SKF Q2 Sales & Profit Continue Slide As Cost Cuts Take Hold

SKF says its recent cost reduction moves are materializing according to plan, while it expects Q3 product demand to be seasonally weaker.

Swedish bearings maker SKF reported its 2016 second quarter financial results on Thursday, highlighted by a continued decline in year-over-year sales and profit.

SKF — which on June 9 announced the closure of its San Diego and Baltimore plants and consolidation of its Hanover, PA site — posted Q2 sales of $2.14 billion, down 8.4 percent from a year ago. That follows an 8.9 percent YOY decline in Q1. Organic sales in Q2 were down 4.4 percent YOY and up 4 percent from Q1.

Compared to last year, Q2 SKF organic sales were down 13.1 percent in North America, up 1.8 percent in Europe, down 2.1 percent in Latin America, down 5.9 percent in Asia and up 1.8 percent in Middle East & Africa.

"Although markets remain challenging, our cost reduction initiatives are materializing according to plan," said SKF president and CEO Alrik Danielson. "Cash flow generation was a solid $140 million (excluding divestments and acquisitions), around $58 million higher than last year. This continued resilient performance is a sign that we are on the right track in our effort to shape SKF into being leaner, more customer-focused and competitive."

SKF's industrial market sales accounted for 70.1 percent of the company's total. Industrial sales were down 9.3 percent year-over-year, but up 4.4 percent from Q1.

The company's Q2 net profit was $82 million, compared to $200 million a year earlier. SKF's divestment of its Kaydon Velocity Control Business was completed on June 30 and had a negative $44.1 millio impact on profit. Q2 operating profit was $220 million, compared to last year's $280 million.

"As we look ahead, we see signs of the market stabilizing," Danielson said. "Entering the third quarter of 2016, demand for SKF’s products and services is expected to be relatively unchanged compared to the same period last year. Sequentially, demand is expected to be weaker, in-line with normal seasonality.”

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