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UPDATE 2-SKF lifts prices as recovery takes hold in Europe, N.America
January 28, 2014 / 3:05 PM / 4 years ago

UPDATE 2-SKF lifts prices as recovery takes hold in Europe, N.America

* Sees slightly higher group demand in Q1 vs Q4

* Sees growth in Europe, North America

* Sees weaker demand in Latin America

* Says has introduced 3 pct price hike in January

* Q4 core profit 1.8 bln SEK vs forecast 1.9 bln (Adds price increase, CEO, analyst, share price)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, Jan 28 (Reuters) - SKF, the world’s biggest bearings maker, has lifted prices, forecasting higher demand in the coming months as an economic recovery takes hold on both sides of the North Atlantic and eclipses a slowdown in some emerging markets.

The firm, a bellwether for global manufacturing with its bearings used in products from dishwashers to wind turbines, said on Tuesday it had rolled out list price increases of around three percent in Europe, North America and parts of Asia - the first increases in the former two regions in about 18 months.

“The outlook is mildly optimistic with first-quarter guidance a bit better in Europe and North America, and that’s what we have been waiting to see,” Berenberg analyst Alexander Virgo said. “It doesn’t sound like it’s that great, but it’s certainly better than being down.”

Shares in SKF were up 5.8 percent by 1445 GMT, outperforming a 0.9 percent advance in the European industrials index.

While gauges of business sentiment have been on the rise for months in some major European markets such as Germany, solid evidence of an upturn have been slow to filter down to factory floors at industrial companies such as SKF.

The Swedish firm, whose rivals include U.S. group Timken and Germany’s Schaeffler AG, said it expected demand to increase slightly in North America and Europe in the first quarter of this year, marking the first real sign of recovery in Europe since 2011.

“We expect to see Europe improve a little bit,” Chief Executive Tom Johnstone told a news conference, pointing to an improvement in markets such as Germany, Eastern Europe and even crisis-hit Spain, although France remained weak.

An upturn in the automotive industry powered a modest recovery in demand during the final quarters of last year for the SKF.

In Europe, home to about half of group sales, activity only marginally edged up last year from lows hit at the height of the region’s debt crisis, while a U.S. industrial upturn, driven by the shale gas boom, has also been stop and go.


SKF, which racked up its first rise in sales volumes in two years in the third quarter, said growth in the final three months had picked up pace to 7.1 percent, the fastest since mid-2011 and higher than the 4.3 percent forecast by analysts.

A storm cloud on the horizon is the hitherto fast-growing emerging markets, where SKF generates roughly a third of its revenues but where investor concerns have mounted over the past week amid a flight from developing world assets.

Gothenburg-based SKF said it expected demand to decline slightly in Latin America in the coming months while remaining roughly unchanged in Asia, where activity had been expanding as late as the preceding quarter.

SKF said its fourth-quarter adjusted operating profit rose to 1.8 billion crowns ($279.9 million) from 1.52 billion in the same period last year, just missing a mean forecast of 1.92 billion in a Reuters poll of analysts.

The earnings figure excludes previously announced one-off items, primarily a charge of 3 billion crowns for an expected European Commission antitrust fine.

$1 = 6.4312 Swedish crowns Editing by Louise Heavens and Mark Potter

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