SKF - Half-year report 1999

Press release SKF - Half-year report 1999 SKF's improvement continues SKF's profit improvement continues. Operating margin for the first half-year of 1999 amounted to 5.3% and in the second quarter to 5.5%. Profit improvement, compared to the first quarter, comes from internal cost reductions, increased efficiency as well as from a more favourable price/mix development. SKF reported a strong cash flow after investments before financing for the first six months of the year. It amounted to MSEK 845 (-697). Sales volumes continued to weaken during the second quarter. There are no signs yet of improved market demand from the Group's main markets, except from Asia, where the improvements continue. e SKF Group's consolidated profit after financial income and expense for the first half-year 1999 totalled MSEK 618 compared with MSEK 817 in the corresponding period of 1998. Profit in the second quarter was MSEK 345 (351). The Group's operating profit in the first half of 1999 amounted to MSEK 1 003 (1 308). Operating profit in the second quarter of 1999 was MSEK 527 (630). The Group's net sales declined 1.3% during the first six months of 1999 from MSEK 19 171 to MSEK 18 920. Net sales during the second quarter totalled MSEK 9 612 (9 695). The decrease in net sales was attributable to volume -5.5%; price/mix +0.5% and currency effect +3.5%. Net profit for the Group amounted to MSEK 375 (491) and earnings per share after tax amounted to SEK 3.30 (4.30). The SKF Group's financial net for the first half 1999 was MSEK -385 (-491). Additions to tangible assets totalled MSEK 582 (991). At the end of June, the Group's inventories amounted to 25.3% (28.6) of annual sales. The return on capital employed during the twelve-month period ended June 30 was -4.1% (11.7). The return on shareholders' equity was -15.3 % (11.4). Group solvency was 29% (32.9). The average number of employees was 41 886 (44 985) and the registered number of employees was 42 264 (46 407). Programmes according to plan The implementation of the comprehensive cost cutting programme and the restructuring programme is running according to plan. During the second quarter of 1999, a further 2 100 employees left the Group. This means that 3 200 employees have left the Group this year. During the first half of 1999, SKF sold its textile machinery components business in Germany and Singapore; its tapered bearing manufacturing operations in Glasgow, KY, USA, and, in early July, the forging operation in Arvika, Sweden. The Group also announced during the second quarter its intention to investigate the feasibility of a joint venture with the US chrome steel ball manufacturer NN Ball & Roller Inc. and the German bearing company FAG Kugelfischer Georg Schäfer AG, for the manufacturing and sale of chrome steel balls in Europe. Such a joint venture would enhance competitiveness in both cost and quality. Bearings Operating profit for rolling bearings for the first half of 1999 amounted to MSEK 813 (1 019) and total sales to MSEK 16 018 (16 356). Second quarter operating profit amounted to MSEK 485 (477) on net sales of MSEK 8 035 (8 255). The Industrial Division's external sales were MSEK 4 204 (4 152). Sales during the second quarter were MSEK 2 078 (2 087). Sales continued to weaken during the second quarter. The heavy industry sector as well as the manufacturing industry in Western Europe and the US have not yet recovered. The Automotive Division's external sales were MSEK 4 420 (4 433). Sales for the second quarter totalled MSEK 2 268 (2 290). Demand from the car/light truck manufacturers in Europe and the US is still on a high level. SKF sales in the US showed a good growth. However, in Europe the customer mix is not to SKF's advantage. The heavy truck industry is still strong in the US. Western Europe is holding up but SKF sales are somewhat weaker due to the exiting of unprofitable businesses. The Electrical Division's external sales were MSEK 800 (853). Sales for the second quarter reached MSEK 394 (416). The negative sales trend from the first quarter of the year continued during the second quarter. Demand is still weak in both the Western European and US markets. The Service Division's external sales were MSEK 5 626 (5 788). The sales for the second quarter reached MSEK 2 878 (2 916). The destocking in the distribution channels in Western Europe and USA is still having a negative impact on Group sales and profits. The growth in sales in Asia, that started during the first quarter 1999, also continued to improve during the second quarter. The demand for bearings continues, however, to be weak in Latin America, The Middle East and Africa. Also, in Central and Eastern Europe, the demand continues to be weak, mainly due to the economic and political unrest in the region. Seals Operating profit for seals for the first six months of 1999 was MSEK 96 (152) and total sales were MSEK 2 237 (2 083). Profit and sales for the second quarter were MSEK 27 (73) and MSEK 1 229 (1 069) respectively. The Seals Division is making a major restructuring in the US this year. The results are depressed by high costs and internal disturbances, which have affected the delivery performance, specially to the aftermarket. In Europe, the declining market demand resulted in lower profits. Steel Operating profit for the Steel Division for the first half 1999 reached MSEK 25 (179) on sales of MSEK 2 194 (2 638). Profit and sales for the second quarter were MSEK 3 (81) and MSEK 1 069 (1 287) respectively. Sales are still negatively affected by the low demand for bearing steel and components. Destocking in the marketplace as well as lower production to reduce inventories have contributed to the low sales figures. Ovako Steel has increased its market share as supplier to bearing manufacturers, other than SKF, both in Europe and the US. This development will start to give results towards the end of this year. The forging unit in Arvika, Sweden, was sold in July. Parent Company Profit after financial income and expense of the Parent Company in the first half of 1999 amounted to MSEK 484 (220). The Company had no net sales. Investments amounted to MSEK 2 (11). As of June 30, short-term financial assets amounted to MSEK 2 (3), a decline of MSEK 3 since January 1. The average number of employees was 135 (156). Göteborg, July 15, 1999 Aktiebolaget SKF (publ.) Sune Carlsson President Enclosures: Consolidated financial information Consolidated balance sheets Consolidated statements of cash flow Consolidated financial information - yearly and quarterly comparisons This report has not been audited by the Company's auditors. The report on SKF's earnings for the first nine months of 1999 will be published on Tuesday, October 19, 1999. For further information please contact: Lars G Malmer, SKF Group Communication, tel +46-705-371541, e-mail: Lars.G.Malmer@skf.com Aktiebolaget SKF, SE-415 50 Göteborg, Sweden tel +46-31-3371000, fax +46-31-3372832, www.skf.com Enclosure 1 CONSOLIDATED FINANCIAL INFORMATION (MSEK unless otherwise stated) Jan-June 1999 Jan-June 1998 MSEK % MSEK % Net sales 18 920 100.0 19 171 100.0 Cost of goods sold -14 899 -78.7 -14 482 -75.5 Gross profit 4 021 21.3 4 689 24.5 Selling and administrative expenses -3 091 -16.3 -3 340 -17.4 Other operating income/expense - net 73 0.3 -34 -0.3 Result of associated companies - - -7 - Operating profit 1 003 5.3 1 308 6.8 Financial income and expense - net -385 -2.0 -491 -2.6 Profit after financial income and expense 618 3.3 817 4.2 Taxes -242 -1.3 -367 -1.9 Profit after taxes 376 2.0 450 2.3 Minority interest -1 - 41 0.3 Net profit for the period 375 2.0 491 2.6 Earnings per share after tax, SEK 3.30 4.30 Number of shares 113 837 113 837 767 767 Additions to tangible assets 582 991 Number of employees registered 42 264 46 407 Return on capital employed for the -4.1 11.7 12-month period ended June 30, % Enclosure 2 CONSOLIDATED BALANCE SHEETS (MSEK) June 1999 Dec 1998 Intangible assets 2 144 2 239 Tangible assets 13 807 14 568 Investments and long-term financial assets 1 113 1 084 Total capital assets 17 064 17 891 Inventories 9 460 10 183 Short-term assets 9 678 8 588 Short-term financial assets 2 370 2 353 Total short-term assets 21 508 21 124 TOTAL ASSETS 38 572 39 015 Shareholders' equity 10 809 10 932 Provisions for pensions and other postretirement benefits 6 480 7 139 Provisions for taxes 1 522 1 488 Other provisions 3 752 4 095 Total provisions 11 754 12 722 Long-term loans 4 856 4 842 Other long-term liabilities, including minority interest 475 455 Total long-term liabilities 5 331 5 297 Short-term loans 3 114 3 337 Other short-term liabilities 7 564 6 727 Total short-term liabilities 10 678 10 064 TOTAL EQUITY, PROVISIONS´AND LIABILITIES 38 572 39 015 Enclosure 3 CONSOLIDATED STATEMENTS OF CASH FLOW (MSEK) Jan-June 1999 Jan-June 1998 Profit after financial income and expense 618 817 Depreciation on tangible assets and 881 809 goodwill amortization Net gain/loss on sales of tangible assets -37 15 Taxes -176 -195 Changes in working capital -95 -923 Cash flow from operations 1 191 523 Investments in tangible assets and -584 -1 238 businesses Sales of tangible assets and businesses 238 18 Cash flow after investments before 845 -697 financing Change in loans -138 -176 Change in other long-term assets, -437 34 liabilities and provisions - net Cash dividends, AB SKF shareholders -228 -598 Cash effect on short-term financial assets 42 -1 437 Change in short-term financial assets December 31 2 353 3 931 Cash effect 42 -1 437 Exchange rate effect -25 -2 June 30 2 370 2 492 Change in net interest-bearing liabilities Opening Net Change in Exchange Closing cash rate balance loans/asset effect balance effect, s ytd Loans, long- and 8 179 -138 -71 7 970 short-term Provisions for 7 139 -412 -247 6 480 pensions Financial assets, long- -884 -11 -20 -915 term short- -2 353 -42 25 -2 370 term Net interest- 12 081 -42 -561 -313 11 165 bearing liabilities Enclosure 4 CONSOLIDATED FINANCIAL INFORMATION - QUARTERLY COMPARISONS (MSEK unless otherwise stated) Full year Full year GROUP 1997 1/98 2/98 3/98 4/98 1998 1/99 2/99 Net sales 36 922 9 476 9 695 9 075 9 442 37 688 9 308 9 612 Operating 2 949 678 630 -706 -1 601 -999 476 527 profit/loss Profit/ loss after financial income 2 106 466 351 -1 064 -1 816 -2 063 273 345 and expense Earnings/ loss per share after tax, 13.70 2.30 2.00 -8.05 -10.65 -14.40 1.60 1.70 SEK Additions 2 664 496 495 574 583 2 148 262 320 to tangible assets BUSINESS AREAS Total sales Bearings* 31 807 8 101 8 255 7 773 8 121 32 250 7 983 8 035 Seals 3 779 1 014 1 069 1 009 1 037 4 129 1 008 1 229 Steel* 4 747 1 351 1 287 1 053 1 079 4 770 1 125 1 069 Operating profit/loss Bearings* 2 281 542 477 -590 -1 491 -1 062 328 485 Seals 377 79 73 -31 -56 65 69 27 Steel* 338 98 81 -57 -140 -18 22 3 Invested capital Bearings* 21 858 22 739 23 217 23 372 23 079 23 079 22 22 319 401 Seals 2 456 2 566 2 611 2 633 2 775 2 775 2 841 2 932 Steel* 3 083 3 262 3 285 3 243 3 169 3 169 3 191 3 027 KEY FIGURES Net worth 111 112 110 103 96 96 95 95 per share, SEK Solvency, % 33.5 33.7 32.9 31.2 29.0 29.0 29.2 29.0 Return on 13.0 12.6 11.7 6.5 -2.8 -2.8 -3.6 -4.1 capital employed for the 12-month period ended June 30, % * Previously published amounts have been restated to conform to the current Group structure. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/07/15/19990715BIT00090/bit0001.doc http://www.bit.se/bitonline/1999/07/15/19990715BIT00090/bit0002.pdf