SKF Q2 2025: Another quarter of margin resilience

Q2 2025

Net sales:MSEK 23,166 (25,606)

Organic growth:?0.2% (?6.6%), driven by lower market demand within the Automotive market while the Industrial segment reported organic sales growth.

Adjusted operating profit:MSEK 3,090 (3,324). The decrease was due to significant currency headwind. Solid price/mix contribution, driven by pricing activities and portfolio management, as well as good cost control more than offset lower volumes.

Adjusted operating margin:13.3% (13.0%) with Industrial at 16.6% (16.3%) and Automotive at 5.1% (5.3%).

Net cash flow from operating activities:MSEK 2,817 (2,152).

Financial overview, MSEK unless otherwise stated    Q2 2025    Q2 2024    Half year 2025    Half year 2024    

Net sales    23,166    25,606    47,132    50,305    

Organic growth, %    ?0.2    ?6.6    ?1.8    ?6.8    

Adjusted operating profit    3,090    3,324    6,323    6,627    

Adjusted operating margin, %    13.3    13.0    13.4    13.2    

Operating profit    1,300    2,489    4,185    5,482    

Operating margin, %    5.6    9.7    8.9    10.9    

Adjusted net profit    2,373    2,498    4,669    4,810    

Net profit    583    1,663    2,531    3,665    

Net cash flow from operating activities    2,817    2,152    3,794    3,933    

Basic earnings per share    1.13    3.36    5.08    7.50    

Adjusted earnings per share    5.06    5.19    9.77    10.02    

Rickard Gustafson, President and CEO:

“It’s encouraging that our adjusted operating margin improved, year-over-year, with relatively flat organic sales and significant currency headwind. We have continued to work hard to create a strong foundation for the future, including our ongoing rightsizing activities.

Margin resilience in markets with mixed demand

Our organic sales declined in the second quarter by-0.2% year-over-year. For our Industrial business, organic sales improved in all regions, especially in Asia where it was partly driven by favorable timing of deliveries. In Europe, sales volumes improved sequentially driven by stronger demand in aerospace, lubrication and magnetics.

Our Automotive business continued to face challenging market conditions globally, except for electrical vehicles, resulting in an organic sales decline, year-over-year.

We delivered a strong adjusted operating margin of 13.3% given the mixed demand and significant negative currency impact. The margin was driven by pricing, portfolio management and good cost control. We largely compensated for increased tariff costs. Given current tariff levels, we expect this to be the case also in the third quarter, with the majority of the net impact in Automotive.

Items affecting comparability (IAC) was high in the quarter. This as the full amount of costs related to the previously indicated rightsizing program were charged. As the Automotive separation is building momentum, IAC also includes sequentially higher separation costs. Furthermore, we reported a capital gain of BSEK 0.8. Due to timing effects, costs related to footprint regionalization were low in the quarter. In total, IAC amounted to BSEK-1.8.

Cash flow increased to BSEK 2.8 (2.2) due to improved working capital, where accounts payable contributed positively.

A more competitive Industrial business

Strengthened operational and commercial excellence are key pillars to create significant customer value in targeted markets.

As part of improving our operational excellence, we have managed to swiftly adapt our organization to the rapidly changing market conditions in recent years, contributing to our margin resilience.

To further enhance our competitiveness, the previously announced rightsizing of our Industrial business, enabled by the Automotive separation, comprise of a gross reduction of approximately 1,700 positions, primarily staff positions in Europe. With re-hires related to our ongoing strategic footprint shift, the net reduction is approximately 1,200 positions. These actions are difficult to take, but necessary to secure our future competitiveness. The savings are estimated at approximately BSEK 2 and will more than compensate for dissynergies related to the Automotive separation. The full annual run-rate saving is expected to be achieved in 2027, with a fairly linear pace between 2026-2027. The savings also include a reduction of consultants and other cost-saving activities. Restructuring costs are fully charged to this quarter as IAC and amount to BSEK 2, while the cash flow impact is primarily expected in 2026. The ongoing organizational review, including manning activities, of our Automotive business and its associated effects will be presented on our Capital Markets Day on 11 November.

One targeted market, where we have improved our performance through commercial excellence including portfolio prioritization and pricing activities, is aerospace. Following the strategic review we started in 2023, our aerospace business has had 12% annual sales growth and an increased adjusted operating margin of 8pp between 2022 and 2025. We’re now well positioned for future profitable growth from attractive long-term contracts with major customers, an increased aftermarket presence, and an operational setup to serve our customers effectively. We are doing similar commercial initiatives in other parts of our industrial business to cater for long-term value creation.

Outlook

While the global economic development makes the outlook uncertain, we expect organic sales to be relatively unchanged in Q3, year-over-year.”

Outlook and guidance

Outlook

Q3 2025: While the global economic development makes the outlook uncertain, we expect organic sales to be relatively unchanged, year-over-year.

Guidance Q3 2025

Currency impact on the operating profit is expected to be around MSEK 500 negative compared to the third quarter 2024, based on exchange rates per 30 June 2025.

Guidance FY 2025

Tax level excluding effects related to divested businesses: around 26%.

Additions to property, plant and equipment: around BSEK 4.5 excluding separation of the Automotive business.