UPDATE 1-SKF forecasts flat demand after in line Q2 profit

Tue Jul 15, 2014 2:29am EDT

Related Topics

* SKF sees flat European demand, Latam slowdown

* Says global markets still marked by uncertainty

* Says manufacturing level roughly unchanged in Q3

* Q2 EBIT 2.10 bln SEK vs forecast 2.10 bln (Adds detail, background)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, July 15 (Reuters) - Sweden's SKF, the world's biggest bearings maker, said on Tuesday that it expected demand to remain flat in the third quarter amid lingering uncertainty in global markets after posting a rise in second quarter earnings in line with forecast.

After a solid if not stellar start to the year where caution among industrial players in Europe and harsh U.S. weather tempered growth, manufacturing bellwether SKF said sales volumes rose a slightly better than expected 3.6 percent.

SKF, whose products make their way into equipment ranging from dishwashers to passenger jets, said flat demand in Europe and a slowdown in Latin America was likely to offset slightly higher activity in North America and Asia in coming months.

"Looking forward and taking account of the continued uncertainty in the global market place we expect that in the third quarter overall demand for our products and services will stay on the same level," the company said.

The Gothenburg-based company also said the run rate in its manufacturing was expected to be roughly unchanged.

While growth in the car industry has powered a modest upturn in demand, SKF's profitability has been under pressure due to the growing share of automotive business, where margins are thinner than on sales into other industrial sectors.

Operating profit at SKF, which generates roughly a quarter of its sales in the automotive industry, rose to 2.10 billion crowns ($309.2 million) from a year-ago 1.84 billion, in line with a mean forecast of 2.11 billion in a Reuters poll of analysts.

The company, a competitor of U.S. Timken and Germany's Schaeffler AG, posted an operating margin of 11.7 percent compared to a year-ago 11.2 percent, just below the 11.9 percent seen by analysts. Its long-term target is 15 percent.

Taking heart from firming demand, SKF announced list price increases of 3 percent in Europe and North America earlier this year, its first in 18 months for the two regions which together account for two thirds of turnover.

"While the business mix remained somewhat negative the steps we are taking to improve the price/mix gave positive results," the company said. ($1 = 6.7909 Swedish Crowns) (Editing by Alistair Scrutton)

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