The SKF Group

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The SKF Group
Year-end results 2007 Tom Johnstone,
President and CEO
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Strong Q4, strong full-year, positive outlook
Strong sales growth Operating profit, excl. one-time items, up with around 20 Strong cash flow Continued good volume growth for the first quarter 2008 Proposed distribution to shareholders of SEK 4,554 million
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Major events during the fourth quarter 2007

• Acquisition completed of S2M, magnetic bearings
• SKF and GE Aviation agreed to establish a company
  for the manufacture and refurbish of bearings for
  GE's engines for large aircraft
• Announced to build a factory in Russia for
  tapered bearing units to supply the Russian
  railway market
• Announced to close the manufacturing facility in
  Glasgow, United States, and reduce the number of
  employees at the Fontenay-le-Comte facility in
  France
• New business
• Started a joint project with Knorr-Bremse to
  develop condition monitoring of brake control
  systems
• Signed a long-term service contract to supply
  ArcelorMittal
• Gained business on new hybrid pinion unit
  solution for automotive, provides 30 friction
  reduction

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Highlights previous quarters 2007

• Main acquisitions
• ABBA Linear Tech Co., Ltd., Taiwan
• Three service companies in North America
• Other highlights
• announced investments for two new factories in
  India
• announced significant investments in Sweden
• announced the development of energy-efficient
  bearings
• and a number of other energy-efficient solutions
  
• distributed SEK 6,603 million to shareholders
• was included in the DJSI World and DJSI STOXX
  indexes for the
• eighth year in succession, and in the FTSE4Good
  Index for the
• seventh year in succession

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Fourth quarter 2007
SEKm 2007 2006
Net sales 15,070 13,895
Operating profit 1,831 1,858
Operating margin 12.1 13.4
Profit before taxes 1,710 1,846
Net profit 1,105 1,257
Basic earnings per share, SEK 2.33 2.67
Cash flow after operating investments before financial items 617 1,561
Cash flow after operating investments before financial items, excluding acquisitions 1,123 2,022
9.9 excluding Ovako
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Year-end results 2007
SEKm 2007 2006
Net sales 58,559 53,101
Operating profit 7,539 6,707
Operating margin 12.9 12.6
Profit before taxes 7,138 6,387
Net profit 4,767 4,432
Basic earnings per share, SEK 10.09 9.48
Cash flow after operating investments before financial items 2,126 2,158
Cash flow after operating investments before financial items, excluding acquisitions 3,335 4,287
11.3 excluding Ovako
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Operating margin
Long-term target 12 operating margin level

2005
2006
2007
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Operating margin
Long-term target 12 operating margin level

12.9
12.6
10.8
11.3
10.4
excluding income from the jointly controlled
company Oy Ovako Ab
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Operating margin per division

Service
Industrial
Automotive
2007
2006
2005
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Sales in local currencies (excl. structural
changes)
change y-o-y
2006
2007
2005
12
Growth development in local currency
Acquisitions/Divestments
Long-term target 6-8 growth in local
currencies, per annum
Organic growth
Y-o-Y
13.2
7.5
7.3
Excluding effect from Ovako 2005
10.4 2006 10.1
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Net sales development per quarter
2005
2006
2007

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
8.3 7.6 5.1 1.3 6.0 2.5 3.3 8.8 7.9 6.9 9.0 6.3
2.3 0.2 -2.9 -3.7 -4.9 -0.5 1.1 4.6 4.0 4.6 3.7 1.0
3.6 3.6 2.1 2.6 2.9 2.0 2.0 2.3 1.8 2.7 2.0 3.2
14.2 11.4 4.3 0.2 4.0 4.0 6.4 15.7 13.7 14.2 14.7 10.5
-3.2 0.2 3.2 9.4 8.0 1.0 -2.1 -5.8 -5.6 -2.3 -1.9 -2.0
11.0 11.6 7.5 9.6 12.0 5.0 4.3 9.9 8.1 11.9 12.8 8.5
Percent y-o-y

Volume
Structure
Price / Mix
Sales in local currency
Currency Net sales

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Growth development by geography
Local currency 2007 vs 2006
Europe 15
North America 7
Asia 15
Latin America 11
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Industrial Division
Net sales growth 12.2 organic growth 10.0
structure 5.0 currency effects -2.8
SEKm 2007 2006
Net sales 19,266 17,176
Sales incl. intra-Group sales 29,318 26,698
Operating profit 3,430 3,027
Operating margin 11.7 11.3

• Acquisitions
• ABBA Linear Tech Co., Ltd.
• S2M

• Major investments
• New factory for large size bearings in India
• Increased investments in Sweden
• New factory for tapered roller bearing in Russia

• In Q4 2006, SEK 210 m in restructuring charges,
  impairments and write-offs
• In Q4 2007, SEK 30 m in restructuring
  activities and other one-time items

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Highlights Industrial Division

• SKF will supply the tapered roller bearing units
  to the Île de France suburban trains
  manufactured by Bombardier Transportation
• A long term supply agreement with Suzlon Energy
  Ltd
• SKF and Caterpillar forged a strategic
  partnership
• SKF Agri Hub, a relubrication free solution for
  agricultural implements
• Developed a lubrication system for machine tool
  spindles
• SKF Conro Low, a relubrication free roll unit
  for the lower segments in continuous slab
  casters

Photo Bombardier Transportation
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Service Division
Net sales growth 9.0 organic growth 12.0
structure 0.8 currency effects -3.8
SEKm 2007 2006
Net sales 19,597 17,984
Sales incl. intra-Group sales 21,393 19,761
Operating profit 2,846 2,362
Operating margin 13.3 12.0

• Acquisitions
• Preventive Maintenance Company Inc. (PMCI)
• Baker Instruments Company
• Automatic Lubrication Systems (ALS)

• In Q4 2006, SEK 20 million in restructuring
  charges and write-offs

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Highlights Service Division

• A partnership with Aker Kvaerner for condition
  based maintenance for the offshore and onshore
  oil and gas industry
• A two-year IMS contract signed with the world's
  leading producer of bleached eucalyptus pulp,
  Brazilian company Aracruz
• An agreement with Meridium, Inc. granting SKF
  non-exclusive rights to license and distribute
  Meridium Asset Performance Management System
  software
• Expansion of SKFs 360 Solution programme
• Expansion of SKF power transmission products
  into the European market
• Introduction of the SKF Certified Rebuilder
  programme for electric motors
• SKF Caster Analyst System, load and temperature
  measurement for slab casters
• New important tools The _at_ptitude Monitoring
  Suite and SKF Client Needs Analysis for Energy
  and Sustainability

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Automotive Division
Net sales growth 9.8 organic growth 8.3
structure 3.8 currency effects -2.3
SEKm 2007 2006
Net sales 19,617 17,869
Sales incl. intra-Group sales 23,795 21,807
Operating profit 1,154 946
Operating margin 4.8 4.3

• Major investments
• expansion of the seal manufacturing facility in
  Judenburg, Austria
• Haridwar, Uttarakhand in India ball bearings

• Acquisitions
• the remaining 40 shareholding in SKF
  (Shanghai) Bearing Company Ltd.

• In Q4 2006, SEK 170 m in restructuring charges,
  impairments and write-offs
• In Q4 2007, SEK 270 m in restructuring
  activities and other one-time items

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Highlights Automotive Division

• business for the steering column bearing with
  Piaggio in India
• business for wheel hub units for a four-wheeler
  light vehicle with Piaggio in India
• business with Hendrickson in the USA for the
  recently launched SKF Wheel End Monitor, which
  helps track possible damage and wear to trailer
  wheel bearings
• a wheel bearing solution to be manufactured in
  Spain for the new Renault Master platform
• wheel bearings for the new Ford Focus generation
  in North America, with the Chinese company
  Shanghai Automotive Industry Corporation for a
  new car platform and for a new Alfa Romeo
  platform
• additional business in China for two Chery
  models
• SKF and Haldex have jointly developed an
  integrated truck hub unit with a dual disc brake
  and fixed caliper

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Six Sigma

• 4 dimensions
• Standard Six Sigma, Design for Six Sigma,
• Lean Six Sigma and Six Sigma for Growth
• 2007 status
• 16 Master Black Belts
• 378 Black Belts
• 1,614 Green Belts
• 704 projects closed, whereof 145 replicated
• 915 projects ongoing
• Hard savings in 2007 SEK 302 m (up gt50 from
  2006)

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Cash flow, after operating investments before
financial items
SEKm
Cash out from acquisitions (SEKm) 2005
419 2006 2,129 2007 1,209 Cash in from Ovako
(SEKm) 2006 Q4 1,217 2007 Q2 46
2005
2006
2007
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Net debt (Short-term financial assets minus loans)
SEKm
AB SKF, dividend paid (SEKm) 2005 Q2
1,366 2006 Q2 1,821 2007 Q2 2,049 2005 Q2,
redemption 2,846 2007 Q2, redemption 4,554
2005
2006
2007
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Net debt (Short-term financial assets minus
loans and post-employment benefits)
SEKm
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Inventories as of annual sales
Long-term target 18

2005
2006
2007
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Return on capital employed
Long-term target 24

ROCE Operating profit plus interest income, as a
percentage of twelve months average of total
assets less the average of non interest bearing
liabilities.
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SKF capital structure
The AB SKF Board proposes the AGM to decide on

• a 11.1 increase in the dividend,SEK 5.00 per
  share
• a share split 21 combined with anautomatic
  redemption procedureof one share for SEK 5.00
• a mandate to the Board to repurchase
  the company's own shares

Adding up to a total distribution to
shareholders ofSEK 4,554 million
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January 2008 Outlook for the first quarter
2008(compared to the fourth quarter 2007)
The market demand for SKF's products and services
in the first quarter of 2008 is expected to be
higher for the Group. The demand is expected to
be higher in Europe, significantly higher in Asia
and Latin America and relatively unchanged in
North America. The demand is expected to be
higher in all divisions. The manufacturing level
for the first quarter 2008 will be unchanged
compared to the fourth quarter 2007, and higher
than the first quarter 2007.
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Volume development
Net sales 2007 Net sales 2007
Europe 56
North America 18
Asia Pacific 18
Latin America 5
Total
Outlook Q1 2008 vs 2007





Daily volume trend for Q4 2007 Q1 2008 Daily volume trend for Q4 2007 Q1 2008





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Guidance 2008

• Tax level 32
• Financial net for first quarterminus SEK 130
  million
• Exchange rates on operating profit versus
  2007Q1 a slightly negative effect Full year
  a negative effect of SEK 150 million
• Additions to property, plant and equipment
• slightly above SEK 2 billion

Guidance is approximate and based on current
assumptions and exchange rates
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Key focus areas ahead

• Strengthen the platform/segment approach
• Maintain a positive price/mix
• Focus on fast growing segments and geographies
• Drive operational efficiency and Six Sigma
• Manage material costs and supply
• Attract and retain the best people

Use sustainability as a guiding light
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SKF Corporate Sustainability
Employee Care
Business Care
Operating margin
SKF Care
BeyondZeroTM
Environment Care
Community Care
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SKF Group Vision
To equip the world with SKF knowledge
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