SKF reports first quarter 2003 results

SKF AB (Sweden) reported first quarter 2003 earnings improved, while sales results were mixed compared to 2002, depending upon your analysis. Sales, valued in Kronor, showed a slight dip of 1.2% in first quarter 2003, to SEK 10.54 billion (USD $1.25 billion) from SEK 10.66 billion ($1.27 billion) in 2002. However, the dropoff was entirely due to international currency fluctuations. Actual sales, valued in local currencies, grew 8.1% in the quarter. Currency effects (-9.3%) offset the sales improvements due to structure, volume, and price/mix (+0.7%, +6.2%, and +1.2%, respectively). SKF said it experienced sales improvements in Europe, while Asian regions were up sharply and North American sales were flat. The company recently set a new quarterly sales target of approximately SEK 13.0 billion by 2005/2006. First quarter operating profit was SEK 944 million ($112.2 million), from SEK 903 million ($107.3 million) in 2002, while operating profit margin hit 9.0%, up sharply from 8.5% a year ago. SKF has set a target operating margin of 10% by 2005. Net profit was SEK 562 million ($66.8 million), gaining more than 6% from SEK 529 million ($62.9 million) reported in second quarter 2002. SKF has regularly been making small acquisitions, and the company indicated it would continue on that course as opportunities arose; also indicating it would not rule out any larger acquisitions. By 2004, SKF said it expects to have made acquisitions contributing at least SEK 3 billion in annual sales. Although acquisitions during the past year were generally small and can go unnoticed, SKF has added nearly 1,400 employees via acquisition since first quarter 2002. Organic growth is expected to come from geographic expansion into new and underserved markets, especially in eastern Europe, leveraging into fast-growing customer segments, more profitable aftermarket sales, value-added service business and finally, new product introductions. Looking forward to next quarter, SKF predicts flat sales from 2002 on an expected drop in worldwide manufacturing output and continued overall softness in its markets outside Asia. As a result, no production schedule changes are being made.