SKF (Gothenberg, Sweden), the world's largest bearing company, reported a downswing in earnings for third quarter 2001 as sales volume shrank while sales value grew.

Sales for 3Q2001 were up 7.7%, to MSEK 10,228 ($1 billion) from MSEK 9,495 ($928.4 million) in 3Q2000. The sales gain, however, was primarily due to the effects of exchange rates and the mix of products sold. Actual sales volume was down 3.2% from 2000.

Net profit was MSEK 429 ($41.9 million), down from MSEK 506 ($49.5 million) in 2000.

Overall inventory levels were driven down to 22.5% of sales in the past quarter. For the same period in 2000, inventory had been 23.5% of sales.

For the 12-month period ended September 30, 2001, SKF had short-term assets in excess of short and long-term loans of MSEK 522 ($51 million). Return on capital was 15.3%, down from 15.8% last year, while return on equity also dipped, to 14.5% from 15.7% in 2000.

SKF now employs 38,500 people worldwide, down 2,000 from a year ago. During the third quarter, 781 jobs were cut, some from attrition and 650 of which resulted from SKF eliminating its Information Technology department. All IT functions around the world have been outsourced to EDS (Plano, Texas).

Sales were MSEK 11,896 ($1.16 billion), up from MSEK 10,689 ($1.04 billion) in 2000. Of that, external sales were MSEK 7,426 ($726 million), rising from MSEK 6,437 ($629.4 million) for 2000. Operating margin on those sales dipped to 10.2% from 11.7% last year.

The division reported European markets showed slowdowns through the year, primarily in response to weakening North American markets. Bright spots were strong growth in windmill bearings and sales to the rail industries of Europe and China.

Sales were MSEK 8,404 ($822 million), up from MSEK 7,588 ($742 million) last year. External sales were MSEK 7,304 ($714 million), up 9.7% from MSEK 6,659 ($651 million) in 2000. Net operating margin continued to slide, now down to 2.9%. For 2000, operating margin had been 3.5%.

North American automotive and truck markets were down again, with trucks especially hard-hit. European automotive market sales were up, offset by a slight drop in European truck sales. The European automotive aftermarket sales volume was also up from 2000.

Sales for 2001 were up 1.8%, from MSEK 3,504 ($342.6 million) in 2000 to MSEK 3,575 ($349.6 million) this year. As operating margin fell to only 1.5% this year, however, operating income plummeted to MSEK 53 ($5.2 million), down from MSEK 119 ($11.6 million) a year ago when operating margin was 3.4%.

Production cuts through the year have reached 20%, as C-R continues to be strongly affected by the poor conditions across its primary markets, the North American automotive and truck sectors.

Sales of MSEK 4,689 ($458.5 million), down from MSEK 4,710 ($460.5 million) in 2000. Operating margin was 6.3%, down from 8.3% in 2000.

Sales were MSEK 11,259 ($1.1 billion), up from MSEK 10,199 ($997.2 million) last year. Profits were MSEK 906 ($88.6 million), up from MSEK 745 ($72.8 million). Operating margin rose to 8% this year from 7.3% in 2000.

Sales grew slightly, to MSEK 2,312 ($226 million) from MSEK 2,297 ($224.6 million) in 2000. Actual production volume dropped, however, creating operating losses of MSEK 33 ($3.2 million), as opposed to an MSEK 11 ($1.0 million) profit in 2000. The already-thin operating margin of 0.5% in 2000 slid to -1.4% for 2001. Steel Division cut 57 jobs in this past quarter.

Sales rose to MSEK 3,047 ($297.9 million) from MSEK 2,773 ($271.1 million) in 2000. Operating margin was 6.5%, off slightly from 7.4% in 2000.

SKF warned the outlook for coming months is uncertain, but indications are that the overall drop in volume will continue. SKF further indicated it will cut production over the coming months, but not by how much or in which divisions, saying only, "the risk for a deeper downturn in market demand for the next quarters has now increased."