SKF Nine-month Report 2019

GOTHENBURG, Sweden, Oct. 22, 2019 /PRNewswire/ --

Alrik Danielson, President and CEO:

"SKF has managed the business well in a weakening economic environment and our efforts to reduce costs are contributing to a strong and stable operating margin in the quarter with an underlying margin of 11.3%. We had higher realized cost savings than cost increases, resulting in a positive net contribution to operating profit in the quarter.

Cash flow was SEK 2,120 million (SEK 1,626) – a strong performance, highlighting our ability to generate a strong cash flow, even in periods of a weaker demand.

Restructuring costs and customer settlements had a negative impact on operating profit of SEK 272 million. A VAT credit in Brazil had a positive impact of SEK 180 million. The reported operating profit for the quarter was SEK 2,288 million and the reported operating margin was 10.9% (12.2%).

As expected, we saw a decline in organic sales of 3% compared to last year, with net sales of SEK 21 billion. Sales were relatively unchanged in Asia, slightly lower in Europe, significantly lower in North America and slightly higher in Latin America.

The industrial business had yet another strong quarter with an underlying operating margin of 14.1% with a negative organic growth of 1.4% (+9.2%). Sales in Europe and Latin America were relatively unchanged, significantly lower in North America, but increased in Asia. The reported operating margin of 14.7% (14.3%), was impacted negatively by restructuring costs and positively by a VAT credit.

The automotive business had an underlying operating margin of 4.3%. Organic growth was negative 7.0% (+1.7%) with signif­icantly lower sales volumes in North America and Asia, lower sales volumes in Europe and significantly higher sales in Latin America. The reported operating margin of 1.1% (6.8%), was impacted negatively by costs related to customer settlements and restructuring.

We recently acquired Presenso, a developer of AI driven industrial analytics, to further strengthen our Rotating Equipment Performance offer. We continue to focus on developing our fee- and performance-based business, with customer wins in a number of markets. We also continue to increase the proportion of region-for-region manufacturing in the Group, with volumes being moved from our factory in Luton, UK to Nilai, Malaysia. Recently we successfully launched our Vehicle aftermarket eShop in Germany which will bring us closer to automotive end customers in the largest market in Europe.

In the fourth quarter of 2019, we expect to see lower volumes for the Group, slightly lower for Industrial and lower for Automotive."

*including restructuring and impairments

Outlook and guidance

Demand for Q4 2019 compared to Q4 2018

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 relatively unchanged in Asia, lower in Europe, significantly lower in North America and higher in Latin America.

Guidance Q4 2019

• Financial net: SEK -250 million

• Currency impact on the operating profit is expected to be around SEK +250 million compared with 2018, based on exchange rates per 30 September 2019.

Guidance 2019

• Tax level excluding effect related to divested businesses: around 29%. Previous guidance was 28%.

• Additions to property, plant and equipment: around SEK 3,100 million. Previous guidance was 2,800 million.

A teleconference will be held on 22 October 2019 at 14:00 (CET):

Conference ID: SKF or 4090618

Standard International: +44 (0) 2071 928000

Sweden: +46 (0)8 5069 2180

United States: +1 631 510 7495

Website: http://investors.skf.com/en/result-centre

Aktiebolaget SKF

      (publ)

The information in this press release is information which AB SKF is required to disclose under the EU Market Abuse Regulation (EU) No 596/2014 The information was provided by the above contact persons for publication on 22 October 2019 at 13:00.

For further information, please contact:

PRESS: Theo Kjellberg, Director, Press Relations

tel: +46-31-337-6576, mobile: +46-725-776576, e-mail: theo.kjellberg@skf.com

INVESTOR RELATIONS: Patrik Stenberg, Head of Investor Relations

Patrik Stenberg, +46-31-337-2104; +46-705-472-104; patrik.stenberg@skf.com

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