Half Year 2019 AB SKF Earnings Call

50 Goteborg Jul 18, 2019 (Thomson StreetEvents) -- Edited Transcript of AB SKF earnings conference call or presentation Wednesday, July 17, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alrik Danielson

AB SKF (publ) - President, CEO & Director

* Carina van den Berg

* Niclas Rosenlew

AB SKF (publ) - Senior VP & CFO

* Patrik Stenberg

AB SKF (publ) - Head of IR

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Conference Call Participants

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* Alexander Stuart Virgo

BofA Merrill Lynch, Research Division - Director

* Andre Kukhnin

Crédit Suisse AG, Research Division - Mechanical Engineering Capital Goods Analyst

* Andrew J. Wilson

JP Morgan Chase & Co, Research Division - Analyst

* Benedict Ernest Uglow

Morgan Stanley, Research Division - MD and Head of European Capital Goods Equity Research

* Erik Golrang

Skandinaviska Enskilda Banken AB (publ.) - Analyst

* Klas Henrik Bergelind

Citigroup Inc, Research Division - Director

* Lars Wauvert Brorson

Barclays Bank PLC, Research Division - Director

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Q2 report 2019 conference call. (Operator Instructions) I must advise you the conference is being recorded today, Wednesday, the 17th of July 2019.

I would now like to hand the call over to your first speaker today, Patrik Stenberg. Please go ahead.

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Patrik Stenberg, AB SKF (publ) - Head of IR [2]

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Thank you, and good morning, everyone. Welcome to the conference call on the second quarter results for SKF. Today's speakers are President and CEO, Alrik Danielson; and our Senior Vice President and CFO, Niclas Rosenlew. Carina van den Berg, Theo Kjellberg and myself, Patrik Stenberg, are also present here in the room representing Group Controlling, Media Relations and IR.

As usual, we will start by presenting the results. It will probably take about 20 to 30 minutes. And we will follow that up by a Q&A session.

So with that, welcome once again, and I leave the world -- the word to Alrik. Please?

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Alrik Danielson, AB SKF (publ) - President, CEO & Director [3]

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Thank you. Thank you. Welcome to what I see as yet another strong quarter from SKF.

We have seen in the second quarter a strong operating performance on lower volumes. Our efforts to keep costs under control are showing good results in a market with lower demand.

Operating profit for the second quarter was SEK 2.5 billion, including costs for restructuring and impairments of SEK 317 million.

The underlying operating margin was 12.7%, the sixth straight quarter above 12% in a row. Our operating performance was positively impacted by cost reductions and price. Restructuring and impairment costs, on the other hand, had a negative impact.

Net sales were SEK 22.5 billion, a drop in organic sales of 1.6% compared to last year. Sales were relatively unchanged in Europe, slightly lower in Asia and North America and significantly higher in Latin America. And cash flow from operations, which is always one of our fortes, was in line with last year.

If we turn to the next page. A few comments about the industrial business. The industrial business had yet another strong quarter with operating margins of almost 14%, it was 14.6% (sic) [14.7%] last year, and organic growth of 0.5% (sic) [0.6%].

The underlying net operating margin was higher than last year, with restructuring costs and impairment impacting reported result negatively. Sales in Europe and Asia and North America were relatively unchanged but increased in Latin America.