High-end bearings maker SKF steps up drive into mid-market
Resource from: Reuters Likes:206
Sep 24,2015
High-end industrial bearings maker SKF is accelerating its push into the middle market as it pursues sales growth in the face of sluggish global demand and fierce competition.
The Swedish firm is the one of the world's largest bearings makers, with its products found in equipment ranging from skateboards to wind turbines, and it is viewed as a manufacturing bellwether.
The company traditionally makes high-end bearings but, faced with increasing competition from lower-cost Chinese rivals, it said it needed to rethink its manufacturing to also cater to markets and industries requiring lower-performance bearings.
"Of course the Chinese can do things they couldn't before, but that doesn't mean we can't do it as well," Chief Executive Alrik Danielson told Reuters. "Before there were no alternatives, it was us, the Western premium brands," he said.
He pointed to India as an example of what could be done. There, SKF has developed truck bearings which have a much shorter lifespan than the ones produced for Europe, but which are as good or better than what existed in the Indian market.
"The key is that it was competitive," Danielson said. "With this type of thinking we can in a profitable way address a much bigger part of the market than we have before."
Danielson also said some customers in financially squeezed industries like mining and steel were more inclined to switch to cheaper alternatives with lower performance.
"It puts additional pressure on us to take cost out of the system and to find the solutions that are more fitting to a real need, and do that as quickly as possible," he said.
CHINA CONCERN
Danielson took the helm on Jan. 1 following years of weak sales growth and profit margin pressure at the company, which counts Germany's Schaeffler and U.S. group Timken among its main rivals. He has merged SKF's industrial and services businesses, cutting 1,500 jobs, and invested in manufacturing to boost its flexibility.
But SKF shares have lost over a third of their market value since a mid-April peak, hit by investor concerns about weak global demand, particularly in China, and the group's decision to keep its automotive unit, which has lagged the wider group in profitability for years.
The firm's financial targets, set by Danielson's predecessor, include annual sales growth of 8 percent and a 15 percent operating margin target.
However, SKF's sales dropped 0.2 percent in the first half of 2015, stripping out the effects of acquisitions, divestments and currency movements, while the adjusted operating margin was 12.6 percent.
The company's push further into lower-priced markets is likely to involve prioritizing sales growth over profit margins in some cases.
"I allow myself to say that we have the targets we have so far, but I know I can't do that forever," Danielson said. "My assignment, I believe, is to try and create as strong long-term cash flow as possible."
Danielson said the Chinese economic slowdown was a major concern.
"How much overcapacity is in the system? And it's not only that capacity has been built up for China in China, but that capacity has been built up in many parts of the world for China."
(Reuters)
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
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