SKF AB (Sweden; Stockholm: SKFA) reported financial results for third quarter 2007, ended September 30, 2007.

Sales in the quarter were SEK 14.2 billion (USD $2.2 billion), up 13% from SEK 12.5 billion ($2 billion) in third quarter 2006.

SKF attributed the sales increase to: volume: +9%; structure: +3.7%; price/mix: +2/0%; and currency effects: -1.9%.

Third quarter operating profit was SEK 1.8 billion ($283 million), or 12.7% of sales, up from SEK 1.5 billion ($242 million), or 12.3% of sales, in 2006.

The quarter's net profit rose to SEK 1.2 billion ($189 million) in third quarter, from SEK 966 million ($152 million) last year.

SKF said third quarter sales were higher across the board, for the entire Group as well as all operating divisions. Geographically, sales were significantly higher across Europe, Asia and Latin America; sales in North America were somewhat higher.

The company also tracks and manages overall manufacturing activity level, which was unchanged from second quarter to third quarter. Year on year, third quarter manufacturing activity level was "significantly higher" in 2007 than 2006. Inventory at the end of the quarter remained unchanged year-on-year at 19.3% of sales.

Potentially impacting production, however, SKF reported raw material and components shortages. While this had been a problem so far in 2007, third quarter was especially difficult in that regard, and the company said no improvement is expected in fourth quarter.

Industrial Division was particularly hard hit by the shortages, which hampered production, inhibited customer deliveries and hurt operating margin. Costs related to specialty bearing steel and steel components have risen in 2007, and were up sharply in third quarter. SKF said these costs are expected to be higher yet in the fourth quarter from third quarter.

For now, SKF said it, "expects to be able to continue to compensate for this through productivity, sourcing and pricing."

Industrial Group third quarter sales were SEK 4.9 billion, up 13% from 2006's SEK 4.0 billion. Sales were significantly higher in every market worldwide. Within those results, several market segments were especially strong: renewable energy, mining, railways, pumps, fans and metal.

Service Division third quarter sales were SEK 4.9 billion, up 11% from 2006's SEK 4.4 billion. As with the Industrial Group, sales were stronger in every market worldwide.

Automotive Division third quarter sales were SEK 4.7 billion, up 14% from 2006's SEK 4.1 billion. Contrary to general expectations, bearing sales to the automotive and light truck industry in Europe and North America were significantly higher. Sales to the heavy truck market in Europe were significantly higher, but significantly lower in North America as that market recovers from a sales pushed to 4Q2006. Aftermarket bearing sales were up, significantly higher in Europe and higher in North America. Automotive's sales to the electrical business and to two-wheeler OEMs were significantly higher in Europe and significantly lower in Asia.

Several key automotive market wins were the front and rear wheel bearing hub assembly units for the Ford Focus, with Job 1 in 2008. Shanghai Automotive will be a front and rear wheel bearing customer for a new platform debuting in 2009. And Alfa Romeo will use SKF bearings in a new platform also set to debut in 2009.

Looking forward to next quarter, SKF forecast market demand as up for all products and services companywide. Geographically, Europe is expected to see higher demand, exceeded by significantly higher demand in Asia and Latin America, and flat in North America.

SKF said it will not ramp up manufacturing in fourth quarter beyond its current level -- still leaving the level significantly higher than fourth quarter 2006, and higher in absolute terms due to the effects of normal fourth quarter seasonality.

Finally, in third quarter, SKF's deregistration from the U.S. securities markets became effective. As a result, SKF will no longer reconcile the financial statements to US GAAP, nor file an annual report on Form 20-F with the Securities and Exchange Commission.