SKF AB (Sweden; Stockholm: SKFB; 5251R9N7) posted strong first quarter 2010 profit, on nearly flat sales but higher manufacturing levels. The automotive sector also proved surprisingly strong, although that hurt the sales mix's overall profitability.

Sales for the quarter were SEK 14,849 million (USD $1.9 billion), essentially flat from first quarter 2009.

However, Operating Profit rose to SEK 1,702 ($226 Million) at 11.8% margin, from just SEK 768 million ($102 million) at 5.2% margin.

Net profit also shot up, to SEK 1,070 ($142 million) from just SEK 394 million ($52 million) a year ago.

The improved results were due to SKF's ability to ramp up its manufacturing during this recent quarter, better absorbing costs across that larger output.

Tom Johnstone, SKF President and CEO, explained the results: "SKF delivered a very strong result in the quarter with better volume and higher manufacturing levels, resulting in an operating margin of 11.8%.Demand developed positively during the quarter particularly within the automotive business, which adversely affected our price/mix. We saw a very positive development of our business in Asia and Latin America and some improvement in North America. However, Europe still remains weak if we exclude our automotive business."

He went on to give a positive outlook for 2010: "Going forward into the second quarter we expect demand to be significantly higher than the same quarter last year and slightly higher sequentially. As a result of this demand picture, we increased our manufacturing as the first quarter progressed, which gave a good effect on our cost absorption, particularly in March. We will keep this manufacturing level during the second quarter."

Geographically, SKF expects demand to be significantly higher in the second quarter, led by Asia and Latin America. Both Europe and North America are expected to be somewhat higher. By sector, it expects slightly higher demand for the Industrial Division, and significantly stronger demand from the value-added Service Division and from the Automotive Division.