Bloomberg News

SKF Sees Lower Demand as Markets for Cars, Railways Decline

October 19, 2011

(Updates with analyst comment in fifth paragraph.)

Oct. 19 (Bloomberg) -- SKF AB, the world’s largest maker of ball bearings, predicted demand will decline in the fourth quarter, bringing to a halt a phase of expansion as customers in the transport and energy industries curtail investments.

Demand for SKF’s products and services in the last three months of the year will likely be “slightly lower” than in the third quarter, the Gothenburg, Sweden-based company said in a statement today. The stock fell as much as 3.3 percent in Stockholm, the most in more than two weeks.

“There is uncertainty in the demand outlook,” Chief Executive Officer Tom Johnstone said in the statement, citing the car, truck, railway and wind energy markets. The company began reducing output at the end of the third quarter and will cut it further in the fourth quarter, it said today.

SKF is considered an industry bellwether because its bearings are used in products such as construction cranes and cars. The company is the first major Nordic manufacturer, a peer group which also includes Atlas Copco AB and Sandvik AB, to report earnings this quarter.

“The shares are down because of the lower demand,” said Michael Hagmann, an analyst at Nomura International Plc in London with a “neutral” rating on SKF. “That a company that’s so close to the pulse of the economy is only expecting a moderate decline in demand should come as a relief,” he added.

The shares fell as much as 4.6 kronor to 137 kronor and traded at 139.60 kronor at 1:56 p.m. The stock has lost 27 percent of its value this year. Atlas Copco, the biggest maker of compressors, has lost 19 percent in 2011.

Third Quarter

SKF’s third-quarter net income rose to 1.6 billion kronor ($240 million), or 3.52 kronor per share, from 1.39 billion kronor, or 3.05 kronor, a year earlier. Profit beat the 1.57 billion-krona average estimate in a Bloomberg survey of 14 analysts. Sales rose 7 percent to 16.5 billion kronor.

Scania AB, the Swedish truckmaker controlled by Volkswagen AG, plans to lower production at European factories by as much as 15 percent beginning in November as demand for commercial vehicles drops, that company said last week.

Atlas Copco is scheduled to report earnings on Oct. 21, while Sandvik AB, the world’s biggest manufacturer of metal- cutting tools, reports on Oct. 27.

--Editors: Benedikt Kammel, Jerrold Colten

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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