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By Niklas Pollard
STOCKHOLM (Reuters) -Sweden’s SKF cut its outlook for like-for-like annual sales on Friday after the world’s biggest maker of industrial bearings narrowly missed third-quarter core earnings expectations.
The manufacturer, seen as a gauge of global industrial demand, forecast a fall in fourth-quarter like-for-like sales as a slowing economy weighs.
SKF said adjusted operating earnings rose by 39% to 2.96 billion Swedish crowns ($266 million) in the third quarter from 2.13 billion a year earlier to come in just below analysts’ mean forecast of 3.06 billion, LSEG estimates showed.
SKF’s sales suffered a “marked deceleration”, analysts at Jefferies wrote in a research note, but added that margins were broadly in line with expectations, calling the results “a good achievement given the volume backdrop”.
Shares in the company were up 0.6% at 0721 GMT.
SKF, whose rivals include Germany’s Schaeffler, has been raising prices in recent quarters, largely offsetting the impact of strong if uncertain and somewhat patchy demand.
In the third quarter, sales fell 0.6% on a like-for-like basis, missing SKF’s own expectations, hurt by slower demand in China, mainly in wind power, and North American destocking.
Volumes were negative in Europe as well, but CEO Rickard Gustafson told Reuters that pricing and product mix had more than offset the impact there while demand had held up better in western Europe than further east.
“In a situation where (cost inflation) is flattening out and demand is lower, there will be pressure from many of our customers. Here I would argue that we’ve been pretty good historically at holding on to prices,” he said.
The Gothenburg-based manufacturer forecast a “low single-digit decline” in like-for-like sales growth for the fourth quarter.
It cut its annual sales growth outlook to “mid to low single-digit” growth from a “high-single-digit” rise.
“During the quarter we continued to see a slowdown in demand from a weakening economic sentiment and customers reducing their inventories,” Gustafson said in a statement.
“Beyond 2023, we expect continued volatility and geopolitical uncertainty where we are preparing the business for different scenarios,” he added.
SKF has completed a strategic review of its aerospace business, and aims to fully or partially exit business lines which account for about 1 billion crowns in annual sales.
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