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2016-02-02

SKF: SKF Year-end report 2015

Gothenburg, 2 February 2016:

Alrik Danielson, President and CEO:

"Customer demand developed in-line with our expectations during the
quarter, with the exception of North America, which saw a sharper
decline than anticipated reflecting both lower demand and destocking
in the supply chain. Sales in local currency declined by 5%, driven
mainly by lower sales volumes within Industrial Market, which could
not be counteracted by increased volumes within Automotive Market.

Faced with challenging market conditions, we focused significant
efforts on strengthening our balance sheet and adjusting our
organizational structure and ways of working during the year.

With that in mind, I am pleased to report continued strong levels of
cash flow, declining net working capital and reduced net debt.

The structural changes implemented during the year have made us leaner
and more focused on supporting our core business: bearings and
solutions that support rotating shaft machinery efficiency. Our cost
reduction programme has been delivered on time, affecting 2 100
employees. In addition, temporary and agency personnel were reduced
by around 400. Activity-based cost reductions continue across the
Group, as do our efforts to divest non-core businesses.

In order to reflect the market conditions, competitive landscape and
industrial activity levels we foresee and the consequential reshaping
of the company, the Group's financial targets have been adjusted. The
new targets are to achieve, over a business cycle, an organic sales
growth of five percent in local currencies and a reported operating
margin of 12 percent, according to IFRS. On the capital side, we have
increased our ambition to manage our working capital in an efficient
manner and the new target is to reach a net working capital of 25
percent of sales. The target for return on capital employed (ROCE)
has been adjusted to 16 percent, as a consequence of the operating
margin target. Our target of achieving a net debt/equity ratio of 80
percent remains unchanged. Although we have more hard work ahead of
us, I believe these targets can be achieved.

Entering the first quarter of 2016, we expect macro-economic
uncertainty to continue. As a result, we expect demand to be
relatively unchanged sequentially but slightly lower year-on-year.

The markets we operate in remain challenging, but I am convinced that
we will benefit from the structural changes we have implemented and
our increased focus on customer applications."

Key figures, SEKm Q4 2015 Q4 2014 2015 2014
Net sales 18 215 18 499 75 997 70 975
Operating profit excl. one-time 1 726 2 078 8 655 8 291
items
Operating margin excl. one-time 9.5 11.2 11.4 11.7
items, %
One-time items in operating -687 -470 -1 687 -490
profit
Operating profit 1 039 1 608 6 968 7 801
Operating margin, % 5.7 8.7 9.2 11.0
Profit before taxes, excl. 1 626 1 763 7 857 7 258
operating and financial one-time
items,
Profit before taxes 653 1 293 5 834 6 668
Net cash flow after investments 1 966 2 126 6 416 2 137
before financing

Net sales change y-o-y, %: Organic Structure Currency Total
Q4 2015 -5.2 -1.0 4.7 -1.5
Full year -2.6 -0.5 10.2 7.1

Organic sales change in local Europe North Latin Asia Middle
currencies, per region y-o-y, America America East &
%: Africa
Q4 2015 0.3 -12.7 -0.5 -8.7 10.8
Full year 0.4 -8.1 0.5 -4.2 13.2

Dividend Proposal
The Board has decided to propose an unchanged dividend of SEK 5.50 per
share to the Annual General Meeting.

Outlook for the first quarter 2016

Demand compared to the first quarter 2015
The demand for SKF's products and services is expected to be slightly
lower for the Group. Demand for the Automotive Market and Specialty
Business is expected to be relatively unchanged, while demand for the
Industrial Market is expected to be lower. Demand is expected to be
relatively unchanged in Europe, slightly lower in Asia and Latin
America and significantly lower in North America.

Demand compared to the fourth quarter 2015
The demand for SKF's products and services is expected to be
relatively unchanged for the Group. Demand for the Automotive Market
is expected to be higher, demand for Specialty Business to be
slightly higher and demand for Industrial Market is expected to be
relatively unchanged. Demand is expected to be higher in Europe,
slightly lower in North America and lower in Latin America and Asia.

A teleconference will be held on 2 February 2016 at 14:00 (CEST):
SE: +46 8 5065 3937
UK: +44 20 3427 1904
US: +1 646 254 3365

You will find all information regarding the SKF Year-end report 2015
on the IR website.

Aktiebolaget SKF
(publ)

AB SKF is required to disclose the information provided herein
pursuant to the Securities Markets Act and/or the Financial
Instruments Trading Act. The information was submitted for
publication at 13:00 on 2 February 2016.

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

SKF is a leading global supplier of bearings, seals, mechatronics,
lubrication systems, and services which include technical support,
maintenance and reliability services, engineering consulting and
training. SKF is represented in more than 130 countries and has
around 15,000 distributor locations worldwide. Annual sales in 2014
were SEK 70 975 million and the number of employees was 48 593.
www.skf.com

® SKF is a registered trademark of the SKF Group.

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http://news.cision.com/skf/r/skf-year-end-report-2015,c9906108
http://mb.cision.com/Main/637/9906108/471657.pdf

Författare WKR

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