SKF Advances After BofA Upgrades on Cost-Cuts: Stockholm Mover
SKF AB (SKFB), the world’s largest maker of bearings, rose the most in almost five months in Stockholm trading after Bank of America Merrill Lynch welcomed SKF’s cost- cutting program and raised its recommendation on the stock.
SKF jumped as much as 5.2 kronor, or 3.4 percent, to 157.9 kronor, its steepest advance since Nov. 19. The stock traded 3 percent higher at at 12:03 p.m. local time, giving SKF a market value of 71.6 billion kronor ($11.2 billion). Volumes were at 76 percent of the daily average in the past three months.
Bank of America, which today upgraded its rating on the stock to neutral from underperform, said that while the first quarter of this year is expected to have been weak for SKF, demand is seen improving in the second half of this year with lower de-stocking efforts supporting margins. The bank’s downgrade of SKF shares on Jan. 9 came before SKF announced a major restructuring program, it said in a note to clients today.
“We still think the program looks fairly low on detail, but welcome the intent and think the market will start to focus on the potential upside if demand and inventories stabilize,” Bank of America said. “Recent weak performance leaves the stock screening less negatively against the sector.”
SKF said on Jan. 14 it would seek to cut 3 billion kronor in costs by the end of 2015 as production is moved from western European countries to eastern Europe, Asia and Latin America.
Separately, SKF said today it would book a 250 million- krona expense in the first quarter related to the cost-cutting program. The total cost is estimated at 1.5 billion kronor, of which 200 million kronor was taken in the fourth quarter. Chief Executive Officer Tom Johnstone said Jan. 30 that about half of the remaining 1.3 billion kronor would be booked this year.
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