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SKF Delivers Profits Amid Restructuring Efforts

SKF’s Falconer plant has made it through the latest round of the company’s restructuring unscathed.

But the company’s regionalization efforts will continue this year, according to company officials who spoke during a recent conference call with investor analysts.

SKF officials announced fourth quarter net sales of 24,438,000 crowns, a decrease of 1.9% from the fourth quarter of 2023, though the company recorded fourth quarter profits of 2,929,000 crowns, an increase of 12% from the fourth quarter of 2023. Full-year 2023 sales of 103,881,000 crowns were a 3.7% increase from 2022 net sales while operating profits were 12,977,000 crowns, an increase of 12.5% from 2022. SKF officials are anticipating a single-digit organic sales decline in the first quarter of 2024 that will likely continue throughout the year.

“This was a year where we diligently executed in our strategy to further strengthen us as a company,” said Rickard Gustafson, SKF president and CEO. “The ongoing transformation has made us more resilient and competitive, both in the first half of the year with strong demand, as well as in the weaker demand environment that we faced in the second half of the year. I am very happy to conclude that this is also reflected in our 2023 full year results.”

SKF cut more than 1,000 positions across the company in 2023 as part of a company-wide restructuring that included the opening inauguration of a factory in Monterrey, Mexico, and the announced closings of SKF factories in Luton, U.K., and Busan, Korea, while restructuring operations in Schweinfurt, Germany.

One investor analyst asked if there will be more plant closings in 2024 given that SKF has a history of closing plants regularly and the company’s push toward regionalizing its supply chains. Niclas Rosenslew, SKF CFO, said 2023 was a higher one-off cost for plant closures than a typical year as SKF began its SEK2 billion program. The 2023 financial year included about half of the $2 billion restructuring.

“So, I would say that, in that sense, 2023 was exceptionally high when it comes to IAC, very much as Rickard commented earlier,” Rosenslew said. “Yes, we do have an ambition and a plan, and we will continue with our footprint activities, regionalization. We don’t see it that one should assume that we continue from here to eternity. We had a very good level of activity, exceptionally good level of activity in 2023. Let’s see what it turns out to be in 2024. But therefore, we very much view these as, in that sense, restructuring activities, not something that goes on for the rest of the future.”

SKF’s Falconer facility is part of SKF’s Aerospace Division, an area that has seen some restructuring that was noted in the recent conference call. Gustafson said among SKF’s targeted high-growth segments, it performed well in railway, industrial distribution and aerospace. Railway and aerospace each grew by about 20%, he said.

Some of that improved margin is from restructuring efforts in the division that took place in the past year as SKF figures out which parts of its Aerospace Division should remain part of SKF and which should be sold.

“But we also work, to your question, strategically on our portfolio. The one that we have highlighted and been very transparent about is the strategic review on aerospace and our conclusion of that strategic review, and that we now are embarking actually delivering on finding a home for some of those assets that was not deemed as core to us. So, that work is ongoing,” Gustafson said. “And then do we have others? The answer is, yes, we do work. We do constantly look into our portfolio. We do think about how can we further enhance or reposition it also strategically. As of today, I have no information to share in that regard, but you can rest assured that it’s something that we work on. And potentially, maybe at some point in the future, we have concluded something and then we’ll be delighted to share it broadly with you.”

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