© Reuters.
By Niklas Pollard
STOCKHOLM (Reuters) -Sweden’s SKF, the world’s biggest maker of industrial bearings, reported adjusted fourth-quarter earnings that beat market expectations on Wednesday, shrugging off a slowdown in like-for-like sales to send its shares up 7%.
SKF reported operating earnings excluding items affecting comparability of 2.93 billion crowns ($281 million) in the quarter compared to 2.54 billion a year earlier and a mean forecast of 2.76 billion, according to LSEG analyst estimates.
The rival of Germany’s Schaeffler weathered a year of strong cost inflation in 2023, offsetting it through price hikes and product portfolio pruning as it navigated decent if uncertain demand that tapered off towards year-end.
The manufacturer, seen as bellwether for global industrial demand due to its wide customer base, said it expected a mid-single-digit like-for-like sales decline in the first quarter and a low-single-digit drop for the full year.
The Gothenburg-based manufacturer said sales fell 1.9% on an organic, or like-for-like basis in the final quarter of 2023.
“In the quarter, we saw lower customer demand in all of our regions due to the economic slowdown, partially offset by effective price & mix management,” SKF CEO Rickard Gustafson said in a statement.
“In 2024, we expect to see continued market volatility and geopolitical uncertainty and the business is prepared to tackle different scenarios.”
The company booked bigger-than-expected one-off costs of 1.0 billion crowns in the fourth quarter, stemming from restructuring, currency devaluation in Argentina and impairments due to factory closures.
In recent months the global outlook has been muddied as ships are forced to reroute to avoid key Red Sea shipping lanes attacked by the Houthis, who control parts of Yemen and say they are acting in solidarity with Palestinians in the Gaza war.
Gustafson told Reuters SKF was reviewing alternatives, such as different routes and modes of transport, while building small inventory buffers to ensure customers were not hit while also discussing with them how to shoulder associated costs.
“Our ambition of course is to do what we can to get compensated for this cost increase,” he said. So far production stoppages related to the shipping issues in industries such as autos had not yielded any greater impact on SKF, he added.
“This is not a huge problem for us right now, touch wood. But that’s where we are right now and of course something we’re following closely.”
($1 = 10.4271 Swedish crowns)
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