Interim report January-March 2019

"A decent start to the year"

“Trelleborg started the year with the highest EBIT to date for a single quarter. Despite that, we are not satisfied with our performance, as our operating margin declined during the period. Some of our operations were burdened by sales mix and certain units lagged behind in compensating for increased costs. However, it is important to note that both the economy as a whole and our own business activity remain at a generally high level. Order bookings continued to trend positively during the quarter, although certain market segments are displaying a more modest organic trend year on year.

Sales increased 9 percent, of which organic sales contributed 1 percentage point and structural growth 2 percentage points. During the quarter, the Group’s organic growth slowed compared with the preceding period, in particular, there was a reduction in business from automotive-related customers.

Operating cash flow was mainly impacted by a higher rate of investment and higher seasonal working capital compared with the preceding year. We assess that cash flow will normalize moving forward.

Our largest business area, Trelleborg Sealing Solutions, registered unchanged organic sales, but with distinct differences between the various segments. Sales to aerospace were strong, at the same time as there was a downturn in sales to the automotive industry. Sales to general industry were more stable, albeit with some geographic differences. Within the business area, we continue to add resources to enable long-term growth in several segments.

Organic sales for our tire operation performed favorably, but earnings were negatively impacted by the sales mix and some imbalance between raw materials and sales prices during the quarter.

Trelleborg Industrial Solutions continues to display a favorable growth rate, and most market segments developed in a positive direction. As earlier forecast, profitability was still impacted by inefficiency in a Czech production unit. Intensive efforts are under way to improve the situation.

The delivery situation in the offshore oil & gas operation remained difficult during the quarter, but at the same time, we are seeing both market activity and order bookings continuing to increase. The business area is expected to improve its earnings during the quarters ahead, and our forecast of positive earnings in the latter part of the year stands firm.

A few acquisitions were also completed during the quarter and I particularly want to highlight Sil-Pro, which complements and broadens Trelleborg’s existing offerings in healthcare & medical. Through a number of acquisitions, we have built a competitive platform in this market segment and we have now achieved a critical mass, in which global organic initiatives will increase further in scope moving forward.

In addition to acquisitions, the investments in our operations continued at an historically high level, which is aimed at strengthening our leading market positions and creating an improved platform for future growth. One example of this is that, during April, we opened a new state-of-the-art production facility in Ohio, in the U.S., where the operations of three facilities were consolidated into a shared, efficient unit. We are also continuing to position ourselves geographically, with an example of this being the establishment of another facility in India during the quarter.

During the period, we extended our syndicated credit facility, which constitutes the majority of our long-term funding, and we are thus well-financed on competitive terms for the foreseeable future.

Although our business environment is dominated by extensive uncertainty, our overall assessment is that the demand for our products and solutions will move laterally next quarter. We monitor developments continuously and stand prepared to manage our various operations according to varied levels of demand,” says Peter Nilsson, President and CEO.

First quarter

Net sales for the first quarter of 2019 rose 9 percent to SEK 9,381 M (8,577).

Organic sales increased 1 percent, both for the Group in its entirety and excluding project deliveries.

EBIT, excluding items affecting comparability, amounted to SEK 1,295 M (1,291), which was equivalent to an EBIT margin of 13.8 percent (15.1). EBIT was the highest to date in a single quarter for the Group.

Items affecting comparability for the quarter were a negative SEK 20 M (neg: 18) and pertained to restructuring costs in line with earlier communications.

Earnings per share, excluding items affecting comparability, totaled SEK 3.25 (3.41). For the Group in its entirety, earnings per share amounted to SEK 3.14 (3.36).

Operating cash flow amounted to SEK 179 M (408). The cash conversion ratio for the most recent 12-month period declined to 70 percent (12 months 2018: 74), impacted by a higher level of capital expenditure and somewhat higher working capital.

Market outlook for the second quarter 2019
Demand is expected to be on a par with the first quarter of 2019, adjusted for seasonal variations.

Market outlook from the interim report published on February 13, 2019, relating to the first quarter of 2019
Demand is expected to be on a par with, or somewhat lower than, the fourth quarter of 2018, adjusted for seasonal variations.

For further information, please contact:
Vice President Media Relations Karin Larsson, +46 (0)410 67015, +46 (0)733 747015,
Vice President IR Christofer Sjögren, +46 (0)410 67068, +46 (0)708 665140,

This information is information that Trelleborg AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 1:00 p.m. CET on April 26, 2019.

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