Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SKF AB (SKFRY, Financial) maintained a strong adjusted operating margin of nearly 12% despite challenging market conditions.
- The company reported a robust cash flow of SEK3.6 billion, surpassing the same quarter last year.
- SKF AB (SKFRY) successfully executed strategic portfolio management, including bolt-on acquisitions and divestments, to strengthen its business.
- The Industrial business achieved a 15% adjusted operating margin, an improvement from the previous year.
- The company is progressing with its plan to separate its Industrial and Automotive businesses, aiming to list the Automotive business by the first half of 2026.
Negative Points
- SKF AB (SKFRY) experienced a negative organic growth of 4%, primarily due to weaker demand in China and the automotive sector.
- The company faced significant negative organic growth in China, with a decline of nearly 9%, impacting its overall performance.
- There was a notable reduction in sales, from SEK25.8 billion last year to SEK23.7 billion this quarter.
- The ongoing regionalization and manufacturing footprint optimization efforts are causing short-term inefficiencies and margin pressures.
- The wind sector in China continues to be a challenge, with no significant improvement in demand.
Q & A Highlights
Q: Can you elaborate on the current macro environment and inventory levels at your customers, and how does this affect your pricing strategy?
A: Niclas Rosenlew, CFO, explained that there are no significant changes in inventory levels, with some exceptions in China and the US. Pricing remains selective, focusing on value-based strategies and new product launches rather than broad-based increases.
Q: Why did you choose to list the automotive business instead of considering a sale, as you did with the aerospace divestment?
A: Rickard Gustafson, CEO, stated that the automotive business is deeply integrated with the industrial segment, making a listing more beneficial for value creation for employees, customers, and shareholders.
Q: Was there any significant impact on operating profit and margin from production dynamics in the quarter?
A: Niclas Rosenlew, CFO, noted that there were no significant impacts on profitability or margins from production dynamics, indicating normal fluctuations.
Q: Can you provide insights into the profitability of the aerospace business you are divesting?
A: Rickard Gustafson, CEO, mentioned that the divested aerospace business does not significantly differ in margin from the remaining aerospace operations, but specific margin details were not disclosed.
Q: How is the wind sector in China affecting your business, and do you expect this trend to continue?
A: Rickard Gustafson, CEO, explained that the wind sector in China has been challenging but is now stabilizing at a low level, with no further deterioration expected.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
