|
|
|
|
|
|
The eBearing News
July 14, 2003
SKF Reports Second Quarter 2003 Results
copyright © 2003 eBearing Inc.
SKF AB (Sweden) reported second quarter 2003 operating results, dragged down by
continuing weakness in North American markets.
SKF, the world's largest bearing manufacturer, failed to meet analyst expectations
even though the company stayed cash flow positive and maintained a 9% operating margin.
The company reported second quarter sales of SEK 10.53 billion (USD $1.30 billion), down
5% from SEK 11.05 billion ($1.36 billion) in 2002.
Overall sales, calculated in local currencies, were considerably higher in the Asian region and
somewhat higher in Europe. However, that growth was more than offset by a general downturn in North
American sales and volatile exchange rates.
Broken down, SKF attributed the change in sales to: structure: 0.1%, volume: 3.2%, price/mix: 0.6%,
and currency effect: -8.6%. Exchange rates had a negative effect of approximately SEK 250 million
on profits, or a -1.5% hit to the company's operating margin.
Second quarter profits were also hurt, reflecting a drop in operating profit to 9.0% from 9.5%
a year ago. Operating profit was SEK 945 million ($117 million), down from 1.05 billion ($130 million).
Net profit for the quarter was SEK 569 million, down sharply from SEK 636 million earned in 2002.
As sales fell, inventory as a percent of sales crept up -- even as SKF cut second quarter production
schedules in an attempt to keep them in balance. Inventory rose to 21.9% of sales, up from 20.5% in 2002.
SKF's target inventory is 20.0% of annual sales, or five inventory turns.
Over the past year, SKF has managed to keep its payroll under control, even as a continuing string of
acquisitions brought more than 1,400 new employees into the company. At the end of the second quarter,
SKF employed 38,821 people, down from 39,926 at the end of second quarter 2002.
Outlook - acquisitions and further production cuts
During this third quarter 2003, SKF said it does not expect to see any broad strength develop in its
markets. In fact, the company indicated a second consecutive quarter of manufacturing cutbacks
is coming: "Manufacturing will be reduced during the quarter in order to continue the reduction of inventory
levels."
Tom Johnstone, the company's recently-appointed CEO, said, "We cut back production by five percent during
the second quarter and we will reduce by a little bit more than that in the third quarter."
Even as market projections remain lackluster, SKF plans to continue leveraging its financial
strength and market position to make strategic acquisitions. eBearing has been told by a number of
sources within the company that it is particularly alert for opportunities in Asia and eastern Europe.
Industrial Division
External sales were up 1%, while operating margin fell to 8.9% from 10.7%. The division's operating
result dropped to SEK 352 million from SEK 422 million in 2002.
The division reported sales in Europe were flat from 2002, up slightly in North America and up
strongly in the Asian region.
Automotive Division
External sales were off 5.2%, to SEK 3.4 billion, while operating margin dipped to 4.7% from 5.0% in 2002.
The operating result fell to SEK 178 million from SEK 197 million.
Sales of bearings and seals to automotive and light truck manufacturers were higher in Europe and
North America during the quarter than 2002. Heavy truck manufacturer sales were higher in Europe,
but demand in North America was "significantly" lower.
Aftermarket sales were higher across the board.
Electrical Division
External sales were SEK 459 million, down 9% from 2002's MSEK 504 million. The drop resulted in
operating results falling to only SEK 83 million from SEK 109 million a year ago. Operating margin
also fell sharply, to 5.1% from 6.2%.
SKF said sales were flat in the Asian region and down sharply in Europe.
Service Division
External sales dropped 7.8%, to SEK 3.2 billion from SEK 3.5 billion in 2002. Operating margins slipped
to 9.1% from 9.4% last year, producing operating results of SEK 325 million, down from
SEK 361 million.
Sales in the Asian region were significantly higher than 2002, while Latin America, Central Europe
and Eastern Europe sales were also up. Sales in Europe were lower, and North America was down
significantly.
Aero and Steel Division
Results for Aero and Steel continue to disappoint, with external sales falling almost 3% to
SEK 937 million from SEK 962 million in 2002. The division's already-slim operating margin, however,
fell by more than half, to only 1.6% from 3.9%. The operating results of SEK 25 million reflect
those factors, marking a sharp drop from the SEK 63 million recorded in 2002.
SKF said higher raw materials and energy costs were largely to blame for the
disappointing results, compounded by negative currency effects. Sales to the aerospace industry were
down, although orders for future delivery of Airbus A380 components were received.
Ovako Steel reporting increased external sales of SEK 462 million from SEK 427 million a year ago,
while overall sales dropped to SEK 783 million from SEK 789 million. Net operating results for Ovako
reflect the higher raw materials and energy costs, falling to a loss of SEK 25 million from a
2002 operating profit of SEK 12 million.
|
|
|
printer-friendly version
|
|
- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
|
|
eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
|
|
|
|
|
| |
eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
|
|
|
