SKF First quarter report 2020: Continuing to deliver strong results and cash flow
Gothenburg, 23 April 2020
Alrik Danielson, President and CEO:
“We have delivered another very strong set of results, despite falling demand connected to the Covid-19 pandemic. Our cash flow generation and financial liquidity continues to be strong. We have continued to invest in innovation, optimize our operations and reduce costs.
Net sales fell organically by almost 9% to SEK 20.1 billion. Sales were 10% lower in Asia, 9% lower in Europe, 12% lower in North America and almost 4% higher in Latin America. Sales were impacted across most regions by both government- imposed closures as well as lower underlying demand.
Despite this development, the adjusted operating margin for the first quarter was very strong, at 12.8%, (12.8% last year), with an adjusted operating profit of SEK 2,572 million (2,720 last year). Cash flow was also strong, at 1,930 million (684).
The Industrial business delivered an adjusted margin of 15.5% (15.8%), despite a drop in organic sales of almost 7%.
The Automotive business, which in Europe was significantly impacted by customer closures from the middle of March, delivered an adjusted margin of 5.7%, in-line with last year’s performance, despite a fall in organic sales of over 13%.
Precautionary measures by authorities and lower overall demand is impacting many of the regions and industries in which SKF operates. This was particularly visible during the last two weeks of March when we experienced a sharp drop in sales of 25% compared to last year.
In India and Southeast Asia, for instance, our factories have been closed, in accordance with government guidelines. Some of our factories in Italy have also been closed, with exceptions for those supplying critical industries. Factories in most other countries have remained operational, albeit at a lower capacity, taking lower demand levels into account.
We continue to work diligently to ensure our sites remain safe places to work, with increased focus on personal hygiene and wellbeing. Our colleagues around the world have done a great job in continuing to keep our customers in focus, despite exceptionally challenging circumstances in many economies and societies.
We are also taking steps to mitigate the financial impact of the situation. This includes closure of sites, reducing costs and number of employees and increasing flexibility within the workforce. These are difficult but necessary steps that we need to take, in a responsible manner, to protect the business and make sure we have the foundations in place from which to emerge from this crisis as an even stronger SKF.
We are preparing the business for a range of different demand development scenarios and feel confident that we will be able to act accordingly as the situation develops. SKF has a strong financial position and has a track- record of resilient margins and strong cash flow in a downturn. With this in mind, and given the uncertainty in the current global economic situation, it is not feasible to provide a reliable demand guidance for the second quarter.”
Key figures, SEKm
|Q1 2020||Q1 2019|
|Adjusted operating profit||2,572||2,720|
|Adusted operating margin, %||12.8||12.8|
|Operating margin, %||11.3||12.5|
|Profit before taxes||1,856||2,442|
|Adjusted profit before taxes||2,160||2,504|
|Net cash flow after investments before financing||1,930||684|
|Basic earnings per share||2.75||3.77|
|Adjusted earnings per share||3.41||3.91|
Net sales change y-o-y, %
Organic sales change in local currencies, y-o-y, %
|Europe||North America||Latin America||Asia||Mid-East & Africa|
Outlook and guidance
Demand for Q2 2020 compared to Q2 2019
The industries and regions in which SKF operates are being impacted by initiatives by authorities and by SKF’s customers related to the spread of the Covid-19 virus. As a result of this significant level of uncertainty, it is not feasible to provide a reliable demand guidance for the second quarter.
Guidance Q2 2020
Financial net: SEK -250 million
Tax level excluding effect related to divested businesses: around 29%.
- Additions to property, plant and equipment: around SEK 3,300 million.
A teleconference will be held on 23 April 2020 at 08:00 (CET):
Conference ID: 2975346
International: +44 (0) 2071 928338
Sweden: +46 (0)8 566 18467
United States: +1 646 741 3167
The information in this press release is information which AB SKF is required to disclose under the EU Market Abuse Regulation (EU) No 596/2014 The information was provided by the above contact persons for publication on 23 April 2020 at 07:00.
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SKF’s mission is to be the undisputed leader in the bearing business. SKF offers solutions around the rotating shaft, including bearings, seals, lubrication, condition monitoring and maintenance services. SKF is represented in more than 130 countries and has around 17,000 distributor locations worldwide. Annual sales in 2019 were SEK 86 013 million and the number of employees was 43,360. www.skf.com
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