Half-year report 2021
Press release 20 July
Record operating profit
The second quarter saw a record in adjusted operating profit of SEK 3,118 million (1,565 million) and an adjusted operating margin of 15.0% (9.4%).
The result was especially strong, given continued headwinds in the form of negative currency impact and rising input costs. Through mitigating actions we have been able to compensate for approximately 50% of this cost increase. We've done well to serve our customers under these circumstances, and we're doing our outmost to capture additional growth opportunities.
Organic sales development in the quarter was just above
33%, with net sales of SEK 20,735 million (SEK 16,599 million). Sales were significantly higher on all main geographical markets with organic growth of 91% in Latin America, 40% in EMEA, 27% in North America and 19% in APAC.
The Industrial business delivered a record set of results, with an adjusted operating margin of 18.0% (14.0%). The Automotive business delivered an adjusted operating margin of 7.6% (-7.6%).
Cash flow generation in the quarter was SEK 509 million (negative 838 million), an improvement compared to last year as well as the last quarter.
We continue to invest in and consolidate our manufacturing footprint. Since 2019 we have permanently closed six sites and are currently in the process of closing an additional 11.
Regretfully, some of these initiatives have a negative impact on some employees which we try to mitigate to the extent possible. Nevertheless, they are necessary to align our presence and capabilities with customer demand and, thereby enabling growth opportunities.
Investments in our factories are expected to reach SEK
3.8 billion for the year, 200 million higher than our previous guidance. These investments make us more flexible and efficient as well as being an important foundation for
winning more business from customers in fast-growing segments and regions. These investments and consolidation efforts have, on an annual basis, realized SEK 1.1 billion of the 5 billion in savings we expect to generate by 2025.
We are moving towards a more sustainable future and we already have an ambitious net zero CO2 emissions target from our own operations by
2030. By also committing to the Science Based Targets Initiative, we're now taking steps to further increase our ambition and transparency levels throughout our supply chain. This will also ensure that our efforts are fully aligned with the ambitions of the Paris Agreement.
The record high operating result for the quarter is a proof point on SKF's ability to drive efficiency and effectiveness in a volatile and demanding market environment. Together with opportunities to further capitalize on our strong market position and industrializing new offerings and business models, we have a solid platform to fuel future growth. I'm thrilled and eager to embark on the exciting journey that lies ahead of us!
Looking ahead, demand is expected to remain strong but there is also uncertainty related to both Covid and to the supply situation. For the third quarter we expect an organic growth of about 10 percent compared to Q3 2020.
Rickard Gustafson
President and CEO
Operating margin1)
TARGET 14%
% | 13.3 | 13.2 | 14.0 | 15.0 | |
15 | |||||
10 | 9.4 | ||||
5 | |||||
0 | Q2 20 | Q3 20 | Q4 20 | Q1 21 | Q2 21 |
Adjusted operating margin
Revenue growth2)
TARGET 5%
% | 33.2 | ||||
40 | |||||
20 | 8.6 | ||||
0 | -5.1 | -0.1 | |||
-20 | |||||
-25.2 | |||||
-40 | Q3 20 | Q4 20 | Q1 21 | Q2 21 | |
Q2 20 |
Net debt/Equity3)
TARGET <40%
% | |||||
40 | |||||
30 | 21 | ||||
20 | 16 | 17 | |||
9 | 10 | ||||
10 | |||||
0 | Q2 20 | Q3 20 | Q4 20 | Q1 21 | Q2 21 |
ROCE1)
TARGET 16%
% | |||||
20 | |||||
15 | 12.7 | 13.1 | 15.4 | ||
12.0 | 12.1 | ||||
10 | |||||
5 | Q2 20 | Q3 20 | Q4 20 | Q1 21 | Q2 21 |
Carbon Neutral by 20304)
TARGET 0 BY 2030
Thousand ton C02e | |||||
800 | 603 | ||||
600 | 492 | ||||
420 | 381 | 385 | |||
400 | |||||
200 | |||||
0 | 2017 | 2018 | 2019 | 2020 | 2021 |
SKF's long-term targets shall be achieved over a business cycle
- Adjusted for items affecting comparability.
- Including acquisitions, adjusted for divestments.
- Excluding pension liabilities.
- Scope 1 & 2 C02e from all SKF manufacturing and logistics units.
Cover picture:
Production of a sensor roller bearing at SKF world-class manufacturing site in Gothenburg.
2 SKF Half-year report 2021
Key figures
MSEK unless otherwise stated | Q2 2021 | Q2 2020 | Half year 2021 | Half year 2020 |
Net sales | 20,735 | 16,599 | 40,600 | 36,684 |
Adjusted operating profit | 3,118 | 1,565 | 5,907 | 4,137 |
Adjusted operating margin, % | 15.0 | 9.4 | 14.5 | 11.3 |
Operating profit | 2,878 | 669 | 5,577 | 2,937 |
Operating margin, % | 13.9 | 4.0 | 13.7 | 8.0 |
Adjusted profit before taxes | 3,040 | 1,476 | 5,626 | 3,635 |
Profit before taxes | 2,801 | 580 | 5,296 | 2,436 |
Net cash flow after investments before financing | 509 | -838 | -193 | 1,092 |
Basic earnings per share | 4.59 | 0.75 | 8.50 | 3.50 |
Adjusted earnings per share | 5.11 | 2.72 | 9.23 | 6.13 |
Financial performance
Second quarter 2021
Operating profit for the second quarter was SEK 2,878 million (669). Operating profit included items affecting comparability of SEK -238 million (-896) whereof -238(-657) related to ongoing restructuring and cost reduction activities and SEK 0 million (-227) related to customer settlements.
The adjusted operating profit for the second quarter was SEK 3,118 million (1,565). The adjusted operating profit was positively impacted by sales and manufacturing volumes, sales prices and customer mix as well as cost reductions. Adjusted operating profit was negatively impacted by currency effects, material costs and logistics costs.
Adjusted operating profit bridge, MSEK | Q2 |
2020 | 1,565 |
Currency impact | -586 |
Organic sales & Manufacturing volumes | 2,824 |
Cost development | -685 |
2021 | 3,118 |
Key figures
- Financial income and expense, net in the second quarter was SEK -77 million (-89).
- Taxes in the quarter were SEK -661 million (-249) resulting in an effective tax rate of 23.6% (42.9%). The tax rate in last year was negatively affected by withholding tax on dividends, deferred tax not recognized and non-deductible expenses.
- Net cash flow after investments before financing in the second quarter was SEK 509 million (-838). Excluding cash flow related to divestments and acquisitions during the second quarter it was SEK 509 million (-854). The increase is driven by the higher operating profit partly offset by higher working capital.
- Net working capital in percent of annual sales was 30.7% in the second quarter compared to 30.0% in the second quarter 2020. The ratio was negatively affected by exchange rate fluctuations.
- Provisions for post-employment benefits decreased by SEK -251 million (-1,550) in the second quarter mainly due to net payments and exchange rate effects. No material effect from actuarial gains and losses in the quarter due to stable discount rates since last quarter.
30 June 2021 | 31 March 2021 | 30 June 2020 |
Net working capital, % of 12 months rolling sales | 30.7 | 30.2 | 30.0 |
ROCE for the 12-month period, %1) | 15.4 | 13.1 | 12.0 |
Net debt/equity, % | 50.1 | 43.2 | 62.5 |
Net debt/equity, excluding post-employment benefits, % | 16.8 | 10.2 | 20.7 |
Net debt/EBITDA | 1.5 | 1.6 | 2.1 |
1) Adjusted for items affecting comparability.
SKF Half-year report 2021 3
Sales
Net sales, change y-o-y, % | Q2 | Half year | |||||||
Organic1) | Structure | Currency | Total | Organic1) | Structure | Currency | Total |
SKF Group | 33.2 | - | -8.3 | 24.9 | 19.6 | - | -8.9 | 10.7 | ||
Industrial | 21.7 | - | -7.9 | 13.8 | 13.1 | - | -8.6 | 4.5 | ||
Automotive | 75.9 | - | -9.8 | 66.1 | 39.2 | - | -10.2 | 29.0 | ||
1) Price, mix and volume | ||||||||||
Q2 | Half year | |||||||||
Organic sales in local currencies, | Europe, | North | Latin | Asia- | Europe, | North | Latin | Asia- | ||
Middle East | Middle East | |||||||||
change y-o-y, % | and Africa | America | America | Pacific | and Africa | America | America | Pacific | ||
SKF Group | 39.8 | 27.2 | 91.0 | 19.1 | 18.0 | 11.8 | 42.9 | 22.4 | ||
Industrial | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Automotive | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Q2 | Half year | |||||||||
Europe, | North | Latin | Asia- | Europe, | North | Latin | Asia- | |||
Customer industries | Middle East | Middle East | ||||||||
and Africa | America | America | Pacific | and Africa | America | America | Pacific | |||
Organic sales in local currencies, change y-o-y: | ||||||||||
Light vehicles | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Trucks | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Vehicle aftermarket | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Aerospace | ++ | +/- | +++ | --- | -- | +++ | ||||
Industrial drives | +++ | ++ | +++ | +++ | +++ | + | +++ | +++ | ||
Energy | +++ | --- | +++ | ++ | +++ | --- | +++ | +++ | ||
Heavy industries | +++ | +++ | +++ | -- | ++ | ++ | ++ | - | ||
Off-highway | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ | ||
Railway | +++ | ++ | -- | ++ | +/- | ++ | --- | |||
Agriculture, food and beverage | +++ | +++ | ++ | -- | +/- | +++ | ||||
Marine | --- | +++ | +++ | --- | +++ | +/- | ||||
Electrical | +++ | +++ | +++ | +++ | - | +++ | ||||
Other industrial | +++ | +++ | +++ | +++ | +++ | +++ | -- | +++ | ||
Industrial distribution | +++ | +++ | +++ | +++ | +++ | +++ | +++ | +++ |
Comments on organic sales in local currencies in Q2 2021, compared to Q2 2020
Europe, Middle East and Africa
Industrial: Sales were significantly higher in the quarter. By industry, sales to all industrial segments, except Marine and Aerospace, were significantly higher compared to Q2 2020.
Sales to the aerospace industry were higher and sales to the marine industry were significantly lower compared to Q2 last year.
Automotive: Sales in the quarter were significantly higher compared to last year with significantly higher sales to light vehicles, trucks and to the vehicle aftermarket compared to Q2 2020.
North America
Industrial: Sales were significantly higher in the quarter compared to Q2 2020. By industry, sales to most industrial segments were significantly higher. The exceptions were, railway and industrial drives where sales were higher compared to Q2 2020, aerospace where sales were relatively unchanged and energy where sales were significantly lower compared to Q2 last year.
Automotive: Sales in the quarter were significantly higher compared to last year with significantly higher sales to light vehicles, trucks and to the vehicle aftermarket compared to Q2 2020.
Asia-Pacific
Industrial: Sales were significantly higher in the quarter. Sales were significantly higher to all industrial segments except for energy which saw higher sales and railway and heavy industries where sales were lower compared to Q2 2020.
Automotive: Sales were significantly higher in the quarter. Sales were significantly higher to trucks, light vehicles as well as to the vehicle aftermarket compared to Q2 2020.
Latin America
Industrial: Overall, sales were significantly higher in the quarter. Sales to all relevant industrial segments were significantly higher compared to Q2 2020.
Automotive: Sales in the quarter were significantly higher compared to last year with significantly higher sales to light vehicles, trucks and to the vehicle aftermarket compared to Q2 2020.
4 SKF Half-year report 2021
Segment information1)
MSEK unless otherwise stated
Industrial | Q2 2021 | Q2 2020 | Half year 2021 | Half year 2020 |
Net sales | 14,889 | 13,080 | 28,677 | 27,444 |
Adjusted operating profit | 2,674 | 1,832 | 4,921 | 4,062 |
Adjusted operating margin, % | 18.0 | 14.0 | 17.2 | 14.8 |
Operating profit | 2,405 | 1,282 | 4,582 | 3,433 |
Operating margin, % | 16.2 | 9.8 | 16.0 | 12.5 |
Automotive | Q2 2021 | Q2 2020 | Half year 2021 | Half year 2020 |
Net sales | 5,846 | 3,519 | 11,923 | 9,240 |
Adjusted operating profit | 444 | -267 | 986 | 75 |
Adjusted operating margin, % | 7.6 | -7.6 | 8.3 | 0.8 |
Operating profit | 473 | -613 | 995 | -496 |
Operating margin, % | 8.1 | -17.4 | 8.3 | -5.4 |
1) Previously published figures for 2020 have been restated to reflect a change in classification of customers between the segments.
Net sales by customer industry for Industrial Q2 2021
Net sales by customer industry for Automotive Q2 2021
Agriculture, food and beverage 1% Electrical 1% Marine 2%
Other industrial 5% Railway 6% Off-highway 8% Heavy industries 8%
Industrial distribution 35%
Trucks 21%
Light vehicles 46%
Aerospace 8%
Energy 12%
Vehicle aftermarket 33%
Industrial drives 14%
Net sales by region for Industrial Q2 2021 | Net sales by region for Automotive Q2 2021 |
Latin America 7% | Latin America 14% | ||
North America 21% | EMEA 42% | North America 16% | EMEA 46% |
Asia-Pacific 30% | Asia-Pacific 24% |
SKF Half-year report 2021 5
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AB SKF published this content on 20 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 July 2021 05:13:04 UTC.