GOTEBORG, Sweden, Jan. 29, 2002 (PRIMEZONE) -- SKF, year-end report for 2001:
The SKF Group's profit before taxes for the full year of 2001 amounted to MSEK 3 120 (3 002), an increase of 3.9%. For the year 2000 a non- recurring profit of MSEK 100 was included. The profit for the fourth quarter 2001 was MSEK 824 (761).
Earnings per share for the full year 2001 increased 10.5 % to SEK 19.04 (17.23). The Board proposes that a dividend of SEK 6.00 (5.25) per share be paid for the 2001 financial year.
Total sales, recorded in local currencies, were fairly flat for the full year. Sales in Europe had good growth in the beginning of last year but decreased in the fourth quarter. In North America, sales decreased considerably, although in the fourth quarter they were slightly higher, mainly due to seasonal reasons. The annual sales in Asia increased and good growth was noted in the fourth quarter.
The Group's production levels and the number of employees were gradually reduced during the year to adapt to the lower market demand and to continue the reduction of inventories.
Outlook
There are signs that a recovery in market demand could start already during the course of this year. The first quarter, however, is expected to be weak and the production volume will be considerably lower than that recorded for the same period last year.
Summary
-- The operating profit for the year amounted to MSEK 3 634 (3 674,
or 3 574 excluding non-recurring items). The figure for the fourth
quarter was MSEK 931 (941).
-- The operating margin for the full year 2001 amounted to 8.4% (9.2,
or 9.0 excluding non-recurring items), and for the fourth quarter
to 8.4% (9.0)
-- Cash flow after investments before financing amounted to MSEK 4
271 (2 880). Cash flow for the fourth quarter was MSEK 1 433 (1
088).
-- Net sales for 2001 amounted to MSEK 43 370 (39 848), an increase
of 8.8% compared with 2000. Net sales for the fourth quarter
amounted to MSEK 11 088 (10 459), an increase of 6.0% compared
with the corresponding period in 2000.
-- The increase in net sales for 2001 was attributable to: structure
+0.5%, volume -2.0%, price/mix +1.8% and currency effect +8.5%. A
comparison between the fourth quarter 2001 and 2000 shows:
structure +1.0% volume -3.8%, price/mix +2.1% and currency effect
+6.7%
-- Net profit amounted to MSEK 2 167 (1 962), an increase of 10.5%.
Net profit for the fourth quarter was MSEK 596 (532).
The Group's financial net for 2001 was MSEK -514 (-672). Interest- bearing loans at year-end 2001 totalled MSEK 3 541 (4 968), while pension liabilities amounted to MSEK 7 044 (6 746). At year-end, the Group had financial assets of MSEK 6 797 (4 557), of which MSEK 5 387 (3 481) were short-term financial assets. The equity/assets ratio at year-end was 41.1% (37.1).
Additions to tangible assets totalled MSEK 1 403 (1 388). Of the Group's total additions to tangible assets, approximately MSEK 43 (47) were invested in measures to improve the environment both internally and externally. Depreciation according to plan was MSEK 1 714. The comparable figure for 2000 was MSEK 1 572.
Compared with the year 2000, exchange rates for the full year 2001, including translations effects and flows from transactions had a positive effect on SKF's profits before taxes to an estimated amount of MSEK 425 whereof MSEK 100 refer to the fourth quarter of 2001.
Expenditure in research and development amounted to MSEK 871 (710), corresponding to 2.0 % (1.8) of annual sales. Development expenditure for IT solutions and customized designs is not included. The number of first-time patent applications in 2001 was 171. The number in 2000 was 144.
The average number of employees was 37 636 (39 557) and the registered number of employees was 38 091 (40 401).
At the end of December, the Group's inventories amounted to 21.0% (23.2) of annual sales. Return on capital employed for the 12-month period ended December 31 was 14.9% (16.2). Return on equity was 14.3% (16.0).
Divisions
The result by Division is based on SKF management reporting.
Industrial Division
External sales in 2001 amounted to MSEK 9 852 (8 727), an increase of 12.9%. Total sales (sales to external and internal customers) were MSEK 16 027 (14 544). The Division's operating result was MSEK 1 670 (1 665) with an operating margin of 10.4% (11.4).
Despite the slowdown in sales and lower manufacturing volumes, the operating result remained on a satisfactory level, comparable to the level in 2000.
Sales in Europe started the year on a high level but declined during the autumn. Sales were low throughout the year in North America. The business in Asia developed well, especially in China. The joint-venture factory for railway bearings in Nankou achieved a record output for the second year running.
Improved flexibility in manufacturing, the further reduction of lead times, increased production frequencies plus more robust manufacturing processes allowed the Division to simultaneously reduce inventories and improve its delivery service.
Two new companies were added to the business area Linear Motion and Precision Technologies. The first was Gamfior S.p.A. in Italy, a leading manufacturer of high-precision motorized spindles, and high-precision ball screws for machine tools. At the beginning of 2002, Magnetic Elektromotoren AG in Switzerland was also acquired. The company develops, manufactures and markets electrical actuation products and systems for medical, industrial, healthcare, ergonomics and building automation applications.
The Automotive Division
External sales in 2001 amounted to MSEK 9 719 (8 932), an increase of 8.8%. Total sales (sales to external and internal customers) were MSEK 11 155 (10 162). The Division's operating result was MSEK 305 (338) with an operating margin of 2.7% (3.3).
The result was on too low a level and was slightly weaker than for the previous year due to lower volumes in the truck business.
Sales to the car and light truck industry in Europe started to develop positively for the year but weakened as the year progressed. In North America, the level was lower than last year due to the reduction in production and inventories of vehicles.
The heavy truck market in Europe declined. In North America, sales fell sharply for the second year running.
The vehicle service market developed very positively during the year owing to both the addition of new and improved products and to an expanded distributor network. An agreement with the Swedish software company Infocar, was concluded to develop and market a unique diagnostic software for repair and services for cars.
The FILO drive-by-wire concept car, jointly developed by SKF and Bertone, was launched at the Geneva Motor Show. The car is the first and only car featuring brake-by-wire, steer-by-wire, clutch-by-wire and gear- shift-by-wire, all of which have been developed by SKF. SKF has been selected by GM as the drive-by-wire partner for their new versatile fuel cell concept car - Autonomy.
The Electrical Division
External sales in 2001 amounted to MSEK 1 726 (1 575), an increase of 9.6%. Total sales (sales to external and internal customers) were MSEK 6 246 (6 268). The Division's operating result was MSEK 372 (504) with an operating margin of 6.0% (8.0).
Substantial falls in volume in Europe and USA had a negative impact on the Division's results.
In Europe, sales were affected by the weakening of the economy and the two-wheeler segment suffered most. Sales were more stable in the electrical segments owing to new businesses.
Sales in Asia increased strongly in 2001 thanks to the introduction of advanced technical solutions. The training of customers, and the offering of advanced calculation and simulation software, played an important role for the growing business in this market.
Sales of sensor-bearing units for electric motor control, forklift steering etc., developed well. The business in Europe is expanding rapidly, and the Division also gained an order from India for bearings for electric vehicle applications.
A joint-venture agreement was concluded with Shanghai Bearing (Group) Co. Ltd to build a deep groove ball bearing factory in Shanghai to serve the fast-growing Chinese market with high-quality products.
SKF sold its Italian based manufacturing of sheet metal components to an Italian company specialising in sheet metal pressing.
The Service Division
External sales in 2001 amounted to MSEK 13 920 (12 844), an increase of 8.4%. Total sales (sales to external and internal customers) were MSEK 15 497 (14 034). The Division's operating result was MSEK 1 291 (1 013) with an operating margin of 8.3 % (7.2).
Currencies and price increases, supported by efficient logistics, cost effective operations and revenues from acquired companies contributed to an improved result.
Sales were strong in western Europe during the first half of the year, but then weakened in the second half. In North America sales remained weak, but towards the end of the year sales were higher, mainly due to seasonal reasons. Central and Eastern Europe grew strongly whilst the Middle East and Africa were weaker than 2000. In Asia, there was again some solid growth, particularly in China and South East Asia, whereas Latin America sales remained on the 2000 level, but with demand weakening during the year.
Greater efficiency in the supply chain was achieved during the year through the expanded use of endorsia.comtm and PTplace.comtm web-based marketplaces. Endorisa.comtm is now running at an annual rate of one million transactions. These all-in-one service networks feature branded industrial goods and endorsed manufacturer know-how. Users can access price and availability, check order status, gain product knowledge, and place orders.
SKF enhanced its global distribution network in Asia with the move into a new and larger, high-tech distribution centre in Singapore.
SKF Logistics Services gained a number of new external customers in 2001.
The total sales of SKF Reliability Systems, the unit within the Division that is responsible for developing and selling products and services for maintenance of rotating industrial machinery, increased 40% on the 2000 figure as a result of an increasing base of maintenance service agreements and performance-based contracts.
The Service Division increased the scope of its technology and strengthened its position in the Reliability Systems business in 2001 with the acquisition of Naiden Teknik AB, a Swedish condition-monitoring company.
The Seals Division
External sales in 2001 amounted to MSEK 4 068 (3 990), an increase of 2.0%. Total sales (sales to external and internal customers) were MSEK 4 732 (4 618). The Division's operating result was MSEK 57 (114) with an operating margin of 1.2% (2.5).
Sales and production in the North American operations were significantly down in 2001 owing to the market situation and the lower production of both light and heavy vehicles. This affected the margin despite the measures to reduce the workforce and costs. The aftermarket, while still down, developed better than the OEM business thanks to the very good level of service and the launch of new products such as timing belt kits.
The European business was also significantly down owing to lower overall demand. The sales in the Asian operations developed positively during the year but they are still only a fraction of the overall business.
The seals business started deliveries during the year for a number of new businesses such as the new Ford Fiesta and the Jaguar X-Type. Ford selected Chicago Rawhide to supply wheel and axle seals for use by Ford dealer service departments as replacement parts on Ford passenger cars and light trucks in North America.
The Steel Division
External sales in 2001 amounted to MSEK 1 708 (1 689), an increase of 1.1%. Total sales (sales to external and internal customers) were MSEK 2 991 (3 093). The Division's operating result was MSEK -80 (-14) with an operating margin of -2.7% (-0.4).
Extensive cost reduction activities are being implemented to restore profitability. Although the results are unsatisfactory, the cash flow in the Division remained positive.
The market peaked in Europe in mid-year and there was a major drop in demand during the latter half of 2001. The biggest drop in sales volumes was in the US market. Produced volume was some 15% down on the figure for 2000.
The Steel Division was negatively affected by the high dollar rate as this influences the price of scrap, alloys, oil, LPG and other input materials.
The super-clean steel for high-pressure fuel-injection pumps is developing positively as the production of diesel engines increases. This application contributes to a reduction of harmful emissions and less fuel consumption.
The share of sales to external customers increased during the year.
Aerospace and Other Businesses
External sales in 2001 amounted to MSEK 2 311 (1 943), an increase of 18.9 %. Total sales (sales to external and internal customers) were MSEK 4 054 (3 730). The operating result was MSEK 274 (259) with an operating margin of 6.8% (7.0).
Sales in the Aerospace business were good throughout the year, in both Europe and North America. The operating result remained strong during the year.
The result for the forging operations, however, was affected by a major machine overhaul and lower volumes.
In 2001, MRC Bearings signed a five-year contract to supply main-shaft engine bearings to GE Aircraft Engines. MRC Bearings has also signed an agreement with Rolls Royce to provide all the bearings for the lift fan for the Joint Strike Fighter to be built by Lockheed-Martin.
SARMA has developed a new generation of composite rods for airframe applications, which is being delivered today for the Airbus A340. Because of the composite properties, weight savings per rod range from 25-45% compared with aluminium. This is a key factor for the development of any new large aircraft. SARMA will supply the rods reinforcing the wing box on the new Airbus A380, and is also supplying electromechanical equipment to the fly-by-wire technology in the A380.
Previous Outlook Statement
Nine-months 2001: The risk for a deeper downturn in market demand for the next quarters has now increased. The production rate will be further reduced in the fourth quarter this year.
Overhead Presentation from SKF
For your convenience, an overhead presentation of SKF's year-end report 2001 will be published on SKF's website at the following address: http://investors.skf.com/presentations/.
Sune Carlsson President and CEO
Enclosures:
Consolidated financial information Consolidated balance sheets Consolidated statements of cash flow Consolidated financial information - yearly and quarterly comparisons (Group and Divisions)
The accounting principles and methods of calculation are those described in Note 1 in the Annual Report 2000. The report has not been audited by the Company's auditors.
The SKF Annual Report 2001 will be published on Friday, March 15, 2002 and will be available at the Company as of that day.
The report on SKF's first-quarter earnings in 2002 will be published on the date of the Company's Annual General Meeting on Thursday, April 18, 2002.
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