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The SKF Group Year-end result, 2005 Tom Johnstone, President and CEO

The SKF Group Year-end result, 2005 Tom Johnstone, President and CEO. Areas in focus 2005 Performance 2005. 3.4% Done 8.4% -1.1% Ongoing MSEK 2 848. Operating margin level Maintain a positive price/mix Recovery of raw material cost increase Continued sales growth

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The SKF Group Year-end result, 2005 Tom Johnstone, President and CEO

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  1. The SKF GroupYear-endresult, 2005Tom Johnstone, President and CEO

  2. Areas in focus 2005 Performance 2005 3.4% Done 8.4% -1.1% • Ongoing • MSEK 2 848 • Operating margin level Maintain a positive price/mix Recovery of raw material cost increase • Continued sales growth Maintain organic growth pace Acquisition/divestment (mainly Ovako) • Strengthen the platform/segment offer • Cash flow after investments before financing and acquisitions

  3. Major events 2005 • SKF included in sustainability indexes:DJSI World and DJSI STOXX - for the sixth year and FTSE4Good Index Series - for the fifth year. • Global OHSAS 18001 certification • 4.2 billion SEK was distributed to SKF shareholders via the dividend and a share split/redemption programme. • SKF steel business was merged into a jointly owned company Oy Ovako Ab. SKF's share is 26.5%. • Construction of a number of new factories in Asia was initiated. • Acquisition of Jaeger Industrial Ltd. and Sommers Industriteknik AB. • Announced the closure of two factories in the USA, for the automotive industry. • Rationalization in Europe, mainly in France.

  4. New divisional structure in 2006 Restated financial figures will be published on the Group's website during March 2006. Automotive Division Industrial Division Service Division -Sales to the industrial OEMcustomers and the develop- ment and manufacturing of a wide range of bearings, linear motion and mecha- tronics products, couplings, related products and lubrication systems. Sales - some 31% of the Group's sales*. -Sales to the industrial aftermarket, mainly through a network of some 7 000 distributors -Knowledge based solutions to optimise asset efficiency. -Logistic services. Sales - some 33%*. -Sales, development and manufacturing of bearings,seals and components to automotive, two-wheelers, household appliances and power tools OEM manu- facturers. -Vehicle Service Market. Sales - some 36%*

  5. Fourth quarter 2005

  6. Year-end result 2005

  7. Operating margin % 2004 2005 2002 2003

  8. Operating margin per division % Service Industrial Automotive Aero and Steel excl. Ovako Electrical 2004 2005 2003

  9. Sales in local currencies (excl. structural changes) % change y-o-y 2004 2005 2002 2003

  10. Net sales development per quarter 2003 2005 2004 Percent y-o-y

  11. Group sales volume vs Industrial production

  12. Growth development / local currency6% annual growth rate (whereof 4% organic) % Y-o-Y 11.8 (Organic 8.4,Net acq/div -1,1) 7.3 5.2 3.0 Acquisitions / Divestments Organic growth

  13. Net sales per geography, 2005 (2004) Middle East and Africa, 3% (3) Asia, 17% (15) Western Europe excl. Sweden, 47% (48) Latin America, 5% (5) North America, 20% (20) Central and Eastern Europe, 4% (4) Sweden, 4% (5)

  14. Cash flow, after investments before financing MSEK 2004 2005 2002 2003

  15. Net cash (Short-term financial assets - loans) MSEK Dividend paid: 2001 Q2, MSEK 598 2002 Q2, MSEK 683 2003 Q2, MSEK 911 2004 Q2, MSEK 1 138 2005 Q2, MSEK 1 366 2004 Q2, Pension: MSEK 3 100 2005 Q2, Redemption, MSEK 2 846 2004 2005 2002 2003

  16. Inventories as % of annual sales % Target, end 2007 - 18% 2004 2005 2003 2002

  17. Currency management and net currency flows Currency management 2006: Net currency flows 2005 excl. Ovako: • 75% of net currency flows in USD will be hedged 3-12 months, all other currency flows and also translation are not hedged. • Negative effect for 2005 vs 2004: MSEK 150 • Estimated positive effect for 2006 vs 2005, based on current assumptions and exchange rates: • Q1, 2006: MSEK 100 Full year, 2006: MSEK 400 CAD Others USD Euro SEK

  18. January 2006: Outlook for the first quarter 2006 The market demand for SKF's products and services in the first quarter of 2006, compared to the previous quarter, is expected to remain on a high level in Europe, to be slightly higher in North America, significantly higher in Asia and to remain on a high level in Latin America. This is in addition to normal seasonality. The manufacturing level will be unchanged for the first quarter of 2006, compared to the fourth quarter of 2005, while higher in absolute terms due to normal seasonality.

  19. Volume trend for the first quarter 2006 Net sales 2005 October 2005 January 2006 Europe 55% 20% North America Asia Pacific 17% Latin America 5% Total Note: This is the sequentialdevelopment

  20. SKF Group targets • 10% Operating margin level • 6% Growth per annum • 20% ROCE • 18% Inventory / sales 2006 2007

  21. Guidance 2006 • Taxes, annual level: around 32% • Financial net, for the year: approximately MSEK 200 • Currency, based on current assumptions and exchange rates: a positive MSEK 100 for Q1, 2006 and a positive MSEK 400 for the year • Addition to tangible assets: in line with depreciations

  22. SKF capital structure 2006 • The AB SKF Board proposes the AGM to decide on: • a 33% increase in the dividend, SEK 4 per share, in total SEK 1.8 billion • a mandate to the Board to repurchase up to 5% of the company's share

  23. 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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