Bearings maker SKF posts narrow profit beat as demand recovers

STOCKHOLM (Reuters) - SKF, the world’s biggest maker of industrial bearings, forecast on Tuesday further sales growth in the third quarter after reporting earnings slightly above forecasts despite negative currency effects and rising costs.

SKF reported its organic net sales jumped by a third in the second quarter from the depths of the coronavirus pandemic a year earlier, helped by a strong recovery in demand from the auto industry. Its automotive business, which generates about 30% of overall sales, soared 75.9% while the industrial division, which accounts for 70% of sales, reported a 21.7% rise in sales.

The Swedish firm, which competes against Germany’s Schaeffler said it expected an organic growth of around 10% in the third quarter compared with a year ago.

SKF reported second-quarter operating earnings of 2.88 billion Swedish crowns ($331.3 million), above the 2.81 billion forecast in a Refinitiv poll, and well above 669 million reported a year earlier.

“This is the strongest EBIT beat so far this quarter in the sector,” investment bank Jefferies said in a note, noting that adjusted operating margin in the industrial division grew to 18% from 14% in the year-ago quarter.

SKF shares, which were unchanged so far this year through Monday, were up 2.5% at 0703 GMT.

Chief Executive Officer Rickard Gustafson, who took the reins last month, warned however that strain on the supply chain would continue to “be a theme” also in the third quarter.

“The pandemic, as we all know, is far from over. We are still wrestling with this... And the supply situation is still a challenge, but we do believe that demand growth will continue,” he told analysts and reporters.

SKF had said in April that the global semiconductor shortage that has forced global automakers to cut production in recent months could have a “minor effect” in the second quarter.

($1 = 8.6930 Swedish crowns)

Reporting by Helena Soderpalm; editing by Niklas Pollard, Shailesh Kuber and Tomasz Janowski