SKF Year-end report for 2000

SKF Year-end report for 2000 SKF's operating margin for the full year of 2000 amounted to 9.2% (6.9) and for the fourth quarter to 9.0% (9.2). Excluding non-recurring items, the margin was 9.0% (5.8) for the full year and 9.0% (7.3) for the fourth quarter. Market demand for SKF's products and services developed well last year in Europe, where SKF has half its sales. Demand declined in North America, especially in the automotive segment. In Asia, demand weakened in a number of countries after a strong start at the beginning of the year. Market development during the fourth quarter confirmed that demand had be- gun to weaken. Production levels were lowered in most of SKF's factories at the end of last year in order to adapt the manufacturing to a period of weaker demand. * The SKF Group increased its profit before tax to MSEK 3 002 (1 769), excluding non-recurring items, MSEK 2 902 (1 381). Profit for the fourth quarter was MSEK 761 (693), excluding non-recurring items, MSEK 761 (518). * The operating profit for the year amounted to MSEK 3 674 (2 520). The figure for the fourth quarter was MSEK 941 (851). * Cash flow after investments before financing amounted to MSEK 2 880 (2 219). Cash flow for the fourth quarter was MSEK 1 088 (417). * Net sales for 2000 amounted to MSEK 39 848 (36 693), an increase of 8.6% compared with 1999. Net sales for the fourth quarter amounted to MSEK 10 459 (9 300), an increase of 12.5% compared with the corresponding period in 1999. * The increase in net sales for 2000 was attributable to: structure -0.5% volume +5.1%, price/mix +1.6% and currency effect +2.4%. A comparison be- tween the fourth quarter 2000 and 1999 shows: structure +0.4% volume +2.4%, price/mix +2.8% and currency effect +6.9% * Net profit amounted to MSEK 1 962 (1 111) and profit per share to SEK 17.23 (9.76). Net profit for the fourth quarter was MSEK 532 (416). * The Board proposes that a dividend of SEK 5.25 (4.00) per share be paid for the 2000 financial year. The Group's financial net for 2000 was MSEK -672 (-751). Interest-bearing loans at year-end 2000 totalled MSEK 4 968 (5 976), while pension liabili- ties amounted to MSEK 6 746 (6 478). At year-end, the Group had financial assets of MSEK 4 557 (2 894), whereof short-term financial assets of MSEK 3 481 (1 976). Group solvency at year-end was 37.2% (33.8). Additions to tangible assets totalled MSEK 1 388 (1 230). Of the Group's total additions to tangible assets, approximately MSEK 47 (98) was in- vested in measures to improve the environment both internally and exter- nally. Depreciation according to plan was MSEK 1 572. The comparable fig- ure for 1999 was MSEK 1 725. Expenditure in research and development amounted to MSEK 710 (756), corre- sponding to 1.8 % (2.1) of annual sales. Development expenditure for IT solutions and customized designs is not included. The number of first-time patent applications in 2000 was 144. The number in 1999 was 129. The average number of employees was 39 557 (40 747) and the registered number of employees was 40 401 (40 637). At the end of December, the Group's inventories amounted to 23.2% (23.5) of annual sales. Return on capital employed for the 12-month period ended December 31 was 16.2% (11.2). Return on equity was 16.0% (10.2). During the year, SKF continued to prioritize profitability and to focus on moving business to higher valued products and services. Non-profitable businesses were discontinued and price increases were implemented. Sales developed well for most of SKF's products and services during the first half of the year. They were strong in Europe throughout the year, particularly in Germany. Sales declined in North America. In the Asia- Pacific region there was a significant difference between the larger mar- kets. While SKF's sales increased rapidly in China, they declined in In- dia. Sales in South East Asia were much higher than in 1999, but they weakened during the year. Sales developed positively in Central and Eastern Europe, and SKF strengthened its position on this market. Last year saw a healthy recovery as regards sales in Latin America and they increased substantially in Af- rica and the Middle East, particularly during the second half of the year. The Group continued to reduce assets. Real estate was sold for MSEK 321. Last year the European steel ball manufacturing and the Group's machine tool business were divested. During the year, opportunities to sell the Steel Division were considered without leading to a deal. For the near future the Division will be kept within the Group. SKF's decision to launch an e-business market place, endorsia.com , has given the Group a leading position in e-business in the bearing world. By the end of 2000, some 1 400 users in 23 countries were connected to the marketplace. The recently announced cooperation agreement in the e-commerce and logis- tics field between SKF, Rockwell, Timken, INA and Sandvik is aiming at providing the industrial aftermarket with extended and more efficient services. Divisions The result by Division is based on SKF management reporting. Industrial Division External sales in 2000 amounted to MSEK 8 605 (8 011), an increase of 7.4%. Total sales (sales to external and internal customers) were MSEK 14 496 (13 147). The Division's operating result was MSEK 1 588 (961) with an operating margin of 11.0% (7.3). The operating result was good throughout the year, due primarily to high capacity utilization, better prices and an increase in the business for value added products and solutions. Sales in Europe, the Division's largest market developed strongly in the second half of the year. In North America sales began to slow down during the second quarter and in Asia they remained flat over the year. Sales to light industry developed more positively than sales to the heavy equipment industry. A number of companies were acquired during the year: - Electrac SA, manufacturer of electromechanical actuators, - Revolve Magnetic Bearings Inc., manufacturer of magnetic bearing sys- tems. - MTSR Ltd, machine tool service company, - Roller Bearing Industries Inc., a rail-bearing service company. The Automotive Division External sales in 2000 amounted to MSEK 8 882 (8 527), an increase of 4.2%. Total sales (sales to external and internal customers) were MSEK 9 883 (9 676). The Division's operating result was MSEK 376 (237) with an operating margin of 3.8% (2.4). Although still on an unsatisfactory level, the operating result in 2000 increased by nearly 60% compared with 1999. This has resulted from the fo- cus on cost reductions and from promoting higher value added products. Sales to the car and light truck segment remained stable in Europe throughout the year. The North American market weakened in the second half of the year. Sales in Brazil, however, developed positively after the cri- sis in 1999. Sales in India were weak for both the car and the truck segments. The European sales for heavy trucks remained at a high level throughout the year in contrast to North America, where sales fell heavily from the record level in 1999. The vehicle aftermarket in Europe weakened during the second half of the year, due to weaker demand and de-stocking. The same applied to the vehi- cle aftermarket in North America, which is managed by the Seals Division. The Division formed a Drive-by-Wire Business area in 2000. SKF signed a joint development agreement with Brembo, Italy, to develop Brake-by-Wire solutions for the car industry. The Electrical Division External sales in 2000 amounted to MSEK 1 575 (1 475), an increase of 6.8%. Total sales (sales to external and internal customers) were MSEK 6 169 (5 949). The Division's operating result was MSEK 460 (219) with an operating margin of 7.5% (3.7). The doubling of the operating result was due mainly to increased sales volumes in Europe and in the USA, and to the offer of more types of inno- vative products, mainly to the power tools segment. Sales in Asia were good, in particular in the two-wheeler segment. Efforts to improve profitability in all the markets continued, and unprofitable businesses were exited in favour of customized solutions. Several new solutions based on the use of sensors in bearing applications were developed and introduced during the year. The Service Division External sales in 2000 amounted to MSEK 12 844 (11 380), an increase of 12.9%. Total sales (sales to external and internal customers) were MSEK 13 854 (12 173). The Division's operating result was MSEK 1 013 (848) with an operating margin of 7.3% (7.0). High sales activity, positive price development and high performance in logistics contributed to the result. During the first half of the year, there was a positive sales development in most markets. However, in the second half of the year, sales slowed down. Sales in Central and Eastern Europe continued to grow strongly all through the year. The Middle East and Africa recovered in the second half of 2000. A growing number of maintenance and condition-monitoring contracts were concluded during the year with customers in the process industry. Several acquisitions strengthened SKF's position within the service busi- ness: - Development Engineering International Ltd. (DEI). Services for main- tenance engineering. - Machine Support BV. Services within laser alignment. - Diagnostic Instruments Ltd. (DI). Industrial mobile computing equip- ment. The Seals Division External sales in 2000 amounted to MSEK 4 130 (3 750), an increase of 10.1%. In local currencies, sales were at the same level as in 1999. Total sales (sales to external and internal customers) were MSEK 4 728 (4 313). The Division's operating result was MSEK 127 (49) with an operating margin of 2.7% (1.1). The year opened with good demand, particularly in North America. The re- structuring measures undertaken in 1999 started to show results. The de- livery service level was restored. The Division's high exposure to the North American automotive market led to a strong decline in sales and lower margins during the second half of the year. The Steel Division The external sales in 2000 amounted to MSEK 1 838 (1 572), an increase of 16.9%. Total sales (sales to external and internal customers) were MSEK 4 481 (4 057). The Division's operating result was MSEK 173 (54) with an op- erating margin of 3.9% (1.3). The market, which turned upwards at the end of 1999, continued to be good and the demand for steel products was high. A flattening of demand oc- curred at the end of the year. The operating result trebled during the year. Technical problems and an unfavourable cost development in the Swedish operations were the main rea- sons for the weak development of the result in the second half of the year. The strategy to develop a customer base outside SKF showed good results. The Aerospace business SKF's aerospace business developed favourably during the year. The busi- ness reached external sales of close on MSEK 1 700 in 2000 and employed 1 920 people. During the year, a five-year contract was signed with Aerospatiale-Matra Airbus for the supply of airframe bearings and metallic composite rods. The total value of the contract is MSEK 500. Göteborg, January 29, 2001 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 SKF Annual Report 2000 will be published on Friday, March 9, 2001 and will be available at the Company as of that date. The report on SKF's first-quarter earnings in 2001 will be published on the date of the Company's Annual General Meeting on Tuesday, April 24, 2001. Further information can be obtained from: Lars G Malmer, Group Communication, tel +46-705-371541, e-mail: lars.g.malmer@skf.com Marita Björk, Investor Relations, tel +46-705-181994, e-mail: mari- ta.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/2001/01/29/20010129BIT00560/bit0001.doc The full year-end report http://www.bit.se/bitonline/2001/01/29/20010129BIT00560/bit0002.pdf The full year-end report