GOTHENBURG, Sweden — SKF President and CEO Rickard Gustafson on Thursday announced the company's financial results for the first quarter of 2023:
"I’m pleased to report a solid quarter with strong organic sales growth and a record high adjusted operating profit for a first quarter.
In the period, we delivered an organic sales growth of more than 10%, with continued robust demand across all our regions. Most of our targeted high-growth segments contributed with double-digit growth, e.g. railway, renewable energy and aerospace.
The adjusted operating profit improved to SEK 3,478 million (3,058), with an adjusted operating margin of 13.1% (13.3%). Through active and ongoing portfolio management and pricing activities, we have been able to offset cost inflation in the quarter.
Our Industrial business saw strong demand across all regions and most segments, with an especially high demand in India & Southeast Asia. In Europe, Middle East & Africa, price/mix was the main contributor to the overall sales growth. In China & Northeast Asia, demand bounced back in many industries, e.g. wind and industrial distribution. All in all, organic growth came in at 9.5%. The Industrial business, also delivered a robust result of SEK 3,208 million (2,775), with an adjusted operating margin of 16.9% (16.8%). It’s very satisfactory to note that all business areas improved their underlying profitability in the quarter, both sequentially and versus the same quarter last year.
Our Automotive business delivered an organic growth of 11.9% and an adjusted operating margin of 3.6% (4.4%). Despite the profitability comparison to last year, it is encouraging to see that the underlying business performance is on a positive trajectory as we progress our ongoing portfolio shift and emphasis on electrical vehicles. Also in this quarter, we have several new customer wins supporting our strategic re-positioning.
Our focus on improving cash efficiency is continuing to show results, with net cash flow from operations exceeding SEK 2.7 billion (-0.3 billion last year). This was driven mainly by the higher operating profit and our efforts to improve net working capital.
Delivering on our strategic transformation
We continue to diligently work on executing our strategy, increasing our efficiency and reducing fixed costs. During the quarter, the total workforce has been reduced by approximately 560 employees.
Our operating model has enabled an accelerated momentum in our prioritized industry segments within each business area. In high-speed machinery for example, our wide range of super precision bearings, with more than 50% of ceramic rolling elements, are growing rapidly. As an example, we won a sizable contract with a Swiss producer of high-end motor spindles in the quarter.
The first quarter also marked an important milestone for SKF, the celebrations of SKF’s 100 years of operations in India. Strong local presence and well-established supply chains are key to take advantage of future growth opportunities in the region. This gives us a strong foundation for future profitable growth.
Another important achievement in the quarter was the approval and validation from the Science Based Targets initiative (SBTi) for our scope 1, 2 and 3 emissions reduction targets for 2030 and 2050. Sustainability is an integrated part of our strategic framework and a competitive advantage for SKF. Our annual clean tech revenues now exceed SEK 10 billion.
The strong financial development and business achievements during the quarter are to a large extent the result of hard work and dedication by our employees. I would like to express my sincere appreciation to all colleagues and partners across the SKF footprint. Furthermore, I would also like to recognize the co-creation work, by thousands of colleagues, to define our purpose: “Together, we re-imagine rotation for a better tomorrow”. Thanks to the efforts by so many people, we’re now ready to embark on the journey to become a purpose-driven company.
Given our strong sales growth in the first quarter, we adjust our full year guidance upwards somewhat. Looking into the second quarter of 2023, as well as the full year, we now foresee high single-digit organic sales growth. However, we expect continued volatility and geopolitical uncertainty impacting the markets in which we operate.”