SKF First-quarter report 2001

SKF First-quarter report 2001 Another good quarter The SKF Group reports a profit before taxes of MSEK 791 (770). Excluding non-recurring items the figure is MSEK 791 (670), up 18%. Market demand for SKF's products and services in Europe continued to grow during the first quarter of 2001. Demand declined further in North America. Total demand from the Asian region remained unchanged. The overall demand for the Group is expected to remain fairly flat for the second quarter. The production rate was adapted to correspond to market demand. The number of employees was reduced by 631 during the quarter, the cutbacks being made mainly in North America. * Operating profit for the first quarter was MSEK 908 (938), excluding non-recurring items, MSEK 908 (838). * The operating margin for the SKF Group for the first quarter of 2001 amounted to 8.3% (9.5) Excluding non-recurring items, the margin was 8.3% ( 8.5). * Cash flow after investments before financing amounted to MSEK 497 (410). * Net sales amounted to MSEK 10 906 (9 822), an increase of 11.0% compared with the figure for the corresponding period in 2000. * The increase in net sales was attributable to: structure +0.3%, volume +1.1%, price/mix +1.9% and currency effect +7.7%. * Net profit amounted to MSEK 562 (497) and earnings per share after tax amounted to SEK 4.94 (4.37). The Group's financial net for the first quarter was MSEK -117 (-168). Additions to tangible assets totalled MSEK 339 (249). At the end of March, the Group's inventories amounted to 23.7% (23.7) of annual sales. Group solvency was 38.7% (34.1). Return on capital employed for the 12- month period ended March 31 was 15.8% (13.1). Return on equity was 15.6% (12.8). The registered number of employees was 39 770 (40 672). As a consequence of the flow of foreign funds and translation gains, it is estimated that changes in the exchange rate have had a positive effect on SKF's profit before taxes to the amount of MSEK 100 for the first quarter of 2001 compared with the corresponding period in 2000. Sale of fixed assets, primarily real estate, resulted in a non-recurring profit of MSEK 80 during the quarter. The same amount has been set aside to finance restructuring measures during the year. SKF's long-term credit rating was upgraded by Moody's Investors Service to Baa1 from Baa2 during the quarter. Moody's rating has taken into account SKF's improved performance regarding profits, cash flow and debt reduction. During the quarter the Group signed a letter of intent with EDS regarding transfer of SKF's IT Services with some 700 employees to EDS. The purpose of the partnership is to speed up IT development, improve efficiency and reduce costs for SKF. Divisions The result by Division is based on SKF management reporting. As from the first quarter of 2001, the result of "Aerospace and other businesses" is reported separately. It includes the manufacture of bearings, seals and components for the Aerospace industry. The forging operations in Germany and Italy, that were previously part of the Steel Division, are also included. There have also been some other smaller changes made in the divisional structure for 2001. Previously published amounts have been restated to conform to current Group structure. The Industrial Division's external sales amounted to MSEK 2 579 (2 197), an increase of 17.4%. Total sales for the quarter were MSEK 4 128 (3 483). The operating result for the first quarter amounted to MSEK 412 (389), resulting in an operating margin of 10.0% (11.2) on total sales including internal deliveries. Sales in Europe, the Division's largest market, continued to be strong during the quarter. In North America, sales weakened somewhat, but showed signs of picking up in Asia. SKF's new generation of a compact tapered roller bearing unit for railways was chosen by Siemens for the main part of their new train concept DESIRO. SKF's CARB® bearing has become the standard solution in the world's continuous slab-casting machines for steel production. The three leading suppliers of continuous casting equipment in the world have incorporated the SKF bearing solutions with CARB® and Explorer bearings in their products and a large number of steel mills are upgrading their existing machinery to take advantage of this new SKF technology. The Automotive Division's external sales amounted to MSEK 2 486 (2 320), an increase of 7.2%. Total sales for the quarter were MSEK 2 890 (2 565). The operating result for the first quarter amounted to MSEK 98 (110), resulting in an operating margin of 3.4% (4.3) on total sales including internal deliveries. Sales to the car and light truck segment was good in Europe but continued to fall in North America. Sales to the truck segment in Europe started to weaken and fell even further in North America. A new car concept, developed by SKF and Bertone, was unveiled at the Geneva Motor Show. The new car, called FILO (Italian for 'wire') contains new, technically sophisticated products developed by SKF. Steering, brakes, gear change and clutch are all controlled by SKF's by- wire technology. At the heart of each system there is an SKF smart electro-mechanical actuating unit under intelligent control. Signals from the driver's control unit are interpreted by logic systems developed by SKF that ensure appropriate behaviour from the individual by-wire systems. In Brazil SKF and Timken have established a jointly owned, stand-alone company for the manufacturing of forged and turned steel rings for bearings. SKF, Tenneco Automotive, TRW and Valeo have initiated studies to create a strategic alliance for the provision of enhanced services for their European automotive aftermarket customers. The Electrical Division's external sales amounted to MSEK 451 (404), an increase of 11.6%. Total sales for the quarter were MSEK 1 601 (1 580). The operating result for the first quarter amounted to MSEK 107 (106), resulting in an operating margin of 6.7% (6.7) on total sales including internal deliveries. Sales in Europe remained unchanged during the quarter. In Asia sales were strong, in particular to the two-wheeler segment. The Service Division's external sales amounted to MSEK 3 311 (2 930), an increase of 13.0%. Total sales for the quarter were MSEK 3 704 (3 176). The operating result for the first quarter amounted to MSEK 269 (206), resulting in an operating margin of 7.3% (6.5) on total sales including internal deliveries. Sales in Europe strengthened during the quarter. In North America sales were significantly affected by the economic downturn. Sales in Asia and Latin America were flat. To enhance and speed up the e-business implementation in the aftermarket in Europe and North America, SKF, Rockwell Automation, INA, Timken and Sandvik announced an agreement to provide web-based services and integrated logistics. The ownership of SKF Endorsia.com International AB - owner of endorsia.comtm - is shared equally by the five companies. In USA a new company, equally owned by SKF, Rockwell Automation, INA and Timken, was established, which acquired both the portal PTplace.com, and the shared logistics operations of Rockwell and SKF in the USA. The Seals Division's external sales totalled MSEK 989 (1 026), a decrease of 3.6%. Total sales for the quarter were MSEK 1 160 (1 198) Operating result for the first quarter amounted to MSEK 9 (35), resulting in an operating margin of 0.8% (2.9) on total sales including internal deliveries. Some 70% of the Division's sales go to the US market and the main part is automotive related. The sharp decrease in car and truck manufacturing in North America has had a negative impact on the Division's sales and profit development. Excluding the currency effect, sales dropped some 15% compared to the first quarter 2000. The Division's manufacturing has been reduced to adapt to the lower demand, and so has the workforce. During the first quarter the number of employees was reduced by 280. Aerospace and other businesses reported external sales of MSEK 572 (496), an increase of 15.3%. Total sales for the quarter were MSEK 1 046 (994). The operating result for the first quarter amounted to MSEK 72 (67), resulting in an operating margin of 6.9% (6.7) on total sales including internal deliveries. Sales to the aerospace industry were strong during the quarter. The main customers, both for bearings, seals and airframe components continued to increase their manufacturing levels. The Steel Division's external sales amounted to MSEK 496 (449), an increase of 10.5%. Total sales for the quarter were MSEK 858 (810). The operating result for the first quarter amounted to MSEK -9 (22), resulting in an operating margin of -1.0% (2.7) on total sales including internal deliveries. The sales of steel products remained flat over the quarter in Europe, but fell in the USA. The organizational changes described under the heading 'Divisions' have been made to enable the Steel Division to concentrate on increasing the profit in the Swedish steel business. Göteborg, April 24, 2001 Aktiebolaget SKF (publ.) Sune Carlsson President and CEO Enclosures: Consolidated financial information Consolidated balance sheets Consolidated statements of cash flow Consolidated financial information - yearly and quarterly comparisons (Group and Divisions) The accounting principles and methods of calculation are those described in Note 1 in the Annual Report 2000. The quarterly report has not been audited by the Company's auditors. The SKF Half-year report 2001 will be published on Tuesday, July 17, 2001. Further information can be obtained from: Lars G Malmer, Group Communication, tel +46-31-3371541, +46-705-371541, e-mail: lars.g.malmer@skf.com Marita Björk, Investor Relations, tel +46-31-3371994, +46-705-181994, e- mail: marita.bjork@skf.com Aktiebolaget SKF, SE-415 50 Göteborg, Sweden, telephone +46-31-3371000, fax +46-31-3372832, www.skf.com ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/24/20010424BIT00820/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/24/20010424BIT00820/bit0002.pdf The full report