S&P downgrades SKF

S&P said it lowered the long-term corporate credit rating on SKF AB to BBB- from BBB, along with the ratings on its debt to BBB- from BBB.

The outlook is stable.

The downgrades follow the release of SKF's 2016 third-quarter results, which pictured continuous volumes contraction, chiefly in North America, S&P explained.

The volume contraction, however, was to a lesser extent during the first half of 2016, the agency added.

But this unsupportive operating environment, alongside further increase in SKF's significant pension deficit, translated into funds from operations-to-adjusted debt of about 21% for the rolling 12-month period that ended Sept. 30, S&P said.

This is well below the 30% threshold commensurate with its previous BBB rating, the agency said.

The company's industrial market segment remained the most hurt by the depressed operating environment, S&P said.

The group has recovered some market shares in the automotive segment in the third quarter, leading the agency to believe this segment should limit overall profitability erosion linked to a drop in volumes, unfavorable product mix and ongoing pricing pressure, the agency said.

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