SKF AB (Sweden; Stockholm:SKFA) reported financial results for third quarter 2008, ended September 30.

Sales rose 8.7%, reaching SEK 15.4 billion (USD $$$) from SEK 14.2 billion ($$$) in third quarter 2007.

Similarly, third quarter profit rose to SEK 2.1 billion ($$$) from SEK 1.8 billion ($$$) in 2007.

SKF said the sales gain was broken down: +6.7% to more favorable price / sales mix, +2.7% to higher volume, +0.5% to internal structure, and -0.9% to currency exchange rates.

Sales in Europe and North America were up, but significantly higher in Asia and Latin America. Overall, Industrial and Service Division sales were significantly higher. Automotive sales were flat in the quarter.

In the quarter, SKF launched a series of new products and services, opened its expanded large bearing capacity in Gothenberg, and acquired Peer Bearing in the U.S. for $150 million.

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article: SKF acquires Peer Bearing
Through third quarter, inventory edged up to 22% of sales, from 19.3% at the end of third quarter 2007.

Manufacturing activity level stayed steady since second quarter, up from 2007, and will remain at the current rate through the fourth quarter -- reflecting a changing mix in customer demand, and to sell down inventory.

Industrial Division sales were SEK 5.5 billion ($$$), up 15% from 2007's SEK 4.7 billion ($$$$). The division's operating margin rose to 12.4% from 11% a year ago. SKF said industrial sales were higher worldwide and across all sectors, but showing particularly solid gains were energy, mining, agriculture, fluid power, industrial gearboxes and construction equipment.

Service Division sales were SEK 5.3 billion ($$$) up 11% from 2007's SEK 4.8 billion ($$$). The division's operating margin hit 14.5% from last year's 13%. SKF said the division's sales were higher in Europe and North America, but significantly higher in Asia and Latin America.

Automotive Division sales were down slightly but essentially flat at SEK 4.57 billion ($$$) from 2007's SEK 4.63 billion ($$$). Operating margin rose to 5.7% from 5.6% in 2007. The division's sales to the auto and light truck industry were sharply lower Europe and North America, offset by improving sales to the heavy truck industry in Europe and North America. Aftermarket sales were down in Europe and North America, while rising slightly in Asia. The division also sells automotive sizes for electrical components in Europe, where those sales were down. Sales to the two-wheeler industry in Asia were significantly higher.

Like every other bearing manufacturer worldwide, SKF continues to battle raw material and component cost increases, including scrap surcharges. Rising costs were a particular problem early in 2008, but the pace has since slowed. SKF said it has been able to offset higher costs through a combination of more aggressive sourcing management, reducing operating costs, and raising prices when possible. Recently, scrap prices have been dropping, which reduces SKF's steel surcharges but still leaves the component volatile. In fourth quarter, the company expects raw material and component prices to stay significantly higher than they were in fourth quarter 2007, but that continuing the existing programs will allow it to keep offsetting rising costs.

President and CEO, Tom Johnstone, said: "We delivered a very strong third quarter result. However, toward the end of the quarter, with the dramatic events in the financial markets, we had lower volumes particularly in our automotive business, while volumes in our industrial business were strong."

Mr Johnstone went on to say: "For the fourth quarter, we expect slightly lower demand both compared to the third quarter this year and the fourth quarter last year. As a result of this we have intensified our actions addressing the cost and capital situation in the group."

All calculations: SEK 1 = USD $0.122