Alrik Danielson, President and CEO:

“2019 has been a solid year for SKF. We saw stable demand during the first half of the year. During the last six months, we maintained a strong operating result, despite falling demand. A consistent focus on cost reduction, especially during the fourth quarter, where cost reductions more than compensated for cost inflation, has allowed us to continue to deliver solid results, whilst continuing to invest in our factories and in R&D.

During the fourth quarter, we delivered a strong underlying operating margin of 10.3% (10.4% last year) and an underlying operating profit of SEK 2,181 million (2,197).

We saw a drop in organic sales of 2.9%, with net sales of SEK 21.2 billion. Sales were higher in Asia, driven by strong demand in China, slightly lower in Europe, significantly lower in North America and significantly higher in Latin America.

The industrial business delivered an underlying margin of 13.3%, higher than last year (12.9%), despite a drop in organic sales of 1.2%. Sales were significantly higher in Asia, relatively unchanged in Europe and Latin America and significantly lower in North America.

The automotive business delivered an underlying margin of 2.4% (3.8% last year), due to a fall in organic sales of 7.5%. Sales were significantly lower in Europe and North America, lower in Asia and significantly higher in Latin America.

During the fourth quarter we have taken steps to create a more efficient structure for our support functions. The new way of working and resulting organizational changes are being implemented during 2020-2021 and will see the creation of regional centers of excellence.

Investments supporting our regional manufacturing strategy continue as planned and the recently announced ball bearing factory in Xinchang is ramping up production during the first quarter, as announced in June 2019.

The testing of our bearings with fibre optical load sensors has moved over to the next stage, with equipped large-size bearings soon to be deployed to a mine in northern Sweden. These bearings analyze loads in real-time, giving customers and SKF even more insights into the performance of rotating machinery.

In the first quarter of 2020, we expect to see lower volumes for the Group, slightly lower for Industrial and lower for Automotive, compared to Q1 2019.

SKF is well-positioned for the future. We have a track record of strong financial performance, which has enabled us to pay down debt and increase investments in manufacturing and R&D during 2019. In recognition of this, the Board has proposed to increase the dividend to SEK 6.25 per share.”

  Key figures, SEKm    Q4 2019    Q4 2018    2019    2018    

Net sales    21,208    21,192    86,013    85,713    

Operating profit    1,910    2,902    9,395    11,049    

Operating margin, %    9.0    13.7    10.9    12.9    

Profit before taxes    1,722    2,636    8,469    10,188    

Net cash flow after investments before financing    701    4,259    4,953    8,326    

Basic earnings per share    2.27    4.63    12.2    16.0    

Net sales change y-o-y, %, Q4    Organic    Structure    Currency    Total    

SKF Group    -2.9    -1.8    4.8    0.1    

Industrial    -1.2    -2.6    4.6    0.8    

Automotive    -7.3    0.2    5.3    -1.8    

Net sales change y-o-y, %, 2019    Organic    Structure    Currency    Total    

SKF Group    -2.0    -2.3    4.7    0.4    

Industrial    0.1    -3.3    4.7    1.5    

Automotive    -6.8    0.1    4.3    -2.4    

Organic sales change in local currencies, per region y-o-y, %, Q4    Europe    North America    Latin America    Asia    Middle East & Africa
     

SKF Group    -3.0    -15.9    8.2    4.3    13.4    

Industrial    +/-    ---    +/-    +++    +++    

Automotive    ---    ---    +++    --    +++    

Organic sales change in local currencies, per region y-o-y, %, 2019    Europe    North America    Latin America    Asia    Middle East & Africa
     

SKF Group    -1.9    -7.8    5.6    0.7    1.8    

Industrial    +/-    --    +/-    +    +/-    

Automotive    --    ---    +++    --    +++    

Outlook and guidance

Demand for Q1 2020 compared to Q1 2019

The demand for SKF’s products and services is expected to be lower for the Group, including slightly lower demand for Industrial and lower demand for Automotive. Demand is expected to be slightly higher in Asia, lower in Europe, significantly lower in North America and significantly higher in Latin America.

Guidance Q1 2020

Financial net: SEK -225 million

Currency impact on the operating profit is expected to be around SEK +60 million compared with Q1 2019, based on exchange rates per 31 December 2019.

Guidance 2019

Tax level excluding effect related to divested businesses: around 28%.

Additions to property, plant and equipment: around SEK 3,300 million.