SKF Reports Third Quarter 2003 Results

SKF AB (Sweden), the world's largest bearing manufacturer, reported third quarter 2003 financial results. While sales improved, results as reported were once again severely impacted by adverse currency and exchange rate effects. Sales in the quarter were SEK 10.06 billion (USD $1.31 billion), up just 0.1% from SEK 10.05 billion ($1.32 billion) in third quarter 2002. Operating profit for the quarter was SEK 841 million ($110 million), down sharply from SEK 950 million ($124 million) in 2002. Profits before taxes were SEK 697 million ($91 million), again down from SEK 877 million ($115 million) recorded in 2002. Net profit for the quarter fell to SEK 503 million ($66 million) from 2002's SEK 582 million ($76 million). The decline in operating profits was compounded by a drop in operating margin to just 8.4% from 9.5% last year. Cash flow in the quarter remained reasonably strong but still fell sharply, to SEK 982 million ($128 million) from SEK 1.4 billion ($183 million) in third quarter 2002. Third quarter was challenging for SKF, as sales (calculated in their local currencies) actually improved or were flat. Sales were much higher in Asia, somewhat higher in North America, and flat in Europe. The results translated into only a 0.1% overall gain when converted to Kronor, however. SKF said +0.2% was due to structure, +4.2% due to volume, +1.2% due to price/sales mix. But the results took a -5.5% hit from currency effects. SKF said efficiency and restructuring activities are being pursued across the company's worldwide operations. Part of that initiative involves a program to restructure its Ovako Steel business. In all, the restructuring initiatives are expected to cost SEK 300 million and result in fourth quarter 2003 asset writedowns of at least SEK 200 million. The company gave no specific details or plans regarding the restructuring effort. Looking forward, SKF said the overall market demand for the company's products and services is expected to improve slightly in the fourth quarter. Demand in Europe is predicted to remain flat and unchanged, improve in North America, and be up strongly in Asia.