SKF Q1 2021: Strong organic growth and operating profit, while managing cost and currency headwinds

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Apr 22, 2021, 03:23 ET

GOTHENBURG, Sweden, April 22, 2021 /PRNewswire/ -- As the Board announced in January, Rickard Gustafson will be joining as President and CEO at the latest by 1 July. Alrik Danielson's last working day with SKF will be 30 April. The Board has appointed Niclas Rosenlew as Interim CEO in addition to his current role as CFO.

Alrik Danielson, President and CEO:

"During the first quarter we saw strong sales and demand growth. We also experienced significant headwinds in terms of cost inflation and currency impact, affecting our operating result by SEK 1.3 billion. Despite this, we delivered a very solid adjusted operating result of SEK 2,789 million (SEK 2,572 million), representing an adjusted operating margin of 14% (12.8%).

Organic sales development in the quarter was 8.6%, with net sales of SEK 19,865 million (SEK 20,085 million). Sales were significantly higher in Latin America and Asia and relatively unchanged in Europe and North America.

We are already implementing measures across both Industrial and Automotive to compensate for rising input costs.

The Industrial business delivered strong results, with an adjusted operating margin of 16.3% (15.5%).

The Automotive business continues to perform well, with an adjusted operating margin of 8.9% (6.0%).

The first quarter is historically lower in terms of cash flow generation. The sharp increase in demand in the quarter also contributed to increased working capital. As a result, cash flow was SEK -702 million (SEK 1,930 million).

From this quarter, we will be reporting on our sustainability-related targets as an integrated part of our quarterly report. One of SKF's strengths is our ability to support the development of industries that enable a shift towards a low-carbon world. Our investments in industries such as renewable energy, electric vehicles and railway is paying off, with sales to these industries growing from SEK 4 billion to 7 billion in the last two years.

We are also making progress on our ambitions to reduce CO2 emissions from our own operations.

We continue to capitalize on new ways of working and digitalizing throughout the organization. The sharp increase in demand in the quarter has necessitated an increase of around 200 temporary workers, predominantly in our factories. Permanent staff numbers were unchanged.

Demand has increased gradually since the trough in the second quarter of 2020. Net sales is expected to continue to grow, reaching pre-COVID levels in the second quarter of 2021: i.e. in line with levels reported in the second quarter of 2019.

After close to seven years as CEO, this will be my last quarterly report. To all colleagues, customers and stakeholders: thank you for your support during these years, making all we have done possible."

Key figures, SEKm

Q1 2021

Q1 2020

Net sales

19,865

20,085

Adjusted operating profit

2,789

2,572

Adusted operating margin, %

14.0

12.8

Operating profit

2,699

2,268

Operating margin, %

13.6

11.3

Adjusted profit before taxes

2,586

1,856

Profit before taxes

2,495

2,160

Net cash flow after investments before financing

-702

1,930

Adjusted earnings per share

4.11

3.41

Basic earnings per share

3.91

2.75

Net sales change y-o-y, %

Organic*

Structure

Currency

Total

SKF Group

8.6

0.0

-9.7

-1.1

Industrial

5.4

0.0

-9.4

-4.0

Automotive

16.7

0.0

-10.5

6.2

*Price, mix and volume

Organic sales in local currencies, change, %

EMEA

North America

Latin America

Asia

SKF Group

1.7

-0.4

17.7

26.2

Industrial

+/-

+++

Automotive

+++

Outlook and guidance

Demand for Q2 2021 compared to Q2 2020

Demand has improved gradually since the trough in the second quarter of 2020. Net sales is expected to continue to grow, reaching pre-COVID levels in the second quarter of 2021, i.e. in line with levels reported in the second quarter of 2019.

Guidance Q2 2021

Currency impact on the operating profit is expected to be around SEK -400 million compared with Q2 2020, based on exchange rates per 31 March 2021.

Guidance 2021

Tax level excluding effect related to divested businesses: around 28%.
Additions to property, plant and equipment: around SEK 3,600 million.

Niclas Rosenlew appointed Interim CEO

As the Board announced in January, Rickard Gustafson will be joining as President and CEO at the latest by 1 July. Alrik Danielson's last working day with SKF will be 30 April. The Board has appointed Niclas Rosenlew as Interim CEO in addition to his current role as CFO.

A teleconference will be held on 22 April 2021 at 10:00 (CET):

Conference ID: 895705
International: +44 (0) 207 3936 2999
Sweden: +46 (0)10 884 8016

Website: https://investors.skf.com/en

Aktiebolaget SKF (publ)

The financial 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 22 April 2021 at 08:45.

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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