SKF Shares Slips As 1Q Demand Disappoints--Update

By Christina Zander

STOCKHOLM--Shares in Swedish ball bearing maker SKF plunged Friday as the company reported lower than expected demand for its products in North America during the first quarter.

SKF, which had previously guided for slightly higher demand sequentially in the region during the first quarter, said lower activity in the mining, agriculture and oil sectors had a more negative impact on sales than expected, resulting in an organic sales growth of 1.4%.

"We underestimated the exposure that some of our customers have to these segments," Chief Executive Officer Alrik Danielson said.

Ball bearings are used to reduce friction in rotating parts in cars, industrial machinery, and turbines. SKF, a global supplier to almost all industries, including the automotive and energy sectors, is an important barometer of how the industrial cycle will affect the Nordic engineering sector.

The company said that demand for its products and services in the second quarter is seen relatively unchanged for the group in Europe and North America, while for Asia it is expected to be higher and for Latin America slightly lower, compared to the first quarter.

SKF Friday reported a net profit for the three months ended March 31 of 1.17 billion Swedish kronor ($136 million), compared with SEK1.28 billion in the same period a year earlier, as currency tailwinds of SEK450 million only partly offset restructuring charges.

Sales in the first quarter totalled SEK19.45 billion, up from SEK16.73 billion a year earlier. Operating profit was SEK1.72 billion down from SEK2.02 billion. Analysts polled by Factset expected sales of SEK19.73 billion

"SKF's first quarter figures showed a lower than expected demand, but a bigger than expected boost from currency tailwinds," said Peder Frolen, an analyst at Handelsbanken.

Currency tailwinds, mainly due to the depreciation of the Swedish krona against the dollar, is expected to add SEK800 million to its operating profit in the second quarter, the company said.

At 0837 GMT shares traded down 6.1% at SEK212.00.

Write to Christina Zander at [e-mail]