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SKF Interim / Quarterly Report 2021
2973_10-q_2021-10-26_6f606710-c6d7-47bf-a062-a8eec568a384.pdf
Interim / Quarterly Report
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SKF
Nine-month report 2021
Press release 26 October
Industrial maintains its strong momentum; Automotive hit by customer supply constraints
The third quarter saw continued solid demand. Our Industrial business, which represents approximately 75% of sales, maintained its strong momentum, despite challenges from logistics constraints and cost inflation. Our Automotive business was significantly impacted by reduced production amongst key customers, especially in September. Throughout the whole business, we have worked hard and diligently to mitigate the negative impact of these external circumstances.
Organic growth in the quarter was 8%, with Industrial growing by a strong 13% and Automotive down by -5%. Net sales were SEK 20,146 million (18,596). We saw growth in all regions, with some levelling off in Asia.
The adjusted operating profit was SEK 2,672 million (2,475) and the adjusted operating margin was 13.3% (13.3%).
Our Industrial business delivered a strong result, further increasing its adjusted operating margin to 17% (16%), despite very challenging conditions during the quarter, including cost inflation and logistics availability. We are seeing particularly strong growth in industrial drives, industrial distribution and off-highway applications. On a regional basis, Europe, North America and Latin America saw the strongest growth levels.
Our Automotive business was impacted by reduced production at key customers, often with short notice, resulting in lower sales, reduced productivity and a build-up of inventories. Demand in the automotive aftermarket stayed strong, however, due to the volatile demand from car manufacturers, the adjusted operating margin came in at 4% (7%). Whilst underlying demand for cars was strong, we are meeting continued uncertainty with actions to protect our margins, including reviewing commercial terms and manufacturing capacity.
On a Group level, we continue to consolidate our manufacturing footprint, with a further six sites to be closed by the end of the year, taking the total since 2019 to 12.
Cash flow generation in the quarter was SEK 1,470 million (2,266), mainly driven by increased inventories due to logistics bottlenecks, customer shutdowns and higher investments.
The Group already has ambitious CO2 reduction targets for its own operations, including a net zero objective for 2030. We're now taking the next step, with an ambition to also have a net zero greenhouse gas supply chain by 2050. Steel is the main source of emissions in our supply chain, and we are working with suppliers and partners, such as SteelZero, Responsible Steel and
Luleå University, to speed up the development of fossil-free bearing steel.
Taking a more long-term view, I am convinced of our ability to continue to build on our strong brand and technological leadership. Our focus right now is articulating a roadmap for securing the growth that will help us achieve our financial and operational targets. Therefore, we have commenced a strategic review initiative, which will help us identify how to maximize the full potential of our current business as well as prioritize future technology and footprint investments. The review will be completed by the turn of the year and presented in conjunction with our full year results in early 2022.
Looking into the fourth quarter, we expect to see continued challenging conditions from cost inflation and constrained logistics. In terms of sales, we expect a continued solid demand across our Industrial business. Demand development in our Automotive business will remain uncertain, with supply constraints and production delays resulting in very different market conditions than those experienced in the fourth quarter last year. Given the uncertainties in the market, we expect organic sales for the fourth quarter to be in-line with the previous year.
Rickard Gustafson
President and CEO
Operating margin¹)
Revenue growth²)
Net debt/Equity³)
ROCE¹)
Carbon Neutral by 2030⁴)
SKF's long-term targets shall be achieved over a business cycle
1) Adjusted for items affecting comparability.
2) Including acquisitions, adjusted for divestments.
3) Excluding pension liabilities.
4) Scope 1 & 2 CO₂e from all SKF manufacturing and logistics units.
Cover picture:
A student from SKF Technical College is watching when rolls are measured and sorted in the RK factory in Gothenburg, Sweden.
SKF Nine-month report 2021
Key figures
| MSEK unless otherwise stated | Q3 2021 | Q3 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Net sales | 20,146 | 18,596 | 60,746 | 55,280 |
| Adjusted operating profit | 2,672 | 2,475 | 8,578 | 6,612 |
| Adjusted operating margin, % | 13.3 | 13.3 | 14.1 | 12.0 |
| Operating profit | 2,588 | 1,922 | 8,165 | 4,859 |
| Operating margin, % | 12.8 | 10.3 | 13.4 | 8.8 |
| Adjusted profit before taxes | 2,524 | 2,273 | 8,150 | 5,909 |
| Profit before taxes | 2,440 | 1,720 | 7,736 | 4,156 |
| Net cash flow after investments before financing | 1,470 | 2,266 | 1,277 | 3,358 |
| Basic earnings per share | 3.86 | 2.59 | 12.36 | 6.09 |
| Adjusted earnings per share | 4.04 | 3.80 | 13.27 | 9.94 |
Financial performance
Third quarter 2021
Operating profit for the third quarter was SEK 2,588 million (1,922). Operating profit included items affecting comparability of SEK -84 million (-553) whereof -84 (-462) related to ongoing restructuring and cost reduction activities and SEK 0 million (-91) related to customer settlements.
The adjusted operating profit for the third quarter was SEK 2,672 million (2,475). The adjusted operating profit was positively impacted by sales and manufacturing volumes, sales prices and customer mix. Operating profit was negatively impacted by currency effects, material costs and logistics costs.
| Adjusted operating profit bridge, MSEK | Q3 |
|---|---|
| 2020 | 2,475 |
| Currency impact | -92 |
| Organic sales & Manufacturing volumes | 1,360 |
| Cost development | -1,071 |
| 2021 | 2,672 |
- Financial income and expense, net in the third quarter was SEK -148 million (-202). The financial net was negatively impacted by exchange rate losses.
- Taxes in the quarter were SEK -618 million (-487) resulting in an effective tax rate of 25.3% (28.3%). Last year, the tax rate was negatively affected by withholding tax on dividends, deferred tax not recognized and non-deductible expenses.
- Net cash flow after investment before financing in the third quarter was SEK 1,470 million (2,266). Excluding cash flow related to divestments and acquisitions during the third quarter it was SEK 1,510 million (2,266). The decrease is driven by higher working capital and higher investments, partly offset by higher operating profit.
- Net working capital in percent of annual sales was 30.5% in the third quarter compared to 28.7% in the third quarter 2020. The ratio was negatively affected by exchange rate fluctuations.
- Provisions for post-employment benefits decreased by SEK -79 million (+636) in the third quarter mainly due to a one-time payment related to the defined benefit retirement plan in the USA.
| Key figures | 30 Sep 2021 | 30 June 2021 | 30 Sept 2020 |
|---|---|---|---|
| Net working capital, % of 12 months rolling sales | 30.5 | 30.7 | 28.7 |
| ROCE for the 12-month period, %^{1)} | 15.6 | 15.4 | 12.1 |
| Net debt/equity, % | 44.0 | 50.1 | 59.8 |
| Net debt/equity, excluding post-employment benefits, % | 12.9 | 16.8 | 16.3 |
| Net debt/EBITDA | 1.4 | 1.5 | 2.1 |
1) Adjusted for items affecting comparability.
SKF Nine-month report 2021
Sales
| Net sales, change y-o-y, % | Q3 | Jan-Sep 2021 | ||||||
|---|---|---|---|---|---|---|---|---|
| Organic^{1)} | Structure | Currency | Total | Organic^{1)} | Structure | Currency | Total | |
| SKF Group | 7.7 | – | 0.6 | 8.3 | 15.6 | – | -5.8 | 9.8 |
| Industrial | 13.3 | – | 0.3 | 13.6 | 13.1 | – | -5.7 | 7.4 |
| Automotive | -5.2 | – | 1.3 | -3.9 | 22.4 | – | -5.8 | 16.6 |
1) Price, mix and volume
| Organic sales in local currencies, change y-o-y, % | Q3 | Jan-Sep 2021 | ||||||
|---|---|---|---|---|---|---|---|---|
| Europe, Middle East and Africa | North America | Latin America | Asia-Pacific | Europe, Middle East and Africa | North America | Latin America | Asia-Pacific | |
| SKF Group | 11.9 | 7.2 | 12.7 | 1.6 | 16.0 | 10.4 | 32.6 | 14.8 |
| Industrial | +++ | +++ | +++ | ++ | +++ | +++ | +++ | +++ |
| Automotive | - | --- | +/- | -- | +++ | +++ | +++ | +++ |
| Customer industries | Q3 | Jan-Sep 2021 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Europe, Middle East and Africa | North America | Latin America | Asia-Pacific | Europe, Middle East and Africa | North America | Latin America | Asia-Pacific | |
| Organic sales in local currencies, change y-o-y: | ||||||||
| Light vehicles | --- | --- | -- | -- | +++ | +/- | +++ | +++ |
| Trucks | ++ | +++ | +++ | --- | +++ | +++ | +++ | +++ |
| Vehicle aftermarket | +++ | ++ | + | +++ | +++ | +++ | +++ | +++ |
| Aerospace | +++ | --- | +++ | +/- | --- | +++ | ||
| Industrial drives | +++ | +++ | +++ | +++ | +++ | ++ | +++ | +++ |
| Energy | ++ | +++ | +++ | --- | +++ | --- | +++ | + |
| Heavy industries | +++ | +++ | - | --- | +++ | +++ | + | -- |
| Off-highway | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ |
| Railway | ++ | +/- | +/- | ++ | + | +++ | --- | |
| Agriculture, food and beverage | +++ | --- | +++ | +++ | + | ++ | ||
| Marine | ++ | +++ | --- | -- | +++ | --- | ||
| Electrical | +++ | -- | +++ | +++ | - | +++ | +++ | |
| Other industrial | +++ | +++ | +++ | +++ | +++ | +++ | ++ | +++ |
| Industrial distribution | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ |
Comments on organic sales in local currencies in Q3 2021, compared to Q3 2020
Europe, Middle East and Africa
Industrial: Sales were significantly higher in the quarter compared to Q3 2020. By industry, sales to the energy, railway and marine industries were higher while sales to all other industries were significantly higher compared to Q3 2020.
Automotive: Sales in the quarter were slightly lower compared to last year with significantly lower sales to light vehicles, higher sales to trucks and significantly higher sales to the vehicle aftermarket compared to Q3 2020.
North America
Industrial: Sales were significantly higher in the quarter compared to Q3 2020. By industry, sales to most industrial segments were significantly higher. The exceptions were, aerospace, electrical and rail where sales were significantly lower, lower and relatively unchanged respectively compared to Q3 of last year.
Automotive: Sales in the quarter were significantly lower compared to last year with significantly lower sales to light vehicles, significantly higher sales to trucks and higher vehicle aftermarket sales compared to Q3 2020.
Asia-Pacific
Industrial: Sales were higher in the quarter. Sales were significantly higher to aerospace, industrial distribution, industrial drives, off-highway, electrical and other industrial compared to Q3 2020. Sales to the railway industry were relatively unchanged while sales to the energy, marine, agriculture, food and beverage and heavy industries were significantly lower compared to Q3 of last year.
Automotive: Sales were lower in the quarter. Sales were significantly higher to the vehicle aftermarket, sales to light vehicles were lower and sales to trucks were significantly lower compared to Q3 2020.
Latin America
Industrial: Overall, sales were significantly higher in the quarter. Sales to all industrial segments were significantly higher compared to Q3 2020 with the exception of heavy industries where sales were slightly lower compared to Q3 last year.
Automotive: Sales in the quarter were relatively unchanged compared to last year with significantly higher sales to trucks, slightly higher sales to the vehicle aftermarket and lower sales to light vehicles, compared to Q3 2020.
SKF Nine-month report 2021
Segment information¹)
MSEK unless otherwise stated
| Industrial | Q3 2021 | Q3 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Net sales | 14,747 | 12,979 | 43,424 | 40,423 |
| Adjusted operating profit | 2,462 | 2,045 | 7,382 | 6,107 |
| Adjusted operating margin, % | 16.7 | 15.8 | 17.0 | 15.1 |
| Operating profit | 2,417 | 1,595 | 6,998 | 5,028 |
| Operating margin, % | 16.4 | 12.3 | 16.1 | 12.4 |
| Automotive | Q3 2021 | Q3 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
| --- | --- | --- | --- | --- |
| Net sales | 5,399 | 5,617 | 17,322 | 14,857 |
| Adjusted operating profit | 210 | 430 | 1,196 | 505 |
| Adjusted operating margin, % | 3.9 | 7.7 | 6.9 | 3.4 |
| Operating profit | 171 | 327 | 1,167 | -169 |
| Operating margin, % | 3.2 | 5.8 | 6.7 | -1.1 |
¹) Previously published figures for 2020 have been restated to reflect a change in classification of customers between the segments.
Net sales by customer industry for Industrial Q3 2021
Net sales by customer industry for Automotive Q3 2021
Net sales by region for Industrial Q3 2021
Net sales by region for Automotive Q3 2021
SKF Nine-month report 2021
SKF Nine-month report 2021
Outlook and Guidance
Demand for Q4 2021 compared to Q4 2020
Looking ahead, uncertainty remains and in terms of sales, we expect to see continued supply chain challenges among our customers. We expect organic sales for the fourth quarter to be relatively unchanged compared to the fourth quarter 2020.
Guidance Q4 2021
Currency impact on the operating profit is expected to be around SEK 50 million compared with Q4 2020, based on exchange rates per 30 September 2021.
Guidance 2021
- Tax level excluding effects related to divested businesses: around 26%. Previous guidance was around 28%.
- Additions to property, plant and equipment: around SEK 3,800 million.
Previous outlook statement
Demand for Q3 2021 compared to Q3 2020
Demand is expected to continue to grow and we expect an organic growth of about 10% for the third quarter compared to Q3 2020.
Highlights
17 August 2021 – SKF to service Berlin underground carriages
SKF has signed a long-term agreement with Stadler Rail to equip and service rolling stock for the Berlin underground (U-Bahn) in Germany. The contract includes a number of SKF solutions ranging from wheel set bearings and axle boxes to lubrication systems.
31 August and 1 September 2021 – Acquisitions
SKF has completed the acquisition of Rubico Consulting AB, an industrial consultancy firm with 10 employees based in Luleå, Sweden. Rubico Consulting AB specializes in visualization and analysis of signal data and will strengthen SKFs analytics capabilities.
SKF has also completed the acquisition of EFOLEX AB, a Gothenburg-based manufacturer of the Europafilter-branded industrial lubrication and oil filtration systems. EFOLEX currently have approximately 10 employees.
5 October 2021 – SKF supports the development of fossil-free bearing steel
Through a collaboration with Luleå University of Technology's CH2ESS initiative, SKF is supporting the development of fossil-free bearing steel. As part of the collaboration, SKF will participate in and fund research within hydrogen use in industrial processes and energy systems.
20 October 2021 – Net zero supply chain by 2050
SKF has announced its commitment to have a supply chain with net zero greenhouse gas emissions by 2050. SKF commits to reduce CO2 emissions in its supply chain by 45% by 2035 and by 60% by 2040. In addition, SKF has pledged to source at least 40% of steel from carbon neutral steel plants by 2040 and to reduce transport-related greenhouse gas emissions by 80% by 2040. This will align with the Paris Climate Agreement to reach net zero global emissions by 2050.
Sustainability performance
SKF has been publicly reporting on sustainability performance for many years in the Group's annual report, on skf.com and in various other forums. Reflecting the increasing operational and strategic importance of these issues, the Group is now including certain related KPI's also in the quarterly report. It is anticipated that the scope and depth of this reporting will increase over time.
Cleantech revenues
Cleantech revenues are the aggregated sales to acknowledged cleantech sectors such as renewable energy, electric vehicles, recycling industry and bearing remanufacturing. The growth of these sectors has far outstripped the organic growth of SKF as a whole – indicating the successful execution of SKF's cleantech strategy.
1) Previously published figures for 2020 have been restated to reflect a change in classification.
2) 2021 figures relate to the latest 12 months period.
Accident rate
The Accident rate measures the number of recordable accidents per 100 employees per year. There has been a considerable reduction in the accident rate over the past 5 years.
1) 2021 figures relate to the latest 12 months period.
CO₂ emissions, Equivalent energy
CO₂ emissions¹) for SKF's operations (Scope 1 and 2 according to the Greenhouse Gas protocol) and total energy use for the same scope are presented in the graph. SKF continues to make good progress towards the Group's goal to be Carbon Neutral for these aspects by 2030.
1) Due to external reporting constraints, this data is presented for the end of the previous quarter.
SKF Nine-month report 2021
Accounting principles
The consolidated financial statements of the SKF Group were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The interim report was prepared in accordance with IAS 34 Interim Financial Reporting. The financial statements of the Parent company were prepared in accordance with the "Annual Accounts Act" and the RFR 2 "Accounting for legal entities". SKF Group and the Parent company
applied the same accounting principles and methods of computation in the interim financial statements as compared with the latest annual report. IASB issued several amended accounting standards that were endorsed by EU, effective date 1 January 2021. None of these have a material effect on the SKF Group's financial statements.
This report has not been reviewed by AB SKF's auditors.
Risks and uncertainties in the business
The SKF Group operates in many different industrial and geographical areas that are at different stages of the economic cycle. A general economic downturn at global level, for example caused by a pandemic, or in one of the world's leading economies, could reduce the demand for the Group's products, solutions and services for a period of time. In addition, terrorism and other hostilities, as well as disturbances in worldwide financial markets and natural disasters, could have a negative effect on the demand for the Group's products and services. There are also political and regulatory risks associated with the wide geographical presence.
Regulatory requirements, taxes, tariffs and other trade barriers, price or exchange controls or other governmental policies could limit the SKF Group's operations. The SKF Group is subject to both transaction and translation of currency exposure.
For commercial flows the SKF Group is primarily exposed to the EUR, USD and CNY. As the major part of the profit is made outside Sweden, the Group is also exposed to translational risks in all the major currencies. The financial position of the parent company is dependent on the financial position and development of the subsidiaries. A general decline in the demand for the products and services provided by the Group could mean lower residual profits and lower dividend income for the parent company, as well as a need for writing down values of the shares in the subsidiaries.
SKF is subject to an investigation in Brazil by the General Superintendence of the Administrative Council for Economic Defense, regarding an alleged violation of antitrust rules by several companies active on the automotive aftermarket in Brazil.
Gothenburg, 26 October 2021
Aktiebolaget SKF (publ)
Rickard Gustafson
President and CEO
SKF Nine-month report 2021
Condensed consolidated income statements
| MSEK | Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Net sales | 20,146 | 18,596 | 60,746 | 55,280 |
| Cost of goods sold | -14,582 | -13,759 | -43,147 | -41,230 |
| Gross profit | 5,564 | 4,837 | 17,599 | 14,050 |
| Research and development cost | -648 | -553 | -1,984 | -1,855 |
| Selling and administrative expenses | -2,385 | -2,317 | -7,514 | -7,594 |
| Other operating income/expenses, net | 57 | -45 | 64 | 258 |
| Operating profit | 2,588 | 1,922 | 8,165 | 4,859 |
| Financial income and expense, net | -148 | -202 | -429 | -703 |
| Profit before taxes | 2,440 | 1,720 | 7,736 | 4,156 |
| Taxes | -618 | -487 | -1,925 | -1,285 |
| Net profit | 1,822 | 1,233 | 5,811 | 2,871 |
| Net profit attributable to: | ||||
| Shareholders of AB SKF | 1,756 | 1,179 | 5,627 | 2,771 |
| Non-controlling interests | 66 | 54 | 184 | 100 |
| Basic earnings per share (SEK) | 3.86 | 2.59 | 12.36 | 6.09 |
| Diluted earnings per share (SEK) | 3.86 | 2.59 | 12.35 | 6.08 |
Condensed consolidated statements of comprehensive income
| MSEK | Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Net profit | 1,822 | 1,233 | 5,811 | 2,871 |
| Items that will not be reclassified to the income statement: | ||||
| Remeasurements (actuarial gains and losses) | -30 | -659 | 2,134 | -706 |
| Income taxes | 5 | 209 | -545 | 179 |
| -25 | -450 | 1,589 | -527 | |
| Items that may be reclassified to the income statement: | ||||
| Exchange differences arising on translation of foreign operations | 778 | -466 | 1,892 | -1,401 |
| Assets at fair value through other comprehensive income | 76 | 30 | 93 | -6 |
| Income taxes | - | - | 1 | 11 |
| 854 | -436 | 1,986 | -1,396 | |
| Other comprehensive income, net of tax | 829 | -886 | 3,575 | -1,923 |
| Total comprehensive income | 2,651 | 347 | 9,386 | 948 |
| Shareholders of AB SKF | 2,543 | 337 | 9,127 | 966 |
| Non-controlling interests | 108 | 10 | 259 | -18 |
SKF Nine-month report 2021
Condensed consolidated balance sheets
| MSEK | September 2021 | December 2020 |
|---|---|---|
| Goodwill | 10,699 | 10,117 |
| Other intangible assets | 6,033 | 6,125 |
| Property, plant and equipment | 20,107 | 18,161 |
| Right of use asset leases | 2,438 | 2,517 |
| Deferred tax assets | 4,266 | 4,800 |
| Other non-current assets | 1,786 | 1,939 |
| Non-current assets | 45,329 | 43,659 |
| Inventories | 19,447 | 15,733 |
| Trade receivables^{1)} | 13,895 | 12,286 |
| Other current assets | 5,315 | 4,242 |
| Other current financial assets^{1)} | 13,583 | 14,637 |
| Current assets | 52,240 | 46,898 |
| Total assets | 97,569 | 90,557 |
| Equity attributable to shareholders of AB SKF | 40,566 | 34,309 |
| Equity attributable to non-controlling interests | 1,611 | 1,403 |
| Long-term financial liabilities^{1)} | 18,222 | 15,089 |
| Provisions for post-employment benefits | 13,135 | 15,170 |
| Provisions for deferred taxes | 901 | 792 |
| Other long-term liabilities and provisions | 1,523 | 2,150 |
| Non-current liabilities | 33,781 | 33,201 |
| Trade payables^{1)} | 8,882 | 8,459 |
| Short-term financial liabilities^{1)} | 803 | 3,260 |
| Other short-term liabilities and provisions | 11,926 | 9,925 |
| Current liabilities | 21,611 | 21,644 |
| Total equity and liabilities | 97,569 | 90,557 |
1) Valuation principles and classifications of the financial instruments, as described in SKF Annual report 2020, have been consistently applied throughout the reporting period. There are no major changes in fair value during the period.
Condensed consolidated statements of changes in shareholders' equity
| MSEK | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|
| Opening balance 1 January | 35,712 | 37,366 |
| Total comprehensive income | 9,386 | 948 |
| Cost for performance share programmes, net | 19 | -50 |
| Transaction with non-controlling interests, other | - | - |
| Other | 71 | 58 |
| Dividend to shareholders^{1)} | -3,011 | -1,763 |
| Closing balance | 42,177 | 36,559 |
1) Dividend to ordinary shares has been paid during the period.
SKF Nine-month report 2021
Condensed consolidated statements of cash flow
| MSEK | Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Operating activities: | ||||
| Operating profit | 2,588 | 1,922 | 8,165 | 4,859 |
| Non-cash items: | ||||
| Depreciation, amortization and impairment | 652 | 812 | 2,420 | 2,552 |
| Net loss/gain (-) on sales of PPE and businesses | -2 | -1 | -35 | -242 |
| Other non-cash items | -90 | 4 | -647 | 339 |
| Income taxes paid | -507 | -683 | -1,543 | -1,529 |
| Other | -197 | - | -899 | - |
| Changes in working capital: | 70 | 943 | -3,444 | -576 |
| Inventories | -773 | 998 | -3,029 | 680 |
| Accounts receivable | 1,375 | -949 | -1,067 | 404 |
| Accounts payable | -511 | 1,232 | 111 | -247 |
| Other operating assets/liabilities | -21 | -338 | 541 | -1,413 |
| Net cash flow from operations | 2,514 | 2,997 | 4,017 | 5,403 |
| Investing activities: | ||||
| Payments for intangible assets, PPE, businesses and equity securities | -1,043 | -803 | -2,781 | -2,409 |
| Sales of PPE, businesses and equity securities | -1 | 72 | 41 | 364 |
| Net cash flow used in investing activities | -1,044 | -731 | -2,740 | -2,045 |
| Net cash flow after investments before financing | 1,470 | 2,266 | 1,277 | 3,358 |
| Financing activities: | ||||
| Proceeds from short- and long-term loans | 11 | 80 | 3,091 | 2,995 |
| Repayments of short- and long-term loans | 35 | -195 | -2,099 | -602 |
| Repayment leases | -179 | -390 | -535 | -1,763 |
| Cash dividends | -39 | - | -3,011 | - |
| Other financing items | -169 | - | -169 | - |
| Investments in short-term financial assets | -1 | -40 | -30 | -398 |
| Sales of short-term financial assets | 6 | 500 | 92 | 4,735 |
| Net cash flow used in financing activities | -336 | -45 | -2,661 | 4,967 |
| Net cash flow | 1,134 | 2,221 | -1,384 | 8,325 |
| Change in cash and cash equivalents: | ||||
| Cash and cash equivalents at 1 July/1 January | 11,756 | 12,250 | 14,050 | 6,430 |
| Cash effect excl. acquired/sold business | 1,132 | 2,221 | -1,386 | 8,328 |
| Cash effect of acquired/sold businesses | 2 | - | 2 | -3 |
| Exchange rate effect | 149 | -66 | 373 | -350 |
| Cash and cash equivalents at 30 September | 13,039 | 14,405 | 13,039 | 14,405 |
| Change in Net debt | Closing balance 30 September 2021 | Other non-cash changes | Acquired/sold businesses | Cash changes |
| --- | --- | --- | --- | --- |
| Loans, long- and short-term | 16,379 | -57 | - | 992 |
| Post-employment benefits, net | 13,103 | -1,785 | - | -621 |
| Lease liabilities | 2,521 | 356 | - | -535 |
| Financial assets, others | -423 | - | - | 39 |
| Cash and cash equivalents | -13,039 | - | -2 | 1,386 |
| Net debt | 18,541 | -1,486 | -2 | 1,261 |
Number of shares
| Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 | |
|---|---|---|---|---|
| Total number of shares: | 455,351,068 | 455,351,068 | 455,351,068 | 455,351,068 |
| - whereof A shares | 30,582,656 | 32,256,712 | 30,582,656 | 32,256,712 |
| - whereof B shares | 424,768,412 | 423,094,356 | 424,768,412 | 423,094,356 |
| Weighted average number of shares in: | ||||
| - basic earnings per share | 455,351,068 | 455,351,068 | 455,351,068 | 455,351,068 |
| - diluted earnings per share | 455,565,763 | 455,638,007 | 455,501,677 | 455,623,117 |
SKF Nine-month report 2021
Condensed consolidated financial information
MSEK unless otherwise stated
| Q4/19 | Q1/20 | Q2/20 | Q3/20 | Q4/20 | Q1/21 | Q2/21 | Q3/21 | |
|---|---|---|---|---|---|---|---|---|
| Net sales | 21,208 | 20,085 | 16,599 | 18,596 | 19,572 | 19,865 | 20,735 | 20,146 |
| Cost of goods sold | -15,717 | -14,575 | -12,895 | -13,759 | -14,118 | -14,124 | -14,441 | -14,582 |
| Gross profit | 5,491 | 5,510 | 3,704 | 4,837 | 5,454 | 5,741 | 6,294 | 5,564 |
| Gross margin, % | 25.9 | 27.4 | 22.3 | 26.0 | 27.9 | 28.9 | 30.4 | 27.6 |
| Research and development cost | -684 | -651 | -652 | -553 | -660 | -653 | -683 | -648 |
| Selling and administrative expenses | -2,993 | -2,708 | -2,569 | -2,317 | -2,659 | -2,423 | -2,706 | -2,385 |
| - as % of sales | 14.1 | 13.5 | 15.5 | 12.5 | 13.6 | 12.2 | 13.1 | 11.8 |
| Other, net | 96 | 117 | 186 | -45 | 75 | 34 | -27 | 57 |
| Operating profit | 1,910 | 2,268 | 669 | 1,922 | 2,210 | 2,699 | 2,878 | 2,588 |
| Operating margin, % | 9.0 | 11.3 | 4.0 | 10.3 | 11.3 | 13.6 | 13.9 | 12.8 |
| Adjusted operating profit | 2,181 | 2,572 | 1,565 | 2,475 | 2,582 | 2,789 | 3,118 | 2,672 |
| Adjusted operating margin, % | 10.3 | 12.8 | 9.4 | 13.3 | 13.2 | 14.0 | 15.0 | 13.3 |
| Financial net | -188 | -412 | -89 | -202 | -66 | -204 | -77 | -148 |
| Profit before taxes | 1,722 | 1,856 | 580 | 1,720 | 2,144 | 2,495 | 2,801 | 2,440 |
| Profit margin before taxes, % | 8.1 | 9.2 | 3.5 | 9.2 | 11.0 | 12.6 | 13.5 | 12.1 |
| Taxes | -641 | -549 | -249 | -487 | -541 | -646 | -661 | -618 |
| Net profit | 1,081 | 1,307 | 331 | 1,233 | 1,603 | 1,849 | 2,140 | 1,822 |
| Net profit attributable to | ||||||||
| Shareholders of AB SKF | 1,035 | 1,250 | 342 | 1,179 | 1,527 | 1,782 | 2,089 | 1,756 |
| Non-controlling interests | 46 | 57 | -11 | 54 | 76 | 67 | 51 | 66 |
Reconciliation of profit before taxes for the Group
| MSEK | Q4/19 | Q1/20 | Q2/20 | Q3/20 | Q4/20 | Q1/21 | Q2/21 | Q3/21 |
|---|---|---|---|---|---|---|---|---|
| Operating profit: | ||||||||
| Industrial1) | 1,879 | 2,151 | 1,282 | 1,595 | 1,663 | 2,177 | 2,405 | 2,417 |
| Automotive1) | 31 | 117 | -613 | 327 | 547 | 522 | 473 | 171 |
| Financial net | -188 | -412 | -89 | -202 | -66 | -204 | -77 | -148 |
| Profit before taxes for the Group | 1,722 | 1,856 | 580 | 1,720 | 2,144 | 2,495 | 2,801 | 2,440 |
1) Previously published figures for 2019 and 2020 have been restated to reflect a change in classification of customers between the segments.
SKF Nine-month report 2021
Key figures
Definitions, see page 15
| Q4/19 | Q1/20 | Q2/20 | Q3/20 | Q4/20 | Q1/21 | Q2/21 | Q3/21 | |
|---|---|---|---|---|---|---|---|---|
| EBITDA, MSEK | 2,840 | 3,134 | 1,543 | 2,734 | 3,059 | 3,494 | 3,852 | 3,239 |
| EBITA, MSEK | 2,063 | 2,421 | 822 | 2,069 | 2,369 | 2,841 | 3,024 | 2,733 |
| Adjusted operating profit | 2,181 | 2,572 | 1,565 | 2,475 | 2,582 | 2,789 | 3,118 | 2,672 |
| Adjusted operating margin, % | 10.3 | 12.8 | 9.4 | 13.3 | 13.2 | 14.0 | 15.0 | 13.3 |
| Basic earnings per share, SEK | 2.27 | 2.75 | 0.75 | 2.59 | 3.36 | 3.91 | 4.59 | 3.86 |
| Adjusted earnings per share, SEK | 2.86 | 3.41 | 2.72 | 3.80 | 4.17 | 4.11 | 5.11 | 4.04 |
| Diluted earnings per share, SEK | 2.27 | 2.74 | 0.75 | 2.59 | 3.35 | 3.91 | 4.59 | 3.86 |
| Dividend per share, SEK | - | - | 3.00 | - | - | - | 6.50 | - |
| Net worth per share, SEK | 78 | 83 | 76 | 77 | 75 | 86 | 83 | 89 |
| Share price at the end of the period, SEK | 189.4 | 136.7 | 173.2 | 185.7 | 213.4 | 248.2 | 217.9 | 207.6 |
| NWC, % of 12 months rolling sales | 27.7 | 29.5 | 30.0 | 28.7 | 26.1 | 30.2 | 30.7 | 30.5 |
| ROCE for the 12-month period, % | 13.2 | 12.5 | 9.8 | 9.3 | 9.8 | 10.5 | 13.6 | 14.5 |
| ROE for the 12-month period, % | 15.7 | 14.3 | 10.9 | 10.6 | 12.1 | 13.7 | 18.4 | 19.3 |
| Gearing, % | 47.1 | 47.4 | 49.7 | 50.2 | 48.0 | 44.4 | 44.7 | 43.1 |
| Equity/assets ratio, % | 39.7 | 39.4 | 38.7 | 38.1 | 39.4 | 42.4 | 41.6 | 43.2 |
| Additions to property, plant and equipment, MSEK | 1,154 | 917 | 670 | 796 | 949 | 819 | 895 | 969 |
| Net debt/equity, % | 59.3 | 57.6 | 62.5 | 59.8 | 51.7 | 43.2 | 50.1 | 44.0 |
| Net debt, MSEK | 22,176 | 22,877 | 22,866 | 21,868 | 18,460 | 17,576 | 19,809 | 18,541 |
| Net debt/EBITDA | 1.7 | 1.8 | 2.1 | 2.1 | 1.8 | 1.6 | 1.5 | 1.4 |
| Registered number of employees | 43,360 | 43,134 | 41,835 | 41,174 | 40,963 | 41,151 | 41,433 | 42,139 |
SKF applies the guidelines issued by ESMA (European Securities and Markets Authority) on APMs (Alternative Performance Measures). These key figures are not defined or specified in IFRS but provide complementary information to investors and other stakeholders on the company's performance. The definition of each APM is presented at the end of the interim report. For the reconciliation of each APM against the most reconcilable line item in the financial statements, see investors.skf.com/en.
Segment information – quarterly figures
MSEK unless otherwise stated
| Industrial | Q4/19 | Q1/20 | Q2/20 | Q3/20 | Q4/20 | Q1/21 | Q2/21 | Q3/21 |
|---|---|---|---|---|---|---|---|---|
| Net sales | 15,232 | 14,364 | 13,080 | 12,979 | 13,489 | 13,788 | 14,889 | 14,747 |
| Adjusted operating profit | 2,022 | 2,230 | 1,832 | 2,045 | 1,963 | 2,247 | 2,674 | 2,462 |
| Adjusted operating margin, % | 13.3 | 15.5 | 14.0 | 15.8 | 14.6 | 16.3 | 18.0 | 16.7 |
| Operating profit | 1,879 | 2,151 | 1,282 | 1,595 | 1,663 | 2,177 | 2,405 | 2,417 |
| Operating margin, % | 12.3 | 15.0 | 9.8 | 12.3 | 12.3 | 15.8 | 16.2 | 16.4 |
| Assets and liabilities, net | 42,949 | 45,898 | 43,384 | 41,713 | 38,508 | 41,472 | 41,643 | 41,130 |
| Registered number of employees | 35,839 | 35,478 | 33,916 | 33,400 | 33,157 | 33,446 | 33,572 | 34,283 |
| Automotive | Q4/19 | Q1/20 | Q2/20 | Q3/20 | Q4/20 | Q1/21 | Q2/21 | Q3/21 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net sales | 5,976 | 5,721 | 3,519 | 5,617 | 6,083 | 6,077 | 5,846 | 5,399 |
| Adjusted operating profit | 159 | 342 | -267 | 430 | 619 | 542 | 444 | 210 |
| Adjusted operating margin, % | 2.7 | 6.0 | -7.6 | 7.7 | 10.2 | 8.9 | 7.6 | 3.9 |
| Operating profit | 31 | 117 | -613 | 327 | 547 | 522 | 473 | 171 |
| Operating margin, % | 0.5 | 2.0 | -17.4 | 5.8 | 9.0 | 8.6 | 8.1 | 3.2 |
| Assets and liabilities, net | 11,954 | 11,909 | 11,184 | 10,313 | 9,358 | 10,645 | 10,936 | 10,977 |
| Registered number of employees | 6,850 | 6,741 | 6,499 | 6,362 | 6,351 | 6,292 | 6,416 | 6,391 |
1) Previously published figures for 2019 and 2020 have been restated to reflect a change in classification of customers between the segments.
SKF Nine-month report 2021
Parent company condensed income statements
| MSEK | Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Revenue | 2,168 | 608 | 5,185 | 2,797 |
| Cost of goods sold | -1,172 | -1,194 | -3,726 | -3,695 |
| General management and administrative expenses | -311 | -246 | -1,045 | -1,032 |
| Other operating income/expenses, net | -2 | 16 | -3 | 11 |
| Operating result | 683 | -816 | 411 | -1,919 |
| Financial income and expense, net | 207 | 281 | 433 | 586 |
| Profit before taxes | 890 | -535 | 844 | -1,333 |
| Taxes | -150 | 188 | -69 | 427 |
| Net profit | 740 | -347 | 775 | -906 |
Parent company condensed statements of comprehensive income
| MSEK | Jul-Sep 2021 | Jul-Sep 2020 | Jan-Sep 2021 | Jan-Sep 2020 |
|---|---|---|---|---|
| Net profit | 740 | -347 | 775 | -906 |
| Items that may be reclassified to the income statement: | ||||
| Assets at fair value through other comprehensive income | 76 | 30 | 93 | -6 |
| Other comprehensive income, net of tax | 76 | 30 | 93 | -6 |
| Total comprehensive income | 816 | -317 | 868 | -912 |
Parent company condensed balance sheets
| MSEK | September 2021 | December 2020 |
|---|---|---|
| Intangible assets | 1,408 | 1,528 |
| Investments in subsidiaries | 22,393 | 22,496 |
| Receivables from subsidiaries | 15,983 | 12,750 |
| Other non-current assets | 971 | 970 |
| Non-current assets | 40,755 | 37,744 |
| Receivables from subsidiaries | 3,216 | 5,971 |
| Other receivables | 196 | 163 |
| Current assets | 3,412 | 6,134 |
| Total assets | 44,167 | 43,878 |
| Shareholders' equity | 23,676 | 25,801 |
| Provisions | 495 | 468 |
| Non-current liabilities | 15,982 | 12,750 |
| Current liabilities | 4,014 | 4,859 |
| Total shareholders' equity, provisions and liabilities | 44,167 | 43,878 |
SKF Nine-month report 2021
Alternative performance measures and definitions
Adjusted operating profit
Operating profit excluding items affecting comparability.
Adjusted operating margin
Operating profit margin excluding items affecting comparability.
Basic earnings/loss per share in SEK
Profit/loss after taxes less non-controlling interests divided by the ordinary number of shares.
Currency impact on operating profit
The effects of both translation and transaction flows based on current assumptions and exchange rates compared to the corresponding period last year.
Debt
Loans and net provisions for post-employment benefits.
Diluted earnings per share
Diluted earnings per share is calculated using the weighted average number of shares outstanding during the period adjusted for all potential dilutive ordinary shares.
EBITA
(Earnings before interest, taxes and amortization). Operating profit before amortizations.
EBITDA
(Earnings before interest, taxes, depreciation and amortization)
Operating profit before depreciations, amortizations, and impairments.
Equity/assets ratio
Equity as a percentage of total assets.
Gearing
Debt as a percentage of the sum of debt and equity.
Items affecting comparability
Significant income/expenses that affect comparability between accounting periods. This includes, but is not limited to, restructuring costs, impairments and write-offs, currency exchange rate effects caused by devaluations and gains and losses on divestments of businesses.
Net debt
Debt less short-term financial assets excluding derivatives.
Net debt/EBITDA
Net debt, as a percentage of twelve months rolling EBITDA.
Net debt/equity
Net debt, as a percentage of equity.
Net worth per share (Equity per share)
Equity excluding non-controlling interests divided by the ordinary number of shares.
Net working capital as % of 12 month rolling sales (NWC)
Trade receivables plus inventory minus trade payables as a percentage of twelve months rolling net sales.
Operating margin
Operating profit/loss, as a percentage of net sales.
Operational performance
Operational performance includes the effects on operating profit related to changes in organic sales, changes in manufacturing volumes and manufacturing costs and changes in selling and administrative expenses.
Revenue growth
Sales excluding effects of currency and divested businesses.
Registered number of employees
Total number of employees included in SKF's payroll at the end of the period.
Return on capital employed (ROCE)
Operating profit/loss plus interest income, as a percentage of twelve months rolling average of total assets less the average of non-interest bearing liabilities.
Return on equity (ROE)
Profit/loss after taxes as a percentage of twelve months rolling average of equity.
SKF demand outlook
The demand outlook for SKF's products and services represents management's best estimate based on current information about the future demand from our customers. The demand outlook is the expected volume development in the markets where our customers operate.
For reconciliations of other Key Ratios, see investors.skf.com/en.
Cautionary statement
This report contains forward-looking statements that are based on the current expectations of the management of SKF. Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions, fluctuations in exchange rates and other factors mentioned in SKF's latest annual report (available on investors.skf.com/en), including under the Administration Report; "Risk management" and in this report under "Risks and uncertainties in the business."
SKF Nine-month report 2021
This is SKF
SKF is a leading global supplier of bearings, seals, lubrication systems and services, which include technical support, maintenance and reliability services, engineering consulting and training.
Quick facts
Founded 1907
Represented in more than 130 countries
Net sales in 2020: SEK 74,852 million
40,963 employees
15 technical centers
91 manufacturing sites
More than 17,000 distributors
AB SKF (publ)
Postal address: SE-415 26 Gothenburg, Sweden
Visiting address: Sven Wingquists Gata 2
tel. +46 31 337 10 00
www.skf.com
Company reg.no. 556007-3495
Vision
SKF works to reduce friction, make things run faster, longer, cleaner and more safely. Doing this in the most effective, productive and sustainable way contributes to the vision
- A world of reliable rotation.
Mission
To be the undisputed leader in the bearing business.
Strategic focus areas
Based on SKF's vision and mission, the company focuses on six strategic areas:
- Digital sales
- New business models
- Innovation
- World-class manufacturing
- Future workforce
- Cleantech
For further information, please contact:
INVESTOR RELATIONS: Patrik Stenberg, Director, SKF Group Investor Relations and Mergers & Acquisitions
tel: 46 31-337 2104 mobile: 46 705-472 104
e-mail: [email protected]
PRESS: Carl Bjernstam, Corporate Communication
tel: 46 31 337 2517 mobile: 46 722-201 893
e-mail: [email protected]
Webcast
26 October at 09:00 (CEST), 08.00 (UK)
https://investors.skf.com/en
Sweden +46 10 884 80 16
UK / International +44 203 936 2999
Passcode: 101419
Calendar
2 February 2022, Q4 report 2021
24 March 2022, Annual General Meeting
26 April 2022, Q1 report
The financial information in this press release is information which AB SKF is required to disclose under the EU Market Abuse Regulation (EU) No 596/2014. The information was provided by the above contact persons for publication on 26 October 2021 at 08.00 CEST.
© SKF is a registered trademark of the SKF Group. © SKF Group 2021 - The contents of this publication are the copyright of the publisher and may not be reproduced (even extracts) unless prior written permission is granted. Every care has been taken to ensure the accuracy of the information contained in this publication but no liability can be accepted for any loss or damage whether direct, indirect or consequential arising out of the use of the information contained herein. October 2021