SKF First-quarter report for 2000

Press release SKF First-quarter Report for 2000 A strong first quarter The operating margin for the first quarter of 2000 amounted to 9.5%. With the exclusion of capital gains, the operating margin was 8.5%. The Group's new target for the operating margin is 10%. The upturn in market demand strengthened during the first quarter in most of the geographical regions and business segments. Sales volumes are expected to continue to grow this year. Production levels in the factories were raised during the first quarter and further increases are planned during the year. The SKF Group reports a profit before taxes of MSEK 770 for the first quarter of 2000, to be compared with MSEK 273 for the corresponding period in 1999. Operating profit for the first quarter was positively affected by net non- recurring earnings of MSEK 100 (80), due to sales of real estate. Operating profit for the first quarter was MSEK 938 (476) and the operating margin was 9.5%. Cash flow after investments before financing amounted to MSEK 410 (94). Net sales amounted to MSEK 9 822 (9 308), an increase of 5.5% compared with the figure for the corresponding period in 1999. The increase in net sales was attributable to: structure -1.0%, volume +7.0%, price/mix +0.2% and currency effect -0.7%. Net profit amounted to MSEK 497 (180) and earnings per share after tax amounted to SEK 4:37 (1:60). The Group's financial net for the first quarter was MSEK -168 (-203). Additions to tangible assets totalled MSEK 249 (262). At the end of March, the Group's inventories amounted to 23.7% (26.5) of annual sales. Group solvency was 34.1% (29.2). Return on capital employed for the 12-month period ended March 31 was 13.1% (-3.6). The average number of employees was 40 064 (42 704) and the registered number of employees was 40 672 (44 406) New Target The SKF Group has now set its next financial targets to be reached within a couple of years. The operating profit is to increase to MSEK 4 000 resulting in an operating margin of 10%. Earnings per share are to reach about SEK 20 and the return on capital employed is to reach 18%. To reach these targets, the Group will intensify market penetration through Internet solutions and expand into the service and maintenance market. There will also be new product generations launched and focus on customized solutions and intelligent products with built-in electronics. The Group will enhance manufacturing competitiveness by introducing flexible manufacturing for small batch production. Reporting by Division From this quarter onwards, SKF reports the following for each division: external sales, total sales, operating result, invested capital and registered number of employees. The information is based on SKF management reporting. The Industrial Division's external sales amounted to MSEK 2 162 (2 139), an increase of 1.1%. Total sales for the quarter were MSEK 3 469. Operating result for the first quarter amounted to MSEK 371, resulting in an operating margin of 10.7% on total sales including internal deliveries. Sales are increasing both in the USA and in Europe but Germany is the country with the strongest growth trend. Sales to the light industry have developed positively for some time and now also sales to the heavy industry are on the upturn. The new spherical roller bearings, Explorer, are successfully being introduced. The benefit, which is not only the longer lifetime but also the possibility to downsize the whole application, is now being exploited by customers. The Automotive Division's external sales amounted to MSEK 2 310 (2 147), an increase of 7.6%. Total sales for the quarter were MSEK 2 512. Operating result for the first quarter amounted to MSEK 124, resulting in an operating margin of 4.9% on total sales including internal deliveries. Sales increased in all segments in the European market and in the car business in North America. The truck business in North America experienced a significant decline owing to the drop in truck production. In Brazil sales continued to grow in the first quarter, but in India they remained on the same level as in 1999. In line with the Group strategy to focus on electronics and to enter into partnerships, SKF announced during the quarter a joint development agreement with Brembo, an Italian manufacturer of braking systems, for brake-by-wire solutions for high-performance vehicles. The Electrical Division's external sales amounted to MSEK 404 (406), a decrease of 0.5%. Total sales for the quarter were MSEK 1 556. Operating result for the first quarter amounted to MSEK 93, resulting in an operating margin of 6.0% on total sales including internal deliveries. The recovery for sales, which started in Asia, is now also apparent in Europe with the strongest growth being reported in Germany. In North America, sales were slow owing mainly to SKF's exiting of low performance businesses. SKF has got its first order from a leading motorcycle manufacturer for hub units equipped with an impulse ring for ABS. These are to be mounted on its new top class 1000 cc motorcycle. The Service Division's external sales amounted to MSEK 2 939 (2 743), an increase of 7.2%. Total sales for the quarter were MSEK 3 133. Operating result for the first quarter amounted to MSEK 206, resulting in an operating margin of 6.6% on total sales including internal deliveries. There was a recovery in demand from end-users in the metalworking, pulp, and paper industries in Western Europe. The overall improvement in business in this region was strong during the quarter, with sales in Germany and France being particularly good. Sales to industrial distributors are growing not only as a result of the overall economic recovery but also owing to the superior delivery service of SKF's European distribution centre. Sales to distributors in the USA were seasonally low during the first quarter, but sales in Asia grew steadily. SKF's markets in the Middle East, Africa, and Latin America, however, are still recovering from weak performance in 1999. Several new performance-related service contracts were signed during the quarter. As the implementation of the service and maintenance contracts increases, competence development and training is becoming a vital part of the growth programme in order to provide value-added solutions for customers. The Seals Division's external sales totalled 1 056 (926), an increase of 14.0%. Total sales for the quarter were MSEK 1 238. Operating result for the first quarter amounted to MSEK 39, resulting in an operating margin of 3.2% on total sales including internal deliveries. There was a good sales growth in the seals business. The demand was high for internal deliveries as well as from external customers. The restructuring programme for the North American business is well underway and will be completed during the second quarter. There was also a significant improvement in the service level in North America during the first quarter. The Steel Division's external sales amounted to MSEK 487 (430), an increase of 13.3%. Total sales for the quarter were MSEK 1 205. Operating result for the first quarter amounted to MSEK 73, resulting in an operating margin of 6.1% on total sales including internal deliveries. Demand for steel continued to increase substantially. The order intake remains at a high level and the steel production capacity is highly utilized. The demand improved from both SKF and external customers. In line with the Division's aim to broaden the external customer base the number of external customers is on the increase. Göteborg, April 25, 2000 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 (Group and Divisions) This report has not been audited by the Company's auditors. The report on SKF's first six months of 2000 will be published on Tuesday, July 18, 2000. Further information can be obtained from: Lars G Malmer, Group Communication, tel +46-31-3371541, e-mail: lars.g.malmer@skf.com Marita Björk, Investor Relations, tel +46-31-3371994, e-mail: marita.bjork@skf.com Aktiebolaget SKF, SE-415 50 Göteborg, Sweden phone: +46-31-3371000, fax: +46-31-3372832, telex: 2350, http://www.skf.com ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/04/25/20000425BIT00620/bit0001.doc The full report http://www.bit.se/bitonline/2000/04/25/20000425BIT00620/bit0002.pdf The full report