Alrik Danielson, President and CEO: "Our record start to 2018 has continued. Sales grew by 9% organically, to SEK 22.6 billion and our operating profit was SEK 2,925 million – SKF's highest reported quarterly profit to date. Our operating margin, at 12.9%, continues to improve. Cash flow was also strong, at 2.2 billion.
"The industrial business had a strong quarter with an operating margin of 14.6% and an organic growth of 10.7%, with strong growth in both Asia and Europe. We also saw stronger growth in North America, albeit from a lower level. By industry, we saw particular strength in heavy industries and industrial drives.
"The automotive business delivered a strong operating margin of 8.9%, driven by good demand for both trucks and light vehicles. Organic growth was 5.2%, a clear sign that we continue to outpace vehicle production levels.
"We continue to invest in the development of our value propositions, through the opening of a Rotating Equipment Performance Center in Gothenburg. The center's team of machine health specialists will act as a Nordic hub for the monitoring of connected customer machines as well as playing an important role in developing new logistic solutions for spare parts and remanufacturing services.
"During the last 18 months, we accelerated production to ensure high customer service levels. As foreseen and communicated in April, production has been adjusted during the second quarter, to avoid building inventories. Entering the third quarter of 2018, we expect to see continued growth for both our industrial and automotive businesses."
Outlook and guidance
Demand for Q3 2018 compared to Q3 2017
The demand for SKF's products and services is expected to be higher for the group, including Industrial and Automotive. Demand is expected to be significantly higher in Asia, higher in Europe and North America, and slightly lower in Latin America.
Guidance Q3 2018
- Financial net: SEK -200 million.
- Currency impact on the operating profit is expected to be around SEK +180 million compared with 2017, based on exchange rates per June 30, 2018.
- Tax level excluding effect related to divested businesses: around 28%.
- Additions to property, plant and equipment: around SEK 2,400 million.