July 16 (Bloomberg) -- SKF AB, the world’s biggest maker of bearings, posted second-quarter profit that beat analyst estimates amid signs of a recovery in the automotive industry.
Net income declined to 1.08 billion kronor ($161 million) from 1.2 billion kronor, the Gothenburg, Sweden-based company said today in a statement. Analysts on average expected profit of 1.03 billion kronor, a survey of 13 estimates by Bloomberg showed. Sales declined 4.7 percent to 16.4 billion kronor, beating the 15.9 billion kronor analysts had expected.
While the company predicted demand would be lower than last year in the second quarter, Chief Executive Officer Tom Johnstone forecast “slowly improving business” conditions would start to become visible. Profitability in the automotive business is improving and though SKF saw no improvement in demand in industrial markets, it still took a number of important orders, Johnstone said today.
“While there continues to be uncertainty from a macro viewpoint we expect demand in the third quarter to remain on the same level which means it will be slightly higher compared to the same quarter last year,” Johnstone said in the statement. “The manufacturing level was increased during the second quarter and we will stay at that level in the third quarter.”
SKF is considered a barometer for the health of global industrial orders as its products are used by customers in construction, automotive and aviation manufacturing. Its shares climbed 2.8 percent to 171.2 kronor at the open of trading in Stockholm.
S&P put SKF’s long-term credit rating on a negative watch in February, meaning it could be downgraded within the next 12 months if profit measures don’t improve. First-quarter net income declined 38 percent.
SKF booked a 190 million-kronor charge related to a program to cut 2,500 jobs and move production from Western Europe to faster-growing countries. It had earlier predicted a 250 million-krone charge. The program targets annual cost cuts of 3 billion kronor by the end of 2015.
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