Investing.com -- AB SKF (ST:SKFb) on Friday forecasted a small drop in organic sales for the first quarter of 2025 compared to the first quarter of 2024.
Due to continued market uncertainty, the company will no longer provide full-year organic sales forecasts.
A positive currency impact of SEK 200 million is expected on Q1 2025 operating profit, based on exchange rates as of December 31, 2024.
SKF's fourth-quarter 2024 net sales reached SEK 24.7 billion, up slightly from SEK 24.4 billion in the same period of 2023.
Organic sales, however, fell by 3.1%, reflecting weaker demand. This decline stemmed primarily from lower sales volumes in Europe and China. Sales increased in the Americas and India & Southeast Asia.
SKF’s adjusted operating profit fell to SEK 2.7 billion from SEK 2.9 billion in the same period last year, with the adjusted operating margin narrowing to 11.1% from 12.0%.
The decline was attributed to a combination of negative currency effects and lower production volumes, which impacted cost efficiency.
The Industrial business remained the stronger division, posting an adjusted operating margin of 14.6%, down slightly from 15.0% a year earlier.
Sales performance varied by region, with growth in the Americas and India & Southeast Asia, while demand remained weak in Europe and China.
SKF also noted favorable year-end deliveries in some markets, contributing to regional performance disparities.
The Automotive division faced challenges due to fluctuating demand and reduced customer production.
This resulted in a lower adjusted operating margin of 2.6%, down from 4.5% in the year ago quarter.
Sales dropped due to lower volume and a less profitable mix of products. However, the company's EV business in China is promising, especially with the new Hub Bearing Unit.
This unit improves efficiency by reducing weight by 10% and friction by 30% compared to standard wheel bearings.
SKF's cost-cutting measures, implemented to counter rising wages and material costs amid weak demand, proved insufficient in the fourth quarter.
While successful for most of the year, these reductions could no longer offset the impact of lower sales volumes.
SKF is proceeding with plans to separate its Automotive and Industrial businesses into two independent entities.
SKF is focused on regional growth, investing in stronger local supply chains and more efficient operations. This has led to a 25% reduction in order-to-delivery time in China since 2019.
SKF anticipates ongoing market volatility due to geopolitical issues and changing market conditions.
Though facing short-term challenges, SKF is investing in high-speed rotation and electrification technologies for long-term growth, while continuing to cut costs.
The company's strong financial position allows the board to propose a dividend of SEK 7.75 per share.