“SKF’s transformation into a more customer-focused, innovative and lean business continues. Our strong results in the third quarter illustrate that we are delivering on the implementation of our strategy, including new ways of working, developing better, more attractive customer offers as well as making our manufacturing closer and more responsive to customer needs.

Despite an organic sales decline of 5.1% compared to last year, we improved our adjusted operating margin to a very strong 13.3% (11.3%).

Net sales at SEK 18.6 billion were lower than last year but illustrating a sequential rebound in demand since the significantly lower levels seen during the second quarter. Cash flow during the quarter was SEK 2,266 million, driven mainly by reduced working capital.

Sales in Europe decreased by 12.5% organically. Sales in North America decreased by 11.9%, Latin America increased by 4.6% and Asia increased by 7.2%.

The Industrial business delivered an adjusted operating margin of 15.8% (13.9%), with organic sales down 6.9%. The Automotive business delivered an adjusted operating margin of 7.4% (4.6%), with organic sales down 0.7%.

We are accelerating our efforts to regionalize, consolidate and modernize our manufacturing footprint. During the quarter we announced an investment totalling SEK 550 million in North America, bringing world-class processes and automation to our slewing bearing facility in Sumter, as well as locating taper roller bearing manufacturing in Mexico, from China. These investments will make our offer and position in North America even stronger. The resulting improvements in flexibility and service levels enables us to consolidate the factories in Avon, Ohio and North Charleston, South Carolina into the Sumter factory.

We also continue to adjust our ways of working and the structure of our business, resulting in restructuring costs of SEK 462 million during the quarter. However difficult these decisions are to make, this flexibility also enables us to adjust our business swiftly, whilst also investing in the competences needed for the future.

Uncertainty surrounding the near-term economic climate makes it difficult to provide a reliable demand outlook for the fourth quarter. As a result of this uncertainty in the economy, the Board has decided not to call for an Extraordinary General Meeting with the purpose of proposing an additional dividend for 2019.

The transformed SKF of 2020 is well-positioned to respond to differing demand scenarios. We will continue to invest in making our offers stronger, our operations leaner and our innovation pace higher.”

Key figures, SEKm unless otherwise stated

   Q3 2020    Q3 2019    Jan-Sep 2020    Jan-Sep 2019    

Net sales    18,596    21,039    55,280    64,805    

Adjusted operating profit    2,475    2,380    6,612    7,956    

Adjusted operating margin, %    13.3    11.3    12.0    12.3    

Operating profit    1,922    2,288    4,859    7,485    

Operating margin, %    10.3    10.9    8.8    11.6    

Adjusted profit before taxes    2,273    2,135    5,909    7,217    

Profit before taxes    1,720    2,044    4,156    6,747    

Net cash flow after investments before financing    2,266    2,120    3,358    4,252    

Adjusted earnings per share    3.80    3.04    9.94    10.97    

Basic earnings per share    2.59    2.84    6.09    9.93    

Net sales change y-o-y, %, Q3

   Organic    Structure    Currency    Total    

SKF Group    -5.1    –    -6.5    -11.6    

Industrial    -6.9    –    -6.2    -13.1    

Automotive    -0.7    –    -7.2    -7.9    

Net sales change y-o-y, %, Jan-Sep 2020

   Organic    Structure    Currency    Total    

SKF Group    -13.2    –    -1.5    -14.7    

Industrial    -10.3    –    -1.4    -11.7    

Automotive    -20.3    –    -2.0    -22.3    

Organic sales change in local currencies, per region y-o-y, %, Q3

   Europe    North America    Latin America    Asia    Middle East & Africa    

SKF Group    -12.5    -11.9    4.6    7.2    -2.9    

Industrial    ---    ---    ++    ++    --    

Automotive    ---    --    ++    +++    +++    

Organic sales change in local currencies, per region y-o-y, %, Jan-Sep 2020

   Europe    North America    Latin America    Asia    Middle East & Africa    

SKF Group    -17.6    -18.0    -10.6    -4.3    -3.4    

Industrial    ---    ---    -    -    --    

Automotive    ---    ---    ---    ---    +++    

Outlook and guidance

Demand for Q4 2020 compared to Q4 2019

The industries and regions in which SKF operates are being impacted by initiatives by authorities and by SKF’s customers related to the spread of the Covid-19 virus.

As a result of this uncertainty, it is not feasible to provide a reliable demand guidance for the fourth quarter.

Guidance Q4 2020

Financial net: SEK -200 million

Guidance 2020

Tax level excluding effects related to divested businesses: around 29%.

Additions to property, plant and equipment: around SEK 3,300 million.