Interim report and Year-end report 2015

"Stable end to the year"

“2015 turned out to be quite an eventful year, and despite the challenging market conditions in several segments, we once again succeeded in achieving record results for the full-year. Operating profit was the highest ever recorded for a fourth quarter, giving a stable end to a largely satisfactory year.

However, organic sales growth was below our target. Organic sales were negative at two percent for the full-year, but remained unchanged in the fourth quarter. With a relatively weak market situation in several segments and raw material prices that continued to decline, with a subsequent negative effect on our organic growth, the year proved challenging in terms of growth. Several initiatives are ongoing and others will be launched to address our sales growth going forward.

Development of the Group continues, with a focus on selected segments and improved positions, involving many targeted organic initiatives. During the year, we invested heavily in both improved efficiency and new geographic areas, with the establishment of a new manufacturing unit for agricultural tires in North America being particularly noteworthy. Investment in structural improvements will continue.

We completed eight acquisitions during the year, which will contribute almost SEK 500 M to annual sales, strengthen our total offering and market positions in selected segments, and complement our organic initiatives. We will continue to actively seek bolt-on acquisitions.

In the fourth quarter, we signed an agreement to acquire CGS Holding a.s. CGS has well-positioned and favorably performing operations within agricultural and specialty tires, as well as engineered polymer solutions. This marks Trelleborg’s largest acquisition in decades and will significantly alter the position and size of a number of our business areas. The transaction is subject to regulatory approval, and we expect to complete the acquisition in the first half of 2016.

The jointly owned company TrelleborgVibracoustic developed according to plan, with organic sales well in excess of underlying market growth during the year. The company’s operating profit was the highest ever for the full-year as well as for a fourth quarter. Efforts to prepare TrelleborgVibracoustic for a possible IPO are progressing according to plan.

At present, there are some signs of a market improvement in certain geographic areas and some segments, such as the aerospace and automotive industries, which appear to be displaying satisfactory development. However, the situation looks considerably more difficult than it did last year in other parts of our business. Low oil prices, generally low raw material prices and a continued weak trend in parts of general industry and agriculture are continuing to hamper some parts of the Group. The share of our order backlog related to oil & gas has contracted significantly, which is why we expect tougher times ahead with both fewer project deliveries and lower profitability in the segment. Adjustment to a lower level of activity has already been initiated and has been partly completed.

2016 will probably bring major structural changes for the Group. Trelleborg will continue to strengthen its positions, and we are maintaining preparedness to adjust our various businesses to fluctuating demand. I therefore feel confident, and look forward to the continued development of Trelleborg into an even better company”, says Peter Nilsson, President and CEO.

  
Continuing operations, fourth quarter

Net sales for the fourth quarter of 2015 increased by 6 percent (9) to SEK 5,927 M (5,592). Sales were the Group’s highest to date for a fourth quarter. Organic sales were unchanged (neg: 2). Effects of structural changes made a positive contribution of 2 percent (3), while the effects of exchange rate movements were 4 percent (8).

Operating profit, excluding the participation in TrelleborgVibracoustic and items affecting comparability, rose by 2 percent to SEK 705 M (690), equivalent to an operating margin of 11.9 percent (12.3). The operating profit was the Group’s highest to date for a fourth quarter.

Items affecting comparability for the quarter amounted to an expense of SEK 90 M (expense: 68), which is in line with communicated full-year levels.

Operating profit during the quarter for TrelleborgVibracoustic, excluding items affecting comparability, increased by 26 percent and amounted to EUR 43.5 M (34.4). This corresponded to an operating margin of 8.8 percent (7.6). The operating profit and corresponding margin were the highest to date for the company for a fourth quarter.

Trelleborg’s participation in TrelleborgVibracoustic’s profit amounted to SEK 104 M after tax (72). Items affecting comparability amounted to an expense of SEK 29 M (expense: 11), which is in line with communicated full-year levels.

Earnings per share rose 9 percent to SEK 2.00 (1.84).

Operating cash flow amounted to SEK 854 M (1,031). During the fourth quarter of 2015, a dividend of SEK 1,357 M (-) was received from TrelleborgVibracoustic. The operating cash flow, including this dividend, amounted to SEK 2,211 M (1,031).

The Board of Directors and President propose a cash dividend of SEK 4.00 per share (3.75).

    
Continuing operations, full year

Net sales for the full-year 2015 increased by 10 percent (5) and totaled SEK 24,803 M (22,533). Organic sales declined by 2 percent (neg: 1). Effects of structural changes made a positive contribution of 2 percent (2), while the effects of exchange rate movements were 10 percent (4).

Operating profit, excluding the participation in TrelleborgVibracoustic, and items affecting comparability, rose 7 percent to SEK 3,219 M (3,001), equivalent to an operating margin of 13.0 percent (13.3). Operating profit was the highest to date for the Group for a full-year.

Operating profit for the full-year for TrelleborgVibracoustic, excluding items affecting comparability, rose 21 percent to EUR 182.9 M (151.0), corresponding to an operating margin of 9.4 percent (8.5). Both operating profit and operating margin were the highest to date for the company for a full-year. Trelleborg’s participation in TrelleborgVibracoustic’s profit amounted to SEK 509 M (298) after tax.

Earnings per share rose 17 percent to SEK 9.60 (8.23).

Operating cash flow amounted to SEK 2,282 M (2,705). A dividend of SEK 1,357 M (131) was received from TrelleborgVibracoustic during 2015. The operating cash flow, including this dividend, amounted to SEK 3,639 M (2,836). The cash conversion ratio was 71 percent (90), excluding dividends from TrelleborgVibracoustic.

The total return on shareholders’ equity for the Group was 14.3 percent (13.6).

Market outlook for the first quarter of 2016

Demand is expected to be on a par with, or slightly weaker, than the fourth quarter of 2015, adjusted for seasonal variations.

Market outlook from the interim report published on October 22, 2015, relating to the fourth quarter of 2015

Demand is expected to be on a par with, or slightly weaker, than the third quarter of 2015, adjusted for seasonal variations.

Proposed dividend 2015

The Board of Directors and President propose a cash dividend of SEK 4.00 per share (3.75).

For further information, please contact:
Media: Vice President Media Relations Karin Larsson, +46 (0)410 67015, +46 (0)733 747015, karin.larsson@trelleborg.com
Investors/analysts: Vice President IR Christofer Sjögren, +46 (0)410 67068, +46 (0)708 665140, christofer.sjogren@trelleborg.com

This is information of the type that Trelleborg AB (publ) is obligated to disclose in accordance with the Swedish Securities Exchange and Clearing Operations Act and/or the Financial Instruments Trading Act. The information was issued for publication on Thursday, February 4, 2016, at 07:45 CET.