New SKF boss makes mark with move to cut 1,500 jobs
Resource from: Reuters Likes:211
Jan 29,2015
STOCKHOLM (Reuters) - SKF , the world's biggest bearings maker, is to cut about 1,500 staff as its new boss, only weeks into his job, takes action to rein in costs across the Swedish company, sending its shares up nearly 4 percent.
SKF, whose bearings are found in products ranging from skateboards to wind turbines, said on Wednesday the brunt of the staff cuts would be carried out this year and yield 1.2 billion crowns of savings by the end of next year.
The cutbacks are a sign that new chief executive Alrik Danielson, who took over at the turn of the year, is tackling some of the challenges facing SKF as a result of tough competition in low-growth markets.
SKF forecast flat demand in the first quarter after reporting adjusted fourth-quarter operating profit of 2.1 billion crowns (169 million pounds) up from 1.8 billion a year ago, in line with a mean forecast in a Reuters poll of analysts.
Gothenburg-based SKF, a rival of Germany's Schaeffler AG [SCHFN.UL] and U.S. manufacturer Timken , said it expected flat demand in Europe and Latin America but a slight upturn in North America and Asia.
"The earnings are basically as expected, but then there are new actions on cost, which is just what the market wants to see," said Peder Frolen at Handelsbanken, which has a "reduce" recommendation on SKF's stock.
Danielson faces the challenge of meeting a 15 percent margin target and has to decide whether to remain committed to SKF's automotive business, which has long lagged the group in profitability.
"If you look at the overall profitability of the automotive business it's below our expectations and what we want it to be," Danielson told a news conference. "So we have initiated a review under my tenure now to look at the business portfolio to see how we can drive productivity."
The company's adjusted operating margin was 11.2 percent in the fourth quarter versus 11.0 percent a year ago and 11.5 percent expected by analysts. SKF Automotive reported a margin of 1.2 percent in the same period.
SKF is benefiting from a weaker Swedish crown which has fallen 5 percent in trade weighted terms <.TCW> and more than 20 percent against the dollar over the past six months.
But SKF said that the short-term effects of the very low mineral and oil prices as well as the stronger dollar were difficult to predict.
SKF's shares are up more than 30 percent from a trough in October on the sliding crown and upbeat expectations for its new CEO. They were up 3.0 percent by 1:30 p.m.
(Reporting by Niklas Pollard and Johannes Hellstrom; Editing by Alistair Scrutton and Jane Merriman)
(Reuters)
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