Stable earnings The SKF Group reports a profit before taxes of MSEK 802 (761) for the first quarter of 2003. Earnings per share for the first quarter were SEK 4.94 (4.64). Total sales, calculated in local currencies, grew in Europe during the first quarter 2003 compared with the same period last year. In North America sales were fairly flat compared with last year, while in the Asian region sales continued to grow strongly. Outlook: The overall market demand for the Group's products and services is expected to remain relatively unchanged in the second quarter. Manufacturing levels, which were higher than sales in the first quarter, will be adjusted downwards during the second quarter. The Group's financial net for the first quarter was MSEK -142 (-142). Additions to tangible assets totalled MSEK 304 (289). At the end of March, the Group's inventories amounted to 22.2% (21.0) of annual sales. The equity/assets ratio was 41.2% (41.2). Return on capital employed for the 12-month period ended March 31 was 17.4% (14.8). Return on equity was 16.0% (13.7). The registered number of employees was 39 645 (38 205). The increase is due to a number of acquisitions. Exchange rates for the first quarter 2003, compared with first quarter 2002, had a negative effect on SKF's profits before taxes to an estimated amount of MSEK 160. New accounting principles SKF implemented the Swedish accounting principle RR 29 "Employee Benefits" as of January 1, 2003, which is based on the International Accounting Standard (IAS) 19. The one time effect of this change in accounting principle was MSEK -1 447 after tax and was charged against equity in accordance with RR 5 "Accounting for changes in accounting principles". As of January 1, 2003, the Swedish accounting principles RR 25 "Segment Reporting" has been implemented. Thus, information in this press release regarding business segments has been adjusted to comply with RR 25. SKF's primary segment format is in line with the SKF operational division structure. New President and CEO and new target Since the President and Chief Executive Officer Sune Carlsson had announced his decision to retire from SKF with effect from the Annual General Meeting 2003, the Board of Directors of AB SKF decided to appoint Tom Johnstone as the new President and CEO of SKF. The new target for the SKF Group is to maintain an operating margin at the 10% level and achieve SEK 10 billion of additional annual net sales 2005/2006. To achieve the target the focus will be on further development of operational excellence, organic growth and acquisitions. The organic growth should come from geographical expansion, fast growing customer segments, the aftermarket, service business and new products. The acquisitions should contribute about one third of the additional net sales. Divisions The result by Division is based on SKF management reporting. Industrial Division Operating result for the first quarter amounted to MSEK 370 (376), resulting in an operating margin of 9.5% (9.5) on total sales (sales and deliveries to external and internal customers). External sales amounted to MSEK 2 536 (2 493), an increase of 1.7%. Total sales for the quarter were MSEK 3 890 (3 950). Sales in Europe and Asia increased during the quarter compared to the same period for 2002. Sales in the North American market remained flat. The SKF Explorer family of high performance bearings was expanded during the quarter with the incorporation of the spherical roller thrust bearing. These bearings are used in industrial and marine transmissions, vertical pumps and a variety of other applications. Automotive Division Operating result for the first quarter amounted to MSEK 174 (123), resulting in an operating margin of 4.6% (3.2) on total sales (sales and deliveries to external and internal customers). External sales amounted to MSEK 3 441 (3 457), a decrease of 0.5%. Total sales for the quarter were MSEK 3 812 (3 831). Sales of bearing and seal products to the car and the light truck industry increased in Europe compared to the first quarter last year. Also in North America sales were higher than in the same period a year ago. Sales to the heavy trucks industry increased in Europe but declined in North America, compared with the same period 2002. Sales to the vehicle service market in Europe grew compared with the first quarter last year but declined in North America. Electrical Division Operating result for the first quarter amounted to MSEK 80 (73), resulting in an operating margin of 4.7% (4.4) on total sales (sales and deliveries to external and internal customers). External sales amounted to MSEK 502 (493), an increase of 1.8%. Total sales for the quarter were MSEK 1 690 (1 675). Sales in the first quarter were higher than in the corresponding period last year in both Asia and Europe. In February the first channel in the new Shanghai factory started series production of ball bearings. Decision was taken to establish a development centre for two-wheelers in Bangalore, India. The centre will focus on completely new technologies. Service Division The operating result for the first quarter amounted to MSEK 294 (275), resulting in an operating margin of 8.4% (7.8) on total sales (sales and deliveries to external and internal customers). External sales amounted to MSEK 3 083 (3 176), a decrease of 2.9%. Total sales for the quarter were MSEK 3 493 (3 539). Sales were flat in West Europe but declined significantly in North America compared with the first quarter 2002. In Asia, sales continued to grow strongly. In both Latin America and Central and East Europe sales grew during the quarter. Reliability Services continued to sign mayor product and service contracts around the world, including customers in the mining industry in Australia, in the paper industry in Mexico and in the cement industry in Thailand. Aero and Steel Division The operating result for the first quarter amounted to MSEK 47 (60), resulting in an operating margin of 2.8% (3.5) on total sales (sales and deliveries to external and internal customers). External sales amounted to MSEK 971 (1 042), a decrease of 6.8%. Total sales for the quarter were MSEK 1 681 (1 732). Sales to the aerospace industry were significantly weaker compared with the corresponding period 2002. The first deliveries of composite rods from the Group's French subsidiary SARMA to the new Airbus A380, were made during the quarter. Ovako Steel, previously the Steel Division and today part of the Aero and Steel Division, reported external sales of MSEK 442 (442). Total sales for the quarter were MSEK 829 (822). The share of non SKF customers has increased. The operating result for the first quarter amounted to MSEK 8 (-9). Previous Outlook statement The recovery in the market demand for SKF's products and services is expected to continue during the first quarter. The production volume will be kept at the present level.