Skf q4 2010_pr_eng

SKF Year-end report 2010
Tom Johnstone, President and CEO:
"SKF delivered a very good performance in 2010 with record operating profit and operating
margin and a strong cash flow. We took a number of steps during the year to further
strengthen the Group and opened three new factories and announced two more to support our
development in the faster growing regions and segments. In addition, we completed the
acquisition of Lincoln Industrial which complements our existing lubrication systems business.
In the fourth quarter all regions and divisions showed very good growth, as expected.
Entering 2011 we expect to see a continued positive volume development. However, we will
face headwinds due to currency and higher raw material costs, adding to those already faced
in the fourth quarter. To support our long-term profit and growth targets we will step up our
investments in manufacturing, research and development and in additional sales and
engineering resources.”

Q4 Q4 YTD YTD
2010 2009 2010 2009
Net sales, SEKm 15,409 13,887 61,029 56,227
Operating profit, SEKm 2,202 1,004 8,452 3,203
Operating margin, % 14.3 7.2 13.8 5.7
Operating margin excl. one-off items, % 14.9 10.1 14.2 8.0
Profit before taxes, SEKm 2,048 765 7,549 2,297
Net profit, SEKm 1,350 505 5,296 1,705
Basic earnings per share, SEK 2.87 1.05 11.28 3.61

The increase of 11.0% in net sales for the quarter, in SEK, was attributable to: volume 16.3%,
price/mix 0.9% and currency effects -6.2%. For the full year, the increase of 8.6%, in SEK,
was attributable to: volume 14.1%, price/mix 0.1% and currency effects -5.6%.

The quarter included costs, affecting the operating profit, of around SEK 100 million due to the
acquisition of Lincoln Industrial. Total one-off items impacting operating profit for the full-year
amounted to SEK 190 million.

Dividend proposal
Based on the strong performance, cash generation capacity and outlook, the Board has
decided to propose to the Annual General Meeting an increase in the dividend of 43%, giving a
dividend of SEK 5.00 (3.50) per share.

Outlook for the first quarter of 2011
Development compared to the first quarter last year
The demand for SKF products and services is expected to be significantly higher for the Group, the
divisions and for the different geographical areas.

Development compared to the fourth quarter 2010 and adjusted for normal seasonality
The demand is expected to be slightly higher for the Group and for the different geographical
areas. The Industrial Division and the Service Division are expected to be slightly higher and the
Automotive Division higher.

Manufacturing level
The manufacturing level will be significantly higher year on year and slightly higher compared
to the fourth quarter, adjusted for normal seasonality.

Development in the fourth quarter compared to the same period last year
Sales in local currencies were significantly higher for the Group, for Europe, North America,
Latin America and Asia as well as for the divisions.

The manufacturing level was significantly higher than in the fourth quarter last year.

Financial
31 December 30 September 31 December
Key figures 2010 2010 2009
Inventories, % of annual sales 21.1 20.2 20.9
ROCE for the 12-month period, % 24.0 20.7 9.1
ROE for the 12-month period, % 28.4 24.3 9.0
Equity/assets ratio, % 36.0 36.0 35.8
Gearing, % 48.6 47.6 49.3
Net debt/equity, % 80.5 61.5 68.9
Registered number of employees 44,742 42,475 41,172

The SKF Group’s balance sheet and key figures above are impacted by the inclusion of Lincoln
Industrial’s preliminary balance sheet. Excluding Lincoln Industrial, inventories were 20.0%
and the number of employees was 42,735. The total purchase price for Lincoln Industrial was
SEK 7,047 million, and the cash outflow was SEK 6,764 million.

Cash flow, after investments and before financing, was SEK -5,966 million (1,445) for the
fourth quarter and SEK -2,838 million (5,752) for the full year 2010. Excluding the acquisition
of Lincoln Industrial it was SEK 798 million for the fourth quarter and SEK 3,926 million for the
full year.

The financial net in the fourth quarter of 2010 was SEK -154 million (-239), for the full year it
was SEK -903 million (-906). The full-year figure has a negative effect of SEK 225 million
relating to a loss on the Ovako vendor note.

Exchange rates, the effects of translation and transaction flows, had a negative effect of SEK
50 million on SKF’s operating profit in the fourth quarter and a negative effect of around SEK
400 million for the full year, compared to the corresponding period last year. It is estimated
that there will be a negative effect of SEK 150 million on operating profit in the first quarter
and for the full year a negative effect of SEK 900 million, based on current assumptions and
exchange rates and compared to the corresponding period last year.

R&D expenditure was SEK 1,184 million (1,217), corresponding to 1.9% (2.2) of annual
sales, excluding developing IT solutions. The number of first filings of patent applications
was 251 (218).

SKF’s Performance Share Programme 2011
In order to continue to link the interests of the senior management and the shareholders, the
Board proposes that a decision be taken at the Annual General Meeting in April 2011 on SKF’s
Performance Share Programme 2011. The terms and conditions of the proposed SKF’s
Performance Share Programme 2011 are in essence the same as the terms and conditions of
the programmes for 2008, 2009 and 2010.

It is proposed that the programme covers a maximum of 310 senior managers and key
employees in the SKF Group, including Group Management, with the opportunity of being
allotted, free of charge, SKF class B shares. The number of shares that may be allotted must
be related to the degree of achievement of financial targets defined by the Board of Directors
in accordance with the SKF Group’s TVA management model and must pertain to the period
commencing 2011 up to and including 2013. Under the programme, no more than 1,000,000
class B shares may be allotted.
The Performance Share programme 2008, which was decided by the AGM on April 16, 2008
will be settled in the first quarter 2011. The outcome is that about 250 managers of the SKF
Group will receive around 117,000 SKF class B shares (around 12% of maximum) amounting
to around SEK 25 million including social charges.

The year in brief
The Group’s ongoing cost reduction activities, combined with the improved volumes both in
sales and manufacturing and the continued implementation of the Group’s strategy, had a
very positive effect on the Group’s operating profit and resulted in a record operating profit
and operating margin for the Group. The steps taken in recent years to make the company
more robust is giving results which can be seen by the very positive development in 2010 and
the resilient performance in 2009.
As a result of the strong performance and the strategy for the SKF Group new long-term
financial targets were announced in October 2010. The new targets are to have an operating
margin level of 15%, annual sales growth in local currencies of 8% and a return on capital
employed of 27%. The inventory target of 18% of net sales remain. The main initiatives going
forward to support the strategy and targets will be to accelerate profitable growth, to reduce
costs and eliminate waste and to invest for growth.
Three new factories were opened during the year, two in India, at Haridwar and Ahmedabad,
and one in Russia at Tver. These factories are built to the LEED (Leadership in Energy and
Environmental Design) or equivalent standard as with all new SKF facilities. SKF also
announced the construction of two new factories which will open in late 2011. A new seals
factory is under construction in Mysore, India and a bearing factory is being established in
Dalian, China to produce medium-sized bearings for the industrial market.
SKF continued to open new SKF Solution Factories throughout the year with nine being
opened, bringing the total at the end of 2010 to 17. These SKF Solution Factories gather SKF’s
expertise under one roof and are already proving beneficial for customers and distributors by
making SKF’s knowledge more readily accessible to them.
To support the development in Asia, SKF opened a new Global Technical Centre in China to
complement the centre opened in India in 2009. These new Global Technical Centres will be
an integral part of the SKF Group’s global technology network and will bring new product
development closer to SKF’s customers in this rapidly developing region.

Acquisition of Lincoln Industrial (see separate press release dated 23 December 2010)
SKF’s acquisition of Lincoln Holding Enterprises (Lincoln Industrial), a leading supplier of
lubrication systems and tools was completed at the end of the year. Lincoln Industrial,
headquartered in St. Louis, Missouri, USA has about 2,000 employees and generated sales of
around USD 400 million in 2010 with an operating margin of around 24%.

The acquisition is in line with SKF’s strategy to grow the lubrication systems market. Lincoln
Industrial is highly complementary to SKF’s existing lubrication system business when it
comes to geographical sales coverage, technology and manufacturing footprint, in particular in
North America and Asia. In addition, Lincoln Industrial provides SKF with improved access to
the lubrication tools and equipment aftermarket in North America.

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Lincoln Industrial is included in the Group’s balance sheet at year-end 2010 with preliminary
opening balances, as follows:

Fair value of net assets acquired (SEKm):
Intangibles assets 7,032
Operating assets 1,747
Other liabilities -1,732
Total purchase price 7,047

Cash and cash equivalents acquired -283
Cash outflow 6,764

Lincoln Industrial’s income statement will be included in the Group from the first-quarter results of
2011, as part of a newly created business unit for lubrication systems within SKF Industrial
Division.
Based on the preliminary opening balances, annual amortization and depreciation together are
expected to be slightly below USD 25 million for acquired intangibles and plant, property and
equipment after fair value adjustments. The operating profit will be negatively impacted primarily
in the first quarter by around USD 15 million, representing the fair value adjustment on inventories
as part of opening balances for Lincoln Industrial.

Please see enclosure 8 for more information about the acquisition of Lincoln Industrial.

Divestment subsequent to year end
SKF divested its forging business, Officine Meccaniche Villar Perosa SpA (OMVP), in Villar Perosa,
Italy to the German based company Neumayer Tekfor Holding GmbH, one of the largest forging
companies in Europe. The sale is fully in line with the SKF’s strategy to divest non-core component
manufacturing and will have a limited impact on the results and cash flow. OMVP has about 550
employees and net sales of around EUR 100 million, mainly to other SKF operations. The parties
have agreed on continuing the supply and strengthening the cooperation.

Divisions
Comments on sales are based on local currencies and compared to the corresponding period for
2009. The operating margin has been calculated on sales including intra-Group sales.

Industrial Division
The operating profit for the fourth quarter amounted to SEK 902 million (237), resulting in an
operating margin of 12.1% (3.5) on sales including intra-Group sales. The operating profit for the
full year amounted to SEK 3,498 million (1,551), resulting in an operating margin of 11.8% (5.4).
Sales including intra-Group sales for the quarter were SEK 7,443 million (6,745), and for the full
year SEK 29,607 million (28,546).

Net sales for the fourth quarter amounted to SEK 4,904 million (4,508) and for the full year SEK
19,424 million (19,534). The increase of 8.8% for the quarter was attributable to:
organic growth 16.6% and currency effects -7.8%.
For the full year the decrease of -0.6% was attributable to:

Sales in local currency for the fourth quarter were significantly higher in Europe, North America
and Asia. For the full year they were lower in Europe, higher in North America and significantly

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higher in Asia. The positive trend continued in all main segments with a particular good
development in construction equipment, fluid power and industrial gearboxes.

Service Division
operating margin of 14.6% (14.3). The operating profit for the full year amounted to SEK 3,036
million (2,585), resulting in an operating margin of 13.5% (13.0). Sales including intra-Group sales
for the quarter were SEK 5,763 million (5,098), and for the full year SEK 22,408 million (19,957).
For the full year the increase of 12.4% was attributable to:

Sales in local currencies for the fourth quarter were significantly higher in Europe, Asia, North
America and Latin America. In Middle East and Africa they were higher. For the full year they were
significantly higher in Europe, Asia, Latin America and Middle East and Africa. In North America
they were higher, affected by the ongoing distributor de-stocking.

Automotive Division
operating margin of 8.2% (1.9). The operating profit for the full year amounted to SEK 1,859
million (-785), resulting in an operating margin of 8.5% (-4.1). Sales including intra-Group sales
for the quarter were SEK 5,439 million (4,880), and for the full year SEK 21,989 million (19,103).

For the full year the increase of 13.6% was attributable to:

Sales in local currencies to the car and light truck industries in Europe and North America were
higher for the quarter and significantly higher for the full year. In Asia sales were significantly
higher both for the quarter and for the full year.
Sales to the heavy truck industries in Europe, North America and Asia were significantly higher
both for the quarter and for the full year.
Sales to the vehicle service market in Europe, Latin America and Asia were significantly higher in
the quarter and for the full year. In North America sales were significantly higher in the quarter
and relatively unchanged for the full year.
Sales to the electrical industry in Europe as well as sales to the two-wheeler industry in Asia were
significantly higher both for the quarter and for the full year.

Highlights in the quarter:
In Europe, a new contract for the SKF Low Friction Engine Seal with Isuzu was signed. The SKF
Low Friction Engine Seal, launched in 2010, is used in many automotive applications, providing
lower fuel consumption and reducing CO2 emissions via significantly reduced friction.
In Germany, a SKF Gear Bearing Unit was developed with Daimler for their heavy duty engines.
This is a customized tapered gear bearing unit designed to accommodate heavy loads.

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A number of new offerings were launched during the quarter. The solutions include among others a
pulley unit designed for the alternator in the engine and a unit that helps to reduce energy and
water consumption for front loaded washing machines.

Previous outlook statement:
Outlook for the fourth quarter of 2010
Development compared to the fourth quarter last year
The demand for SKF products and services is expected to be significantly higher for the Group, the
divisions and for the different geographical areas.

Development compared to the third quarter 2010 and adjusted for normal seasonality
The demand is expected to be slightly higher for the Group, the divisions and for the different
geographical areas.

Manufacturing level
The manufacturing level will be significantly higher year on year and unchanged compared to the
third quarter, adjusted for normal seasonality.

Highlights in the previous quarters
• SKF was awarded a contract with Guohua Energy Investment, a major Chinese energy
company to supply 180 SKF WindCon systems to improve reliability maintenance for existing
turbines. Guohua Energy Investment is also developing a new wind farm in Beijing to which
SKF will supply 58 SKF WindCon systems.
• SKF has launched 13 new offerings to help customers increase reliability and safety as well as
reduce costs, CO2 emissions and environmental impact. The solutions include a four-row
tapered roller bearing for rolling mills, a low friction X-Tracker wheel hub bearing unit for cars
and light trucks, SKF Cam Follower Units for direct injection systems of cars and trucks, asset
management services for cranes, specialized bearings for sub-sea and pumps in extreme
environments in the oil and gas industry and a hydraulic-driven lubricator for hammers and
breakers used in the construction industry.
• SKF has now documented over USD two billion savings by its customers as a result of using
SKF solutions. This data was collected over a 10-year period with the close cooperation of
customers and the use of a patented SKF program, SKF Documented Solutions Program.
• SKF is building a factory for medium-sized bearings in China. The factory will be located in
Dalian, close to SKF’s existing factory for large-sized bearings. The new investment amounts to
around SEK 400 million and is expected to come into operation in 2011 employing 250 people.
• SKF will expand its present seals manufacturing capacity by building a new factory in Mysore,
India that will serve customers within the automotive, railway and industrial applications
segments. The investment amounts to around SEK 160 million and will be fully operational by
the second half of 2012 employing about 600 people.
• SKF is investing around USD 18 million in a new heat treatment facility in Falconer, USA, as
part of an expansion to its areoengine operations in the country. The new facility will house a
new high-tech vacuum furnace for the carburizing and hardening of a variety of materials and
is a very critical operation in the bearing manufacturing process.
• Two new SKF Solution Factories were inaugurated in the quarter, one in the UK and one in
Turkey. There are now fourteen SKF Solution Factories over the world.
• SKF’s newly constructed manufacturing facility in Tver, Russia as well as the new corporate
head office in Lansdale, USA have been designed and constructed according to the U.S. Green
Building council’s LEED (Leadership in Energy and Environmental Design) standard. The factory
in Tver has now been awarded Gold level and is the first manufacturing facility to have this

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type of certification anywhere in Russia, while the Lansdale office has achieved Platinum - the
highest level in the LEED certification system.
• For the eleventh year in succession, SKF was selected to be a member of Dow Jones’
Sustainability World Indexes and for the tenth year in succession, in the FTSE4Good Index
Series.
• SKF inaugurated its new factory in Tver, Russia where the new generation of SKF’s sealed and
pre-lubricated compact tapered bearing units will be produced for the Russian and international
railway customers. The factory will be one of the first in Russia and in Europe with LEED
certification. The investment amounts to around SEK 235 million and the factory will employ
100 people.
• SKF inaugurated a Global Technical Centre China in Shanghai. The centre will be an integral
part of SKF’s global network of technical centres and will enable SKF to develop products and
solutions for local and global customers in a faster and more cost effective way.
• SKF was awarded an agreement with ZF Sachs Italy to supply 140,000 oil seals and wiper
seals for motorcycle forks.
• SKF signed a three-year contract worth around SEK 34 million with Valeo to supply SKF Rotor
Positioning Bearings for the new i-StARS, Valeos stop-start system. i-StARS automatically cuts
off the vehicle’s engine when slowing down under 8 km/h, e.g when stopping for a red light.
The system enables further reduction in CO2 emissions.
• SKF signed a framework agreement with the State Forestry Administration in China to plant
new forests, in remote areas of the country. The project is expected to run for five years.
• SKF received the “Golden Mousetrap” award in the 2010 “Best products awards” announced by
the magazine Design News. This was in the Electronics/Test and Measurement category and for
the new SKF Machine Condition Advisor, a handheld instrument which simplifies machine
monitoring and provides early warning of potential failures. Design News annual Golden
Mousetrap Awards recognize engineering innovation and creativity in product design.
• SKF has assisted S-OIL, a large South Korean oil refinery, to increase productivity and reduce
potential production downtime. The project resulted in a payback for S-OIL in less than 11
months. The SKF solution included the development of asset strategy, defect eliminations and
operator driven reliability.
• Three new SKF Solution Factories were inaugurated, one in Schweinfurt, Germany,
one in Montigny-le-Bretonneux, France and one in Moscow, Russia.
• SKF inaugurated two new factories in India. The factory in Haridwar will manufacture deep
groove ball bearings and the Ahmedabad factory will manufacture medium to large-sized
bearings of various types.
• A programme was concluded in March for adjusting the manufacturing capacity in Gothenburg,
Sweden. The total cost of these activities, around SEK 90 million, mainly impacted the
Industrial Division and has been charged to the income statement in the first quarter. The
benefit of these actions will be around SEK 50 million per year when fully implemented by the
third quarter.
• The ninth SKF Solution Factory was inaugurated in Houston, USA.

Risks and uncertainties in the business
The SKF Group operates in many different industrial, automotive and geographical segments that
are at different stages of the economic cycle. A general economic downturn at global level, or in
one of the world’s leading economies, could reduce the demand for the Group’s products, solutions
and services for a period of time. In addition, terrorism and other hostilities, as well as
disturbances in worldwide financial markets, could have a negative effect on the demand for the

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Group’s products and services. There are also political and regulatory risks associated with the
wide geographical presence. Regulatory requirements, taxes, tariffs and other trade barriers, price
or exchange controls or other governmental policies could limit the SKF Group’s operations.
The SKF Group is subject to both transaction and translation of currency exposure. For commercial
flows the SKF Group is primarily exposed to the USD and to US dollar-related currencies. As the
major part of the profit is made outside Sweden, the Group is also exposed to translational risks in
all the major currencies. The parent company performs services of a common Group character. The
financial position of the parent company is dependent on the financial position and development of
the subsidiaries. A general decline in the demand for the products and services provided by the
Group could mean lower dividend income for the parent company, as well as a need for writing
down values of the shares in the subsidiaries.

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 annual report (available
on www.skf.com) under the Administration Report; "Important factors influencing the financial
results", "Financial risks" and "Sensitivity analysis", and in this full-year report under "Risks and
uncertainties in the business."

Gothenburg, 1 February 2011
Aktiebolaget SKF
(publ.)

Tom Johnstone
President and CEO

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Teleconference/meeting - On 1 February at 13.30 (CET), 12.30 (UK):
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Venue: Operaterrassen
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You will find all information regarding SKF Year-end results on the IR website.
http://investors.skf.com/quarterlyreporting

Enclosures:

Financial statements
1. Consolidated income statements
2. Consolidated statements of comprehensive income and consolidated statements of changes in
shareholders’ equity
3. Consolidated balance sheets
4. Consolidated statements of cash flow
Other financial statements
5. Consolidated financial information - yearly and quarterly comparisons
6. Segment information - yearly and quarterly comparisons
7. Parent company income statements, statements of comprehensive income, balance sheets and
footnote
8. Acquisition of Lincoln Industrial

The consolidated financial statements of the SKF Group are prepared in accordance with International Financial
Reporting Standards as adopted by EU. The SKF Group applies the same accounting policies and methods of
computation in the interim financial statements as compared with the Annual Report 2009 including
Sustainability Report. No new or amended IFRS effective 2010 had any significant impact on the Group.

The consolidated quarterly report has been prepared in accordance with IAS 34. The report for the parent
company has been prepared in accordance with the Annual Accounts Act and RFR 2. The report has not been
reviewed by the company’s auditors.

The SKF First-quarter report 2011 will be published on Tuesday, 19 April 2011.
The Annual General Meeting will be held on Thursday, 28 April 2011 in Gothenburg, Sweden.

The SKF Annual Report including Sustainability Report for 2010 will be published in a pdf-format on SKF’s
website http://investors.skf.com on 11 March 2011. The printed report will be delivered on 24 March 2011
and will be available at the company on that day.

Further information can be obtained from:
Ingalill Östman, Group Communication
tel: +46-31-3373260, mobile: +46-706-973260, e-mail: ingalill.ostman@skf.com
Marita Björk, Investor Relations
tel: +46-31-3371994, mobile: +46-705-181994, e-mail: marita.bjork@skf.com

Aktiebolaget SKF, SE-415 50 Göteborg, Sweden, Company reg.no. 556007-3495,
Tel: +46-31-3371000, fax: +46-31-3372832, www.skf.com

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Enclosure 1
CONSOLIDATED INCOME STATEMENTS (SEKm)

Oct-Dec Oct-Dec Jan-Dec Jan-Dec
2010 2009 2010 2009

Net sales 15,409 13,887 61,029 56,227
Cost of goods sold -11,139 -11,049 -44,216 -45,024
Gross profit 4,270 2,838 16,813 11,203

Selling and administrative expenses -2,020 -1,838 -8,222 -7,915
Other operating income/expenses - net -49 2 -139 -74
Profit/loss from jointly controlled and
associated companies 1 2 0 -11
Operating profit 2,202 1,004 8,452 3,203

Operating margin, % 14.3 7.2 13.8 5.7

Financial income and expense - net -154 -239 -903 -906
Profit before taxes 2,048 765 7,549 2,297

Taxes -698 -260 -2,253 -592
Net profit 1,350 505 5,296 1,705

Net profit attributable to
Shareholders of the parent 1,311 476 5,138 1,642
Non-controlling interests 39 29 158 63

Basic earnings per share, SEK* 2.87 1.05 11.28 3.61

Diluted earnings per share, SEK* 2.87 1.05 11.28 3.61

Additions to property, plant and equipment 460 505 1,651 1,975

Number of employees registered 44,742 41,172 44,742 41,172

Return on capital employed for the
12-month period ended 31 December, % 24.0 9.1 24.0 9.1

* Basic and diluted earnings per share are based on net profit attributable to shareholders of the parent.

NUMBER OF SHARES

Total number of shares 455,351,068 455,351,068 455,351,068 455,351,068
- whereof A shares 44,915,604 45,421,004 44,915,604 45,421,004
- whereof B shares 410,435,464 409,930,064 410,435,464 409,930,064

Total number of diluted shares outstanding 455,351,068 455,351,068 455,351,068 455,351,068

Total weighted average number of diluted
shares 455,351,068 455,351,068 455,351,068 455,365,536

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Enclosure 2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (SEKm)

2010 2009 2010 2009

Net profit 1,350 505 5,296 1,705

Other comprehensive income
Exchange differences arising on translation of
foreign operations 22 456 -1,660 -798

Available-for-sale assets 119 79 169 134

Cash flow hedges 14 -41 18 182

Actuarial gains and losses 839 -75 -616 -888

Income tax relating to components of other
comprehensive income -286 8 56 105
Other comprehensive income, net of tax 708 427 -2,033 -1,265

Total comprehensive income 2,058 932 3,263 440

Total comprehensive income attributable to
Shareholders of AB SKF 2,012 869 3,131 412
Non-controlling interests 46 63 132 28

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (SEKm)

December 2010 December 2009
Opening balance 1 January 18,280 19,689
Total comprehensive income 3,263 440
Cost for share programmes and exercise of options, net 8 -12
Non-controlling interests -35 -208
Total cash dividends -1,622 -1,629
Closing balance 19,894 18,280

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Enclosure 3
CONSOLIDATED BALANCE SHEETS (SEKm)

Goodwill 6,309 2,759

Other intangible assets 4,164 1,255

Property, plant and equipment 12,922 13,933

Deferred tax assets 1,695 1,665

Other non-current assets 1,411 1,502
Non-current assets 26,501 21,114

Inventories 12,879 11,771

Trade receivables 9,859 8,800

Other current assets 2,839 3,590

Other current financial assets 3,146 5,740
Current assets 28,723 29,901

TOTAL ASSETS 55,224 51,015

Equity attributable to shareholders of AB SKF ← 18,935 ← 17,411
← ←
Equity attributable to non-controlling interests ← 959 ← 869

Long-term financial liabilities 10,850 8,987

Provisions for post-employment benefits 7,093 7,020

Provisions for deferred taxes 2,132 754

Other long-term liabilities and provisions 1,622 1,599
Non-current liabilities 21,697 18,360

Trade payables 4,476 3,989

Short-term financial liabilities 1,325 2,018

Other short-term liabilities and provisions 7,832 8,368
Current liabilities 13,633 14,375

TOTAL EQUITY AND LIABILITIES 55,224 51,015

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Enclosure 4
CONSOLIDATED STATEMENTS OF CASH FLOW (SEKm)

2010 2009 2010 2009
Operating activities:
Operating profit 2,202 1,004 8,452 3,203
Depreciation, amortization and impairment 539 503 1,992 2,171
Net loss/gain (-) on sales of intangible assets, PPE,
equity securities, businesses and assets held for sale -30 15 -5 29
Taxes -511 -227 -1,722 -1,068
Other including financial and non-cash items -453 206 -1,950 590
Changes in working capital -489 467 -1,216 3,076
Net cash flow from operations 1,258 1,968 5,551 8,001

Investing activities:
Payments in intangible assets, PPE, businesses and
equity securities -7,239 -532 -8,496 -2,271
Sales of intangible assets, PPE, businesses, assets held
for sale and equity securities 15 9 107 22
Net cash flow used in investing activities -7,224 -523 -8,389 -2,249
Net cash flow after investments before financing* -5,966 1,445 -2,838 5,752

Financing activities:
Change in short- and long-term loans 3,636 -2,078 2,281 -2,048
Payment of finance lease liabilities -1 0 -11 -6
Cash dividends 0 -1 -1,622 -1,629
Investments in short-term financial assets -119 -169 -788 -2,831
Sales of short-term financial assets 631 1,441 996 2,461
Net cash flow used in financing activities 4,147 -807 856 -4,053
NET CASH FLOW -1,819 638 -1,982 1,699

Change in cash and cash equivalents:
Cash and cash equivalents at 1 October/1 January 4,193 3,761 4,430 2,793
Cash effect excl. acquired businesses -2,102 638 -2,265 1,699
Cash effect of acquired businesses 283 0 283 0
Exchange rate effect 21 31 -53 -62
Cash and cash equivalents at 31 December 2,395 4,430 2,395 4,430

Change in net interest- Opening Translation Cash Businesses Other non Closing
bearing liabilities balance effect change acquired/ cash balance
1 Jan 2010 sold changes 31 Dec
2010
Loans, long- and short-term 10,750 -1,289 2,281 0 54 11,796
Post-employment benefits, net 6,993 -760 -466 163 1,117 7,047
Financial assets, others -1,512 76 208 -2 217 -1,013
Cash and cash equivalents -4,430 53 2,265 -283 0 -2,395
Net interest-bearing
liabilities 11,801 -1,920 4,288 -122 1,388 15,435

* Adjusted for acquisition of Lincoln Industrial
2010 2009 2010 2009

Net cash flow after investments before financing -5,966 1,445 -2,838 5,752
Adjustment for acquisition of Lincoln Industrial 6,764 0 6,764 0
Net cash flow after investments before financing
after adjustment for acquisition of Lincoln Industrial 798 1,445 3,926 5,752

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Enclosure 5
CONSOLIDATED FINANCIAL INFORMATION –
YEARLY AND QUARTERLY COMPARISONS
(SEKm unless otherwise stated)
Full Full
year year
1/09 2/09 3/09 4/09 2009 1/10 2/10 3/10 4/10 2010

Net sales 14,849 14,167 13,324 13,887 56,227 14,446 15,709 15,465 15,409 61,029
Cost of goods sold -11,844 -11,656 -10,475 -11,049 -45,024 -10,701 -11,336 -11,040 -11,139 -44,216
Gross profit 3,005 2,511 2,849 2,838 11,203 3,745 4,373 4,425 4,270 16,813

Gross margin, % 20.2 17.7 21.4 20.4 19.9 25.9 27.8 28.6 27.7 27.5
Selling and administrative
expenses -2,219 -2,007 -1,851 -1,838 -7,915 -2,032 -2,128 -2,042 -2,020 -8,222
Other operating income/
expenses - net -14 -25 -37 2 -74 -7 -7 -76 -49 -139
Profit/loss from jointly
controlled and associated
companies -4 -5 -4 2 -11 -4 1 2 1 0
Operating profit 768 474 957 1,004 3,203 1,702 2,239 2,309 2,202 8,452

Operating margin, % 5.2 3.4 7.2 7.2 5.7 11.8 14.3 14.9 14.3 13.8
Financial income and
expense - net -237 -162 -268 -239 -906 -198 -192 -359 -154 -903
Profit before taxes 531 312 689 765 2,297 1,504 2,047 1,950 2,048 7,549

Profit margin before taxes,% 3.6 2.2 5.2 5.5 4.1 10.4 13.0 12.6 13.3 12.4
Taxes -137 11 -206 -260 -592 -434 -596 -525 -698 -2,253
Net profit 394 323 483 505 1,705 1,070 1,451 1,425 1,350 5,296

Net profit attributable to
Shareholders of the parent 390 314 462 476 1,642 1,033 1,405 1,389 1,311 5,138
Non-controlling interests 4 9 21 29 63 37 46 36 39 158

Basic earnings per share, SEK* 0.86 0.69 1.01 1.05 3.61 2.27 3.09 3.05 2.87 11.28

Diluted earnings per share, SEK* 0.86 0.69 1.01 1.05 3.61 2.27 3.09 3.05 2.87 11.28

Dividend per share, SEK - 3.50 - - 3.50 - 3.50 - - 3.50

Return on capital employed
for the 12-month period, % 18.7 13.4 10.2 9.1 9.1 11.9 16.8 20.7 24.0 24.0

Gearing, %** 50.1 51.1 52.9 49.3 49.3 48.3 47.4 47.6 48.6 48.6

Equity/assets ratio, % 35.9 34.6 33.5 35.8 35.8 36.2 36.0 36.0 36.0 36.0

Net worth per share, SEK* 43 40 36 38 38 38 38 37 42 42

Additions to property, plant
and equipment 494 442 534 505 1,975 389 433 369 460 1,651

Registered number of employees 43,653 42,422 41,756 41,172 41,172 41,055 41,644 42,475 44,742 44,742

* Basic and diluted earnings per share and Net worth per share are based on net profit attributable to shareholders
of the parent.

** Current- plus non-current loans plus provisions for post-employment benefits, net, as a percentage of the sum of current-
plus non-current loans, provisions for post-employment benefits, net, and shareholders equity, all at end of interim
period/year end.

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Enclosure 6

SEGMENT INFORMATION - YEARLY AND QUARTERLY COMPARISONS**
(SEKm unless otherwise stated)
Full Full
year year
1/09 2/09 3/09 4/09 2009 1/10 2/10 3/10 4/10 2010

Industrial Division
Net sales 5,802 4,844 4,380 4,508 19,534 4,695 4,873 4,952 4,904 19,424
Sales incl. intra-Group sales 8,187 7,120 6,494 6,745 28,546 7,105 7,514 7,545 7,443 29,607
Operating profit 635 344 335 237 1,551 713 909 974 902 3,498
Operating margin* 7.8% 4.8% 5.2% 3.5% 5.4% 10.0% 12.1% 12.9% 12.1% 11.8%
Operating margin excl.
restructuring* 8.0% 5.5% 5.7% 6.6% 6.5% 11.2% 12.1% 12.9% 12.1% 12.1%
Assets and liabilities, net 18,734 17,474 15,948 15,966 15,966 15,511 15,960 14,843 23,392 23,392
Registered number of
employees 19,010 18,616 18,093 17,853 17,853 17,701 17,715 17,882 19,922 19,922

Service Division
Net sales 5,011 4,944 4,636 5,008 19,599 5,093 5,635 5,637 5,664 22,029
Operating profit 598 636 622 729 2,585 647 745 803 841 3,036
Operating margin* 11.7% 12.7% 13.2% 14.3% 13.0% 12.5% 13.0% 14.0% 14.6% 13.5%
restructuring* 11.7% 12.9% 13.5% 14.6% 13.1% 12.5% 13.0% 14.0% 14.6% 13.5%
employees 5,940 5,823 5,761 5,725 5,725 5,731 5,710 5,773 5,832 5,832

Automotive Division
Net sales 3,747 4,126 4,068 4,110 16,051 4,362 4,850 4,528 4,491 18,231
Operating profit -437 -468 28 92 -785 374 570 470 445 1,859
Operating margin* -9.6% -9.6% 0.6% 1.9% -4.1% 7.2% 9.8% 8.5% 8.2% 8.5%
restructuring* -6.2% -0.6% 3.7% 5.5% 0.7% 7.2% 9.8% 8.5% 8.2% 8.5%
employees 14,318 13,744 13,778 13,480 13,480 13,569 14,002 14,399 14,469 14,469

* Operating margin is calculated on sales including intra-Group sales.

Reconciliation to profit before tax for the Group**
Jan-Dec 2010 Jan-Dec 2009
Operating profit:
Industrial Division 3,498 1,551
Service Division 3,036 2,585
Automotive Division 1,859 -785
Other operations outside the divisions 341 158

Unallocated Group activities and adjustments, net -282 -306

Financial net -903 -906
Profit before tax for the Group 7,549 2,297

** Previously published amounts have been restated to conform to the current Group structure in 2010. The structural
changes include business units being moved between the divisions and between other operations/Group activities and
divisions.

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Enclosure 7
PARENT COMPANY INCOME STATEMENTS (SEKm)

2010 2009 2010 2009
Net sales 438 447 1,683 1,623
Cost of services provided -438 -447 -1,683 -1,623
Gross profit 0 0 0 0

Administrative expenses -95 -18 -213 -101
Other operating income/expenses – net -2 1 -14 0
Operating loss -97 -17 -227 -101

Financial income and expenses - net -68 -68 1,718 2,602
Loss/profit before taxes -165 -85 1,491 2,501

Provisions to untaxed reserves -178 -145 -178 -145
Taxes 68 53 157 99
Net loss/profit -275 -177 1,470 2,455

PARENT COMPANY STATEMENTS of COMPREHENSIVE INCOME (SEKm)

2010 2009 2010 2009
Net loss/profit -275 -177 1,470 2,455

Other comprehensive income
Available-for-sale assets 118 76 168 134
Other comprehensive income, net of tax 118 76 168 134

Total comprehensive income -157 -101 1,638 2,589

PARENT COMPANY BALANCE SHEETS (SEKm)
N December 2010 December 2009
o
t
e
Investments in subsidiaries 22,255 17,211
Receivables from subsidiaries 10,592 8,614
Other non-current assets 689 524
Non-current assets 33,536 26,349

Receivables from subsidiaries 3,285 3,472
Other receivables 154 209
Current assets 3,439 3,681

TOTAL ASSETS 36,975 30,030

Shareholders’ equity 1 11,490 10,208
Untaxed reserves 1,417 1,240
Provisions 165 151
Non-current liabilities 10,581 8,614
Current liabilities 13,322 9,817
TOTAL SHAREHOLDERS’ EQUITY,
PROVISIONS AND LIABILITIES 36,975 30,030
Contingent liabilities 5 5

Note 1. Shareholders’ equity (SEKm)
Opening balance 1 January 10,208 8,258
Dividends -1,594 -1,594

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Total comprehensive income 1,638 2,589
Exercise of options and cost for share programmes, net 31 -11
Group contribution, net 1,207 966
Closing balance 11,490 10,208
Enclosure 8
Acquisition of Lincoln Industrial
On 28 December 2010 the Group acquired 100% of the shares of Lincoln Holdings Enterprises, Inc
(Lincoln Industrial) from Harbour Group. Lincoln Industrial is a leader in the design, manufacture
and supply of highly engineered lubrication systems, tools and equipment, and is headquartered in
St. Louis, Missouri, USA.
Lincoln Industrial’s three main product lines are automated lubrication systems, hose reels, and
grease guns, with a focus on grease-based systems. Sales are mainly generated from automated
lubrication systems and related products. Major end markets include industrial, energy, off-
highway, mining, agriculture, and steel. The company has a global footprint with around 50% of its
sales generated in North America, 25% in Europe and 20% in Asia Pacific. The company has
around 2,000 employees with manufacturing operations in the US, Asia and Europe.
Lincoln Industrial will be part of a newly created business unit for lubrication systems within SKF’s
Industrial Division. The acquisition of Lincoln Industrial is in line with SKF’s strategy and builds on
a series of acquisitions made in the lubrication systems sector over the last six years. Lincoln
Industrial is highly complementary to SKF’s existing lubrication systems business, with limited
product and geographical overlap. The acquisition furthers SKF’s strategy including:
• improving the lubrication systems platform through Lincoln Industrial’s complementary
product portfolio.
• increasing the geographical sales coverage in North America and Asia.
• expanding the business to the automotive aftermarket in the US.
• expanding the manufacturing operations through Lincoln Industrial’s strong US and Asian
manufacturing footprint.
SKF expects to achieve significant synergies from the combination through improved sales
opportunities and greater efficiencies.
Lincoln Industrial is included in the Group’s balance sheet at 31 December 2010, with no impact on
the Group’s income statement for the year 2010. Their results will be included in the Group’s
income statement as from 1 January 2011.
A preliminary allocation of the acquisition cost to the identifiable assets acquired and liabilities
assumed (net assets) was made. All allocations are only preliminary and are expected to be
finalized in Q2 2011 pending the final audit and asset valuations. The preliminary values are as
follows:

Fair value of net assets acquired (SEKm):
Trademarks 1,020
Customer relationships 1,836
Other intangibles 287
Plant, property and equipment 358
Receivables 441
Inventory 648
Other assets 300
Deferred tax provisions -1,225
Post-employment benefits -163
Other liabilities -344
3,158
Goodwill 3,889
Total acquisition cost 7,047

Cash and cash equivalents acquired -283
Cash outflow 6,764

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The acquisition cost is subject only to adjustments for the final audited cash, working capital, and
indebtedness levels. The acquisition was paid using existing cash and credit facilities. Acquisition
related-costs of SEK 99 million were expensed, of which SEK 80 million was included as Other
operating expense and SEK 19 million was included as Selling expense in the Group’s income
statement.
Receivables arise from the normal course of business and include an allowance for uncollectibilty of
approximately SEK 16 million.
The acquisition of Lincoln Industrial included all Lincoln, Alemite and Reelcraft entities and brands.
Consequently the opening balances include a preliminary valuation of trademarks of SEK 1,020
million, which the Group considers to have indefinite useful lives, as it is intended to continue to
promote these brands in the foreseeable future. Preliminary values were allocated to other
significant intangibles which included customer relationships to be amortized over an expected life
of 15 years.
None of the goodwill is expected to be deductible for tax purposes. The preliminary goodwill arises
due to Lincoln Industrial’s expected ability to continuously renew its technology resulting in
improved sales opportunities as well as their ability to deliver strong financial performance on a
consistent basis.

Proforma net sales and net profit
Had Lincoln Industrial been acquired at 1 January 2010, the consolidated revenue for the Group
would have amounted to SEK 63,858 million, and consolidated net profit would have been SEK
5,509 million. This unaudited proforma information adds Lincoln Industrial’s income statement
excluding their acquisition-related costs and financing costs, and adjusts for the additional
amortizations, depreciations, and inventory costs arising from the fair value adjustment.
Additionally, net financial costs were adjusted to reflect the change in the Group’s net interest
bearing liabilities caused by the payment of the purchase price. Income taxes have been included
in all proforma adjustments.

Skf q4 2010_pr_eng

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