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The SKF Group. Nine-month result, 2006 Tom Johnstone, President and CEO. Acquisitions and divestments. Completed: Macrotech Polyseal Inc. , a leader in fluid power seals. SNFA SAS , a leading French manufacturer of bearings for aerospace and machine tool applications.
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The SKF Group Nine-month result, 2006 Tom Johnstone, President and CEO
Acquisitions and divestments • Completed: • Macrotech Polyseal Inc., a leader in fluid power seals. • SNFA SAS, a leading French manufacturer of bearings for aerospace and machine tool applications. • The lubrication systems business of John Crane Safematic Oy, part of Smiths Group plc. • Economos, a manufacturer of hydraulic and pneumatic seals. • Precision Balancing & Analyzing, specialized in repair of machine tool spindles. • Monitek Australia, a leading Australian predictive maintenance service company. • RC DEI Norge AS, provides services for condition based maintenance • Still subject to customary due diligence and/or regulatory approvals: • Rautaruukki Corporation, AB SKF and Wärtsilä Corporation have signed an agreement whereby their jointly held company, Oy Ovako Ab, will sell its operating subsidiaries. • Divestment of SKF's forging business at the Luchow factory in Germany to Johann Hay GmbH & Co KG.
Third quarter 2006 * MSEK 1,382, before acquisitions.
Nine-month result 2006 * MSEK 2,272 (2,366), before acquisitions.
Operating margin % 2006 2004 2005 2003
Operating marginexcl. income from jointly controlled company OY Ovako Ab % 2006 2004 2005 2003
Operating margin per division % Industrial Service Automotive 2004 2006 2005
Sales in local currencies (excl. structural changes) % change y-o-y 2004 2005 2003 2006
Net sales development per quarter 2005 2004 2006 Percent y-o-y
Growth development / local currency6% annual growth rate (whereof 4% organic) % Y-o-Y 11.8 (Organic 6.3) 7.3 5.2 4.7 Acquisitions / Divestments Organic growth
Growth development / local currencyexcluding the effect from the Ovako divestment % Y-o-Y 11.8 10.4 7.3 5.2
Cash flow, after investments before financing MSEK Cash out from acquisitions: 2006 MSEK 1,668 (mainly SNFA in Q3) 2005 MSEK 419 (mainly Jaeger in Q2) 2004 MSEK 644 (mainly Vogel in Q3) 2006 2004 2005
Cash flow, after investments before financing and acquisitions MSEK 2006 2004 2005
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
Inventories as % of annual sales % Target, end 2007 - 18% 2006 2004 2005 2003
Financial net Full year 2005 Q3 2006 YTD Q3 2006 MSEK • Interest income/expense, net -32 -65 -29 • Interest on post-employment benefits -57 -172 -235 • Other items*, net -27 -71 190 • Financial net -116 -308 -74 • * includes e.g. share swaps, capital gains/losses and foreign • exchange gains/losses.
October 2006: Outlook for the fourth quarter 2006(compared to the third quarter 2006) The market demand for SKF's products and services in the fourth quarter of 2006 is expected to be slightly higher. The demand is expected to be higher in Europe and Latin America, significantly higher in Asia and to be lower in North America. The demand for the Industrial and Service Division's products and services is expected to be higher and for the Automotive Division is expected to be slightly lower. The manufacturing level for the fourth quarter of 2006 will be unchanged, while higher in absolute terms due to normal seasonality.
SKF Group targets • 10% Operating margin level • 6% Growth per annum • 20% ROCE • 18% Inventory / sales 2006 2007
Guidance 2006 • Underlying tax level: around 32-33% • Financial net, annual level: approximately MSEK 350 • For the fourth quarter, exchange rates are estimated to have a limited negative effect on the operating profit. • For the full year, the positive effect is estimated to be approximately MSEK 250. This is based on current assumptions and exchange rates. • Additions to property, plant and equipment: approximately in line with depreciations
Acquisition - SNFA • 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)
Acquisition - Economos • Sales in 2005: close to 70 million euro • 805 employees • Sealing solutions and engineering plastics solutions • Price: 67 million euro cash and debt free
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
Acquisitions • Precision Balancing & Analyzing • Yearly sales: 7 million US dollars • 40 employees • Specialized in repair and upgrading of machine tool spindles. • Monitek Australia • Yearly sales: 4.3 million Australian dollars • 29 employees • A leading predictive maintenance services company. • Price: 62 million SEK in total
New factories in China • Two new factories started to operate during the third quarter: • In Dalian, North East of China - manufacturing of large size bearings • In Pinghu, outside Shanghai - electromechanical actuators and actuation systems
SKF College SKF Colleges offers a wide range of training for SKF employees, distributors and customers. In September, SKF inaugurated a new regional training centre in Pinghu, outside Shanghai - the fourth SKF College in the world.
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".