SKF Forecasts Global Demand Will Hold Up as Europe Declines

SKF AB (SKFB), the world’s largest maker of ball bearings, predicted little change in the worldwide demand for its offerings in the first quarter even as European customers in the transport industry curtail investments.

Sales of SKF’s products and services in the year’s first three months will probably be “slightly lower” in Europe compared with the fourth quarter, the Gothenburg, Sweden-based company said in a statement today. Global demand for all divisions is expected to be “relatively unchanged,” it said.

“The European automotive market was expectedly weak” with fewer car registrations in the fourth quarter, said Lars Brorson, an analyst at DNB Bank ASA in London with a “hold” recommendation for SKF’s shares. Brorson said it is “positive” that SKF had an unchanged or slightly higher outlook for all its main segments except trucks.

SKF began reducing production at the end of the third quarter. The manufacturer is considered an industry bellwether because its bearings are used in products such as construction cranes and cars. The company is the first major Nordic manufacturer to report earnings this quarter.

SKF traded 1.7 percent higher at 160.50 kronor as of 2:13 p.m. in Stockholm, compared with a 1.9 percent advance for the OMX Stockholm 30 Index. The stock has gained 10 percent this year, valuing the company at 73.2 billion kronor ($10.8 billion).

Fourth-quarter net income fell to 1.17 billion kronor, or 2.57 kronor a share, from 1.31 billion kronor, or 2.87 kronor, a year earlier. Sales rose 5.5 percent to 16.3 billion kronor, in line with the average estimate of 17 analysts surveyed by Bloomberg.

Europe Outlook

“Looking into the first quarter, we still see uncertainty in demand in Europe and in our automotive business,” Chief Executive Officer Tom Johnstone said in the statement. SKF generated 46 percent of its revenue in Europe last year.

Sweden’s economy probably entered a recession this quarter, and annual growth may only reach 0.6 percent this year, Swedbank AB (SWEDA) predicted on Jan. 24, citing slumping exports and rising unemployment. Europe’s turmoil will “definitely” get worse before the situation improves, Swedish Finance Minister Anders Borg said last week.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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