Shares of Sweden's SKF drop 8% as company's new targets, costly split disappoint

By Greta Rosen Fondahn

STOCKHOLM (Reuters) -Sweden's SKF presented new earnings targets that failed to impress investors on Tuesday as well as costly restructuring charges ahead of a planned split of the group, sending shares of the world's biggest bearings maker down 8%.

SKF, whose bearings are used across a vast range of industries and products, from machine tools and cars to wind turbines, has announced plans to spin off its struggling automotive division as a separately listed company in 2026.

The automotive business, which represents about 30% of sales but only 11% of profits, has failed to deliver the margins expected, analysts have said, diluting the group's performance, where the higher-margin industrial business dominates.

SKF said on Tuesday it would also spend about 5 billion Swedish crowns ($531 million) to restructure the industrial business amid the split, on top of 1.5 billion crowns to separate the automotive unit.

The industrial unit will target an adjusted operating margin above 17% in the mid-term, up from 16.3% so far in 2025, increasing to 19% long-term, the company said in its strategy update.

SKF's share price fell 8% by 1042 GMT on Tuesday but is still up 14% year-to-date.

Brokers Jefferies said the earnings improvement goals were "underwhelming", adding that the mid-term target was only in line with what the industrial business already delivers and that the cost of the separation was higher than expected. 

"We are somewhat disappointed that it will take until 2028 before we start to see that a more streamlined SKF that is out of the woods," said Pareto Securities analyst Anders Roslund.

($1 = 9.4155 Swedish crowns)

(Reporting by Greta Rosen Fondahn and Agnieszka Oleńska; Writing by Stine Jacobsen; Editing by Louise Rasmussen and Emelia Sithole-Matarise)