Trelleborg

Another strong quarter

“Trelleborg presents another strong quarter. Sales increased 28 percent, of which organic sales rose 15 percent. Currency fluctuations had a positive impact on sales of 11 percent and acquisitions 2 percent. Sales were the highest to date for a single quarter. EBIT, excluding items affecting comparability, increased 34 percent, corresponding to an operating margin of 17.0 percent, the highest to date for a third quarter. Operating cash flow was somewhat lower than in the preceding year, primarily impacted by the higher sales.

Order intake during the quarter remained healthy in most geographies and market segments, albeit not as strong as during the first six months. We continue to advance our positions through investments in new geographies, improved efficiency, increased presence in selected market segments and value-generating solutions for our customers.

Energy and raw materials prices continued their upward trajectory for most of the period and the general rate of inflation continued to increase in most parts of the world. Overall, the challenges have been well managed within the Group, with flexible production and adjustments of prices to customers.

In Trelleborg Industrial Solutions, sales to all market segments and geographical markets grew. Deliveries to the construction and industry-related market segments were higher year on year. However, indications were noted of a downward trend in the European construction industry. Highly favorable sales were noted to the aerospace industry and to applications related to liquefied natural gas (LNG). Sales to the automotive industry were similarly healthy, which was partly attributable to a recovery among customers from previously lower rates of production.

Organic sales for Trelleborg Sealing Solutions grew by double figures in all geographies, with the trend strongest in North America. Deliveries to most market segments grew steadily and the healthy sales to the aerospace industry were particularly notable. Deliveries to healthcare & medical and the automotive industry also performed well.

Trelleborg Wheel Systems, which is reported under Assets held for sale, recorded strong organic sales growth during the quarter, which were largely attributable to adapted sales prices in relation to significantly higher costs for raw materials and energy. During the quarter, a weakening of the aftermarket for agricultural tires in Europe was noted, which was deemed to be mainly due to the increasing geopolitical uncertainty in the region.

During the quarter, we signed agreements to acquire two companies that will be included in Trelleborg Sealing Solutions. One is a German company specializing in sealing solutions for aerospace and industrial applications, while the other is US-based company Minnesota Rubber & Plastics. The latter acquisition is a major step for Trelleborg Sealing Solutions and will lead to the business area becoming as strong in North America as its already well-established position in Europe.

We have several outstanding transactions that we expect to be completed in the next few months. The divestment of Trelleborg Wheel Systems and Trelleborg Printing Solutions are being processed at the time of writing by the authorities in a number of countries that still need to approve the transactions. We also expect that the acquisition of Minnesota Rubber & Plastics will be finalized in the near future.

We enter the fourth quarter with healthy order books and with a high level of activity in most of our manufacturing units. At the same time, we assess that demand will generally decline somewhat from the very strong level that we have experienced in the past year. For a long time, the Group has demonstrated its ability to adapt to constantly changing conditions and we look to the future with confidence. Our general assessment at present is that demand for the fourth quarter will be slightly lower compared with demand in the third quarter, adjusted for seasonal variations,” says Peter Nilsson, President and CEO.

Third quarter 2022 – continuing operations

• Net sales during the quarter increased 28 percent, positively impacted by acquisitions and exchange rate effects, and amounted to SEK 7,536 M (5,872). Sales were the highest to date for a quarter. Organic sales increased 15 percent compared with the preceding year.

• EBIT, excluding items affecting comparability, increased 34 percent to SEK 1,278 M (957). The EBIT margin was 17.0 percent (16.3). The EBIT and the margin were the highest to date for a third quarter.

• Operating cash flow amounted to SEK 928 M (1,014). The cash conversion ratio for the most recent 12-month period amounted to 63 percent (96).

• Items affecting comparability for the quarter were a negative SEK 68 M (neg: 20) and pertained to restructuring costs.

• EBIT, including items affecting comparability, amounted to SEK 1,210 M (937) for the quarter.

• Earnings per share, excluding items affecting comparability, amounted to SEK 3.52 (2.55), an increase of 38 percent. For the Group as a whole, including discontinuing operations, earnings per share were SEK 4.79 (3.21), an increase of 49 percent.

• An agreement was signed in March 2022 to divest the Trelleborg Wheel Systems business area to Yokohama Rubber Company. It is reported as a discontinuing operation in the financial statements.

• The key figures in this report relate to continuing operations, unless otherwise stated.

Market outlook for the fourth quarter of 2022
Demand is expected to be slightly lower than in the third quarter of 2022, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty. For further information, refer to page 11.

Market outlook from the interim report published on July 21, 2022, relating to the third quarter of 2022
Demand is expected to be slightly lower than in the second quarter of 2022, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty.

This is a translation of the company’s Interim Report in Swedish.