Sensitivity analysis

Costs

The annual cost of raw materials and components is around SEK 21 billion of which steel-based products account for the majority. An increase/decrease of 1% in the cost of raw materials
and components reduces/increases the operating profit by around SEK 210 million. Steel scrap is a major ingredient in making bearing steel. An isolate 10% increase/decrease of market scrap prices would decrease/increase SKF’s operating profit by around SEK 50 million.

An increase of 1% to wages and salaries (including social security charges) reduces the operating profit by around SEK 200 million. A decrease/increase of 1% in interest rates has a positive/negative effect on the profit before tax of around SEK 180 million, based on the current position. The Group had net debt of SEK 23,357 million on 31 December, 2016.

Cost split 2016, operating expenses SEK 65,252 million


Currency impact

Translation effects: Most of the operating profit is made outside Sweden, meaning that the Group is exposed to translation risks from all major currencies into the reporting currency SEK. Based on 2016 operating profits in local currencies,the below graph represent a sensitivity-analysis that shows the effect on the translation of operating profits to SEK of a 5% weaker SEK against all other currencies.

Effect on translation of operating profits to SEK of a 5% weaker SEK

Net currency flows 2016 (SEKm)

For the commercial foreign exchange exposure, the SKF Group is exposed to currencies shown in the graph above. Based on the assumption that the net currency flows will be the same as in 2016, the below graph represents a sensitivityanalysis that shows the effect on operating profit of a 5% stronger SEK against all other currencies.

Effect on operating profits of a 5% stronger SEK

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