By Bearings News>Lily Bearings
©2004-2011
SKF, the world's top bearings maker, reported little sign of a brightening economic outlook and said patchy business would make 2010 more challenging than last year.
The manufacturing bellwether, whose products are used in everything from dishwashers to passenger jets, on Thursday posted fourth-quarter sales and earnings below forecasts and said it expected first-quarter demand to be "slightly higher".
"As the demand outlook is still uncertain we will continue to adapt our cost structure while stepping up our activities in the faster growing areas of our business and in developing new environmental offerings," the Swedish company said.
Fourth-quarter pretax profit fell nearly a third to 765 million Swedish crowns ($105 million), below a forecast for 833 million in a Reuters poll.
"I see 2010 as a much more challenging environment than in 2009," SKF Chief Executive Tom Johnstone said. "Some segments are going up, some segments are going down, some regions are going up, and some regions are not recovering yet.
"So it's quite a challenging year to manage both expansion and braking, and both cost reduction and investing in growth going forward," he told a news conference.
SKF shares were down 5.8 percent at 1454 GMT, with the Stockholm bourse's blue-chip index .OMXS30 up 0.4 percent.
"I would say that we have seen similar stock price reactions yesterday from the U.S. companies in our space which have reported with a muted outlook," Nomura analyst Rahul Garg said. "That is true also for SKF because the outlook statement is quite cautious with industrial markets just expected to stabilise quarter on quarter."
Caterpillar (CAT.N), the world's largest maker of construction and mining equipment, also gave an unexpectedly guarded view of the coming year this week. [ID:nN21182482]
LONG WAY BACK
SKF and peers across the manufacturing industry saw sales dry up in a matter of weeks when the global financial crisis struck in 2008, cutting off access to credit and sending economies across the world deep into recession.
Since then, massive stimulus by governments and central banks has underpinned tentative recovery, evidenced this week in the 10th consecutive monthly rise in business sentiment in Germany, the biggest economy in SKF's key European market. [nLDE60P0PG]
But the strength of the upturn remains in doubt and for industrial companies such as SKF the booming demand of the pre-crisis years remains a distant memory.
"Demand for the group improved slightly in the quarter but was still significantly lower than a year ago," SKF said. "Additional steps were taken to further adapt our manufacturing structure and costs towards a lower level of demand."
Sales also lagged forecasts, falling to 13.9 billion crowns from 16.3 billion, while analysts had expected 14.3 billion.
Unit sales volumes in the period fell 14.1 percent year-on-year versus a forecast for a 12.2 percent decline.
"The top line and earnings came in a bit short overall, but the share price reaction is a bit overdone. Still, expectations were really a bit higher with the usual hopes that they would provide a positive surprise," Swedbank analyst Mats Liss said.
Weak market conditions have also heaped pressure on prices for manufacturers such as SKF though Johnstone said he still expected prices and product mix to have small positive impact on sales volume growth in the first quarter.
SKF, which slashed thousands of jobs to cope with the downturn, proposed a dividend of 3.50 crowns, meeting expectations it would keep its payout unchanged. (Additional reporting by Victoria Klesty and Veronica Ek; Editing by Mike Nesbit and Dan Lalor) ($1 = 7.267 Swedish crowns)