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Dec 10, 2008

SKF plans 2,500 job cuts

SKF, the world's biggest bearings maker, forecast on Wednesday a 20-25 percent slide in fourth-quarter operating profit and said it would cut 2,500 jobs in light of weakening demand, sending its shares up.

SKF is the latest big industrial firm in Sweden to slash jobs as the world economic crisis has sapped demand. Heavyweights such as truck maker Volvo and engineering firm Sandvik have also made big cuts in recent weeks.

SKF estimated fourth-quarter operating profit, before restructuring and impairments, would be about 1.6 billion Swedish crowns ($195 million) to 1.7 billion Swedish crowns, based on current assumptions.

That compared with an operating profit of 2.1 billion crowns in the year-earlier quarter, excluding restructuring costs and other one-time items.

"The automotive segments have continued to rapidly fall and a negative trend is now also seen for the industrial segments leading to a much lower total demand for the group in the fourth quarter," SKF said in a statement.

At 1626 GMT SKF shares were up 7.7 percent versus a 0.35 percent rise in Sweden's blue chip index .

"Their comments on the market, and their estimated earnings in the fourth quarter, is exactly in line with our estimates," said Johan Trocme, analyst at Nordea.


The Swedish firm said it saw total group volumes dropping about 15 percent in the fourth quarter compared with the same period last year.

SKF's Chief Executive Officer Tom Johnstone told Reuters the company's automotive division would make a loss in the fourth quarter after stripping out restructuring charges.

Seven automotive plants closed down last week, so December is all but lost for them. And when we say that group volumes are down 15 percent, they are down a lot more than that within automotive," Johnstone said.

In October, the Swedish engineering company said it expected demand to be slightly lower in the final three months of 2008, both compared with a year earlier and the third quarter, and said it was cutting production.

Trocme said: "When it comes to the cost level it is completely in line with what they flagged after the third-quarter report ... so this was what could be expected."

SKF, whose bearings are used in everything from industrial tools to wind turbines, said the fourth-quarter profit estimate comes despite a "very positive price/mix" as well as positive currency effects.

Johnstone said he expected SKF to keep profiting from price increases and higher-margin products even when volumes drop.

"I still believe we will be able to have a positive price/mix going forward, but I think it will come down to more normal levels," he said.

Based on 2007 staff numbers, the job cuts announced on Wednesday amount to nearly 6 percent of the workforce.

After years of robust growth, SKF and its Swedish engineering peers now face increasingly tough market conditions as the financial crisis has pushed an increasing number of countries, including their home market, into recession.

Source : Reuters


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