Bearing supplier SKF said it achieved "a very strong underlying [Q4 2020] operating profit" of SEK2,582m (versus SEK2,181m the previous year), representing an adjusted operating margin of 13.2% (10.3%) despite flat demand and a negative currency impact of SEK645m.
Organic sales for the quarter slipped 0.1%to SEK19.6bn (SEK21.2bn).
"Sales were significantly higher in Latin America, higher in Asia, and lower in both North America and Europe," SKF said in a statement.
Adjusted operating margin was 14.5% (13.3%) despite an organic sales drop of 4.4%.
The automotive business achieved adjusted operating margin of 10.1% (2.3%), driven, SKF said, "by continued ability to control costs as well as an organic sales increase of 11.1%".
"Since coming back to SKF in 2015, I have highlighted our ability to generate strong cash flow as one of our key strengths and the fourth quarter was no exception," said Alrik Danielson, SKF president and CEO.
"Cash flow during the quarter was SEK1,901m (SEK701m), driven mainly by a strong operating income and reduction of working capital. We continue to invest in the business, with a total of SEK3.3bn invested in our factories (up from SEK1.9bn in 2016) and pay down our debt, positioning the business well for the future.
"Capitalising on new ways of working, ensuring we create and maintain simplified organisational structures and always keep the customer's needs at heart has enabled us to continually reduce our headcount during the year, with a further headcount reduction in the quarter of 200.
"Investments in and consolidation of our factories continued during the quarter, including the announcement of a consolidation of our slewing bearing manufacturing and supporting functions in France."
"Our solid performance during the year is reflected in the board's proposal of a SEK6.50 dividend (SEK3.00)."
Outlook and guidance
SKF said the industries and regions in which it operates are still impacted by the effects related to the spread of COVID-19.
"We expect to see mid-single digit organic sales growth in the first quarter of 2021 compared to the first quarter of 2020."
Currency impact on Q1 20121 operating profit is expected to be around SEK600m less compared with Q1 2020.