By Niklas Pollard
STOCKHOLM (Reuters) - Sweden's SKF said on Thursday that "exceptional" cost inflation had peaked and been fully offset as the world's biggest maker of industrial bearings reported higher underlying fourth-quarter earnings, lifting its shares.
SKF, which competes with firms such as Germany's Schaeffler, has faced mounting cost inflation, a simmering energy crisis and supply chain strains in recent quarters, met with price hikes of its own.
For the first time in well over a year, SKF's pricing fully compensated for the cost surge coursing through the economy and CEO Rickard Gustafson said inflationary pressures, while still a challenge, had finally begun to moderate.
"We can't relax in any way. We still see a high cost level, but the inflation rate in some areas has begun to flatten out," he told Reuters. "It's one data point, not a trend."
Still, markets are expected to remain volatile and the company said it expected mid-single-digit like-for-like sales growth in the first quarter and for the full year, representing a slowdown from a rise of 9.7% for the fourth quarter.
SKF's fourth-quarter pretax profit fell to 1.69 billion Swedish crowns ($164 million) from 2.33 billion a year earlier, missing analysts' forecast of 1.76 billion, Refinitiv data showed.
However, operating earnings excluding one-off charges rose to 2.54 billion from 2.26 billion reflecting its efforts to cut fixed costs and boost operational flexibility.
Gustafson said cost inflation had peaked in the third quarter and SKF shares, which have gained more than 25% this year, were up 8.0% at 1003 GMT.
"SKF ... beat on price/cost already this quarter with price/cost now in balance," analysts at Citi said in a note, predicting consensus upgrades for SKF's earnings this year.
A bellwether for global industrial demand with its bearings used across a wide range of sectors, SKF said it had continued to implement price increases, enabling it to compensate for 1.8 billion crowns of cost inflation during the fourth quarter.
The Gothenburg-based manufacturer proposed an unchanged annual dividend of 7.00 crowns per share, slightly below analysts' expectations of 7.30 crowns.
($1 = 10.3046 Swedish crowns)
(Reporting by Niklas Pollard, Editing by Terje Solsvik and Mark Potter)