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Rickard Gustafson, president and CEO of SKF, is pictured.
Profits are down at SKF as the company, which operates a plant in Falconer, continues its restructuring efforts in an effort to boost sales and profits when demand for its products picks up again.
SKF’s net sales totaled $25,606,000 Swedish krona in the second quarter of 2024, a decrease from $27,123,000 krona in the second quarter of 2023. Profits slipped from $3,614,000 krona in the second quarter of 2023 to $3,324,000 krona in the second quarter of 2024 while organic growth slipped from 7.9% in the second quarter last year to 6.6% contraction in the second quarter of 2024. This marks the fourth consecutive quarter of negative revenue growth for SKF.
“We are driving regionalization and building strong and competitive value chains in all of the geographies where we operate, and we continue to drive innovation. And I will come back to innovation later in this presentation. But all in all, we believe that we’re creating a company that is very well positioned to take advantage of profitable growth while once demand turns back into the growth again,” said Rickard Gustafson, SKF president and CEO, during a conference call recently with investor analysts.
Gustafson said company officials don’t expect much to change throughout the rest of 2024. The market for SKF’s goods is soft right now as the company enters a time of year in which demand is typically slower. SKF is also still working to regionalize its operations.
SKF cut more than 1,000 positions across the company in 2023 as part of a companywide restructuring that included the opening inauguration of a factory in Monterrey, Mexico, and the announced closings of SKF factories in Luton, U.K., and Busan, Korea, while restructuring operations in Schweinfurt, Germany. The regionalization initiative is driving higher costs which, like soft demand for products, won’t change in the third quarter.
Organic sales are expected to be about the same in the third quarter of 2024 as they were in the third quarter of 2023, while organic sales are expected to decline through the rest of 2024 as well.
“These two together may potentially put some additional pressure on our cost competitiveness, but it’s the right thing to do,” Gustafson said. “By continuing to drive this, we will create a stronger company that is geared for profitable growth once demand turns again. Taking a look into our strategic priorities. They have not changed, and we continue to deliver on these and execute on these priorities with diligence and rigor.”
Gustafson pointed to some positive signs in the second quarter. SKF reported $25.6 billion kroner in net sales, which helped deliver a stable operating margin for the company of 13%. Another area of strength in the second quarter is the aerospace division, which includes the Falconer plant. Company officials expect the division’s growth to continue in the third quarter.
“So, on aerospace, I would say, continuous very good momentum, very happy with how that business is evolving and the team is doing a great job,” said Niclas Rosenslew, SKF chief financial officer. “I mean you are right that, I mean, if there’s one thing holding us back, it’s on the supply side. So it’s not really about demand. It’s really a supply side there. But again, that’s nothing new for specific for (the second quarter) as such. It’s something that we’ve been working on for some time already. So I would say no major change, good traction. Team is doing a fantastic job there. Demand is there.”
