Interim report July – September 2020

"Earnings and cash flow level with previous year"
 
“During the third quarter, sales declined 12 percent, of which organic sales declined 7 percent. Exchange rate effects had a negative impact on sales of 5 percentage points. EBIT, excluding items affecting comparability, declined 4 percent, corresponding to an operating margin of 12.9 percent (11.7). The operating margin for our core businesses amounted to 13.7 (13.3). Operating cash flow, in relation to operating profit, was strengthened significantly.

Hard work and good ability to adapt the operations to the prevailing situation were the factors behind the margin improvement during the third quarter. The stable level of earnings, given the circumstances, was achieved through a strong focus on operational excellence, which includes strict cost control and good price discipline at all levels of the Group.

In parallel with this daily work, we continued to improve our long-term structure, which will lead to further efficiency and stability over time. Focused measures were implemented in those areas of the Group where demand has been particularly affected by the prevailing situation, such as in the aerospace segment.

During this period marked by the COVID-19 pandemic, we have continued to prepare both processes and legal structures for units in the Businesses Under Development reporting segment. The structural work has largely been completed, which gives us possibilities to act swiftly if certain conditions arise. Discussions with external stakeholders were limited during the summer as a result of the restrictions related to the pandemic. At the end of the quarter, several discussions on structural alternatives had been resumed.

Within Trelleborg Industrial Solutions, sales to most market segments continued to recover. Deliveries to the automotive industry made a strong recovery and sales of our marine solutions grew somewhat.

Sales in Trelleborg Sealing Solutions to the aerospace industry continued to note a very negative trend under the influence of the ongoing pandemic and deliveries to this segment halved compared with the year-earlier period. Sales to both general industry and the automotive segment improved, compared with the sharp fall during the second quarter. China stood out, in particular, with a positive trend.

Sales in Trelleborg Wheel Systems made a strong recovery and displayed slightly positive growth overall. This was primarily driven by deliveries of agricultural tires, both to OE manufacturers and aftermarket sales. Sales of tires for material handling and construction vehicles remained weaker compared with the year-earlier period.

Organic sales in Businesses Under Development declined, although the trend was more positive compared with the preceding quarter. This was mainly attributable to the favorable development in our offshore oil & gas operation.

During the quarter, demand improved gradually in most market segments, which was probably due to a combination of an underlying improvement and some pent-up demand caused by the lockdowns during earlier quarters. However, there is considerable uncertainty regarding developments moving forward and further consequences of the ongoing pandemic remain.

We see today that new local restrictions are being imposed as the spread of the infection continues. We foresee a tougher climate during the fourth quarter of the year, not least in the oil & gas segment, and a recovery in the aerospace segment will not occur until further into the future. We continue to adapt to the constantly changing conditions and we are doing this well. However, our general assessment in the current situation is that demand for the fourth quarter will be on a par with the third quarter”, says Peter Nilsson, President and CEO.

Third quarter 2020

• Organic sales declined 7 percent and continued to be impacted by the market development as a result of COVID-19. Net sales for the quarter declined 12 percent to SEK 7,743 M (8,828).

• EBIT, excluding items affecting comparability, amounted to SEK 999 M (1,036), corresponding to an EBIT margin of 12.9 percent (11.7).

• Operating cash flow amounted to SEK 1,391 M (1,412). The cash conversion ratio for the most recent 12-month period amounted to 121 percent (82).

• Items affecting comparability for the quarter were a negative SEK 80 M (neg: 127) and pertained in their entirety to restructuring costs.

• Earnings per share, excluding items affecting comparability, totaled SEK 2.31 (2.83). For the Group, earnings per share were SEK 2.41 (2.44). 

Market outlook for the fourth quarter of 2020
Demand is expected to be on a par with the third quarter of 2020, adjusted for seasonal variations. Uncertainty regarding demand for the coming quarters remains considerable.

Market outlook from the interim report published on July 20, 2020, relating to the third quarter of 2020
Demand was expected to be slightly better than in the second quarter of 2020, adjusted for seasonal variations.

Dividend
The Board of Directors has resolved not to pay a dividend during 2020.

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. The information was submitted for publication, through the agency of the contact person set out above, at 7:45 am. CET on October 27, 2020.

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