Year-End Report 2001

YEAR END REPORT January - December 2001 * Operating profit, excluding non-comparable items, increased to SEK 1,134 M (992). * Group cash flow from ongoing operations increased to SEK 1,395 M (763). * Profit after net financial items, excluding non-comparable items, amounted to SEK 976 M (981). * Earnings per share, excluding non-comparable items, increased to 7.45 SEK (6.50). * The restructuring program within the Wheel Systems business area affected non-comparable items in the amount of SEK 200 M. * Anders Narvinger is being proposed as the new Chairman of the Board of Directors. * Reclassification of Series A shares proposed. * A dividend of SEK 4.00 (3.75) per share proposed. 2001 2000 Net sales, SEK M 18,760 13,654 Operating profit, SEK M 1,134 992 (excluding non-comparable items) Cash flow from ongoing operations, SEK M 1,395 763 Profit after net financial items, SEK M 976 981 (excluding non-comparable items) Earnings per share, SEK 7.451) 6.502) (excluding non-comparable items) Earnings per share, SEK 5.351) 7.302) 1) Based on an average number of shares excluding holding of own shares 96,512,234. 2) Based on an average number of shares excluding holding of own shares 109,855,550. Group, full year 2001 Net sales and profit Full year 2001 The Group's net sales amounted to SEK 18,760 M (13,654). Net sales of comparable units declined by two percent, excluding currency effects. The Group's net sales during the period were distributed as follows: approximately one third denominated in U.S. dollars and two thirds denominated in other currencies, mainly euro. The portion of sales of comparable units denominated in U.S. dollars declined by seven percent, while the portion denominated in euro declined by one percent. Operating profit for the Group, excluding non-comparable items, amounted to SEK 1,134 M (992). Non-comparable items affected operating profit negatively by SEK 208 M during the period, compared with a positive effect of SEK 367 M a year earlier. As noted in the Group's nine-months report, these items in 2001 included a restructuring program amounting to SEK 200 M in the Wheel Systems business area to adapt the business area's capacity to a weaker market. Approximately SEK 130 M of the restructuring costs have an effect on cash flow, mainly in 2002. The program is expected to yield a repayment on cash flows corresponding to approximately two years, and to affect the business area's earnings positively beginning in the second half of 2002. The program is expected to produce full effect, corresponding to slightly more than SEK 70 M, as of 2004. Operating profit for the Group amounted to SEK 926 M (1,359). The Group's net financial expense amounted to SEK 158 M (11). Profit after net financial expense amounted to SEK 727 M (1,141), and to SEK 976 M (981) excluding non-comparable items. The write-down of Boliden shares was adjusted positively in the amount of SEK 80 M during the last quarter of the year, resulting in a total write-down of SEK 41 M. The return on capital employed, excluding amortization of goodwill, amounted to 12.2 (14.9) percent. Earnings per share, excluding non-comparable items, increased by 15 percent Earnings per share, excluding non-comparable items, increased to SEK 7.45 (6.50) during the period. Earnings per share were SEK 5.35 (7.30). Earnings per share were affected favorably by repurchases of Company shares. The table in connection with the income statement includes Earnings per share based on the number of shares outstanding at year-end in order to show the full effect of the repurchase of Company shares. Earnings per share excluding non-comparable items as of December 31, 2001 amounted to SEK 7.95 (6.85). Group Earnings per share excluding non-comparable items and amortization of goodwill amounted to SEK 9.00 (7.35). This data is provided as supplementary information when comparing Trelleborg with companies which effective in 2002, in accordance with US GAAP, are reporting profit excluding amortization of goodwill. Balance sheet, cash flow and investments Full year 2001 As of December 31, 2001, the Group's capital employed amounted to SEK 10,451 M (9,675). Company shares totaling SEK 1,135 M (1,048) were repurchased during the year. Financial liabilities amounted to SEK 3,267 M (1,720). Liquid funds included Boliden shares with a book value of SEK 314 M (317). The debt/equity ratio at year-end was 41.7 percent (19.7). The equity/assets ratio was 44.2 percent (50.9). Shareholders' equity per share (based on 86.6 million shares outstanding) at year-end amounted to SEK 88.70 (84.60). The return on shareholders' equity, excluding non- comparable items was 8.9 percent (8.1). The return on shareholders' equity amounted to 6.3 percent (9.0). The Group's cash flow from ongoing operations amounted to SEK 1,395 M (763), and investments totaled SEK 642 M (543). The strong increase in cash flow was primarily the result of action programs implemented in a consistent manner. Business areas, Full year 2001 Trelleborg Automotive Operating margins in line with preceding year The business area's net sales amounted to SEK 9,777 M (5,822). Operating profit for the year rose to SEK 747 M (451). During the fourth quarter, the operating margin was positively affected by the high personnel- related costs charged against earnings earlier in the year. In terms of geographical distribution, the business area has about 62 percent of its sales in Europe, nearly 30 percent in North America and approximately 8 percent in the rest of the world. Auto production in Europe showed growth of 1 percent, compared with 2000. During the final quarter, European auto production declined by about 5 percent as a result of adjustments following the inventory build- up during the third quarter. Auto production in North America was down by around 10 percent for 2001 as a whole, due mainly to inventory adjustments at the beginning of the year. The decline in production during the final quarter was around 5 percent. Although the Brazilian market developed slightly more favorably during 2001, compared with the preceding year, this market deteriorated during the second half. The markets in China and India developed satisfactorily during the year. Work to integrate the operations of earlier acquisitions progressed favorably during the year. Four plants were closed during the year and production was transferred to other units in the business area with lower cost levels. In addition, the reorganization of the sales, development and purchasing structure in Europe proceeded according to plan. It is planned that the Component & Acoustics plant in Bow in the UK will be closed in 2002 and production transferred to other product area plants. To meet the declining demand in North American markets, and as a result of the reduction in production locations noted above, Trelleborg made adjustments to the workforce during the year, corresponding to a total of approximately 600 personnel. During the year, the decision was made to expand the unit in Kalmar, Sweden, to accommodate the production of the noise-suppression material DuruLam (Durability, Rubber and Laminate). During the fourth quarter, production started for the first series production order for DuruLam. Also during the final quarter, authorities approved building plans for a new plant for the production of industrial antivibration products and systems in Leicester, UK, which will replace an existing facility. The new plant is expected to be ready for occupancy at the year end 2002. The business area's operating cash flow amounted to SEK 903 M (510). Trelleborg Wheel Systems Weak demand in main markets Net sales during the year amounted to SEK 3,127 M (3,024). Operating profit totaled SEK 93 M (200). In the Forest and Farm Tires segment, which accounts for the bulk of the business area's sales, OEM sales in Europe, the most important market, declined gradually during the year. In the most important machine categories in Europe, the decline for the year as a whole was 10-15 percent. The business area strengthened its position in this segment, primarily through its Pirelli range. The business area's other large product segment is Industrial Tires. Demand in this market segment is directly related to the trend of industrial investment. The weak investment climate in both North America and Europe had a substantial impact on the industrial tires product area throughout the second half of 2001. Demand in North America declined for the fourth consecutive quarter, while in Europe the fourth quarter of 2001 was one of the weakest in many years. The downturn in OEM sales in North America was 30 percent and in after-market sales 25 percent. The business area strengthened its market share in these segments in North America. The continuing market downturn created pressure on prices in all areas. The continuing decline in demand in the business area's main markets resulted in an operating loss in the fourth quarter and sharply reduced earnings for the year as a whole. Towards the end of 2001, the business area implemented a restructuring program, which resulted in costs of SEK 200 M being charged against fourth-quarter earnings, of which approximately SEK 130 M will affect cash-flow, primarily during 2002. The pay-back time for the cash-flow expense is an estimated two years, with a positive effect on earnings expected in the second half of 2002. The program is expected to produce full effect, corresponding to slightly more than SEK 70 M, as of 2004. Parts of the restructuring program were presented in December 2001 and include mainly a reduction of about 150 personnel at various production units in the Trelleborg area at an estimated cost of approximately SEK 60 M. The remaining elements of the restructuring program will be announced during the first half of 2002. The business area's operating cash flow amounted to SEK 104 M (128). Trelleborg Engineered Systems Continued improvement in profitability despite poorer market conditions Net sales in 2001 increased to SEK 3,369 M (2,941). Operating profit rose to SEK 181 M (140). The increase in profit was achieved through cost-savings and improvements in the business area's product portfolio - mainly in the form of acquisitions in the field of marine fender systems. The higher results were achieved despite more difficult market conditions, notably in the area of industrial supplies, where the market in North America declined by 15 percent and the market in Europe weakened gradually during the year. This substantial loss of volume was offset through corrective-action programs in North America and an increase in market shares in Europe. Demand in the oil, offshore and infrastructure market sectors was stable, but characterized by some uncertainty during the latter part of the year. Interest in, and demand for, the business area's chemical- resistant suits was strong during the second half of 2001. During the fourth quarter the business area concluded an agreement with Vredestein, a Dutch company, to acquire its operations in the field of sealing systems - including tunnel seals - for infrastructure projects. Trelleborg acquired the company's customer base, machines and inventory. All production is being transferred to Trelleborg Engineered Systems' production units. Earlier in the year the business area acquired Hercules Rubber & Chemicals (Singapore), Queensland Rubber (Australia) and Fentek Marine Systems (Germany). The companies' principal products are marine fender systems - a field in which Trelleborg is a market leader in Europe and Oceania and number two in the world - and other infrastructure products (including bridge bearing systems and and tunnel seals), areas in which the Group already occupies good market positions. The business area's operations in roll coverings in Trelleborg were sold during the year. The unprofitable production of laminates in Mexico was also closed down. As a result of acquisitions and the improvement of the product portfolio, the business area now has a broader geographic balance of sales. The business area's cash flow from ongoing operations amounted to SEK 199 M (159). Trelleborg Building Systems Declining markets in Central Europe depress earnings Net sales for the period amounted to SEK 1,794 M (1,471) and the operating profit was SEK 138 M (162). Because the markets for Building Systems' products follow the seasons, the first and fourth quarters are the weakest for the business area. This effect has become even more pronounced with the acquisition of Phoenix Tag, a Danish company, which increases the percentage of roof products. Overall demand in Central Europe - notably in Germany, the business area's most important geographical market - continued to be weak. The trend in other important geographical markets, including the Nordic Region, was more fragmented, with a stable development in Sweden, but a leveling off in the other countries. The business area's programs in consumer profiles contributed to increased profits in the North American market, among others. The non-building-related sector of the business area's markets leveled off slightly during the second half of 2001. Despite the weakening, Industrial Profiles developed well, due to increased exports. Lead times in the unit in Värnamo were reduced successfully by improving the efficiency of the process. There was an increase in the number of project inquiries related to rubber sheeting for roofs. As a result of this, combined with the successes recorded by the new Elastofol and Elastoseal product systems, sales and profitability in the Rubber Membranes business unit were higher. Phønix Tag, a Danish company, was acquired in the beginning of the year, strengthening the position of the business area in the field of bitumen- based waterproofing products in the Nordic Region. As a result of synergy effects, the company - which was operating at a loss when it was acquired - is already showing positive operating results, calculated at an annual rate. Despite weakening markets, the greater part of the units developed at the level of 2000. Within Industrial Profiles-Europe earnings declined due to the downturn in the market in continental Europe, and within Roofing due to the higher prices for materials. The effects of higher raw-material prices were offset through improvements in efficiency. The business area's cash flow from ongoing operations amounted to SEK 172 M (153). Other Trenor (49 percent holding) Trelleborg's share (49 percent) of profit before tax in the Trenor Group amounted to SEK 121 M (203). The decline was attributable primarily to the effects of a weaker economy, which affected both Bröderna Edstrand and Reynolds. Trelleborg's holding in Trenor Holding is carried on the books at SEK 177 M (90). Holding in Boliden. Preference shares were converted to common shares Trelleborg participated in Boliden's issue of shares during the second half of 2001. Trelleborg sold its portion of the issue during the autumn. In connection with the transfer of Boliden shares from the Toronto Stock Exchange to the Stockholm Exchange, Trelleborg's holding of Boliden preference shares was converted to a corresponding 7.2 million common shares with a total value of SEK 314 M at December 31, 2001. Buy-back of Company shares 15 million shares redeemed or cancelled To "normalize" its balance sheet and achieve its objective with respect to the return on shareholders' equity, Trelleborg has implemented measures designed to create a better financial structure. Accordingly, Trelleborg has made substantial repurchases of Company shares. During the fourth quarter, 15 million Series B common shares were redeemed or cancelled. There are now 90.6 million shares outstanding. Trelleborg owns approximately 4 million Company shares for its own account, with the result that the number of outstanding shares, net, is 86.6 million. Based on the decision of a General Meeting of shareholders, there is a mandate for Trelleborg to purchase as many as 10 percent of the Company's shares - or approximately another five million shares. Proposals to be submitted to the Annual General Meeting on April 23 Dividend The Board of Directors proposes that a dividend of SEK 4.00 per share be paid The Board of Directors and the President propose that a cash dividend of SEK 4.00 per share (3.75) be distributed to the shareholders. The Group's dividend policy, which was revised in 2001, provides that the dividend should amount over the long term to between 30 percent and 50 percent of net profit for the year. The proposed dividend, corresponding to SEK 347 M, amounts to distribution of 48 percent of the net profit for 2001, excluding non-comparable items. Reclassification of A-shares The Board of Directors is proposing the reclassification of 2.5 million Series A shares The Board of Directors has decided to present a proposal to the Annual General Meeting regarding the reclassification of Series A shares to a corresponding amount of Series B shares. The principal shareholders, the Dunker Funds and Foundations, have stated that they are willing to reclassify 2.5 million of their 12 million Series A shares to Series B shares. In line with what was stated when the buy-back program was started, this will restore the Dunker Funds and Foundations' holdings of voting rights to the level of their holding before the repurchasing began. Following the reclassification, outstanding Series A shares will carry 53.9 percent of the voting rights of the present 90.6 million shares, and 52.4 percent after full dilution (following conversion of debentures and exercise of options). New Chairman Anders Narvinger to succeed Rune Andersson as new Chairman Rune Andersson, Chairman of the Board of Directors of Trelleborg AB, and Lennart Nilsson, Vice Chairman, have decided to resign their positions in connection with the Annual General Meeting in April 2002. The Board intends to appoint Anders Narvinger, who has been a member of Trelleborg's Board since 1999, as the new Chairman. Anders Narvinger, 53, will become President of the Association of Swedish Engineering Industries in May 2002. Earlier, he worked in the ABB Group for many years and has a solid industrial background. He held various senior executive positions in ABB, including President and Chief Executive Officer of ABB Sweden during the years 1996-2001. Anders Narvinger is Chairman of the Boards of Directors of the Swedish Export Council and Lund Technical College, among other responsibilities. Repurchase of Company shares Extended mandate to repurchase up to 10 percent of the shares The Board of Directors intends to propose to the Annual General Meeting that the Board be given an extended mandate, in line with an earlier General Meeting decision, to repurchase up to 10 percent of the Company's shares. Options program for senior executives Proposed continuation in 2002 The Board of Directors intends to propose to the Annual General Meeting that the Board be authorized to continue the three-year call-options program for senior executives that was introduced in 2000. The scope and terms of the program, which are in line with the program for 2001, will be presented prior to the Annual General Meeting on April 23. Outlook Improvements in efficiency and cash flow being given priority in uncertain principal markets Uncertainty with respect to future demand from our customers continued in the fourth quarter of 2001 in both North America and Europe, which are Trelleborg's principal markets. The downturn in the general economy and the prevailing uncertainty is expected to result in reduced production of cars in North America as well as Europe. Production of cars in North America is expected to decline by one to two percent in 2002, compared with 2001. The decline in Europe is estimated to amount to between two and four percent. The first half of 2002 is expected to be weaker than the second half, relative to 2001. Conditions for most market segments of the Group's other business areas are expected to be weaker during the first half of the year, with a potential improvement during the second half, driven by a higher rate of a potential growth in GDP in North America and Europe. The work of integrating acquisitions will continue in the Automotive business area, with a positive impact on profit in 2002. The restructuring program being implemented in the Wheel Systems business area is expected to have a favorable impact on earnings beginning in the second half of 2002. Trelleborg has taken major steps toward normalizing its financial structure during the past two years. The Group continues to have good financial capacity and the adaptation to a higher debt/equity ratio will continue, primarily via acquisitions. As a result of its repurchases of Company shares during the past two years, the number of shares outstanding has been reduced substantially, which will continue to have a favorable impact on earnings per share. The "share base", excluding own holdings, was reduced from approximately 101 million shares to 86.6 million in 2001. The Group is continuing to focus on improvements in efficiency, lower costs and a strong cash flow as a means of dealing with a weak market trend. Trelleborg, February 5, 2002 Fredrik Arp President For additional information, please call: Jan Björck, Trelleborg's Chief Financial Officer. Telephone: +46-410 670 28 Mobile: 46-708 46 02 07, or Mikael Byström, Senior Vice President, Corporate Communcations.Telephone: +46-410 670 37, Mobile +46-708 55 21 69. The preliminary report on 2001 operations and other information on the Trelleborg Group, including T-TIME, a publication for persons with an interest in Trelleborg. is available on the Internet at The interim report for the first quarter of 2002 will be issued on April 23, 2002. ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The full year-end report The full year-end report