Trelleborg

Continued strong earnings growth

“During the third quarter of the year, the Group performed well and reported higher sales, improved earnings and a strong operating cash flow. Net sales increased by 12 percent, with organic sales decreasing by 1 percent, compared to the previous year. Acquisitions contributed 9 percent and positive exchange rate effects 4 percent. EBITA, excluding items affecting comparability, increased 11 percent, corresponding to a margin of 17.6 percent (17.7). Operating cash flow increased by a full 73 percent. During the quarter, inflation continued to impact us, though we successfully offset this through price adjustments and ongoing efficiency improvements.

Trelleborg Industrial Solutions reported organic sales that were slightly lower compared with the strong year-earlier period. Sales grew particularly in Europe, but also in North America, while they declined in Asia. Similar to earlier in the year, deliveries to the construction industry were lower. However, this was offset by sales to the automotive industry and in marine segments, where sales related to our SmartPort concept performed particularly well. It was gratifying to note that the business area achieved its highest margin to date for a single quarter.

Organic sales for Trelleborg Sealing Solutions declined marginally compared with the preceding year. Sales to the aerospace industry remained strong, while deliveries to the automotive industry continued to grow, driven mainly by sales in Europe. Sales to healthcare & medical also developed positively. However, deliveries to general industry declined in several geographic regions, which we believe is partly impacted by inventory adjustments among our customers. Substantial investments in the organization within a number of rapidly expanding market segments are having a temporary, negative impact on the margin, but are expected to have a positive effect in several dimensions in the long term.

During the quarter, we continued to make improvements to our structure. An older factory in the Netherlands was closed, and production was transferred to more cost-effective units. After the end of the quarter, we signed an agreement to divest a Czech operation in vibration-damping components for the light and heavy vehicle industry. This unit was outside our core operation and is currently reported separately from the two business areas.

Several targeted actions are in progress to improve efficiency. In the quarter, a new facility was inaugurated in France that will provide improved conditions for both efficient manufacturing and material development while in parallel increasing manufacturing capacity. During the period, we inaugurated a new state-of-the-art facility in China. The facility will boost our capacity for antivibration solutions while improving opportunities to provide technical support for our customers in the local market.

Our expansion of new manufacturing facilities continues, particularly in Asia where we see favorable prospects for further growth through a stronger local presence. We have already announced two new manufacturing facilities in Vietnam, one in Japan and a two-fold increase in capacity for Trelleborg Sealing Solutions in India. More initiatives are in progress, and I hope to be able to provide more information about these in the near future. All of these measures contribute to our goal of increasing sales with improved profitability, while also balancing our geographic exposure.

External factors continue to create significant uncertainty regarding market developments moving forward. Meanwhile, we are highly confident in our ability to address the fluctuations in the market. Due to our leading market positions and our financial status, Trelleborg stands stronger than ever. For the fourth quarter, our overall assessment is that demand will be in line with the third quarter of the year,” says Peter Nilsson, President and CEO.

Third quarter 2023 – continuing operations

• Net sales for the quarter increased 12 percent to SEK 8,458 M (7,536). Organic sales decreased 1 percent compared with the preceding year, while acquisitions increased sales by 9 percent and currency by 4 percent.
• EBITA, excluding items affecting comparability, increased 11 percent to SEK 1,487 M (1,336). The EBITA margin was 17.6 percent (17.7).
• Operating cash flow amounted to SEK 1,608 M (928), an increase of 73 percent. The cash conversion ratio for the most recent 12-month period amounted to 99 percent (63).
• Items affecting comparability for the quarter totaled SEK -111 M (-68) and pertained to restructuring costs.
• EBITA, including items affecting comparability, amounted to SEK 1,376 M (1,268) for the quarter.
• Earnings per share for continuing operations, excluding items affecting comparability, amounted to SEK 4.19 (3.52), up 19 percent. For the Group as a whole, earnings per share were SEK 3.84 (4.79), where discontinuing operations contributed SEK 1.46 in the year-earlier quarter. These were divested in the second quarter of 2023.
• The key figures in this report relate to continuing operations, unless otherwise stated.

Market outlook for the fourth quarter of 2023
Demand is expected to be in line with the third quarter of 2023, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty. For further information, refer to page 10.

Market outlook from the interim report published on July 19, 2023, relating to the third quarter of 2023
Demand is expected to be somewhat lower than in the second quarter of 2023, 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.