000 wireless sensors
connected to SKF REP Center.
Strong demand from customers
aligned with their Industry 4.0
journey.
• Introduction of RecondOil
business across countries and
industries as an innovational and
environmental business with
contracts running at customers
in chemical, pulp and paper and
mining.
• More than 300 tons of bearings
remanufactured, thus saving
more than 500 tons of CO
2
and13 million liters of water.
LATIN AMERICA
• Investment in bearing reman-
ufacturing service at the SKF
Competence Service Center in
Turkey supporting customers
in carbon footprint reduction,
performance optimization and
cost reductions.
40
SKF Annual Report 2021
SKF’S GLOBAL PRESENCE
3 tonnes
SKF’s early stage life-cycle assessments
estimate that every tonne of reused oil can
reduce CO
2
e emissions by up to 3tonnes.
19 million tonnes
An estimated 19 million tonnes of industrial
lubricants are used globally every year.
57 million tonnes
Based on the industrial life-cycle
assessment, reusing all the industrial oil
could potentially reduce CO
2
e-emissions
byaround 57 million tonnes per year.
41
SKF Annual Report 2021
In 2019, SKF added a clean and smart technology that
strengthens our decarbonization efforts. Under the brand name,
SKF RecondOil, SKF delivers an innovation to turn the environ-
mentally harmful use of industrial oil into an asset thatcan be
used repeatedly with maintained performance.
When machines break down it is usually because of dirt.
With SKF RecondOil we can purify oil down to a nano level while
retaining all the original properties. No downtime, and a cleaner
and safer production environment. The same oil can be regene-
rated over and over again – a truly circular economy of oil.
SKF RecondOil is changing the business model for the use of
industrial oils. As well as reducing customers’ environmental
footprint, our performance-based contracts reduce customers’
total oil related costs. Up to 40% of maintenance costs are
lubricant related. The downtime associated with replacing oil
–and disposing of it – is expensive and unsustainable. SKF
RecondOil enables a financially and environmentally sound
lubrication management with multiple benefits.
After tremendous improvement on KPIs at our production
sites in Italy, the global roll-out across SKF’s world-class man-
ufacturing sites is progressing rapidly. With such showcases,
we are also making the technology available to customers
around the world – both as part of its offer around the rotating
shaft, as well as via licensed partners in selected markets.
DECARBONIZING IN PROGRESS
Accelerating the
circulareconomy of oil
No more oil changes, saving
10cubic metres per year and
increasing productivity by 25%
(Zapp Precision Metals,
Sweden).
RecondOil increases bearing
performance in terms of noise
and vibration, critical para-
meters for food processing
applications (Cassino, Italy).
42
SKF Annual Report 2021
RISK MANAGEMENT
Risk management
Main risks Trend Mitigation
Information Security
Increasing cyber security threats. Increasing require-
ments from customers and governments to adhere to
information security standards such as ISO, NIST and
ITAR.
Continuously measure and evaluate effective ness of protec-
tion mechanisms and invest in new solutions to meet the
changes in threat landscape. Strengthen the information
security awareness and continue to implement controls
according to SKF’s Information Security Management
System (ISMS).
Digitalization
Increasing demands for afully connected value chain
and excellent digital customer experience placing high
demands on the speed of the digital transformation.
Strategic initiatives in place to ramp-up digitaliz ation
including strengthening capabilities, investing in digital
talents, moderniz ing, harmonizing and simplifying
theITlandscape.
New product technologies
Introduction of disruptive and quickly changing new
technologies.
Acquisitions and partnerships to help SKF make step
changes in new technology areas. Establish aprocess
to systematically look for new opportunities.
Aftermarket disruption
New online channels disrupting existing channels
to the after market.
Maintain existing channels to market, and at the same
timework strategically with new digital channels. Give the
SKF channel partners a competitive advantage through
online tools. Ensure leadership across full SKF value chain
and focus on application specific offers which bring differ-
entiation/uniqueness making it harder for digital channels
to take market shares from SKF.
The SKF Group operates in many different industries and
geographical areas. A general economic downturn on a global
level, for exampel caused by a pandemic, or in one of the
world’s leading economies, could reduce the demand for the
Group’s products, solutions and services. Terrorism and other
hostilities, natural disasters and disturbances in worldwide
financial markets, could also have a negative effect on the
demand for the Group’s products and services. There are also
regulatory requirements, taxes, tariffs and other trade barriers,
price or exchange controls or other governmental policies that
could limit the SKF Group’s operations.
SKF applies an integrated approach to risk management and
has implemented an enterprise risk management (ERM) pro-
cess that covers all parts of the Group. The risk impact includes
impact on strategy, long term financial performance, as well
asbrand and reputation. The enterprise risk and opportunity
management process is illustrated below. The risks highlighted
below and on next page are the main risks identified during the
2021 Group ERM process. The main areas of opportunity are
described on page 22.
As with other risks, SKF applies an integrated approach to
the identification and management of risks related to sustaina-
bility. The table on page 44 provides a summary of the main
sustainability risks and SKF’s approach to managing them.
For information about financial risks including currency risks,
interest risks, liquidity risks and credit risks, see Note 26 on
pages 90–93.
For Information about ongoing compliance related investi-
gations, see Note 19 on pages 82–83.
43
SKF Annual Report 2021
Main risks Trend Mitigation
Workforce
There is a fierce competition in the labor market, where
the success of companies are dependent on the ability to
attract, develop and retain critical competences and
capabilities for the future.
SKF takes a holistic approach in strengthening the Group
as the employer of choice, by putting the employee experi-
ence at the center. Employee engagement, leadership,
competence and way of working are all key building blocks
in this area.
Business interruption
Demand chain interruption.
Implement a sourcing strategy with reduced single sourcing
and regionalized supplier base. Implement a systematic
process to manage supply chain disruption situations.
Modernize, harmonize and simplify the IT landscape to
reduce risk of system failure.
Global/regional crisis
Sanctions, tariffs and other trade barriers. Climate
change, pandemics, war andother major events.
Regionalize SKF’s manufacturing footprint and supplier
base. Focus on business that will benefit on the increased
climate focus.
Compliance
The compliance risks include illegal cooperation and
information exchange between competitors and anti-
trust risks in the distribution business.
Policies and instructions combined with manage ment
commit ment and a strong tone from the top. Employee
training, audits and the SKF Ethics & Compliance Reporting
Line. Thisis valid for all compliance areas.
The result is shared yearly with Group Management and the Audit Committee.
There is also a half-year internal assessment to monitor changes and make
sure mitigation actions are in place and delivering expected result which is
presented to Group Management.
Risk and opportunity
assessments
Group Management
review
Risk and opportunity
consolidation
Audit Committee
SKF strategy
development &
execution
Risk owners
Annual Report
Assessments are made by
the business areas and
Group support functions.
Group Risk Manager
receives and consolidates
the assessments.
Group Management
reviews the consolidated
assessment.
The consolidated risk
assessment is shared
with the Audit Committee.
The risk assessments are
used as input to strategy
development and execu-
tion on Group level.
Risk owners manage risk
mitigation and follow-up.
A high level overview
isshared externally in
the Annual Report.
SKF Group ERM process
44
SKF Annual Report 2021
RISK MANAGEMENT
Sustainability risks Trend Mitigation
A major incident at an SKF facility causing
environmental damage leading to fines and
loss of reputation.
SKF's Environmental management systems, certified to
ISO14001, work to assure that all such material risks
areidentified and that effective countermeasures are
implemented to mitigate them.
Water scarcity in the supply chain or at
SKF facilities leads to reduced production.
SKF facilities which are in areas of water scarcity are
required to drive strong water reduction programs.
SKFrequires that suppliers follow environmental norms
and implement certified management systems.
Extreme weather events.
Requirements for emergency response plans at all sites
include flood risks etc. For more information, see
SKF TCFD report available at skf.com/ar2021.
Increased energy and other environmental costs
due to legislation.
SKF focuses on energy efficiency at its own facilities and
suppliers - reducing energy demand and therefore related
risks. For more information, see SKF TCFD report available
at skf.com/ar2021.
SKF employees or employees working in the supply
chain, are hurt or killed by an accident at work.
SKF's Health and Safety management system is certified to
ISO 45001. The Group’s zero accident program, supported
by proactive near miss reporting, aims to avoid all work-
place accidents. Within the code of conduct for suppliers,
SKF has defined specific requirements for the assurance of
health and safety for the employees of suppliers and sub
suppliers.
A person or persons are hurt or injured because of
SKFproduct failure, malfunction or defect.
SKF follows strict design and validation rules for all prod-
ucts, and fully adheres to industry specific requirements for
safety critical applications. SKF provides detailed instruc-
tion on the correct use, fitting and application of products.
SKF's overall approach to quality management assures
product conformity and performance to the highest level.
Human rights of employees working at SKF
or within the supply chain are not respected.
SKF adheres to international standards and guidelines
andenforces the SKF Code of Conduct policy in all its
operations. Periodic Code of Conduct compliance audits
areperformed and a whistleblowing process is available
atlocal and global levels.
SKF employees act in a fraudulent or corrupt manner
leading to financial penalties and reputation damage.
SKF takes a proactive approach to assure awareness of
demanded ethical standards, including anti-corruption,
antifraud and antitrust. The work to follow up adherence
is facilitated by the whistleblower function and a risk and
incident based audit system.
45
SKF Annual Report 2021
46
SKF Annual Report 2021
THE SKF SHARE
The SKF share
SKF’s A and B shares are listed on the NASDAQ Stockholm,
Large Cap stock exchange and are included in several indexes.
In 2021, the share price increased by 2.5% for the SKF A
share and 0.14% for the SKF B share. The total number of SKF
shares traded on Nasdaq Stockholm was 392,339,062. SKF’s
B shares are also traded on Bats CXE, Bats BXE and Turquoise.
The total number of shares traded on these three marketplaces
combined in 2021 was 98,095,339. SKF’s American Depositary
Receipts (ADRs) are traded on the OTC market.
Share conversion
Owners of A shares have an option to convert these to B shares.
In 2021, 867,122 shares were converted. As of 31 December
2021, A shares were 6.7% (6.9) of the total number ofshares.
Dividend and total return
The Board of Directors proposes to the Annual General Meeting
that a dividend of SEK 7.00 per share be paid for 2021. The
total return from investing in the SKF A share over the past
three years was 82.1% and for the SKF B share 77.8%.
Ownership structure
SKF had 69,453 shareholders on 31 December 2021. Around
52.4% of the share capital was owned by foreign investors,
around 37.1% by Swedish companies, institutions and mutual
funds and around 8.2% by private Swedish investors. Most of
the shares owned by foreign investors are registered through
trustees, which means that the actual shareholders are not
officially registered.
FAM AB, which is wholly owned by Wallenberg Investments
AB, in its turn owned by the three largest Wallenberg Founda-
tions, is the only shareholder with a shareholding representing
more than 10% of the voting rights in SKF.
Information to shareholders
Financial reports and further information about the share
canbe found at skf.com/investors. A list of analysts following
SKF and the opportunity to subscribe to information from
SKFis also available on the website.
Sustainability indexes
Based on the 2021 submission, SKF has been rated B within
the Carbon Disclosure Project rating system which signifies
that the company is taking coordinated action on climate issues.
SKF is also evaluated as Platinum (in the top 1% of companies
in its sector) via the EcoVadis supplier sustainability evaluation
platform which is used by many of the Group’s global customers
to understand supplier sustainability performance.
Additional information
There are no regulations under Swedish law or under the
Articles of Association limiting the transferability of SKF
shares. Furthermore, to the best of SKF’s knowledge, no
agreements exist between shareholders limiting the right
totransfer SKF shares (e.g. by pre-emption or first refusal
clauses). No restrictions exist limiting the number of votes
thateach shareholder may cast at a shareholders’ meeting.
There are no existing agreements between SKF and any
Boardmember or employee, allowing them to receive
compensation in the event of resignation, dismissal without
cause, or termination of employment as a consequence of
apublic takeover bid for the shares in AB SKF.
47
SKF Annual Report 2021
50
100
150
200
202120202019
0
25
50
75
Million 100
B share
Nasdaq Stockholm_PI
(normalized against the B share)
A share
Number of A shares traded, millionNumber of A shares traded, million
Number of B shares traded, million
250 SEK
100
150
200
250
% 300
100
150
200
250
Jan
2019
Jan
2020
Jan
2021
Dec
2021
Total return 2019−2021
SKF B share (SEK)
SKF B Total return (%)
300 SEK
Data per share
SEK per share
unless otherwise stated 2021 2020
Earnings per share 16.10 9.44
Dividend per A and B share 7.0 0
1)
6.50
Total dividends, MSEK 3,188
1)
2,960
Purchase price of B shares at
year-end on NASDAQ Stockholm 214.50 213.40
Equity per share 96 75
Yield (B), % 3.3
1)
3.0
P/E ratio, B
(share price/earnings per share) 13.3 22.6
Cash flow from operations, per share 11.5 18.2
Cash flow, after investments
before financing, per share 4.6 11.6
1) According to the Board’s proposal for the year 2021.
The ten largest shareholders sorted by voting rights
Number
of shares
Share
capital, %
Voting
rights, %
FAM AB 63,749,150 14.0 29.3
Harris Associates 23,039,843 5.1 3.2
Swedbank Robur Fonder 15,502,350 3.4 2.1
BlackRock 13,868,126 3.0 1.9
Vanguard 11,604,257 2.5 1.6
Handelsbanken Fonder 10,125,631 2.2 1.4
ODDO BHF Asset Management 9,805,977 2.2 1.3
Didner & Gerge Fonder 9,688,538 2.1 1.3
Invesco 8,673,181 1.9 1.2
Norges Bank 7,395,190 1.6 1.0
Source: Monitor, Modular Finance as of 31 December 2021.
Geographic ownership 2021
Others, 7.8%
Anonymous, 12.5%
Europe excl Sweden, 9.1%
USA, 23.0%
Sweden, 47.6%
Share development 2019–2021
48
SKF Annual Report 2021
Introduction
The Board of Directors of AB SKF has decided to submit the
following principles of remuneration for SKF’s Group Manage-
ment to the Annual General Meeting. Group Management
is defined as the President and the other members of the
management team. The principles shall apply to remuneration
agreed and amendments to remuneration already agreed, after
the adoption of the principles by the Annual General Meeting
2022, and, in other cases, to the extent permitted under exist-
ing agreements.
The objective of the principles is to ensure that the SKF
Group can attract and retain the best people in order to con-
tribute to the SKF Group’s mission and business strategy, its
long-term interests and sustainability. Remuneration for
Group Management shall be based on market competitive
conditions and at the same time support the shareholders’
bestinterests. Variable salary covered by the principles shall
belinked to predetermined and measurable criteria, aiming
topromote the SKF Group’s business strategy and long-term
interests, including its sustainability. For further information
on SKF Group’s strategy, please refer to skf.com and the
AnnualReport.
Since 2008 SKF’s Annual General Meeting has resolved each
year upon a performance share programme for senior manag-
ers and key employees. Each year, the Board of Directors will
evaluate if SKF’s Performance Share Programme, which
includes Group Management, shall be proposed to the Annual
General Meeting. Remuneration resolved by the Annual Gen-
eral Meeting is excluded from the principles. SKF Performance
Share Programme shall have the aim to continue to link the
long-term interests of the participants and the shareholders.
The performance criteria used to assess the outcome of the
proposed performance share programme shall be linked to the
business strategy and thereby to SKF Group’s long-term value
creation, including its sustainability. For further information
onsaid performance share programme, including the criteria
which the outcome depends on, please refer to the Board of
Directors’ proposal on SKF’s Performance Share Programme.
Types of remuneration
The total remuneration package for a Group Management
member shall consist of the following components: fixed
salary,variable salary, pension benefits, conditions for notice
of termination and severance pay, and other benefits such as
acompany car. The components shall create a well-balanced
remuneration reflecting individual performance and respon-
sibility aswell as the SKF Group’s overall performance.
TheAnnual General Meeting may also – irrespective of the
prin ciples –resolve on other remuneration components,
e.g.SKF’s Perfor mance Share Programme.
Fixed salary
The fixed salary of a Group Management member shall be at
amarket competitive level. It shall be based on competence,
responsibility, experience and performance. The SKF Group
shall use an internationally well-recognized evaluation system,
in order to evaluate the scope and responsibility of the position.
Market benchmarks shall be conducted on a yearly basis. The
performance of Group Management members shall be continu-
ously monitored during the year and shall be used as a basis for
annual reviews of fixed salaries.
Variable salary
The variable salary of a Group Management member shall
runaccording to a performance-based programme. The pur-
pose of the programme shall be to motivate and compensate
value- creating achievements in order to support operational,
financial and sustainability targets and thereby promote the
SKF Group’s business strategy, sustainability and long-term
interests.
The performance-based programme shall have predeter-
mined and measurable criteria which can be both financial and
non-financial and which contribute to the company’s long-term
and sustainable development. The criteria shall primarily be
based on the annual financial performance of the SKF Group,
such as financial result, growth and capital efficiency and shall
promote sustainability targets of the SKF Group.
The satisfaction of criteria for awarding variable salary shall
be measured over a period of one year. To which extent the
criteria for awarding variable salary has been satisfied shall be
determined when the measurement period has ended. The
Board of Directors is responsible for the evaluation so far as it
concerns variable salary to the President. For variable salary
toother executives, the President is responsible for the evalua-
tion. For financial targets, the evaluation shall be based on
financial information made public by the SKF Group. Variable
salary shall qualify for pension benefits to the extent required
by mandatory collective agreement provisions. The maximum
variable salary shall vary between 50 to 70 percent of the accu-
mulated annual fixed salary of Group Management members.
The Board of Directors’ proposal for
a resolution on principles of remuneration
for Group Management
49
SKF Annual Report 2021
Other benefits
The SKF Group may provide other benefits to Group Manage-
ment members in accordance with local practice. Other bene-
fits can for instance be a company car or health and medical
insurance. Premiums and other costs relating to such benefits
shall depend on and follow local conditions and local practice
but shall represent, as a general rule, a limited value and may
amount to not more than 10 per cent of the accumulated
annual fixed salary of the members of Group Management.
Pension
The SKF Group shall strive to establish pension plans based on
defined contribution models, which means that a premium is
paid amounting to a certain percentage of the employee’s
annual salary. The commitment in these cases is limited to
thepayment of an agreed premium to an insurance company
offering pension insurance.
A Group Management member shall normally be covered by,
in addition to the basic pension (for Swedish members usually
the ITP pension plan), a supplementary defined contribution
pension plan. By offering this supplementary defined contribu-
tion plan, it is ensured that Group Management members are
entitled to earn pension benefits based on the fixed annual sal-
ary above the level of the basic pension. The normal retirement
age for Group Management members shall be 65 years. For
employments governed by rules other than Swedish, pension
benefits and other benefits may be duly adjusted for compliance
with mandatory rules or established local practice, taking into
account, to the extent possible, the overall purpose of the prin-
ciples. For employments governed by Swedish rules, the pre-
mium for the supplementary pension plan shall be linked to age
and amount to a maximum of 40 percent of the accumulated
annual fixed salary not covered by any other pension plan.
Notice of termination and severance pay
A Group Management member may terminate his/her employ-
ment by giving six months notice. In the event of termination
ofemployment at the request of the company, employment
shall cease immediately. The Group Management member shall
however receive a severance payment related to the number
ofyears service, provided that it shall always be maximized to
two years fixed salary.
Salary and terms of employment for employees
When preparing the principles, the Board of Directors has
paidregard to the salary and terms of employment of the
employees of the company. Information about employees’ total
remuneration, the components of the remuneration and the
growth and growth rate over time have been part of the basis
for the Board of Director’s and the Remuneration Committee’s
evaluation of the fairness of the principles of remuneration
andthe limitations which the principles entail.
The decision-making process to determine, review and
implement the principles
The Board of Directors has established a Remuneration Com-
mittee. The Committee consists of a maximum of four Board
members. The Remuneration Committee prepares all matters
relating to the principles of remuneration for Group Manage-
ment, as well as the terms of employment for the President.
The principles of remuneration for Group Management are
presented by the Remuneration Committee to the Board of
Directors that, at least every fourth year, submits a proposal
for such principles to the Annual General Meeting for approval.
The principles of remuneration shall be valid until new principles
have been adopted by the Annual General Meeting. The Board
of Directors must approve the terms of employment for the
President. The Remuneration Committee shall also monitor
and evaluate programmes for variable remuneration for Group
Management, the application of the principles of remuneration
for Group Management and applicable remuneration structures
and levels of the SKF Group.
The members of the Remuneration Committee are indepen-
dent of the SKF Group and Group Management. The President
and other members of Group Management shall not be present
when the Board of Directors processes and resolves on remu-
ner ation related matters in so far as they are affected by such
matters.
The Board of Directors’ right to derogate from the
principles of remuneration
The Board of Directors may derogate from the principles of
remuneration decided by the Annual General Meeting, in whole
or in part, if in a specific case there is special cause for the der-
ogation and a derogation is necessary to serve the SKF Group’s
long-term interests, including its sustainability, or to ensure
the SKF Group’s financial viability. As set out above, the Remu-
neration Committee’s tasks include preparing the Board of
Directors’ resolutions in remuneration related matters. This
includes any resolutions to derogate from the guidelines.
Description of material changes to the principles and
howthe views of shareholders’ have been taken into
consideration
The principles of remuneration are substantially similar to the
previous version with a clarification of the criteria for variable
salary. For the variable salary, examples of financial para meters
have been revised from TVA, cash flow and individual goals to
financial result, growth and capital efficiency. Furthermore,
acriterion promoting the SKF Group’s sustainability targets,
which can be independent of the financial performance of the
SKF Group, have been added. The shareholders have not ex -
pressed any specific views on the principles of remuneration.
The Board of Directors considers the revisions, with clear cri-
teria for variable salary and further promotion of sustainability
targets, to reflect the general interest of the shareholders.
50
SKF Annual Report 2021
17 million
An estimated 17 million bearings per
year aremounted incorrectly. If only half
ofthese were avoided, we could make sub-
stantial reductions in carbon emissions.
100% renewable
To build strong networks, SKF joined RE100
(Renewable energy 100) – a global initiative
bringing together some of the world’s most
influential businesses committed to using
100% renewable electricity.
51
SKF Annual Report 2021
To remain a leader in the bearing business, we need world-
class customer service. In fact, that is our aim with world-class
manufacturing: products developed, produced and delivered
exactly according to what, when, how and where the customer
needs them.
This is a journey we started more than seven years ago and
one that we will keep pursuing with continuous step-ups. The
ambition is to have a fast, flexible, cost-efficient and fully con-
nected organization close to our customers. By 2025, we will
have fewer, but automated, factories, with higher flexibility and
an increased proportion of region-for-region manufacturing.
So far, we have invested SEK 9.5 billion, in a total of 112 on -
going and approved projects. By 2025 the estimated business
benefits are expected to reach SEK 5 billion.
In 2020, we announced our commitment for our sites to
become net zero in 2030. Having made significant decarbon-
izing progress with the introduction of SKF RecondOil system,
remanufacturing technologies and digitalization, the entire
manufacturing flow at our world-class manufacturing sites is
now fully automated, offering precise adjustments.
The strategic decision to pursue ever more demanding climate
targets, such as net zero supply chain by 2050, is valuable in
SKF’s customer relations. Today, an ever increasing number of
customers demand products and solutions with a low carbon
footprint. Ensuring traceability throughout the entire value chain
is therefore the next big challenge. As we see it, this is the next
industrial revolution, Industry 5.0, relying on full digitalization.
DECARBONIZING IN PROGRESS
Accelerating the next
industrial revolution
Less carbon emissions with
technology step-up.
Less waste with remanufactur-
ing technologies.
52
SKF Annual Report 2021
Nomination of Board members and
notice of Annual General Meeting
Capital structure, financing, credit rating
and dividend policy
In addition to specially appointed members and deputies,
thecompany’s Board of Directors shall according to the
ArticlesofAssociation, comprise a minimum offiveand
a maximum of twelve members, with a maximum offive
deputies. The Annual General Meeting shall, inter alia,
determine the number of Board members and deputy Board
members, and preside over the elections of Board members
and deputy Board members.
Capital structure
The capital structure target is a gearing of around 50%, corre-
sponding to an equity/assets ratio of around 35% or a net debt/
equity ratio, excluding pension liabilities, below 40%. This
underpins the Group’s financial flexibility and its ability to
continue investing in its business, while maintaining a strong
credit rating. On 31 December 2021, the gearing was 40.5%
(48.0), the equity/assets ratio 45.5% (39.4) and the net debt/
equity ratio, excluding pension liabilities 12.5% (9.3).
Financing
SKF’s policy is to have long-term financing of its operations.
As of 31 December 2021, the average maturity of SKF’s loans
was five years. SKF has four notes issued on the European bond
market. EUR 296 million per 2022, EUR 300 million per 2025,
EUR 300 million per 2029, and one with an outstanding amount
of EUR 300 million, due 2031. In addition to these notes, SKF
also has two notes issued on the Swedish bond market, due
2024 and in a total of SEK 3,000 million.
According to the conditions of the notes, the notes’ interest
rate may increase by 5% in case of a change of control of the
company in combination with a rating downgrade to a non-
investment grade as a consequence of this. Change of control
meaning any party/concerted parties acquiring more than
50%of SKF’s share capital or SKF’s shares carrying more than
50% of the voting rights.
Since SKF has relatively standardized loan documentation
similar conditions also apply to other loan agreements. In addi-
tion to the bonds mentioned above, SKF also has one bilateral
loan of USD 100 million due in 2027. In addition to its own
liquidity, AB SKF has two unutilized committed credit facilities,
one of EUR 500 million with a due date in 2025 and one of
EUR250 million with a due date in 2022.
Notice to attend an Annual General Meeting and notice to
attend an Extra General Meeting where an issue relating to a
change in the Articles of Association will be dealt with, shall be
issued no earlier than six weeks and no later than four weeks
prior to the General Meeting. Notice to attend an Extra General
Meeting for other matters, shall be issued noearlier than six
weeks and nolater than three weeks prior tothe General
Meeting.
Credit rating
On 31 December 2021, the Group had a Baa1 rating from
Moody’s Investors Service and a BBB+ rating from Fitch
Ratings, both with a stable outlook. SKF intends to keep a
strong credit rating, which is reflected in its capital structure
targets.
Dividend
SKF’s dividend and distribution policy is based on the principle
that the total dividend should be adapted to the trend for
earnings and cash flow, while considering the Group’s develop-
ment potential and financial position. The Board of Directors’
view isthat the ordinary dividend pay-out ratio should amount
to around onehalf of SKF’s average net profit calculated over
abusiness cycle, which is reflected in SKF’s long-term financial
targets. If the financial position of the SKF Group exceeds the
targets for the capital structure an additional distribution to
the ordinary dividend could be made in the form of a higher
dividend, a redemption scheme or a repurchase of the compa-
ny’s own shares. On the other hand, in periods of more un -
certainty a lower dividend ratio could be appropriate.
Based on the operating performance, cash generation
capacity and outlook, the Board has decided to propose to the
Annual General Meeting a dividend of SEK 7.00 (6.50) per
share. This proposal is subject to a resolution by the Annual
General Meeting in March 2022, see page 105, Proposed
distribution of surplus.
53
SKF Annual Report 2021
FINANCIAL STATEMENTS OF THE PARENT COMPANY
Parent Company income statements and
statements of comprehensive income ................................................... 94
Parent Company balance sheets ............................................................ 95
Parent Company statements of cash flow ............................................ 96
Parent Company statements of changes in equity ............................. 97
NOTES TO THE FINANCIAL STATEMENTS OF
THE PARENT COMPANY
Note 1 Accounting policies ................................................................ 98
Note 2 Revenues and operating expenses ..................................... 98
Note 3 Financial income and financial expenses .......................... 98
Note 4 Appropriations ........................................................................ 98
Note 5 Taxes ......................................................................................... 99
Note 6 Intangible assets .................................................................... 99
Note 7 Property plant and equipment .......................................... 100
Note 8 Investments in subsidiaries ............................................... 100
Note 9 Investments in equity securities ....................................... 103
Note 10 Provisions for post-employment benefits ...................... 103
Note 11 Loans....................................................................................... 104
Note 12 Salaries, wages, other remunerations,
average number of employees and men
and women in Management and Board .......................... 104
Note 13 Contingent liabilities ............................................................ 104
CONTENTS
Consolidated income statements and consolidated
statements of comprehensive income ................................................... 54
Comments on the consolidated income statements .......................... 55
Consolidated balance sheets ................................................................... 56
Comments on the consolidated balance sheets .................................. 57
Consolidated statements of cash flow ................................................... 58
Comments on the consolidated statements of cash flow .................. 59
Consolidated statements of changes
in equity and comments ........................................................................... 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Accounting policies ............................................................... 62
Note 2 Segment information ............................................................ 63
Note 3 Acquisitions ............................................................................. 65
Note 4 Divestment of businesses .................................................... 66
Note 5 Research and development .................................................. 66
Note 6 Expenses by nature ............................................................... 66
Note 7 Other operating income and expenses .............................. 67
Note 8 Financial income and financial expenses .......................... 67
Note 9 Taxes ......................................................................................... 68
Note 10 Intangible assets .................................................................... 69
Note 11 Property, plant and equipment ........................................... 72
Note 12 Right-of-use assets ................................................................ 74
Note 13 Inventories ............................................................................... 75
Note 14 Financial assets ...................................................................... 76
Note 15 Other short-term assets ...................................................... 78
Note 16 Share capital ........................................................................... 78
Note 17 Earnings per share ................................................................. 79
Note 18 Provisions for post-employment benefits ........................ 79
Note 19 Other provisions and contingent liabilities ....................... 82
Note 20 Financial liabilities .................................................................. 84
Note 21 Other short-term liabilities .................................................. 85
Note 22 Related parties including
associated companies ........................................................... 85
Note 23 Remuneration to key Management .................................... 86
Note 24 Fees to the auditors ............................................................... 89
Note 25 Average number of employees ............................................ 90
Note 26 Financial risk management ................................................. 90
Note 27 Non-controlling interests ..................................................... 93
Note 28 Subsequent events ................................................................ 93
Amounts in MSEK unless otherwise stated. Amounts
in parentheses refer to comparable figures for 2020.
The Administration Report is presented on pages
14– 105. It has been audited by SKF’s external auditors.
See the Auditor’s Report on pages 106–109. Accord-
ing to theSwedish Annual Accounts Act chapter 6,
§11, SKF’s statutory sustainability report isprepared
as a separate report. The scope of this Sustainability
Report is presented on page 110.
Financial statements
54
SKF Annual Report 2021
CONSOLIDATED INCOME STATEMENTS
Consolidated income statements
January–December
MSEK Note 2021 2020
Net sales 2 81,732 74,852
Cost of goods sold 6 –58,457 –55,348
Gross profit 23,275 19,504
Research and development expenses 5 –2,751 –2,515
Selling expenses 6 –9,736 –9,732
Administrative expenses 6 –514 –521
Other operating income 7 1,188 1,019
Other operating expenses 7 –725 –702
Income from associated companies 7 21 16
Operating profit 10,758 7,069
Financial income 8 102 72
Financial expenses 8 –797 –841
Profit before taxes 10,063 6,300
Income tax 9 –2,484 –1,826
Net profit 7,579 4,474
Net profit attributable to:
Shareholders of AB SKF 7,331 4,298
Non-controlling interests 248 176
Basic earnings per share (SEK) 17 16.10 9.44
Consolidated statements of comprehensive income
January–December
MSEK Note 2021 2020
Net profit 7,579 4,474
Items that will not be reclassified to the income statement - -
Remeasurements (actuarial gains and losses) 18 2,751 –850
Income tax 9 –694 203
Items that may be reclassified to the income statement - -
Currency translation adjustments 2,759 –3,726
Assets at fair value through other comprehensive income 14 96 –39
Income tax 9 2 8
Other comprehensive income, net of tax 4,914 –4,404
Total comprehensive income 12,493 70
Total comprehensive income attributable to
Shareholders of AB SKF 12,127 111
Non-controlling interests 366 –41
55
SKF Annual Report 2021
2020201920182017 2021
Operating profit
0
2.5
5.0
7.5
10.0
12.5 SEK billion
2020 2021
Operating profit development y-o-y
Organic sales &
manufacturing volumes
Cost development
Currency impact
Items affecting comparability
at 2020 years exchange rates
0
2,000
4,000
6,000
8,000
10,000
12,000 SEK million
−1,415
1,995 10,758
7,069
5,981 –2,871
Comments on the consolidated income statements
General
The Group’s income statement for 2021 included the result of two
smaller acquired businesses in Sweden for the period 1 September
–31 December. It also included the result from a real estate busi-
ness for the period 1 January–30 November.
Net sales
In 2021, net sales amounted to MSEK 81,732 (74,852) corre-
sponding to an increase of 9.2% compared to 2020. The change
ofthe Swedish krona towards other currencies had a negative
impact in 2021 of –3.4%. Structural changes accounted for 0%.
Net sales in local currencies increased with 12.6%, driven by
higher sales volumes in all regions.
Sales development
y-o-y, % Q1 Q2 Q3 Q4
Full
year
Organic 8.6 33.2 7.7 3.8 12.6
Structure — — — — —
Currency
–9.7 –8.3 0.6 3.4 –3.4
Total –1.1 24.9 8.3 7.7 9.2
Operating profit
Operating profit for the year was MSEK 10,758 (7,069). Operating
profit was positively impacted by sales volumes, price and customer
mix. Operating profit was negatively impacted by currency effects
and cost increases related to material, logistics and energy. Operat-
ing profit included items affecting comparability of MSEK –81
(– 2,124) whereof MSEK –466 (–1,683) related to the restructuring
and cost reduction program and MSEK +385, net (–442) related to
gain on sales of assets and impairments in 2021 and settlements
and impairments offset by a VAT credit in 2020.
Financial income and expenses, net
The financial income and expenses, net for 2021 was MSEK –695
(–769). For more information about the changes year-over-year,
see Note 8.
Taxes
The effective tax rate for the year was 25% (29). The tax rate in
2020 was negatively impacted by withholding tax on intra-group
dividends of MSEK –128. Adjusted for this the tax rate would have
been 27%. For more information, see Note 9.
Values by quarter
MSEK Q1 Q2 Q3 Q4
Full
year
Net sales 19,865 20,735 20,146 20,986 81,732
Operating profit 2,699 2,878 2,588 2,594 10,758
Profit before taxes 2,495 2,801 2,440 2,328 10,063
Basic earnings
per share (SEK) 3.91 4.59 3.86 3.74 16.10
56
SKF Annual Report 2021
CONSOLIDATED BALANCE SHEETS
0
5
10
15
20 %
202120202019
Return on capital employed
0
10
20
40
30
50 %
202120202019
Gearing
Consolidated balance sheets
As of 31 December
MSEK Note 2021 2020
ASSETS
Non-current assets - -
Goodwill 10 10,924 10,117
Other intangible assets 10 6,018 6,125
Property, plant and equipment 11 20,723 18,161
Right-of-use assets 12 2,661 2,517
Long-term financial assets 14 1,213 1,306
Deferred tax assets 9 3,839 4,800
Other long-term assets 461 633
Current assets - -
Inventories 13 20,997 15,733
Trade receivables 14 13,972 12,286
Other short-term assets 15 5,163 4,242
Other short-term financial assets 14 438 587
Cash and cash equivalents 14 13,219 14,050
Total assets 99,628 90,557
EQUITY AND LIABILITIES - -
Equity attributable to shareholders of AB SKF 43,645 34,309
Equity attributable to non-controlling interests 27 1,720 1,403
Non-current liabilities - -
Long-term financial liabilities 20 13,293 13,065
Long-term lease liabilities 12, 20 2,179 2,024
Provisions for post-employment benefits 18 11,781 15,170
Deferred tax provisions 9 1,040 792
Other long-term provisions 19 1,412 2,073
Other long-term liabilities 33 77
Current liabilities - -
Trade payables 20 9,881 8,459
Short-term provisions 19 1,105 1,409
Short-term lease liabilities 12, 20 579 560
Other short-term financial liabilities 20 3,285 2,700
Other short-term liabilities 21 9,675 8,516
Total equity and liabilities 99,628 90,557
0
10
20
30
40
50 %
202120202019
Equity/assets
57
SKF Annual Report 2021
0
40
80
120
% 160
18171615
19 20 21
Net debt/equity
0
10
20
30
40 SEK billion
Net debt
Net debt/Equity ratio
0
10
20
30
% 50
40
18171615 19 20 21
Plant and property % of net sales
0
5
10
15
20
25 SEK billion
Plant and property
Plant and property % of net sales
0
10
20
30
40%
Q1
2019
Q2 Q3 Q4 Q1
2020
Q2 Q3 Q4 Q1
2021
Q2 Q3 Q4
Net working capital in % of annual sales
Total trade payables
Total trade receivables
Inventories
Target
Net working capital
Comments on the consolidated balance sheets
Net working capital
On 31 December 2021, net working capital as percentage of sales
was 30.7 % (26.1) consisting of the following components:
• Inventories amounted to MSEK 20,997 (15,733) being 25.7%
(21.0) of annual sales. The increase in inventories was attributed
to currencies by MSEK 957 and to volumes by MSEK 4,307 net of
divestments and acquisitions.
• Trade receivables amounted to MSEK 13,972 (12,286) which is
17.1% (16.4) of annual sales. The change in trade receivables was
attributable to currencies with MSEK 752 and to volume increase
with MSEK 934, net of divestments and acquisitions. The average
days of outstanding trade receivables were 64 days (64).
• Trade payables amounted to MSEK 9,881 (8,459) corresponding
to 12.1% (11.3) of annual sales. The change attributable to cur-
rencies was MSEK 450 and the remaining MSEK 972 was due to
volume increase, net of divestments and acquisitions.
Plant and property
On 31 December 2021, plant and property amounted to MSEK
20,997 (18,161). This was as 25.7% (24.3) of annual sales. The
change attributable to currencies was MSEK 1,075.
Net debt
Net debt amounted to MSEK 17,360 (18,460) at the end of 2021.
Post-employment benefit provisions totalled MSEK 11,711
(15,136) at year-end, representing a net decrease of MSEK 3,425
(net decrease of 177), which was attributable to:
• Cash payments of MSEK –1,740 (–888)
• Actuarial gains and losses of MSEK +2,751 (–850)
• Expenses of MSEK 574 (757)
• Acquired/divested businesses of MSEK 0 (0)
• The remainder was attributable to currency translation
differences.
Loans totalled MSEK 16,454 (15,240), at the end of 2021, repre-
senting an increase of MSEK 1,217. The change was primarily
attributable to a net increase between the repayment of a bond due
and a new bond issued during the year of MSEK 1,022 and positive
currency translation effects of MSEK 243.
Equity
During the year, equity increased from MSEK 35,712 to MSEK
45,365. Net profit amounted to MSEK 7,579 (4,474) and dividends
paid were MSEK 3,012 (1,778). Currency translation had a negative
effect of MSEK –2,759 (–3,726). Remeasurements had a net of tax
effect of MSEK 2,059 ( –639). The capital structure target for the
Group is a gearing of around 50%, corresponding to an equity/
assets ratio of around 35% or a net debt/equity ratio, excluding
pension liabilities, below 40%. This underpins the Group’s financial
flexibility and its ability to continue investing in its business.
On31December 2021, the gearing was 40.5% (48.0), the equity/
assets ratio 45.5% (39.4) and the net debt/equity ratio, excluding
pension liabilities 12.5 % (9.3).
58
SKF Annual Report 2021
CONSOLIDATED STATEMENTS OF CASH FLOW
Consolidated statements of cash flow
January–December
MSEK Note 2021 2020
Operating activities
Operating profit 10,758 7,069
Adjustments for
Depreciation, amortization and impairment 6 3,305 3,401
Net gain on sales of businesses and property, plant and equipment –436 –245
Other non-cash items –758 806
Income taxes paid –2,250 –2,240
Contributions to and payments under post-employment defined benefit plans 18 –810 –888
Associated companies 66 –51
Changes in working capital
Inventories –4,308 1,542
Trade receivables –931 1,102
Trade payables 970 396
Other operating assets and liabilities, ne
t 322 –1,810
Interest and other financial items –680 –817
Net cash flow from operating activities 5,248 8,265
Investing activities
Additions to intangible assets 10 –68 –39
Additions to property, plant and equipment 11 –3,822 –3,332
Sales of property, plant, equipment, and intangible assets 10, 11 52 354
Acquisitions of businesses, net of cash and cash equivalents 3 –40 –4
Divestments of businesses, net of cash and cash equivalents 4 733 20
Investment in/sale of equity securities –3 –5
Net cash flow used in investing activities –3,148 –3,006
Net cash flow after investments before financing 2,100 5,259
Financing activities
Proceeds from medium- and long-term loans 3,148 3,303
Repayments of medium- and long-term loans –2,126 –2,455
Payments of leases –738 –799
Cash dividends to shareholders of AB SKF and non-controlling interests –3,012 –1,778
Funding of post-employment benefits –930 —
Investments in financial assets –33 –409
Sales of financial assets 178 4,829
Net cash flow used in/from financing activities –3,513 2,691
Net cash flow –1,413 7,950
Cash and cash equivalents at 1 January 14,050 6,430
Cash effect excluding acquired/sold businesses –1,386 7,953
Cash effect from acquired/sold businesses –27 –3
Translation effect 582 –330
Cash and cash equivalents on 31 December 13,219 14,050
59
SKF Annual Report 2021
20202019 2021
Cash flow after investments,
before financing
0
2,000
4,000
6,000
8,000
10,000 MSEK
202120202019
Additions to property,
plant and equipment
0
1,000
2,000
3,000
4,000 MSEK
20202019 2021
Paid dividend
per A and B share
0
2
4
8 SEK
6
0
50
100
200
250
150
300 MEUR
2024
2025
2027
2029
2022
2031
Debt structure
Q3 Q4Q2 Q3 Q4Q2 Q3
Q4
Q2Q1
2020
Q1
2019
Q1
2021
Cash flow after investments before financing
1)
1) Excl. acquisitions/divestments
-1,000
1,000
2,000
3,000
4,000 MSEK
0 0
2,000
6,000
4,000
MSEK 8,000
Quarter
12-month rolling
Comments on the consolidated statements of cash flow
The consolidated statements of cash flow have been adjusted
for exchange rate effects arising upon the translation of foreign
subsidiaries’ balance sheets to SEK, as these do not represent
cash flows.
Cash and cash equivalents comprise of cash on hand, bank
deposits, debt securities and other liquid investments that have
amaturity of three months or less at the time of the investment.
Cash flow after investments before financing
Cash flow after investments before financing, which is the primary
cash flow measure used in the Group, reached MSEK 2,100 (5,259)
in 2021. Adjusted for acquisitions and divestments of businesses,
the cash flow amounted to MSEK 1,407 (5,243). Other non-cash
items included expenses for which the cash flow has not yet
occurred. The most significant items were related to unrealized
exchange differences and expenses on the post-employment
benefits.
Interest and other financial items included interest paid of
MSEK –239 (–431), interest received of MSEK 24 (116), and the
remainder related primarily to realized derivatives on commercial
flows between Group companies. During the year, the Group
acquired two smaller businesses which generated a net cash
outflow of MSEK –40. The Group also executed a real estate
sale which resulted in a cash inflow of MSEK +733.
Cash flow used in financing activities
The Group’s debt structure improved in 2021, by net of repayment
of aEUR bond due during the year and with the issuing of a new
SEKbond with maturity 2031. Cash flow used in financing activities
included a payment of MSEK –930 (0), net of taxes, related to con-
tributions to the defined benefit retirement plans in the US and in
Germany.
The Board of Directors’
proposed distribution of surplus
for the year 2021, which is sub-
ject to approval at the Annual
General Meeting in March 2022,
includes an ordinary dividend of
SEK 7 per share, see Note 16.
60
SKF Annual Report 2021
CONSOLIDATED STATEMENTS OF CASH FLOW
MSEK
2021
Closing
balance
Cash
change
Businesses
acquired/sold
Other non-cash
changes
Translation
effect
2021
Opening
balance
Loans
1)
16,454 1,022 — –51 243 15,240
Post-employment benefits, net
2)
11,711 –1,740 — –2,183 498 15,136
Lease liabilities 2,758 –738 — 756 156 2,584
Other short-term financial assets
3)
–344 113 — 15 –22 –450
Cash and cash equivalents –13,219 1,386 27 — –582 –14,050
Net debt 17,360 43 27 –1,463 293 18,460
Derivatives
4)
included in Other financing items — — — — — —
MSEK
2020
Closing
balance
Cash
change
Businesses
acquired/sold
Other non-cash
changes
Translation
effect
2020
Opening
balance
Loans
1)
15,240 848 — 9 –587 14,970
Post-employment benefits, net
2)
15,136 –888 — 921 –210 15,313
Lease liabilities 2,584 –799 — 602 –230 3,011
Other short-term financial assets
3)
–450 4,225 — –21 34 –4,688
Cash and cash equivalents –14,050 –7,953 3 — 330 –6,430
Net debt 18,460 –4,567 3 1,511 –663 22,176
Derivatives
4)
included in Other financing items — –314 — –133 — 447
1) Excludes derivatives, see Note 20.
2) Other non-cash changes includes remeasurements as well as expenses
on defined benefit plans, see Note 18.
3) Other short-term financial assets excludes derivatives, see Note 14.
Cash change of MSEK 113 (4,225) is explained by investment in
financial assets of MSEK –14 (–396) and sale of financial assets
ofMSEK127 (4,621).
4) Financing activities to hedge short- and long-term loans. Other financing
items in cash flow include cash flow from derivatives as stated in the
table and interest premium for the repayment of loans.
Change in net debt
Cont. Comments on the consolidated statements of cash flow
61
SKF Annual Report 2021
Consolidated statements of changes in equity
Equity attributable to owners of AB SKF
MSEK Share capital
Share
premium
FV OCI
reserve
Translation
reserve
Retained
earnings Subtotal
Non-
controlling
interests
1)
Total
Opening balance 1 January 2020 1,138 564 130 2,237 31,443 35,512 1,854 37,366
Net profit — — — — 4,299 4,299 175 4,474
Hyperinflation adjustment
3)
— — — — 99 99 — 99
Components of other comprehensive income
Currency translation adjustments — — — –3,513 — –3,513 –213 –3,726
Change in FV OCI assets
and cash flow hedges — — –39 — — –39 — –39
Remeasurements — — — — –847 –847 –3 –850
Income taxes — — — 8 202 210 1 211
Transactions with shareholders
Non-controlling interest
1)
— — — — 50 50 — 50
Cost for Performance Share Programmes, net
2)
— — — — –95 –95 — –95
Dividends — — — — –1,366 –1,366 –412 –1,778
Closing balance 31 December 2020 1,138 564 91 –1,268 33,785 34,310 1,402 35,712
Net profit — — — — 7,331 7,331 248 7,579
Hyperinflation adjustment
3)
— — — — 146 146 — 146
Components of other comprehensive income
Currency translation adjustments — — — 2,637 — 2,637 122 2,759
Change in FV OCI assets
and cash flow hedges — — 96 — — 96 — 96
Remeasurements — — — — 2,751 2,751 — 2,751
Income taxes — — — 1 –693 –692 — –692
Transactions with shareholders
Non-controlling interests — — — — — — — —
Cost for Performance Share Programmes, net
2)
— — — — 25 25 — 25
Dividends — — — — –2,959 –2,959 –52 –3,011
Closing balance 31 December 2021 1,138 564 187 1,370 40,386 43,645 1,720 45,365
1) See Note 27 for details.
2) See Note 23 for details.
3) See Note 1 for details.
Fair value other comprehensive income reserve
The fair value other comprehensive income (FV OCI) reserve accu-
mulates changes in the fair value of assets recognized directly in
other comprehensive income, net of tax, with the exception of any
dividends and any impairment losses. See Note 14 for details on
FVOCI assets.
Hedging reserve
The hedging reserve accumulates activity related to cash flow
hedges, net of tax, being both changes in fair value as well as
amounts released to the income statement. See Note 26 for
detailson hedging activity.
Translation reserve
Exchange differences relating to the translation from the functional
currencies of the SKF Group’s foreign subsidiaries into SEK are
accumulated in the translation reserve. Upon the sale of a foreign
operation, the accumulated translation amounts are recycled to the
income statement and included in the gain or loss on the disposal.
Additionally, gains and losses on hedging instruments meeting the
criteria for hedges of net investments in foreign operations, are
recognized in the translation reserve net of tax. See Note 26 for
details.
NOTES GROUP
62
SKF Annual Report 2021
Notes to the consolidated financial statements
Basis of presentation
The consolidated financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union (EU). Furthermore, the Group is in com-
pliance with the Swedish Financial Reporting Board’s RFR 1,
Supplementary Accounting Rules for Groups, as well as their
interpretations (UFR).
The Annual Report of the Parent Company, AB SKF, has been
signed by the Board of Directors on 2 March 2022. The income
statement and balance sheet, and the consolidated income state-
ment and consolidated balance sheets are subject to adoption at
the Annual General Meeting on 24 March 2022.
The consolidated financial statements are prepared on the
historical cost basis except as disclosed in the accounting policies
below or in respective note.
Basis of consolidation
The consolidated financial statements include the Parent Company,
AB SKF and those companies in which it directly or indirectly exer-
cises control, and hereafter is referred to as “the Group”, “SKF” or
“the SKF Group”. Control exists when the Group has the right to
direct the relevant activities of a company, is exposed to variable
returns and can use those rights to affect those returns. For the
vast majority of the Group’s subsidiaries, control exists via 100%
ownership. There is also a very limited number of subsidiaries con-
trolled by SKF where ownership is between 50–100%. The largest
of such companies is SKF India Ltd. that is a publicly listed company
in India of which the Group has control via ownership of 52.6% of
the voting rights. For the subsidiaries where less than 100% is
owned, the non-controlling interests are shown separately within
equity.
Translation of foreign financial statements and items
denominated in foreign currency
AB SKF’s functional currency is the Swedish krona (SEK), which is
also the Group’s reporting currency.
All foreign subsidiaries report in their functional currency,
beingthe currency of the primary economic environment in which
the subsidiary operates. Upon consolidation, all balance sheet
itemsare translated to SEK based on the year-end ex change rates.
Income statement items are translated at average exchange rates,
with an exception for those mentioned below in hyperinflation
reporting. The accumulated exchange differences arising from
these translations are recognized via other comprehensive income
to the translation reserve in equity. Such translation differences
are reclassified into the income statement upon thedisposal of the
foreign operation.
Transactions in foreign currencies during the year have been
translated at the exchange rate prevailing at the respective trans-
action date.
Assets and liabilities denominated in a foreign currency, prim-
arily receivables and payables and loans, have been translated at
the exchange rates prevailing at the balance sheet date. Exchange
gains and losses related to trade receivables and payables and
other operating receivables and payables are included in other
operating income and other operating expenses. The exchange
gains and losses relating to other financial assets and liabilities
are included in financial income and financial expenses.
Exchange rates
The following exchange rates have been used when translating
the financial statements of foreign subsidiaries operating in the
countries shown below into SEK:
Average rates Year-end rates
Country Unit Currency 2021 2020 2021 2020
Argentina 1 ARS 0.10 0.15 0.09 0.10
China 1 CNY 1.43 1.44 1.42 1.25
EMU countries 1 EUR 10.99 11.38 10.23 10.02
India 100 INR 12.53 13.55 12.16 11.16
Brazil 1 BRL 1.72 2.00 1.59 1.57
United Kingdom 1 GBP 12.71 12.85 12.18 11.09
USA 1 USD 9.25 10.00 9.05 8.18
Hyperinflation reporting
Argentina is classified as a hyperinflation economy. Since SKF has
operations in the country, the Group has applied IAS 29 Financial
Reporting in Hyperinflationary Economies and restated the financial
statements accordingly. The Argentinian indexes used in the
restatement are; Wholesale Domestic Price Index (IPIM) and
Consumer Price Index (IPC).
Revenue
Revenue consists of sales of products or services in the normal
course of business. Service revenues are defined as business
activities, billed to a customer, that do not include physical products
or where the supply of any product is subsidiary to the fulfilment of
the contract. Any products that are included in service contracts are
reported as separate performance obligations and classified as
revenue from products.
Revenue is recognized when the control hasbeen transferred
tothe customer. Sales are recorded net of allowances for volume
rebates, sales returns and other variable considerations if it is
highly probable that they will occur.
Revenues from products are recognized at a point in time. Reve-
nues from service and/or maintenance contracts are either recog-
nized at a point in time or over time. In those contracts where the
service is delivered to the customer over time, the revenue is
accounted for over the duration of the contract with the use of
either the input or output methods. These are different methods
to measure the progress towards a complete satisfaction of a
performance obligation. Revenue from all other service contracts
is accounted for at a point in time.
Any anticipated losses on contracts are recognized in full in the
period in which losses become probable and estimable.
For revenue presented per customer industry, segment and
geographic area, see Note 2.
1 Accounting policies
63
SKF Annual Report 2021
Critical accounting estimates and judgements
Management believes that the following areas contain the most
keyjudgements and the most significant sources of estimation
uncertainty used in the preparation of the financial statements,
where a different opinion or estimate could lead to significant
changes to the Group’s financial statements in the upcoming year.
• Judgement on the realizability of deferred tax assets (Note 9).
• Judgements in recoverability of the carrying value of internally
developed software (Note 10).
• Estimates and key assumptions used in impairment testing
of intangible assets (Note 10).
• Judgements used in determening extension options for right of
use assets (Note 12).
• Significant assumptions used in the calculation of the post
employment benefit obligations (Note 18).
• Judgements used in the recognition and disclosure of provisions
and contingent liabilities (Note 19).
• Climate risks are taken into consideration in investing decisions
and impairment testing.
New accounting principles
New accounting principles 2021
IASB issued several new and amended accounting standards
thatwere endorsed by EU, effective date 1 January 2021. None
ofthese has had a material effect on the SKF Group’s financial
statements.
New accounting principles 2022
IASB issued several amended accounting standards that were
endorsed by EU, effective date 1 January 2022. None of these are
expected to have a material effect on the SKF Group’s financial
statements.
The amendments to IFRS 7, IFRS 9 and IFRS 16 are attributable
to the reform for reference interest rates - Phase 2 and provide
guidance on how the effects of the reform are to be reported.
In short, the changes in Phase 2 mean that it enables companies
to reflect the effects of changing from reference rates such as
“STIBOR” to other reference rates without giving rise to accounting
effects in reported amounts that would not provide useful informa-
tion to users of financial reports. The Group assesses that Phase 2
has no significant impact as the use of hedge accounting is very
limited.
COVID-19
The industries and regions in which SKF operates have been
impacted by the effects related to the spread of COVID-19. Due to
this there have been uncertainties in demand and revenue growth
as well as supply chain challenges which have led SKF to perform
several initiatives to reduce costs.
Each operating segment is defined as those business activities that
may earn revenues or incur expenses, whose operating results are
regularly reviewed by the chief operating decision maker (CODM)
and for which discrete financial information is available. In the case
of SKF, the CODM is defined as Group Management which makes
decisions about allocation of resources to the segments and also to
assess their performance on a regular basis. The internal reporting
package comprises two segments, Industrial and Automotive.
This segment information includes sales and operating profit
related to all significant industrial and automotive customers.
Segment profit represents the business result generated by the
capital employed of the segment and includes allocated corporate
expenses and eliminations.
Segment assets include all operating assets used and controlled
by a segment and consists principally of property plant and equip-
ment, intangible assets, external trade receivables and inventories.
Segment liabilities include all operating liabilities used and controlled
by a segment and consists principally of external trade payables,
other provisions as well as accruals. Reconciling items to the Group’s
reported assets and liabilities include consolidation eliminations,
all tax-related balances as well as items of a financial, interest
bearing nature, including post-employment benefit assets and
provisions.
Asymmetrical allocations affecting the segments relate primarily
to post-employment benefits where non-financial expenses are
allocated to the segments although the related provision is not.
Additionally, receivables and payables relating to sales between
segments, are not allocated to the segments. Such items are sold
toand settled directly with SKF Treasury Centre, the Group’s
internal bank, thereby becoming financial in nature.
Industrial is structured according to a functional approach and
ismanaged as one segment comprising six different functional
organizations: Industrial Sales Americas, Industrial Sales Europe
and Middle East and Africa, Industrial Sales Asia, Industrial Tech-
nologies, Bearing Operations, and Aerospace.
Industrial sells to customers in the global industrial market,
directly and indirectly through SKF’s worldwide distributor net-
work. Key customers are companies within industrial drives, heavy
industry (such as metals, mining, cement, and pulp and paper),
other industrial (such as automation and machine tool), railway,
marine, energy (such as wind, oil and gas) and aerospace. These
customer industries are served both directly to OEMs and end-
users as well as indirectly through SKF’s network of industrial
distributors.
Automotive sells to customers in the global automotive market,
directly or indirectly through SKF’s distributor network. Key
customers are manufacturers of cars, light and heavy trucks,
trailers, buses, two-wheelers and the vehicle aftermarket.
For more information on the customer industries and related
products, see pages 6–8.
Previously published segment figures for 2020 have been restated
to reflect a change in classification of smaller customers.
2 Segment information
NOTES GROUP
64
SKF Annual Report 2021
Net sales
Contribution to
profit before tax
MSEK 2021 2020 2021 2020
Industrial 58,559 53,912 9,308 6,691
Automotive 23,173 20,940 1,450 378
Subtotal operating segments 81,732 74,852 10,758 7,069
Financial net — — –695 –769
Tot al 81,732 74,852 10,063 6,300
Depreciation and
amortization
Impairments
Additions to property,
plant and equipment, intangible
assets and right-of-use assets
MSEK 2021 2020 2021 2020 2021 2020
Industrial 2,691 2,752 33 23 3,798 3,413
Automotive 581 618 — 8 650 472
Tot al 3,272 3,370 33 31 4,448 3,885
Assets Liabilities
MSEK 2021 2020 2021 2020
Industrial 54,518 48,360 11,906 9,852
Automotive 16,856 15,364 6,087 6,006
Subtotal operating segments 71,374 63,724 17,993 15,858
Financial and tax items 19,717 21,518 31,511 33,874
Eliminations and other unallocated items 8,537 5,315 4,759 5,113
Tot al 99,628 90,557 54,263 54,845
Cont. Note 2
Net sales – Total
Electrical, 1%
Light vehicles, 14%
1
1
Aerospace, 5%
Trucks, 6%
2
2
Industrial drives, 10%
Vehicle aftermarket, 10%
3
3
Off-Highway, 6%
Heavy industries, 5%
Marine, 2%
4
Energy, 7%
5
6
9
Railway, 4%
Other industrial, 3%
7
Agriculture, food and beverage 1%
Industrial distribution, 26%
8
11
10
1
2
2
3
7
6
5
4
3
11
10
1
8
9
Net sales by customer industry – Automotive
Light vehicles, 47%
1
Trucks, 20%
2
Vehicle aftermarket, 33%
3
1
2
3
Net sales by customer industry – Industrial
Electrical, 1%
1
Aerospace, 7%
2
Industrial drives, 14%
3
Heavy industries, 8%
Marine, 3%
4
5
Energy, 11%
Off-highway, 8%
6
9
Railway, 6%
Other industrial, 5%
7
10
Agriculture, food and beverage, 1%
Industrial distribution, 36%
8
11
2
3
4
5
7
9
10
11
6
8
1
65
SKF Annual Report 2021
Net sales are allocated according to the location of the respective
customer. Of the Group’s total net sales by customer location,
19%(20) were located in China, 18% (19) in USA and 9% (9) in
Germany. Non-current assets exclude financial assets, deferred
taxassets and post-employment benefit assets. Non-current
assets are allocated according to the location of the subsidiaries.
Ofthe Group’s total non-current assets as defined above, 30% (28)
were located in USA, 15% (15) in Germany, and 13% (10) in China.
Geographic disclosure
MSEK
Net sales by
customer location
Non-current assets
2021 2020 2021 2020
Sweden 1,871 1,680 4,013 4,270
Europe excl. Sweden 31,732 28,616 15,217 14,467
North America (incl. Mexico) 17,377 17,148 12,308 11,358
Asia-Pacific 25,416 23,486 6,820 5,422
Latin America 5,336 3,922 1,773 1,485
Eliminations — — 585 517
Tot al 81,732 74,852 40,716 37,519
Accounting policy
All business combinations are accounted for in accordance with
the purchase method. At the date of acquisition, when control is
obtained, the acquired assets, liabilities and contingent liabilities
(net identifiable assets) are measured at fair value.
Any excess of the cost of acquisition over fair values of net ident ifi-
able assets of the acquired business is recognized as goodwill.
Companies acquired during the year are included in the financial
statements as of acquisition date.
MSEK 2021 2020
Total fair value of net assets acquired
Intangible assets, excluding goodwill — 4
Property, plant and equipment 1 —
Current assets 7 —
Non-current liabilities — —
Current liabilities –3 —
Fair value net assets acquired 5 4
Goodwill 36 —
Total acquisition cost 41 4
Deferred consideration — —
Cash and cash equivalents acquired –1 —
Cash outflow 40 4
In 2021, SKF had a cash outflow of MSEK 40 for the acquisition
of two smaller businesses, Edge AB, an industrial consultancy firm
based in Lulea, Sweden and EFOLEX AB, a Gothenburg-based
manufacturer of the Europafilter-branded industrial lubrication
and oil filtration systems.
In 2020, SKF had a cash outflow of MSEK 4 for the acquisition
ofasmaller business within lubrication.
Also during 2020, adjustments were made to the initial PPA
relating to the 2019 acquisition of SKF AI (former SKF Presenso).
Identification of IP were made and a reclassification net of tax of
MSEK 86 were made from goodwill to other intangible assets.
3 Acquisitions
Net sales by geographic area
Asia and Pacific, 29%
Latin America, 9%
North America, 20%
Europe, Middle East
and Africa, 42%
Net sales by geographic area
Industrial
Asia and Pacific, 31%
Latin America, 7%
North America, 20%
Europe, Middle East
and Africa, 42%
Net sales by geographic area
Automotive
Asia and Pacific, 26%
Latin America, 15%
North America, 17%
Europe, Middle East
and Africa, 42%
NOTES GROUP
66
SKF Annual Report 2021
MSEK 2021 2020
Goodwill — —
Other intangible assets — —
Property, plant and equipment 343 1
Deferred tax assets — —
Other non-current assets — 5
Current assets 32 8
Deferred tax provisions — —
Non-current liabilities — –1
Current liabilities –10 –1
Non-controlling interest — —
Net assets disposed of 365 12
Profit/loss 397 11
Total consideration 762 23
Cash and cash equivalents divested –29 –3
Cash outflow for previous years
divestments — —
Total cashflow 733 20
During 2021, the Group executed a real estate sale, resulting in
atotal cash inflow of MSEK 733 and a net gain of MSEK 397.
During 2020, the Group divested smaller businesses in Asia and
inSweden, resulting in a total cash inflow of MSEK 20 and a net
gain of MSEK 11.
4 Divestment of businesses
Research and development expenditure, excluding developing
ITsolutions, totalled MSEK 2,751 (2,515), corresponding to
3.4% (3.4) of annual sales.
MSEK 2021 2020
Employee benefit expenses including social charges 24,270 23,000
Raw material and components consumed, including traded products 27,426 24,361
Change in work in process and finished goods 2,809 –578
Depreciation, amortization and impairments 3,305 3,401
Other expenses, primarily purchased services, shop supplies and utilities 13,648 17,932
Total operating expenses 71,458 68,116
Depreciation, amortization and impairments
were accounted for as (MSEK)
2021 2020
Depre ciation Amortization Impairments Total Depre ciation Amortization Impairments Total
Cost of goods sold 2,318 98 33 2,449 2,304 99 20 2,423
Selling expenses 372 484 — 856 454 513 11 978
Tot al 2,690 582 33 3,305 2,758 612 31 3,401
0
1
2
3
5
4
% 6
20202019 2018 20212017
Research and development % of net sales
0
500
1,000
1,500
3,000 MSEK
2,500
2,000
Research and development
Research and development % of net sales
5 Research and development
6 Expenses by nature
67
SKF Annual Report 2021
7 Other operating income and expenses
MSEK 2021 2020
Other operating income
Exchange gains on trade receivables/payables 512 392
Profit from sale of property, plant and equipment 74 247
Profit from associated companies 21 16
Profit from divestment of businesses 397 11
Other 205 369
1)
Tot al 1,209 1,035
Other operating expenses
Exchange losses on trade receivables/payables –545 –529
Loss from sale of property, plant and equipment –19 –37
Other –161 –136
Tot al –725 –702
Other operating income and expenses, net 484 333
1) Includes VAT credit.
MSEK 2021 2020
Interest income 35 68
Interest expense –308 –289
Net gains/losses:
Net interest cost on post-employment benefits –146 –239
Exchange differences, net –193 –179
Other financial income including dividends 50 4
Other financial expense –133 –134
Financial net –695 –769
8 Financial income and financial expenses
Other financial expense includes costs related to unwinding the
dis count on provisions, bank charges and other transaction-
related costs.
The below table specifies which category of financial instru ment
that gave rise to the financial income and expense as described
above. For a specification of the underlying financial assets and
financial liabilities to these categories, see Note 14 and Note 20.
2021 2020
Financial net specified by category of financial instruments (MSEK)
Interest
income
Interest
expense
Net gains/
losses
Interest
income
Interest
expense
Net gains/
losses
Financial assets/liabilities at fair value through profit or loss
Designated upon initial recognition 1 — — 2 — —
Derivatives held for trading 1 –6 –12 1 –65 420
Derivatives held for hedge accounting — — — — — —
Financial assets classified as amortized cost 33 — –118 65 — –23
Financial assets classified as fair value
through other comprehensive income — — 1 — — 10
Other financial liabilities, primarily loans — –302 –22 — –224 –582
Other liabilities including post-employment benefits — — –271 — — –373
Tot al 35 –308 –422 68 –289 –548
Derivatives classified as held for trading are mainly used for economic
hedging, which mitigate the effect of certain items in the categories
loans and receivables and other liabilities. Net gains/losses are
mainly exchange differences and changes in fair value for all the
categories except for other liabilities, which includes primarily net
interest costs on post-employment benefits and other financial
expenses.
NOTES GROUP
68
SKF Annual Report 2021
Accounting policy
Taxes include current taxes on profits, deferred taxes and other
taxes such as taxes on capital, actual or potential withholding taxes
on current and expected transfers of income from Group companies
and tax adjustments relating to prior years. Income taxes are recog-
nized in the income statement, except to the extent that they relate
to items directly taken to other comprehensive income or to equity,
in which case they are recognized in other comprehensive income
or directly in equity.
All the companies within the Group calculate current income taxes
in accordance with the tax rules and regulations of the countries
where the income is taxable.
The Group applies the required balance sheet approach for
measuring deferred taxes, where deferred tax assets and provisions
are recorded based on enacted tax rates for the expected future tax
consequences when the asset is realized or debt regulated. These
tax rates are applied on existing differences between accounting
and tax reporting bases of assets and liabilities, as well as for tax
loss and tax credit carry-forwards. Such tax loss and tax credit
carry- forwards can be used to offset future income.
Accounting estimates and judgements
Significant management judgment is required in determining
current tax liabilities and assets as well as deferred tax provisions
and assets. The process involves estimating the current tax
together with assessing temporary differences arising from
differing treatment of items for tax and accounting purposes.
Theprocess also involves judgements when there is uncertainty
over income tax treatments.
In particular, management assesses the likelihood that deferred
tax assets will be recoverable from future taxable income. Deferred
tax assets are recorded to the extent that it is probable in manage-
ment’s opinion that sufficient future taxable income will be available
to allow the recognition of such benefits.
9 Taxes
2021 2020
Gross deferred taxes per type (MSEK)
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
Intangibles and other assets 27 1,377 25 1,236
Property, plant and equipment 52 932 66 874
Inventories 555 409 544 322
Trade receivables 57 1 49 1
Provisions for post-employment benefits 2,643 62 3,324 47
Other accruals and liabilities 1,018 1 956 49
Tax loss carry-forwards 835 — 1,178 —
Tax credit carry-forwards 185 — 179 —
Other 286 77 322 106
Gross deferred taxes 5,658 2,859 6,643 2,635
Net deferred taxes presented in the Consolidated balance sheet 3,839 1,040 4,800 792
2021 2020
Tax expense (MSEK)
Income
statement
Other
comprehensive
income Total taxes
Income
statement
Other
comprehensive
income Total taxes
Current taxes –1,951 — –1,951 –2,222 — –2,222
Deferred taxes –533 –692 –1,225 396 211 608
Tot al –2,484 –692 –3,176 –1,826 211 –1,614
Taxes charged to other comprehensive income included MSEK -694 (203) related to remeasurements of post-employment benefits,
MSEK 1 (0) related to cash flow hedges and MSEK 1 (8) related to net investment hedges.
Reconciliation of the statutory tax in Sweden to the actual tax (MSEK) 2021 2020
Tax calculated using statutory tax rate in Sweden –2,073 –1,348
Difference between statutory tax rate in Sweden and foreign subsidiaries –340 –180
Other taxes –55 –72
Tax credits and similar items 28 59
Non-deductible/non-taxable profit items –48 –319
Tax loss carry-forwards –56 27
Current tax referring to previous years 10 –14
Other 50 21
Tax expense Income Statement –2,484 –1,826
The corporate statutory income tax rate in Sweden was 20.6% (21.4). The actual tax rate on profit before taxes was 24.7% (29.0).
69
SKF Annual Report 2021
Realizability of net deferred tax assets are assessed by manage-
ment based on the individual company’s profitability history, fore-
casts of taxable profits as well as length to expiry of the asset.
The SKF Group had total unrecognized deferred tax assets of
MSEK 183 (183), whereof MSEK 101 (107) related to tax loss
carry- forwards and MSEK 82 (77) related to other deductible
temporary differences. These were not recognized due to the
uncertainty of future profit streams.
Unrecognized deferred tax assets of MSEK 0 (7) related to
taxlosses and will expire during the period 2022 to 2026. The
remaining unrecognized assets will expire after 2026 and/or may
be carried forward indefinitely.
The change in the balance of unrecognized deferred tax assets
that reduced current tax expense was MSEK 11 (1) mainly relating
to the use of tax loss carry-forwards. The change in the balance
ofunrecognized deferred tax assets that impacted deferred
tax expense was MSEK -11 (51) which resulted from a revised
judgement on the realizability of certain tax assets in future years.
Gross value of tax loss carry-forwards
As of 31 December 2021, the Group had tax loss carry-forwards
amounting to MSEK 4,426 (6,042), which are available for offset
against taxable future profits. Such tax loss carry-forward expire
as follows:
2022–2026 74
2027 and thereafter 333
Never 4,019
Accounting policy
Intangible assets are stated at initial cost less any accumulated
amortization and any impairment. Amortization is made on a
straight line basis over the estimated useful lives and begins once
the asset is ready for its intended use. The useful lives are based
toa large extent on historical experience, the expected application,
as well as other individual characteristics of the asset.
The useful lives are:
• Patents and similar rights up to 11 years.
• Software in use 4–12 years.
• Customer relationships 10–15 years.
• Product development expenditures 3–7 years.
• Technology acquired in business combinations 15–18 years.
• Other intangibles 3–5 years.
• Strategic tradenames indefinite.
• Goodwill indefinite.
Amortization and impairments are included in cost of goods sold,
selling expenses or administrative expenses depending on where
the assets have been used.
Internally developed intangibles
The Group’s most significant internally developed intangibles are
software in use, developed for internal purposes and to a minor
extent product development. The amortization plan for SKF ERP
Programme (SEP) is a straight-line amortization for the rest of the
useful life, with an amortization rate of 10%.
Intangible assets with definite useful lives
Intangible assets with definite useful lives are tested for impair-
ment whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. The determination
isusually performed at the cash generating unit (CGU) level but
could also be at the individual asset level.
Factors that are considered important are:
• Underperformance relative to historical and forecasted
operating results;
• Significant negative industry or economic trends;
• Significant changes relative to the asset including plans to
discontinue or restructure the operation to which the asset
belongs.
When there is an indication that the carrying value may not be
recoverable based on the above indicators, the profitability of the
CGU to which the asset belongs is analyzed to further confirm the
nature and extent of the indication. If an indication is confirmed,
an impairment loss is recognized to the extent that the carrying
amount of the affected assets exceeds its recoverable amount.
Intangible assets with indefinite useful lives
Goodwill and other intangible assets with indefinite useful lives have
been allocated to CGUs, and are tested for impairment annually and
whenever an indication of impairment exists. The impairment test
is carried out at the lowest level at which these assets are moni-
tored by management. The lowest CGU level used for impairment
test is the segment level, Industrial and Automotive.
Accounting estimates and judgements
Significant management judgement is required in determining if
development expenditures should be capitalized. Such expenses
are only capitalized when it is probable that they will result in future
economic benefits for the Group and the expenditures during the
development phase can be reliably measured. The Group applies
stringent criteria before a development project results in the record-
ing of an asset, which include the ability to complete the project,
evidence of technical feasibility, intention and ability to use or sell
the asset. When evaluating software for internal use, management
specifically considers new functionality and/or increased standard
of performance to be strong evidence that future economic benefits
will be achieved. In evaluating product development projects,
management considers the existence of a customer order as signifi-
cant evidence of technological and economic feasibility. All other
research expenditures as well as development expenditures not
meeting the capitalization criteria, are charged to cost of goods sold
in the income statement when incurred.
When there is an indication that the carrying value may not
berecoverable, the carrying amount of the asset is compared
against its recoverable amount. The recoverable amount is the
10 Intangible assets
NOTES GROUP
70
SKF Annual Report 2021
greater of the estimated fair value less costs to sell and value in
use. In assessing value in use, a discounted cash flow model (DCF)
is used. This assessment contains a key source of estimation
uncertainty because the estimates and assumptions used in the
DCF model encompass uncertainty about future events and market
conditions. The actual outcomes may be significantly different.
However, estimates and assumptions are reviewed by management
and are consistent with internal forecasts and business outlook.
The DCF model involves the forecasting of future operating cash
flows over a five-year period and includes estimates of revenues,
production costs and working capital requirements, as well as
anumber of assumptions, the most significant being the revenue
growth rates and the discount rate. These forecasts of future
operating cash flows are built up from business strategic plans
representing management’s best estimates of future revenues
andoperating expenses using historical trends, general market
conditions, industry trends and forecasts and other currently
available information. Estimates are extrapolated using growth
rates determined on an individual CGU basis, reflecting a combina-
tion of product, industry and country growth factors. A terminal
value is then calculated based on the Gordon Growth model, which
includes a terminal growth factor representing an outlook not
exceeding the market growth for the industry.
Forecasts of future operating cash flows are adjusted to present
value by an appropriate discount rate derived from the Group’s cost
of capital, considering the long-term government bond rate, the
corporate spread, the market risk premium, the country risk pre-
mium where applicable, and the systematic risk of the CGU at the
date of evaluation. Management determines the discount rate to
beused based on the risk inherent in the related activity’s current
business model and industry comparisons.
MSEK
2021
Closing
balance Additions
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2021
Opening
balance
Acquisition cost
Goodwill 11,493 — 36 — — –44 611 10,890
Patents, tradenames and similar rights 2,942 15 — — — –3 225 2,705
Internally developed software 2,666 45 — — — — 4 2,617
Customer relationships 4,700 — — — — 2 320 4,378
Leaseholds 279 — — — — — 33 246
Product development 361 1 — — — — 13 347
Technology 1,214 — — — — — 84 1,130
Other intangible assets 232 7 — — — –6 4 227
Tot al 23,887 68 36 — — –51 1,294 22,540
MSEK
2021
Closing
balance
Amorti-
zations
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2021
Opening
balance
Accumulated amortization and
impairments
Goodwill 569 — — — — –46 –158 773
Patents, tradenames and similar rights 529 29 — — 2 14 –1 485
Internally developed software 1,376 184 — — — — 5 1,187
Customer relationships 3,283 274 — — — 1 191 2,817
Leaseholds 110 5 — — — — 12 93
Product development 197 12 — — — — 7 178
Technology 796 74 — — — — 55 667
Other intangible assets 85 4 — — — –18 1 98
Tot al 6,945 582 — — 2 –49 112 6,298
Net book value 16,942 16,242
1) Includes reclassification between categories.
Cont. Note 10
71
SKF Annual Report 2021
MSEK
2020
Closing
balance Additions
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2020
Opening
balance
Acquisition cost
Goodwill 10,890 8 — –1 — –83 –1,133 12,099
Patents, tradenames and similar rights 2,705 8 — — — 9 –316 3,004
Internally developed software 2,617 10 — –3 — 19 –9 2,600
Customer relationships 4,378 2 — — — –6 –472 4,854
Leaseholds 246 — — — — –8 –17 271
Product development 347 8 — — — –1 –18 358
Technology 1,130 — — — — –3 –115 1,248
Other intangible assets 227 3 4 — — 107 –6 119
Tot al 22,540 39 4 –4 — 34 –2,086 24,553
MSEK
2020
Closing
balance
Amorti-
zations
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2020
Opening
balance
Accumulated amortization and
impairments
Goodwill 773 — — — — 11 –86 848
Patents, tradenames and similar rights 485 23 — — — 9 –21 474
Internally developed software 1,187 182 — –3 — 2 –9 1,015
Customer relationships 2,817 285 — –11 — –21 –285 2,849
Leaseholds 93 5 — 11 — –8 –6 91
Product development 178 7 — — — –33 –10 214
Technology 667 92 — — — 66 –69 578
Other intangible assets 98 18 — — — –2 –5 87
Tot al 6,298 612 — –3 — 24 –491 6,156
Net book value 16,242 18,397
1) Includes reclassification between categories.
Impairment losses
Impairments amounted to MSEK –2 (0) in 2021.
Intangibles with indefinite useful lives
Certain tradenames and trademarks are considered to have indefi-
nite useful lives as the Group anticipates to continue to promote
these brands in the foreseeable future. This includes the trade-
names and trademarks in Lincoln MSEK 1,195 (1,080), Kaydon
Friction MSEK 702 (536), PEER MSEK 195 (178), GBC MSEK 206
(187) and others MSEK 95 (71).
Significant intangibles
Internally generated software related primarily to the development
of SEP to create and deploy improved processes and solutions
across the Group. The balance of capitalized expenditures was
MSEK 1,240 (1,411), including amortizations of MSEK –174 (–174)
made during 2021. Remaining useful life is seven years.
Other individual intangible assets that are material for the Group
include the customer relationships for Lincoln amounting to MSEK
521 (603) having a remaining useful life of four years, and for Kaydon
amounting to MSEK 654 (622) having a remaining useful life of
seven years.
CGUs with significant intangibles
The CGUs follow the segment reporting. The table below shows
goodwill and other intangibles with in definite useful lives allocated
to the CGUs Industrial and Automotive, as well as some crucial rates
that were used for the DCF calculation.
2021 2020
Industrial Auto motive Industrial Auto motive
Goodwill, MSEK 10,535 389 9,902 215
Tradenames,
MSEK 2,092 206 2,077 187
Average revenue
growth rate, % 6.5 4.6 6.1 5.9
Discount rate,
pre tax, % 9.2 9.7 10.5 10.7
Terminal growth
factor, % 2.5 2.5 2.5 2.5
The recoverable amounts used in the testing of the CGUs have
been calculated based on value in use using the DCF model as
described in Accounting estimates and judgements. The most
significant assumptions are the discount rate and the growth rates,
being both the revenue growth rates and the terminal growth
factor. Revenue growth rates are expressed in the above table as
the average growth rate over the five-year forecast period. The
same discount rate is applied to all cash flows in the five-year fore-
cast period. Additional information on the forecast period as well
as the discount rate and growth rates and how they are calculated
is described in accounting estimates and judgements above.
A number of sensitivity analyzes were performed to evaluate
ifany reasonable possible adverse changes in assumptions would
lead to impairment. The analyzes focused around decreasing the
revenue growth rates to zero, and increasing the discount rate by
two percentage points, each taken individually and while holding all
other assumptions constant. No impairment needs were indicated.
72
SKF Annual Report 2021
NOTES GROUP
Accounting policy
Machinery and supply systems, land, buildings, tools, office equip-
ment and vehicles are stated in the balance sheet at cost, less
accumulated depreciation and any impairment loss. A component
approach to depreciation is applied. This means that where items
of property, plant and equipment are comprised of different com-
ponents having a cost significant in relation to the total cost of the
items, such components are depreciated separately. Depreciation
is provided on a straight-line basis and is calculated based on cost.
The rates of depreciation are based on the estimated useful lives
of the assets, which are subject to annual review.
The useful lives are:
• 33 years for buildings and installations.
• 10–20 years for machinery and supply systems.
• 10 years for control systems within machinery
and supply systems.
• 4–5 years for tools, office equipment and vehicles.
Depreciation and impairments are included in cost of goods sold,
selling expenses or administrative expenses depending on where
the assets have been used.
Accounting estimates and judgments
The useful lives are based upon estimates of the periods during
which the assets will generate revenue and are based to a large
extent on historical experience of usage and technological
development.
PPE is tested for impairment whenever events or changes
in circumstances indicates that the carrying value may not be
recoverable.
Geographical distribution of property, plant and equipment 2020–2021
2021
29%
2020
26%
Asia / Pacific
2021
7%
2010
6%
Eastern Europe
2021
3%
2020
3%
Latin America
2021
13%
2020
13%
North America
2021
8%
2020
10%
Sweden
2021
40%
2020
42%
Western Europe
excl. Sweden
2020
2021
11 Property, plant and equipment
73
SKF Annual Report 2021
MSEK
2021
Closing
balance Additions
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2021
Opening
balance
Acquisition cost
Buildings 10,060 272 –352 –17 — 100 493 9,564
Land and land improvements 1,008 3 — –7 — –5 28 989
Machinery and supply systems 34,868 1,259 — –250 — 190 1,645 32,024
Machine tooling and factory fittings 4,631 345 1 –114 — 21 217 4,161
Assets under construction including
advances
2)
3,812 1,943 — –64 — –565 143 2,355
Total 54,379 3,822 –351 –452 — –259 2,526 49,093
MSEK
2021
Closing
balance
Depre-
ciation
Businesses
sold Disposals Impairments Other
1)
Translation
effects
2021
Opening
balance
Accumulated depreciation and impairments
Buildings 4,947 273 –9 –12 1 2 193 4,499
Land improvements 297 6 — –7 — 3 18 277
Machinery and supply systems 25,081 1,456 — –308 21 –307 1,124 23,095
Machine tooling and factory fittings 3,331 273 — –113 7 –15 118 3,061
Total 33,656 2,008 –9 –440 29 –317 1,453 30,932
Net book value 20,723 18,161
MSEK
2020
Closing
balance Additions
Businesses
acquired/
sold Disposals Impairments Other
1)
Translation
effects
2020
Opening
balance
Acquisition cost
Buildings 9,564 494 — –16 — 497 –666 9,255
Land and land improvements 989 339 — –85 — 27 –55 763
Machinery and supply systems 32,024 748 –2 –471 — 1,178 –2,405 32,976
Machine tooling and factory fittings 4,161 217 — –58 — 57 –336 4,281
Assets under construction including
advances
2)
2,355 1,534 — — — –1,797 –235 2,853
Total 49,093 3,332 –2 –630 — –38 –3,697 50,128
MSEK
2020
Closing
balance
Depre-
ciation
Businesses
sold Disposals Impairments Other
1)
Translation
effects
2020
Opening
balance
Accumulated depreciation and impairments
Buildings 4,499 274 — –16 1 5 –299 4,534
Land improvements 277 7 — — 7 –17 –20 300
Machinery and supply systems 23,095 1,507 –1 –448 24 55 –1,668 23,626
Machine tooling and factory fittings 3,061 208 — –35 — –116 –244 3,248
Total 30,932 1,996 –1 –499 32 –73 –2,231 31,708
Net book value 18,161 18,420
1) Includes reclassification between categories.
2) Contractual commitments for acquisition of PPE not yet booked amounted to MSEK 0 (89).
74
SKF Annual Report 2021
NOTES GROUP
Accounting policy
All lease contracts are recognized in the balance sheet, at com-
mencement date, as a right-of-use asset and a lease liability.
Acontract is or contains a lease if it conveys, to the Group, the right
to control the use of an identified asset for a period of time in
exchange for a consideration. A right-of-use asset and a lease
liability is recognized for all leases with a term of more than 12
months unless the underlying asset is of low value. The right-of-
use asset is subsequently accounted for with the same regulations
as Property, plant and equipment.
The lease liability is discounted using the interest rate implicit in
the lease, if that rate can be readily determined. If that rate cannot
be readily determined, the incremental borrowing rate is used.
Theincremental borrowing rate is established by the Group’s
treasury centre based on currency and maturity of lease contracts.
The lease term is determined as the non-cancellable period of
thelease, together with periods covered by an option to extend the
lease if the lessee is reasonably certain to exercise that option, and
periods covered by an option to terminate the lease if the lessee
isreasonably certain not to exercise that option. The Group also
applies the practical expedient for fixed non-lease components and
includes them together with any lease component in the contract.
Any future lease modification not registered as a separate
contract, is recognized as a remeasurement of the lease liability
and an adjustment to the right-of-use asset.
Accounting estimates and judgments
Management judgement and assumptions are required to deter-
mine the value of the right-of-use assets and the present value
ofthe lease liability. Such judgement and assumptions involve
identifying a lease, defining the lease term and defining the
discount rate.
Lease expenses for short-term leases, low value-assets and
variable lease payments amount to MSEK 277 (290). The lease
expenses correspond in all material aspects to the cash flow for
those leases.
Interest expenses related to leases amount to MSEK 106 (103).
MSEK 2021 2020
Short-term lease expenses 198 195
Low-value asset lease expenses 61 66
Variable lease payments
not included in lease liability
15 19
Other 3 10
Total 277 290
12 Right-of-use assets
MSEK
2021
Closing
balance Additions Modifications Impairments
Translation
effects
2021
Opening
balance
Acquisition cost
Premises 3,738 401 2 — 216 3,119
Vehicles 682 118 9 — 14 541
Forklifts 247 37 2 — 6 202
Machinery 30 — –4 — 1 33
Office equipment 20 2 –4 — 2 20
Other 7 — 2 — –1 6
Total 4,724 558 7 — 238 3,921
MSEK
2021
Closing
balance Depre ciation Modifications Impairments
Translation
effects
2021
Opening
balance
Accumulated depreciation and impairments
Premises 1,388 441 –60 2 73 932
Vehicles 463 169 –44 — 15 323
Forklifts 150 42 –4 — 4 108
Machinery 40 22 –5 — 1 22
Office equipment 16 4 –1 — 1 12
Other 6 4 –4 — –1 7
Total 2,063 682 –118 2 93 1,404
Net book value 2,661 2,517
75
SKF Annual Report 2021
MSEK
2020
Closing
balance Additions Modifications Impairments
Translation
effects
2020
Opening
balance
Acquisition cost
Premises 3,119 347 –41 — –286 3,099
Vehicles 541 131 14 — –32 428
Forklifts 202 30 3 — –8 177
Machinery 33 — — — –1 34
Office equipment 20 4 — — –3 19
Other 6 2 — — — 4
Total 3,921 514 –24 — –330 3,761
MSEK
2020
Closing
balance Depre ciation Modifications Impairments
Translation
effects
2020
Opening
balance
Accumulated depreciation and impairments
Premises 932 513 –17 –1 –84 521
Vehicles 323 169 — — –19 173
Forklifts 108 56 1 — –6 57
Machinery 22 11 — — –1 12
Office equipment 12 6 — — –1 7
Other 7 7 — — — —
Total 1,404 762 –16 –1 –111 770
Net book value 2,517 2,991
Accounting policy
Inventories are stated at the lower of cost (first-in, first-out basis)
or market value (net realisable value). Initially raw materials and
purchased finished goods are valued at actual purchase costs and
work in process and manufactured finished goods are valued at
actual production costs. Production costs include direct costs such
as material and labour, as well as manufacturing overhead as
appropriate.
Accounting estimates and judgements
Adjustments to the cost of inventory may be necessary when the
cost exceeds net realisable value. Net realisable value is defined as
selling price less costs to complete and costs to sell. The estimates
used in determining net realisable value are a source of estimation
uncertainty. As future selling prices and selling costs are not known
at the time of assessment, management’s best estimates are used
based on current price and cost levels. Adjustments to net realisable
value also include estimates of technical and commercial obsoles-
cence on an individual subsidiary basis. Commercial obsolescence
isassessed by the rate of turnover and ageing as risk indicators.
MSEK 2021 2020
Finished goods 11,686 9,188
Raw materials and supplies 6,901 5,202
Work in process 2,410 1,343
Total 20,997 15,733
Inventory values are stated net of a provision for net realizable value
of MSEK 1,353 (1,498). The amount charged to expense for net
realizable provisions during the year was MSEK 70 (269). Reversals
of net realizable provisions during the year were MSEK 47 (70).
13 Inventories
76
SKF Annual Report 2021
NOTES GROUP
Accounting policy
Financial assets are classified in three categories and are based on
the Groups business model for managing the asset and the asset’s
contractual cash flow characteristics. The assets can be measured
at amortized cost, fair value through other comprehensive income
(FVOCI) or fair value through profit or loss (FVPL).
Financial assets are recognized in the balance sheet when the
Group becomes a party to the contractual provisions of a financial
instrument. Financial assets are initially measured at fair value,
which is normally equal to cost. Settlement day recognition is
applied for purchases and sales of financial assets.
Financial assets measured at amortized cost are calculated
using the effective interest method. For disclosure purpose, fair
values have been calculated using valuation techniques, mainly
discounted cash flow analyses based on observable market data.
For current receivables, such as trade receivables, the carrying
amount is considered to correspond to fair value.
Equity securities are measured at fair value. The Group have
elected to classify Equity securities at FVOCI since these investments
are held as long-term strategic investments. There is no reclassifi-
cation of fair value gain or loss when the investment is derecognized
and the dividends from those investments are recognized in profit or
loss when the Group have the right to receive the payment.
Debt securities are valued at fair value based on the current bid
price for the securities and they are classified as either at FVPL or
at FVOCI depending on the Groups model for managing those
securities and on the characteristics of the cash flows.
Derivatives are categorized as held for trading unless they are
subject to hedge accounting. Derivatives classified as held for
trading are mainly derivatives used in economic hedges where the
changes in fair value are taken directly through profit or loss.
Financial assets and allowance for doubtful accounts, are recog-
nized with the use of a forward-looking ‘expected-loss’ impairment
model which indicates when the asset may not be recovered. The
forward-looking information should capture changes in the market
that the customers operate in.
Financial assets are derecognized when the contractual rights
to the cash flow have expired or been transferred together with
substantially all risks and rewards.
Accounting estimates and judgements
An allowance for doubtful accounts for expected losses on trade
receivables is maintained. When evaluating the need for an allow-
ance, management considers the aging of trade receivable balances,
historical write-off experience of customer with similar characteristics.
Management does also an estimation of expected credit losses based
on market conditions.
Where discounted cash flow techniques are used, the future cash
flows are determined (if not stated explicit in the contract) based
on the best assessment by management and discounted using the
market interest rate for similar instruments.
14 Financial assets
Financial assets per category 2021
Fair value through
profit or loss
MSEK
Amortized
cost
Fair value
through other
comprehensive
income
At initial
recognition Trading Total
Of which
cur rent
Trade receivables 13,972 — — — 13,972 13,972
Cash and cash equivalents 6,320 — 6,899 — 13,219 13,219
Equity securities — 402 — — 402 —
Marketable securities — — — 736 736 —
Hedging derivatives — — — — 0 —
Trading derivatives — — — 94 94 94
Debt securities — 21 6 — 27 6
Other loans and receivables 392 — — — 392 338
Carrying amount 20,684 423 6,905 830 28,842 27,629
Fair value 20,684 423 6,905 830
Financial assets per category 2020
Fair value through
profit or loss
MSEK
Amortized
cost
Fair value
through other
comprehensive
income
At initial
recognition Trading Total
Of which
cur rent
Trade receivables 12,286 — — — 12,286 12,286
Cash and cash equivalents 8,952 — 5,098 — 14,050 14,050
Equity securities — 301 — — 301 —
Marketable securities — — — 607 607 —
Hedging derivatives — — 295 — 295 —
Trading derivatives — — — 137 137 137
Debt securities — 22 5 — 27 5
Other loans and receivables 526 — — — 526 445
Carrying amount 21,764 323 5,398 744 28,229 26,923
Fair value 21,764 323 5,398 744
77
SKF Annual Report 2021
Financial assets categorized as amortized cost are non- derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. These include trade receivables, loans
granted, funds held with banks and deposits comprising princi-
pally of funds held with landlords and other service providers,
forwhich substantially all initial investment is expected to be
recovered.
Debt securities and strategic investments in equity securities are
categorised as FVOCI. The exception is debt securities held by SKF
Treasury Centre which are categorised as FVPL at initial recognition.
Financial instruments are designated at FVPL when the Group
manages such investments and makes purchase and sale decisions
based on their fair value. Derivatives are categorized as trading
derivatives unless they are subject to hedge accounting.
Fair value hierarchy for financial assets
at fair value (MSEK) Level 1 Level 2 Level 3 2021 Level 1 Level 2 Level 3 2020
Fair value through other
comprehensive income
Equity securities 349 — — 349 253 — — 253
Debt securities 21 — — 21 22 — — 22
Fair value through profit or loss
Trading securities 680 — 62 742 558 — 55 613
Cash and cash equivalents 6,899 — — 6,899 5,098 — — 5,098
Hedging derivatives — — — — — 295 — 295
Trading derivatives — 94 — 94 — 137 — 137
Total 7,949 94 62 8,105 5,931 432 55 6,418
Financial assets recorded at fair value, which include the columns
Fair value through other comprehensive income and Fair value
through profit or loss are disclosed above according to the hierarchy
that shows the significance of the inputs used in the fair value
measurements as defined in IFRS 13. Level 1 includes financial
instruments with a quoted price in an active market. Level 2
includes financial instruments with inputs based on observable
data other than quoted prices in an active market. Fair value has
been calculated using mainly discounted cash flow analyses based
on observable market data. Level 3 includes inputs that are not
based on observable market data.
Amounts for equity securities include MSEK 53 (48) valued at
cost and are not included in the specification above.
Past due, net of allowance
Trade receivables by due date (MSEK)
Carrying
amount
Not yet
due
1–30
days
31–60
days
61–90
days > 91 days
2021 13,972 12,284 1,201 254 127 106
2020 12,286 10,824 1,096 236 85 45
The average days outstanding of trade receivables in 2021 were
64 days (64). Trade receivables as a percentage of annual net sales
totalled 17.1% (16.4). Trade receivables included receivables sold
with recourse amounting to MSEK 89 (69). The risk of customer
default for these receivables has not been transferred in such a
way that the financial assets qualify for derecognition.
The table below shows the development of the reserve for credit
losses on trade receivables.
Specification of reserve for credit losses (MSEK) 2021 2020
Opening balance 1 January 395 413
Additions 117 121
Reversals –95 –82
Changes through the income statement 22 39
Allowances used to cover write-offs –22 –24
Currency translation adjustments 29 –33
Closing balance 31 December 424 395
NOTES GROUP
78
SKF Annual Report 2021
Number of shares authorized and outstanding
A Shares B Shares Total
Share capital
(MSEK)
Opening balance 1 January 2020 32,460,528 422,890,540 455,351,068 1,138
Conversion of A shares to B shares –1,089,473 1,089,473 — —
Closing balance 31 December 2020 31,371,055 423,980,013 455,351,068 1,138
Conversion of A shares to B shares – 8 67,122 867,1 22 — —
Closing balance 31 December 2021 30,503,933 424,847,135 455,351,068 1,138
An A share has one vote and a B share has one-tenth of a vote.
Atthe Annual General Meeting on 18 April 2002, it was decided to
insert a share conversion clause in the Articles of Association which
allows owners of A shares to convert those to B shares. Since the
decision was taken, 196,432,814 A shares have been converted to
B shares. The quota value for all shares is SEK 2.50.
Dividend policy
The SKF Group’s dividend and distribution policy is based on the
principle that the total dividend should be adapted to the trend
forearnings and cash flow while taking account of the Group’s
development potential and financial position. The Board of
Directors’ view is that the ordinary dividend should amount to
around one half of the SKF Group’s average net profit calculated
over a business cycle.
If the financial position of the SKF Group exceeds the target
forcapital structure, which is described in Note 26, an add itional
distribution to the ordinary dividend could be made in the form
ofahigher dividend, a redemption scheme or as a repurchase of
the company’s own share. On the other hand, in periods of more
uncertainty a lower dividend ratio could be appropriate.
Dividend payments
The total surplus of the Parent Company amounted to MSEK
23,627 (23,646), see page 105. The Board has decided to propose
to the Annual General Meeting, on 24 March 2022, a dividend of
SEK 7.00 per share to be paid to the shareholders. The proposed
dividend for 2021 is payable to all shareholders on the Euroclear
Sweden AB’s public share register as of 28 March 2022. The total
proposed dividend to be paid is MSEK 3,187 (2,960). The dividend
is subject to approval by shareholders at the Annual General Meet-
ing and has not been included as a liability in these financial state-
ments. On 1 April 2021, a dividend of SEK 6.50 per share was paid
to the shareholders.
MSEK 2021 2020
Value added tax receivables, net 2,421 2,145
Income tax receivables 1,009 775
Prepaid expenses 637 514
Accrued income 120 138
Advances to suppliers 119 95
Other current receivables 857 575
Total 5,163 4,242
15 Other short-term assets
16 Share capital
79
SKF Annual Report 2021
Accounting policy
The post-employment provisions and assets arise from defined
benefit obligations in plans which are either unfunded or funded.
For the unfunded plans, benefits paid out under these plans come
from the all-purpose assets of the company sponsoring the plan.
The related provisions carried in the balance sheet represent the
present value of the defined benefit obligation. For funded defined
benefit plans, the assets of the plans are held in trusts legally sepa-
rate from the Group. The related balance sheet provision or asset
represents the deficit or excess of the fair value of plan assets over
the present value of the defined benefit obligation. However, an
asset is recognized only to the extent that it represents a future
economic benefit which is actually available to the Group, for example
in the form of reductions in future contributions or refunds from
the plan. When such excess is not available it is not recognized, but
it is disclosed in the note as an asset ceiling adjustment.
The projected unit credit method is used to determine the pres-
ent value of all defined benefit obligations and the related current
service cost. Valuations are carried out quarterly for the most
significant plans and annually for other plans. External actuarial
experts are used for these valuations and estimating the obliga-
tions and costs involves the use of assumptions. Remeasurements
arise from changes in actuarial assumptions and experience
adjustments, being differences between actuarial assumptions
and what has actually occurred. They are recognized immediately
in other comprehensive income and are never reclassified to the
income statement.
For all defined benefit plans the cost charged to the income
statement consists of current service cost, net interest cost and
when applicable past service cost, curtailments and settlements.
Any past service cost is recognized immediately. Net interest cost is
classified as financial expense while all other expenses are allocated
to the operations based on the employee’s function as manufacturing,
selling or administrative.
The defined benefit accounting described above is applied only
in the consolidated accounts. Subsidiaries, as well as the Parent
Company, continue to use the local statutory pension calculations to
determine pension costs, provisions and assets in the stand-alone
statutory reporting, and when applicable funding requirements.
Some post-employment benefits are also provided by defined
contribution schemes, where the Group has no obligation to pay
benefits after payment of an agreed-upon contribution to the third
party responsible for the plan. Such contributions are recognized
as expense when incurred.
Accounting estimates and judgements
Significant judgements and assumptions are required to determine
the present value of all defined benefit obligations and the related
costs. Such assumptions vary according to the economic conditions
of the country in which the plan is located and are adjusted to reflect
market conditions at valuation point. However, the actual costs
and obligations that in fact arise under the plans may be materially
different from the estimates based on the assumptions due to
changing market and economic conditions.
The most significant assumptions can vary per plan but in gen-
eral include discount rate, pension increase rate, salary growth
rate and longevity. These assumptions are established for each
plan separately. The discount rate for each plan is determined
by reference to yields on high quality corporate bonds (AA-rated
corporate bonds as well as mortgage bonds for the plans in Sweden)
having maturities matching the duration of the obligation. The
pension increase rate assumption is relevant mainly for retired
plan members, and refers to the indexation of pension payments
tied primarily to inflation. The salary growth rate is relevant for
active plan members and reflect the long-term actual experience,
the near term outlook and assumed inflation. Longevity reflects
thelife expectancy of plan members and is established based on
mortality tables used for each plan.
2021 2020
Net profit attributable to
owners of AB SKF (MSEK) 7,331 4,298
Weighted average number of
ordinary shares outstanding 455,351,068 455,351,068
Basic earnings per share (SEK) 16.10 9.44
Dilutive shares from
Performance Share Programmes — —
Weighted average
diluted number of shares 455,351,068 455,351,068
Diluted earnings per share (SEK) 16.10 9.44
Basic earnings per share is calculated by dividing the net profit or
loss attributable to shareholders of the Parent Company by the
weighted average number of ordinary shares outstanding during
the period.
Diluted earnings per share is calculated using the weighted
average number of shares outstanding during the period adjusted
for all potential dilutive ordinary shares. Performance shares are
considered dilutive if vesting conditions are fulfilled on the balance
sheet date.
Shares from the Performance Share Programme are not con-
sidered dilutive.
17 Earnings per share
18 Provisions for post-employment benefits
NOTES GROUP
80
SKF Annual Report 2021
The Group sponsors post-employment defined benefit plans in a
number of subsidiaries. The most significant plans are the pension
plans in USA, Germany, U.K., and Sweden, which supplement the
social security pensions in these countries.
USA
The major U.S. pension plans, represent around 89% of the total
U.S.obligation. Benefits are based on length of service and average
final salary or a years of service multiplier. All these plans are closed
for new entrants, who instead are covered by defined contribution
pension solutions. The salary and non-Union defined benefit pension
plans have been frozen as of December 2016 and in 2021 the
remaining active accruing plans were frozen, hence no additional
service cost will be accrued for these plans.
Governance of the plans lies with a benefit board whose members
are chosen by the board of directors of the U.S. subsidiary. Theplans
are subject to regulatory minimum funding requirements based on
an adjusted statutory pension formula which in the case of funding
deficits, require contributions to achieve full funding in seven years.
The U.S. subsidiary also sponsors post-retirement health care
plans which are closed for new entrants. The plans provide health
care and life insurance benefits for eligible retired employees.
Thecompany is entitled to receive a subsidy under the U.S. Medicare
Program Part D, for prescription drug costs for certain plan partici-
pants. On 31 December 2021, this reimbursement right totalled
MSEK 1 (5).
Germany
The major German pension plans represent around 91% of the total
German obligation. Benefits are based on length of service and final
salary, and are indexed when paid. The majority of entitlement
conditions are determined in accordance with a governmental pen-
sions act. A plan change affecting around 75% of the participants
ofthe major German pension plan occurred from 1 January 2018.
For these participants defined contributions are made, and the
value of the contributions is guaranteed to the participants as
required by German law. Thus, this plan also qualifies as a defined
benefit plan even if the benefit for the participants is equal to the
contributions made into the plan.
United Kingdom
The major plans in the U.K. represent around 92% of the total
U.K.obligation. Benefits under these plans are based on length
of service and a career average revalued earnings basis, andare
indexed when paid. As of April 2012, these plans are closed to new
entrants, who instead are entitled to defined contribution pension
solutions. Responsibility for the governance ofthe plan lies jointly
with the subsidiary and a board of trustees comprised of repre-
sentatives of the subsidiary as well as plan participants in accord-
ance with the Plan constitution. The plan is subject to statutory
funding objectives based on the local pension calculation which
inthe case of funding deficits have an agreed recovery plan to
achieve full funding in ten years.
Sweden
The major plan in Sweden is the ITP plan and it represents around
90% of the total Swedish obligation. Benefits are based on final
salary and are indexed when paid. Benefits are established in
accordance with a collective agreement established between
participating Swedish companies. The plan is closed for employees
born after 1978, who instead are entitled to a defined contribution
pension solution. The Swedish subsidiaries are required to have
credit insurance which covers all pension obligations in case of
insolvency. For the Swedish subsidiaries, the portions of the ITP
pension financed through insurance premiums to Alecta only
cover family pension, health insurance and TGL and as such are
immaterial. There are no regulatory funding requirements, how-
ever voluntary funding has been provided for the plans through
afoundation, which is governed jointly by the company and
employee representatives. The foundation must comply with
government regulations.
Other
The most significant plans include the funded pension plans in
Switzerland, Canada, and Belgium. Additionally, there are retire-
ment indemnity plans in France and termination indemnity plans
inItaly, where lump sum payments are made upon retirement
andtermination respectively.
2021
Amounts recognized in the consolidated balance sheet (MSEK)
USA
pension
USA
medical
Germany
pension
U.K.
pension
Sweden
pension Other Total
Present value of unfunded defined benefit obligation 416 649 728 — 317 868 2,978
Present value of funded defined benefit obligation 8,638 — 10,206 4,838 2,777 1,722 28,181
Less: Fair value of plan assets –7,8 3 6 — –4,737 –4,510 –794 –1,571 –19,448
Total 1,218 649 6,197 328 2,300 1,019 11,711
Reflected as
Other long-term assets — — — — — –71 –71
Provisions for post-employment benefits 1,218 649 6,197 328 2,300 1,090 11,782
Total 1,218 649 6,197 328 2,300 1,019 11,711
2020
Amounts recognized in the consolidated balance sheet (MSEK)
USA
pension
USA
medical
Germany
pension
U.K.
pension
Sweden
pension Other Total
Present value of unfunded defined benefit obligation 413 626 823 — 335 859 3,056
Present value of funded defined benefit obligation 8,323 — 11,428 4,456 2,890 1,752 28,849
Less: Fair value of plan assets –7,18 0 — –3,491 –3,905 –728 –1,465 –16,769
Total 1,556 626 8,760 551 2,497 1,146 15,136
Reflected as
Other long-term assets — — — — — –34 –34
Provisions for post-employment benefits 1,556 626 8,760 551 2,497 1,180 15,170
Total 1,556 626 8,760 551 2,497 1,146 15,136
Cont. Note 18
81
SKF Annual Report 2021
Components of total post-employment benefit expenses (MSEK) 2021 2020
Post-employment defined benefit expense 684 868
Post-employment defined contribution expense 575 486
Total post-employment benefit expenses 1,259 1,354
Whereof amounts charged to:
Cost of goods sold 658 737
Selling expenses 435 353
Administrative expenses 20 25
Financial expenses 146 239
Total 1,259 1,354
2021 2020
MSEK
Present
value of
obligation
Fair value of
plan assets Total
Present
value of
obligation
Fair value of
plan assets Total
Opening balance 1 January 31,905 –16,769 15,136 32,438 –17,125 15,313
Interest expense/(income) 432 –286 146 626 –387 239
Current service cost 533 — 533 513 — 513
Past service cost –4 — –4 17 — 17
Settlements –13 2 –11 –80 5 –75
Other 19 1 20 167 7 174
Subtotal expenses 967 –283 684 1,243 –375 868
Difference between actual return and interest income — –762 –762 — –1,475 –1,475
Actuarial (gains)/losses – demographic assumptions 8 — 8 –27 — –27
Actuarial (gains)/losses – financial assumptions –2,170 — –2,170 2,599 — 2,599
Experience adjustments 173 — 173 –247 — –247
Subtotal remeasurements in OCI –1,989 –762 –2,751 2,325 –1,475 850
Employer contribution — –359 –359 — –271 –271
Employee contribution 20 –4 16 27 –5 22
Benefit payments –1,562 165 –1,397 –1,640 1,001 –639
Subtotal cash flow
1)
–1,542 –198 –1,740 –1,613 725 –888
Sold businesses — — — — — —
Other
2)
19 –134 –115 –213 –584 –797
Translation differences 1,799 –1,302 497 –2,275 2,065 –210
Closing balance 31 December 31,159 –19,448 11,711 31,905 –16,769 15,136
1) Cash outflows for 2022 are expected to be some MSEK 750 which include contributions to funded plans as well as payments made directly by the companies under
unfunded plans and partially funded plans.
2) Other includes reclassification of the German pension plans from defined contribution plans to defined benefit plans, for both 2020 and 2021.
2021 2020
Plan asset composition (MSEK) Quoted Unquoted Total Quoted Unquoted Total
Government bonds 1,721 — 1,721 1,622 — 1,622
Corporate bonds 6,072 — 6,072 5,794 5 5,799
Equity instruments 6,223 434 6,657 5,049 449 5,498
Real estate 259 1,648 1,907 232 681 913
Other, primarily cash and other financial receivables 2,174 917 3,091 2,053 884 2,937
Total 16,449 2,999 19,448 14,750 2,019 16,769
The SKF Group strives to balance risk in the investments of
plan assets, by aiming for a range of 30–50% equity instruments
with the remainder in lower risk/fixed income investments such
as corporate and government bonds.
The investment positions for the major pension plans are
managed within the asset-liability matching framework. Within
thisframework, the Group’s objective is to match plan assets to
To enable consistent, proactive and effective management of the
post-employment benefits in line with its business strategy and
values, the SKF Group established a Global Pension Committee,
agovernance body who is responsible to align post-employment
benefits to SKF Global Pension Policy. SKF Global Pension Policy
sets out principles for managing SKF´s pension and other long-
term employee benefits within SKF globally.
NOTES GROUP
82
SKF Annual Report 2021
Sensitivity analysis of significant
assumptions
Change in
actuarial
assumption
Impact on defined
benefit obliga-
tions, MSEK
Discount rate +1% –3,758
–1% 4,902
Salary growth rate +0.5% 475
–0.5% –446
Pension increase rate +0.5% 1,188
–0.5% –1,019
Longevity +1 year 1,137
–1 year –1,131
2021
Significant weighted-average assumptions at end of year
USA
pension
USA
medical
Germany
pension
U.K.
pension
Sweden
pension Other
Discount rate 2.7 2.6 1.2 1.8 1.5 1.3
Pension increase rate
1)
n/a n/a 3.0 3.3 1.8 n/a
Salary growth rate
2)
n/a n/a 2.2 3.3 3.1 3.2
Longevity male/female
3)
20.6/22.5 20.5/22.5 20.4/23.9 21.9/24.3 22.1/24.9 21.0/24.0
Weighted average duration of the plan (in years)
4)
10.1 9.4 18.5 19.1 21.2 10.7
2020
Significant weighted-average assumptions at end of year
USA
pension
USA
medical
Germany
pension
U.K.
pension
Sweden
pension Other
Discount rate 2.5 2.3 0.6 1.3 1.1 1.1
Pension increase rate
1)
n/a n/a 2.0 2.9 1.8 n/a
Salary growth rate
2)
n/a n/a 2.7 2.9 3.1 3.0
Longevity male/female
3)
20.5/22.4 20.4/22.4 20.2/23.6 21.6/23.6 22.2/24.6 19.9/22.9
Weighted average duration of the plan (in years)
4)
11.2 9.4 20.3 20.1 22.2 10.6
1) Pension increase rate refers to indexation primarily tied to inflation.
2) Salary growth rate for the U.S. pension is n/a as no additional service cost
will be accrued for these plans.
3) Longevity is expressed as the life expectancy of a current
65 year old in number of years.
4) Represents the average number of years remaining until the
obligation is paid out.
n/a = assumptions not applicable or not significant for the plan.
Accounting policy
In general, a provision is recognized when there is a present obliga-
tion as a result of a past event, it is probable that an outflow of
resources will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. The amount
recognized as provisions is management’s best estimate of the
future cash flows necessary to settle the obligations at the balance
sheet date, and the timing of settlement is uncertain.
Claims include both provisions for litigation and warranties, and
represent management’s best estimate of the future cash flows
necessary to settle obligations. Other long-term employee benefits
refer to benefits earned and expected to be settled before employ-
ment ends. These provisions are calculated using the projected unit
credit method and remeasurements (actuarial gains and losses) are
recognized immediately in the income statement.
Restructuring programmes are defined as activities that
materially change the way a unit does business. Any related
restructuring provisions are recognized when a detailed formal
plan has been established and a public announcement of the
planhas occurred thereby creating a valid expectation that the
plan willbe carried out.
When an obligation does not meet the criteria for recognition it
may be considered a contingent liability and disclosed. Contingent
liabilities represent possible obligations whose existence will be
confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of
the Group. They also include existing obligations where it is not
probable that an outflow of resources is required, or the outflow
cannot be reliably quantified.
Cont. Note 18
The sensitivity analysis is based on the change in one assumption
while holding all other assumptions constant, see notes to previous
table. In practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated. When calculating the sensitivity
analysis of the DBO to changes in assumptions the same method has
been applied as when calculating the pension liability recognized
within the obligation.
The sensitivity analysis considers the most significant plans
inthe U.S., Germany, U.K. and Sweden, and it has been prepared
consistently with prior years.
19 Other provisions and contingent liabilities
thepension obligations by investing in securities with maturities
that align with the benefit payments as they fall due and in the
appropriate currency. SKF Treasury Centre regularly monitors
howthe duration and the expected yield of the investments are
matching the expected cash outflows arising from the pension
obligations. Final investment decisions are taken by the local
subsidiary/trustee together with SKF Treasury Centre.
83
SKF Annual Report 2021
automotive aftermarket in Brazil. As per management judgement,
these investigations did not qualify for recognition as other provi-
sions or contingent liabilities.
Warranty provisions involve estimates of the outcome of claims
resulting from defective products, which include estimates for
potential liability for damages caused by such defects to the Group’s
customers. Assumptions are required for anticipated returns and for
cost for replacing defective products and/or compensating customers
for damage caused by the Group’s products. These assumptions
consider historical claims statistics, expected costs to remedy and
the average time lag between faults occurring and claims against
the Group.
Restructuring provisions involve estimates of the timing and cost
of the planned future activities where the most significant estimates
relates to the costs necessary to settle employee severance/sepa-
ration obligations, as well as the costs involved in contract cancella-
tions and other exit costs. These estimates are based on historical
experience as well as the current status of negotiations with the
affected parties and/or their representatives.
MSEK
2021
Closing
balance
Provisions
for the year
Utilized
amounts
Reversal
unutilized
amounts Other
Translation
effect
2021
Opening
balance
Claims 263 107 –143 –88 86 5 296
Other employee benefits 990 391 –296 –511 37 18 1,351
Restructuring 824 419 –633 –142 –2 40 1,142
Other 440 189 –94 –222 –144 18 693
Total 2,517 1,106 –1,166 –963 –23 81 3,482
MSEK
Of which
current
Claims 102
Other employee benefits 48
Restructuring 771
Other 184
Total 1,105
Accounting estimates and judgements
Significant management judgement is required in determining the
existence and amount of provisions. As the estimates may involve
uncertainty about future events outside the control of the Group,
the actual outcomes may be significantly different.
Claims include both provisions for litigation and warranties, and
represent management’s best estimate of the future cash flows
necessary to settle obligations, although the timing of the settlement
is uncertain. Provisions for litigation are based on the nature of the
litigation, the legal process in the applicable jurisdiction, the pro-
gress of the cases, the opinions of internal and external legal coun-
sel and advisers regarding the outcome of the case and experience
with similar cases. Tax claims in different countries and in different
stages of the claim that do not meet the definition of tax liability are
recognized as contingent liabilities.
SKF is part of investigations regarding possible violations of
anti-trust rules, class action claims and lawsuits. SKF is subject to
an investigation in Brazil by the General Superintendence of the
Administrative Council for Economic Defense, regarding an alleged
violation of antitrust rules by several companies active on the
Claims decreased during 2021 with MSEK –33, related to warranty
claims.
In 2021, the total restructuring cost amounted to around
MSEK466, whereof MSEK 419 refers to provisions, and includes
theconsolidation of factories in North America and Europe as well
as a general reduction in headcount driven by new ways of working
and simplified organizational structures. This cost includes volun-
tary and involuntary termination benefits spread over several
countries. The majority of the remaining restructuring provisions
are expected to be settled in 2022 and 2023.
The largest items in other employee benefits are jubilee bonus
inItaly, part-time retirement programmes in Germany and special
payroll tax in Sweden.
Other provisions primarily include insurance and worker’s
compensation as well as environmental commitments.
Contingent liabilities at nominal values (MSEK) 2021 2020
Guarantees 47 10
Tax claims 347 1,124
Other contingent liabilities 28 23
Total 422 1,157
NOTES GROUP
84
SKF Annual Report 2021
Accounting policy
Financial liabilities are recognized in the balance sheet when the
Group becomes a party to the contractual provisions of a financial
instrument. Financial liabilities are initially recorded at fair value,
which is normally equal to acquisition cost. Transaction costs are
included in the initial measurement of financial liabilities that are
not subsequently measured at fair value through the income state-
ment. Derivatives are recognized at trade date.
Financial liabilities, excluding derivatives, are classified as Other
financial liabilities measured at amortized cost. Amortized cost
is measured using the effective interest method. The carrying
amount of liabilities that are hedged items, for which fair value
hedge accounting is applied, are adjusted for gains or losses
attributable to the hedged risks. Derivatives are classified into
the category Fair value through profit or loss. Financial liabilities
are derecognized when they are extinguished.
Accounting estimates and judgements
For disclosure purposes, fair values of financial liabilities have
been calculated using valuation techniques, mainly discounted
cash flow analyses based on observable market data.
2021 2020
MSEK Maturity
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Long-term financial liabilities
MEUR 296 2022 — — 2,963 3,096
MSEK 900 2024 899 922 897 939
MSEK 2,100 2024 2,097 2,153 2,096 2,174
MEUR 300 2025 3,118 3,143 3,127 3,151
MUSD 100 2027 905 1,057 817 1,018
MEUR 300 2029 3,057 3,243 2,993 3,332
MEUR 300 2031 3,019 3,079 — —
Long-term lease liabilities 2022 and thereafter 2,179 2,179 2,024 2,024
Other long-term loans 2022–2028 181 197 172 172
Derivatives held for hedge accounting 18 18 — —
Derivatives held for trading — — — —
Subtotal long-term financial liabilities 15,473 15,991 15,089 15,906
Short-term financial liabilities
MEUR 200 2021 — — 2,006 2,005
MEUR 296 2022 3,031 3,094 — —
Trade payables 2022 9,881 9,881 8,459 8,459
Short-term lease liabilities 2022 579 579 560 560
Short-term loans 2022 147 147 169 169
Derivatives held for hedge accounting 2022 — — — —
Derivatives held for trading 2022 106 106 525 525
Subtotal short-term financial liabilities 13,744 13,807 11,719 11,718
Total 29,217 29,798 26,808 27,624
Derivatives are measured at fair value and fall into Level 2 of the
fair value hierarchy. See Note 14 for a description of the fair value
hierarchy.
The maturities for bonds and loans stated in the table above are
based on the earliest date on which they can be required to be repaid.
One of the loans is subject to fair value hedging. The fixed EUR
interest on the MEUR 300 loan has been swapped into floating USD
interest rate.
Part of the long-term loan, MEUR 30 of outstanding MEUR 296
with due date 2022 has been designated as hedge instrument in
net investment hedges of foreign operations. The fair value of this
financial liability amounted to MSEK 317 (317) as of the balance
sheet date.
More information regarding financial risk management and hedge
accounting can be found in Note 26. Methods used for establishing
fair value are described in Note 14. Interest rates for the loans are
disclosed in Note 11 of the Parent Company.
The Group does not have any pledged assets to secure financial
liabilities.
20 Financial liabilities
85
SKF Annual Report 2021
MSEK 2021 2020
Employee related accruals 3,366 2,356
Accrual for rebates 1,270 935
Income tax payable 972 1,027
Deferred income 245 256
Customer advances 315 520
Value added taxes payable, net 640 937
Other current liabilities 834 804
Other accrued expenses 2,033 1,681
Total 9,675 8,516
FAM is a privately owned holding company that manages assets as
an active owner with a long-term ownership horizon. FAM is owned
by Wallenberg Investments AB, which is owned by the three larg-
est Wallenberg foundations – the Knut and Alice Wallenberg Foun-
dation, the Marianne and Marcus Wallenberg Foundation and the
Marcus and Amalia Wallenberg Foundation. TheFoundations have,
since 1917, granted funding to excellent researchers and research
projects beneficial to Sweden, primarily to Swedish universities.
The SKF Group has had no indication that FAM has obtained its
ownership interest in the Group for other than investment purposes.
No significant transactions have been identified between the parties
with the exception of dividend paid during the year to FAM. Atthe
end of 2021 FAM is the major shareholder of the Parent Company,
holding 29.3% (29.5) of the voting rights and 14.0% (13.8) of the
share capital.
Investments in associated companies include a 25% shareholding
of Simplex Turbolo Co. Ltd. i Storbritannien, a 28% shareholdning of
Sunstrength Renewables Pvt Ltd. i Indien, a 42% shareholding of
Ningbo Hyatt Roller Co. Ltd i Kina, a 20% shareholding of Colinx,
LLC in USA, a 50% shareholding of Wuhan Economos seals technol-
ogy Co., Ltd. in Kina, and a 25% shareholding of Schwarz GmbH
Technischer Großhandel in Germany.
Transactions with Associated companies (MSEK) 2021 2020
Sales of goods and services 55 53
Purchases of goods and services 437 328
Receivables as of 31 December 37 7
Liabilities as of 31 December 50 32
Other related party transactions include remuneration to key
manage ment as specified in Note 23. For a list of significant
sub sidiaries, see Note 8 to the financial statements of the Parent
Company.
21 Other short-term liabilities
22 Related parties including associated companies
NOTES GROUP
86
SKF Annual Report 2021
Salaries and other remunerations for SKF Board of
Directors, President and Group Management
Principles of remuneration for Group Management
In March 2020, the Annual General Meeting adopted the Board’s
proposal for principles of remuneration for Group Management,
which are summarized below.
Group Management is defined as the President and the other
members of the management team. The principles shall apply to
remuneration agreed and amendments to remuneration already
agreed, after the adoption of the principles by the Annual General
Meeting 2020, and, in other cases, to the extent permitted under
existing agreements.
The objective of the principles is to ensure that the SKF Group
can attract and retain the best people in order to contribute to the
SKF Group’s mission and business strategy, its long-term interests
and sustainability. Remuneration for Group Management shall
be based on market competitive conditions and at the same time
support the shareholders’ best interests.
The total remuneration package for a Group Management mem-
ber shall consist of the following components: fixed salary, variable
salary, pension benefits, conditions for notice of termination and
severance pay, and other benefits such as a company car. The com-
ponents shall create a well-balanced remuneration reflecting indi-
vidual performance and responsibility as well as the SKF Group’s
overall performance.
The Annual General Meeting also, irrespective of the principles
ofremuneration for Group Management, resolved on SKF’s
Performance Share Programme 2021 for senior managers and
keyemployees, where Group Management is included. For more
information on SKF’s Performance Share Programme 2021,
seepage 88.
Fixed salary
The fixed salary of a Group Management member shall be at a
market competitive level. It shall be based on competence, respon-
sibility, experience and performance. The SKF Group shall use
aninternationally well-recognized evaluation system, in order to
evaluate the scope and responsibility of the position. Market bench-
marks shall be conducted on a yearly basis.
The performance of Group Management members shall be con-
tinuously monitored during the year and shall be used as a basis for
annual reviews of fixed salaries.
Variable salary
The variable salary of a Group Management member shall run
according to a performance-based programme. The purpose of the
programme shall be to motivate and compensate value-creating
achievements in order to support operational and financial targets
and thereby promote the SKF Group’s business strategy, sustaina-
bility and long-term interests.
The performance-based programme shall have predetermined
and measurable criteria including both financial and non-financial
targets. The criteria shall primarily be based on the annual financial
performance of the SKF Group, such as TVA, cash flow and indivi-
dual goals.
The satisfaction of criteria for awarding variable salary shall
be measured over a period of one year. If the financial performance
23 Remuneration to key Management
of the SKF Group is not in line with the requirements of the
performance-based programme, no variable salary will be paid.
The maximum variable salary shall vary between 50 to 70%
of the accumulated annual fixed salary of Group Management
members.
Other benefits
The SKF Group may provide other benefits to Group Management
members in accordance with local practice. Premiums and other
costs relating to such benefits shall depend on and follow local
conditions and local practice but shall represent, as a general rule,
alimited value and may amount to not more than 10% of thefixed
salary of the members of Group Management.
Other benefits can for instance be a company car or health and
medical insurance.
Pension
The SKF Group shall strive to establish pension plans based on
defined contribution models, which means that a premium is paid
amounting to a certain percentage of the employee’s annual salary.
The commitment in these cases is limited to the payment of an agreed
premium to an insurance company offering pension insurance.
A Group Management member is normally covered by, in addi-
tion to the basic pension (for Swedish members usually the ITP
pension plan), a supplementary defined contribution pension plan.
By offering this supplementary defined contribution plan, it is
ensured that Group Management members are entitled to earn
pension benefits based on the fixed annual salary above the level
ofthe basic pension. The normal retirement age for Group Manage-
ment members shall be 65 years.
For employments governed by rules other than Swedish, pension
benefits and other benefits may be duly adjusted for compliance
with mandatory rules or established local practice, taking into
account, to the extent possible, the overall purpose of the principles.
For employments governed by Swedish rules, the premium for the
supplementary pension plan shall be linked to age and amount to
amaximum of 40% of the fixed annual salary not covered by any
other pension plan.
Notice of termination and severance pay
A Group Management member may terminate his/her employment
by giving six months’ notice. In the event of termination of employ-
ment at the request of the company, employment shall cease
imme diately. The Group Management member shall however
receive a severance payment related to the number of years’ of
service, provided that it shall always be maximized to two years’
fixed salary.
Salary and terms of employment for employees
When preparing the principles, the Board of Directors has paid
regard to the salary and terms of employment of the employees of
the company. Information about employees’ total remuneration,
the components of the remuneration and the growth and growth
rate over time have been part of the basis for the Board of Direc-
tor’s and the Remuneration Committee’s evaluation of the fairness
of the principles of remuneration and the limitations which the
principles entail.
87
SKF Annual Report 2021
The decision-making process to determine, review and
implement the principles
The Board of Directors has established a Remuneration Committee.
The Committee consists of a maximum of four Board members.
The Remuneration Committee prepares all matters relating to the
principles of remuneration for Group Management, as well as the
terms of employment for the President.
The principles of remuneration for Group Management are pre-
sented by the Remuneration Committee to the Board of Directors
that, at least every fourth year, submits a proposal for such princi-
ples to the Annual General Meeting for approval. The principles of
remuneration shall be valid until new principles have been adopted
by the Annual General Meeting. The Board of Directors must
approve the terms of employment for the President. The Remuner-
ation Committee shall also monitor and evaluate programmes for
variable remuneration for Group Management, the application of
the principles of remuneration for Group Management and applica-
ble remuneration structures and levels of the SKF Group.
The members of the Remuneration Committee are independent
of the SKF Group and Group Management. The President and other
members of Group Management shall not be present when the
Board of Directors process and resolve on remuneration related
matters in so far as they are affected by such matters.
The Board of Directors’ right to derogate from the principles
of remuneration
The Board of Directors may derogate from the principles of remu-
neration decided by the Annual General Meeting, in whole or in
part, if in a specific case there is special cause for the derogation
and a derogation is necessary to serve the SKF Group’s long-term
interests, including its sustainability, or to ensure the SKF Group’s
financial viability. As set out above, the Remuneration Committee’s
tasks include preparing the Board of Directors’ resolutions in
remuneration related matters. This includes any resolutions to
derogate from the guidelines.
Board of Directors
The Chairman of the Board and the Board members are remuner-
ated in accordance with the decision taken at the Annual General
Meeting. At the Annual General Meeting of AB SKF held in 2021 it
was decided that the Board should be paid fees according to the
following: – an allotment of SEK 2,300,000 to the Chairman of the
Board and with SEK 750,000 to each of the other Board members;
and – an allotment of SEK 260,000 to the Chairman of the Audit
Committee, with SEK 190,000 to each of the other members of the
Audit Committee, with SEK 150,000 to the Chairman of the Remu-
neration Committee and with SEK 120,000 to each of the other
members of the Remuneration Committee. A prerequisite for
obtaining an allotment is that the Board member is elected by the
Annual General Meeting and not employed by the company.
President and Chief Executive Officer
Rickard Gustafson, President and Chief Executive Officer of AB SKF
has received remuneration from the company during 2021 governed
by the remuneration principles decided upon by the Annual General
Meeting 2020; salary and other remunerations amounted to a total
of SEK 8,277,590 of which SEK 8,277,590 was fixed annual salary
and other benefits.
Alrik Danielson, former President and Chief Executive Officer of
AB SKF, has received remuneration from the company in year 2021
in accordance with the remuneration principles; salary and other
remunerations amounted to a total of SEK 26,791,643 of which
SEK 11,435,433 was fixed annual salary and other benefits includ-
ing final salary, SEK 8,497,310 was severence payment, SEK
2,551,500 was variable salary related to 2020 year’s performance,
and SEK 4,310,400 was alottment of shares under the Perfor-
mance Share Programme 2018.
The pension arrangement for Rickard Gustafson and
Alrik Danielson is a combination of the ITP scheme and a defined
contribution of 40% of the annual fixed salary above 30 income
base amounts.
Niclas Rosenlew has received remuneration from the company
during 2021 specifically for his assignment as acting Chief Execu-
tive Officer in accordance with the remuneration principles; salary
and other remunerations amounted to a total of SEK 458,333 of
which SEK 458,333 was fixed annual salary. The pension arrange-
ment is a combination of the ITP scheme and a defined contribution
of 35% of the annual fixed salary above 30 income base amounts.
Rickard Gustafson’s shareholdings (own and/or held by related
parties) in the company as well as material shareholdings or other
holdings (own and/or held by related parties) in companies with
which the company has important business relationships are listed
in the Corporate Governance Report.
Group Management
The SKF’s Group Management, consisting of 10 people at the end
ofthe year, received in 2021 (exclusive of the President) salary and
other remunerations amounting to a total of SEK 61,388,439 of
which SEK 40,418,297 was fixed annual salary, SEK 11,316,173
was variable salary related to 2020 year’s performance, and SEK
9,653,969 was alottment of shares under the Performance Share
Programme 2018.
The variable salary for Group Management was according to a
short-term performance-based programme primarily based on
thefinancial performance of the SKF Group with criteria such as
operating profit and cash flow.
SKF’s Performance Share Programmes are further described
onpage 88.
In the event of termination of employment at the request of
the company of a person in Group Management, that person will
receive a severance payment amounting to a maximum of two
years’ salary.
For Group Management the Board has decided on a defined
contribution supplementary pension plan. The plan entitles Group
Management members covered to receive an additional pension
over and above the basic pension (for Swedish members usually
the ITP pension plan). The contributions paid for Group Manage-
ment members covered by the defined contribution plan are based
on each individual’s pensionable salary (normally the fixed monthly
salary excluding holiday pay, converted to yearly salary) exceeding
the level of the basic pension (for Swedish members 30 income
base amounts). Group Management members are never covered by
both defined benefit pension and defined contribution pension for
the same part of their pension entitlements. The normal retirement
age is 65 years.
NOTES GROUP
88
SKF Annual Report 2021
Cont. Note 23
SKF’s Performance Share Programme
Performance Shares
The Annual General Meeting 2021 decided on the introduction
ofSKF’s Performance Share Programme 2021. The programme
covers a maximum of 225 senior managers and key employees in
the SKF Group, including Group Management, with the opportunity
of being allotted, free of charge, SKF shares of series B.
The number of shares that may be allotted is related to the
degree of achievement of the TVA target level, as defined by the
Board of Directors, for the financial years 2021–2023 compared
to the financial year 2020. Under the programme, no more than
1,000,000 SKF shares of series B, may be allotted.
The allocation of shares is based on the level of TVA increase.
Inorder for allocation of shares to take place the TVA increase must
exceed a certain minimum level (the threshold level). In addition
tothe threshold level a target level is set. Maximum allotment is
awarded if the target level is reached or exceeded.
Provided that the TVA increase reaches the target level, the
partic ipants of the programme may be allotted the following maxi-
mum number of shares per person within the various key groups:
• CEO and President: 30,000 shares
• Other members of Group Management: 13,000 shares
• Managers of large business units and similar: 4,500 shares
• Other senior managers: 3,000 shares
• Other key persons: 1,250 shares
Before the number of shares to be allotted is finally determined,
the Board shall examine whether the allotment is reasonable con-
sidering SKF’s financial results and position, the conditions on the
stock market as well as other circumstances, and if not, as deter-
mined by the Board, reduce the number of shares to be awarded to
the lower number of shares deemed appropriate by the Board.
If the TVA increase exceeds the threshold level for allotment
ofshares but the final allotment is below 5% of the target level,
payment will be made in cash instead of shares, whereupon the
amount of the cash payment shall correspond to the value of the
shares calculated on the basis of the closing price for SKF’s B share
the day before settlement.
Fixed salary and other
benefits
1)
/fixed Board
remuneration
Short-term
variable salary
Performance
Share Programmes
Remuneration for
committee work
Gross
pension
costs
2)
Amounts in SEK
Amounts
paid in
2021
3)
Amounts
expensed
in 2021
3)
Amounts paid
in 2021 related
to 2020
3)
Amounts
expensed
in 2021
3)
Amounts paid
in 2021 related
to prior years
3)
Amounts
expensed
in 2021
3)
Amounts
paid in
2021
3)
Amounts
expensed
in 2021
3)
Amounts
expensed
in 2021
3)
Total
expensed
in 2021
Total
expensed
in 2020
Board of directors
of AB SKF
Hans Stråberg
2,216,500 2,300,000 — — — 340,000 340,000 — 2,640,000 2,454,000
Hock Goh 741,000 750,000 — — — — — — 750,000 732,000
Ronnie Leten 366,000 — — — — — — — — 1,022,000
Barb Smardzich 741,000 750,000 — — — — — — 750,000 732,000
Colleen Repplier 741,000 750,000 — — — 120,000 120,000 — 870,000 732,000
Geert Follens 741,000 750,000 — — — 190,000 190,000 — 940,000 732,000
Håkan Buskhe 741,000 750,000 — — — 380,000 380,000 — 1,130,000 1,094,000
Susanna Schneeberger 741,000 750,000 — — — — — — 750,000 732,000
CEO 8 ,277,590 9,286,670 — 2,8 61,369 — 2,265,000 — — 3,041,959 17,454,998 43,600,153
4)
Former CEO 19,929,743
5)
6,159,121 2,551,500 1,922,467 4,310,400 1,448,400 — — 2,134,932 11,664,920 —
Former acting CEO
6)
458,333
458,333
— 145,000 — — — — 160,417 763,750 —
Group Management
7) 8)
40,418,297 42,543,138 11,316,173 16,090,429 9,653,969 16,292,019 — — 11,8 31,882 86,757,468 85,158,098
whereof AB SKF 20,586,860 22,71 1,701 5,593,214 8,356,071 7, 327,684 13,383,334 — — 11,126,889 55,577,995 54,926,251
Total 2021 76,112,463 65,247,261 13,867,673 21,019,266 13,964,369 20,005,419 1,030,000 1,030,000 17,169,190 124,471,136 —
whereof AB SKF 56,281,026 45,165,824 8,144,714 13,284,908 11,638,084 17,096,734 1,030,000 1,030,000 16,464,197 93,291,663 —
Total 2020 67,554, 84 0 91,295,937 19,688,41 7 16,278,933 21,529,382 5,843,699 973,000 973,000 22,596,682 — 136,988,251
whereof AB SKF 49,113,190 72,854,287 11,972,178 6,083,348 18,886,984 6,536,234 973,000 973,000 20,309,535 — 106,756,404
1) Other benefits include for example company car and medical insurance.
2) Represents premiums paid under defined contribution plans as well as gross
service costs under defined benefit plans.
3) Amounts paid represent the cash outflow and are amounts received by the
individual during a specific calendar year. These amounts include remunera-
tion for services rendered during given calendar year such as salary, but can
also include remuneration for services rendered in a prior year where pay-
ment occurs subsequent to that year, for example the variable salary pro-
grammes. Amounts expensed refer primarily to the costs for the Group for
services rendered during a specific calendar year by the individual, butcan
also include adjustments or reversals related to prior years. Consequently,
differences between amounts paid and amounts expensed can arise as
timing of the expense can be occurring in a different calendar year than the
cash outflow tothe individual.
4) The total expense refers to the previous CEO.
Includes maximum severance payment of SEK 20,438,000, which will be in the
range of SEK 6,812,000 to SEK 20,438,000 depending on any other income from
new employment or any other business activity which will be deducted from the
maximum amount.
5) Includes severence payment of MSEK 8,497,310.
6) Compensation specifically for the assignment as acting CEO. Niclas Rosenlew’s
ordinary compensation as CFO is not included in the amount.
7) Total pension obligations, for SKF Group, related to Group Management
(including CEO) were MSEK 134.
8) Exclusive of CEO.
89
SKF Annual Report 2021
Fees to the SKF Group statutory auditors
were split as follows (MSEK) 2021 2020
Deloitte
Audit fees 50 —
Where of Deloitte AB 10 —
Audit related fees 2 —
Where of Deloitte AB 2 —
Tax fees 7 —
Where of Deloitte AB 2 —
Other fees 3 —
Where of Deloitte AB 2 —
PricewaterhouseCoopers
Audit fees 1 47
Where of PricewaterhouseCoopers AB — 11
Audit related fees — 1
Where of PricewaterhouseCoopers AB — 1
Tax fees 0 9
Where of PricewaterhouseCoopers AB — 0
Other fees — 1
Where of PricewaterhouseCoopers AB —
0
63 58
The Parent Company’s share (MSEK) 2021 2020
Deloitte
Audit fees 7 —
Audit related fees 2 —
Tax fees 1 —
Other fees to auditors 1 —
PricewaterhouseCoopers
Audit fees — 9
Audit related fees — 1
Tax fees —
0
Other fees to auditors — 0
11 10
Audit fees related to examination of the annual report and financial
reporting and the administration by the Board and the President as
well as other tasks related to the duties of a company auditor. Audit
related fees are mainly attributable to the review of the SKF’s sus-
tainability report. Tax fees related to tax consultancy and tax com-
pliance services. All other assignments were defined as other.
24 Fees to the auditors
The share-based compensation programmes of the Group are
mainly equity-settled through the SKF Group’s Perform ance Share
programmes.
The fair value of the SKF B share at grant date is calculated as
the market value of the share excluding the present value of
expected dividend payments for the next three years.
The estimated cost for these programmes, which is based on
thefair value of the SKF B share at grant date and the number of
shares expected to vest, is recognized as an operating expense
with a corresponding offset in equity. The fair value of the SKF
shares ofseries B at grant date was determined as SEK 226,5
forSKF’s Perfor mance Share Programme 2021. The dividend
compensation amount is recognized as employee benefit expense
separate from the share-based compensation expense. The cost
for the programmes is adjusted annually for changes to the number
of shares expected to vest and for the forfeitures of the participants’
rights that no longer satisfy the programme conditions. Provisions
for social costs to be paid by the employer in connection with
share-based compensation programmes are calculated based on
the fair value of the SKF B share at each reporting date and
expensed over the vesting period.
Allotment of shares under SKF’s Performance Share Programme
requires that the persons covered by each of the programmes are
employed in the SKF Group during the entire three year calculation
period.
SKF’s Performance Share Programme 2018: Allotment of
shares was made in February 2021. In total 392,883 SKF class B
shares were allotted pursuant to the terms of the programme,
based on the degree of achievement of TVA during the three year
period 2018–2020.
SKF’s Performance Share Programme 2019: Allotment of shares
was made in February 2022. In total 200,010 SKF class B shares
were allotted pursuant to the terms of the programme, based on
the degree of achievement of TVA during the three year period
2019–2021.
SKF’s Performance Share Programme 2020: Allotment of shares
may be made following the expiry of the three year calculation
period, i.e. during 2023, if all the conditions of the programme are
met and the allotment is approved by the Board.
SKF’s Performance Share Programme 2021: Allotment of shares
may be made following the expiry of the three year calculation
period, i.e. during 2024, if all the conditions of the programme are
met and the allotment is approved by the Board.
Amounts expensed 2021 for all programmes were MSEK 95 (26)
excluding social charges. The total provision for all programmes
was MSEK 106 (89) and the total provision for social charges for all
programmes was MSEK 27 (25).
2021 2020
Men and women in
Board of Directors and
Group Management
Number of
persons
Whereof
men
Number of
persons
Whereof
men
The Group
Board of Directors of
the Parent company
incl. CEO 8 63% 9 67%
Group Management
incl. CEO 10 80% 10 80%
Parent Company
Board of Directors of
the Parent company
incl. CEO 8 63% 9 67%
Group Management
incl. CEO 8 75% 8 75%
NOTES GROUP
90
SKF Annual Report 2021
The Group’s overall financial objective is to create value for its
shareholders. Over time, the return on the shareholders’ invest-
ment in the SKF share should exceed the risk-free interest rate
by around six percentage points. This is the basis for the Group’s
long-term financial objectives and the financial performance
manage ment model.
The SKF Group defines its managed capital as the capital
employed. One of the Group’s long term financial targets is to
achieve a return on capital employed of 16%.
The capital structure target of the Group is
• a gearing of around 50%, which corresponds to
• an equity/assets ratio of around 35% or
• a net debt/equity ratio, excluding pension liabilities of below 40%.
Key figures
1)
2021 2020
Total equity, MSEK 45,365 35,712
Gearing, % 40.5 48.0
Equity/assets ratio, % 45.5 39.4
Net debt/equity ratio, excluding post-
employment benefits, % 12.5 9.3
Adjusted Return on capital employed
2)
, % 14.9 12.7
1) Definition of these key figures is available on page 154.
2) Adjusted for items affecting comparability.
The purpose of the targeted capital structure is to keep an appro-
priate balance between equity and debt financing. This will ensure
financial flexibility and enable the Group to continue investing in its
business while maintaining a strong credit rating. The Group’s
policy and structure of debt financing are presented below.
The SKF Group’s operations are exposed to various types of
financial risks; market risks (being currency risk, interest rate risk
and other price risks), liquidity risks and credit risks, each being
discussed below.
The Group’s risk management incorporates a financial policy that
establishes guidelines and definitions of currency, interest rate, credit
and liquidity risks and establishes responsibility and authority for
the management of these risks. The policy states that the objective
is to eliminate or minimize risk and to contribute to a better return
through the active management of risks. The management of the
risks and the responsibility for all treasury operations are largely
centralized at SKF Treasury Centre, the Group’s internal bank.
The policy sets forth the financial risk mandates and the financial
instruments authorized for use in the management of financial risks.
Financial derivative instruments are used prim arily to manage the
Group’s exposure to fluctuations in foreign currency exchange rates
and interest rates. The Group also uses financial derivative instru-
ments for trading purposes, according to Group policy.
26 Financial risk management
2021 2020
Number of employees Whereof men,% Number of employees Whereof men,%
Parent Company in Sweden 689 66 691 68
Subsidiaries in Sweden 1,900 81 1,846 80
Subsidiaries abroad 38,272 76 35,848 79
40,861 75 38,385 78
Geographic specification of average number
of employees in subsidiaries abroad
2021 2020
Number of employees Whereof men,% Number of employees Whereof men,%
France 2,197 82 1,995 82
Italy 3,039 70 3,074 78
Germany 5,142 88 4,842 88
Other Western Europe excluding Sweden 3,163 83 3,136 84
Central and Eastern Europe 4,301 65 3,811 64
USA 3,677 74 3,660 76
Canada 192 80 174 76
Mexico 1,649 69 1,349 71
Latin America 3,303 88 2,947 89
China 6,390 69 5,851 67
India 2,730 95 2,421 95
Other Asian countries/Pacific 2,104 82 2,230 81
Middle East and Africa 385 69 358 76
38,272 76 35,848 79
25 Average number of employees
91
SKF Annual Report 2021
Market risk – Currency risk
The Group is exposed to changes in exchange rates in the future
flows of payments related to firm commitments and forecasted
transactions and to loans and investments in foreign currencies,
i.e. transaction exposure. The Group’s accounts are also affected
bytranslating the results and net assets of foreign subsidiaries
intoSEK, i.e. translation exposure.
Transaction exposure
Transaction exposure mainly arises as a result of intra-Group
trans actions between the Group’s manufacturing companies and
the Group’s sales companies, situated in other countries and selling
the products to end-customers normally in local currency on their
local market. In some countries, transaction exposure may arise
from sales to external customers in a currency different from the
local currency. The Group’s principal commercial flows of foreign
currencies pertain to exports from Europe to North America and
Asia and to flows of currencies within Europe. Currency rates and
payment conditions to be applied to the internal trade between SKF
companies are set by SKF Treasury Centre. Currency exposure and
risk is primarily, and to a large extent, reduced by netting internal
transactions. The currency flows between SKF companies managed
by SKF Treasury Centre were reduced through netting from MSEK
70,357 (58,341) to MSEK 6,594 (4,538). This amount represented
the Group’s main transaction exposure excluding hedges.
Net currency flows (MSEK) 2021 2020
CAD 747 621
CNY 2,666 2,803
DKK 626 444
EUR –6,833 –7,194
RUB 958 719
THB 427 462
TRY 909 761
USD 5,331 4,245
Other
1)
1,763 1,677
SEK –6,594 –4,538
1) Other is a sum comprising 11 different currencies.
Based on the assumption that the net currency flows will be the
same as in 2021, the below graph represents a sensitivity analysis
that shows the effect in SEK on operating profit of a 5% weaker SEK
against all other currencies.
The effect on equity is the below result after tax. The effects
of fluctuations upon the translation of subsidiaries’ financial state-
ments into the Group’s presentation currency are not considered.
Translation exposure
Translation exposure is defined as the Group’s exposure to currency
risk arising when translating the results and net assets of foreign
subsidiaries to SEK. Based on 2021 operating profits in local
currencies, the below graph represents a sensitivity- analysis that
shows the effect in SEK on the translation of operating profits of a
5% weaker SEK against all other currencies. To reduce the transla-
tion exposure of net assets, the Group has hedged some of its net
investment in foreign subsidiaries, for details see pages 92
–93.
Effect of translation on operating profits to SEK
of a 5% weaker SEK
0
40
80
200 M
SEK
160
120
INRGBP Other
1)
USDCNY EUR
1) Other is a sum comprising 47 different currencies.
Market risk – Interest rate risk
The Group defines interest rate risk as the risk of negative fluctua-
tions in the Group’s cash flow caused by changes in the interest rates.
At year-end, total interest bearing financial liabilities amounted
to MSEK 30,923 (32,960) and total interest-bearing financial
assets amounted to MSEK 14,374 (15,210). Liquidity management
is concentrated to SKF Treasury Centre. By matching the duration
of investments and borrowings, the interest rate exposure of the
Group can be reduced.
To manage the interest rate risk and currency risk in the bor-
rowing, the Group uses cross-currency interest rate swaps, where
fixed EUR interest rates are swapped into floating USD and floating
EUR interest rates are swapped into floating USD.
As of the balance sheet date, given the prevailing amount of net
interest-bearing liabilities, an unfavourable change of the interest
rates by 1% would have reduced pre-tax profit for the year, includ-
ing the effect of derivatives, by around MSEK –70 (65). For details
on interest rates of individual loans, see Note 11 of the Parent
Company’s financial statements.
Market risk – Price risks
Market risks also include other price risks, where the relevant risk
variables for the Group are stock exchange prices or indexes.
As of 31 December, the Group held investments in equity securi-
ties with quoted stock prices, amounting to MSEK 402 (301), which
are categorized as fair value through other comprehensive income.
If the market share prices had been 5% higher/lower at the balance
sheet date, the available- for-sale reserve in equity would have
been MSEK 20 (15) higher/lower.
−400
−300
−200
−100
0
200
100
THBRUBEUR USDTRYCAD DKKCNY
Effect of transactional currency flows on operating profits
of a 5% weaker SEK
300 MSEK
Other
1)
1) Other is a sum comprising 11 different currencies.
NOTES GROUP
92
SKF Annual Report 2021
Liquidity risk
Liquidity risk, also referred to as funding risk, is defined as the risk
that the Group will encounter difficulties in raising funds to meet
commitments. Group policy states that, in addition to current loan
financing, the Group should have a payment capacity in the form of
available liquidity and/or long-term committed credit facilities.
Asof the balance sheet date, in addition to its own liquidity, the
Group had unutilzed committed credit facilities of MEUR 500 syn-
dicated by ten banks that will expire in 2025, and one unutilized
committed credit facilities of MEUR 250 that will expire in 2022.
A good rating is important in the management of liquidity risks.
As of 31 December 2021 the long-term rating of the Group is
Baa1
by Moody’s Investors Service and BBB+ by Fitch Ratings,
both with stable outlook.
The table below shows the Group’s contractually agreed and
undiscounted interest payments and repayments of the non-
derivative financial liabilities and derivatives with payment flows.
All instruments held on 31 December 2021 for which payments
were contractually agreed were included. Planning data for future,
new liabilities was not included. Amounts in foreign currency were
translated at closing rate. The variable interest payments arising
from the financial instruments were calculated using the last inter-
est rates fixed before 31 December 2021. Financial liabilities
were assigned to the earliest possible time period when they can
be required to be repaid.
2021 Cash flows
MSEK 2022 2023 2024–2026
2027 and
thereafter
Loans –3,249 –222 –6,508 –7,104
Trade payables –9,881 — — —
Derivatives, net 5 — –18 —
Lease liabilities –587 –447 –853 –1,036
Total –13,712 –669 –7,379 –8,140
Credit risk
Credit risk is defined as the Group’s exposure to losses in the event
that one party to a financial instrument fails to discharge an obliga-
tion. The SKF Group is exposed to credit risk from its operating
activities and certain financing activities.
The maximum exposure to credit risk for the Group amounted to
MSEK 28,440 (27,928) as of the balance sheet date. The exposure
is represented by total financial assets that are carried on the bal-
ance sheet with the exception of equity securities. No granting of
significant financial guarantees increasing the credit risk and no
significant collateral agreements reducing the maximum exposure
to credit risk existed as of the balance sheet date.
Credit risk (MSEK) 2021 2020
Trade receivables 13,972 12,286
Other receivables 1,155 1,160
Derivatives 94 432
Cash and cash equivalent 13,219 14,050
Total 28,440 27,928
At operational level, the outstanding trade receivables are conti-
nuously monitored locally in each area. The Group’s concentration
of credit risk related to trade receivables is mitigated primarily due
to its many geographically and industrially diverse customers.
Trade receivables are subject to credit limit control and approval
procedures in all subsidiaries.
With regard to treasury related activities, the Group’s policy
states that only well-established financial institutions are approved
as counterparties. The SKF Group has signed ISDA agreements
(International Swaps and Derivatives Association, Inc.) with nearly
all of these financial institutions. ISDA is classified as an enforceable
netting arrangement. One feature of the ISDA agreement is that it
enables the SKF Group to calculate its credit exposure on a net basis
per counterpart, i.e. the difference between what the Group owes
and is owed. The agreement between the Group and the counter-
party allows for net settlement of derivatives when both elect to
settle net. In the event of default of one of the counterparties the
other counterpart of the netting agreement has the option to settle
on a net basis. Transactions are made within fixed limits and credit
exposure per counterparty is continuously monitored. As of the
balance sheet date the Group had derivative assets of around
MSEK94 (425) and derivative liabilities of around MSEK 117 (513)
subject to enforceable master netting arrangements.
Hedge accounting
The Group manages risks related to the volatility of balance sheet
items and future cash flows, which otherwise would affect the
income statement, by hedging. A distinction is made between
cash flow hedges, fair value hedges and hedges of net investment
in foreign operations based on the nature of the hedged item.
Derivative instruments which provide effective economic hedges,
but are not designated for hedge accounting by the Group, are
accounted for as trading instruments. Changes in the fair value of
these economic hedges are immediately recognized in the income
statement as financial income or expense or in the operating result
depending on the nature of the hedged item.
Fair value hedges
Hedge accounting is applied to derivative financial instruments
which are effective in hedging the exposure to changes in fair
value in foreign borrowing. Changes in the fair value of these
derivative financial instruments designated as hedging instruments
are recognized in the income statement under financial items.
The carrying amount of the hedged item (the financial liability) is
adjusted for the gain or loss attributable to the hedged risk. The
gain or loss is recognized in the income statement under financial
items. If a hedge relationship is discontinued, the accumulated
adjustment to the carrying amount is amortized over the duration
of the life of the hedged item.
The SKF Group hedges the fair value risk of financial liabilities
on December 2021, by using cross-currency interest rate swap.
The MEUR 300 loan with fixed interest payments has been
swapped into floating USD interest. Maturity and carrying amount
are disclosed in Note 20. The effectiveness of the hedging relation-
ship is measured at inception of the hedge relationship and pro-
spectively to ensure that the economic relationship between hedge
item and hedging instrument remains. When the effectiveness was
being measured, the change in the credit spread was not taken into
account for calculating the change in the fair value of the hedged
item. As the list of the fair values of derivatives shows (see table in
the Derivatives section below), the Group had designated interest
rate derivatives for a net amount of MSEK –18 (295) as fair value
hedges as of 31 December 2021.
Cont. Note 26
93
SKF Annual Report 2021
The following table shows the changes in the fair value of the
hedges recorded in interest expense during the year.
MSEK
Financial
expense
2021
Financial
expense
2020
Financial liabilities (hedged items) 70 –4
Cross-currency interest-rate swaps
(hedging instruments) –69 3
Difference (inefficiency) 1 –1
Hedges of net investments
Hedge accounting is applied to financial instruments which are
effective in offsetting the exposure to translation differences aris-
ing when the net assets of foreign operations are translated into
the Group’s functional currency. Any gain or loss on the hedging is
recognized in the foreign currency translation reserve via other
comprehensive income.
As of the balance sheet date net investments in foreign opera-
tions for a nominal amount of MEUR 30 (30) were hedged by the
Group against changes in the EUR/SEK exchange rates. EUR loan
for an amount of MEUR 30 (30) and derivatives for an amount of
MEUR 0 (0) were designated as hedge instruments.
The result of the hedges totalled MSEK –6 (–36) before tax in
2021 and was recognized as a translation difference in other com-
prehensive income. During the year no gains/losses (0) have been
recycled from other comprehensive income to the income state-
ment, matching the recycling of the hedged subsidiary’s cumulative
translation differences.
Derivatives
The table below shows the fair values of the various derivatives
carried as of 31 December reflected as assets in Note 14 and
liabilities in Note 20. A distinction is made depending on whether
these are part of an effective hedging relationship or not.
Derivative net (MSEK) Category 2021 2020
Interest rate and
currency swaps
Fair value hedges Hedge accounting –18 295
Economic hedges Trading — –242
Currency forwards/
currency options
Economic hedges Trading –11 –148
Share swaps
Economic hedges Trading — 2
–29 –93
January–December
Summarized income statement (MSEK) 2021 2020
Net sales 3,973 2,944
Operating profit 675 451
Net income 435 321
Other comprehensive income 161 –349
Total comprehensive income 596 –28
Profit allocated to NCI 206 152
Dividends paid to NCI –40 –355
Accounting policy
Subsidiaries that the Group controls, but owns less than 100% in,
are consolidated into the Group’s financial statements. The cate-
gory “non-controlling interests (NCI)” in the equity report accumu-
lates the portion of a subsidiary’s equity that is not attributable to
the owners of AB SKF.
There is uncertainty about how and to which extent SKF’s opera-
tions will be affected by the ongoing conflict in Ukraine. SKF
operates in both Ukraine and Russia with approximately 1,100
and250employees, respectively. Sales in Ukraine amount to less
than 0,5%of SKFs total sales and sales in Russia amount to approxi-
mately 2%of SKFs total sales.
SKFs factory in Lutsk, Ukraine accounts for a production volume
of about 1% of SKFs totalproduction volume. At the time of
27 Non-controlling interests
28 Subsequent events
Significant non-controlling interests
During 2021, there has been no change in significant non-controlling
interests.
The largest non-controlling interest is SKF India Ltd.
Thenon-controlling interests holds a 47.4% (47.4) shareholding in
the company. This represents 2.2% (2.2) of the Group’s total equity.
The tables below present the summarized financial information
of SKFIndia Ltd.
publication of this report (2 March 2022), the factory in Ukraine
is closed due to prevailing circum stances.
SKF is currently evaluating the extent of the impact on the
supply of raw materials from this area. To reduce exposure SKF
has taken measures to replace parts of of the raw material supply
from the region.
As of 31 December
Summarized balance sheet (MSEK) 2021 2020
Non-current assets 608 539
Current assets 2,627 1,851
Total assets 3,235 2,390
Equity attributable to shareholders of AB SKF 1,123 853
Equity attributable to NCI 1,013 770
Non-current liabilites 45 31
Current liabilities 1,054 736
Total equity and liabilities 3,235 2,390
PARENT COMPANY INCOME STATEMENTS
94
SKF Annual Report 2021
Parent Company income statements
Parent Company statements of comprehensive income
January–December
MSEK Note 2021 2020
Revenue 2 7,775 5,267
Cost of revenue 2 –5,036 –4,819
General management and administrative expenses 2 –1,470 –1,489
Other operating income and expenses, net 2 0 13
Operating profit 1,269 –1,028
Financial income and expenses, net 3 2,325 2,271
Profit after financial items 3,594 1,243
Appropriations 4 –793 1,070
Profit before tax 2,801 2,313
Income taxes 5 –54 30
Net profit 2,747 2,343
January–December
MSEK Note 2021 2020
Net profit 2,747 2,343
Items that may be reclassified to the income statement
Assets at fair value through other comprehensive income 9 95 –40
Other comprehensive income, net of tax 95 –40
Total comprehensive income 2,842 2,303
Parent Company of the SKF Group Swedish limited
address is AB SKF, SE-415 50 Gothenburg , Sweden .
AB SKF is the Entrepreneur within the Group. The role of Entre-
preneur is to make the strategic decisions and pay for research and
development in the Group as well as the management services.
Subsidiaries in the Group perform tasks decided by the Entrepreneur
and thus have a limited commercial liability.
Dividend income from consolidated subsidiaries amounted to
MSEK 2,010 (2,878).
Net investments in subsidiaries decreased by MSEK –421 (58)
whereof MSEK
–60 (–490) is attribuatble to impairments and
MSEK 70 (279) related to capital contributions. Shares with
abooked value of MSEK –354 (
0) were sold during the year.
Parent Company, AB SKF
Risks and uncertainties in the business for the Group are
de scribed in the Administration Report for the Group. The financial
position of the Parent Company is dependent on the financial posi-
tion and development of the subsidiaries. A general decline in the
demand for the products and services provided by the Group could
mean lower residual profit and lower dividend income for the Parent
Company, as well as a need for write-down of the values in the shares
in subsidiaries. Due to the wide spread of markets, geographically
as well as operationally in which the subsidiaries operate, the risk
that the financial position for the Parent Company will be negatively
affected is assessed as small.
Unrestricted equity in the Parent Company amounted to
MSEK 23,627.
95
SKF Annual Report 2021
Parent Company balance sheets
As of 31 December
MSEK Note 2021 2020
ASSETS
Non-current assets
Intangible assets 6 1,371 1,528
Property, plant and equipment 7 63 83
Investments in subsidiaries 8 22,074 22,496
Long-term receivables from subsidiaries 13,022 12,749
Investments in equity securities 9 349 253
Other long-term receivables 167 334
Deferred tax assets 5 312 301
37,358 37,744
Current assets
Short-term receivables from subsidiaries 6,958 5,971
Other short-term receivables 140 70
Prepaid expenses and accrued income 130 91
Cash and cash equivalents 3 2
7,231 6,134
Total assets 44,589 43,878
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital 1,138 1,138
Statutory reserve 918 918
Capitalized development reserve — 99
2,056 2,155
Unrestricted equity
Fair value reserve 163 68
Retained earnings 20,717 21,235
Net profit 2,747 2,343
23,627 23,646
25,683 25,801
Untaxed reserves 4 — —
Provisions
Provisions for post-employment benefits 10 430 431
Other provisions 15 37
445 468
Non-current liabilities
Long-term loans 11 13,023 12,750
13,023 12,750
Current liabilities
Short-term loans 11 3,031 2,005
Trade payables 320 180
Short-term liabilities to subsidiaries 1,488 2,135
Other short-term liabilities 132 151
Accrued expenses and deferred income 467 388
5,438 4,859
Total shareholders’ equity and liabilities 44,589 43,878
PARENT COMPANY BALANCE SHEETS
96
SKF Annual Report 2021
PARENT COMPANY STATEMENTS OF CASH FLOW
Parent Company statements of cash flow
January–December
MSEK Note 2021 2020
Operating activities
Operating loss/profit 1,269 –1,028
Adjustments for
Depreciation, amortization and impairments 6, 7 202 206
Impairments equity securities 8 60 490
Other non-cash items
1)
66 –366
1)
Payments under post-employment defined benefit plans 10 –36 –28
Changes in working capital
Trade payables 140 –175
Other operating assets and liabilities, net –2,394 –684
Interest received 203 235
Interest paid –252 –301
Other financial items 404 –139
Net cash flow from operating activities –338 –1,790
Investing activities
Additions to intangible assets 6 –112
1)
—
Additions to property, plant and equipment 7 –4 –13
Sales of property, plant and equipment 7 17 —
Dividends received from subsidiaries 3 2,010 2,878
Investments in subsidiaries 8 –464 –548
Sales of shares in subsidiaries 8 354 —
Capital repayments from subsidiaries 8 472 —
Investments in equity securities 9 –1 –4
Net cash flow used in investing activities 2,272 2,313
Net cash flow after investments before financing 1,934 523
Financing activities
Proceeds from medium- and long-term loans 3,045 3,000
Repayment of medium- and long-term loans –2,018 –2,163
Cash dividends to AB SKF’s shareholders –2,960 –1,366
Net cash flow used in financing activities –1,933 –529
Increase(+)/decrease(–) in cash and cash equivalents 1 –6
Cash and cash equivalents at 1 January 2 8
Cash and cash equivalents at 31 December 3 2
1) Includes intangible assets of MSEK 112 paid in 2021.
97
SKF Annual Report 2021
Parent Company statements of changes in equity
Restricted equity Unrestricted equity
MSEK
Share
capital
1)
Statutory
reserve
Capitalized
development
reserve
Fair value
reserve
Retained
earnings Total
Opening balance 1 January 2020 1,138 918 273 108 22,522 24,959
Net profit — — — — 2,343 2,343
Components of other comprehensive income
Change in assets to fair value through other
comprehensive income — — — –40 — –40
Capitalized development reserve — — –174 — 174 —
Transactions with shareholders
Cost under Performance Share Programmes
2)
— — — — –95 –95
Dividends — — — — –1,366 –1,366
Closing balance 31 December 2020 1,138 918 99 68 23,578 25,801
Net profit — — — — 2,747 2,747
Components of other comprehensive income
Change in assets to fair value through other
comprehensive income — — — 95 — 95
Capitalized development reserve — — –99 — 99 0
Transactions with shareholders
Cost under Performance Share Programmes
2)
— — — — — —
Dividends — — — — –2,960 –2,960
Closing balance 31 December 2021 1,138 918 0 163 23,464 25,683
1) The distribution of share capital between share types and the quota value is shown in Note 16 to the Consolidated financial statements.
2) See Note 23 to Consolidated financial statements for information about Performance Share Programmes.
Restricted equity includes share capital and statutory reserves as
well as capitalized development reserves which are not available
for dividend payments.
Unrestricted equity includes retained earnings which can be
distributed to shareholders. It also includes the fair value reserve
which accumulates the changes in fair value of available-for-sale
assets.
PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY
98
SKF Annual Report 2021
NOTES PARENT COMPANY
Notes to the financial statements
of the Parent Company
Basis of presentation
The financial statements of the Parent Company are prepared
in accordance with the “Annual Accounts Act” and The Swedish
Financial Reporting Board recommendation RFR 2, “Accounting for
Legal Entities” as well as their interpretation (UFR). In accordance
with RFR 2, IFRS is applied to the greatest extent possible under
Swedish legislation, but full compliance is not possible. The areas
inwhich the Parent Company’s accounting policies differ from the
Group’s are described below. For a description of the Group’s
accounting policies, see Note 1 to the Consolidated financial
statements.
Post-employment benefits
AB SKF reports pensions in the financial statements in accordance
with RFR 2. According to RFR 2, IAS 19 shall be adopted regarding
supplementary disclosures when applicable.
Investments in subsidiaries
Investments in subsidiaries are recorded at acquisition cost,
reduced by any impairment.
Untaxed reserves
The tax legislation in Sweden allows companies to make pro visions
to untaxed reserves. Hereby, the companies may, with certain
limits, allocate and retain profits in the balance sheet instead of
immediate taxation. The untaxed reserves are taken into taxation
at the time of their dissolution. In the event that the business shows
losses, the untaxed reserves may be dissolved in order to cover the
losses without any taxation.
Equity
When development expenses are capitalized for internal develop-
ment of intangible assets, a corresponding amount is transferred
from retained earnings to a reserve for capitalized development in
restricted equity. The reserve is released to retained earnings upon
amortization of the capitalized development.
Intangible assets
According to Swedish legislation, goodwill has a definite useful life.
The useful life amounts to eight years and the amortization follows
a linear pattern.
Leases
RFR 2 allows an exception from IFRS 16 which the Parent Company
has applied. Lease contracts are reported as operational leases.
AB SKF is since 2012 the entrepreneur within the Group and
as such entitled to the residual profits while taking the costs for
management and research and development. Consequently the
revenues are comprised of residual profits and royalties from
MSEK 2021 2020
Income from participations in Group
companies
Dividends from subsidiaries 2,010 2,878
Other financial income from investments
in subsidiaries 483 —
Impairment and disposals of investments
in subsidiaries –60 –490
2,433 2,388
Financial income
Interest income from subsidiaries 203 235
Other financial income — 8
203 243
Financial expenses
Interest expenses to subsidiaries –73 –84
Interest expenses to external parties –202 –242
Other financial expense –36 –34
–311 –360
subsidiaries. Cost of revenue include research and development
expenses totalling MSEK 2,501 (2,221).
Of the total operating expenses, MSEK 3,782 (3,336) was
invoiced from subsidiaries.
Appropriations (MSEK) 2021 2020
Paid/received group contribution –793 1,070
Untaxed reserves
Change in accelerated depreciation
reserve — —
–793 1,070
Untaxed reserves in the balance sheet
Accelerated depreciation reserve — —
1 Accounting policies
2 Revenues and operating expenses
3 Financial income and financial expenses 4 Appropriations
99
SKF Annual Report 2021
Taxes on profit before tax (MSEK) 2021 2020
Current taxes — —
Other taxes 11 93
Deferred tax –65 –63
–54 30
Net deferred assets per type net (MSEK) 2021 2020
Provisions for post-employment benefits 126 97
Tax credit carry forwards 186 190
Tax loss carry forwards — —
Other — 14
Deferred tax assets 312 301
MSEK
2021
Closing balance Additions Impairments Derecognitions
2021
Opening balance
Acquisition cost
Goodwill 35 — — — 35
Technology, Intellectual property
and similar items 1,013 — — — 1,013
Internally developed software 2,290 38 — — 2,252
3,338 38 — — 3,300
MSEK
2021
Closing balance Amortization Impairments Derecognitions
2021
Opening balance
Accumulated amortization
Goodwill 25 5 — — 20
Technology, Intellectual property
and similar items 925 16 — — 909
Internally developed software 1,017 174 — — 843
1,967 195 — — 1,772
Net book value 1,371 1,528
MSEK
2020
Closing balance Additions Impairments Derecognitions
2020
Opening balance
Acquisition cost
Goodwill 35 — — — 35
Technology, Intellectual property
and similar items 1,013 112 — — 901
Internally developed software 2,252 — — — 2,252
3,300 112 — — 3,188
MSEK
2020
Closing balance Amortization Impairments Derecognitions
2020
Opening balance
Accumulated amortization
Goodwill 20 5 — — 15
Technology, Intellectual property
and similar items 909 16 — — 893
Internally developed software 843 174 — — 669
1,772 195 — — 1,577
Net book value 1,528 1,611
6 Intangible assets
5 Taxes
Reconciliation of the statutory tax in Sweden
andthe actual tax (MSEK) 2021 2020
Tax calculated using the
statutory tax rate in Sweden –577 –495
Non-taxable dividends and
other financial income 526 617
Tax referring to previous years 23 36
Other non-deductible and
non-taxable profit items, net –26 –128
Actual tax –54 30
The corporate statutory income tax rate in Sweden is 20.6% (21.4).
See Note 10 to the Consolidated financial statements for information on the internally developed software including impairment.
Technology and similar items are amortized over eight years.
100
SKF Annual Report 2021
MSEK
2021
Closing balance Additions Disposals
2021
Opening balance
Acquisition cost
Buildings 5 — — 5
Machine toolings and factory fittings 81 — — 81
Assets under construction including advances 27 4 –17 40
113 4 –17 126
MSEK
2021
Closing balance Depreciation Disposals
2021
Opening balance
Accumulated depreciation
Buildings 3 — — 3
Machine toolings and factory fittings 47 7 — 40
50 7 — 43
Net book value 63 83
MSEK
2020
Closing balance Additions Disposals
2020
Opening balance
Acquisition cost
Buildings 5 — — 5
Machine toolings and factory fittings 81 3 –18 95
Assets under construction including advances 40 10 –3 34
126 13 –21 134
MSEK
2020
Closing balance Depreciation Disposals
2020
Opening balance
Accumulated depreciation
Buildings 3 1 — 2
Machine toolings and factory fittings 40 7 –18 51
43 8 –18 53
Net book value 83 81
Investments in subsidiaries
held on 31 December (MSEK) 2021 Additions Impairment
Disposals
and capital
repayments 2020 Additions Impairment
Disposals
and capital
repayments 2019
Investments in subsidiaries 22,074 464 –60 –826 22,496 548 –490 — 22,438
The Group is composed of 183 legal entities (subsidiaries), where
AB SKF is the ultimate parent either directly or indirectly via inter-
mediate holding companies. The vast majority of the Group’s sub-
sidiaries perform activities related to manufacturing and sales.
Alimited number are involved in central Group functions such as
treasury or reinsurance, or as previously mentioned, act as inter-
mediate holding companies. This legal structure is designed to
effectively manage legal requirements, administration, financing
and taxes in the countries in which the Group operates. In contrast,
the Group’s operational structure described in the Administration
Report, gives a better overview of how the Group runs its business.
See also Note 2 to the Consolidated financial statements.
The tables below list firstly, the subsidiaries owned directly by
the Parent Company, and secondly, the most significant of the
remaining subsidiaries of the Group. Taken together these subsidi-
aries account for more than 90% of the Group’s sales and for more
than 90% of the Group’s manufacturing facilities.
Book value (MSEK)
Name of directly owned subsidiaries Country/Region
Registration
number No. of shares % ownership 2021 2020
Main
activities
1)
SKF Argentina S.A. Argentina — 14,677,299 29.2
2)
94 75 M,S
SKF Australia Pty. Ltd. Australia — 96,500 100 — — S
SKF Österreich AG Austria — 200 100 176 176 M,S
SKF Belgium NV/SA Belgium — 1,778,642 99.9
2)
109 109 S
7 Property, plant and equipment
8 Investments in subsidiaries
NOTES PARENT COMPANY
101
SKF Annual Report 2021
Book value (MSEK)
Name of directly owned subsidiaries Country/Region
Registration
number No. of shares % ownership 2021 2020
Main
activities
1)
Carried Forward 379 360
SKF Logistics Services Belgium NV/SA Belgium — 29,907,952 99.9
2)
28 28 O
SKF do Brasil Ltda. Brazil — 517,294,748 99.9
2)
626 626 M,S
SKF Bearings Bulgaria EAD Bulgaria — 24,664,309 100 202 183 M,S
SKF Bulgaria Ltd Bulgaria — — — — 19 S
SKF Canada Ltd. Canada — 130,000 100 58 58 M,S
SKF Chilena S.A.I.C. Chile — 88,191 99.9
2)
— — S
SKF (China) Co. Ltd. China — 133,400 100 1,135 1,135 O
SKF China Ltd. China — 11,000,000 100 15 15 S
SKF CZ, a.s. Czech Republic — 430 100 10 10 S
SKF Danmark A/S Denmark — 5 100 7 7 S
Oy SKF Ab Finland — 48,400 100 12 12 M,S
SKF Holding France S.A.R.L. France — 1 100 3,371 3,371 O
SKF GmbH Germany — 1,000 100 1,573 1,573 M,S
SKF Lubrication Systems Germany GmbH Germany — 2,574 10,1
2)
223 223 M,S
SKF Maintenance service GmbH Germany — — — — 6 S
SKF Hellas S.A. Greece — 2,000 100 — — S
SKF Svéd Golyóscsapágy Zrt Hungary — 20 100 — — S
SKF Engineering and Lubrication India
Private Ltd. India — 1,196,450 52.8
2)
314 314 M,S
SKF India Ltd. India — 22,666,055 45.8
3)
87 87 M,S
PT. SKF Indonesia Indonesia — 53,411 60 26 24 M,S
PT. SKF Industrial Indonesia Indonesia — 5 96.3
2)
1 1 S
SKF AI Ltd Israel — 2,413,322 100 220 220 S
SKF Industrie S.p.A Italy — 465,000 100 912 912 M,S
SKF Japan Ltd. Japan — 32,400 100 174 196 S
SKF Malaysia Sdn Bhd Malaysia — 1,000,000 100 57 57 S
SKF de México, S.A. de C.V. Mexico — 375,623,529 99.9
2)
204 204 M,S
SKF New Zealand Ltd. New Zealand — 375,000 100 11 11 S
SKF Norge AS Norway — 50,000 100 — — S
SKF del Peru S.A. Peru — 2,564,903 99.9
2)
— — S
SKF Philippines Inc. Philippines — 8,395 100 20 20 S
SKF Financial Services Poland sp.zoo Poland — 100 100 30 14 O
SKF Polska S.A. Poland — 3,701,466 100 156 156 M,S
SKF Portugal-Rolamentos, Lda. Portugal — 61,601 95
2)
4 4 S
SKF Korea Ltd. Republic of Korea — 128,667 100 74 74 M,S
SKF Sealing Solutions Korea Co., Ltd. Republic of Korea — 153,320 51 15 15 M,S
SKF Treasury Centre Asia & Pacific Pte. Ltd. Singapore — — 100 — 467 O
SKF Asia Pacific Pte. Ltd. Singapore — 1,000,000 100 — — S
Barseco (PTY) Ltd. South Africa — 1,422,480 100 157 157 O
SKF Española S.A. Spain — 3,650,000 100 383 383 M,S
SKF Förvaltning AB Sweden 556350-4140 124,500 99.6
2)
4,144 4,144 O
SKF HQ AB Sweden 559250-5027 — — — — O
SKF International AB Sweden 556036-8671 20,000 100 1,320 1,320 O
Återförsäkringsaktiebolaget SKF Sweden 516401-7658 30,000 100 125 125 O
Bagaregården 16:7 KB Sweden 916622-8529 — 99.9
2)
99 66 O
SKF Eurotrade AB Sweden 556206-7610 83,500 100 12 12 S
SKF Lager AB Sweden 556219-5288 2,000 100 — — O
AB Svenska Kullagerfabriken Sweden 556210-0148 1,000
100 — — O
The Waste Company Sweden AB Sweden 559128-2016 50,000 100 — — O
SKF Efolex AB Sweden 559233-1275 2,500 100 31 — M,S
SKF Edge AB Sweden 556785-4640 1,000 100 9 — S
SKF Verwaltungs AG Switzerland — 500 100 502 502 O
SKF Taiwan Co. Ltd. Taiwan — 169,475,000 100 102 139 S
SKF (Thailand) Ltd. Thailand — 1,847,000 92.4
2)
37 37 S
SKF B.V the Netherlands — 1,450 100 304 304 S
SKF Holding Maatschappij Holland B.V. the Netherlands — 60,002 100 423 423 O
Trelanoak Ltd. United Kingdom — 6,965,000 100 120 120 O
PSC SKF Ukraine Ukraine — 1,267,495,630 100 207 207 M,S
SKF USA Inc. USA — 1,000 100 4,155 4,155 M,S
SKF Venezolana S.A. Venezuela — 20,014,892 100 — — O
22,074 22,496
1) M=Manufacturing, S=Sales, O=Other incl treasury, reinsurance and/or holding activities.
2) Parent Company together with subsidiares own 100%.
3) Parent Company together with subsidiaries own 52.6%.
102
SKF Annual Report 2021
Name of indirectly owned subsidiaries Country/Region % Ownership
Owned by
subsidiary in
Main
activities
1)
Alemite LLC USA 100 USA M,S
Beijing Nankou SKF Railway Bearings Co. Ltd. China 51 China M,S
BFW Coupling Services Ltd. Canada 100 Canada S
Cooper Roller Bearings Co. Ltd. United Kingdom 100 United Kingdom M
Industrial Tectonics Inc. USA 100 USA M,S
Kaydon Corporation USA 100 USA M,S
Kaydon Precision Components (Suzhou) Co. Ltd. China 100 USA M
Kaydon S de R.L. de C.V. Mexico 100 the Netherlands M
Lincoln Industrial Corporation USA 100 USA M,S
Lincoln Lubrication Mocambique LDA Mocambique 100 South Africa S
Lincoln Lubrication (SA) Pty Ltd. South Africa 100 South Africa S
M3M S.A.S France 100 France M
Ningbo General Bearing Ltd. China 100 Barbados M,S
PEER Bearing Company USA 100 USA S
PEER Bearing Company, Changshan (CPZ1) China 100 China M
RKS S.A.S France 100 France M
Shanghai Peer Bearing Co. Ltd. Shanghai China 100 China S
SKF (China) Sales Co. Ltd. China 100 China S
SKF (Dalian) Bearings and Precision Technologies Co. Ltd. China 100 China M
SKF (Jinan) Bearings & Precision Technology Co. Ltd. China 100 China M
SKF (Schweiz) A.G. Switzerland 100 Switzerland S
SKF (Shanghai) Automotive Technologies Co. Ltd. China 100 China M
SKF (U.K.) Ltd. United Kingdom 100 United Kingdom M,S
SKF (Xinchang) Bearings and Precision Technologies China 100 China M
SKF (Zambia) Ltd. Zambia 100 Sweden S
SKF Aeroengine France S.A.S France 100 France M,S
SKF Aerospace France S.A.S. France 100 France M,S
SKF Bearing Industries (Malaysia) Sdn Bhd Malaysia 100 the Netherlands M
SKF Distribution (Shanghai) Co. Ltd. China 100 China S
SKF Economos Deutschland GmbH Germany 100 Austria S
SKF France S.A.S France 100 France M,S
SKF Industrial Service Shanghai Co. Ltd. China 66 China S
SKF Latin Trade S.A.S Colombia 100 Chile S
SKF LLC Russian Federation 100 Sweden M,S
SKF Lubrication Systems CZ s.r.o Czech Republic 100 Germany M
SKF Magnetic Mechatronics S.A.S France 100 France M,S
SKF Marine GmbH Germany 100 Germany M,S
SKF Marine Singapore Pte Ltd. Singapore 100 Germany S
SKF Mekan AB Sweden 100 Sweden M
SKF Metal Stamping S.R.L Italy 100 Italy M,S
SKF RecondOil AB Sweden 100 Sweden M,S
SKF Sealing Solutions Austria GmbH Austria 100 Austria M,S
SKF Sealing Solutions GmbH Germany 100 Germany M,S
SKF Sealing Solutions (Qingdao) CO. China 100 Austria M,S
SKF Sealing Solutions (Wuhu) Co. Ltd. China 100 China M,S
SKF Sealing Solutions S.A. de C.V. Mexico 100 USA M,S
SKF Seals Italy S.p.A. Italy 100 Italy M
SKF Slovensko, spol. S.r.o. Slovenia 100 Sweden S
SKF South Africa (Pty) Ltd. South Africa 70 South Africa S
SKF Steyr Liegenschaftsvermietungs GmbH Austria 100 Austria O
SKF Sverige AB Sweden 100 Sweden M,S
SKF Türk Sanayi ve Ticaret Limited Sirketi Turkey 100 Belgium S
SKF Uruguay S.A Uruguay 100 Argentina S
SKF Vietnam Co. Ltd. Vietnam 100 Singapore S
Stewart Werner Corporation of Canada Canada 100 USA S
Venture Aerobearings LLC. USA 51 USA M,S
Vesta Si Sweden AB Sweden 100 Sweden M
1) M=Manufacturing, S=Sales, O=Other incl treasury, reinsurance and/or holding activities.
Cont. Note 8
NOTES PARENT COMPANY
103
SKF Annual Report 2021
Name and location (MSEK)
Holding in
percent
Number
of shares Currency
2021
Book value
2020
Book value
Wafangdian Bearing Company Limited, China 19.7 79,300,000 HKD 332 237
Other SEK 17 16
349 253
Amount recognized in the balance sheet (MSEK) 2021 2020
Present value of funded pension obligations 546 510
Fair value of plan assets –313 –275
Net obligation 233 235
Present value of unfunded pension obligations 197 196
Net provisions 430 431
Change in net provision for the year (MSEK) 2021 2020
Opening balance 1 January 431 378
Defined benefit expense 35 81
Pension payments –36 –28
Closing balance 31 December 430 431
Components of expense (MSEK) 2021 2020
Pension cost 56 76
Interest expense 17 16
Return on plan assets –38 –11
Defined benefit expense 35 81
Defined contribution expense 119 105
Total post-employment benefit expense 154 186
All white collar workers of the Company are covered by the ITP-
plan according to collective agreements. Additionally, the Company
sponsors a complementary defined contribution (DC) scheme for a
limited group of managers. This DC scheme replaced the previous
supplementary defined benefit plan which from 2003 is closed for
new participants.
The calculation of defined benefit pension obligations has been
made in accordance with regulations stipulated by the Swedish
Financial Supervisory Authority, FFFS 2007:24 and FFFS 2007:31.
The discount rate for the ITP-plan was 3.84% (3.84) and for the
other defined benefit plan it was 0.39% (1.45).
Next year’s expected cash outflows for pension obligations are
MSEK 160.
9 Investments in equity securities
10 Provisions for post-employment benefits
In January 2022 the Swedish pension assumptions are updated,
the discount rate, the life expectancy and the consolidation reserv.
The net effect on AB SKFs pension liability will be a sustantial
increase.
104
SKF Annual Report 2021
Salaries, wages, other remunerations, average number of employees
and men and women in Management and Board
12
2021 2020
MSEK Maturity Interest rate
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Bonds
MEUR 200 2021 0.15 — — 2,005 2,005
MEUR 296 2022 1.63 3,031 3,094 2,963 3,096
MSEK 900 2024 1.13 899 922 897 939
MSEK 2,100 2024 0.89 2,097 2,153 2,096 2,174
MEUR 300 2025 1.25 3,046 3,143 2,984 3,151
MUSD 100 2027 4.06 905 1,057 817 1,018
MEUR 300 2029 0.88 3,057 3,243 2,993 3,332
MEUR 300 2031 0.25 3,019 3,079 — —
16,054 16,691 14,755 15,715
MSEK 2021
1)
2020
Salaries, wages and other remuneration 798 768
Social charges (whereof post- employment benefit expense) 466 (154) 444 (186)
1) 2021 includes cost of MSEK 59 related to 2020s short-term variable salary programme.
See Note 23 to the Consolidated financial statements for informa-
tion on remuneration to the Board and President as well as men
and women in management and the Board. Refer to Note 25 to
theConsolidated financial statements for the average number of
employees and to Note 24 to the Consolidated financial statements
for fees to the auditors.
11 Loans
13 Contingent liabilities
MSEK 2021 2020
General partner 4 1
Other contingent liabilites 24 22
28 23
General partner relates to liabilities in limited partnership
Bagaregården 16:7.
Other contingent liabilities refer to guarantee commitment
regarding pension liabilities in the Swedish subsidiaries.
NOTES PARENT COMPANY
105
SKF Annual Report 2021
Proposed distribution of surplus
Fair value reserve SEK 162,583,341
Retained earnings SEK 20,716,903,273
Net profit for the year SEK 2,747,066,008
Total sur plus SEK 23,626,552,622
The Board of Directors and the President recommend
to the shareholders, a dividend of SEK 7.00 per share
1)
SEK 3,187,457,476
2)
to be carried forward:
Fair value reserve SEK 162,583,341
Retained earnings SEK 20,276,511,805
SEK 23,626,552,622
The results of operations and the financial position of the Parent Company, AB SKF, and the Group for
the year 2021 are given in the income statements and in the balance sheets together with related notes.
The Board of Directors and the President certify that the annual financial report has been prepared in accordance with
generally accepted accounting principles in Sweden and that the consolidated accounts have been prepared in accordance
with the international set of accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament
and of the Council of 19 July 2002 on the application of international accounting standards, and give a true and fair view of
the position and profit or loss of the Company and the Group, and that the management report for the Company and for the
Group gives a fair review of the development and performance of the business, position and profit or loss of the Company
and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.
Gothenburg, 2 March 2022
Hans Stråberg, Chairman
Hock Goh, Board member
Barb Samardzich, Board member
Colleen Repplier, Board member
Geert Follens, Board member
Håkan Buskhe, Board member
Susanna Schneeberger, Board member
Rickard Gustafson, President and CEO,
Board member
Jonny Hilbert, Board member
Zarko Djurovic, Board member
Our auditors’ report for this Annual Report and the consolidated Annual Report was issued 2 March 2022.
Deloitte AB
Hans Warén
Authorized Public Accountant
1) Suggested record day for right to dividend, 28 March 2022.
2) Board Members’ statement: The members of the Board are of the opinion that the proposed dividend is justifiable considering the demands on Company
and Group equity imposed by the type, scope and risks of the business and with regards to the Company’s and the Group’s financial strength, liquidity and
overall position.
PROPOSED DISTRIBUTION OF SURPLUS
106
SKF Annual Report 2021
AUDITOR’S REPORT
Auditor’s report
To the general meeting of the shareholders of AB SKF (publ)
corporate identity number 556007-3495
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of
AB SKF (publ) for the financial year 2021-01-01–2021-12-31.
Theannual accounts and consolidated accounts of the company
areincluded on pages 14–105 in this document.
In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly, in all
material respects, the financial position of the parent company as
of 31 December 2021 and its financial performance and cash flow
for the year then ended in accordance with the Annual Accounts
Act. The consolidated accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material
respects, the financial position of the group as of 31 December
2021 and their financial performance and cash flow for the year
then ended in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, and the Annual Accounts
Act. The statutory administration report is consistent with the
other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of share-
holders adopts the income statement and balance sheet for the
parent company and the group.
Our opinions in this report on the annual accounts and consoli-
dated accounts are consistent with the content of the additional
report that has been submitted to the parent company’s audit com-
mittee in accordance with the Audit Regulation (537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards
on Auditing (ISA) and generally accepted auditing standards in
Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibility section. We are independ-
ent of the parent company and the group in accordance with pro-
fessional ethics for accountants in Sweden and have otherwise
fulfilled our ethical responsibilities in accordance with these require-
ments. This includes that, based on the best of our knowledge and
belief, no prohibited services referred to in the Audit Regulation
(537/2014) Article 5.1 have been provided to the audited company
or, where applicable, its parent company or its controlled compa-
nies within the EU.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinions.
Other information
The audit of the annual accounts for the fiscal year 2020-01-01
–2020-12-31 was performed by another auditor who signed the
audit report 2 March 2021 without exceptions in the Annual
Report.
Key Audit Matters
Key audit matters of the audit are those matters that, in our pro-
fessional judgment, were of most significance in our audit of the
annual accounts and consolidated accounts of the current period.
These matters were addressed in the context of our audit of, and in
forming our opinion thereon, the annual accounts and consolidated
accounts as a whole, but we do not provide a separate opinion on
these matters.
Valuation of Goodwill
As of 31 December 2021, AB SKF (publ) accounts for goodwill in
the consolidated balance sheet amounting to MSEK 10 924. The
value of the goodwill is dependent on future income and profitabil-
ity in the cash-generating units, to which the goodwill refers, and
isassessed for impairment at least once a year. Management bases
its impairment test on several judgements and estimates such as
growth, EBIT development and cost of capital (WACC) as well as
other complex circumstances. Incorrect judgements and estimates
may have a significant impact on the group’s result and financial
position. Management has not identified any need for impairment
for any of the cash-generating units within the Group.
For further information, see note 10, where it is described how
management has performed the impairment test together with
important judgements and estimates.
Our audit procedures included, but were not limited to:
• Review and assessment of SKF’s procedures and model for
impairment tests of goodwill and evaluation of the reasonability
of judgements and estimates made, that the procedures are con-
sistently applied and that there is integrity in calculations;
• Verification of input data in calculations including information
from business plans for the forecast period;
• Test of head room for each cash-generating unit by performing
sensitivity analyses; and
• Review of the completeness in relevant disclosures to the financial
reports.
When performing the audit procedures our valuation experts have
been involved.
Other information than the annual accounts and consolidated
accounts
The other information includes the pages 1–13 and 106–159 in
this document which does not include the annual accounts, the
consolidated accounts or our Auditors report.
Our opinion on the annual accounts and consolidated accounts
does not cover this other information and we do not express any
form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consoli-
dated accounts, our responsibility is to read the information identi-
fied above and consider whether the information is materially
107
SKF Annual Report 2021
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board of
Directors and the Managing Director of AB SKF (publ) for the finan-
cial year 2021-01-01–2021-12-31 and the proposed appropria-
tions of the company’s profit or loss.
We recommend to the general meeting of shareholders that the
profit to be appropriated in accordance with the proposal in the
statutory administration report and that the members of the Board
of Directors and the Managing Director be discharged from liability
for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the group
in accordance with professional ethics for accountants in Sweden
and have otherwise fulfilled our ethical responsibilities in accord-
ance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors and the Managing Director are responsible
for the proposal for appropriations of the company’s profit or loss.
At the proposal of a dividend, this includes an assessment of
whether the dividend is justifiable considering the requirements
which the company’s and the group’s type of operations, size and
risks place on the size of the parent company’s and the group’s
equity, consolidation requirements, liquidity and position in gen-
eral.
The Board of Directors is responsible for the company’s organi-
zation and the administration of the company’s affairs. This
includes among other things continuous assessment of the com-
pany’s and the group’s financial situation and ensuring that the
company’s organization is designed so that the accounting, man-
agement of assets and the company’s financial affairs otherwise
are controlled in a reassuring manner. The Managing Director shall
manage the ongoing administration according to the Board of
Directors’ guidelines and instructions and among other matters
take measures that are necessary to fulfill the company’s account-
ing in accordance with law and handle the management of assets in
a reassuring manner.
inconsistent with the annual accounts and consolidated accounts.
In this procedure we also take into account our knowledge other-
wise obtained in the audit and assess whether the information other-
wise appears to be materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this other infor-
mation, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Board of Directors and the
ManagingDirector
The Board of Directors and the Managing Director are responsible
for the preparation of the annual accounts and consolidated
accounts and that they give a fair presentation in accordance with
the Annual Accounts Act and, concerning the consolidated accounts,
in accordance with IFRS as adopted by the EU. The Board of Direc-
tors and the Managing Director are also responsible for such inter-
nal control as they determine is necessary to enable the prepara-
tion of annual accounts and consolidated accounts that are free
from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts,
TheBoard of Directors and the Managing Director are responsible
for the assessment of the company’s and the group’s ability to con-
tinue as a going concern. They disclose, as applicable, matters
related to going concern and using the going concern basis of
accounting. The going concern basis of accounting is however not
applied if the Board of Directors and the Managing Director intends
to liquidate the company, to cease operations, or has no realistic
alternative but to do so.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether
the annual accounts and consolidated accounts as a whole are free
from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinions. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs and generally accepted
auditing standards in Sweden will always detect a material mis-
statement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual accounts and
consolidated accounts.
A further description of our responsibilities for the audit of the
annual accounts and consolidated accounts is located at the Swed-
ish Inspectorate of Auditors website: www.revisorsinspektionen.se/
revisornsansvar. This description forms part of the auditor´s report.
108
SKF Annual Report 2021
AUDITOR’S REPORT
Auditor’s responsibility
Our objective concerning the audit of the administration, and
thereby our opinion about discharge from liability, is to obtain audit
evidence to assess with a reasonable degree of assurance whether
any member of the Board of Directors or the Managing Director in
any material respect:
• has undertaken any action or been guilty of any omission which
can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations
of the company’s profit or loss, and thereby our opinion about this,
is to assess with reasonable degree of assurance whether the pro-
posal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with generally
accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or that
the proposed appropriations of the company’s profit or loss are not
in accordance with the Companies Act.
A further description of our responsibilities for the audit of the
management’s administration is located at the Swedish Inspectorate
of Auditors website: www.revisorsinspektionen.se/revisornsansvar.
This description forms part of the auditor´s report.
The auditor’s examination of the Esef report
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also examined that the Board of Directors and
the Managing Director have prepared the annual accounts and
consolidated accounts in a format that enables uniform electronic
reporting (the Esef report) pursuant to Chapter 16, Section 4 a of
the Swedish Securities Market Act (2007:528) for AB SKF (publ) for
the financial year 2021.
Our examination and our opinion relate only to the statutory
requirements.
In our opinion, the Esef report [#checksum] has been
prepared in a format that, in all material respects, enables
uniform electronic reporting.
Basis for opinion
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in more
detail in the Auditor’s responsibility section. We are independent of
AB SKF (publ) in accordance with professional ethics for account-
ants in Sweden and have otherwise fulfilled our ethical responsibili-
ties in accordance with these requirements.
We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors and the Managing Director are responsible
for the preparation of the Esef report in accordance with the Chap-
ter 16, Section 4 a of the Swedish Securities Market Act
(2007:528), and for such internal control that the Board of Direc-
tors and the Managing Director determine is necessary to prepare
the Esef report without material misstatements, whether due to
fraud or error.
Auditor’s responsibility
Our responsibility is to obtain reasonable assurance whether the
Esef report is in all material respects prepared in a format that
meets the requirements of Chapter 16, Section 4(a) of the Swedish
Securities Market Act (2007:528), based on the procedures
performed.
RevR 18 requires us to plan and execute procedures to achieve
reasonable assurance that the Esef report is prepared in a format
that meets these requirements.
Reasonable assurance is a high level of assurance, but it is not a
guarantee that an engagement carried out according to RevR 18
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the Esef report.
The audit firm applies ISQC 1 Quality Control for Firms that Per-
form Audits and Reviews of Financial Statements, and other Assur-
ance and Related Services Engagements and accordingly maintains
109
SKF Annual Report 2021
a comprehensive system of quality control, including documented
policies and procedures regarding compliance with professional
ethical requirements, professional standards and legal and regula-
tory requirements.
The examination involves obtaining evidence, through various
procedures, that the Esef report has been prepared in a format
that enables uniform electronic reporting of the annual accounts
and consolidated accounts. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of mate-
rial misstatement in the report, whether due to fraud or error. In
carrying out this risk assessment, and in order to design audit pro-
cedures that are appropriate in the circumstances, the auditor con-
siders those elements of internal control that are relevant to the
preparation of the Esef report by the Board of Directors and the
Managing Director, but not for the purpose of expressing an opin-
ion on the effectiveness of those internal controls. The examination
also includes an evaluation of the appropriateness and reasonable-
ness of assumptions made by the Board of Directors and the Man-
aging Director.
The procedures mainly include a technical validation of the Esef
report, i.e., if the file containing the Esef report meets the technical
specification set out in the Commission’s Delegated Regulation (EU)
2019/815 and a reconciliation of the Esef report with the audited
annual accounts and consolidated accounts.
Furthermore, the procedures also include an assessment of
whether the Esef report has been marked with iXBRL which ena-
bles a fair and complete machine-readable version of the consoli-
dated statement of financial performance, financial position,
changes in equity and cash flow.
Deloitte AB, was appointed auditor of AB SKF (publ) by the gen-
eral meeting of the shareholders on 25 March 2021 and has been
the company’s auditor since 25 March 2021.
Gothenburg, March 2, 2022
Deloitte AB
Hans Warén
Authorized Public Accountant
110
SKF Annual Report 2021
Sustainability statements
1)
General disclosures
Organizational profile
.......................................... 111
Strategy
..................................................................... 112
Ethics
.......................................................................... 113
Governance
............................................................. 113
Stakeholder engagement
.................................... 114
Reporting practices
.............................................. 115
SKF’s material topics
Economic category
Economic performance ....................................... 117
Anti-corruption
..................................................... 118
Anti-competitive behavior
................................. 118
Customer sustainability performance
........... 119
Environmental category
Energy ........................................................................ 119
Emissions
.................................................................. 119
Materials
.................................................................. 123
Water
.......................................................................... 123
Effluents and waste
............................................. 123
Environmental compliance
................................ 123
Social category
Employment ............................................................ 126
Labour management relations
........................ 127
Occupational health and safety
....................... 128
Training and education
....................................... 130
Diversity and equal opportunity
..................... 131
Human rights
......................................................... 133
Supplier assessments
......................................... 135
Socioeconomic compliance
............................... 136
EU Taxonomy
........................................................... 137
CONTENTS
This report has been prepared in accordance
with the GRI Standards “Core” option.
The reader will find relevant sustainability
information in each part of the report. These
statements provide SKF’s stake holders with
information on the Group’s sustainability
performance.
Topics related to the Annual Report
In addition to the information provided in this
Annual Report, related topics can be found at
skf.com/ar2021.
• GRI content index
1)
• CO
2
e emission data
• Environmental performance data
• Articles of Association
• SKF Code of Conduct
• SKF Environmental, Energy, Health
and Safety (EHS)Policy
• Manufacturing units 2021
• TCFD Report
• Green Bond Investor Letter
and Impact Report
• SDG analysis
About this report
Statutory Sustainability Report
SKF has prepared a separate report according
to the Swedish Annual Account Act chapter 6,
§ 11 on sustain ability reporting and reports
on the topics:
• Business model pages 22–23
• Anti-corruption page 118
• Climate and environment
pages 119–125
• Employees pages 126–132
• Human rights and other relevant
social topics pages 133–136
• EU Taxonomy page 137
Risks associated with the topics above are
found in connection to the topics in SKF’s
overall risk management on pages 42–44
andon page 112.
1) Documents subject to limited assurance by SKF’s auditors.
SUSTAINABILITY STATEMENTS
111
SKF Annual Report 2021
General disclosures
Organizational profile
General Disclosures – GRI 102 2016
102–01 Name of the organization
AB SKF
102-02 Activities, brands, products and services
The SKF Group is a leading global supplier of products, solutions
and services within bearings, seals, services and lubrication sys-
tems. Services include technical support, maintenance services,
condition monitoring, asset efficiency optimization, engineering
consultancy and training. For information on SKF’s brands, please
refer to skf.com/brands.
102-03 Location of headquarters
Sven Wingquists Gata 2 in Gothenburg, Sweden.
102-04 Location of operations
SKF operations are global. The Group has manufacturing opera-
tions in 22 countries and direct sales channels in 70 countries.
For more information please refer to SKF’s global presence on
pages 32–41.
102-05 Ownership and legal form
AB SKF, listed at Nasdaq Stockholm, Large cap. For more informa-
tion about the SKF share, see pages 46–47.
102-06 Markets served
SKF is a global actor, with business across all geographical markets
and major customer industries. Pages 6–8 and 32–39 provide an
overview of geographies and industries served.
102-07 Scale of the organization
Represented in 130 countries, 42,602 employees, 15 technical
centres and 87 manufacturing sites. Net sales in 2021 amounted
toSEK 81,732 million.
Total capitalization broken down in terms of debt and equity
are presented in the financial statements on page 53. In 2021,
SKF delivered 429,825 tonnes of bearings, as well as seals,
condition monitoring, lubrication systems and services.
102-08 Information on employees and other workers
Employees and other workers by employment type
Permanent Tempor ary Agency Total
2021
White
collar
Blue
collar
White
collar
Blue
collar
Western Europe 9,303 10,327 161 303 1,386 21,480
Asia and Pacific 2,968 6,342 4 385 2,547 12,246
North America
(incl. Mexico) 1,755 3,321 20 2 167 5,265
Eastern and
Central Europe 847 2,598 29 782 164 4,420
Latin America 543 2,480 0 110 55 3,188
Africa and
Middle East 277 44 1 0 6 328
Total 15,693 25,112 215 1,582 4,325 46,927
Data was collected from the Group’s financial consolidation system
per all operational units within the Group. The numbers represent
headcount per year-end December 2021.
Employees by contract and region
2021 Full time Part time
Western Europe 19,226 868
Asia and Pacific 9,696 3
North America (incl Mexico) 5,096 2
Eastern and Central Europe 4,243 12
Latin America 3,101 32
Africa and Middle East 320 2
Total 41,683 919
Employees by gender and contract
2021 Full time Share, % Part time Share, %
Men 33,057 79% 316 34%
Women 8,626 21% 603 66%
Total 41,683 100% 919 100%
Gender and contract data is extrapolated from different sources
using percentage of full time and part time per gender from local
People Experience systems and applying these percentages to the
total headcount per geographic area.
102-09 Supply chain
SKF’s downstream value chain serves some 40 different industries
in 130 countries. To serve the diverse customer base in these
markets in the best way, SKF owns and operates 87 manufacturing
plants across the world. SKF directly employs over 26,000 people
in manufacturing.
Reflecting its global operations, SKF sources materials and
services from suppliers around the world. The purchased material
consists of steel raw material, such as bars, wires, tubes and strips,
and steel-based components, such as rings, balls, rollers and sheet
metal parts and other direct material, as well as subcontracted
andtraded products. In addition to direct materials, SKF sources
shop supplies, capital equipment and various types of services.
Tosupport SKF’s global manufacturing footprint, SKF has sourcing
offices around the world in Europe, China, India and in the Americas.
About 90% of supplies to SKF factories comes from local or regional
suppliers. The total annual spend of the SKF Group is around
SEK45 billion and roughly around 1,100 suppliers make up80%
ofthe total spend by volume. For more information please refer
tothe Supplier assessments section on pages 135–136.
SUSTAINABILITY STATEMENTS
112
SKF Annual Report 2021
102-10 Significant changes to the organization
and its supply chain
In 2021, SKF acquired EFOLEX AB and Rubico Consulting AB.
102-11 Precautionary principle or approach
As required by the International Chamber of Commerce Charter and
referring to the RioDeclaration on Environment and Development,
SKF applies aprecautionary approach in its development work.
Conservative assumptions are also used for any claims made by
SKF regarding product or operational performance.
102-12, 102-13 External initiatives and Membership
of associations
SKF endorses or subscribes to a number of internationally recog-
nized principles, charters and guidelines which promote sustainable
and ethical business practices. The main ones are:
• The United Nations Global Compact, which is a strategic policy
initiative for businesses that are committed to aligning their
operations and strategies with ten universally accepted principles
in the areas of human rights, labour, environment and anti-
corruption. SKF has participated in the Global Compact since
2006. SKF Annual Report is also the Group’s communication
channel on progress for the principles of the Global Compact.
• The International Labour Organization (ILO), which draws up
and oversees international labour standards, bringing together
representatives of governments, employers and workers to jointly
shape policies and programmes promoting decent work for all.
• The International Chamber of Commerce (ICC) is the voice of
world business, championing the global economy as a force for
economic growth, job creation and prosperity.
• The Organization for Economic Co-operation and Development
(OECD) has the mission to promote policies that will improve
theeconomic and social wellbeing of people around the world.
SKF endorses and works to apply the OECD Guidelines for Multi-
national Companies. By doing this, SKF commits to conducting
business in a global context in a responsible manner, consistent
with applicable laws and internationally recognized standards.
• Pursuant to SKF’s net zero scope 1 and 2 emissions by 2030
target, SKF joined the RE100 (Renewable Energy 100) initiative
in 2020. This global initiative brings together some of the world’s
most influential businesses committed to using 100% renewable
electricity.
• Pursuant to SKF’s overall climate strategy and ambitions, SKF
committed to the Science Based Targets initiative (SBTi) in July
of 2021.
• Pursuant to SKF’s net zero scope 3 (upstream) by 2050 target,
SKF joined the SteelZero initiative in2021. This global initiative
brings together industrial users of steel committed to decarboni-
zation of the global steel industry by 2050.
• As part of SKF’s overall Responsible Sourcing strategy, SKF joined
the Responsible Steel Initiative (RSI) in 2021. The RSI is the steel
industry’s first global multi-stakeholder standard and certification
initiative.
• SKF is an active partner in several industry collaborations and
initiatives. The Group holds dialogues with industrial peers on
issues relating to technology and management across relevant
short- and long-term aspects relating to economic, governance,
environmental and social dimensions. SKF takes part in the
World Bearing Association, Transparency International,
Teknikföretagen, the Royal Swedish Academy of Engineering
Sciences, the Swedish Life Cycle Centre and the Inter national
Standardization Organization among others. In addition, SKF
collaborates with a number of internationally recognized
universities on topics such as tribology, materials techno logy,
remote diagnostics, environmental and social sustainability
andmetallurgy.
• SKF maintains a central list of the organizations SKF is a member
of. This list is reviewed annually to make sure that the organiza-
tions are in line with SKF’s values and commitments.
Strategy
102-14 Statement from senior decision-maker
The President’s letter is found on pages 10–13. SKF’s strategic
framework, trends, targets, achievements and outlook are described
throughout the report.
As described in the front section of this report, in February 2022,
SKF has announced and embarked on a revised strategy and organi-
zation. The work to adapt the current organization, processes and
governance relating to sustainability matters in line with this new
strategy is ongoing at the time of writing. The explanations provided
in this section of the report on the governance, organization and
processes related to sustainability reflect the reporting period 2021
and will be updated in subsequent reports.
102-15 Key impacts, risks and opportunities
The United Nations Sustainable Development Goals (SDG) help
to highlight risks and opportunities for businesses globally. The
SDG’s provide a lens to the social change needed to achieve them.
External drivers, trends and opportunities are described on
page 22. SKF’s risk management is described on page 42.
SKF’s materiality analysis, described on page 114, helps the
organization identify sustainability risks in the value chain and
supports the organization to filter out and aggregate the risks that
are material. SKF’s integrated management system and processes
for risk management are critical to integrate, monitor and manage
the risks and opportunities that stem from internal and external
forces – whether social, environmental, legal, political, technological
and/or economic. For example, human rights related issues, where
SKF has worked for many years according to external principles
and charters to integrate human rights risks in its policies and
procedures.
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SKF Annual Report 2021
Ethics
Governance
102-16 Values, principles, standards, and norms
of behavior
The SKF Code of Conduct is the main policy on ethical standards.
There are several related policies, at Group level and in local adap-
tions of the SKF management systems, but the SKF Code of Conduct
is the superior policy. All other policies are subordinate to it. It is
available in 19 languages and publicly available on skf.com/code.
The SKF Ethics and Compliance Reporting Line is available to external
parties on skf.com. SKF employees and others can report concerns
in their own language via a designated web portal or by calling a
local telephone number (telephone service is available only in Brazil
and Mexico). SKF has a strict non-retaliation policy towards anyone
raising concerns in good faith. During 2021, 431 (437) concerns
were reported to the central functions via the SKF Ethics and
Compliance Reporting Line or via other channels. The major types
of concerns reported were discrimination or harassment (23%),
conflict of interest (7%) and bribery (6%). Concerns related to
COVID-19 amounted to 6%. In addition to the concerns reported to
the central functions, grievances related to ethics and compliance
are reported to – and managed by – local management. During
2021, a procedure has been developed for local grievances related
to discrimination and harassment, to be reported centrally.
102-18 Governance structure as per 31 December 2021
The President of the Group, who is also the Chief Executive Officer,
is appointed by the Board and handles the day-to-day management
of the company’s business in accordance with the guidelines and
instructions from the Board. SKF is organized in Industrial Sales
Americas, Industrial Sales Europe and Middle East and Africa,
Industrial Sales Asia, Automotive, SKF Technology and Industrial
Technologies. The responsibility for end-to-end procurement,
manufacturing and logistics is combined into Bearing Operations.
Group Management and the Board of Directors have the ultimate
responsibility to state SKF’s mission and to ensure that the values
and drivers are implemented. The Director of Group Sustainability
reports directly to the Chief Executive Officer and has the task to
assure that all relevant aspects of sustainability are addressed and
integrated into operations and activities throughout the Group. The
Director of Group Sustainability also establishes policies, strategies
and targets related to SKF’s overall sustainability performance.
These in turn drive and support the integration of sustainability into
business practices, processes, operations and staff functions.
Sustainability performance is the responsibility of the operations
and shall be delivered in accordance with the strategic direction and
fundamental requirements as set by Group Management.
The implementation of the sustainability program in the line
organization is driven by the respective SKF areas, their business
units or by country organizations, with direction and coordination
from formal, cross-functional, decision making bodies and
working- groups such as:
• The Responsible Sourcing Committee, established to assure
that SKF’s Code of Conduct for suppliers and sub-contractors
is effectively deployed, and that appropriate measures are taken
when deviations from the Code of Conduct are identified at our
suppliers.
• The Cluster level EHS and Energy reviews, and the operational
EHS network, oversees issues related to management systems,
ISO 9001, ISO 14001, ISO 45001, ISO 50001 and associated
policies and instructions; and coordinates the deployment of the
Group’s related strategy.
• The Group Ethics and Compliance Committee, which oversees
therisks and opportunities related to the ethics and compliance
areas.
• The Global Energy Committee drives and coordinates the pro-
curement of energy, owns and drives the plan to transition to
100% renewable energy for the entire Group.
• The Green Finance team which oversees the Green finance funds
allocation process, reporting , approval and follow up of eligible
projects.
• The Group Health and Safety Committee brings together senior
managers from EHS and People Experience with worker repre-
sentatives from the World Union Council to ensure consultation
and participation with the employee representees at Group level.
In general, EHS and Sustainability topics are integrated into SKF
processes and governance structures – for example, performance
and strategy are regularly addressed by the Bearing Operations
management team. Authority and responsibility are further dele-
gated to the country managers who are appointed by SKF’s Group
Management. Each country and company manager is responsible
for their entity’s performance including financial metrics, social
impact, compliance and other topics as stated in the SKF Group
Policy on Country Manager and Managing Director Roles and
Responsibilities.
The SKF Group values
Empowerment • High ethics
Openness • Teamwork
431
cases reported via the Group’s
whistle blowing system
102-17 Mechanisms for advice and concerns about ethics
SKF employees are requested to report behavior that is not in
linewith SKF’s Code of Conduct to their manager, local People
Experience function or to other senior managers. Employees
canalso raise concerns or seek advice via the SKF Ethics and
Compliance Reporting Line. The reporting line is hosted by a
thirdpart andreports can be made anonymously, unless this is
prohibited bylocal legislation.
SUSTAINABILITY STATEMENTS
114
SKF Annual Report 2021
102-40–102-44 Stakeholder engagement
SKF aims to align its business practices with the needs and expec-
tations from its stakeholders. Stakeholder groups are defined as
entities or individuals that may both influence and be influenced by
SKF’s activities. SKF works in different ways to identify individuals
with whom to engage and establish ongoing dialogue. Connected
tosustainable development, the general rationale is that all these
different stakeholders have specific concerns. Feedback and input
are therefore sought from a wide range of stakeholders and in many
different ways.
The input to SKF’s sustainability activities is collected from
customers, investors and analysts, employees, unions and repre-
sentatives from civil society, and is collected via interviews, surveys,
conferences, meetings and data analysis.
The work to engage with the stakeholder groups is conducted
byrespective functions within the Group (e.g. Investor Relations,
People Experience, Communication, Sales, Bearing Operations,
Purchasing, Legal and Compliance). This includes managing the
direct dialogue and identifying individuals from whom to seek feed-
back. SKF has not made afull stakeholder analysis during 2021 but
has sought and received input to complement the previous analysis
and this has been reflected in minor changes to the materiality
ratings of some topics.
Stakeholder engagement
Approach to
stakeholder engagement
Key topics
and concerns raised
Customers Customer input is sought and received via sales and marketing operations and
activities carried out by the Group. These range from global discussions with key account
managers to daily conversations between customer representatives and SKF’s local
account managers. SKF also collects key issues and concerns from customer surveys
and assessments.
• Climate impact
• Conflict minerals
• Environmental compliance
• Human rights and labour rights
(including health and safety)
• Corruption
Investors
and analysts
SKF takes an active approach in communicating the Group’s strategy and performance
to existing and potential investors, analysts and media. Information is provided through
various channels, such as the quarterly reports, meetings with investors, telephone
conferences, the company’s website and press releases. Capital market days are held to
present the strategy, targets and the different businesses in more detail. SKF receives
feedback from investors via discussions during investor meetings.
• Climate impact and financial climate
risk and opportunities management
• Human rights along the value chain
(including health and safety)
• Cost competitiveness and operational
efficiency
• Digitalization, job development and
manufacturing footprint
Employees
and union
organizations
SKF holds an annual World Union Council meeting during which employee representa-
tives meet with Group Management. This is a form of social dialogue to make sure that
the framework based on the SKF Code of Conduct is deployed across the Group.
Employee represen tatives are also members of SKF’s Board – see SKF’s Corporate
Governance Report, pages 139–146. In addition, SKF carries out periodic employee
feedback surveys to drive continuous improvement on working climate.
• Environment, health and safety
• Employment and competency
development in relation to digital
automation
• Diversity and working climate
• Leadership and change management
Civil society The communities in which SKF operates are important stakeholders for the company
and their input helps shape local SKF activities. Local SKF organizations interact with
their surrounding communities through various activities and initiatives ranging from
business related matters to volunteer work, charity work, sponsoring and local network
collaboration. Local media is also considered to represent civil society. Formal and
informal networks are used to share experiences and ideas with other companies, topic
experts andNGOs.
• Climate impact
• General responsible business
conduct, tax transparency
• Connection between the Group’s
strategy and the Global Goals
Suppliers Suppliers’ input on material topics is managed via SKF’s responsible sourcing programme.
Local sourcing offices enable close communication on daily operations. On-site audits
and training provide feedback to SKF on suppliers’ performance related quality and sus-
tainability as part of a total cost assess ment of supplier development. The SKF Code of
Conduct is the standard used during audits and screening.
• Employment procedures
• Health and safety
• Overtime
• Systematic environmental
management
Collective bargaining agreements
SKF holds collective bargaining agreements in most countries
where it is present. The 20 countries that are part of the SKF World
Union Council; Argentina, Austria, Brazil, Bulgaria, China, Czech
Republic, France, Germany, India, Indonesia, Italy, Malaysia, Mexico,
Poland, Spain, South Korea, Sweden, the U.K., Ukraine and USA
– all have collective bargaining agreements. These countries make
up over 95% of all blue-collar workers (around 25,000 of SKF’s total
workforce of 42,000). If the workers at a site choose not to be
unionized, or if there are restrictions to the independence of a trade
union, the employees in the country are still covered by the SKF
Framework Agreement and are part of a collective bargaining
group. In addition to the 20 countries above, SKF employed around
1,000 people in blue-collar roles in sales, logistics and manufactur-
ing, of which the biggest countries are: Colombia, Finland, Peru,
Russia, Singapore, South Africa and Zambia.
In 2021, annual European World Union Council (EWC) and World
Union Council (WUC) meetings was held in October,due to the
pandemic, in an online format with online translations. Due to the
change in management, one extraordinary online meeting for both
EWC and WUC was held in spring 2021.
115
SKF Annual Report 2021
Impact mainly on
Material topic GRI standard Suppliers SKF Customers Society
Economic topics
Economic performance
GRI 201 Economic performance 2016
Anti-corruption and Anti-
competitive behavior
GRI 205 Anti-corruption 2016
GRI 206 Anti-competitive behaviour 2016
Customer sustainability
performance
n.a
Environmental topics
Energy and emissions GRI 302 Energy 2016
GRI 305 Emissions 2016
Materials, water, effluents,
and waste, environmental
compliance
GRI 301 Material 2016
GRI 303 Water and effluents 2016
GRI 306 Effluents 2016, Waste 2020
Social topics
Employment
GRI 401 Employment 2016
Labour management relations
GRI 402 Labour management relations 2016
Occupational health and safety
GRI 403 Occupational health and safety 2018
Training and education
GRI 404 Training and education 2016
Diversity and Equal opportunity
GRI 405 Diversity and equal opportunity 2016
Human rights GRI 406 Non-discrimination 2016
GRI 407 Freedom of association and collective
bargaining 2016
GRI 408 Child labour 2016
Supplier assessments GRI 414 Supplier social assessment 2016
GRI 308 Supplier environmental assessment 2016
Socioeconomic compliance GRI 419 Socioeconomic compliance 2016
102-45 Entities included in the consolidated financial
statements
See pages 100–102.
102-46 Defining report content and topic boundaries
SKF seeks to provide stakeholders with relevant information
regarding operational, financial, environmental and social perfor-
mance, based on the input provided to the Group as presented in
the previous section. To do this, SKF applies reporting principles
of stakeholder inclusiveness, sustainability context, materiality and
completeness. The topic boundaries have been evaluated from an
Reporting practices
organizational and business context, as well as from a stakeholder
perspective. It is also evaluated in terms of impact and contribution
to the UN Sustainable Development Goals.
When approaching stakeholders proactively, the respondents
are usually provided a shortlist of potentially material topics. The
stake holders are asked to highlight the most significant topics for
their assessments and decisions related to SKF. They are also asked
to add additional issues or remove what they consider irrelevant.
SKF uses this input, together with risk assessments, and general
impact assessments to define the significant environmental, eco-
nomic and social impacts.
SUSTAINABILITY STATEMENTS
116
SKF Annual Report 2021
102-47 List of material topics
When combining the feedback above with previously collected input
from other stakeholder groups, as presented on page 114, the
result is translated and presented in terms of GRI Standard topics.
All these topics are considered material and relevant to report.
The context, scope and boundaries of each topic are described
further in the specific disclosures on pages 117–136, along with
themanagement approach.
Loss of Biodiversity is an increasingly critical challenge for the
planet. Due to the nature of SKF’s business, operations and value
chain, the possibility to exert direct influence on this is relatively
limited and therefore this is not included as a material topic.
However, the work done on topics such as climate change alleviates
some of the drivers of biodiversity loss. Certain SKF solutions and
local community based actions also address biodiversity.
102-48 Restatements of information
On pages 121 to 123, as defined by the GHG reporting protocol,
energy and CO
2
e statements relating to scope 1 and 2 emissions
have been restated due to acquisitions and divestments.
The reporting scope of transportation scope 3 emissions has
been increased in 2021 and the previous data has been re-stated
accordingly (page 123).
102-49 Changes in reporting
During 2021 SKF has further explained the reported scope of
scope 3 green house gas emissions related to purchased materials
– specifically steel and forgings, see pages 122-123.
Cajamar AM and Cajamar ICS have been consolidated under one
site. St Cyr AM and St Cyr IM have been consolidated under one site.
Walldorf Berlin replaces Hockeneim (closed) and includes Berlin.
The following sites are Included for the first time in 2021:
• Jordanesia, Brazil
• Dexter, USA
• Moody, USA
Updates to the materiality analysis
Input received from stakeholders during 2021 has been added to
complement previously collected feedback. The main new input
sought pro-actively in 2021 comes from senior SKF managers,
SKFcustomers, employees and unions.
No significant changes were identified in the updated analysis.
There were no new or removed material topics.
102-50 Reporting period
1 January to 31December 2021.
102-51 Date of most recent report
The previous report was published on 3 March 2021.
102-52 Reporting cycle
Annual
102-53 Contact point for questions regarding the report
Johan Lannering
Director Sustainability
email: johan.lannering@skf.com
102-54 Claims of reporting in accordance with the
GRI Standards
This report has been prepared in accordance with the
GRI Standards: Core option.
102-55 GRI content index
A complete GRI content index is available together with topics
related to the Annual Report on skf.com/ar2021
102-56 External assurance
To ensure SKF’s stakeholders and readers of the Group’s sustaina-
bility report are confident in the transparency, credibility and
materiality of the information published, SKF Group Management
has decided to submit the sustainability report for third-party
review and verification. This has been done since the year 2000.
Thesustainability report is subject for limited assurance by our
auditors in accordance with the standard ISAE 3000. Please refer
to the Auditor’s Limited Assurance Report on the Sustainability
Report and statement regarding the Statutory Sustainability
Report on page 138.
The Board has also approved this report.
117
SKF Annual Report 2021
Material topic – GRI 201: Economic Performance 2016
Management approach – General disclosures 2016
103-1 Materiality and boundaries
Economic performance is considered to be material for the SKF
Group and its subsidiaries. The consolidated financial statements
include the Parent Company, AB SKF and those companies in which
it directly or indirectly exercises control.
103-2–103-3 Management approach, its components
and evaluation
SKF is a profit-driven organization. The financial performance is the
overall indicator of the economic impact SKF has on society. All SKF
entities are accountable for their financial and economic performance.
SKF reports its financial performance in accordance with IFRS.
Please refer to page 62 for more information about SKF’s financial
accounting policies.
201-1 Direct economic value generated and distributed
The data from the financial statements has been used to break down
economic value generated and distributed as described below.
Economic value generated
and distributed (MSEK) 2021 2020
Net sales 81,732 74,852
Revenue from financial investments
and other operating income 506 290
Economic value generated 82,238 75,142
Operating costs – 47,618 –46,074
Employee wages and benefits –24,270 –23,000
Economic value distributed to
providers of capital –3,496 –3,249
Economic value distributed to
government (income taxes) –2,484 –1,826
Economic value distributed –77,868 –74,149
Economic value retained 4,370 993
Economic value generated
includes net sales, interest income, and
profit on sale of assets and businesses, net.
Operating costs include total operating expenses, plus the net
ofother operating income and expenses, plus financial net, less
employee wages and benefits, less revenues from financial invest-
ments and other operating income, less interest expenses.
Employee wages and benefits includes costs related to wages and
salaries including social charges.
Economic value distributed to providers of capital includes sug-
gested dividends to SKF’s shareholders and interest expenses.
Economic value distributed to government includes Group income
taxes. For the actual payment of taxes during the year, see consoli-
dated statement of cash flow on page 58.
201-2 Financial implications and other risks and
opportunities for the organization’s activities
due to climate change
SKF’s business is diversified in terms of products, customers,
geographic markets and industries. The Group usually divides its
customers into some 40 different industries. SKF owns and opera-
tes around 87 manufacturing units in 22 countries around the
world. This diversification reduces SKF’s overall exposure to risks
related to climate change. SKF reports to CDP and has aligned it's
reporting approach with the TCFD framework. A detailed TCFD
report is included in the Topics Related at SKF.com/ar2021.
Business risks and opportunities
SKF sees it as a key element in its strategy to provide products and
offerings which are sustainable, low carbon and which can improve
customers’ operations in these regards. SKF is also focusing on
markets and industries that will benefit and grow due to the actions
needed to manage the climate crisis. One example is SKF’s early
participation in the industrialization of wind and tidal energy. Another
example is SKF’s close partnerships with automotive customers in
electrification and to improve energy efficiency of drivelines. Many
industries, especially those producing vehicles or input material to
vehicles are subject to similar transformational changes. SKF is
following this on an industry, as well as on a customer level, to
develop new technologies for new demands. Please find further
details in the TCFD report which is included in the Topics Related
at SKF.com/ar2021.
Please see pages 6–7 for an overview of SKF’s business areas.
SKF operations
SKF has mapped all its manufacturing units from a physical cli-
mate risk perspective (risks of flooding and strong wind). Climate
change effects are considered when deciding where to locate new
manufacturing sites.
One of the most immediate and obvious financial risks related to
climate change for SKF’s value chain is an increased cost of energy.
It is with high uncertainty how and where, e.g. CO
2
taxation would
beimplemented, and SKF chooses to address this as an integrated
risk of energy cost. The best way to mitigate this risk is to reduce the
energy demand. In terms of spend, electricity makes up most of the
energy cost with a smaller share of natural gas, biomass, heat, fuel
oil and LPG. To give an indication of the financial impact, a 20%
increase in costs related to energy would impact the Group's result
by around MSEK 260. For more on SKF’s climate objectives, please
refer to Climate impact and energy on page 119.
Supply chain
A general cost increase in energy would also impact the cost of raw
materials and components purchased by SKF. Most direct materials
undergo several refinement steps before being procured by SKF.
This makes SKF less sensitive to raw material cost fluctuations,
buthas traditionally made SKF more sensitive to other operational
costs at suppliers. Regardless, energy cost remains one major cost
driver in the supply chain. SKF has established an objective for
energy intensive major suppliers to implement the ISO 50001
energy management standard to mitigate cost risks and to reduce
environmental impact.
Economic Performance
SKF’s material topics
SUSTAINABILITY STATEMENTS
118
SKF Annual Report 2021
Material topics – GRI 205: Anti-corruption 2016 and
GRI 206: Anti-competitive Behavior
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
SKF addresses anti-corruption and anti-trust as part of the Group’s
compliance program. The compliance program includes the areas
and supporting processes included in the illustration below.
SKF
compliance
framework
WHY
Purpose
HOW
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pillars
Policies and
guidelines
Management
commitment and
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assessment
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SKF has, over many years, had a strong focus on business ethics in
its corporate values. This work has led to an increased number of
reported concerns and a willingness to discuss ethical dilemmas
more openly. Openness and transparency are key to a successful
compliance program. SKF continues to work on fully incorporating
these values in the corporate culture in all regions.
103-2–103-3 Management approach, its components
andevaluation
The function called Group Assurance is, together with Group Comp-
liance, responsible for internal control, compliance, internal audit
and enterprise risk management of the Group.
SKF has Group policies and instructions setting out the expecta-
tions on how to act. Processes, controls, guidelines, training and
tools are integrated parts of the program and are available for
employees on the Group’s internal websites. SKF’s anti-corruption
efforts focus on regions and activities with a high corruption risk.
The regional risk assessment is mainly based on the Transparency
International Corruption Perception Index.
SKF has dedicated compliance resources for all high-risk regions:
Central and East Europe, China, India, Latin America, Middle East
and Africa, Russia and CIS, and South-East Asia. Together with
Group Compliance & Assurance, each region develops a compliance
activity plan which is approved by the Audit Committee of AB SKF
on a yearly basis.
During 2021, SKF launched mandatory e-learnings in Data pri-
vacy, Export Control and Conflicts of Interest with 88%, 85% and
78% completion rates respectively. (Conflict of Interest was laun-
ched in December 2021). Also, a mandatory e-learning on Antitrust
compliance was launched for employees in Sales Europe.
The number of ethical concerns reported via SKF ethics & comp-
liance reporting line reported 2021 was 431, this included 26
reports related to COVID-19.
205-1 Operations assessed for risks related to corruption
All units are required to perform yearly compliance risk assess-
ments. One of the main challenges, and thus one of the focus areas,
is to create a commitment by local management to take ownership
of compliance risk management, including development and imple-
mentation of mitigating activities. The main corruption risk is when
distributors and agents are used to represent SKF when interacting
with governments or state-owned entities in regions with a high
corruption risk. During 2021, compliance risk assessments have
been conducted in Asia Pacific, China, Eastern Europe, Latin
America, MEA and Russia.
At SKF’s manufacturing units, risk-based ethics and compliance
reviews are carried out, in conjunction with environmental, health
and safety audits. The purpose is to assist units in their work to
identify and address specific ethics and compliance risks, including
corruption. During 2021, eleven such reviews have been reported.
205-3 Confirmed incidents of corruption and actions taken
During 2021, SKF substantiated 15 incidents of corruption (incl.
bribery, fraud, conflict of interest). As a consequence, four employees
have left SKF.
One distributor contract in India was terminated during 2021
due to involvement in corruption.
There were no reported public legal cases involving corruption.
206-1 Legal actions for anti-competitive behavior,
anti-trust and monopoly practices
For any ongoing investigations, please refer to note 19 on page 82.
Anti-corruption and Anti-competitive Behavior
SKF has also incorporated risk management in the purchasing
strategies. One risk area is supply issues linked to natural disasters.
The risk mitigation actions will support suppliers to reduce the
potential impact of climate change, such as extreme weather events.
In general, the costs associated with actions to commercialize
opportunities and to mitigate risks related to climate change are
embedded in other costs, such as research and development, main-
tenance and investment budgets, and cannot be reported separately.
Direct impact on
UN Sustainable
Development Goals
119
SKF Annual Report 2021
Material topic, SKF indicator: Customer sustainability
performance
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
For many years, the Group has built up knowledge around lifecycle
management and how environmental and social impacts can be
reduced or avoided. Studies show that the greatest impact is during
the use phase of SKF’s products in customer applications and sys-
tems. SKF can enable improvements in customers’ sustainability
performance through products, services, business models and
value propositions. The improvements include for example in -
creased energy efficiency, reduced CO
2
emissions, improved safety,
reduced water use, increased lifetime of applications, in creased
material efficiency, reduced noise levels and more. The Group also
brings value to customers through the way we run ouroperations
as a responsible business partner.
Recent years’ development, with an increased understanding of
the connection between economic, social and environmental issues
and the implementation of the Sustainable Development Goals
(SDGs) from the United Nations has provided the Group with the
opportunity to collaborate more closely with customers to create
Customer sustainability performance
and deliver ever more sustainable solutions. In doing so, the Group
has carefully assessed the targets and activities proposed by the
Agenda 2030 and mapped risks and opportunities related to both
internal activities and how SKF can further support customers
withengineered solutions.
103-2–103-3 Management approach, its components
andevaluation
SKF has made cleantech one of its strategic focus areas and will
continue to add technologies and offerings to the value proposi-
tions. The Group enables and drives technology development in
industries such as renewable energy generation and sustainable
transport systems, including electric vehicles. Moreover, the Group
develops new circular business models and works in collaboration
with its customers to improve sustainability performance of their
applications and systems. To support that work, SKF has estab-
lished guidelines for product development, environmental pre-
evaluation tools and guidelines for quantifying and communicating
customer sustainability performance. As part of the Group’s climate
objectives, SKF provides yearly aggregated revenue data from SKF
customer solutions enabling climate change mitigation in these
areas: renewable energy, electric vehicles, recycling industry and
bearing remanufacturing. The total revenues of these areas
amounted to SEK 6,8 billion in 2021.
SEK billion 2021 2020 2019
Total revenues from renewable energy,
electric vehicles, recycling industry and
bearing remanufacturing 6.8 6.6
1)
5.2
1) Previously published figures for 2020 have been restated to reflect a change
in classification.
Material topics – GRI 302: Energy 2016 and
GRI 305: Emissions 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
Climate change presents a critical challenge for businesses, govern-
ments and society. The ability of SKF to run its operations and
supply chain in a highly energy and carbon efficient manner reduces
the environmental impact of the Group and increases SKF’s compe-
titive advantage. At the same time, the Group focus on developing
and offering customer solutions that enable energy efficiency and
greenhouse gas reductions is a key part of the overall strategy.
The Group therefore focuses on improving energy efficiency and
driving down GHG emissions from its own operations, its extended
supply chain as well as helping to enable improvements for its
customers.
103-2–103-3 Management approach, its components
and evaluation
In July 2021, SKF signed up to the Science Based Targets initiative
(SBTi) and committed that all its climate targets shall be in line with
the Paris Agreement to reach net zero global emissions by 2050 at
the latest, to limit global warming to 1.5°C.
The Group’s climate objectives are based on this commitment
and a comprehensive understanding of SKF’s life cycle greenhouse
gas emissions. The graph on the next page shows an estimation of
all relevant GHG impacts from SKF in 2019 from raw material
extraction to finished product at the customer.
In line with this, during 2021 SKF announced its goal to achieve
net zero greenhouse gas emissions (from raw material to finished
product delivered to the customer) by 2050 – adding all relevant
upstream scope 3 impacts to the existing scope 1, 2 and 3 impacts
which SKF already reports and addresses. This goal includes and
incorporates a number of sub-goals and interim targets such as the
existing goals for 40% reduction in CO
2
emissions/tonnes sold pro-
duct by 2025, the 40% reduction in CO
2
per tonne of goods shipped
by 2025 and net zero SKF operations by 2030 (scope 1 and 2). It also
introduces a number of new interim (2025, 2030, 2035 and 2040)
goals which are summarized in the table below.
As part of this updated approach and in order to engage with
other stakeholders to drive change, SKF joined the SteelZero and
ResponsibleSteel multi-stakeholder initiatives in 2021.
Climate impact and energy
Direct impact on
UN Sustainable
Development Goals
Direct impact on
UN Sustainable
Development Goals
SUSTAINABILITY STATEMENTS
120
SKF Annual Report 2021
Tonnes CO
2
e
Waste to incineration and landfill
Downstream transportation by SKF
Employee commuting
ICT
Business travel
Manufacturing equipment
SKF operations scope 1
SKF operations scope 2
Indirect material
Upstream transportation
Indirect energy related emissions
– upstream of generation
Direct material
0
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
1,800,000
A deeper explanation of the overall approach can be found on
SKF.com/decarbonizing.
SKF is working to establish robust reporting approaches for those
aspects of the new goals which we have not previously reported.
The Group will increase the scope of reporting to include all these
aspects over the coming two to three years, with highest priority on
the most significant impacts (direct material sourcing).
Scope 2 emissions are calculated using the market-based method
(GHG Protocol, 2015). In this statement, the management approach
along the value chain and total energy and emissions are disclosed.
Purchased direct material Logistics Other up-stream impacts SKF operations
GHG Reporting
Scope
Scope 3 – upstream, expect logistics both upstream and downstream Scope 1 & 2
2025 • ISO 50001 for energy
intensive suppliers.
• 15% reduction in
emissions from forging
and ring suppliers, base
year 2019.
• 40% reduction in CO
2
emissions per tonne of
goods shipped to end
customer, base year
2015.
• Ambition to limit GHG for
business travel to <50% of
2019 figure.
• Goals and follow up
defined for all other
relevant emissions.
• 40% reduction of CO
2
emissions from manu-
facturing per tonne
ofbearings sold, base
year 2015.
• 5% year on year improve-
ment in energy efficiency.
2030 • 32% reduction in
emissions from direct
material, base year 2019.
• SteelZero goals met or
exceeded for steel
suppliers.
35% reduction in transport
related greenhouse gas
emissions, base year 2019.
TBD Net zero emissions
for allSKF operations.
2035 43% reduction in emissions
from direct material, base
year 2019.
55% reduction in transport
related greenhouse gas
emissions, base year 2019.
TBD
2040 60% reduction in emissions
from direct material, base
year 2019.
77% reduction in transport
related greenhouse gas
emissions, base year 2019.
TBD
2050 Net zero emissions
SKF’s own operations
In 2020, SKF announced the objective for manufacturing and other
operations to achieve net zero GHG emissions by 2030. This relates
to scope 1 and 2 emissions and will be achieved by a combination
ofefforts focused on energy and material efficiency, generating
re newable energy, sourcing renewable energy and, as a last resort
to cover any remaining emissions, purchasing carbon offsets. As
part of this approach, SKF joined the RE100 initiative – a signal that
the Group intends to source 100% renewable electricity by 2030.
In 2021, SKF used some 1,772 GWh of energy in its manufac-
turing operations, which has resulted in around 369,881 tonnes of
CO
2
emissions. In addition to ISO 14001:2015 for environmental
management, SKF has an energy management system globally
certified according to ISO 50001:2018. The certificate covers the
45 more energy intensive operations making up about 80% of the
Group’s total energy use. SKF has a centralized function to manage
strategic energy sourcing decisions for the Group, including cost
effective reduction of CO
2
intensity. SKF’s management approach is
decentralized to SKF’s sites and integrated in the environmental
management system. Energy efficiency work at sites is often closely
linked to local maintenance strategies.
To increase focus and accelerate improvements, in both energy
and CO
2
performance, SKF applies a Group wide energy target to
all units within the scope of the ISO 50001 standard. In 2021, SKF
required an improvement in energy performance of 5% compared to
unit, cluster, area or Group energy base line. The base line is esta-
blished using linear regression of the previous two years’ monthly
energy use vs. value added (a measure of production activity, which
is known to correlate with energy demand). This KPI removes dis-
tortions, which impact more simplistic measurements of energy
performance (such as production volume variations) and allows
afocus on the real underlying energy performance. In 2021, the
performance against this target was –1.7% vs. the –5.0% target.
Energy performance improved in 2021, although not enough to
reach the target. This was mainly due to supply chain disruptions
caused by the COVID-19 pandemic which had a negative impact
onproduction and energy efficiency.
Estimated GHG emissions (tonnes), base year 2019
121
SKF Annual Report 2021
Goods transportation
SKF is directly managing most of the goods transportation down-
stream and part of the transportation upstream. The Group works
to reduce CO
2
emissions from transports in four main ways: optimi-
zing transport networks and routing; using energy-efficient modes
of transport with low CO
2
intensity (e.g. ocean and rail instead of
airwhere and when feasible); procuring transport with high fuel
effici ency and low-carbon fuels; and minimizing mileage between
suppliers, factories and end customers (i.e. optimize SKF’s footprint).
Raw material and components
As seen in the graph above, the emissions from raw material and
components (direct materials) are typically the most significant of
all ‘cradle to customer gate’ emissions.
For several years, SKF has worked to influence energy intensive
suppliers by requiring them to implement energy management sys-
tems certified according to ISO 50001. This standardized way of
managing energy and emissions is considered a pragmatic approach
to cut emissions in the upstream value chain.
During 2020 and 2021, SKF has increased its focus on driving
reductions related to raw materials and components. The Group
isworking with the 13 largest steel suppliers (representing 80% of
total steel sourcing by weight) and the 15 largest suppliers of steel
forgings (representing 45% of total forging supply).
SKF has started to focus on this because steel and forgings are
by far SKF's most energy and carbon intensive suppliers andsteel
represents more than 95% of weight total direct material purchased
by the company.
The focus is applied in several ways. Firstly, the companies in
scope are required to report the scope 1 and 2 emissions which
result from the materials supplied to SKF. The aggregated report
ofthis data is included in this report. Secondly, the suppliers are
required to explain and present their plans to improve energy
efficiency and CO
2
per tonne of output. SKF has developed a tool
which allows product designers and purchasing colleagues to esti-
mate the upstream CO
2
impact of different steel supplier options.
This allows SKF to meet increasing customer focus on reducing the
embedded CO
2
emissions in the products which they buy.
During 2021, SKF started the process to inform and engage the
direct material suppliers in the scope of the Groups new net zero
2050 objective and this work will continue through 2022.
The scope 3 direct material figures presented in this report
represent around 72,6% of the estimated total for this scope (steel,
rings, rolling elements). In line with the Groups net zero 2050 stra-
tegy, SKF will systematically increase the scope of reporting GHG
emissions related to its significant direct material suppliers in the
next few years, with the aim to have at least 95% coverage by 2025.
Business travel
SKF monitors CO
2
emissions from the large majority of business tra-
vel undertaken by its employees. Included in the scope are Argen-
tina, Brazil, Canada, Chile, China, Europe, India, Mexico, Uruguay
and USA. In August 2020, SKF announced the ambition toreduce
CO
2
emissions from business travel by limiting the amount of CO
2
from business travel at 50% of the full year 2019. The ambition com-
mits to stay below this ceiling each year for the coming several years
and will be achieved by significantly increasing the use of digital col-
laboration in order to reduce the need for business travel.
Other upstream impacts
As described in the carbon footprint graph above and Position
Paper referred to previously, there are several other upstream GHG
impacts associated with SKF’s activities. These include upstream
energy related emissions, information and communications techno-
logy (ICT), employee commuting and indirect material purchasing.
These impacts are much less significant compared to those from
SKF operations, direct material purchasing and logistics. In total,
they make up around 15% of the total footprint, nevertheless, as
part of the Group's net zero 2050 commitment, SKF will work to
find pragmatic ways to report and drive toward net zero also in
these aspects.
Customer solutions
Life cycle studies confirm that the greatest potential for SKF to
reduce environmental impact, lies in the customer use phase of the
Group’s products and solutions. As reported on page 119 (customer
sustainability performance), many of SKF’s offerings can be strongly
linked to sustainability needs alongside other business needs and in
doing so, create value for customers, investors and society. Some
are more specifically linked to mitigate climate change.
Life cycle impact
In addition to cutting climate impact in the transactional value
chain, SKF also works to develop new business models to reduce
environmental impact alongside cost. Firstly, the Group works to
predict maintenance and enable cost effective repair and service
within the customers’ processes. Secondly, SKF brings back bea-
rings and units for refurbishment or remanufacturing – a process
which can cut energy and emissions by up to 90%, compared to
theproduction of a new bearing.
Data reporting according to the Greenhouse Gas Protocol
guidance
In these statements, all SKF’s manufacturing sites, technical and
engineering centres and logistics centres are included, including
those outside the ISO 50001 scope. Joint ventures are included
where SKF has management control. Energy data and related
greenhouse gas (GHG) emissions are reported monthly and followed
up biannually by the SKF Group Management.
SKF uses the GHG Protocol Corporate Guidance for reporting
itsemissions. Due to the nature of SKF’s operations, only three
greenhouse gases are likely to be released in significant quantities
for tracking. These are CO
2
, methane and nitrous acid, where CO
2
is
byfar the biggest contributor to SKF’s emissions. Scope 1 and 2
emissions are all reported in CO
2
- equivalents (CO
2
e), including the
above mentioned other emissions. Refrigerants are currently not
included in the GHG reporting scope as their impact on the overall
carbon footprint is considered to be insignificant.
302-1 Energy consumption within the organization
Source, GWh 2021 2020 2019
LPG 18 16 19
Natural gas 298 255 288
Fuel oil 8 5 6
Renewable energy generated onsite
1)
32 20 23
District heating and cooling 141 118 112
Electricity 1,275 1,146 1,248
Total energy use 1,772 1,561 1,696
1) includes electricity procured with Power Purchase Agreement (PPA)
302-3 Energy intensity
This disclosure includes all energy generating scope 1 and 2 emis-
sions for the SKF Group, and revenues in SEK million for the SKF
Group. In this disclosure, the data have not been adjusted for
acquisitions and divestments.
GWh per SEK million 2021 2020 2019
Total energy use within the
organization (GWh) 1,772 1,561 1,696
Revenues, net sales (MSEK) 81,732 74,852 86,013
Energy intensity
(GWh/SEK million x 1,000) 21.68 20.85 19.72
SUSTAINABILITY STATEMENTS
122
SKF Annual Report 2021
302-4 Reduction of energy consumption
As mentioned, SKF uses a specific target and KPI to drive improved
energy performance at the main manufacturing sites. 2021 sho-
wed a -1.7% improvement against this target indicating an underly-
ing energy efficiency saving of 15.5 GWh.
305-1 Direct (scope 1) GHG emissions and
305-2 Energy indirect (scope 2) GHG emissions
During 2021, SKF purchased a small quantity of carbon offsets to
cover the last few tonnes of scope 1 emissions (for building heat)
to make SKF’s factory in Tudela, Spain, net zero. During 2021, SKF
switched from gas fired heating to renewable electric power heat
pump at this facility, thereby eliminating the need for continued off-
set purchases.
In general, SKF considers carbon offsets to be a last resort in
achieving its targets – only to be deployed when all other measures
to avoid emissions (energy and material efficiency, fuel switching,
renewable energy sourcing or generation) have been exhausted.
Historical data in this disclosure has been adjusted for acquisi-
tions and divestments in line with the GHG Protocol.
Market-based emissions, tonnes 2021 2020 2019
Direct (scope 1) GHG emissions
CO
2
e emissions 56,478 50,285 58,606
Energy indirect (scope 2)
GHG emissions
CO
2
e emissions market-based 313,403 331,509 361,960
Total CO
2
e emissions,
market-based 369,881 381,794 420,566
Location-based, tonnes 2021 2020 2019
Direct (scope 1) GHG emissions
CO
2
e emissions 56,478 50,285 58,606
Energy indirect (scope 2) GHG
emissions
CO
2
e emissions, location-based 525,849 466,248 501,067
Total CO
2
e emissions,
location-based 582,327 516,532 559,673
Sources of emissions
Tonnes, conversion factors
in tonne per unit in brackets 2021 2020 2019
Direct (scope 1)
LPG
(3.0 per tonne) 3,890 3,468 3,996
Fuel oil
(3.2 per tonne) 1,937 1,302 1,565
Natural gas
(0.002 per cubic meter) 50,651 45,515 53,045
Supplied (scope 2), market-based
Electricity 288,589 310,282 341,931
District heating and cooling 24,813 21,226 20,030
Total CO
2
e emissions,
market-based 369,881 381,794 420,566
Scope 1 emission factors have been derived from the UK DEFRA standard,
except Gothenburg where the local RECERT standard has been applied.
Scope 2 contractual emission factors have been provided by relevant electricity
suppliers. Scope 2 location based emission factors have taken from IEA, DEFRA
and other recognized data sources.
DEFRA Standard used for district heat except certain sites in Germany, Sweden
and Poland where specific emission factors from suppliers are provided by the
local district heat provider.
171615 18 19 20 232221 24 25 26 27 28 29 30
Progress towards net zero Goal
0
100,000
200,000
500,000
600,000
400,000
300,000
700,000
Total Scope 1 & 2 CO
2
e Market based
Actual
Trajectory
Year
305-3 Other indirect (scope 3) GHG emissions
Under scope 3 emissions, SKF reports CO
2
e emissions from the
most significant direct material suppliers (steel and forgings),
goods transportation and business travel.
Direct material supplier emissions
These data are based on aggregation of figures provided by the
13major suppliers of steel and the 15 major suppliers of forgings to
SKF. This scope covers 33% by volume of total direct material spend
and 80% by weight of steel purchased (an increased reporting scope
compared to 2020 of 16% and 27% respectively. This is only the
second year in which SKF reports this information and the data
should be considered as indicative rather than a precise quantifi-
cation of these upstream impacts. Going forward, SKF is working
toincrease both the scope and accuracy of the data collected and
reported.
CO
2
e Tonnes 2021
Scope 3 direct material supplier emissions in scope
1)
770,246
Scope 3 direct material supplier emissions total
2)
1,060,424
1) See text for description of scope.
2) Total estimated emissions related to steel, forging, rolling elements
Goods transportation data and related CO
2
e emissions
2021 2020
1)
2019
1)
2015
1)
CO
2
e emissions from
transports scope 3,
(tonnes) 226,666 144,466 173,459 153,031
Transport works
(tonnes shipped) 422,720 340,934 392,224 352,641
1) Scope of reporting was increased and figure for 2020 recalculated, previous
figures re-stated accordingly.
Shipped volumes and emissions per transport mode 2021
Road Sea Air Rail
Transport works,
tonnes shipped, % of total 70.2 26.1 1.6 2.1
CO
2
e emissions, % of total 21.0 29.0 47.5 2.5
Tonne * kilometer, % of total 11.0 80.6 3.1 5.3
Business travel (air travel)
2021 2020 2019
CO
2
e emissions (tonnes) from
air travel (scope 3) 3,990 3,584 12,954
123
SKF Annual Report 2021
305-4 GHG emissions intensity
All greenhouse gases are included and converted to CO
2
e emissions
according to the GHG Protocol for scope 1–3.
SKF’s bearing manufacturing (scope 1 and 2)
Intensity in tonnes unless
otherwise stated 2021 2020
1)
2019
1)
2015
1)
CO
2
e emissions – bear-
ings & units factories
308,613 323,750 352,376 482,956
Weight bearings and
units sold
2)
429,825 367,68 4 388,565 336,803
GHG emissions intensity
CO
2
e
emissions/tonnes
sold products
0.72 0.88 0.91 1.43
Change vs 2015, % –50% –39 –37 —
1) All data has been restated to reflect acquisitions and divestments.
Missing historical data for acquisitions are estimated.
2) ”Weight bearings and units sold” for 2015 restated in 2020
Goods transportation (scope 3)
2021 2020
1)
2019
1)
2015
1)
GHG emissions intensity
kg CO
2
e emissions per
tonnes shipped goods
to end customer
2)
536 424 442 434
Change vs 2015, % 24 –2 2 —
1) Scope of reporting was increased in 2020 and previous years restated
accordingly. Restated 2015–2020.
305-5 Reduction of GHG emissions (scope 1 and 2)
Following the good trend of recent years, absolute CO
2
emissions
were again reduced in 2021. This is despite a sharp increase in
production output vs. 2020 and is due to a combination of factors.
Notably further increases in energy efficiency and an increased
share of renewable energy.
Goods transportation (scope 3)
Continued problems related to COVID-19, material shortages and
other disruptions made 2021 an extremely challenging year for
theglobal logistics industry. This was reflected in a disappointing
result for SKF’s goods transportation CO
2
performance. The KPI
(CO
2
/Tonne KM) increased by 24% and this was largely due to the
unavoidable use of air-freight to make up for inadequacy in the
normal transport modes (mainly sea-freight). Going forward, SKF’s
work to regionalise its manufacturing and supply chain footprint
willresult in reduced need for intercontinental transports.
Other scope 3 impacts
During 2021, the number of direct material suppliers in scope has
increased compared to 2020, from 10 to 28. SKF has focused on
energy intensive suppliers, with the higher GHG emissions (steel,
forgings). All investigated suppliers have been requested to share
their GHG reduction target (CO
2
mainly). After the first screening,
the average target for steel makers is to reduce 20% by 2030
(vs.2019); for the others the planned reduction is 13%. SKF's new
net zero 2050 strategy will be communicated to the suppliers to
push for more aggressive targets and for further reductions.
As the scope of reporting is still evolving significantly, it is not yet
possible to comment on the performance trend for most of other
impacts such as ICT, employee commuting and indirect material
purchasing.
Material topics – GRI 301: Material 2016, GRI 303: Water and
Effluents 2018, GRI 306:Waste 2020
GRI 307: Environmental compliance 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
Details can differ between the environmental topics but, overall,
SKF has a similar management approach to Material, Water,
Effluents and waste, and Environmental compliance. These topics
are material first of all within SKF and its subsidiaries.
In 2021, the Group sourced about 582,000 tonnes of metal
components. The main impact from this lies within the value chain
and is associated to energy and emissions. The main way in which
SKF can influence this is by focusing on material efficiency in the
manufacturing processes. By avoiding wasted material at SKF, the
waste associated with the embedded energy and emissions
upstream are also avoided.
Although SKF operations are not considered to be water inten-
sive, water is relevant in different ways depending on where in the
value chain it is used. Direct water use is material at SKF sites loca-
ted in areas of actual and potential water scarcity (see table below).
In other locations the nature of SKF’s processes (most systems
utilising water are closed loop) means that SKF typically does not
represent a major water user in the local industrial context. Water
is withdrawn from municipal supplies or other sources (ground and
surface water) and is discharged in surface water or sewage sys-
tems after treatment, with quality levels according to local regula-
tions and in this way, water related impacts are addressed. Sites
in water scarcity areas establish specific targets for reducing water
consumption (see table below). Indirect water use is relevant due
to its close correlation to energy generation. Downstream, SKF can
provide solutions to reduce the water footprint for customers or
help to make large scale water treatment viable and cost efficient.
Effluents and waste are relevant from SKF’s manufacturing ope-
rations. Compliance is followed up in relation to SKF’s manufactur-
ing operations and those of its suppliers.
Material, Water, Effluents and waste, Environmental compliance
Direct impact on
UN Sustainable
Development Goals
SUSTAINABILITY STATEMENTS
124
SKF Annual Report 2021
Water efficiency performance for sites in water stressed areas
Unit
KPI 2021
vs. 2020, %
SKF Shanghai Bearings Co, Deep groove ball bearings –23
Nankou –1
Dalian, Large size bearings 10
Dalian, Medium size bearings –42
Jakarta –22
Ahmedabad –15
Bangalore, Deep groove ball bearings –12
Haridwar –21
Mysore –17
Puebla, Hub units 24
Tudela –12
Shanghai, Automotive Technologies Co 20
KPI = water intensity – water use / production volume
103-2–103-3 Management approach, its components and
evaluation (combined)
SKF has deployed an environmental management system certified
according to ISO 14001:2015. This is integrated with the health and
safety management system and is based on the Group EHS Policy.
The management system is further defined at Group, country and
site level. It includes all significant manufacturing sites, technical and
engineering centres and logistics centres. New or recently acquired
subsidiaries are provided a time frame for inclusion.
This is typically one to two years but can be extended if the com-
pany acquired is of significant size and or complexity. The overall
coordination of the work is managed by a central staff function and
the responsibility to drive improvements is with SKF’s functional
areas in the line organization.
SKF assures that environmental matters are prioritized through
the line organization by integrating environmental performance
delivery into the responsibilities of the factory manager, the cluster
or Business Unit manager and up through to Business Area and
Group. Local support, competence (particularly for legal compli-
ance) and coordination for the units is provided by the EHS country
co ordinators. Water quality, following local regulation, refers to the
physical, chemical and biological characteristics.
Potential spills, incidents and fines are publicly reported in the
Environmental Data spreadsheet in Topics related to the Annual
Report, please refer to skf.com/ar2021.
Evaluation of the effectiveness of the management approach is
done through internal and external audits and periodical reporting
reviews governance being adjusted accordingly.
SKF also has a grievance mechanism in place for incidents at
suppliers. This is coordinated by SKF’s responsible sourcing com-
mittee and reported in an aggregated overview of deviations from
supplier audits. Environmental performance at suppliers is further
reported on page 135.
One important feature of SKF’s global environmental manage-
ment system is to ensure that all operating SKF units are compliant
with local rules and legislation, to ensure efficient water use and
responsible water management, including wastewater handling.
The most important dimension of water for SKF is the water needed
to generate energy for use over the value chain.
Defined Group level objectives
• Eliminate solvents (emitting volatile organic compounds) from
washing of bearings and bearing components by 2025.
• Reach and maintain a recycling rate of grinding swarf at 80%.
• Water use targets are established at SKF sites with significant
water risks. In 2021, SKF had eleven such sites.
Group wide targets are not suitable in these cases due to the wide
variation in the types and quantities of waste produced, as well as
the local related infrastructure, therefore KPIs where local objecti-
ves have been or are to be defined cover the following aspects:
• Waste recycling excluding direct material waste.
• Waste recycling including direct material waste.
• Wastewater treatment.
Data collection
All data is compiled either monthly, bi-annually or annually, using
the Group’s main reporting and consolidation tool. It includes all
significant manufacturing sites, technical and engineering centres
and logistics centres. Sales units are included when they are at the
same site as manufacturing or logistics. Separate sales offices are
excluded due to their minor environmental impact. Joint ventures
are included where SKF has management control. Data from sites
can be included in the compilation even if the site is not yet fully
integrated in the management systems. Information is reported
at a local operating unit level, aggregated to site, country/area,
and Group level.
Performance
SKF has set realistic and ambitious targets to reduce environmental
impact from its operations. Overall, the data presented indicates
that SKF is reducing its environmental impact from its operations.
301-1 Materials used by weight or volume
SKF uses various materials such as metals, rubber, solvents,
hydraulic oil and grease. Steel is the main material used by SKF
and much of the steel purchased by the Group is produced by re-
melting steel scrap, as this provides favorable material properties
and is widely available.
SKF does not report any renewable materials or recycled input
material. The most significant part of the material used comes from
components which have been machined and refined along the value
chain. This means that SKF does not have direct influence over the
source of the material but only the specified quality. In general,
bearing steel is made from a significant proportion of scrap steel,
however an exact percentage cannot be provided.
Non-renewable material
Tonnes 2021 2020 2019
Metal as raw material
from external suppliers 582,062 460,971 470,305
Rubber as raw material
from external suppliers 5,308 3,795 3,913
Oils 8,376 7,175 7, 813
Greases 2,524 2,153 2,138
Group target: eliminate solvents (volatile organic compounds)
from washing of bearings and bearing components by 2025
SKF halved its use of solvents between 2007 and 2016. Thereafter,
newly acquired businesses resulted in an increase. In 2018, SKF set
a target to eliminate the use of solvents in washing processes for
bearings and bearing components, which is the main way volatile
organic compounds are emitted from the Group operations.
125
SKF Annual Report 2021
Group target – Eliminate solvent (volatile organic compounds)
from all washing processes by 2025
Tonnes 2021 2020 2019
VOC (Organic solvents) total use 1,144 970 1,069
VOC (Organic solvents) emitted
tothe atmosphere (washing of
bearings and components in
bearings manufacturing
1)
148 242 214
1) Past data are restated for acquired and divested units
303-1, Interactions with water as a shared resource and
303-2, Management of water discharge-related impacts
Water is used at SKF sites for processes and civil purposes (toilets,
showers, cooking facilities, etc.). Focus on efficient water use is
applied in various ways, for example, new factory building projects
where latest technologies have been put in place also to achieve
minimal impact on local resources. Practices like closed loop
systems for industrial water used and rainwater harvesting are
common in many SKF facilities.
Water use is metered at site level for ”water from municipal
supply” (the most common source) and ”water from other sources”.
The first is the aqueducts supply and the second includes supply by
wells or other surface sources (e.g. rivers, creeks) practiced accor-
ding to regional regulations. There are no cases of sourcing from
the sea, or local water production.
Numerous lifecycle assessments (LCAs) (according to ISO
14044:2006) have been conducted both on product and process
levels, and water impacts have been identified. The main findings
from these studies are that SKF’s direct water use is relatively
insignificant compared to upstream use in energy generation, steel
production, etc. However, SKF recognizes the increased importance
of water efficiency and other measures at its sites located in areas
of water scarcity. SKF uses the World Resources Institute’s (WRI)
Water Stress Tool to identify those sites in areas of water stress or
projected water stress. These sites are then required to define
improvement plans and KPI’s to drive reduced water use through
various means.
Due to low water intensity of SKF direct operations and the mea-
sures in place to follow applicable wastewater treatment require-
ments, the chances of SKF water usage impacting local community
water availability/quality are very low.
As part of our overall environmental approach, SKF works with
upstream users of water, such as steel and energy suppliers, to
reduce water use. For example, by switching to renewable electri-
city sources, a dramatic reduction in water needed per/KWh can be
achieved compared to thermal power sources. The SKF require-
ments for suppliers to adopt the ISO 14001 and 50001 standards
will also help increase focus on water in the direct material suppli-
ers (e.g. steel).
303-3 Water withdrawal by source
As the clear majority of SKF’s factories are located in industrial
zones, water is supplied by municipalities. Other sources have not
been considered material. Therefore, SKF monitors total water
consumption at operating units and not per withdrawal by source.
As the reporting is based on actual measurements from water
suppliers or at SKF sites, no specific assumptions are referred to.
Water usage targets are established at SKF sites with significant
water risks. In 2021, SKF had eleven such sites.
Water (1,000 N cubic meters) 2021
2)3)
2020
2)3)
2019
2)
Water from municipal supply 1,902 2,062 1,796
Water use from other source
1)
1,117 1,075 921
Water withdrawal total 3,020 3,137 2,717
1) “Other source” is mostly wells from which water is extracted.
2) All data has been restated to reflect acquisitions and divestments.
3) In 2020, additional 461,000 cubic meters due to an undetected leakage at
Falconer US site.
303-4 Water discharge
Water discharge follows regional regulations. The flow is going
to local sewage systems or to surface water flow in compliance to
mentioned regulations for the quality of discharged water (suspen-
sion, temperature, etc.). Metered discharge flows are thus not
reported.
306-2, 306-3, 306-4, 306-5 Waste by type and disposal
method
SKF works to avoid waste generation in a number of ways.
Upstream these include the use of near-net shape production tech-
nologies such as cold rolling (minimizing the amount of material
which needs to be removed in subsequent processes). Examples
within SKF operations include avoidance of scrap and excessive
material use through optimized processes and downstream SKF
works with its remanufacturing approach to extend the life of SKF
products and the systems in which they operate – thereby avoiding
waste.
Almost all recycling, reuse and recovery of waste which is diver-
ted from disposal is undertaken by external companies (steel
plants, waste management and recycling companies etc.). SKF is
now starting to perform recycling (reconditioning) of lubrication oil
at some sites using SKF’s RecondOil solution, but this is not yet
reported separately.
As part of the Group’s overall responsible sourcing approach, SKF
requires that waste management companies and other companies
making use of SKF’s residual materials operate in full compliance
with the SKF code of conduct and therefore all applicable local
legislation,
The Group reports disposal methods by reuse, recycling, incine-
ration with and without energy recovery andlandfill. Local objecti-
ves have been required by the Group to be established and these
shall drive sites upwards in the waste hierarchy with the goal to
reach zero waste.
The amounts of residual material and recycling rate are disclosed
below, and in more detail in the Environmental data spreadsheet
available at skf.com/ar2021. SKF reports all significant residuals
and waste site-by-site for all relevant SKF’s units. In this note, SKF
highlights the most significant residuals, recycling rates and the
amount of waste sent to landfill. The data on weight of waste gene-
rated comes from both SKF measurements and those made by the
waste management companies – depending on the fraction and the
location.
SUSTAINABILITY STATEMENTS
126
SKF Annual Report 2021
Material topic – GRI 401: Employment 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
As an employer, SKF needs to attract and develop a diverse and
effective workforce to stay competitive and to deliver on the objec-
tives set out by the Group. The focus is on the Group and its sub-
sidiaries, where SKF works with central recruitment processes,
training, leadership, people development and an excellent overall
employee experience to proactively safeguard the need of future
capabilities.
103-2–103-3 Management approach, its components
and evaluation
SKF’s People Experience has been centralized and is since 2020
represented in SKF’s Group Management by the Senior Vice
President People Experience. Group People Experience's contribu-
tion to SKF’s strategy is clarified by focus areas and deliverables.
The deliverables are to establish a customer centric culture, bor-
derless collaboration in the full value chain, a great employee expe-
rience, data driven decision making and a fearless leadership
making change happen. The strategic initiatives are connected to
the deliverables to ensure that the right steps are taken in the
People Experience activities driven on Group, business area, region,
country and site levels. Guiding the work is the Group People Expe-
rience vision “People make it happen”.
People Experience has a regular dialogue with the SKF World
Union Council (WUC) and the European Work Council (EWC) accor-
ding to the global framework agreement, which is based on the SKF
Code of Conduct. Issues relating to significant changes at SKF are
always handled in close collaboration between company manage-
ment, the WUC, the EWC and local unions. As SKF Group operates
under Swedish legislation and the Swedish Corporate Governance
Code, employee representatives are part of the Board. Among other
things, this means that employee representatives from white and
blue collar unions have direct insight on board level issues and the
strategic outlook for the Group.
People Experience has a strong local presence. However, digitali-
zation and synergies in operations and business has increased the
need for and enabled a more centralized and regionalized approach
to processes, systems, operational model and organization. New
common systems are being put in place to facilitate this work.
The top risk in the workforce area is the ability to secure the right
skills and expertise. To deliver on the SKF strategy, the company is
reliant upon a workforce that is competent, engaged and flexible in
all its dimensions and geographies. In many markets there is a skill
deficit in the labor market. Examples of challenges are within engi-
neering, digitalization and deep technical expertise in the core tech-
nologies. There is a fierce competition in the labor market, where
the success of companies is dependent of the ability to attract,
develop and retain critical competences and capabilities for the
future. During 2021, the deficit of critical capabilities has somewhat
increased, as more companies are actively recruiting when the
pandemic situation is slowly stabilizing.
To mitigate the risks SKF continues to strengthen and develop
the recruitment practices and our position of being an attractive
employer. To clearly demonstrate the importance of putting the
employees in the center of everything we do, the Human Resource
department has transferred to become “People Experience”, in
which customer centricity and employee experience steers the
agenda. An important part is to further engage the workforce in
making SKF a great place to work, the quarterly employee satis-
faction survey (SKF Team Pulse) is now launched globally, and
hasbeen complimented with an AI based platform in which all
employees have been invited into dialogue with the SKF CEO.
Tostrengthen leadership at SKF a new model has been introduced,
inwhich focus is on leading yourself, leading others and leading the
business. The model will be a good base to further develop leader-
ship in SKF. End of 2021 SKF launched a new system and way of
working with performance development, having continuous align-
ment and feedback between managers and employees improved.
Inthe pipeline for 2022 examples of projects progressing are to
modernize the learning landscape within SKF and review our total
reward and recognition design.
Employment
Non-hazardous waste
(tonnes unless otherwise stated) 2021 2020 2019
Total residuals generated 142,050 125,564 138,349
Recycled or reused 117,005 102,450 114,571
Recycling rate, % 82 82 83
Incinerated with energy recovery 8,691 8,825 10,079
Incinerated without energy
recovery 1,364 1,930 1,647
Landfill, excl. grinding swarf 14,990 12,356 12,051
1) 2018 was the first year of reporting according to these fractions
Group target: 80% recycling of grinding swarf
On hazardous waste, SKF reports only grinding swarf, which is a
mix of small metal particles and abrasives mixed with emulsion.
The target is to reach and maintain 80% recycling, which was achie-
ved the first time 2015. SKF continues to depend greatly on varia-
tions in regional legislation, volatile scrap prices and other aspects
which mean that this continues to be a very challenging target.
SKF is constantly working to find business partners who can use
grinding swarf as input to their production, both as direct and in-
direct material. In 2021, the rate of recycled or reused grinding
swarf decreased to 61%. This result was impacted by problems in
the recycling supply chain in some regions.
Hazardous waste, grinding swarf
(tonnes unless otherwise stated) 2021 2020 2019
Grinding swarf generated 24,063 19,614 22,054
Recycled or reused 14,623 12,420 14,281
Recycling rate, % 61 63 65
Incinerated, heat recovery
1)
1,581 1,491 1,637
Incinerated, no recovery
1)
4,040 3,366 2,972
Landfill
1)
3,819 2,238 3,163
1) 2018 was the first year of reporting according to these fractions
307-1 Non-compliance with environmental laws
and regulations
SKF received no significant fines or directives from the environ-
mental authorities in 2021.
127
SKF Annual Report 2021
401-1 New employee hires and employee turnover
Employee retention rate by region (excluding lay offs) 2021
% Women Men Total 2020 2019
Asia and Pacific 84.8 90.4 89.2 91.0 88
Middle East and Africa 87. 1 92.3 90.9 93.8 96
North America 88.3 87.9 88.0 92.5 90
Latin America 83.3 88.0 87.5 89.5 93
Eastern and Central Europe 86.1 90.1 88.6 90.6 91
Western Europe 96.8 97.7 97.5 97.2 97
The Group 90.2 93.4 92.7 94.0 93
Retention rate as reported above is measured by comparing remaining SKF employees at year end (minus newly employed) to the number at the start
of the year. Lay-offs are excluded in the calculation.
Employee turnover by region 2021
% Women Men Total 2020 2019
Asia and Pacific 17.6 12.4 13.5 14.5 15
Middle East and Africa 14.7 10.4 12.0 24.6 13
North America 17.3 16.4 16.5 17.0 17
Latin America 22.6 18.4 18.9 19.8 18
Eastern and Central Europe 14.9 11.2 16.4 13.5 10
Western Europe 6.6 4.8 5.1 4.5 4
The Group 13.0 9.7 10.3 10.6 10
New hires by region 2021
Women as share
of total, %Total number Women Men Total
Asia and Pacific 553 1,599 2,152 26%
Middle East and Africa 14 35 49 29%
North America 412 832 1,244 33%
Latin America 128 652 780 16%
Eastern and Central Europe 412 602 1,014 41%
Western Europe 280 872 1152 24%
The Group 1,799 4,592 6,391 28%
Material topic – GRI 402: Labour management relations 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
The main priority of the relationship between labour and manage-
ment is to ensure that the Global Framework Agreement between
SKF and the unions works in practice. This is based on the SKF
Code of Conduct and the work focuses on labour management
relations between SKF Group and workers within SKF Group and
its subsidiaries. SKF also collaborates with other companies in
formal and informal networks.
103-2–103-3 Management approach, its components
andevaluation
Issues relating to significant changes at SKF, such as acquiring,
divesting or consolidating operations, are always discussed and
resolved openly and constructively with union leaders locally and
with the leadership of the SKF World Union Council (WUC). The pre-
cise approach must be adapted to the specific conditions of each
occasion. The European Work Council (EWC) directive is the base
for European related issues. SKF makes it clear in its Code of Conduct
that all employees have the right to join a union and to bargain
collectively. Continual dialogue is on-going to ensure that it works
for both SKF and the union members.
The WUC, which today includes 20 countries (see page 114)
meets every year to openly discuss labor issues and to share what
is on the Groups’ agenda. In addition to the SKF WUC meeting, an
EWC meeting involving only European delegates is set up in conjunc-
tion to the WUC. All countries fulfilling the EWC/WUC agreement
requirements and with major operations, have the right to send
appointed union officials or observers to the SKF EWC/WUC meeting.
In 2021, the annual EWC and WUC meeting was held in October, in
an online format with online translations, due to travel restrictions
during the COVID-19 pandemic. Due to the change in management,
one extra meeting for both EWC and WUC was held online in spring
2021.
The focus areas were employment, environment, health & safety
and digitalization. Overall, SKF’s setup with the WUC is seen as a
great competitive advantage for addressing and deploying global
initiatives between Group management and unions.
Labour management relations
Direct impact on
UN Sustainable
Development Goals
SUSTAINABILITY STATEMENTS
128
SKF Annual Report 2021
Direct impact on
UN Sustainable
Development Goals
Material topic – GRI 403: Occupational health and safety 2018
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
Health and safety are a material issue in different aspects of SKF’s
direct operations, as well as activities occurring along the value
chain. In blue-collar work roles the focus is primarily on physical
health and safety. This is also relevant for suppliers and is addres-
sed as part of SKF’s responsible sourcing approach, see page 135.
In addition, psychological health and wellbeing are increasingly
material across all job roles within the company.
103-2–103-3 Management approach, its components and
evaluation
SKF’s accident rate has steadily improved over the last two decades
and, while the imporovement rate has slowed down in recent years,
2021 showed an improvement of 11% in the recordable accident
rate vs. 2020. In 2021, the accident rate was 0.67 per 200,000
worked hours. SKF strives to achieve further reductions in the
accident rate by increasing the effectiveness of its management
approach towards health and safety in various ways.
The overall EHS governance in SKF emphasizes line ownership
for health and safety. EHS managers are appointed in the manufact-
uring clusters, business units and their equivalent management
teams across SKF. Working as part of the operational management
teams, these individuals make sure that appropriate attention,
resources and investments are given to health and safety in their
respective units. They are supported in this work by the long esta-
blished EHS country coordinators who provide local expertise,
guidance and support to the units.
During 2021, SKF has focused on developing and promoting a
Behavior Based Safety (BBS) approach. BBS works on the psycho-
logical aspects of safety behavior – helping to promote a proactive
and self driven approach to improving safety in the workplace. BBS
has already been deployed in a number of SKF units and this has
correlated with a substantial improvement in safety performance.
Protecting Health and Safety during the COVID-19 pandemic
During the COVID-19 pandemic, the SKF Group has worked accor-
ding to the following priorities;
• Protecting the health and safety of employees and their families.
• Following all applicable guidance and requirements from relevant
authorities.
• Protecting SKF customers by keeping workplaces safe and main-
taining production.
Due to the highly dynamic and regionalized nature of the pandemic,
the definition and execution of risk assessments and control measures
has been largely devolved to the locally established crisis response
teams which have been set up at country and site level.
SKF Group has maintained an overview of the status at all units
and supported local crisis teams via the Global EHS network.
SKFGroup EHS and Group People Experience have held bi-weekly
meetings with the World Union Council in order to discuss and add-
ress any concerns of feedback raised via the local Union delegates
from around the SKF Group.
403-1 Occupational health and safety management system
SKF has established and deployed a Group-wide health and safety
management system according to the ISO 45001:2018 manage-
ment standard. High-level requirements on health and safety are
defined in the Group’s EHS policy and detailed instructions and
procedures are integrated within the environment, energy, health
and safety management system at Group, country and site level.
The system drives compliance with legal requirements and those
defined by the Group, its customers and other stakeholders. The
system also provides a framework to drive continuous improvement
in health and safety performance. SKF successfully completed
theprocess updating the management system to the new ISO
45001:2018 standard in 2021, replacing OSHAS 18001 manage-
ment standard which the Group had previously applied.
The scope of the management system includes physical and
psychological health and safety. It covers employees at SKF sites,
incommute or working for SKF off-site, such as maintenance
engineers at a customer to SKF. Please refer to disclosure 403-8
for more information on the management system and it's coverage.
403-2 Hazard identification, risk assessment and incident
investigation
SKF and its subsidiaries apply tools and processes as prescribed in
the management system and according to legal requirements to
prevent accidents and ill-health. Risk assessments are carried out
on a regular basis at all levels from shop floor to office. The quality
of risk assessments is assured by training EHS staff and other per-
sons undertaking them. Risk assessments are a focus during inter-
nal and external audits, where typically a sample of risk assess-
ments and corrective and preventative actions are reviewed.
Measures to mitigate or eliminate the identified risks are defined
and implemented and risk assessments are reviewed and updated
periodically or after any incident has occurred. Recordable accidents
are reported and followed up both at the unit level and further up in
the organization right up to Group level.
Thorough investigations, which result in effective corrective and
preventative actions must be deployed after each recordable acci-
dent. In cases where the issue is linked to risks which may be rele-
vant for other units, the causes of the accident and the corrective
and preventative measures to avoid a repeat are shared with other
relevant units. In certain cases, changes may be needed in the
Group level management system as part of a preventative measure.
All employees are required to report accidents, incidents and
unsafe conditions, as they are a vital source of improvements
and indicate opportunities to better control the associated risk. The
SKF Code of Conduct and related processes make it clear that any
Occupational health and safety
402-1 Minimum notice periods regarding operational changes
SKF does not state a specific minimum notice period as the Group
cannot overrule the centrally agreed collective bargain agreements
in the countries SKF operates in. SKF holds consultations and pro-
vides information to relevant parties, which are two separate proce-
dures. Notice regarding operational changes is always defined
on a case-by-case basis but always with the local unions involved,
and/or reviewed at the World Union Council. SKF units located in EU
member states also adhere to the EWC directive 2009/38/EG.
129
SKF Annual Report 2021
management reprisals against individuals making such reports are
strictly forbidden. In the unlikely event that a manager acts against
the Code of Conduct, the SKF Ethics and Compliance Reporting Line
can be used to escalate this. Risks reported must be addressed at
the local level but are not required to be reported in detail further
up in the organization. Only the total number of such cases should
be reported for the unit as this gives an indication of the level of
safety related activity. No distinction is made between SKF employ-
ees, agency workers or other persons on site for the identification
and control of risk.
SKF employs health and safety coordinators with expertise to
support team leaders and managers at all levels in the organization.
Periodic training is also organized on health and safety procedures,
roles and responsibilities for factory managers and health and
safety coordinators, as part of the SKF Improvement Academy and
the SKF Manufacturing Academy.
Based on the risk assessment carried out for a specific machine,
process or role, employees receive training so that they understand
the risks and how to manage them by following defined procedures
or wearing personal protective equipment for example. Any emp-
loyees who intentionally ignore the defined safety rules will face
disciplinary measures to protect themselves and their colleagues
from unsafe behaviors.
When defining corrective or preventative actions in response to
identified risk, SKF’s management system requires that the hierar-
chy of control measures principles be applied. First option is hazard
elimination. If this is not possible, substitution, engineering controls,
administrative controls and, finally, personal protective equipment.
SKF’s Group policies on environment, energy, health and safety
and quality are distributed and are highly visible on the walls of
every factory and office within the SKF Group.
403-3 Occupational health services
Occupational health services are provided to workers at most units
and vary from one country to another (depending on the need of the
unit, the level of health service provided externally, etc.). SKF can-
not report exactly how the quality of such health services are evalu-
ated and ensured. Services are generally supplied by third parties
who ensure data privacy in accordance with applicable regulations.
403-4 Worker participation, consultation and
communication on occupational health and safety
Worker representatives are appointed to the health and safety
committees by the employees using a voting system in line with
SKF World Union Council (WUC) processes. SKF health and safety
committees operate on factory or unit management level with the
objective to bring together worker and management representati-
ves to discuss and agree on needed measures to improve the health
and safety performance at the factory or unit. The committees
meet at least once per quarter and decisions taken shall be commu-
nicated to the workforce and acted and followed up on. The com-
mittees are often involved in accident and incident investigations
and may define additional corrective or preventative measures
based on this. A Group level Health and Safety Committee is also
established with representatives from the World Union Council,
Group EHS and Group People Experience. Normally this committee
meets once per quarter, however during the COVID-19 pandemic it
has met on a bi-weekly basis to address specific related issues.
During 2021, SKF’s WUC, Group EHS and Group People Expe-
rience have continued to work to increase the effectiveness of the
local committees through updated procedures, guidance materials
and training and awareness.
403-5 Worker training on occupational health and safety
All employees and agency workers are provided health and safety
training, as well as other Code of Conduct trainings as part of
induction training. More specific training is provided depending on
the job description. Specific training for potentially hazardous jobs,
such as working with electricity, at heights, hot work and so on
ismandatory for employees working with these aspects. SKF
alsoprovides general health and safety training via mandatory
e- learnings. All trainings are provided during work hours. The effi-
ciency is assessed based on accident rates in combination with seve-
rity rates, which are expected to be reduced towards zero over time.
403-6 Promotion of worker health
The SKF Group has for a long time provided various health promo-
ting activities beyond occupational safety. Close to 95% of the
employees are covered by health promoting programmes, including
HIV/AIDS prevention, substance abuse, obesity, healthy lifestyle,
and stress management. Increasingly these programmes or initia-
tives take a more holistic approach to health and, in 2018, SKF for-
malized this process further by issuing the SKF Group Employee
Well-Being policy. This is focused on three areas: psychological
work safety, life-balance and healthy life choices. The confidentiality
of individuals is protected in line with general data privacy laws.
During the COVID-19 pandemic, where possible, SKF has sup-
ported employees to get vaccinated for example, by offering on-site
vaccinations or giving paid leave to get vaccinated.
403-7 Prevention and mitigation of occupational health
and safety impacts directly linked by business
relationships
As part of the SKF Code of Conduct for suppliers and sub- contractors,
the Group performs on-site audits on a wide variety of sustainability
topics. Health and safety are central elements of these follow- ups
with suppliers. Read more about this on page 135, Supplier assess-
ments.
SKF’s employees also work at customers’ sites, at suppliers or
other locations outside SKF premises. As part of the process of
defining such off-site activities, SKF assesses health and safety
risks. Occasionally, risks not previously identified by the customer
or supplier are found, and in such cases, control measures must
be agreed before work commences.
Occupational safety is also a central element in courses held by
SKF for customers on mounting and dismounting bearings.
403-8 Workers covered by an occupational health and
safety management system
Over 78%, or some 33,000 employees are covered by the certified
part of the health and safety management system. The system
focuses on the manufacturing sites, workshops, logistics and
technical centres. In addition, over 89% of consultants or agency
workers under SKF’s management control (around 4,000 people)
are also covered by health and safety management systems. No
specific type of workers or staff are excluded. Newly acquired sites
and companies are given a time period before being included in the
scope of SKF certification of management systems. All units are
subject to internal audit every one to three years. The data has
been collected from the SKF financial reporting system using head-
count data for sites and units included in the Group’s ISO
45001:2018 certification. Accidents reporting is divided by the total
headcount, including agency workers and consultants. SKF is glo-
bally certified according to ISO 45001, ISO 14001, ISO 9001 and
ISO 50001. SKF engages a qualified third-party audit company to
audit for compliance to these management standards at Group and
SUSTAINABILITY STATEMENTS
130
SKF Annual Report 2021
unit level. In addition to these external audits, a number of SKF
employees are qualified as Group internal auditors and these indivi-
duals also audit units to assure compliance with the standards, the
environment, energy, health and safety policy and related Group
instructions and requirements.
Read more on the certification on skf.com/45001.
403-9 Work-related injuries
SKF does not separately report accidents on workers who are not
employees but includes them in the total figures reported on the
next page.
Health and safety data are collected on a quarterly basis using
the Group’s main reporting and consolidation tool.
The accident rate is calculated with R × 200,000/h, where
R = number of recordable accidents and h = total hours worked.
2021 2020 2019 2018 2017 2016 2015 2014
Accident rate
for the Group
0.67 0.75 0.77 0.81 0.85 0.87 0.99 1.13
Rate of high
consequence
work related
injuries
0.003 0.003 0.013 0.013 0.013 — — —
2021 2020 2019
Work related fatalities 0 0 0
High consequence work accidents 1 1 5
Recordable accidents 245 252 281
First aid incidents 1,863 1,987 2,539
Near miss incidents 3,582 4,016 7, 893
Unsafe conditions 30,171 20,988 14,498
Worked hours (x 200,000) 367 338 374
At some units, near miss and first aid incidents occur and are
addressed locally but are not reported at Group level. The ambition
with the pyramid is that an increasing attention to near miss inci-
dents and unsafe conditions, would result in better risk mitigation
and a reduced number of recordable and serious accidents.
Serious recordable accidents
Recordable accidents
First aid incidents
Near miss
Unsafe conditions
1
245
1,863
3,582
30,171
Unsafe conditions are since 2019 added at the base of the pyramid
to increase a proactive reporting, i.e. the detection and study of
events before they have a consequence for workers.
Material topic – GRI 404: Training and Education 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
SKF’s history of success has been dependent on the collective skills
and experiences of the employees. With digitalization, globalization
and new technologies come new opportunities to deliver sustainable
offerings to customers, to enhance production processes and ways
of working. This creates both challenges and possibilities for SKF
employees to develop new skills that are of value to them as indivi-
duals, to SKF and to the customers. To succeed in the fast-changing
global competitive landscape, it is a necessity to develop employees.
SKF is working to improve our offer towards all employees. On top
of current traditional learning methods we are adding focus on
24/7 self-learning, bringing together content from external and
internal sources, recommending material based on interest, needs
and peer activity. The lifelong learning approach is contributing to
the development of individuals, SKF and society.
103-2–103-3 Management approach, its components and
evaluation
Continuous learning and development is vital for SKF to stay com-
petitive in the market. The employees’ own commitment and moti-
vation for competence development are key elements to keep skills
and experiences updated. Increasingly important is the informal
learning taking place in the daily work through knowledge sharing
and collaboration, using social platforms, open forums and commu-
nities, self-studies and performance support tools.
To ensure that competence development supports the strategic
business challenges, academies are established within the business.
Recent initiatives focus on virtual training deliveries in areas such
as manufacturing, leadership, sales and application engineering.
Local learning initiatives are also in place to meet the needs of
specific units and locations.
The Group People Experience function coordinates the overall
strategy, methods and tools for enhanced learning in SKF. Using
the centrally maintained learning and performance platform,
employees can access e-learnings and formal programs, and their
individual development plan (IDP). During 2021 leadership expecta-
tions were clarified and is now the base for employee growth. The
three Leadership pillars are; Develop Yourself, Develop Others,
Develop the Business. Development activities can include, e.g. job
rotation, shadowing, mentoring, and specific technical training.
Tosupport employee engagement, SKF Team Pulse has now been
rolled out in SKF and includes all employees worldwide. Utilizing
Training and Education
Direct impact on
UN Sustainable
Development Goals
131
SKF Annual Report 2021
thejoint resources of Group People Experience, SKF Academies,
learning experts, managers and employees, SKF has a solid
foundation for effective competence enhancing activities.
404-2 Programmes for upgrading employee skills and
transition assistance programmes
SKF offers internal programmes and funding for external educa-
tion. The exact approach differs from country to country. In several
entities, employees can seek scholarships from employee develop-
ment foundations. These are usually open for all employees and, at
times, also to children of employees. Training and skill upgrading
are also done at varying depths or degrees in different parts of the
organization.
In collaboration with the SKF WUC, the Group identified needs
to re-skill people as part of meeting the demands of new digital
technologies and new ways of doing business. Initiatives include
re-skilling from production execution to maintenance by offering
theoretical and practical education in electronics and mechanics,
up-skilling in automation technology, robotics and simulations, as
well as possibilities to combine work with part-time university
studies in production development. These initiatives are continuing
in the different SKF locations.
During 2021 we have put further focus on upskilling our custo-
mer facing functions within sustainability and especially how cus-
tomers can lower emissions when using SKF products. This work
will continue during 2022 in close collaboration with Sales and
Technical Academy.
SKF is also offering the possibility of transition assistance to the
external market through coaching support for employees who find
new internal demands difficult and would like to explore professions
not available at SKF.
404-3 Percentage of employees receiving regular
performance and career development reviews
Managers at SKF are accountable to work with their teams to define
individual and team goals to create clarity on how their achieve-
ments contribute to the overall result and strategy. This process is
supported by a global platform where managers and employees
can agree, review and update progress and priorities throughout
the year.
An overall performance rating is defined during the performance
review meeting held annually. This is used as input to the salary
review and talent management for white collar employees. The glo-
bal platform for performance management (Cornerstone) covers
about 14,000 white collar employee users in 2021.
During 2021 the performance development process and system
has been reviewed leading to the implementation of a new way of
working and system in 2022.
2021 2020
Women Men Women Men
Users with documented perfor-
mance reviews in SKF’s global
system, % 91 92 90 89
Material topic – GRI 405: Diversity and Equal Opportunity 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
Equal opportunity and non-discrimination are central elements
of the SKF Code of Conduct. It is crucial for SKF to offer equal
prerequisites to compete for open positions. In the ever increasing
competition for talent, SKF needs to be inclusive to all. The Code of
Conduct was therefore the starting point stipulating the importance
of encouraging diversity as a means to gaining competitive advantage.
103-2–103-3 Management approach, its components and
evaluation
According to the International Labour Organization (ILO), the global
pay gap is estimated at over 20% and is one of the main challenges
for freedom and equality for society. SKF’s overall approach is to
start with equality and make sure that everyone in SKF has a fair
chance to develop and compete for jobs. That competition should
be based on professionalism.
Diversity and Equal Opportunity
To keep delivering in times of change, SKF is dependent on its
people. SKF needs a truly inclusive atmosphere where differences
bring people together, rather than separating them. To stay compe-
titive and attractive, SKF has, during 2021, put continued effort
into gender diversity. Succeeding to achieve gender balance means
organizations don’t miss talents and abilities – robbing themselves
of creativity and innovation.
The Group works to integrate equality in people processes, such
as learning, succession planning and recruitment. SKF Group’s
recruitment principles are based on the SKF Code of Conduct and
facilitate skills-based recruitment by utilizing Assesio’s Matrigma
ability test, which is a scientifically robust instrument that has been
reviewed and certified by Det Norske Veritas.
In 2021, activities and programs were continued to keep focus
on improving equality. The virtual global programme Elevate, tar-
geting women with leadership ambition started in the beginning of
2020, continued during 2021. To further strengthen our ability to
attract talents and safeguard that we attract from a diverse talent
pool, an AI tool for inclusive language was introduced. Additional
initiatives have focused on building awareness on Diversity and
Inclusion, such as monthly diversity activities for the global applica-
tion engineering team, establishment of a DEI council for North
America, and workshops held globally for close to 700 leaders.
Inaddition to global initiatives there are many local activities
on going.
Direct impact on
UN Sustainable
Development Goals
SUSTAINABILITY STATEMENTS
132
SKF Annual Report 2021
405-2 Ratio of basic salary and remuneration
of women to men
Average annualized basic salary
1)
, % 2021
Women’s average basic salary as percentage of men’s
– Senior Management 85%
Women’s average basic salary as percentage of men’s
– Local Management 96%
Women’s average basic salary as percentage of men’s
– Other Staff 82%
1) Applies to staff basic salaries from all countries of the Group. Salaries for
Group Management and Blue Collars are excluded. Total remuneration could
not be reported at Group level.
SKF Code of Conduct - Our working ethics commitment in
relation to gender and pay requires that:
All employees are treated equally, fairly and with respect regardless
of race, gender, age, national origin or nationality, disability, caste,
religion, sexual orientation, union membership or political affiliation
we provide non-discriminatory working conditions and we promote
diversity, we ensure that wages and other related benefits meet at
least the legal or industry minimum standard in the country in
question. Wages and benefits are rendered in full compliance with
laws and collective agreements
All employees at SKF are to be rewarded on the basis of their
contribution to the companys success, i.e., salaries are to be indivi-
dual, differentiated and based on the degree of difficulty of the
position, together with the employee’s experience of the task and
fulfilment of the job requirements. SKF uses a position evaluation
system – IPE (International Position Evaluation) – for salary setting
to ensure internal equity and to pay people fairly. Salary setting
also follows legislation and/or union agreements as locally applica-
ble. Equal pay audits are carried out locally adhering to country
regulations.
Differences in the gender pay ratio of the company are not due to
unequal pay for equal work. A higher proportion of men in higher
level positions, as well as a higher proportion of women in part-time
work, are contributing to the total pay difference between women
and men. SKF is striving for increased gender diversity on all levels
and closing the gender pay gap.
405-1 Diversity of governance bodies and employees
The graphs show the percentage of women and the age structure at
different categories within the organization. Information on minori-
ties is not available.
The Board
The Board refers to the SKF
Board of Directors which makes
up the highest governance body
for the organization. Please
refer to page 144.
Board of
Directors
2021
30%70%
2020
27%73%
2019
20%80%
Age structure
<30: 0%
30-50: 30%
>50: 70%
Women
Men
30%
70%
Group Management
Group Management is the
operational management team
of the SKF Group. Please refer
to page 148.
Group
Management
2021
20%80%
2020
20%80%
2019
20%80%
Women
Men
Age structure
<30: 0%
30-50: 30%
>50: 70%
30%
70%
Higher management
Higher management refers to
the around top 400 managers in
the SKF Group. The actual num-
ber in this population changes
over time.
Higher
Management
2021
16%84%
2020
14%8 6%
2019
13%87%
Women
Men
Age structure
<30: 0.2%
30-50: 44%
>50: 55%
55%
44%
0.2%
Managers
Managers refers to the employees
who have direct reports.
1)
Managers*
2021
20%80%
Women
Men
Age structure
<30: 2.4%
30-50: 65%
>50: 32%
32%
65%
2.4%
Total employees
Total employees refers to the total
number of employees in SKF as per
end of 2021.
1)
Emplyees*
2021
22%78%
Women
Men
Age structure
<30: 15%
30-50: 52%
>50: 33%
33%
52%
15%
1) New definition and data source from 2021 and therefore no data is presented for previous years.
133
SKF Annual Report 2021
Material topics: Non-discrimination 2016, Freedom of associa-
tion and collective bargaining 2016, Child labour 2016, Forced
or compulsory labour 2016, Human rights assessments 2016
Management approach – General Disclosures 2016
This part of the report is prepared according to
UN Guiding Principles on Business and Human Rights
Reporting Framework as well as GRI Standards.
103-1 Materiality and boundaries
SKF owns and operates around 87 manufacturing plants across the
world, with around 26,000 employees in different types of produc-
tion. These facilities have local and global supply of components and
raw material. On risk to people, the salient issues for SKF relate to
SKF employees and people working in the supply chain. The work is
continually evolving as risk assessment and due diligence processes
are developing and as more knowledge is gained about how the
Group’s activities can have an impact on the people in proximity to
SKF’s operations, its distribution, sales and end-use of products
and services.
Modern Slavery Act 2015
AB SKF is committed to ensure that the companies within
the SKF Group do not allow slavery or human trafficking.
As with other human rights, this commitment extends to
the supply chains used by the SKF Group. This statement is
made pursuant to Section 54, Parts 1, 5 and 6 of the Modern
Slavery Act 2015 and sets out the steps the SKF Group has
taken to ensure that slavery and human trafficking are not
taking place in company operations or supply chains.
103-2–103-3 Management approach, its components and
evaluation
Background and policy commitment
The SKF Code of Conduct is based on a number of international
external principles and charters, such as ILO conventions, UN Gui-
ding Principles for Human Rights, the International Chambers of
Commerce Business Charter for Sustainable Development and
theUN Global Compact. The SKF Code of Conduct has been used
todevelop many related policies on specific topics and to address
business partners along the value chain. The Code is available on
skf.com/code and is part of commercial agreements with suppliers,
sub-contractors, distributors and agents. The SKF Code of Conduct
is the main policy for human rights, backed up by adapted versions
specifically addressing suppliers, sub-contractors and distributors,
but they are all based on the same principles.
SKF works to integrate human rights aspects in all processes
where SKF sees a risk that people could be adversely affected. This
means that in screening and audit activities, such as internal ethics
and compliance reviews and audits, quality audits, Code of Conduct
audits at suppliers, etc., human rights are considered. Deviation or
risks are resolved in the operations or escalated if needed. Alar-
ming issues would be escalated to the audit committee at board
level. SKF Group Management are continually updated on specific
issues, such as health and safety for SKF’s employees and serious
incidents. The Group’s EHS and responsible sourcing programmes
are vital parts of managing salient human rights in SKF operations
and supply chain.
Salient human rights risks
SKF perceives the salient human rights being related to freedom
of association and collective bargaining, compensation, work hours,
health, safety, wellbeing and discrimination. The salient risks are
mainly associated to the supply chain. Lack of transparency and
traceability means that the further upstream in the value chain, the
more difficult it is for SKF to identify concrete human rights risks.
Other human rights issues that SKF is following closely, although
not deemed salient, are related to children’s rights, child labour and
young workers, and forced or bonded labour. SKF follows up closely,
first of all, with potential new suppliers on their risks related to these
human rights. In this work, SKF focuses on geographic regions
where risks are higher, where rule of law and social equality are
weaker. SKF takes in third party data to assess the overall risks on
human rights.
Stakeholder collaboration
SKF collaborates with a range of stakeholder groups to avoid or
mitigate human rights risks. Customers typically require SKF to
manage such risks. The primary stakeholder group with whom SKF
has a direct relationship is the employees, and so a social dialogue
isheld between local management and worker representatives.
Inaddition to this ongoing dialogue on a local level, SKF Group
Management meets annually with SKF World Union Council (WUC).
SKF also maintains dialogues with peers and NGOs via networks
such as the UN Global Compact, Transparency International and
Roundtable on Sustainable Palm Oil (RSPO) as a supplier of bea-
rings and solutions into that industry.
Steel and steel components represent by far the most significant
material input to SKF in terms of value and weight. The steel supply
chain is complex and highly globalized and may involve human
rights risks particularly at the top end of the supply chain. Typically,
SKF has no direct business relationship with actors beyond tier 1 or
2 and so driving change unilaterally is not feasible. Therefore, in
2021, SKF joined many other actors in the steel value chain as well
as representatives from civil society in the Responsible Steel Initia-
tive (RSI). The RSI is a multistakeholder initiative which works to
identify and address salient human rights (along with environmen-
tal) risks in the full steel value chain – from scrap or raw material
tofinished steel.
Trends and patterns 2021
At the annual conference, SKF WUC and the Group focused on health,
safety, decent working conditions, COVID-19 control measures and
behaviour based safety.
Integrating findings and taking action
The SKF Code of Conduct implies that the different stakeholder
aspects shall be taken into consideration prior to any business
decisions. Should any decision be taken that may have adverse
impact on human rights, meaning against the SKF Code of Conduct,
Human rights
Direct impact on
UN Sustainable
Development Goals
SUSTAINABILITY STATEMENTS
134
SKF Annual Report 2021
the individual who records such an event is expected to report this
via formal grievance mechanisms so that the decision can be avoi-
ded. For cases where the normal escalation routine is not an option,
SKF uses an externally hosted ethics and compliance reporting
mechanism, read more on page 113.
The work to prevent adverse impact is a continuously ongoing
task. The most obvious issues for SKF are related to freedom of
association and collective bargaining as SKF has operations in
countries where such do not exist. The Group works together with
the WUC to seek pragmatic ways to bargain collectively and nomi-
nate worker representatives. This is to be in line with its global
framework agreement with the union, while at the same time
making sure to adhere to local laws, and not put employees at risk.
Impact from SKF’s business and products
SKF works to continuously reduce any negative downstream impact
relating to its business. SKF works to ensure compliance to laws and
regulations, and to phase out material and substances hazardous to
people and the natural environment.
With regards to SKF’s business, the purpose of SKF’s products
and solutions is to make things work better, run faster, longer, clea-
ner and more safely. SKF considers that business can drive prospe-
rity and growth to overcome social issues over time.
The work related to human rights focuses on adhering to export
control regulation and ensuring that SKF’s distributors adhere to
the SKF Code of Conduct. SKF has identified a few industry hotspots
where the general human risks are higher, such as the extractive
industries, forestry and energy, as these are associated with
significant land use. No cases of systematic human rights violations
linked to SKF business activities have been identified during 2021.
406-1 Incidents of discrimination and corrective
actions taken
During 2021, 99 reports related to discrimination and harass-
ment have been received through the SKF Ethics & Compliance
Reporting Line.
These cases are normally assigned to local investigators
(mainly People Experience country leads) and actions are taken
on a local level.
SKF has set a process in place during 2021 so that concerns
about harassment and discrimination that are reported locally (e.g.
via email or in-person to People Experience) are also reported and
documented centrally.
In addition, SKF works to establish a corporate harmonization,
adhering local labor laws, in regards of setting appropriate actions
as result of the findings of local investigations.
407-1 Operations and suppliers in which the freedom of
association and collective bargaining may be at risk
All employees are covered by collective agreement or the SKF
Framework agreement. The overall approach from the state
towards union membership and the level of independence of trade
unions in certain countries where SKF has operations, creates
challenges in this respect. SKF works pragmatically with the WUC
and the appointed union representatives to try and address these
challenges. Please refer to pages 114 and 127 for a description of
the SKF WUC’s work related to collective bargaining agreements.
Information on whichcountries SKF has operations in is available
on skf.com/locations.
408-1 Operations and suppliers at significant risk for
incidents of child labour
SKF considers the risk for child labour in SKF’s operations as small.
The issue of child labour is nonetheless included in SKF’s internal
audits. The risk for use of child labour at SKF suppliers is considered
higher and SKF’s supplier audits have a high focus on this topic.
In 2021, SKF found no actual cases of child labour at its own ope-
rations and one case at SKF’s supplier in China (found at the end of
2021). The problem has been immediately solved by the supplier,
but SKF decided to stop business with that supplier.
409-1 Operations and suppliers at significant risk for
incidents of forced or compulsory labour
The issue of forced, bonded and compulsory labour is included in
SKF’s Code of Conduct and internal and supplier audits. In 2021,
two cases of forced or bonded labour have been identified in India.
Immediate corrective actions have been taken and the concerns
were addressed. The two suppliers are now under monitoring.
SKF applies regional risk characterization from tools such as
Maplecroft to help identify countries with these potential risks
(407-1, 408-1, 409-1).
412-1 Operations that have been subject to human rights
reviews or impact assessments
SKF’s manufacturing units are subject to an ethics review including
relevant aspects on the Code of Conduct with a risk-based periodi-
city. In2021, eleven such reviews were carried out. In addition,
sites undergo audits on specific topics and most audits related to
human rights focus on health and safety. SKFalso carries out site
audits at suppliers. Read more on the next page.
Duty of companies
• Policy commitment
• Human rights due
diligence
– Assessing impact
– Act on findings
– Tracking effectiveness
– Communicate
• Stakeholder
engagement
• Remediation
States duty
to protect
Access to
remedy
Companies
duty to
respect
Protection of
human rights
135
SKF Annual Report 2021
103-1 Materiality and boundaries
SKF addresses supplier impact on the environment, human rights,
labor practices and society under the Responsible sourcing pro-
gramme. The programme covers all of SKF’s suppliers but uses a
risk-based approach focusing auditing on tier one and sometimes
tier two suppliers.
Supplier assessments
Screening of suppliers
1517
Americas
Audits
done
Deviations
found
52
Europe/Africa
Audits
done
Deviations
found
21153
India
Audits
done
Deviations
found
15951
China
Audits
done
Deviations
found
External risk maps, combined with SKF’s operations and spend have resulted in
aregion or country focus when it comes to risk assessment audits and follow-u
ps.
Direct impact on
UN Sustainable
Development Goals
103-2–103-3 Management approach, its components and
evaluation
SKF’s Responsible sourcing programme works to ensure the
Group’s effective deployment of the SKF Code of Conduct for
suppliers and sub-contractors. The programme is part of supplier
development, which covers areas of delivery, quality, product comp-
liance and Code of Conduct. All potential suppliers are initially
screened using a set of minimum criteria related to the Code of
Conduct and quality demands. These must be met in order to be
considered as an SKF supplier.
SKF’s responsible sourcing strategy uses a risk based approach,
where direct material suppliers making up 90% are automatically
subject to audits if they are located in high risk regions. These can
be both tier one and tier two suppliers. In addition to these, when
risks to people, the environment or business ethics are flagged,
during site visits or screenings, the suppliers are escalated to be
audited. This can be any type of supplier, e.g. professional services
or other indirect material. Screening of suppliers is done using
SKF’s own risk tool and audits are always done on suppliers’ loca-
tions by SKF specialists or third-party auditors. Warning signs may
also be raised by other SKF staff visiting suppliers, such as during
aquality review. The Code of Conduct audit procedure is based
around a checklist with 62 specific questions focusing on a wide
range of aspects, such as human rights and labor standards,
environ ment, bribery, fraud, and other ethical guidance.
Most non-compliance cases are managed by SKF’s regional
purchasing offices. Significant deviations are escalated to SKF
Group’s Responsible Sourcing Committee. First and foremost, the
work focuses on establishing a strong partnership and developing
targeted suppliers. However, suppliers that fail to address critical
issues over time risk having their contracts with SKF terminated.
In 2021, unacceptable deviations were found at ten suppliers in
India and China. nine cases were escalated to the Responsible
Sourcing Committee, who decided to assign specific support to help
these suppliers to improve. At the end of the year, most of the main
problems have been solved and seven of the ten suppliers were con-
firmed as business approved. Contracts were (or will be soon) ter-
minated with the other three suppliers; sourcing with them has
already been stopped, or will finish within 2022. One of these three
is a case of child labor that has been found at the end of 2021 after
the last RSC. The problem has been immediately solved by the
supplier, but SKF has decided to stop business with it; progress will
be followed up during the next RSC meeting.
Material topics – GRI 414: Supplier social assessment 2016
and GRI 308: Supplier environmental assessment 2016
Management approach – General Disclosures 2016
SUSTAINABILITY STATEMENTS
136
SKF Annual Report 2021
During 2021, SKF worked to closer align quality and Code of
Conduct audits, striving to improve the process of escalating war-
ning signs found during any supplier visits to a full Code of Conduct
audit. The most common deviations found are related to compensa-
tion, work hours, health and safety, pollution and waste handling,
fire license and environmental permits. The data reported in these
statements are consolidating SKF's findings into GRI's designations.
414-1, 308-1 New suppliers that were screened using social
and environmental criteria
All new suppliers of direct material in high risk countries are visited
on site. In other countries, all new direct material suppliers are sub-
ject to a modular quality audit, which could include or trigger a Code
of Conduct audit. Major suppliers in high risk countries are subject
to re-audit. Indirect material suppliers are audited when awarded
strategic sourcing status.
2021 (like 2020) was heavily impacted by the COVID-19 pande-
mic and major travel restrictions, in spite of this 123 suppliers
have been physically audited. 20 out of 123 have been audited
with out negative impact identified (no critical deviations). With the
103 other suppliers, all have confirmed improvements, although
with one of them business exit decision has been taken
by SKF. 32 new suppliers were audited on site using environmental
and social criteria, and all were approved to supply SKF.
414-2 Negative social impacts in the supply chain and
actions taken
In 2021, 326 deviations to the SKF Code of Conduct in this category
have been identified and are being resolved in the operations. The
most common deviations are related to occupational health and
safety, work hours, compensation and employment contract proce-
dures. Seven suppliers with major deviations have been escalated
to the Responsible Sourcing Committee. All cases are prioritized
and addressed according to their urgency.
308-2 Negative environmental impacts in the supply chain
and actions taken
In 2021, 64 environmental deviations related to pollution control
and waste handling have been identified and actions are ongoing
atthe suppliers to resolve them. SKF has the management systems,
skills and experience to do this which is a competitive advantage in
the local supplier development. Specific training programmes about
Code of Conduct, as well as social and environmental matters, have
been conducted in India and China with particular focus on suppliers
having social and environmental issues, including direct and indirect
material suppliers as well as sub-contractors and service providers.
Around 51 suppliers attended the training in India and 12 in China.
To strengthen these supplier follow-ups, local purchasing staff also
have to be trained.
With the intent to continuously monitor suppliers to convert
negative impacts to positive, a pilot on a mobile app, “Connect@
CoC4S” has been launched in India and is now in use. The corrective
and preventive actions are captured by SKF employees when
visiting the suppliers.
Material topic – GRI 419: Socioeconomic compliance 2016
Management approach – General Disclosures 2016
103-1 Materiality and boundaries
SKF addresses socioeconomic compliance as part of the Group’s
ethics and compliance programmes across the full value chain.
Within this report, the focus is on SKF’s operations and parties with
whom SKF has a direct business relationship.
Compliance with international declarations, conventions, treaties
and local regulation is one of the most important tasks amultinatio-
nal enterprise can manage to support sustainable development.
SKF works proactively to prepare for and live up tosuch requirements.
103-2–103-3 Management approach, its components and
evaluation
There is a Group-wide programme of online training courses,
which are mandatory for all employees having an SKF email add-
ress, with content about issues such as Data privacy (88%), Export
Control (85%) Conflict of Interest (78%) Corruption (87%), Workplace
harassment (88%) Diversity & Inclusion (86%), Reporting ethical
concerns (88%) and Ethical leadership (84%). The numbers in brackets
represents the % of the total number of the employees who have
completed the training as per January 2022.
One important compliance area for SKF is data privacy. The
General Data Protection Regulation (GDPR) came into force within
the EU in 2018 and puts clearer responsibility and higher accounta-
bility on companies handling personal data. AsSKF shares informa-
tion globally, these rules affect SKF also outside the EU. SKF meets
this increased responsibility and has, forexample, established a data
privacy policy, appointed data protection officers, assessed and
registered IT applications and reviewed supplier contracts.
SKF monitors and follows closely the development and recommen-
dations from the OECD and the European Union as regards tax
transparency. In line with the OECD recommendations, Sweden has
introduced rules on country by country reporting, and a report inclu-
ding, e.g. income, profit, taxes paid, employees and economic activity
in each country, needs to be filed with the Swedish Tax Authority.
SKF has filed such information but does not report publicly due to
sensitive competitive information. Tax is an important sustainability
topic and SKF makes its tax policy public on skf.com. The global
bearing market, which is the main business of the SKF Group is made
up of a small number of large enterprises. This is explained more on
pages 6–7 and 40. This means that publicly disclosing earnings and
tax per country, or even by region, would provide competitors with
information on exactly where SKF does business and the size of it.
This information would be highly valuable for any competitor. For this
reason, SKF will not disclose tax or earnings by country publicly.
In addition to the above topics and other socioeconomic areas
reported within these statements, SKF works closely to ensure
compliance to topics such as corruption, money laundering, export
control and human rights.
419-1 Non-compliance with laws and regulations in the
social and economic area
No cases of non-compliance related to these topics have been
identified.
Socioeconomic compliance
Direct impact on
UN Sustainable
Development Goals
137
SKF Annual Report 2021
The EU Taxonomy is a classification system to help define environ-
mentally sustainable economic activities to support the transition
to an economy consistent with the EU's environmental objectives.
A cross-functional team with members from sustainability,
finance and investor relations has investigated the EU Taxonomy
requirements and its relevance to SKF based on the EU Taxonomy
Regulation 2020/852 and the related delegated regulations and
annexes.
The conclusion from the analysis is that since the manufacturing
of components is currently not included in the economic activities
covered by the EU Taxonomy, there is no material eligible turnover,
CAPEX or OPEX for SKF.
Turnover
The interpretation of Annexes 1–5 of the Delegated regulations
/2021/4987 section 1.1.1. is that SKF has no eligible turnover, as
the Group's activities neither qualify as enabling nor are taxonomy
eligible themselves, since the manufacturing of components is not
covered.
CAPEX
The interpretation of Annexes 1–5 of the Delegated regulations
/2021/4987 section 1.1.2.2. (a,b) is that SKF has no eligible CAPEX,
since the manufacturing of components is not covered. According
The EU Taxonomy
toparagraph (c) SKF has some eligible CAPEX related to energy
efficiency of buildings and solar panels, but the amount is not
considered to be material as it represents less than 1% of
theGroup'stotal CAPEX.
OPEX
The interpretation of Annexes 1-5 of the Delegated regulations
/2021/4987 section 1.1.3.2. is that SKF has no eligible OPEX,
sincethe manufacturing of components is not covered.
Contextual information
The EU Taxonomy does not cover SKF's operations as described
above. Nevertheless, SKF takes sustainability and climate change
seriously and has been doing so for many years. As described on
pages 13 and 19 in this report, the Group has during 2021 defined
an even higher ambition level with the target to have net zero
greenhouse gas emissions in the full supply chain by 2050.
Since the launch in the end of 2019, the Group has now allocated
the full EUR 300 million Green Bond to projects that support the
transition to low-carbon, climate resilient growth and lower environ-
mental impacts. This is an important part of SKF’s focus on redu-
cing its own emissions as well as increasing investments in R&D,
production, testing and remanufacturing capacity for products used
in industries such as renewable energy generation, electric vehicles
SUSTAINABILITY STATEMENTS
138
SKF Annual Report 2021
To AB SKF (publ), corporate identity number 556007-3495
Introduction
We have been engaged by the Board of Directors of AB SKF (publ) to
undertake a limited assurance engagement of the SKF Sustainability
Report for the year 2021. The Company has defined the scope of the
Sustainability Report on page 2 and the Statutory Sustainability
Report on page 110.
Responsibilities of the Board of Directors and the Executive
Management
The Board of Directors and the Executive Management are respon-
sible for the preparation of the Sustainability Report including the
Statutory Sustainability Report in accordance with the applicable
criteria and the Annual Accounts Act respectively. The criteria are
defined on page 110 in the Sustainability Report, and are part of
theSustainability Reporting Guidelines published by GRI (Global
Reporting Initiative), which are applicable to the Sustainability
Report, as well as the accounting and calculation principles that
theCompany has developed. This responsibility also includes the
internal control relevant to the preparation of a Sustainability
Reportthat is free from material misstatements, whether due to
fraud or error.
Responsibilities of the auditor
Our responsibility is to express a conclusion on the Sustainability
Report based on the limited assurance procedures we have perfor-
med and to express an opinion regarding the Statutory Sustainabi-
lity Report. Our engagement is limited to historical information pre-
sented and does not cover future-oriented information.
We conducted our limited assurance engagement in accordance
with ISAE 3000 Assurance Engagements Other than Audits or
Reviews of Historical Financial Information. A limited assurance
engagement consists of making inquiries, primarily of persons
responsible for the preparation of the Sustainability Report, and
applying analytical and other limited assurance procedures. Our
examination regarding the Statutory Sustainability Report has been
conducted in accordance with FAR’s accounting standard RevR 12
The auditor’s opinion regarding the Statutory Sustainability Report.
Alimited assurance engagement and an examination according to
Auditor’s Limited Assurance Report on the
Sustainability Report and statement regarding
the Statutory Sustainability Report
RevR 12 is different and substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and generally accepted auditing standards in Sweden.
The firm applies ISQC 1 (International Standard on Quality Con-
trol) and accordingly maintains a comprehensive system of quality
control including documented policies and procedures regarding
compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements. We are independent
of AB SKF in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities in
accordance with these requirements.
The limited assurance procedures performed and the examina-
tion according to RevR 12 do not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. The conclusion based on a limited assurance
engagement and an examination according to RevR 12 does not
provide the same level of assurance as a conclusion based on an
audit.
Our procedures are based on the criteria defined by the Board
ofDirectors and the Executive Management as described above.
Weconsider these criteria suitable for the preparation of the
Sustainability Report.
We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our conclusion below.
Conclusion
Based on the limited assurance procedures we have performed,
nothing has come to our attention that causes us to believe that the
Sustainability Report, is not prepared, in all material respects, in
accordance with the criteria defined by the Board of Directors and
Executive Management.
A Statutory Sustainability Report has been prepared.
Gothenburg, 2 March 2022
Deloitte AB
Lennart Nordqvist
Expert Member of FAR
Hans Warén
Authorised Public Accountant
139
SKF Annual Report 2021
Corporate Governance Report
Introduction
SKF Care defines the Group’s approach to securing sustainable,
positive development over the short, medium and long term. SKF
applies the principles of sound corporate governance as an instru-
ment for increased competitiveness and to promote confidence in
SKF among all stakeholders. Among other things, this means that
the company maintains an efficient organizational structure with
clear areas of responsibility and clear rules for delegation, that the
financial, environmental and social reporting is transparent and that
the company in all respects maintains good corporate citizenship.
The corporate governance principles applied by SKF are based
onSwedish law, in particular the Swedish Companies Act and the
Swedish Annual Accounts Act, and the regulatory system of NASDAQ
Stockholm AB (Stockholm Stock Exchange).
Information under the Annual Accounts Act Chapter 6, § 6,
sections 3–4, are found at page 46 of the Administration Report
for the Group in the Annual Report 2021.
Swedish Code of Corporate Governance
The Swedish Code of Corporate Governance (the “Code”) was origi-
nally introduced on 1 July 2005. The Code has been revised several
times since the introduction and the applicable Code is available
atthe website of the Swedish Corporate Governance Board,
www.corporategovernanceboard.se.
It is considered good stock exchange practice for Swedish com-
panies whose shares are traded on a regulated market to apply the
Code. SKF applies the Code, and this Corporate Governance Report
has been prepared in accordance with the Code and the Swedish
Annual Accounts Act. Furthermore, SKF has provided information
on the company’s website in line with the Code requirements. The
Annual General Meeting in 2021 was also held in accordance with
the Code rules. The auditor of the company has read and performed
a statutory examination of the Corporate Governance Report.
General information about how the company is managed
The shareholders’ meeting is the company’s highest decision-making
body. The Annual General Meeting of shareholders shall be held
within six months after the end of the financial year. At the Annual
General Meeting the shareholders exercise their voting rights for
e.g. the composition of the Board of Directors, adoption of principles
of remuneration for Group Management and election of external
auditors. SKF has issued A and B shares. An A share entitles the
shareholder to one vote and a B share to one-tenth of a vote.
The Board of Directors has a responsibility for the company’s
organisation and for the oversight of the management of the compa-
ny’s affairs and is, together with the President and Group Manage-
ment defining and continuously monitoring SKF’s vision, mission,
values and drivers. The Chairman of the Board of Directors shall
direct the work of the Board and monitor that the Board of Direc-
tors fulfils its obligations. The Board annually adopts written rules
of procedure for its internal work and written instructions. For more
details on the rules of procedures and the written instructions, see
below under the heading “Activities of the Board of Directors”.
The President of the company, who is also the Chief Executive
Officer, is appointed by the Board of Directors and handles the day-
to-day management of the company’s business in accordance with
the guidelines and instructions from the Board. The approval of
theBoard is, for example, required in relation to investments and
acquisitions above certain amounts, as well as for the appointment
of certain senior managers. The President is supported by Group
Management.
As per 31 December 2021, SKF was organized in the following
business areas; Industrial SalesAmericas, Industrial Sales Europe,
Middle East and Africa, Industrial Sales Asia, Auto motive, SKF
Technology and Industrial Technologies. The responsibility for end-
to-end procurement, manufacturing and logistics is combined into
Bearing Operations. Further, there are three Group staff units;
Group staff units Sales/Operations
Shareholders through
shareholders’ meeting
Board of Directors
President and CEO
Group Management
Internal audit
Audit Committee
External auditors
Remuneration Committee
Nomination Committee
1
23 4
5
6
7
CORPORATE GOVERNANCE REPORT
140
SKF Annual Report 2021
Group Finance, IT, Marketing & Communication, Group People
Experience and Group Legal, Reinsurance, Brand Protection and
Real Estate & Facility Management, see pages 148–149 in the
Annual Report 2021. Each Group staff unit had its own defined
area of responsibility and the task to define strategic directions
and fundamental requirements within itsarea. The Director of
Sustainability, reported directly to the Chief Executive Officer and
had thetask to assure that all relevant aspects of sustainability are
addressed and integrated into operations and activities throughout
the Group. Policies and instructions are in place toensure that
matters of certain im portance are referred to the President and/or
the Board of Directors.
1
Nomination Committee
At the Annual General Meeting of AB SKF it was resolved that
the company shall have a Nomination Committee formed by one
representative of each of the four major shareholders with regard
to the number of votes held as well as theChairman of the Board.
When constituting the Nomination Committee, the shareholdings
per the last banking day in August each year would determine
which shareholders are the largest with regard to the number of
votes held. The names of the four shareholder representatives were
to be published as soon as they had been elected, however not later
than six months before the next Annual General Meeting. The Nomi-
nation Committee shall remain in office until a new Nomination
Committee has been appointed.
In a press release on 8 September 2021, it was announced that a
Nomination Committee consisting of the following representatives
of the shareholders, besides the Chairman of the Board, had been
appointed in preparation of the Annual General Meeting 2022:
• Marcus Wallenberg, FAM
• Anders Algotsson, AFA Försäkring
• Anders Jonsson, Skandia
• Joachim Spetz, Swedbank Robur Fonder
The Nomination Committee is to furnish proposals in the following
matters to be presented to, and resolved by, the Annual General
Meeting in 2022:
• proposal for Chairman of the Annual General Meeting
• proposal for Board of Directors
• proposal for Chairman of the Board of Directors
• proposal for fee to the Board of Directors
• to the extent deemed necessary, proposal for new instructions
for the Nomination Committee.
The proposals of the Nomination Committee werepublished in
connection with the notice to the Annual General Meeting 2022.
2
The Board of Directors
Composition and remuneration of the Board
The Board shall, in addition to specially appointed members and
deputies, according to the Articles of Association of SKF, comprise
a minimum of five and a maximum of twelve Board members, with
a maximum of five deputies. The Board members are elected each
year at the Annual General Meeting for the period up to the end of
the next Annual General Meeting.
The Nomination Committee proposes decisions to the Annual
General Meeting regarding electoral and remuneration issues,
including proposals for the composition and remuneration of the
Board. As reflected in the Nomination Committee’s statement
regarding the composition of the proposed Board and the proposed
remuneration presented to the Annual General Meeting 2021, the
Nomination Committee has applied the provisions in the Code as
diversity policy. The objectives of the diversity policy is for the Board
to have a composition appropriate to the company’s operations,
phase of development and other relevant circumstances; that the
Board members elected by the shareholders’ meeting collectively
are to exhibit diversity and breadth of qualifications, experience and
background; and that the company is to strive for gender balance on
the Board. The Annual General Meeting 2021 resolved to appoint
Board members in accordance with the Nomination Committee’s
proposal.
Eight Board members, including the Chairman, were elected at
AB SKF’s Annual General Meeting held in the spring of 2021. Alrik
Danielson and Ronnie Leten resigned from the Board. In addition,
the employees have appointed two Board members and two deputy
Board members. No Board member, except for the President,
isincluded in the management of the company.
Information on the composition and remuneration of the Board
members decided upon by the Annual General Meeting 2021 can
befound in the Annual Report 2021, Consolidated Financial State-
ments, Note 23.
Independence requirements
The Board of Directors has been considered to comply with the
requirements regarding independence of the Code. The table below
shows the Board member’s independence according to the require-
ments of the Code in relation to the company and major shareholders.
Name of the Board
members elected by the
Annual General Meeting
Independence
in relation to the
company/senior
management
Independence
in relation to the
major shareholders
of the company
Hans Stråberg • •
Hock Goh • •
Barb Samardzich • •
Colleen Repplier • •
Geert Follens • •
Håkan Buskhe •
Susanna Schneeberger • •
Rickard Gustafson •
141
SKF Annual Report 2021
Activities of the Board of Directors
The Board held nine meetings in 2021. The Board members were
present at the Board meetings as described in the table below.
Name of the Board member
Presence/Total
number of meetings
Hans Stråberg (chairman) 9/9
Hock Goh 9/9
Alrik Danielson (resigned in March 2021) 2/3
Ronnie Leten (resigned in March 2021) 3/3
Barb Samardzich 9/9
Colleen Repplier 9/9
Geert Follens 9/9
Håkan Buskhe 9/9
Susanna Schneeberger 9/9
Rickard Gustafson (elected in March 2021) 6/6
Jonny Hilbert 9/9
Zarko Djurovic 9/9
Thomas Eliasson (appointed in March 2021) 6/6
Steve Norrman (appointed in October 2021) 2/2
Kennet Carlsson (resigned in October 2021) 7/7
Claes Palm (resigned in March 2021) 3/3
The Board adopts written rules of procedure annually for its
internal work. These rules prescribe i.a.:
• the number of Board meetings and when they are to be held,
• the items normally included in the Board agenda, and
• the presentation to the Board of reports from the external
auditors.
The Board has also issued written instructions on:
• when and how information required for the Board’s assessment
of the company’s and the Group’s financial position shall be
collected and reported to the Board, and
• the allocation of the tasks between the Board and the President.
Issues dealt with by the Board in 2021 include i.a. appoinment of
new CEO, market outlook and the impacts of the COVID-19 pan-
demic, financial reporting, capital structure, acquisitions and
divestments of companies, the strategic direction and business
planof the Group and management issues.
The Board continuously evaluates economic, environmental and
social aspects for the Group’s performance and reviews specific
issues such as accident rates, greenhouse gas emissions and Code
of Conduct adherence.
Each new Board member has to go through a general introduction
training about the SKF Group. The Board visits on a regular basis
different SKF sites in order to enhance knowledge about the SKF
Group, subject to COVID-19-related restrictions and recommen-
dations.
3
Remuneration Committee
The Board of AB SKF has in accordance with the principles in
the Code established a Remuneration Committee consisting of the
Chairman of the Board, Hans Stråberg as chairman, and the Board
members Håkan Buskhe and Colleen Repplier.
The Remuneration Committee prepares matters related to the
principles of remuneration for Group Management and employment
conditions for the President. The principles of remuneration for
Group Management shall be submitted to the Board, which shall
submit a proposal for such remuneration principles to the Annual
General Meeting for approval at least every fourth year. The
employment conditions for the President shall be approved by the
Board.
The Remuneration Committee continuously monitors and evalu-
ates the SKF Group’s remuneration package for Group Management.
Not later than three weeks prior to the Annual General Meeting the
Board submits on the company’s website, in accordance with the
Swedish Companies Act and the principles in the Code, a remunera-
tion report.
The Remuneration Committee held five meetings in 2021. The
members of the committee were present at the meetings as follows:
Name of the Board member
Presence/
Total no. of meetings
Hans Stråberg (chairman) 5/5
Håkan Buskhe 5/5
Ronnie Leten (resigned in March 2021) 2/2
Colleen Repplier (elected in March 2021) 3/3
Group staff units Sales/Operations
Shareholders through
shareholders’ meeting
Board of Directors
President and CEO
Group Management
Internal audit
Audit Committee
External auditors
Remuneration Committee
Nomination Committee
1
23 4
5
6
7
CORPORATE GOVERNANCE REPORT
142
SKF Annual Report 2021
4
Audit Committee
The Board of AB SKF has in accordance with the principles
ofthe Swedish Companies Act and the Code appointed an Audit
Committee. The Audit Committee consists of the Board member
Håkan Buskhe, as chairman, the Chairman of the Board, Hans
Stråberg and the Board member Geert Follens.
The Audit Committee oversees and ensures the quality and
reliability of the accounting and financial reporting processes and
reports, monitors the effectiveness of the Group’s internal control
over financial reporting, audit and risk management processes and
the adequacy of the Group’s controls for compliance with laws and
regulations. The Audit Committee also reviews and monitors the
work of external auditors as well as make preparations in relation
to the nomination of external auditors.
The Audit Committee held six meetings in 2021. The members
of the committee were present at the meetings as follows:
Name of the Board member
Presence/Total
number of meetings
Hans Stråberg 6/6
Håkan Buskhe (chairman) 6/6
Ronnie Leten (resigned in March 2021) 1/1
Geert Follens (elected in March 2021) 5/5
Assessment
The Board members assess the quality of the work of the Board
through the completion of a questionnaire, which reflects the
Group’s values and drivers. The result is then discussed at a Board
meeting. The Nomination Committee has been provided with the
result of the assessment.
5
President and Chief Executive Officer
Rickard Gustafson
Rickard Gustafson, President and CEO of AB SKF since June 2021
(succeeding Alrik Danielson).
Board member of AB SKF’s Board since 2021. Born 1964.
Education and job experience
Master of science from the Institute of Technology at Linköping
University. His previous senior positions include president and CEO
of the SAS Group, CEO of the insurance company Codan/Trygg-
Hansa and several positions within General Electric.
Other assignments
Board member of Telia Company and Confederation of Swedish
Enterprise.
Shareholding (own and/or held by related parties) as of
31December 2021
4,350 SKF B
Material shareholdings or other holdings
(own and/or held by related parties) in companies with which the
company has important business relationships: 0
6
The auditor of the company
The task of the auditor is to audit, on behalf of the shareholders,
the Annual Report and the accounting and also to audit the Board’s
and the President’s management of the company.
The Annual General Meeting elects the auditor for a period of
four years. At AB SKF’s Annual General Meeting in the spring 2021,
Deloitte AB (Deloitte) was elected as auditor for the time up to the
closing of the Annual General Meeting in 2025, succeeding Price-
waterhouseCoopers AB. Hans Warén is the auditor in charge.
Hans Warén has many years of experience as auditor in a number
of other listed companies, and is currently the lead auditor for
Axfood, Industrivärden and Trelleborg.
The auditor shall according to a resolution of the Annual General
Meeting be remunerated in accordance with approved invoice.
SKF has a procedure in place whereby all matters that are intended
to be handled by the elected auditors are evaluated in relation to
the independence requirements and are approved or, as the case
may be, rejected, by the Audit Committee. Deloitte applies a similar
procedure and issues annually, in addition thereto, a written state-
ment to the Board stating that the audit firm is independent in
relation to SKF.
Deloitte has during 2021 been involved in matters besides the
audit assignment. These matters have primarily concerned tax ser-
vices. The total fees for Deloitte’s services besides auditing in 2021
amount to MSEK 10.
Financial reporting
The Board of Directors is responsible for documenting how the
quality of the financial reporting is secured and how the company
communicates with its auditor.
The Audit Committee assists the Board of Directors by prepara-
tory work to secure the quality of the company’s financial reporting.
This is, for example, achieved through the Audit Committee’s review
of the financial information and the company’s internal financial
controls.
The Board of Directors had one meeting with the auditors in
2021 and has been provided with the audit and its result. Within the
scope of its work, which includes reviewing the extent of the exter-
nal audit and evaluating the performance of the external auditors,
the Audit Committee met with the auditors in connection with four
Audit Committee meetings. In addition to that, the auditors gave
both the Audit Committee and the Board of Directors information in
writing regarding matters including the planning and implementation
of the audit and an assessment of the risk position of the company.
143
SKF Annual Report 2021
The Board of Directors as of 31 December 2021
Jonny Hilbert
Board member since 2015. Born 1981
Education and job experience
Employed in the SKFGroup since 2005.
Other assignments
Chairman Unionen, SKF, Gothenburg.
Shareholding (own and/or held byrelated parties) 0
Thomas Eliasson
Deputy Board member since 2021. Born 1965
Education and job experience
Employed in the SKF Group since 1984.
Other assignments
Chief Safety Representative and Board member
ofUnionen at SKF in Gothenburg.
Shareholding (own and/or held
by related parties) 0
Zarko Djurovic
Board member since 2015. Born 1977
Education and job experience
Employed in the SKFGroup since 2006.
Other assignments
Chairman Metalworker’s Union, SKF, Gothenburg.
Shareholding (own and/or held byrelated parties) 0
Steve Norrman
Deputy Board member since 2021. Born 1965
Education and job experience
Employed in the SKFGroup since 1994.
Other assignments
Vice Chairman and Safety Officer Metalworker’s Union,
SKF, Gothenburg.
Shareholding (own and/or held byrelated parties) 0
EMPLOYEE REPRESENTATIVES
Geert Follens
Board member since 2019
Born 1959
Education and job experience
Master of Science in Electromechanical
Engineering and a post graduate
degree in Business Economics from the
university of Leuven, Belgium. Senior
Executive Vice President and Business
Area President Vacuum Technique at
Atlas Copco AB. Several leading posi-
tions within the Atlas Copco Group in
Sweden, Belgium and the U.K. since
1995, including General Manager of
Atlas Copco Compressor Technique
customer center, President of the
Portable Energy division and
President of the Industrial Air division.
Shareholding (own and/or held
by related parties) 1,500 SKF B
Håkan Buskhe
Board member since 2020
Born 1963
Education and job experience
Master of Science, Licentiate of E
ngineering, Chalmers University
ofTechnology. CEO of FAM AB, owned
by Wallenberg Investments AB. His
previous senior postitions include CEO
ofSaab AB, 2010–2019 and CEOof
E.ON Nordic AB, 2008–2010.
Other assignments
Chairman of IPCO AB, board member
of FAM AB, Munters Group, Stora Enso
Oyj and Kopparfors Skogar AB
Shareholding (own and/or held
by related parties) 0
Susanna Schneeberger
Board member since 2020
Born 1973
Education and job experience
Master of European Affairs (MBA) and
Master of Science in International Busi-
ness, Lund University. Senior advisor
and several leading positions including
Chief Digital Officer and executive
board member of the KION Group,
2018–2020, CEO of Demag Cranes &
Components, 2015–2018, and various
positions in the Trelleborg Group
2007–2014.
Other assignments
Board member of Concentric AB
and Hempel A/S.
Shareholding (own and/or held
byrelatedparties) 1,000 SKF B
Rickard Gustafson
President and Chief Executive
Officer of AB SKF. For more
details, see page 149.
Hans Stråberg
Chairman, Board member since 2018
Born 1957
Education and job experience
Master of Science in Engineering from
Chalmers University of Technology,
Gothen burg. President and CEO of
Electrolux AB 2002–2010. Several
leading positions within the Electrolux
Group in Sweden and USA since 1983.
Former EU Co-Chair TABD, Trans-
Atlantic Business Dialogue.
Other assignments
Chairman of Atlas Copco AB, Roxtec AB,
CTEK AB and Anocca AB. Board mem-
ber of Investor AB and Mellby Gård AB.
Shareholding (own and/or held
byrelatedparties) 37,000 SKF B
Hock Goh
Board member since 2014
Born 1955
Education and job experience
Bachelor’s degree (honours) in
Mechanical Engineering from Monash
University, Australia, completed the
Advanced Management Program at
INSEAD. Operating Partner ofBaird
Capital Partners Asia, 2005–2012.
Several senior management positions
in Schlumberger Limited, 1995–2005,
President of Network and Infrastruc-
ture Solutions division in London,
President Asia and Vice President and
General Manager China.
Other assignments
Member of the Board of Stora Enso Oyj
and Santos Australia.
Shareholding (own and/or held
byrelated parties) 0
Barb Samardzich
Board member since 2017
Born 1958
Education and job experience
Bachelor of Science in Mechanical
Engineering, University of Florida,
Master ofScience in Mechanical
Engineering, Carnegie Mellon
Univer sity, Master of Science in
Engineering Management, Wayne
State University. Various manage ment
positions at Ford Motor Company,
1990–2016, the latest asCOO of Ford
Europe, 2013–2016. Engineer in the
Commercial Nuclear Fuel Division at
Westing house Electric Corpo ration,
1981–1990.
Other assignments
Board member of Adient plc and
Bombardier Recreational Products.
Shareholding (own and/or held
by related parties) 0
Colleen Repplier
Board member since 2018
Born 1960
Education and job experience
Bachelor’s degree in Electrical Engi-
neering, University of Pittsburgh and
MBA from the University of Central
Florida. Vice president and general
manager ofJohnson Controls 2016–
2018. Several leading positions within
Tyco 2007–2016 and Home Depot
2005–2007, and in the energy industry
within GE Energy 1994–2003, Bechtel
Corporation 1992–1994 and Westing-
house 1983–1992.
Other assignments
Board member of Kimball Electronics
and Triumph Group.
Shareholding (own and/or held
byrelated parties) 0
CORPORATE GOVERNANCE REPORT
144
SKF Annual Report 2021
Hans Warén
Authorized Public Accountant
Deloitte AB
AUDITOR
145
SKF Annual Report 2021
Internal control and risk management regarding
financial reporting
7
SKF applies the Internal Control Integrated Framework launched
in1992 by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In 2013 COSO launched an updated
version of the framework. SKF’s internal control framework is
aligned with the 17 fundamental principles of COSO 2013. The
COSO framework consists offive interrelated components.
The control environment component is the foundation for the
other components. Through its policies, instructions and organiza-
tional structure SKF has documented the division of responsibility
throughout the SKF organization. This is reflected in the fact that
policies and instructions, where applicable, are developed on the
basis of internationally accepted standards and/or best practice.
Policies and instructions are reassessed by the responsible function
based on the need to adapt these to changes in requirements and
legislation.
SKF is a process-oriented company and includes integrated risk
assessment with the business processes such as business planning.
In the area of control activities, SKF has documented all the critical
finance processes and controls for the parent company and subsidi-
ary companies. SKF has implemented these requirements as a
Group standard, the SKF Internal Control Standard (SICS) for all
Group companies. The documentation standards require that
relevant controls in the business processes are described and
performed. When deficiencies in individual controls are identified,
action plans are created to remediate control gaps. A selection
of defined control activities are tested annually. SKF has a risk
approach to controls, control testing and actions to remediate con-
trol gaps. During 2021 the control test activities have been limited
due to the COVID-19 pandemic and been performed primarily
through testing of controls in the newly established Finance
Operations Centers and through self assessments.
SKF has information and communication systems and procedures
in place in order to ensure the completeness and correctness of
thefinancial reporting. Accounting and reporting instructions are
updated when necessary. These instructions are available to all
relevant employees together with training programmes. Changes to
accounting and reporting instructions are communicated regularly.
Information on COSO components of monitoring, information and
communication, financial risk assessment, control environment, test
and review protocols as well as test results are stored in a special IT
System. Detailed financial process and control documentation are
stored centrally and/or locally. This enables access to individual
control documentation and analysis of results from the testing of
SKF’s financial internal control system.
The implementation of SICS consisted primarily of adapting the
process and control descriptions to a common framework and putting
in place a comprehensive system for management testing of the
controls. SKF applies a risk-based annual testing programme of
selected units and critical controls. The test programme is reassessed
annually.
SKF has an internal control function, within SKF Group Compliance
& Assurance, with the main responsibility to support the business to
implement and maintain good internal control as well as to perform
control testing to evaluate adherence with the framework and iden-
tify control weaknesses. The internal audit department Compliance
& Assurance conducts high level risk-based audits within prioritized
areas. The Director, Group Compliance & Assurance reports to the
Group’s Chief Financial Officer and regularly submits reports tothe
Audit Committee of the Board of Directors. The Board of Directors
receives regular financial reports and the Group’s financial position
and development are discussed at every meeting. The Audit Com-
mittee of the Board of Directors reviews all interim and annual
financial reports before they are released to the public.
Gothenburg, 2 March 2022
The Board of Directors
© 2013 Internal Control-
Integrated Framework
Committee of Sponsoring
Organizations of the
Treadway Commission
(COSO). All rights reserved.
Used with permission.
Operations
Control Environment
Risk Assessment
Control Activities
Information & Communications
Monitoring activities
Entity Level
Division
Operating Unit
Function
Reporting
Compliance
Group staff units Sales/Operations
Shareholders through
shareholders’ meeting
Board of Directors
President and CEO
Group Management
Internal audit
Audit Committee
External auditors
Remuneration Committee
Nomination Committee
1
23 4
5
6
7
CORPORATE GOVERNANCE REPORT
146
SKF Annual Report 2021
Auditor’s report on the Corporate Governance
Statement
To the general meeting of the shareholders in AB SKF (publ),
corporate identity number 556007-3495
Engagement and responsibility
It is the Board of Directors who is responsible for the corporate
governance statement for the financial year 2021-01-01
–2021-12-31 on pages 139–146 and that it has been prepared
in accordance with the Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s
standard RevU 16 The auditor’s examination of the corporate
governance statement. This means that our examination of the
corporate governance statement is different and substantially less
in scope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards
in Sweden. We believe that the examination has provided us with
sufficient basis for our opinions.
Opinions
A corporate governance statement has been prepared. Disclosures
in accordance with chapter 6 section 6 the second paragraph
points 2–6 the Annual Accounts Act and chapter 7 section 31 the
second paragraph the same law are consistent with the annual
accounts and the consolidated accounts and are in accordance with
the Annual Accounts Act.
Gothenburg, 2 March 2022
Deloitte AB
Hans Warén
Authorised Public Accountant
147
SKF Annual Report 2021
Changes to Group Management in 2021
Alrik Danielson stepped down from his role
as President and CEO in April 2021.
148
SKF Annual Report 2021
Kent Viitanen
President, Bearing Operations
Born 1965
Business and Economics, School
of Business, Economics and Law,
Univer sity of Gothenburg.
Employed since 1988
Previous positions
Senior Vice President People,
Communi cation and Quality, Director
Renewable Energy and several other
positions within SKF.
Board member
Chalmers University of Tech nology
Shareholding in SKF
140 SKF A and 18,962 SKF B
Ann-Sofie Zaks
Senior Vice President,
Group People Experience
Born 1976
Bachelor’s degree, Innovation
Program with special focus
on Behavioural Science from
University college of Mälardalen.
Employed since 2001
Previous positions
People Experience Director Bearing
Operations, Program manager, Group
People Transformation initiative and
several other positions within SKF.
Shareholding in SKF
4,928 SKF B
Mathias Lyon
General Counsel and Senior
Vice President, Group Legal,
Reinsurance, Brand Protection and
Real Estate & Facility Management-
Born 1975
Master of Laws, Faculty of Law
atLund University.
Employed since 2012
Previous positions
SKF Deputy General Counsel
and several other positions at Volvo,
AstraZeneca, Mannheimer Swartling
and Rosengrens.
Shareholding in SKF
1,625 SKF B
Thomas Fröst
President, Industrial Technologies
Born 1962
Degree in Industrial Economics from
ChalmersUniversity of Technology.
Employed since 1988
Previous positions
Director Industrial Units, Head of
Industrial Marketing, and several
otherpositions within SKF.
Shareholding in SKF
1,248 SKF B
Rickard Gustafson
President and CEO
Born 1964
MSc from the Institute of Technology
at Linköping University, Sweden.
Employed since June 2021
Previous positions
President and CEO of SAS Group,
CEO of Codan/Trygg Hansa and he has
held several positions within General
Electric.
Board member
Telia Company and The Confederation
of Swedish Enterprise
Shareholding in SKF
4,350 SKF B
Niclas Rosenlew
Chief Financial Officer och Senior Vice
President, Group Finance
Born 1972
Master of Science in Finance, Hanken,
Swedish School of Economics.
Employed since 2019
Previous positions
CFO of Basware and senior positions
within Microsoft, Nokia and Deutsche
Bank.
Shareholding in SKF
8,640 SKF B
Erik Nelander
President, Industrial Sales Europe
and Middle East and Africa
Born 1963
Master of Science in Business
Administration and International
Economics, School of Business,
Economics and Law, University of
Gothenburg. Employed since 1987
Previous positions
Vice President SKF Industrial Market,
President SKF China, Business Unit
Director SKFAerospace, and several
other positions within SKF.
Shareholding in SKF
20,245 SKF B
Patrick Tong
President, Industrial Sales Asia,
Born 1962
Executive Master’s Degree of
Business Administration, Hong Kong
University of Scienceand Technology.
Employed since 1989
Previous positions
President Specialty Business,
President SKFSecond Brands
Bearings, as well as several other
positions within SKF.
Shareholding in SKF
23,579 SKF B
Victoria Van Camp
CTO and President, SKF Technology
Born 1966
Master of Science in Mechanical
Engineering, PhDin Machine
Elements; Luleå University of
Techno logy, Sweden.
Employed since 1996
Previous positions
President Business and Product
Development, Director Industrial
Market Technology and Solutions,
Director of Product Innovation
Lubrication BU, as well as several
other positionswithin SKF.
Board member
BillerudKorsnäs AB, Amexci AB
and SKF India Ltd.
Shareholding in SKF
18,300 SKF B
John Schmidt
President, Industrial Sales Americas
Born 1969
Bachelor of Science, Mechanical
Engineering from the Pennsylvania
State University. Employed since
2001 and 1993–1998
Previous positions
President and CEO SKF USA Inc,
Vice President Industrial Market NAM
and several other positions within SKF.
Shareholding in SKF
22,989 SKF B
Group Management as of 31 December 2021
149
SKF Annual Report 2021
150
SKF Annual Report 2021
Thomas Fröst
President, Independent and
Emerging Business
Born 1962
Degree in Industrial Economics from
ChalmersUniversity of Technology.
Employed since 1988
Previous positions
President, Industrial Technologies,
Director Industrial Units, Head of
Industrial Marketing, and several
otherpositions within SKF.
Shareholding in SKF
1,904 SKF B
Victoria Van Camp
CTO and Senior Vice President,
Technology Development
Born 1966
Master of Science in Mechanical
Engineering, PhDin Machine
Elements; Luleå University of
Techno logy, Sweden.
Employed since 1996
Previous positions
President Business and Product
Development, Director Industrial
Market Technology and Solutions,
Director of Product Innovation
Lubrication BU, as well as several
other positionswithin SKF.
Board member
BillerudKorsnäs AB, Amexci AB
and SKF India Ltd.
Shareholding in SKF
20,195 SKF B
Ann-Sofie Zaks
Senior Vice President, Group People
Experience and Communication
Born 1976
Bachelor’s degree, Innovation
Program with special focus
on Behavioural Science from
University college of Mälardalen.
Employed since 2001
Previous positions
People Experience Director Bearing
Operations, Program manager, Group
People Transformation initiative and
several other positions within SKF.
Shareholding in SKF
5,584 SKF B
Mathias Lyon
General Counsel and Senior
Vice President, Group Legal and
Compliance
Born 1975
Master of Laws, Faculty of Law
atLund University.
Employed since 2012
Previous positions
General Counsel and Senior
Vice President, Group Legal,
Reinsurance, Brand Protection and
Real Estate & Facility Management,
SKF Deputy General Counsel
and several other positions at Volvo,
AstraZeneca, Mannheimer Swartling
and Rosengrens.
Shareholding in SKF
2,062 SKF B
Niclas Rosenlew
Chief Financial Officer and Senior Vice
President, Group Finance
Born 1972
Master of Science in Finance, Hanken,
Swedish School of Economics.
Employed since 2019
Previous positions
CFO of Basware and senior positions
within Microsoft, Nokia and Deutsche
Bank.
Shareholding in SKF
8,640 SKF B
Joakim Landholm
Senior Vice President, Operations
and Digital Transformation
Born 1969
MSc Stockholm School of Economics.
Employed since February 2022
Previous positions
CEO Hector Rail, Chief Commercial
Officer SAS and senior positions at
Codan/Trygg Hansa and GE Capital.
Shareholding in SKF
0 SKF B
Rickard Gustafson
President and CEO
Born 1964
MSc from the Institute of Technology
at Linköping University, Sweden.
Employed since June 2021
Previous positions
President and CEO of SAS Group,
CEO of Codan/Trygg Hansa and he has
held several positions within General
Electric.
Board member
Telia Company and The Confederation
of Swedish Enterprise
Shareholding in SKF
9,600 SKF B
John Schmidt
President, Industrial Region Americas
Born 1969
Bachelor of Science, Mechanical
Engineering from the Pennsylvania
State University. Employed since
2001 and 1993–1998
Previous positions
President, Industrial Sales Americas,
President and CEO SKF USA Inc,
Vice President Industrial Market NAM
and several other positions within SKF.
Shareholding in SKF
25,883 SKF B
Manish Bhatnagar
President, Industrial Region India
and Southeast Asia
Born 1969
Master of Business Administration
from Indian Institute of Management,
Calcutta, and B.E. in Electronics
Engineering from Birla Institute of
Technology & Science, Pilani, India.
Employed since 2018
Previous positions
Senior roles at General Electric and
Danaher.
Shareholding in SKF
14,430 SKF B
Patrick Tong
President, Industrial Region
Northeast Asia
Born 1962
Executive Master’s Degree of
Business Administration, Hong Kong
University of Scienceand Technology.
Employed since 1989
Previous positions
President, Industrial Sales Asia,
President Specialty Business,
President SKFSecond Brands
Bearings, as well as several other
positions within SKF.
Shareholding in SKF
26,002 SKF B
David Johansson
President, Automotive
Born 1980
Master in Science; Industrial
Marketing, Electrical Engineering
at Chalmers University of Technology,
Gothenburg.
Employed since 2005
Previous positions
Director, Global Railway and China
Mobility business, Director, China
Automotive, Aerospace and Railway
business, Drector, Global Marine
Business Unit and several other
positions within SKF.
Shareholding in SKF
0 SKF B
Kent Viitanen
President, Industrial Region Europe,
Middle East and Asia
Born 1965
Business and Economics, School of
Business, Economics and Law,
Univer sity of Gothenburg.
Employed since 1988
Previous positions
President, Bearing Operations,
Senior Vice President People,
Communi cation and Quality, Director
Renewable Energy and several other
positions within SKF.
Board member
Chalmers University of Tech nology
Shareholding in SKF
140 SKF A and 20,857 SKF B
Group Management as of 15 February 2022
151
SKF Annual Report 2021
Seven-year review
MSEK unless otherwise stated 2021 2020 2019 2018 2017 2016 2015
Income statements
Net sales 81,732 74,852 86,013 85,713 7 7,93 8 72,589 75,788
Operating expenses incl. associated comp. –70,974 – 67,78 3 –76,618 –74,664 –69,346 –65,062 –68,820
Operating profit 10,758 7,069 9,395 11,049 8,592 7,527 6,968
Financial income and expense, net –695 –769 –926 –861 –934 –788 –1,134
Profit before taxes 10,063 6,300 8,469 10,188 7,65 8 6,739 5,834
Taxes –2,484 –1,826 –2,677 –2,603 –1,898 –2,530 –1,760
Net profit 7,579 4,474 5,792 7,585 5,760 4,209 4,074
Balance sheets
Intangible assets 16,942 16,242 18,397 17,722 17, 360 19,568 21,485
Deferred tax assets 3,839 4,800 4,437 3,563 3,633 3,806 3,185
Property, plant and equipment 20,723 18,161 18,420 16,688 15,762 15,746 15,303
Right of use assets 2,661 2,517 2,991 — — — —
Non-current financial and other assets 1,674 1,939 2,019 1,964 1,627 1,688 1,607
Inventories 20,997 15,733 18,051 17,8 26 17,122 15,418 14,519
Trade receivables 13,972 12,286 14,006 13,842 13,416 13,462 11,777
Other current assets 18,820 18,879 15,787 15,568 12,283 14,219 11,857
Total assets 99,628 90,557 94,108 87,173 81,203 83,907 79,733
Equity 45,365 35,712 37,366 35,452 29,823 27,683 26,282
Provisions for post-employment benefits 11,781 15,170 15,366 12,894 12,309 13,945 13,062
Deferred tax provisions 1,040 792 960 1,118 1,100 1,380 1,373
Other provisions 2,517 3,482 2,474 2,541 2,275 2,224 2,095
Financial liabilities 19,336 18,349 19,017 17,157 18,508 23,650 23,825
Trade payables 9,881 8,459 8,266 7,8 31 7,899 7, 10 0 5,671
Other liabilities 9,709 8,593 10,659 10,180 9,289 7,925 7,425
Total equity and liabilities 99,628 90,557 94,108 87,173 81,203 83,907 79,733
Key figures
1)
(in % unless otherwise stated)
Operating margin 13.2 9.4 10.9 12.9 11.0 10.4 9.2
EBITA, MSEK 11,340 7,6 8 1 10,008 11,541 9,064 8,016 7,522
EBITDA, MSEK 14,064 10,470 12,892 13,522 10,916 9,895 9,826
Return on capital employed 14.8 9.8 13.2 17.6 14.2 11.9 10.9
Return on equity 18.8 12.1 15.7 22.8 20.4 16.5 15.7
Net working capital, % of sales 30.7 26.1 27.7 27.8 29.0 30.0 27.2
Net debt/equity 38.3 51.7 59.3 49.1 71.3 84.4 99.9
Turnover of total assets, times 0.85 0.79 0.90 1.00 0.96 0.89 0.92
Gearing 40.5 48.0 47.1 45.0 49.9 55.3 56.7
Equity/assets 45.5 39.4 39.7 40.7 36.7 33.0 33.0
Net cash flow after investments before financing, MSEK 2,100 5,259 4,953 8,326 4,753 7,717 6,416
Investments and employees
Additions to property, plant and equipment, MSEK 3,822 3,332 3,461 2,647 2,243 1,869 2,063
Research and development expenses, MSEK 2,751 2,515 2,691 2,591 2,395 2,246 2,372
Patents – number of first filings 241 200 201 202 192 191 461
Average number of employees 40,861 38,385 41,559 42,565 43,814 43,508 44,305
Number of employees registered at 31 December 42,602 40,963 43,360 44,428 45,678 44,868 46,635
1) See page 154 for definitions. SKF has applied the guidelines issued by ESMA(European Securities and Markets Authority) on APMs (Alternative Performance
Measures). These key figures are not defined or specified inIFRS but provides complementary information to investors and other stakeholders on the company’s
performance. For the reconciliation of each APMagainst the most reconcilable line item inthe financial statements, see investors.skf.com.
152
SKF Annual Report 2021
SKF GROUP
Three-year review
Distribution of shareholding
Shareholding Number of shareholders % Number of shares %
1–1,000 60,769 87.5 13,912,259 3.2
1,001–10,000 7,836 11.3 21,117,029 4.6
10,001–100,000 631 0.9 18,046,739 3.9
100,001– 217 0.4 344,777,207 75.7
Anonymous ownership — — 57,497,83 4 12.6
69,453 100 455,351,068 100
Source: Monitor, Modular Finance as of 31 December 2021.
Per-share data
1)
SEK per share unless otherwise stated 2021 2020 2019 2018 2017 2016 2015
Earnings per share 16.10 9.44 12.20 16.0 12.02 8.75 8.52
Dividend per A and B share 7.0 0
2)
6.50 3.00 6.00 5.50 5.50 5.50
Total dividends, MSEK 3,188
2)
2,960 1,366 2,732 2,504 2,504 2,504
Purchase price of B shares at year-end
on NASDAQ Stockholm 214.5 213.4 189.4 134.5 182.2 167.6 137. 2
Equity per share 96 75 78 74 62 57 54
Yield in percent (B) 3.3
2)
3.0 1.6 4.5 3.0 3.3 4.0
P/E ratio, B (share price/earnings per share) 13.3 22.6 15.5 8.4 15.2 19.2 16.1
Cash flow from operations, per share 11.5 18.2 20.7 18.3 14.1 15.7 17.0
Cash flow, after investments and before financing,
per share 4.6 11.6 10.9 18.3 10.4 17.0 14.1
1) See page 154 for definitions.
2) According to the Board’s proposal for the year 2021.
MSEK unless otherwise stated 2021 2020
1)
2019
1)
Industrial
Net sales 58,559 53,912 61,031
Operating profit 9,309 6,691 8,579
Operating margin, % 15.9 12.4 14.0
Assets and liabilities, net 42,612 38,508 42,949
Registered number of employees 34,702 33,157 35,839
Automotive
Net sales 23,173 20,940 24,983
Operating profit 1,450 378 816
Operating margin, % 6.3 1.8 3.3
Assets and liabilities, net 10,769 9,358 11,954
Registered number of employees 6,421 6,351 6,850
1) Previously published amounts have been restated to conform to the current Group structure. For more information refer to Note 2 in the consolidated
financial statements.
153
SKF Annual Report 2021
Adjusted operating profit
Operating profit excluding items affecting
comparability.
Average number of employees
Total number of working hours of regis-
tered employees, divided by the normal
total working time for the period.
Basic earnings per share in SEK
(as defined by IFRS)
Net profit less non-controlling interests
divided by the ordinary number of shares.
Currency impact on operating profit
The effects of both translation and trans-
action flows based on current assumptions
and exchange rates compared to the
corresponding period last year.
Debt
Loans plus provisions for post-
employment benefits, net.
Diluted earnings per share
Calculated by using the weighted average
number of shares outstanding during the
period adjusted for all potential dilutive
ordinary shares.
Dividends pay-out ratio
Dividends paid in relation to net income
for the year the dividend relates to.
EBITA (Earnings before interest,
taxesand amortization)
Operating profit before amortizations.
EBITDA (Earnings before interest,
taxes, depreciation and amortization)
Operating profit before depreciations,
amortizations, and impairments.
Equity/assets ratio
Equity as a percentage of total assets.
Equity per share
Equity excluding non-controlling interests
divided by the ordinary number of shares.
Gearing
Debt as a percentage of the sum of debt
andequity.
Items affecting comparability
Significant income/expenses that affects
comparability between accounting periods.
This includes, but is not limited to, restruc-
turing costs, impairments and write-offs,
currency exchange rate effects caused by
devaluations and gains and losses on
divestments of businesses.
Net debt
Debt less short-term financial assets
excluding derivatives.
Net debt/EBITDA
Net debt, as a percentage of twelve months
rolling EBITDA.
Net debt/equity
Net debt, as a percentage of equity.
Net working capital as % of annual
sales (NWC)
Trade receivables plus inventory minus
trade payables as a percentage of
twelvemonths rolling net sales.
Net worth per share (Equity per share)
Equity excluding non-controlling interests
divided by the ordinary number of shares.
Operating margin
Operating profit, as a percentage of net
sales.
Operational performance
Includes the effects on operating profit
related to changes in organic sales, manu-
facturing volumes and manufacturing cost
and changes in selling and administrative
expenses.
Definitions
Revenue growth
Sales excluding effects of currency and
divested businesses.
P/E ratio
Share price at year end divided by basic
earnings per share.
Registered number of employees
Total number of employees included in
SKF’s payroll at the end of the period.
Return on capital employed (ROCE)
Operating profit plus interest income,
as a percentage of twelve months rolling
average of total assets less the average
ofnon-interest bearing liabilities.
Return on equity (ROE)
Net income as a percentage of twelve
months rolling average of equity.
Turnover of total assets
Net sales in relation to twelve-month
rolling average of total assets.
Total value added (TVA)
TVA is the operating profit, less the pre-tax
cost of capital. The pre-tax cost ofcapital
isbased on a weighted cost of capital with
arisk premium of 6% above the risk-free
interest rate.
154
SKF Annual Report 2021
Contact information
Patrik Stenberg
Director SKF Group Investor Relations
and Mergers & Acquisitions
email: patrik.stenberg@skf.com
www.investors.skf.com
Theo Kjellberg
Director Group Communication
email: theo.kjellberg@skf.com
SKF Group Headquarters
SE-415 50 Gothenburg, Sweden
Telephone: +46 31 337 10 00
www.skf.com
Company reg.no 556007-3495
General information
Annual General Meeting
The Annual General Meeting will be held on Thursday, 24March 2022.
Due to COVID-19, the Board of Directors hasdecided that the gen-
eral meeting should be held without physical presence by inviting the
shareholders to exercise their voting rights only by postal voting.
There will be no meeting with a possibility to attend physically or by
proxy; hence, the meeting will be held without physical presence.
Information on the resolutions adopted by the general meeting
will be published on 24 March 2022 as soon as the results of the
postal vote has been finalized. For further information, see the
heading “Postal voting” below.
An address from the President and the auditor will be available
atthe company’s website, www.skf.com, latest by 22 March 2022.
Preconditions for participation
For the right to participate at the Annual General Meeting, share-
holders must be recorded in the shareholders’ register kept by
Euroclear Sweden AB as per Wednesday, 16 March 2022 and must
notify its intention to participate to the company at the latest on 23
March 2022 by casting its postal vote in accordance with the instruc-
tions under the heading “Postal voting” below so that the postal vot-
ing is received by the company through Computershare AB no later
than 23March 2022. Shareholders whose shares are registered in
the name of a trustee must have the shares registered temporarily in
their own name inorder to take part in the Annual General Meeting.
Any such re- registration for the purpose of establishing voting rights
made by thetrustee latest by 18 March 2022 are taken into account
in the production of the share register. This means that the share-
holder should give notice of his/her wish to be included in the share-
holders’ register to the trustee well in advance, in accordance with
the trustee’s procedures.
Postal voting
Shareholders may exercise their voting rights at the Annual General
Meeting only by voting in advance, so-called postal voting in accord-
ance with the Act on temporary exceptions to facilitate the execution
of general meetings in companies and other associations.
A special form shall be used for postal voting. The form is available
on www.skf.com. The postal voting form is considered as the notifica-
tion of participation.
The completed voting form must be received by SKF through
Computershare AB no later than 23 March 2022. The form may be
submitted by post to Computershare AB, ”AGM 2022 of AB SKF”,
Box5267, 102 46 Stockholm or via e-mail to proxy@computershare.se.
Shareholders may also cast their postal votes electronically through
Swedish BankID verification via SKF’s website www.skf.com. Share-
holders who are represented by a proxy holder shall submit a proxy
form enclosed to the voting form. If the shareholder is a legal entity,
acertificate of incorporation or a corresponding document shall be
enclosed to the form.
Shareholders are not permitted to add special instructions or
conditions to their postal votes. If this is done, the vote (i.e. the postal
vote in its entirety) will be invalid. Further instructions and conditions
can be found in the notice of Annual General Meeting and on the
postal voting form.
Payment of dividend
The Board of Directors proposes a dividend of SEK 7.00 per
share for 2021. Monday, 28 March 2022 is proposed as the
record date for shareholders to be entitled to receive dividends
for 2021. Subject to resolution bythe Annual General Meeting,
it is expected that Euroclear will distribute thedividend on
Thursday, 31 March 2022.
Financial information and reporting
Publishing dates for financial reports in 2022:
Annual Report 2021 2 March
Q1 report 26 April
Q2 report 20 July
Q3 report 25 October
Q4 report 2 February 2023
The reports are available in Swedish and English on
investors.skf.com. Asubscription service for press
releases and interim reports, sent via e-mail or SMS,
isavailable on the website.
155
SKF Annual Report 2021
Remuneration
Report 2021
156
SKF Annual Report 2021
Introduction
This remuneration report provides an outline of how AB SKF’s prin-
ciples for remuneration for Group Management (the “remuneration
principles”), adopted by the Annual General Meeting 2020, have
been implemented in 2021. The report also provides details on the
remuneration of AB SKF’s CEO. In addition, the report contains a
summary of AB SKF’s outstanding share and share-price related
incentive programs. The report has been prepared in compliance
with Chapter 8, Sections 53 a and 53 b of the Swedish Companies
Act (2005:551) and the Remuneration Rules issued by the Swedish
Corporate Governance Board.
Information required by Chapter 5, Sections 40–44 of the Annual
Accounts Act (1995:1554) is available in note 23 on pages 86–89 in
the company’s annual report for 2021 (the “annual report 2021”).
Information on the work of the Remuneration Committee in 2021
is set out in the corporate governance report, which is available on
pages 140–146 in the annual report 2021.
Remuneration of the Board of Directors is not covered by this
report. Such remuneration is resolved annually by the Annual
General Meeting and disclosed in note 23 on pages 86–89 in the
annual report 2021.
Key developments 2021
The CEO summarizes the company’s overall performance in his
statement on pages 10–13 in the annual report 2021.
Overview of the application of the remuneration principles
in 2020
The objective of the remuneration principles is to ensure that the
SKF Group can attract and retain the best people in order to con-
tribute to the SKF Group’s mission and business strategy, its long-
term interests and sustainability. Remuneration for Group Manage-
ment shall be based on market competitive conditions and at the
same time support the shareholders’ best interests. Variable salary
covered by the principles shall be linked to predetermined and
measurable criteria, aiming to promote the SKF Group’s business
strategy and long-term interests, including its sustainability.
The total remuneration package for a Group Management member
shall consist of the following components: fixed salary, variable salary,
pension benefits, conditions for notice of termination and severance
pay, and other benefits such as a company car. The components
shall create a well-balanced remuneration reflecting individual
performance and responsibility as well as the SKF Group’s overall
performance. The Annual General Meeting may also –irrespective
of the principles – resolve on other remuneration components, e.g.
SKF’s Performance Share Programme.
The principles are found at www.skf.com. The remuneration
principles, adopted by the Annual General Meeting 2020, have been
fully implemented.
The Board has decided on one partial deviation from the prin-
ciples which is accounted for below in the section Application of
performance criteria. No derogations from the procedure for imple-
mentation of the principles have been made. The auditor’s report
regarding the company’s compliance with the principles is available
on www.skf.com. No remuneration has been reclaimed.
In addition to remuneration covered by the remuneration prin-
ciples, the Annual General Meetings of the company have resolved
to implement SKF Performance Share Programme for senior
mana gers and key employees
Application of performance criteria
The performance measures for the CEO’s variable remuneration
have been selected to deliver the company’s strategy and to encour-
age behavior which is in the long-term interest of the company. In
the selection of performance measures, the strategic objectives,
sustainability, short-term and long-term business priori ties for
2021 have been taken into account.
The performance measures for the CEO’s variable cash remu-
neration have been divided equally between adjusted operating
profit and cash flow. To determine the range for the parameters,
the final result of the year before is the baseline. During 2021, the
criteria for adjusted operating profit were partly met but the criteria
for cash flow were not met. The outcome was therefore that 48% of
the maximum variable cash remuneration was earned by the CEO
Table 1 – Total CEO remuneration in 2021 (kSEK)
Table 1 below sets out total remuneration earned by AB SKF’s CEO current and former during 2021
1)
.
Fixed remuneration Variable remuneration
Extraordinary
items
Pension
expense
Total
remuneration
Proportion
of fixed
and variable
remunerationTotal remuneration
2)
Base salary Other benefits
One-year
variable
Multi-year
variable
3)
Rickard Gustafson
CEO (Current) 8,175 102 2,747 — 114
4)
3,036 14,174 81% / 19%
Niclas Rosenlew
Acting CEO (Former)
5)
458 0 145 — — 160 763 81% / 19%
Alrik Danielson
CEO (Former) 5,128 18 1,922 — — 1,894 8,962 79% / 21%
1) Disbursements may or may not have been made during the year.
2) Alrik Danielson (Jan–April), Niclas Rosenlew (May), Rickard Gustafson (June–Dec).
3) Allotment of shares under the SKF Performance Share Programme is not covered by the remuneration principles and is reported separately under share based
remuneration below.
4) In accordance with separate agreement accounted for in the section Application of performance criteria.
5) The table shows the remuneration Niclas Rosenlew earned specifically for his assignment as Acting CEO in addition to his remuneration for his ordinary role as
CFO and Senior Vice President of the company.
157
SKF Annual Report 2021
REMUNERATION REPORT
during the year; 96% relating to adjusted operating profit and 0%
relating to cash flow. A separate agreement was made with Rickard
Gustafson, in conjunction with his employment by SKF, to grant
Rickard Gustafson a minimum of 50% variable salary for the period
employed during 2021. The granted minimum variable salary con-
stitutes a partial derogation from the requirement in the remuner-
ation principles that the variable salary shall be performance based
and have predetermined and measurable criteria which need to be
satisfied for payment of the variable salary. The Board deemed that
the derogation was necessary to serve the SKF Group’s long-term
interests by attracting and employing the new CEO.
Comparative information on the change of remuneration
andcompany performance
2020 was the first reference year and therefore no year over year
changes for the previously reported financial years (RFY) will be
presented. Coming years will be added so that the annual change
over the last five years will be visible.
Table 2 – Change of remuneration and company performance
over the last reported financial years (kSEK)
2021 vs. 2020 2021
President remuneration
6)
+2,506 (+11.7%) 23,899
Adjusted operating profit
7)
+1,645,000 (+17.9%) 10,839,000
Cash flow
8)
–3,017,000 (–36.5%) 5,248,000
Average remuneration on
a full-time equivalent basis
of employees in AB SKF +18 (+1.7%) 1,048
Share-based remuneration
Outstanding share-related incentive plans
Since 2008 the Annual General Meeting has resolved each year
upon the SKF Performance Share Programme for senior managers
and key employees. The SKF Performance Share Programmes for
2019–2021 have been ongoing during 2021.
The number of shares that may be allotted must be related to
the degree of achievement of the Total Value Added (TVA) target
level, as defined by the Board, for the TVA development during
athree-year calculation period. The performance criteria used
toassess the outcome of the proposed SKF Performance Share
Programme is distinctively linked to the business strategy and
thereby to the SKF Group’s long-term value creation, including its
sustainability. These performance criteria include a clear link to
the SKF Group’s yearly growth, long-term financial targets and
capital efficiency. For further information on said SKF Perfor-
mance Share Programme, including the criteria which the out-
come depends on, please refer to the Board of Directors’ proposal
on SKF’s Performance Share Programme 2021 which can be
found on www.skf.com.
At the end of 2021, the SKF Performance Share Programme
2019 expired. Allotment of shares was subject to the satisfaction
of performance conditions during the three-year period 2019
–2021, compared to the financial year 2018. Since the threshold
level of the TVA was met and the TVA target was partly met, as
decided by the Board, the participants of the programme were
awarded 34% allotment of shares under the programme. In total,
around 200,000 SKF B shares were allotted under the programme,
corresponding to approximately 0.04% of the total number of out-
standing shares. Allotment of shares requires that the persons
covered by the programme are employed in the SKF Group during
the entire calculation period. The current CEO Rickard Gustafson
did not participate in the Performance Share Programme 2019
and was therefore not awarded any allotment of shares under the
programme. The previous CEO, Alrik Danielson’s employment
seized during 2021 and his participation in the Performance Share
Programme 2019 therefore lapsed. No CEO allotment of shares
was therefore awarded.
The current CEO Rickard Gustafson participates in the Perfor-
mance Share Programme 2021. Allotment of shares may be made
following the expiry of the three year calculation period, i.e. during
2024, if all the conditions of the programme are met and the allot-
ment is approved by the Board.
6) Alrik Danielson (Jan–April), Niclas Rosenlew (May), Rickard Gustafson (June–Dec).
7) Operating profit excluding items affecting comparability.
8) Net cash flow after investments before financing.
158
SKF Annual Report 2021
REMUNERATION REPORT
CAUTIONARY STATEMENT
This report contains forward-looking statements that
are based on the current expectations of the manage-
ment of SKF. Although management believes that the
expectations reflected in such forward-looking state-
ments are reasonable, no assurance can be given that
such expectations will prove to have been correct.
Accordingly, results could differ materially from those
implied in the forward-looking statements as a result
of, among other factors, changes in economic, market
and competitive conditions, changes in the regulatory
environment and other government actions, fluctua-
tions in exchange rates and other factors mentioned
in the Administration Report in this Annual Report.
® SKF, ALEMITE, BeyondZero, DST, GBC, HYATT,
INSOCOAT, KAYDON, Lincoln, PEER, RecondOil,
SKF4U, SKF INSIGHT are registered trademarks
of the SKF Group.
© SKF GROUP 2022
The contents of this publication are the copyright
of the publisher and may not be reproduced (even
extracts) un less prior written permission is granted.
Every care has been taken to ensure the accuracy of
the information contained in this publication, but no
liability can be accepted for any loss or damage whether
direct, indirect or consequential arising out of the use
of the information contained herein. The report is
originally written in English and translated to Swedish.
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SKF Annual Report 2021 was published on
2 March 2022.
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