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SKF Group's Year-End Result 2004: Strong Sales Growth and Cash Flow

The SKF Group's year-end result for 2004 shows strong sales growth with a 10.7% organic growth rate and 1.1% growth through acquisitions. The company also maintained a positive price/mix and implemented a restructuring plan for improved operating margins. Cash flow remained in line with net profit, and the launch of Six Sigma throughout the group helped drive efficiency. The company acquired Willy Vogel AG in 2004 and saw continued sales growth in various divisions. The dividend and redemption program for 2005 is proposed to be SEK 37.00. The company aims to maintain a positive price/mix and sales growth in 2005 while strengthening its platform/segment offer.

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SKF Group's Year-End Result 2004: Strong Sales Growth and Cash Flow

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  1. The SKF GroupYear-endresult 2004Tom Johnstone, President and CEO

  2. price/mix 2.4% running according to plan organic growth 10.7% growth by acquisitions 1.1% Areas in focus 2004 Performance 2004 • Operating margin level Maintain a positive price/mix Implement restructuring plan • Continued sales growth Maintain organic growth pace Acquisitions • Cash flow in line with net profit • Launch Six Sigma throughoutthe SKF Group strong cash flow as planned

  3. Net sales development per quarter 2003 2002 2004 Percent y-o-y

  4. Operating margin* % 2004 2002 2003 * excluding restructuring and impairment in Q4 2003

  5. Operating margin per division* % Service Industrial Aero andSteel Electrical Automotive 2002 2004 2003 * excluding restructuring and impairment in Q4 2003

  6. Sales in local currency % change y-o-y 2004 2002 2003

  7. Growth development / local currency10 BSEK additional sales = 6 % annual growth rate % Y-o-Y 6% total growth 4% organic growth Growth by acquisitions Organic growth

  8. Willy Vogel AG - Acquired in July 2004 A world leader in the lubrication systems market • Annual turnover of MSEK 1 000 • 932 employees

  9. Growth development / local currency 10 BSEK additional sales = 6% annual growth rate % Year 2004Growth: 11.8% Year 2003Growth: 5.2%

  10. Cash flow * MSEK 2004 2002 2003 * After investments before financing. Including the acquisition price of Willy Vogel AG in the third quarter.

  11. Inventories as % of annual sales % 2004 2003 2002

  12. Six Sigma • Launched throughout the Group in 2004 • 87 full-time Black Belts • More than 430 Green Belts • Slightly accretive in 2004

  13. Fourth quarter 2004 * The fourth quarter 2003 included restructuring expenses and impairments of MSEK 487. ** After investments before financing.

  14. Full year 2004 * The fourth quarter 2003 included restructuring expenses and impairments of MSEK 487. ** After investments before financing. Including the acquisitionprice of Willy Vogel AG in the third quarter 2003.

  15. Shareholder return: Dividend and Redemption 2005 • Dividend policyThe dividend should amount to approximately one half of SKF's average net profit calculated over a business cycle. • Dividend: 12 SEKSplit and Redemption: 4 new shares and 25 SEK

  16. Shareholder return: Dividend and Redemption 2005 SEK 37.00 10.00 8.00 6.00 5.25 * Board proposal for 2004 dividend and redemption programme

  17. Shareholder return: Dividend and Redemption 2005 MSEK 4212 1138 911 683 598 Proposal

  18. Effects of split and redemption Example based on a share price of SEK 317and everything else equal. 70 SEK 317 SEK 70 SEK 70 SEK Less dividend e.g. 12 SEK 70 SEK 305 SEK 25 SEK 1 mandatory redemption share

  19. Areas in focus 2005 • Operating margin level Maintain a positive price/mix Recovery of raw material cost increase • Continued sales growth Maintain organic growth pace Acquisitions • Strengthen the platform/segment offer • Cash flow In line with net profit

  20. SKF's Platforms

  21. SKF's Platforms Bearings/ Units Lubrication systems Mechatronics Seals Services X X X X Total SKF offer Segment 1 Total SKF offer X X X X Segment 2 Total SKF offer X X X X X Segment 3 Total SKF offer X X X Segment 4

  22. Application example: Machine tool spindle Bearings and units Seals Lubrication systems Mechatronics Services

  23. V 11 SKF business in wind-turbines Bearings and units Seals Lubrication systems Mechatronics Services

  24. Volume trend for the first quarter 2005 Net sales 2004 Jan 2005 Oct 2004 Europe 59% 20% North America Asia Pacific 15% Latin America 5% Total

  25. January 2005: Outlook for the first quarter The market demand for SKF's products and services in the first quarter of 2005 is expected to be higher in Europe, relatively unchanged in North America and significantly higher in both Asia and Latin America. The manufacturing level will be maintained to ensure a good service level throughout the summer.

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