Interim report January – March 2020

"Stable quarter – growing challenges ahead"

“Trelleborg’s first quarter was marked by an accelerating impact from the spread of the COVID-19 pandemic. We have continuously initiated measures to offset the challenges, entailing that the earnings trend and cash flow were relatively stable despite the downturn in sales.

It is a priority for Trelleborg to remain a reliable and stable business partner, even under difficult conditions. In the same way, our employees’ well-being and safety are in focus and comprehensive routines and measures have been activated to prevent the spread of infection.

Organic sales for the Group declined 5 percent, with an accelerating decline in the latter part of the quarter. EBIT, excluding items affecting comparability, declined 5 percent, while operating cash flow was strengthened significantly.

The measures implemented during the period address both costs and cash flow, and comprise focused cost savings in the form of, for example, shortened working hours, lay-off notices and redundancies, temporary facility closures and reduced investments, and an intensified focus on working capital. All units have initiated local action plans that address their unique situation.

Sales and earnings in Trelleborg Industrial Solutions were negatively impacted by strikes in Turkey and France, as well as COVID-19. Despite these strikes, sales were healthy for some time, but at the end of the period, the business climate deteriorated significantly. All market segments and regions were increasingly impacted by their own and customers’ temporary facility closures.

Trelleborg Sealing Solutions generally noted relatively good sales, despite the negative effect of temporary facility closures, first in China and then in Europe. However, during March, demand declined due to the increased uncertainty. Strict cost control limited the impact on the earnings trend.

Trelleborg Wheel Systems experienced a continued subdued agricultural market. During the latter part of the quarter, a number of OE manufacturers of agricultural machinery announced temporary closures of manufacturing units, which contributed to a decline in deliveries. Sales of tires to material handling and construction vehicles were also affected by the declining demand in the wake of the pandemic. Cost savings were initiated during the quarter, which meant that the result could be maintained at a healthy level considering the circumstances.

Businesses Under Development continued to improve its profitability, and all units displayed an operating profit during the quarter. This was achieved despite the latter part of the quarter being affected by temporary facility closures aimed at offsetting customers’ production stoppages and to comply with official decisions. The favorable organic sales were mainly driven by strong growth in the offshore operation. However, during the latter part of the quarter, the oil price fell significantly, which will lead to a worsening market situation.

We are now in the second quarter and the market conditions are very unique and uncertain. During the next quarters, the negative impact on demand will be considerable due to all of the direct and indirect effects arising from the COVID-19 pandemic. That said, Trelleborg has a strong financial base, with good liquidity and long-term confirmed financing in place, and the Group stands well-equipped to face challenging times.

Our overall assessment is that demand will be significantly lower during the second quarter”, says Peter Nilsson, President and CEO.

First quarter 2020

• The Group was affected by the Coronavirus (COVID-19), particularly during the latter part of the quarter. The effects of COVID-19 are expected to impact sales and earnings significantly more during the coming quarters compared with the first quarter. See further details on page 6.
• Net sales for the first quarter of 2020 declined 1 percent to SEK 9,286 M (9,381).
• Organic sales declined 5 percent.
• EBIT, excluding items affecting comparability, amounted to SEK 1,235 M (1,295), which was equivalent to an EBIT margin of 13.3 percent (13.8).
• Items affecting comparability for the quarter were a negative SEK 46 M (neg: 20) and pertained in their entirety to restructuring costs.
• Earnings per share, excluding items affecting comparability, totaled SEK 3.21 (3.25). For the Group, earnings per share were SEK 3.05 (3.14).
• Operating cash flow amounted to SEK 705 M (179). The cash conversion ratio for the most recent 12-month period increased to 102 percent (12M 2019: 90).
• After the close of the period, the molded component operations in Sweden and Estonia, belonging to Businesses Under Development, were divested.
   

Market outlook for the second quarter 2020
Demand is expected to be significantly lower than in the first quarter of 2020, adjusted for seasonal variations.

Market outlook from the interim report published on February 12, 2020 relating to the first quarter of 2020
Demand is expected to be somewhat lower than the fourth 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, karin.larsson@trelleborg.com
Investors/analysts: Vice President IR Christofer Sjögren, +46 (0)410 67068, +46 (0)708 665140, christofer.sjogren@trelleborg.com

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 13:00 p.m. CET on April 23, 2020.

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