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World number one bearings maker SKF on Wednesday stood by its outlook for the second quarter, saying it still expected market demand to grow relative to the first three months of the year.
The Gothenburg-based company, which has ridden a wave of strong demand in recent years, remained undaunted by worries over the health of the global economy, which is struggling with the fallout from the credit crisis and soaring commodity prices.
"We still have good volume development," Chief Executive Tom Johnstone said at the company's capital markets day, adding that the group expected volumes to grow between 6 and 6.5 percent in the second quarter.
"We don't change our volume outlook at all for the second quarter. There are mix changes within that, to be clear," he said.
Johnstone noted that the automotive industry in North America was worse off now than it was three months ago, affected by low production as well as strikes at some auto plants.
"So obviously the volume in that area is a little bit lower. We will not see the same development there as we expected when we entered into the quarter," he said.
Shares in SKF were up 3.3 percent at 110 crowns, outperforming the wider Stockholm index.
AUTOMOTIVE
Johnstone told journalists SKF's Automotive unit, the group's third-biggest division, was outperforming the market in Europe and was still seen reaching its operating margin target for the full year 2008.
"Our target of 6 to 7 percent stands firm, and we aim to reach it. I think we will reach it this year ... We have a very strong truck market, we have a very strong European auto market and good growth in our Asian region," he said.
"It is a combination of this and cost reductions."
SKF Automotive has lagged the group in terms of profitability in recent quarters and posted an operating margin of 6.2 percent in January through March versus a 13.1 percent margin for the group as a whole.
Engineering companies such as SKF have faced widespread shortages of components in recent quarters, and Johnstone said the situtation in this area had remained difficult.
"Supply is still very, very tight. It is better than it was last year, and similar to what it was in the first quarter," he said, adding SKF expected to be able to offset higher raw materials prices during the year, "even if it will be tight in the second quarter, as we have said".
He said SKF was making efforts to reduce tightness in the supply of components, which is due to raw materials shortages as well as insufficient capacity at some suppliers, but those efforts did not include making any direct investments.
"And we are also introducing new suppliers from different regions -- from eastern Europe and from Asia -- to the SKF group," he said.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| NKS22 bearing | 22 | 35 | 20 |
| NKS43 bearing | 43 | 58 | 22 |