SKF Looks To Ride Out Storm

Rickard Gustafson, president and CEO of SKF, is pictured.

Net sales and net profits are down in the first quarter at SKF as the company continues to go through a restructuring process.

Sales decreased from $26,549,000 in the first quarter of 2023 to $24,699,000 in the first quarter of 2024 while SKF’s operating margin decreased from 12.7% to 12.1%. Profit before taxes was $2,942,000 in the first quarter of 2023 compared to $2,277,000 in the first quarter of 2024.

Looking into the second quarter of 2024, SKF officials expect a mid single-digit organic sales decline. That decline is expected to continue at about the same pace throughout the rest of 2024.

“Moving on to profitability, we delivered an adjusted operating profit of SEK3.3 billion in the first quarter. The adjusted operating margin was 13.4% compared to 13.1% last year, and this is astrong performance, not least considering the sales decline, must say that the teams have done a great job managing the business in this softer demand environment,” said Niclas Rosenlew, SKF chief financial officer.

SKF’s industrial sector, which includes Aerospace manufacturing done at the SKF plant in Falconer, maintained an adjusted operating margin above 16%, while the margin for SKF’s automotive business improved to more than 6%. Cash flow from operations was fairly normal for a first quarter, SKF officials said, at $1.8 billion. Company officials are working to reduce inventory in all business sectors and improve net working capital numbers.

One drag on SKF’s business involves China and Northeast Asia business, which Rickard Gustafson, SKF president and CEO, said saw an 11% decrease in organic growth in the first quarter of 2024 as wind turbine-related sales declined.

“We have for now a number of quarters in a row experienced a rather negative sales development in wind in China. We’re talking significant numbers,” Gustafson said. “We’re talking negative 50% or there or thereabout and we don’t really see when this is going to change and when this will end, but now into the third quarter with this development, but if we allow ourselves to exclude wind for a while, the other industries in China have a more — a very different development where we basically would have a small positive organic growth if we exclude wind from our numbers in China. Clearly, as I’ve tried to say in the conference call, we are taking actions and we’re redirecting our efforts to other growth opportunities and heavy industries to compensate for this and then of course we are continuing to work within wind. We still have a wind business and we’re ready to ramp it up once demand comes back, but right now, short term, we don’t see any change to this.”

SKF conference calls in recent quarters have included discussion of the company’s strategic initiatives to increase efficiency and reduce fixed costs. For the rest of the year, SKF plans to further optimize its supply chain and footprint, manage and restructure its portfolio and work on new innovations and products that will create future value.

To that end, SKF officials still plan to invest $5.5 billion in its properties, plants and equipment throughout the rest of the year, and Rosenlew and Gustafson both said investor analysts can expect to see further restructuring as the year goes on.

“And we are looking into this when it comes to portfolio, both from a strategic and a tactical point of view. What we did within aerospace was more in the bucket of strategic actions and the answer is yes, we are also looking into other opportunities and maybe reshaping the balance of our portfolio moving forward. I have nothing to report today, but you can rest assured that is work that is ongoing and I hope that in the not too distant future, we can share some details on what we are thinking and how we see how we’re going to evolve our portfolio in certain segments,” Rosenlew said.


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