SKF First Quarter Report 2020: Continuing to Deliver Strong Results and Cash Flow

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Apr 23, 2020, 01:16 ET

GOTHENBURG, Sweden, April 23, 2020 /PRNewswire/ -- 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
Net sales	20,085	21,278
Adjusted operating profit	2,572	2,720
Adusted operating margin, %	12.8	12.8
Operating profit	2,268	2,658
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	Structure	Currency	Total
SKF Group	-8.6	0.1	2.9	-5.6
Industrial	-6.7	0.1	3.0	-3.6
Automotive	-13.3	-	2.9	-10.4

Organic sales change in local currencies, y-o-y, %	Europe	North America	Latin America	Asia	Mid-East & Africa
SKF Group	-8.8	-11.7	3.5	-10.4	5.6
Industrial	--	---	+	--	+/-
Automotive	---	---	+/-	---	+++

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

Guidance 2020

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

Website: http://investors.skf.com/en/reports-and-presentations

Aktiebolaget SKF

(publ)

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.

CONTACT:

For further information, please contact:

PRESS: Theo Kjellberg, Director, Press Relations
tel: 46 31 337 6576, mobile: 46 725-776576, e-mail: [email protected]

INVESTOR RELATIONS: Patrik Stenberg, Head of Investor Relations

Patrik Stenberg, 46 31-337 2104; 46 705-472 104; [email protected]

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