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2007-04-24
1
The SKF Group
First-quarter results 2007
Tom Johnstone, President and CEO
2007-04-24
3Major events 2007
• Introduction of new energy-efficient bearings and solutions.
• Acquisitions:Preventive Maintenance Company Inc. (PMCI),
USAABBA Linear Tech Co., Ltd., Taiwan Automatic Lubrication Systems (ALS), Canada
•SKF invests SEK 600 million to increase capacity in Göteborg.
•Sale of forging business in Luchow, Germany
2007-04-24
4
MSEK 2007 2006
Net sales 14,371 13,289
Operating profit 1,886 1,609
Operating margin 13.1% 12.1%
Profit before taxes 1,825 1,599
Net profit 1,214 1,138
Basic earnings per share, SEK 2.57 2.45
Cash flow after investments before
financing
538 801
Cash flow after operating investments before financial items -653
177
First quarter 2007
2007-04-24
5Operating margin
%
0123456789
1011121314
2005 2006 2007
2007-04-24
6Operating margin
0
2
4
6
8
10
12
14
2005 2006 2007 Q1
%
* excluding income from the jointly controlled company Oy Ovako Ab
12.6
10.8
13.1
10.4*11.3*
2007-04-24
7
0
2
4
6
8
10
12
14
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Operating margin per division
IndustrialService
Automotive
%
2005 2006 2007
2007-04-24
8Sales in local currencies (excl. structural changes)
0
2
4
6
8
10
12
14
16% change y-o-y
2005 2006 2007
2007-04-24
9Growth development / local currency
% Y-o-Y
02468
101214
2005 2006 2007 Q1
Acquisitions / DivestmentsOrganic growth
7.3 7.5
13.7
2007-04-24
10Net sales development per quarter
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
8.3 7.6 5.1 1.3 6.0 2.5 3.3 8.8 7.9
2.3 0.2 -2.9 -3.7 -4.9 -0.5 1.1 4.6 4.0
3.6 3.6 2.1 2.6 2.9 2.0 2.0 2.3 1.8
14.2 11.4 4.3 0.2 4.0 4.0 6.4 15.7 13.7
-3.2 0.2 3.2 9.4 8.0 1.0 -2.1 -5.8 -5.6
11.0 11.6 7.5 9.6 12.0 5.0 4.3 9.9 8.1
Percent y-o-y
Volume
Structure
Price / Mix
Sales in local currency Currency
Net sales
2005 2006 2007
2007-04-24
11Cash flow, after investments before financing
-1 200-1 000
-800-600-400-200
0200400600800
1 0001 2001 4001 6001 800MSEK
2005 2006
Cash out from acquisitions: 2005 MSEK 4192006 MSEK 2,1292007 Q1 MSEK 214
Cash from Ovako:2006 Q4 MSEK1,217
2007
2007-04-24
12Cash flow after operating investments before financial items
-700
-500-300
-100
100
300500
700
9001 100
1 300
1 500
1 700
2005 2006 2007
MSEK
2007-04-24
13Net cash (Short-term financial assets - loans)
-1 500
-500
500
1 500
2 500
3 500
4 500
5 500
MSEK
AB SKF, dividend paid:
2005 Q2, MSEK 1,366
2006 Q2, MSEK 1,821
2005 Q2, Redemption, MSEK 2,846
2005 2006 2007
2007-04-24
14
18
19
20
21
22
23
Inventories as % of annual sales
%
2005 2006 2007
Target, end 2007 - 18%
2007-04-24
15SKF capital structure
The AB SKF Board proposes to the AGM in April 2007 to decide on:
1.a 12.5% increase in the dividend,SEK 4.50 per share
2.a share split 2:1 combined with anautomatic redemption procedureof one share for SEK 10
3.a mandate to the Board to repurchase up to 5% of the company's share
Adding up to a total distribution to shareholders of SEK 6.6 billion
2007-04-24
16April 2007: Outlook for the second quarter 2007(compared to the first quarter 2007)
The market demand for SKF's products and services in the second quarter of 2007 is expected to be higher for the Group. The demand is expected to be higher in Europe and Latin America, significantly higher in Asia and relatively unchanged in North America. The demand is expected to be higher in the Industrial and Service Division and slightly higher in the Automotive Division.
The manufacturing level for the second quarter will be unchanged compared to the first quarter 2007 and significantly higher compared to the second quarter last year.
2007-04-24
17Volume development
Daily volume trend for: Q1 2007 Q2 2007
Net sales2006
Europe 54%
North America
20%
Asia Pacific 18%
Latin America
5%
Total
Outlook Q22007 vs
2006
++
=
+++
++
++*
Updated in March 2007 from slightly higher to higher.*
2007-04-24
18Financial targets – long term
Operating margin, level 12%
Growth in local currencies, per annum 6-8%
Return on capital employed 24%
Gearing around 50%
Inventories, by end 2007 18%
2007-04-24
19Guidance 2007
• Underlying tax level: around 32-33%
• Financial netQ2: around minus SEK 100-120 million Full year forecast: around minus SEK 500 million
• Exchange ratesQ2: a negative effect of approximately SEK 200 million Full year: a negative effect of approximately SEK 550 million
• Additions to property, plant and equipment: slightly above SEK 2 billion
Guidance based on current assumptions and exchange rates
2007-04-24
20Acquisition – ABBA Linear Tech Co., Ltd.
• Annual turnover: SEK 250
million
• 400 employees
• A leading Asian manufacturer
of profile rail guides.
• Price: SEK 400 million for 90%
shareholding
2007-04-24
21Acquisitions 2007
Automatic Lubrication Systems (ALS)
• Yearly sales: approximately CAD 2 million
• 13 employees
• A leading service company to mobile transportation equipment and industrial machinery customers for lubrication systems
Preventive Maintenance Company
Inc.
• Annual turnover: USD 10 million
• 70 employees
• A market leader in Predicitve maintenance (PdM) services
2007-04-24
22Bearings and units
Acquisitions:
New factories:
Significant manufacturing
expansion:
Restructuring:
Setting new standards:
Bearingsand units
•SNFA SAS, France
•Dalian, China
•Shanghai, China
• Jakarta, Indonesia
•Busan, South Korea
• India
•North America
•Det Norske Veritas and Germanischer Lloyd announced official verification - SKF Explorer bearings has set a new performance standard.
•SKF Life Theory - new standard for bearing life calculations.
• Brazil • Mexico
• France
• Sweden
2007-04-24
23Seals/Mechatronics/Services/Lubrication systems
Services
Acquisitions:
Lubrication systems
•Safematic lubrication, Finland
• Automatic Lubrication Systems, Canada
Seals
Acquisitions:
New factories:
Significant
manufacturing
expansion:
Mechatronics
• ABBA Linear Tech Co., Ltd., Taiwan
•Shanghai, China
•Precision Balancing & Analyzing, USA
•Monitek Australia, Australia
• Preventive Maintenance Company Inc., USA
•Macrotech Polyseal Inc., USA
•Economos Austria GmbH, Austria
•Taegu, Korea
•Bulgaria • India •Mexico
2007-04-24
24SKF Energy efficient bearings
Providing a minimum of 30% reduction in energy consumption.
Deep groove ball bearings Taper roller bearings
2007-04-24
25Energy-efficient solutions
SKF actuators in spot welding cut energy use by more than 90% in welding robots.
SKF actuatorsin buildingscut energy useby 30-50%.
SKF magnetic bearingsin gas compressors reduce energy by 90%.
SKF throttle-by-wire reduces fuel use by 5%in business jets.
SKF Client Energy and Environment Analysis (CEEA)is a web-based tool thatidentifies high-energy consumption areas withinan operation.
2007-04-24
26Cautionary 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".
2007-04-24
27