2007-01-30

The SKF Group

Year-end result, 2006

Tom Johnstone, President and CEO

2

2007-01-30

MSEK 2006 2005

Net sales 13,895 12,648

Operating profit 1,858 1,268

Operating margin 13.4% 10.0%

Profit before taxes 1,846 1,275

Net profit 1,257 862

Basic earnings per share, SEK 2.67 1.85

Cash flow after investments before

financing

1,627* 529

Fourth quarter 2006

* including acquisitions of MSEK 461 and Ovako Cash proceeds of MSEK 1,217

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2007-01-30

MSEK 2006 2005

Net sales 53,101 49,285

Operating profit 6,707 5,327

Operating margin 12.6% 10.8%

Profit before taxes 6,387 5,253

Net profit 4,432 3,607

Basic earnings per share, SEK 9.48 7.73

Cash flow after investments before

financing

2,231* 2,430

Year-end result 2006

* including acquisitions of MSEK 2,129 (418) and Ovako Cash proceeds of MSEK 1,217

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2007-01-30

Operating margin

%

2003 2004

0123456789

1011121314

2005 2006

5

2007-01-30

Operating margin

0

2

4

6

8

10

12

14

2003 2004 2005 2006

%

10.4 %*11.3 %*

* excluding income from the jointly controlled company Oy Ovako Ab

8.0 %

12.6 %

10.8 %9.9 %

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2007-01-30

0

2

4

6

8

10

12

14

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Operating margin per division

Industrial

Service

Automotive

%

2004 2005 2006

7

2007-01-30

Sales in local currencies (excl. structural changes)

0

2

4

6

8

10

12

14

16

% change y-o-y

2003 2004 2005 2006

8

2007-01-30

Growth development / local currency

% Y-o-Y

0

2

4

6

8

10

12

2003 2004 2005 2006Acquisitions / DivestmentsOrganic growth

7.3

5.2

11.8

7.5

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2007-01-30

Net sales development per quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

4.8 8.9 9.6 10.2 8.3 7.6 5.1 1.3 6.0 2.5 3.3 8.8

0.1 0.0 2.2 2.0 2.3 0.2 -2.9 -3.7 -4.9 -0.5 1.1 4.6

1.1 1.8 2.3 4.2 3.6 3.6 2.1 2.6 2.9 2.0 2.0 2.3

6.0 10.7 14.1 16.4 14.2 11.4 4.3 0.2 4.0 4.0 6.4 15.7

-4.6 -2.3 -2.9 -3.8 -3.2 0.2 3.2 9.4 8.0 1.0 -2.1 -5.8

1.4 8.4 11.2 12.6 11.0 11.6 7.5 9.6 12.0 5.0 4.3 9.9

Percent y-o-y

2004

Volume

Structure

Price / Mix

Sales in local currency Currency

Net sales

2005 2006

10

2007-01-30

Growth development/local currency2006 vs 2005

Europe 6.4%

North America 3.6%

Asia 16.1%

Latin America 6.3%

11

2007-01-30

Industrial Division

Acquisitions

• SNFA• John Crane's lubrication systems business (SKF Safematic Inc.)

MSEK 2006 2005

Net sales 17,083

14,750

Sales incl. intra-Group sales

26,600

23,616

Operating profit 3,008 2,354

Operating margin 11.3% 10.0%

Net sales growth 15.8%organic growth 11.9% structure 4.0%currency effects -0.1%

New factories• Dalian, China - large size bearings• Pinghu, China - electromechanical

actuators and actuation systems

Restructuring charges, impairments and write-offs

• In Q4 2006, MSEK 210

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2007-01-30

Service Division

Acquisitions• Precision Balancing & Analyzing (PB&A)• Monitek Australia• RC DEI Norge AS• PMCI (in January 2007)

MSEK 2006 2005

Net sales 17,678

16,115

Sales incl. intra-Group sales

19,344

17,653

Operating profit 2,316 2,072

Operating margin 12.0 11.7

Restructuring charges and write-offs

• In Q4 2006, MSEK 20

Net sales growth 9.7%organic growth 9.6% structure 0.2%currency effects -0.1%

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2007-01-30

Automotive Division

Acquisitions

• Economos• Macrotech Polyseal Inc.

MSEK 2006 2005

Net sales 18,255

17,423

Sales incl. intra-Group sales

21,919

20,990

Operating profit 999 560

Operating margin 4.6 2.7New factories• Jakarta, Indonesia - small deep groove ball bearings• Shanghai, China - bearing• Busan and Taegu, Korea - bearing and seals

Net sales growth 4.8%organic growth 2.2% structure 1.9%currency effects 0.7%

Restructuring charges, impairments and write-offs

• In Q4 2006, MSEK 170

14

2007-01-30

Six Sigma

3 Dimensions: ”Standard” Six Sigma, Design for Six Sigma, Lean Six Sigma

2006 status:

• 205 Black Belts• 1,135 Green Belts• 400 + projects (total 760 projects)

Savings in 2006: approximately MSEK 200

15

2007-01-30

Cash flow, after investments before financing

-200

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

MSEK

2004 2005 2006

Cash out from acquisitions: 2006 MSEK 2,129 2005 MSEK 418 2004 MSEK 644

Cash from Ovako in Q4:2006 MSEK 1,217

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2007-01-30

Cash flow, after investments before financing excl. acquisitions and cash effects from Ovako sale

0

200

400

600

800

1 000

1 200

1 400

1 600

MSEK

2004 2005 2006

17

2007-01-30

Net cash

-1 500

-500

500

1 500

2 500

3 500

4 500

5 500

MSEK

2003

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

(Short-term financial assets - loans)

2005 2006

18

2007-01-30

Inventories as % of annual sales

%

2003 2004

18

19

20

21

22

23

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2005

Target, end 2007 - 18%

2006

19

2007-01-30

SKF capital structure

The AB SKF Board proposes the AGM 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 ofSEK 6.6 billion

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2007-01-30

Financial targets

2003-2006

Operating margin 10% level

Growth in local currencies 6%per annum

Return on capital employed20%

Inventories 18% (2007)

22

2007-01-30

Financial targets

2003-2006

Operating margin 10% level

Growth in local currencies 6%per annum

Return on capital employed20%

Inventories 18% (2007)on plan

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2007-01-30

Financial targets

2003 2007-2006 - long term

Operating margin 10% level 12% level

Growth in local currencies 6%per annum6-8% per annum

Return on capital employed20% 24%

Inventories 18% (2007) 18% (2007)

Gearing < 50% around 50%

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2007-01-30

Financial targets

Operating margin level 12%

• Focus on positive price mix- new products and solutions- eliminate loss making business

• Operational efficiency, utilisation and flexibility

• Increased production in best cost countries

• Reduced purchasing cost

• Six Sigma

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2007-01-30

Operating margin - a longer perspective

-4-202468

101214

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

%1993 - 2003

Excluding income from Ovako

26

2007-01-30

Operating margin - a longer perspective

-4-202468

101214

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

%2004-2006

Excluding income from Ovako

1993 - 2003

27

2007-01-30

Operating margin - a longer perspective

-4-202468

101214

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

%2004-2006New target level

Excluding income from Ovako

1993 - 2003

28

2007-01-30

Financial targets

Growth in local currencies 6-8% *

• Platform/segment approach to continue to be strengthened- organic investments- acquisitions

- increased R&D spending- new products/solutions

•Focus on fast growing regions and segments- BRIC economies- industrial segments

* Growth target 2/3rd organic , 1/3rd acquisition

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2007-01-30

Growth in local currencies – a longer perspective

-6

-4

-2

0

2

4

6

8

10

12

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

%

30

2007-01-30

Financial targets

ROCE 24%

• Continued focus on operating capital reduction in % of sales

- inventory and accounts receivables- fixed assets

• Improved profit

31

2007-01-30

ROCE – a longer perspective

-5

0

5

10

15

20

25

30

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

%

As from 2003, restated according to IFRS except for financial instrumentsAs from 2005, financial instruments accounted for in accordance with IFRS

32

2007-01-30

Financial targets

2003 2007-2006 - long term

Operating margin 10% level 12% level

Growth in local currencies 6%per annum6-8% per annum

Return on capital employed20% 24%

Inventories 18% (2007) 18% (2007)

Gearing < 50% around 50%

33

2007-01-30

January 2007: Outlook for the first quarter 2007(compared to the fourth quarter 2006)

The market demand for SKF's products and services in the first quarter 2007 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 unchanged 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 first quarter of 2007 will be unchanged compared with the fourth quarter 2006 and higher compared with the first quarter 2006.

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2007-01-30

Volume development

Daily volume trend for: Q4 2006 Q1 2007

Net sales2006

Europe 56%

North America

19%

Asia Pacific 18%

Latin America

6%

Total

Outlook Q12007 vs 2006

+

-

+++

++

+

35

2007-01-30

Guidance 2007

• Underlying tax level: around 32-33%

• Financial net:Q1 around MSEK 75annual level towards year end around MSEK 450

• Exchange rates:Q1: a negative effect of approximately MSEK 200 Full year:a negative effect of approximately MSEK 550

• Additions to property, plant and equipment: around the same level as in 2006, above depreciation.

Guidance based on current assumptions and exchange rates

36

2007-01-30

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".