SKF boosted by strong profits, price rises as Russian exit hits sales growth outlook

By Helena Soderpalm

STOCKHOLM (Reuters) -SKF has cut its outlook for sales growth this year due to its planned exit from Russia, after reporting first-quarter profits well above expectations on the back of strong demand and its ability to raise prices.

SKF is being hard hit by industry-wide supply chain challenges and cost inflation and is seeking to buttress its margins by raising prices and cutting costs, moves that helped to compensate for headwinds in the first quarter.

"We have seen a very strong demand across our industries," CEO Rickard Gustafson told a news conference on Tuesday, adding the company had been able to drive prices and other cost mitigation actions effectively.

Shares in the world's biggest maker of industrial bearings, down 27% so far this year, rose 6.6% by 0807 GMT.

"A surprisingly strong set of results today," RBC analysts said, adding that the fact that SKF showed a strong ability to compensate for rapid steel cost inflation with price hikes was a very powerful signal.

Investment bank Jefferies said in its view, the lower growth guidance still implied an upgrade to the previous one, adjusting for Russia and Ukraine.

SKF said it expected organic, or like-for-like, sales growth of about 4-8% in 2022 versus its previous forecast of around 5-10%, while predicting organic sales in the second quarter would be relatively unchanged year-on-year.

Quarterly adjusted operating profit rose to 3.06 billion crowns ($315.8 million) from 2.79 billion a year earlier, beating the 2.58 billion mean analysts' forecast according to a Refinitiv poll.

Organic sales grew by 6.5% during the quarter, with 2.7% negative growth in SKF's automotive business. The Gothenburg-based manufacturer generates about 75% of group sales from its industrial business and 25% from the automotive sector.

SKF said it expected its Industrial division to increase organic sales in the second quarter, while Automotive sales would decline, as it sees continued uncertainties due to supply constraints, the war in Ukraine and the COVID-situation in China.

The company, whose rivals include Germany's Schaeffler, said last week it would leave Russia, which accounted for roughly 2% of its total sales in 2021, and take a related write-down of 500 million crowns in the second quarter.

($1 = 9.6887 Swedish crowns)

(Reporting by Helena Soderpalm; editing by Niklas Pollard and Jane Merriman)