Sweden's SKF says targets margin boost for problem child Automotive
Resource from: Reuters Likes:177
Nov 09,2015
SKF, the world's top bearings maker, said on Wednesday it targeted an 8 percent profit margin in its automotive business in the mid-term as it mapped out a turnaround plan for a unit that has long lagged the rest of the group in profitability.
The firm's automotive unit has undergone several restructuring efforts in recent years which have failed to show a marked impact on profitability and analysts have been calling for bigger structural measures, including a possible sale.
"I am convinced that we can do it," SKF Chief Executive Alrik Danielson told Reuters in an interview in connection with the Group's Capital Markets Day in Gothenburg.
SKF shares rose 3.6 percent at 1233 GMT, compared with a 1.1 percent rise in the STOXX Europe 600 Industrial Goods & Services Index.
The Automotive Market unit, which accounts for roughly a quarter of group sales, reported an adjusted operating margin of 6 percent in the first nine months of 2015, and has been running a mid-single digit margins for many years.
SKF said part of the margin improvement would come through a combination of cost cuts and a review of the product portfolio.
While the Gothenburg-based firm is the clear market leader within industrial end-markets, fierce rival Schaeffler AG of Germany is the biggest within automotive.
Schaeffler is running at double-digit margins in its auto business, but the firm has bigger sales of higher margin products like transmission systems and steering systems than SKF.
Danielson said the group's financial targets, which include a 15 percent operating margin and annual sales growth of 8 percent, would remain for now. Some analysts had speculated Danielson, at the helm since the turn of the year, would alter or remove the margin target.
"I allow myself more time on that, because if I come out with something I don't want to have to revise it later on," Danielson said.
(Reuters)
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