SKF Half-year report 2003


Stable earnings
The SKF Group reports a profit before taxes for the second quarter 2003 of MSEK 815 (925). The profit for the first half of 2003 was MSEK 1 617. Earnings per share for the second quarter were SEK 4.99 (5.58), and for the first half-year, SEK 9.93 (10.22).
Total sales, calculated in local currencies, were higher in Europe in the second quarter 2003 compared to the same period last year. In North America sales were lower compared to last year, while in the Asian region sales were considerably higher than a year ago.

Outlook
The market demand for the Group’s products and services is expected to be somewhat lower during the third quarter, with Europe slightly weaker, North America relatively unchanged and continued strong growth in Asia. Manufacturing will be reduced during the quarter in order to continue the reduction of inventory levels.

Summary
Ø The operating profit for the second quarter was MSEK 945 (1 048).
The figure for the first half-year of 2003 was MSEK 1 889 (1 951).
Ø The operating margin for the SKF Group for the second quarter of 2003 amounted to 9.0% (9.5), and for the first half-year to 9.0% (9.0).
Ø Cash flow after investments before financing for the second quarter was MSEK 510 (829), and for the first half-year MSEK 557 (717).
Ø Net sales for the second quarter amounted to MSEK 10 532 (11 053), and for the first half-year to MSEK 21 073 (21 718).
Ø The decrease of 4.7 % in net sales for the second quarter was attributable to:
structure 0.1%, volume 3.2%, price/mix 0.6% and currency effect -8.6%.
For the first half-year, the decrease of 3.0% was attributable to:
structure 0.4%, volume 4.7%, price/mix 0.9% and currency effect -9.0%.
Ø Net profit for the second quarter amounted to MSEK 569 (636). Net profit for the first half-year was MSEK 1 131 (1 165).
The Group’s financial net for the first half-year was MSEK -272 (-265). Additions to tangible assets totalled MSEK 554 (611). At the end of June, the Group’s inventories were 21.9% (20.5) of annual sales. The equity/assets ratio was 40.9% (40.0). Return on capital employed for the 12-month period ended June 30 was 17.0% (15.3). Return on equity was 15.8% (14.3). The registered number of employees was 38 821 (39 926).
Exchange rates for the second quarter 2003, compared to the second quarter 2002, had a negative effect on SKF’s profit before taxes to an estimated amount of MSEK 250, which corresponds to a negative effect of 1,5% on the operating margin. The total negative effect on the first half-year result is MSEK 410. For the third quarter, it is estimated that the currency effect will be of the same magnitude as for the second quarter.

During the quarter, SKF was upgraded by both Moody’s Investors Service and Standard & Poor’s. SKF has now been rated A3 by Moody’s and A- by Standard & Poor’s. The outlook for both of the ratings is "stable".
SKF sold its component manufacturing operations in Veenendaal, The Netherlands, to the US based NN, Inc for MSEK 200 during the quarter. SKF has also sold its 23% holding in NN Euroball ApS to NN, Inc. for MSEK125. At the same time, SKF acquired 4.5% of the shares in NN, Inc., for MSEK 50. The capital gain of these transactions amounted to MSEK 86, and is part of "Other operating income/expense - net".
A charge of MSEK 75 was recorded during the second quarter mainly for the purpose of writing down assets within certain areas of the Group. This expense is included in "Cost of goods sold".


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