NINE MONTH REPORT JANUARY-SEPTEMBER 1999
Operating profit amounted to SEK 670 M (560)
Profit after financial items totaled SEK 643 M (474)
Operating cash flow was SEK 564 M (19)
Net sales, earnings and profitability
The Group's net sales for the first nine months of 1999 totaled SEK 18,320 M
(18,576). The decrease was due to the sale of the operations within the Other
Activities Sector. The Industrial Sector posted a 12-percent increase in net
sales, compared with the year-earlier period, primarily as a result of
Group operating profit for the period totaled SEK 670 M (560). The return on
capital employed in operations was 8.2 percent (6.1). In regard to the
restructuring program for the Industrial Sector totaling SEK 250 M named in
earlier reports, SEK 72 M was charged against noncomparable items during the
period. The rest of the program is expected to be expensed during the final
quarter of the current year.
Profit after financial items amounted to SEK 643 M (474). Net profit rose to
SEK 447 M (306) and earnings per share amounted to SEK 4.30 (2.45), after
full conversion and excluding noncomparable items.
During October, the Swedish Staff Pension Society (SPP) announced that SEK
242 M of its consolidation surplus had been allocated to companies within the
Trelleborg Group. To date, SPP has not stated how or when these funds will be
Balance sheet, cash flow and investments
As at September 30, 1999, the Group's net debt amounted SEK 2,625 M, compared
with SEK 3,287 M at the beginning of the year. The equity/assets ratio was
48.8 percent (53.9). Cash flow improved during the third quarter, primarily as
a result of operations within the Industrial Sector. The operating cash flow
for the period was SEK 564 M (19).
At the end of the period, the Group had liquid funds of SEK 1,312 M (790).
This includes the holding of preference shares in Boliden Ltd in an amount of
SEK 524 M. On September 30, 1999, the market value of these shares exceeded
their book value by slightly more than SEK 350 M.
Gross investments during the period amounted to SEK 607 M (575).
Net sales within the Industrial Sector rose 12 percent to SEK 6,512 M (5,797)
during the first three quarters of 1999, primarily as a result of
acquisitions. During the same period, operating profit totaled SEK 457 M
The trend noted in the first half is being maintained, with strong sales
trends for operations focusing on the North American automotive industry, but
continued weak demand from general industry and the infrastructure sector.
A number of important orders were obtained from DaimlerChrysler, among other
companies, which will lead to a breakthrough for Trelleborg Automotive's
Mexican units, where an expansion of capacity is safeguarding quality and
access to advanced compounds.
The Industrial Sector's increased focus on agricultural tires has been well
received by the market and the new TM800 radial tire range is continuing to
strengthen Trelleborg Wheel System's market position.
Trelleborg Building Systems is continuing to apply its expansion strategy in
Europe. During the third quarter, the German profiles company DiPro
Dichtungssysteme GmbH was acquired. This company develops, produces and
markets primarily extruded sealing profiles for the German building market and
has annual sales of SEK
125 M. Combined with a positive trend in the Swedish building market, the
launch of new products for the construction industry is offsetting the
continued weak conditions in the European market.
Work on the restructuring program described in earlier reports, which mainly
affects the sector's European units, was started during the third quarter. Of
the total costs of approximately SEK 250 M, SEK 72 M was charged against the
Group's earnings (noncomparable items) through September 1999. It is expected
that the program will have a positive effect of approximately SEK 75 M on
annual earnings commencing in year 2001. The projects decided to date relate
primarily to a restructuring of the hose operations within Trelleborg
Engineered Systems and of a UK profiles manufacturing unit within Trelleborg
The positive market trend in North America remained unchanged during the
period. During October, a new multi-year contract was signed between the
automotive workers' union and the automotive industry, thereby eliminating the
greatest risk for any short-term downturn in demand.
Trelleborg Automotive's operations in Europe are currently in a restructuring
phase, the aim of which is to secure fewer but larger production units and
improved profitability. The business area's Technical Center in Trelleborg and
sales office in Frankfurt are now in full operation.
Trelleborg Wheel Systems
The market for agricultural tires was weak during the period, principally as a
result of the low level of new sales of agricultural machines in both the US
and Europe. However, as a result of marketing activities and the new product
range introduced during 1998, the business area continued to capture market
share within the radial tractor tires product area.
Very favorable demand was shown for industrial tires in North America, while
European demand was sluggish. Certain new niches developed positively,
however, such as the market for aerial lifts.
Trelleborg Engineered Systems
Demand from project-related sectors, such as the oil, infrastructure and
mining industries, remained weak, although some positive signs could be noted
towards the end of the period.
An extensive restructuring program for the Swedish unit producing industrial
hose is currently in progress to boost cost efficiency. Some of the positive
results gained from earlier cost-saving measures are being offset by low
capacity utilization and pressure on prices. The business area's Spanish
operations continue to show favorable development, while South American
operations are currently in an investment phase, which is expected to be
completed at the end of the year.
Trelleborg Building Systems
Demand within the Swedish building market increased, while the trend in the
business area's other European markets remained weak. Bitumen-based roof-
sealing products showed favorable growth, which combined with contributions
from acquired units, compensated for a somewhat weaker trend of earnings
within the Consumer and Materials units. The weak demand in the Russian market
led to lower sales within the Consumer sector.
In September 1999 DiPro Dichtungssysteme GmbH, Germany's leading manufacturer
of extruded sealing strips made from TPE material, was acquired. The
acquisition supplements the product range within an expanding materials area
and further strengthens the business area's position as the leading supplier
to the European building-related industry. The acquisition of DiPro, and the
units acquired in 1998, contributed to the increase in sales.
Excluding the divestment of Starckjohann Auto, the Distribution Sector
increased its net sales by approximately 2 percent for comparable units.
Including the divestment of Starckjohann Auto, net sales for the sector
totaled SEK 10,846 M (10,888).
The positive effects of improved conditions within the building segment and
slightly increasing steel prices are clearly discernable. Cooperation between
the Swedish and Finnish heating and plumbing supplies units and steel units is
progressing rapidly and is expected to make a positive contribution to
earnings commencing in the fourth quarter. The building materials trade in
Finland experienced a weak summer season, which had an adverse effect on the
sales trend for the Starkki building materials chain.
Operating profit for the sector during the first nine months of the year
amounted to SEK 322 M (394). Negotiations are under way regarding a
divestment of the Distribution Sector.
The improved climate for building operation in Sweden made a distinct
impression on Ahlsell's heating and plumbing and electrical operations. The
Electrical supplies division intensified the integration of Skoogs, which it
is estimated will be completed by the end of 1999. The establishment of
operations in Denmark is proceeding according to plan. The termination of the
unprofitable heating and plumbing supplies operations in Poland will be
completed during the year. To date during the current year, the costs for
these measures have been charged against earnings in a nonrecurring total of
approximately SEK 35 M. It is expected that these measures will lead to an
increased earnings capability for Ahlsell as of year 2000.
The industrial retail operations of JW Andersson were sold during the third
quarter and a contract has been signed to acquire the Norwegian heating and
plumbing supplies wholesaler, Sjölie & Birch.
During the third quarter, the trend turned towards increasing prices within
the Bröderna Edstrand product areas. This trend is expected to strengthen
during the fourth quarter and during next year in particular. Although the
above factors resulted in a slight rise in inventory values during the third
quarter, Bröderna Edstrand showed an accumulated decline for the nine-month
period as a whole. Cooperation between Bröderna Edstrand and Starckjohann
Steel is proceeding according to plan, as exemplified by the coordinated
storage of low-frequency materials.
The French market improved, while the UK market remained weak. This, in
combination with slightly increasing steel prices, led to an improvement in
operating earnings during the third quarter.
The acquired company Testas has now been fully integrated and is making a
positive contribution to earnings. A cost-savings program will be implemented
during the coming year to improve the weak profitability of Reynolds' UK
Heating and plumbing and steel operations have now been integrated
operationally within Ahlsell and Bröderna Edstrand, respectively. For the sake
of historic continuity, Starckjohann will continue to be reported externally,
Heating and plumbing operations increased in an otherwise weak market. It was
thus possible to increase market shares with retained profitability. The
Starckjohann Steel service center in Lahtis was completed during the third
quarter and will be placed in operation on a gradual basis during the final
OTHER ACTIVITIES SECTOR
Net sales declined sharply as a result of the divestment of operations and
amounted to SEK 1,014 M (1,951) for the period. Apart from a real estate
portfolio, virtually all that now remains of this sector is the US metals
recovery company, Metech. The number of employees was reduced from slightly
more than 1,400 a year ago to around 150 persons at the end of the period.
In recent years, the Trelleborg Group has conducted an extensive action
program to ensure that all computers in technical and administrative systems,
including so-called embedded systems, will function in connection with the
shift to year 2000. An audit of the measures already implemented has been
conducted with the help of Arthur Andersen. In all significant respects, the
project is proceeding according to plan and it is estimated that all
reasonable measures will have been taken prior to the end of the year.
Trelleborg share price trend
The price of the Trelleborg Series B share at the end of the period was SEK
78. This reflected an 18.2 percent (SEK 12) increase since the beginning of
the year, compared with an increase of 18.4 percent for Affärsvärlden's
General Index. During the year, Trelleborg's shareholders received a dividend
of 0.3908 common shares in Boliden (in the form of a depository receipts) for
each Trelleborg share held, equal to SEK 6.45 at the time of the dividend.
This corresponds to an additional approximately 10-percent increase in
shareholder value during the current year. In addition to the SEK 2 cash
dividend, Trelleborg's shareholders have thus received an approximately 28-
percent value increment during the first nine months of 1999.
Outlook for 1999
On the whole, the outlook is the same as that given in the six-month interim
report. The American market has developed favorably during the year and still
shows no sign of weakening. European markets, which to date have been weak,
especially in Central Europe, are showing some signs of improvement.
During the final quarter, noncomparable items will be charged with the
remainder of the restructuring program for the Industrial Sector totaling
approximately SEK 250 M, of which SEK 72 M was charged in the third quarter.
In line with the new strategic direction, extensive efforts are in progress to
implement the necessary structural changes to concentrate the Group's
operations in future.
Trelleborg, November 10, 1999
President and CEO
For further information, please contact
CFO, Jan Björck, phone: +46 (0)410 670 28,
or Vice President Corporate Communications, Mikael Byström,
phone: +46 (0)410 670 37, mobile: +46 (0)708-55 21 69.
This report and other information about the Trelleborg Group, including the
are also available on the Internet at the following address:
This report has not been subject to specific examination by Trelleborg AB's
The year-end report for 1999 will be published on February 8, 2000.
Please visit http://www.bit.se for further information
The following files are available for download:
http://www.bit.se/bitonline/1999/11/10/19991110BIT00380/bit0001.doc The full Report
http://www.bit.se/bitonline/1999/11/10/19991110BIT00380/bit0002.pdf The full Report