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SKF interim report Q3 2024: Solid margin and strong cash flow in weak markets

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SKF reported Q3 2024 results with net sales of SEK 23,692 million, showing an organic decline of -4.4% due to weak market demand. Despite volume challenges, the company achieved an improved adjusted operating margin of 11.9% (vs 11.5% in Q3 2023) through strong price/mix management and cost control. Net cash flow from operations strengthened to SEK 3,576 million. The company announced plans to separate its Automotive business, targeting completion in H1 2026, and signed a contract to divest its ring and seal operation in Hanover for SEK 2.3 billion. For Q4 and full-year 2024, SKF expects a mid-single-digit organic sales decline.

SKF ha riportato i risultati del terzo trimestre 2024 con vendite nette pari a 23.692 milioni di SEK, mostrando una flessione organica del -4,4% a causa della debole domanda di mercato. Nonostante le sfide di volume, l'azienda ha raggiunto un margine operativo rettificato migliorato dell'11,9% (rispetto all'11,5% nel terzo trimestre del 2023) grazie a una solida gestione dei prezzi/mix e al controllo dei costi. Il flusso di cassa netto dalle operazioni è aumentato a 3.576 milioni di SEK. L'azienda ha annunciato piani per separare la sua attività Automotive, puntando a completarla nel primo semestre del 2026, e ha firmato un contratto per cedere la sua operazione di anelli e guarnizioni a Hannover per 2,3 miliardi di SEK. Per il quarto trimestre e per l'intero anno 2024, SKF prevede una flessione organica delle vendite a un valore medio a una cifra.

SKF reportó los resultados del tercer trimestre de 2024 con ventas netas de 23,692 millones de SEK, mostrando un descenso orgánico del -4.4% debido a la débil demanda del mercado. A pesar de los desafíos de volumen, la empresa logró un margen operativo ajustado mejorado del 11.9% (frente al 11.5% en el tercer trimestre de 2023) gracias a una sólida gestión de precios/mix y control de costos. El flujo de efectivo neto de las operaciones se fortaleció a 3,576 millones de SEK. La empresa anunció planes para separar su negocio de Automoción, con el objetivo de completarlo en la primera mitad de 2026, y firmó un contrato para desinvertir su operación de anillos y sellos en Hannover por 2.3 mil millones de SEK. Para el cuarto trimestre y todo el año 2024, SKF espera un descenso orgánico en las ventas de un dígito medio.

SKF는 2024년 3분기 실적을 발표하며, 매출이 236억 9천 2백만 SEK에 달해 시장 수요 약화로 인해 -4.4%의 유기적 감소를 보였다고 전했습니다. 물량에 대한 어려움에도 불구하고, 회사는 강력한 가격/믹스 관리와 비용 통제를 통해 조정된 운영 마진이 11.9%로 향상되었습니다(2023년 3분기 11.5% 대비). 운영에서의 순 현금 흐름은 35억 7천 6백만 SEK로 강화되었습니다. 회사는 자동차 사업 분리를 계획하고 있으며, 2026년 상반기까지 완료할 목표를 설정했으며, 하노버의 링 및 씰 사업 부문을 23억 SEK에 매각하기 위한 계약을 체결했습니다. 2024년 4분기 및 전체 연도에 대해 SKF는 중간 단일 숫자의 유기적 판매 감소를 예상하고 있습니다.

SKF a rapporté les résultats du troisième trimestre 2024 avec un chiffre d'affaires net de 23,692 millions de SEK, montrant un déclin organique de -4,4% en raison d'une demande du marché faible. Malgré les défis de volume, l'entreprise a obtenu une marge opérationnelle ajustée améliorée de 11,9% (contre 11,5% au T3 2023) grâce à une gestion efficace des prix/mix et à un contrôle des coûts. Le flux de trésorerie net provenant des opérations a renforcé à 3,576 millions de SEK. L'entreprise a annoncé des plans pour séparer son activité automobile, visant une finalisation au premier semestre 2026, et a signé un contrat pour céder son opération de bagues et joints à Hanovre pour 2,3 milliards de SEK. Pour le quatrième trimestre et l'année complète 2024, SKF s'attend à un déclin organique des ventes à un chiffre moyen.

SKF hat die Ergebnisse für das dritte Quartal 2024 mit einem Nettoumsatz von 23.692 Millionen SEK veröffentlicht, was einen organischen Rückgang von -4,4% aufgrund schwacher Marktnachfrage zeigt. Trotz der Volumenschwierigkeiten erzielte das Unternehmen eine verbesserte bereinigte operative Marge von 11,9% (gegenüber 11,5% im dritten Quartal 2023) durch eine starke Preis-/Mix-Management und Kostenkontrolle. Der Netto-Cashflow aus dem operativen Geschäft stieg auf 3.576 Millionen SEK. Das Unternehmen kündigte Pläne zur Abspaltung seines Automobilgeschäfts an, mit dem Ziel, dies im ersten Halbjahr 2026 abzuschließen, und unterzeichnete einen Vertrag zur Veräußerung seiner Ring- und Dichtungsoperation in Hannover für 2,3 Milliarden SEK. Für das vierte Quartal und das gesamte Jahr 2024 erwartet SKF einen organischen Umsatzrückgang im mittleren einstelligen Bereich.

Positive
  • Improved adjusted operating margin to 11.9% from 11.5% year-over-year
  • Increased net cash flow from operations to SEK 3,576 million from SEK 3,435 million
  • Strategic divestment of Hanover operations for SEK 2.3 billion
  • Solid sales performance in India and Aerospace sectors
Negative
  • Organic sales declined by 4.4% year-over-year
  • Net sales decreased to SEK 23,692 million from SEK 25,771 million
  • Weak demand in China and Automotive sector
  • Negative guidance with expected mid-single-digit organic sales decline for Q4 and FY 2024

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."

Financial overview, MSEK unless otherwise stated

Q3 2024

Q3 2023

Jan-Sep 2024

Jan-Sep 2023

Net sales

23,692

25,771

73,997

79,443

Organic growth, %

−4.4

−0.6

−6.1

5.7

Adjusted operating profit

2,821

2,956

9,448

10,049

Adjusted operating margin, %

11.9

11.5

12.8

12.6

Operating profit

2,526

2,567

8,008

9,159

Operating margin, %

10.7

10.0

10.8

11.5

Adjusted profit before taxes

2,536

2,582

8,515

8,855

Profit before taxes

2,241

2,193

7,075

7,965

Net cash flow from operating activities

3,576

3,435

7,509

9,846

Basic earnings per share

3.40

3.64

10.91

12.67

Adjusted earnings per share

4.05

4.49

14.07

14.62

Net sales, change y-o-y, %, Q3

Organic1)

Structure

Currency

Total

SKF Group

−4.4

0.0

−3.6

−8.0

Industrial

−4.6

0.0

−3.7

−8.3

Automotive

−4.0

0.0

−3.5

−7.5

1) Price, mix and volume

Net sales, change y-o-y, %, Jan-Sep 2024

Organic1)

Structure

Currency

Total

SKF Group

−6.1

0.0

−0.8

−6.9

Industrial

−6.5

0.1

−0.9

−7.3

Automotive

−5.1

0.0

−0.8

−5.9

1) Price, mix and volume

Organic sales in local currencies, change y-o-y, %, Q3

Europe, Middle East & Africa

The Americas

China & Northeast Asia

India & Southeast Asia

SKF Group

−5.2

−2.9

−8.7

2.9

Industrial

-

+/-

---

+

Automotive

---

-

+/-

+

Organic sales in local currencies, change y-o-y, %, Jan-Sep 2024

Europe, Middle East & Africa

The Americas

China & Northeast Asia

India & Southeast Asia

SKF Group

−5.5

−6.1

−10.8

1.5

Industrial

--

--

---

+/-

Automotive

---

--

+/-

++

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 

This information was brought to you by Cision http://news.cision.com

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SKF Rickard Gustafson

 

 

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SOURCE SKF

FAQ

What was SKF's (SKFRY) organic sales growth in Q3 2024?

SKF reported an organic sales decline of -4.4% in Q3 2024, primarily due to lower market demand across most regions and industries.

What is SKF's (SKFRY) operating margin for Q3 2024?

SKF achieved an adjusted operating margin of 11.9% in Q3 2024, an improvement from 11.5% in Q3 2023.

When will SKF (SKFRY) complete the separation of its Automotive business?

SKF plans to complete the separation and listing of its Automotive business in the first half of 2026.

What is SKF's (SKFRY) sales guidance for Q4 2024?

SKF expects a mid-single-digit organic sales decline for Q4 2024 compared to the previous year.

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