SKF shares drop as demand outlook renews cyclical worries
Summary
STOCKHOLM (Reuters) - Sweden’s SKF (SKFb.ST), the world’s largest ball-bearing maker, forecast lower year-on-year demand in the fourth quarter, overshadowing in-line quarterly operating earnings and sending shares lower on Tuesday. Many analysts have questioned SKF’s ability to defend its margins when demand is weakening for a business which has historically been sensitive to cyclical downturns. But while weak car markets and slower industrial activity has now begun to eat into sales at the bearings maker, its profitability has so far proven quite resilient with an operating margin of 10.9% in the quarter, down from 12.2% a year ago. “SKF has managed the business well in a weakening economic environment and our efforts to reduce costs are contributing to a strong and stable operating margin in the quarter,” Chief Executive Alrik Danielson said in a statement. The company’s earnings came after stronger than expected results from Swedish industrial peers Sandvik (SAND.ST) and Atlas Copco (ATCOa.ST) over the past week.
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