Rickard Gustafson, SKF president and CEO, is pictured.
Photo courtesy SKF

After a strategic review of its aerospace business, SKF plans to shed two facilities with a billion dollars worth of sales each year.

Those facilities won’t include the SKF facility in Falconer, though the local plant could see increased investment in the future. SKF Falconer produces bearings and components for the aero engine and helicopter sub segments. The strategic review of its aerospace business is part of an SKF to strengthen and invest in its core aerospace business while also considering options to fully or partially exit business lines that company officials consider outside its core business.

Investment in core plants will include accelerated investments, including digitalization, automation and additional modernization activities of the group’s factories.

“The aerospace industry is a high-growth, high-tech industry,” Rickard Gustafson, SKF president and CEO, said in a news release. “We have strong positions within the industry, where we will continue to play an important role. By focusing on our core business and seeking strategic options to areas outside of our core, we will unlock the full potential of this business.”

The two areas SKF is exploring options to exit, which officials term high-quality business lines that are non-strategic to the future platform of SKF aerospace, are related to the aerospace businesses in the Group’s Hanover and Elgin facilities which include mechanical seals, rings, and precision elastomeric devices. The factories represent about 20% of the company’s aerospace revenues.

“By focusing on core areas with accelerating investments, we will be an even stronger partner to our Aerospace customers. Hanover and Elgin are high-quality businesses, but outside of our core,” said Thomas Fröst, SKF president of Independent & Emerging Business. “These high-performing organizations with attractive business prospects will have even greater potential with the right owner or partner.”

‘CASH FLOW REMAINS STRONG’

SKF’s third quarter financial reports show net sales of $25.8 billion in the quarter. Adjusted operating profit in the third quarter was $3 billion with a margin of 11.5%. Pricing, cost management and continuing portfolio pruning actions contributed positively to profitability, offset by declining volumes and what SKF officials termed negative business mix effects.

Cash flow from operations was $3.4 billion as company officials continued activities to improve net working capital, mainly through reduced inventories.

In the quarter one of SKF’s factories in Lutsk, Ukraine, was hit by a Russian missile attack. Three SKF employees were killed and the factory was damaged. After the attack, production was suspended and alternative supply chain options and re-routing of production from Lutsk to other factories were activated to mitigate any impact on customers.

The fourth quarter is likely to see lower demand, according to Gustafson, as customers reduce inventories.

“I would like to thank all SKF employees for their hard work and ability to mitigate the impact of the gradual weakening of demand and the attack on our Ukraine factory in the third quarter,” Gustafson said in his quarterly report. “Going into the final quarter of the year, we expect a continued lower demand scenario, and volatility and geopolitical uncertainty continue to impact the markets in which we operate.”

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