GOTHENBURG, Sweden, Oct. 30, 2024 /PRNewswire/ —

Q3 2024
Net sales: SEK 23,692 million (25,771)
Organic growth: −4.4% (−0.6%), driven by lower market demand across most regions and industries.
Adjusted operating profit: SEK 2,821 million (2,956). Continued strong price/mix contribution, driven by pricing actions and active portfolio management, as well as good cost control which largely offset the lower volumes and currency headwind.
Adjusted operating margin: 11.9% (11.5%)
Net cash flow from operations: SEK 3,576 million (3,435)

Rickard Gustafson, President and CEO:

“We are pleased to report a continued solid margin development, representing a year-over-year improvement, despite declining volumes in the prevailing weak market environment and significant currency headwinds. We continue our strategic execution creating an even stronger SKF, with the initiated separation of our Automotive business as a key component.”

Solid margin and strong cash flow

The weak market conditions prevailed globally during the third quarter, which also was reflected in multiple leading external macro indicators. Our organic sales declined by -4.4%, driven in particular by a weak demand in China and within Automotive, especially towards the end of the quarter. On the other hand, our sales in India and within Aerospace were solid.

Our adjusted operating margin, on the other hand, improved year-over-year and came in just shy of 12%, another proof point of our ability to better adapt to volatile market conditions. Our cost management and robust price/mix actions have effectively offset lower sales volumes, a significant negative currency impact and ongoing regionalization of our manufacturing footprint. We continue to work hard on cost out activities to mitigate potential short-term impact on our cost efficiency from the current lower volume environment.

Our ability to uphold solid earnings also contributed to a strong cash flow from operations of SEK 3.6 billion.

Unlocking value by separating the Automotive business

The announced initiated separation of our Automotive segment follows our strategy to create a separate Automotive business. There is a strong strategic rationale for the separation since Industrial and Automotive are two business segments with different business logics. By establishing two fit-for-purpose independent companies, we expect to unlock long-term value and to accelerate profitable growth in both businesses.

Since the announcement of the separation in mid-September, we have kick-started the separation planning and formed a dedicated project organization with the aim of listing the Automotive business in the first half of 2026. We intend to host a Capital Markets Day in Q4 2025 to share more information on the ambitions for both our Industrial and Automotive businesses.

Strategic portfolio management to build a stronger SKF

We continue to actively work with our portfolio to create a more focused and resilient SKF. I’m pleased that we have signed a contract to divest our ring and seal operation in Hanover, USA, which is a non-strategic asset for our Aerospace business, representing annual sales of approximately SEK 700 million, for a total value of approximately SEK 2.3 billion. Aerospace will remain one of our largest customer industries, representing total annual sales of approximately SEK 6 billion, corresponding to 9% of industrial net sales after the divestment. We will continue to invest and strengthen our position in core Aerospace segments related to the aeroengine and aerostructure bearing offers to optimize our business potential.

With our strategy and decentralized operating model being well implemented, we are now in a position to also gradually accelerate profitable growth through smaller bolt-on acquisitions. As an example, the announced acquisition of John Sample Group is margin accretive and further strengthens our lubrication offering and position in the expansive India and Southeast Asia region.

I would like to express my sincere gratitude to our employees for their contributions to achieving solid margin and strong cash flow, despite the weak demand environment, and a continued high pace in our strategic execution.

Outlook

We expect to see continued market and geopolitical volatility, and the business is prepared to tackle different scenarios. For the fourth quarter of 2024, we expect a mid-single-digit organic sales decline, year-over-year. For the full year, we expect a mid-single-digit organic sales decline, compared to 2023.”

Outlook and Guidance

Outlook

• Q4 2024: We expect a mid-single-digit organic sales decline, year-over-year.
• FY 2024: We expect a mid-single-digit organic sales decline, year-over-year.

Guidance Q4 2024

• Currency impact on the operating profit is expected to be around SEK 250 million negative compared with the fourth quarter 2023, based on exchange rates per 30 September 2024.

Guidance FY 2024

• Tax level excluding effects related to divested businesses: around 26%.
• Additions to property, plant and equipment: around SEK 5 billion.

A webcast will be held on 30 October 2024 at 08:00 (CET):
Sweden +46 (0)8 5051 0031
UK / International +44 (0)207 107 0613
https://investors.skf.com/en

Aktiebolaget SKF
     (publ)

The financial information in this press release contains inside information that AB SKF is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication through the agency of the contact person set out below on 30 October 2024 at 07.00 CET.

For further information, please contact:
PRESS: Carl Bjernstam, Head of Media Relations
tel: 46 31-337 2517; mobile: 46 722-201 893; e-mail: carl.bjernstam@skf.com

INVESTOR RELATIONS: Sophie Arnius, Head of Investor Relations
tel: 46 31-337 8072; mobile: 46 705-908 072; e-mail: sophie.arnius@skf.com 

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SOURCE SKF