• Net Sales: Almost SEK100 billion for the full year, with a 5% negative organic growth.
• Operating Margin: Adjusted operating margin just north of 11% for the fourth quarter.
• Cash Flow: Robust cash flow of SEK3.3 billion in the fourth quarter.
• Dividend Proposal: Increase from SEK7.50 to SEK7.75.
• Fourth Quarter Net Sales: Just shy of SEK25 billion, representing a 3% negative organic growth.
• Americas Sales Growth: Positive net sales growth, with some timing effects.
• Industrial Business Operating Margin: Somewhat higher than 2023 despite negative growth.
• Automotive Business: Significant negative organic growth of 4% and adjusted operating margin of 2.6%.
• Regionalization Rate: Americas at 70%, Asia at 68%.
• FX Impact: Significant FX headwind of 0.9 percentage points affecting the margin.
• CapEx Guidance: SEK4.5 billion for the full year 2025.

• Warning! GuruFocus has detected 3 Warning Sign with SKFRY.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SKF AB (SKFRY) maintained strong margins despite reporting negative organic growth for the sixth consecutive quarter.
• The company reported a robust cash generation of nearly SEK11 billion for the full year.
• SKF AB (SKFRY) announced a slight increase in the proposed dividend from SEK7.50 to SEK7.75.
• The company is making significant progress in its regionalization efforts, with notable increases in regionalization rates in the Americas and Asia.
• SKF AB (SKFRY) is focusing on strategic initiatives such as the separation of its industrial and automotive businesses to create two competitive business units.

Negative Points

• SKF AB (SKFRY) reported a negative organic growth of 3% for the fourth quarter and 5% for the full year.
• The automotive segment faced a challenging quarter with a significant negative organic growth of 4% and a weak adjusted operating margin of 2.6%.
• The company experienced significant FX headwinds, impacting the margin by 0.9 percentage points in the fourth quarter.
• There was a notable destocking in China, particularly affecting the industrial distribution segment.
• The company faced challenges in fully mitigating the volume impact from fixed cost absorption due to lower volumes, especially in the automotive sector.

Q & A Highlights

Q: Should we expect the separation process of SKF's industrial and automotive businesses to be largely done by the Capital Markets Day in November 2025? Will you provide midterm targets for the new businesses by then? A: The vast majority of the work to internally divide the two entities will be done by the end of 2025. We plan to clearly articulate the value creation plans for both businesses and share long-term financial targets. The work will continue into 2026.

Q: Regarding the cost inflation and product mix impact, should we expect this to continue into 2025? A: We do not expect the product mix impact to continue in the coming quarters. The cost inflation was not due to any specific product standing out, and it should not have a material impact moving forward.

Q: Can you provide insights into the pricing strategy for 2025, especially in light of cost versus price dynamics? A: We will continue to work on pricing and mix throughout the year, as we have proven in 2024. We aim to drive pricing wherever possible in the current environment.

Q: How do you see the regional organic growth trends continuing into Q1 2025? A: In Europe, activity levels in the Nordics and Eastern Europe seem robust, but we don't see signs of improvement in Germany, Italy, and France. North America shows increasing activity levels, and strong growth is expected in India, Vietnam, and Indonesia. China remains uncertain despite government incentives.

Q: What impact did portfolio pruning have on organic growth in 2024, and what should we expect for 2025? A: Portfolio pruning had a negative volume effect but was compensated by a positive price mix. We will continue this strategy, but the extent will be more limited in 2025 as most heavy lifting has been done.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.