SKF Year-end report 2022: Strong organic sales and cash flow development

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GOTHENBURG, Sweden, February 2, 2023 – SKF reported strong financial results for Q4 and full year 2022. Q4 net sales reached SEK 25,361 million, a 20.9% increase, with organic growth at 9.7%. Adjusted operating profit was SEK 2,542 million, with a margin of 10.0%. For the full year, net sales totaled SEK 96,933 million and adjusted operating profit was SEK 10,204 million, representing a margin of 10.5%. Despite challenges like cost inflation and geopolitical tensions, the company expects mid single-digit organic sales growth in 2023 and proposes a dividend of SEK 7.00 per share.

Positive

• Q4 2022 net sales of SEK 25,361 million, up 20.9% YoY.
• Organic growth in Q4 was 9.7%, exceeding expectations.
• Strong cash flow from operations of over SEK 3.3 billion.
• Full year 2022 net sales of SEK 96,933 million, an increase of 18.5% YoY.
• Proposed dividend of SEK 7.00 per share, reflecting financial stability.

Negative

• Adjusted operating profit margin declined to 10.0% in Q4 from 10.8% YoY.
• Full year adjusted operating profit decreased to SEK 10,204 million from SEK 10,839 million YoY.
• China operations negatively impacted by COVID-19 spread in December.

GOTHENBURG, Sweden, Feb. 2, 2023 /PRNewswire/ -- 

Q4 2022

Net sales: SEK 25,361 million (20,986) Organic growth: 9.7% (3.8%) Adjusted operating profit/margin: SEK 2,542 million, 10.0% (2,260, 10.8%)

Full year 2022

Net sales: SEK 96,933 million (81,732) Organic growth: 8.1% (12.6%) Adjusted operating profit/margin: SEK 10,204 million, 10.5% (10,839, 13.3%)

Rickard Gustafson, President and CEO:

"Review of 2022

2022 was a year in which we accelerated our strategic development in earnest. We've capitalized on opportunities in our target growth areas delivering double-digit growth in several strategically important segments. At the same time, we are taking a more active approach to portfolio management, working across customer industries and product lines to improve our operational performance. As announced in December, we have also commenced a strategic review of our Aerospace business.

We have accelerated investments in our regional engineering and manufacturing capabilities across Asia and the Americas, with total investments for the year of SEK 5 billion. This is an important step in creating a more competitive and sustainable foundation from which to support our customers, as well as increasing our attractiveness as an employer. 

Throughout the year, we have been operating against a back-drop of challenging external circumstances, including the war in Ukraine and exceptional cost inflation levels, which accelerated throughout the year, peaking during Q3. We have worked hard to compensate for this continually moving target, with the gap closing towards the end of the year.

I'm very grateful for the commitment, customer focus and care for one another that SKF colleagues have demonstrated throughout a very volatile and difficult 2022. I'm convinced that our newly embedded operating model and organizational structure will bring us even closer to our customers and further enhance our speed to market.

Review of the fourth quarter

The fourth quarter saw strong demand across the board, with double-digit sales growth in EMEA and India & Southeast Asia. Net sales were SEK 25,361 million, representing an organic sales growth of approximately 10%, bringing our total organic growth for the year to over 8% - at the top-end of our previous guidance. Our business in China saw a general negative impact from the fast spread of Covid-19 during the month of December.

The adjusted operating profit of SEK 2,542 million improved sequentially and compared to last year, bringing our adjusted operating margin to 10%. We continued to implement broad-based price increases, compensating for the SEK 1.8 billion of cost inflation during the quarter. The positive currency impact on our results was lower than guided (about SEK 150 million, compared to the previously guided SEK 400 million), driven by fluctuations in the US Dollar and Euro rates versus the Swedish Krona.

Our focus on improving cash efficiency is also showing results, with a very strong net cash flow from operations of over SEK 3.3 billion (1.2 billion last year), driven mainly by improved working capital management.

The Industrial business saw solid demand in most segments and regions, with especially high demand in EMEA and India & Southeast Asia. Organic growth was 9% and the adjusted operating margin was 12%. Our historically European-centric manufacturing footprint within Industrial makes us exposed to cost inflation levels in the region, but our positive trend of price/mix compensation continues. Our railway, marine and aerospace business grew by some 20% respectively.

Our future technology initiatives are showing strong momentum. The magnetic bearings business had a strong finish to the year, reaching a record order intake of SEK 1 billion in 2022, driven by new energy applications. Within RecondOil, our partnerships with Quaker Houghton and Castrol are developing well, with the first regenerated oils being reused at several recurring customer locations.

The Automotive business saw double-digit growth in all regions except China & Northeast Asia, delivering an organic growth of 12% and a solid adjusted operating margin of over 5%. We continue to shift our portfolio to focus on customer segments where we can capitalize on the value of our offers: electric vehicles, commercial vehicles and aftermarket. Demand for our high-performance bearings used in EV applications continues to be strong, growing by 46% in the quarter.

Outlook

We expect to see continued volatility and geopolitical uncertainty impacting the markets in which we operate. Nevertheless, looking into the first quarter of 2023, we expect mid single-digit organic sales growth. For the full year, we expect mid single-digit organic sales growth, compared to 2022.

In recognition of the Group's solid financial position, the Board has decided to propose to the Annual General Meeting a dividend of SEK 7.00 per share."

Key figures, SEKm unless otherwise stated	Q4 2022	Q4 2021	2022	2021
Net sales	25,361	20,986	96,933	81,732
Adjusted operating profit	2,542	2,260	10,204	10,839
Adjusted operating margin, %	10.0	10.8	10.5	13.3
Operating profit	2,069	2,594	8,532	10,758
Operating margin, %	8.2	12.4	8.8	13.2
Adjusted profit before taxes	2,166	1,994	8,965	10,143
Profit before taxes	1,693	2,328	7,293	10,063
Net cash flow from operating activities	3,351	1,231	5,641	5,248
Basic earnings per share	1.96	3.74	9.81	16.10
Adjusted earnings per share	3.00	3.01	13.49	16.28

Net sales, change y-o-y, %, Q4	Organic1)	Structure	Currency	Total
SKF Group	9.7	-1.8	13.0	20.9
Industrial	8.9	-2.0	12.9	19.8
Automotive	11.7	-1.6	13.1	23.2
1) Price, mix and volume

 

Net sales, change y-o-y, %, 2022	Organic1)	Structure	Currency	Total
SKF Group	8.1	-1.5	11.9	18.5
Industrial	8.5	-1.5	11.7	18.7
Automotive	7.2	-1.4	12.4	18.2
1) Price, mix and volume

 

Organic sales in local currencies, change y-o-y, %, Q4	Europe, Middle East & Africa	The Americas	China & North-East Asia	India & South-East Asia
SKF Group	14.3	7.2	2.8	14.5
Industrial	+++	++	+	+++
Automotive	+++	+++	+/-	+++

Organic sales in local currencies, change y-o-y, %, 2022	Europe, Middle East & Africa	The Americas	China & North-East Asia	India & South-East Asia
SKF Group	10.0	9.4	-1.9	21.6
Industrial	+++	+++	+/-	+++
Automotive	++	+++	--	+++

 

Outlook and guidance

Demand for Q1 2023 compared to Q1 2022

Looking into the first quarter of 2023, we expect mid single-digit organic sales growth.

Guidance Q1 2023

Currency impact on the operating profit is expected to be around SEK 300 million positive compared with the first quarter 2022, based on exchange rates per 31 December 2022.

Guidance 2023           

• For the full year, we expect mid single-digit organic sales growth, compared to 2022.
• Tax level excluding effects related to divested businesses: around 28%.
• Additions to property, plant and equipment: around SEK 5 billion.

A teleconference will be held on 2 February 2023 at 09:00 (CET):

Sweden +46 10 884 80 16

UK / International +44 203 936 2999

Passcode: 330094

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 2 February 2023 at 08.00 CET.

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

INVESTOR RELATIONS: Patrik Stenberg, Head of Investor Relations
tel: 46 31-337 2104; mobile: 46 705-472 104; patrik.stenberg@skf.com

The following files are available for download:

https://mb.cision.com/Main/637/3707543/1821591.pdf	Q4_2022_Eng
https://news.cision.com/skf/i/q4,c3139967	Q4
https://news.cision.com/skf/i/rickard-gustafson,c3139968	Rickard Gustafson

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SOURCE SKF

FAQ

What is SKF's net sales for Q4 2022?

SKF's net sales for Q4 2022 reached SEK 25,361 million.

What was the organic growth rate for SKF in Q4 2022?

SKF reported an organic growth rate of 9.7% in Q4 2022.

What dividend did SKF propose for 2022?

SKF proposed a dividend of SEK 7.00 per share for 2022.

What are SKF's expectations for organic sales growth in 2023?

SKF expects mid single-digit organic sales growth for the full year 2023.

How did the adjusted operating profit margin change in Q4 2022 for SKF?

The adjusted operating profit margin for SKF declined to 10.0% in Q4 2022 from 10.8% in the same period last year.