SKF Nine-month report 2019
Alrik Danielson, President and CEO:
“SKF has managed the business well in a weakening economic environment and our efforts to reduce costs are contributing to a strong and stable operating margin in the quarter with an underlying margin of 11.3%. We had higher realized cost savings than cost increases, resulting in a positive net contribution to operating profit in the quarter.
Cash flow was SEK 2,120 million (SEK 1,626) – a strong performance, highlighting our ability to generate a strong cash flow, even in periods of a weaker demand.
Restructuring costs and customer settlements had a negative impact on operating profit of SEK 272 million. A VAT credit in Brazil had a positive impact of SEK 180 million. The reported operating profit for the quarter was SEK 2,288 million and the reported operating margin was 10.9% (12.2%).
As expected, we saw a decline in organic sales of 3% compared to last year, with net sales of SEK 21 billion. Sales were relatively unchanged in Asia, slightly lower in Europe, significantly lower in North America and slightly higher in Latin America.
The industrial business had yet another strong quarter with an underlying operating margin of 14.1% with a negative organic growth of 1.4% (+9.2%). Sales in Europe and Latin America were relatively unchanged, significantly lower in North America, but increased in Asia. The reported operating margin of 14.7% (14.3%), was impacted negatively by restructuring costs and positively by a VAT credit.
The automotive business had an underlying operating margin of 4.3%. Organic growth was negative 7.0% (+1.7%) with significantly lower sales volumes in North America and Asia, lower sales volumes in Europe and significantly higher sales in Latin America. The reported operating margin of 1.1% (6.8%), was impacted negatively by costs related to customer settlements and restructuring.
We recently acquired Presenso, a developer of AI driven industrial analytics, to further strengthen our Rotating Equipment Performance offer. We continue to focus on developing our fee- and performance-based business, with customer wins in a number of markets. We also continue to increase the proportion of region-for-region manufacturing in the Group, with volumes being moved from our factory in Luton, UK to Nilai, Malaysia. Recently we successfully launched our Vehicle aftermarket eShop in Germany which will bring us closer to automotive end customers in the largest market in Europe.
In the fourth quarter of 2019, we expect to see lower volumes for the Group, slightly lower for Industrial and lower for Automotive.”
| Key figures, SEKm | Q3 2019 | Q3 2018 | Jan-Sep 2019 | Jan-Sep 2018 |
| Net sales | 21,093 | 21,341 | 64,805 | 64,521 |
| Operating profit* | 2,288 | 2,597 | 7,485 | 8,147 |
| Operating margin*, % | 10.9 | 12.2 | 11.5 | 12.6 |
| Profit before taxes | 2,044 | 2,344 | 6,747 | 7,552 |
| Net cash flow after investments before financing | 2,120 | 1,626 | 4,252 | 4,067 |
| Basic earnings per share | 2.84 | 3.35 | 9.93 | 11.37 |
*including restructuring and impairments
| Net sales change y-o-y, %, Q3 | Organic | Structure | Currency | Total |
| SKF Group | -3.0 | -2.6 | 4.2 | -1.4 |
| Industrial | -1.4 | -3.8 | 4.5 | -0.7 |
| Automotive | -7.0 | 0.2 | 3.6 | -3.2 |
| Net sales change y-o-y, %, Jan-Sep 2019 | Organic | Structure | Currency | Total |
| SKF Group | -1.5 | -2.6 | 4.5 | 0.4 |
| Industrial | 0.6 | -3.7 | 4.8 | 1.7 |
| Automotive | -6.6 | 0.1 | 4.0 | -2.5 |
| Organic sales change in local currencies, per region y-o-y, %, Q3 | Europe | North America | Latin America | Asia | Middle East & Africa |
| SKF Group | -2.9 | -11.4 | 3.8 | 0.8 | 13.4 |
| Industrial | +/- | --- | +/- | ++ | +++ |
| Automotive | -- | --- | +++ | --- | +++ |
| Organic sales change in local currencies, per region y-o-y, %, Jan-Sep 2019 | Europe | North America | Latin America | Asia |
(https://www.skf.com/)
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