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The SKF Group

This report highlights the half-year results of the SKF Group in 2006, including major acquisitions and divestments. It provides information on the company's sales, acquisitions, operating margins, cash flow, inventories, currency management, and financial outlook.

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The SKF Group

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  1. The SKF Group Half-year results, 2006

  2. 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.

  3. 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

  4. 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)

  5. 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.

  6. 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.

  7. Second quarter 2006

  8. Operating margin % 2006 2004 2005 2003

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

  10. Operating margin per division % Industrial Service Automotive 2006 2004 2005

  11. Sales in local currencies (excl. structural changes) % change y-o-y 2004 2005 2003 2006

  12. Net sales development per quarter 2005 2004 2006 Percent y-o-y

  13. 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

  14. Growth development / local currencyexcluding the effect from the Ovako divestment % Y-o-Y 11.8 10.4 7.7 5.2

  15. Cash flow, after investments before financing MSEK 2003 2006 2004 2005 Cash out from acquisitions: 2005 MSEK 419 (mainly Jaeger in Q2) 2004 MSEK 644 (mainly Vogel in Q3) 2003 MSEK 89

  16. 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

  17. Inventories as % of annual sales % Target, end 2007 - 18% 2006 2004 2005 2003

  18. 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 CAD Others SEK • 2006 slightly over MSEK 200* • * Full year 2006, estimated positive effect based on current assumptions and exchange rates.

  19. Financial net Q2 2006 YTD June 2006 MSEK 2005 • Interest income/expense, net -29 -28 -33 • Interest on post-employment benefits -235 -59 -115 • Other items*, net 190 -95 -44 • Financial net -74 -182 -192 • * includes e.g. share swaps, capital gains/losses and foreign • exchange gains/losses.

  20. 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.

  21. Volume development

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

  23. 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

  24. 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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