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SKF's Capital Markets Day: New Strategies Revealed

On November 11, 2025, SKF hosted its highly anticipated Capital Markets Day in Stockholm, unveiling crucial insights into its updated strategic direction for both the Industrial and Automotive sectors. This event marks a pivotal moment for SKF, notably due to the forthcoming separation of its Automotive business from the SKF Group.

Key Insights from the Capital Markets Day

During this informative session, Rickard Gustafson, President and CEO of SKF, emphasized the value expected to be unlocked by establishing these two segments as standalone entities. He stated, _“We are creating two even sharper businesses with a clearer focus on distinct opportunities to enhance customer value, accelerate growth, and improve efficiency and competitiveness.”_ This strategic realignment is designed to account for the unique dynamics, manufacturing processes, and end markets that each sector faces.

New Financial Targets Post-Separation

SKF presented ambitious long-term financial targets during the Capital Markets Day. For the Industrial business, the targets include:

• - Organic Growth: Aiming for 4% growth, guided by market trends.
• - Adjusted Operating Margin: Targeting above 17% in the medium term and exceeding 19% in the long term.
• - Cash Conversion: Looking for cash conversion rates of at least 60%.
• - Adjusted Return on Capital Employed (ROCE): Setting a goal of 20%.
• - Net Leverage: Aspiring to maintain leverage below 2.0 times.
• - Dividend Payout: Planning for a 50% dividend yield based on average net profit.

The sustainability targets reiterate SKF's commitment to reducing carbon emissions, aiming for decarbonization of its operations by 2030 and achieving net-zero status in its supply chain by 2050.

Strengthening the Industrial Segment

Gustafson lauded the Industrial business's robust fundamentals, bolstered by a diverse range of industry verticals and strong geographical presence. Post-separation, SKF Industrial plans to stimulate growth by leveraging high-growth industries and regions, scaling services, and taking decisive steps in the Specialized Industrial Solutions segment. Additionally, they aim to explore minor bolt-on mergers and acquisitions to further solidify their market presence.

Innovation remains at the forefront of SKF's strategy, with a commitment to enhancing customer-centric innovations and finalizing ongoing regional optimization efforts.

Financial Objectives for Automotive Segment

SKF's Automotive business holds significant promise as it stands poised to take advantage of key growth sectors post-separation. The Automotive division will direct investments towards high-margin areas, aiming to operate with greater efficiency following automotive best practices. Long-term objectives for SKF Automotive include:

• - Organic Growth: Targeting above-market growth across business cycles.
• - Adjusted Operating Margin: Anticipating a high single-digit margin.
• - Net Leverage: Maintaining leverage below 1.0 times.

Transformation and Optimization Initiatives

The Capital Markets Day also revealed updates on ongoing initiatives aimed at optimizing SKF's operational footprint and value chain. The transformation process will adapt production facilities to be more automated and strategically positioned near customer bases, which is expected to increase capital expenditures to around 5% of net sales until the mid-term, leading to a targeted long-term ratio of approximately 3.5%.

SKF is determined to harness the opportunities for enhanced potential, aiming for an earnings target sustainably above 19%, while strategically restructuring for efficiency. This restructuring may incur significant costs, with high items affecting comparability estimated at BSEK 5.0 from Q4 2025 through 2028.

Timeline for Automotive Business Separation

The separation process is on track, with major milestones achieved, including filling over 70% of new positions within the Automotive business and completing more than 70% of planned manufacturing channel transfers. SKF expects to be operationally prepared to launch the Automotive business publicly by mid-2026, contingent upon board and shareholder approvals.

Conclusion

SKF's Capital Markets Day represents a significant strategic pivot for the company, spotlighting its efforts to capitalize on distinct opportunities and drive value across both its Industrial and Automotive sectors. By committing to these ambitious targets and embracing innovation, SKF aims to position itself as a leader in both markets for years to come.