SKF CEO Johnstone to Be Replaced by Hoeganaes’s Danielson

SKF AB (SKFB), the world’s largest maker of ball bearings, tapped Alrik Danielson, chief executive officer of Swedish iron and metal powders maker Hoeganaes AB, to replace Tom Johnstone as CEO.

Johnstone, 58, is stepping down in January after almost 38 years at SKF, including more than 11 in the top job, the Gothenburg-based company said in a statement today. Danielson, 52, worked at SKF between 1987 and 2005 and was president of its industrial division between 2003 and 2005, before leaving to become the CEO of Hoeganaes.

Danielson may face an uphill struggle trying to reach the company’s 15 percent operating margin target in the next three years, Credit Suisse analyst Andre Kukhnin said in a note. Although the succession is largely an “amicable” solution, Danielson will inherit some structural risks, and may have to lower the margin target, he said.

SKF’s operating margin in the first half of this year was 11.9 percent, and the company warned in July that demand for its products -- bearings and seals that are essential components in products from dishwashers to mining equipment and aircraft -- remains subdued in Europe. In addition to a sluggish recovery in Europe, Danielson also faces increasing competition from Chinese and Japanese peers.

Asian Competition

The company’s “lack of a strong mid-market offering that would address the competitive threat from the lower-end” makes Asian competition a key issue for SKF in the near- and mid-term, Kukhnin said. “Although, we do not doubt Alrik Danielson’s ability to address or mitigate this issue eventually, we see little scope for a quick fix.”

Under Johnstone’s leadership, SKF increased sales from 41 billion kronor ($5.9 billion) in 2003 to 63 billion kronor last year. The stock more than tripled in Stockholm trading since he took over. Today, SKF shares were little changed at 164.50 kronor as of 10:58 a.m., valuing the company at 74.7 billion kronor.

Danielson has done “a great job” at Hoeganaes, DNB said in a note. Nordea analyst Henrik Nilsson said “Hoeganaes has performed well” under Danielson’s tenure. “We see this as slightly positive.”

To contact the reporter on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Robert Valpuesta

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