Interim report July - September 2019

"More demanding environment"

“The third quarter was marked by a somewhat weaker organic sales trend in a number of market segments, which was partly offset by a good development in the aerospace segment as well as a significant sales increase in oil & gas and infrastructure solutions. Overall, organic sales decreased by 1 percent and by 3 percent excluding our positive project transactions. Operating profit declined 9 percent, mainly due to reduced sales and stock adjustments in Trelleborg Wheel Systems.

At the end of the second quarter, we announced cost-saving measures to address an anticipated lower level of demand. The effects of these initiatives will primarily have an impact toward the end of the year and during 2020. An increased focus on working capital contributed to strong cash flow.

The industrial trend is generally weaker in most geographical markets compared with the first half of the year, probably affected by the trade conflict between the US and China, as well as the uncertainty related to Brexit. This global economic slowdown has impacted sales volumes, not least to customers in the automotive and general engineering industries for both Trelleborg Sealing Solutions and Trelleborg Industrial Solutions. Customer activity in the aerospace industry and for our project-related operations related to oil & gas and infrastructure construction remains at a high level.

The demand for tires in both the agriculture sector and tires for material handling and construction vehicles continued to decline during the quarter in most markets. We made a decision to keep production below the level of demand in order to adapt our stock levels to a weaker market situation, which has had a negative earnings impact in Trelleborg Wheel Systems. During the period, we transferred production between facilities to meet new trading patterns and to create a better production structure for the future. Together, inventory adjustments and production transfers have contributed to temporarily reduced efficiency and increased costs, which will also impact the business area’s earnings during the next quarter in a corresponding manner.

Overall, our assessment is that the demand in the last quarter of the year will be on a par with the third quarter, and with an unfavorable sales mix similar to what we saw during the third quarter. As previously, we are carefully monitoring economic developments and stand well prepared to manage fluctuating market conditions,” says Peter Nilsson, President and CEO.

Third quarter

Net sales for the third quarter of 2019 rose 6 percent to SEK 8,828 M (8,300).

Organic sales declined 1 percent for the Group in its entirety, and declined 3 percent, excluding project deliveries.

EBIT, excluding items affecting comparability, amounted to SEK 1,036 M (1,133), which was equivalent to an EBIT margin of 11.7 percent (13.6).

Items affecting comparability for the quarter were a negative SEK 127 M (neg: 28) and pertained to restructuring costs. At the end of the second quarter, an action program was launched and communicated to address an anticipated downturn in certain market segments. Restructuring costs for the full year is estimated to approximately SEK 500 M.

The Trelleborg Offshore & Construction business area recognized a positive result for the first time since the first quarter of 2017.

Earnings per share, excluding items affecting comparability, totaled SEK 2.83 (2.98). For the Group, earnings per share amounted to SEK 2.44 (2.88).

Operating cash flow amounted to SEK 1,413 M (854). The cash conversion ratio for the most recent 12-month period was 82 percent (77).

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

Market outlook from the interim report published on July 18, 2019, relating to the third quarter of 2019
Demand is expected to be on a par with the second quarter of 2019, adjusted for seasonal variations.

For further information, please contact:
Media: Vice President Media Relations Karin Larsson, +46 (0)410 67015, +46 (0)733 747015,
Investors/analysts: 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. The information was submitted for publication, through the agency of the contact person set out above, at 07:45 a.m. CET on October 24, 2019.