The SKF Group

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The SKF Group
Half-year results, 2006
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Major events - acquisitions and divestment

• Completed
• Macrotech Polyseal Inc., a leader in fluid power
  seals.
• SNFA SAS, a leading French manufacturer of
  bearings for aerospace and machine tool
  applications.
• Still subject to customary due diligence and
  regulatory approvals
• Economos, a manufacturer of hydraulic and
  pneumatic seals.
• The lubrication systems business of John Crane
  Safematic Oy, part of Smiths Group plc.
  
  
• Divestment of SKF's forging business at the
  Luchow factory in Germany to Johann Hay GmbH
  Co KG.

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Acquisition - Macrotech Polyseal
Included in the second quarter reporting as part
of Automotive Division

• Yearly sales 33 million US dollar
• 397 employees
• 51 acquired in April 2006, full ownership latest
  in 2009
• Price approximately 21 million US dollar for 51
• Renamed to SKF Polyseal Inc.

Hydraulic seals
PTFE technology
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Acquisition - SNFA
Will be included in the third quarter reporting

• Sales in 2005 82 million euro
• 720 employees
• Bearings for the Aerospace industry, high
  precision ball bearings for machine tool and
  other special applications
• Price 138.5 million euro (cash and debt free)

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Acquisition - Economos

• Sales in 2005 77 million euro
• 899 employees
• Sealing solutions and engineering plastics
  solutions

Subject to customary due diligence, signing of a
definitive share purchase agreement and relevant
regulatory approvals.
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Acquisition - Safematic lubrication system
business

• Sales in 2005 25 million euro
• 127 employees
• John Crane Safematic Oy's lubrication systems
  business is part of Smiths Group plc.
• Price 22.9 million euro
• Subject to relevant regulatory approvals and is
  expected
• to be finalized during the third quarter.

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Second quarter 2006
9
Operating margin

2003
2004
2005
2006
10
Operating marginexcl. income from jointly
controlled company OY Ovako Ab

2003
2004
2005
2006
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Operating margin per division

Industrial
Service
Automotive
2004
2005
2006
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Sales in local currencies (excl. structural
changes)
change y-o-y
2003
2004
2005
2006
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Net sales development per quarter
2005
2004
2006

Percent y-o-y
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Growth development / local currency6 annual
growth rate (whereof 4 organic)
Y-o-Y
11.8
7.3
(Organic 6.5)
5.2
3.8
Acquisitions / Divestments
Organic growth
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Growth development / local currencyexcluding the
effect from the Ovako divestment
Y-o-Y
11.8
10.4
7.7
5.2
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Cash flow, after investments before financing
MSEK
2003
2004
2005
2006
Cash out from acquisitions 2005 MSEK 419
(mainly Jaeger in Q2) 2004 MSEK 644 (mainly Vogel
in Q3) 2003 MSEK 89
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Net cash
(Short-term financial assets - loans)
MSEK
AB SKF, dividend paid 2003 Q2, MSEK 911 2004
Q2, MSEK 1,138 2005 Q2, MSEK 1,366 2006 Q2,
MSEK 1,821 2004 Q2, Pension
MSEK 3,100 2005 Q2, Redemption, MSEK 2,846
2004
2005
2003
2006
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Inventories as of annual sales

Target, end 2007 - 18
2006
2004
2005
2003
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Currency management and net currency flows
Net currency flows 2005 excl. Ovako
Currency management 2006

• 75 of net currency flows in USD
  are hedged 3-12 months.
• All other currency flows are not hedged.
• Positive effect on the operating
  profit 2006 vs 2005 Q1 MSEK 150
• Q2 MSEK 120

USD
Euro
Others
CAD
SEK
2006 slightly over MSEK 200
Full year 2006, estimated positive effect based
on current assumptions and exchange rates.
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Financial net
YTD June 2006
Q2 2006
MSEK
2005

• Interest income/expense, net -29 -28 -33
• Interest on post-employment benefits -235 -59 -11
  5
• Other items, net 190 -95 -44
• Financial net -74 -182 -192
• includes e.g. share swaps, capital gains/losses
  and foreign
• exchange gains/losses.

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July 2006 Outlook for the third quarter 2006
The market demand for SKF's products and
services in the third quarter of 2006 is expected
to be slightly higher compared to the second
quarter 2006. The demand is expected to be higher
in Europe, significantly higher in Asia and to
remain on a high level in North America and Latin
America. The manufacturing level for the third
quarter of 2006 will be unchanged compared to the
second quarter 2006, while lower in absolute
terms due to normal seasonality.
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Volume development
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SKF Group targets

• 10 Operating margin level
• 6 Growth per annum
• 20 ROCE
• 18 Inventory / sales

2006
2007
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Guidance 2006

• Underlying tax level around 32-33
• Financial net, annual level approximately MSEK
  300-350
• Currency effect, based on current assumptions
  and exchange rates, is estimated to be slightly
  negative for the third and for the fourth
  quarter of 2006. For the full year, the positive
  effect is estimated to be slightly over MSEK
  200.
• Additions to property, plant and equipment
  approximately in line with depreciations

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Cautionary statement
This report contains forward-looking statements
that are based on the current expectations of the
management of SKF. Although management believes
that the expectations reflected in such
forward-looking statements 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, fluctuations in exchange
rates and other factors mentioned in SKF's latest
20-F report on file with the SEC (United States
Securities and Exchange Commission) under
"Forward-Looking Statements" and "Risk Factors".
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