As you would expect given the cooling economic conditions, profit warnings from engineering companies are starting to come. Compared to bulk producers, their stock market valuations have held up rather well, so the market is not yet pricing in any significant long-term weakening. Svenska Kullagerfabriken AB’s (OMX: SKF B) warning from this morning mirrors that sentiment. The global ball bearings, seals and mechatronics supplier speaks of a slightly weaker volume development than previously expected in the second quarter due to general weakness in Western Europe and Asia.
The company is adjusting its cost base by tweaking manufacturing activity in Europe accordingly. It is offering voluntary severance and retirement packages in Germany to reduce workforce by around 400 with cost accruing quickly and annual savings some years away. The company says that general lack of confidence is affecting its business in Europe while in Asia demand in China is yet to pick up and conditions have worsened in India.
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