Interim report and Year-end report 2020
"Strong end to the year – toward a better 2021"
“Like most companies in 2020, Trelleborg was impacted to a high degree by the ongoing pandemic. Priority was assigned to measures to protect our personnel, while we succeeded in offsetting the reduction in sales through a flexible cost base and structural improvements. Despite the circumstances, we were able to deliver a good result, with an improved operating margin and record-strong cash flow compared with 2019, for both the full year and the fourth quarter.
Our employees at all levels of the Group have made the best of a difficult situation and we have adapted our operations and way of working in line with the new reality in an exemplary fashion. Our decentralized approach enabled rapid operational action throughout the organization.
We closed 2020 with a strong quarter. Organic sales declined by 3 percent, meaning that demand continued to improve sequentially. We had a strong currency headwind, which accounted for a 7-percent fall in sales. Cost reductions and structural improvements during the year, combined with slightly better demand, led to the best fourth quarter to date for the Group, in terms of both EBIT and operating margin. This favorable result was achieved despite a negative currency impact on EBIT amounting to SEK 96 M. Cash flow was even stronger, namely the strongest ever for a single quarter.
That said, we continued to be affected by the Coronavirus pandemic. Local outbreaks continue to occur and at the time of writing, production in some parts of China is shut down as a result of official decisions. In other locations, we are seeing unusually high employee absence, which creates operational challenges and ineffectiveness for us and some of our suppliers.
In the Trelleborg Industrial Solutions business area, the recovery continued in the fourth quarter, mainly in Asia, but also in Europe. Deliveries to the automotive industry were highly favorable and sales to the construction-related market segment grew somewhat. Robust cost optimization and a positive sales mix led to improved earnings.
Sales in Trelleborg Sealing Solutions to the aerospace industry continued to be subject to the strong negative effects of the pandemic and, accordingly, an adjustment to long-term reduced demand is under way in the business area. However, the market situation improved in most of the other segments, such as general industry, healthcare & medical and, not least, the automotive industry. Asia developed particularly well, but there was also a clear improvement in the situation in Europe during the quarter.
Sales in Trelleborg Wheel Systems of tires for agricultural machinery increased significantly in most markets, driven by pent-up demand and a generally favorable agricultural market with rising cereal prices. Deliveries of agricultural tires increased in all markets, to both OEMs and aftermarket customers. However, the market situation remained difficult for tires for material handling vehicles and construction vehicles, which declined in both sales channels. Structural improvements and cost adjustments implemented made a positive contribution to earnings.
In our Businesses Under Development reporting segment, sales declined, primarily driven by weak performance in offshore oil & gas and printing blankets. The operations continue to be affected by the Coronavirus pandemic and the restrictions that are still in place.
Discussions with external stakeholders regarding several of our units within Businesses Under Development have intensified and are far advanced in some cases. We are very hopeful that it will be possible to implement structural transactions in the near future. This is well within the framework of our initial communication, that all discussions will have produced results by the end of 2021.
We recently launched a new ambitious climate target, “50 by 25”, meaning that the Group will halve its CO2 emissions relative to sales by 2025. This in conjunction with a vision statement to achieve complete climate neutrality in our own operations, meaning net zero emissions, by the end of 2035.
Finally, I want to share our hope that the positive results from the fourth quarter is a taste of an even stronger 2021. Our strategy to be market leader in selected niches has served us well over the past year and Trelleborg will improve further in the periods to come. Our general assessment in the current situation is that demand for the first quarter will be somewhat better compared with the fourth quarter”, says Peter Nilsson, President and CEO.
Fourth quarter 2020
- Organic sales declined 3 percent and continued to be impacted by the market development as a result of the Coronavirus pandemic. Net sales for the quarter declined 10 percent to SEK 8,118 M (9,018).
- EBIT, excluding items affecting comparability, increased to SEK 1,106 M (1,006), despite negative currency effects of SEK 96 M. This corresponded to an EBIT margin of 13.6 percent (11.2). This was the best fourth quarter to date for both EBIT and the EBIT margin.
- Operating cash flow amounted to SEK 1,813 M (1,525). The cash conversion ratio for the most recent 12-month period amounted to 125 percent (89). Net debt in relation to EBITDA was 1.7 (2.5).
- Items affecting comparability for the quarter were a negative SEK 166 M (neg: 3,431) and pertained in their entirety to restructuring costs. The items affecting comparability for 2019 included impairment of capital employed carried out in Businesses Under Development in the amount of SEK 3,198 M.
- Earnings per share, excluding items affecting comparability, totaled SEK 2.90 (2.45). For the Group as a whole, earnings per share were SEK 2.43 (loss: 9.29).
- Net sales for the full year 2020 declined 10 percent to SEK 32,836 M (36,588).
- Organic sales declined 9 percent compared with 2019, strongly impacted by the Coronavirus pandemic.
- EBIT, excluding items affecting comparability, fell 8 percent to SEK 4,282 M (4,658), corresponding to an EBIT margin of 13.0 percent (12.7).
- Items affecting comparability were a negative SEK 397 M (neg: 3,696) and pertained in their entirety to restructuring costs. The items affecting comparability for 2019 included impairment of capital employed carried out in Businesses Under Development in the amount of SEK 3,198 M.
- Earnings per share, excluding items affecting comparability, totaled SEK 10.89 (11.89). For the Group as a whole, earnings per share were SEK 10.00 (loss: 0.73).
- Net profit for the Group totaled SEK 2,711 M (loss: 199).
- Operating cash flow amounted to SEK 5,332 M (4,167), an increase of 28 percent. The cash conversion ratio increased to 125 percent (89).
Market outlook for the first quarter 2021
Demand is expected to be slightly better than in the fourth quarter of 2020, adjusted for seasonal variations. Uncertainty regarding the pandemic’s impact on the coming quarters remains considerable.
Market outlook from the interim report published on October 27, 2020, relating to the fourth quarter of 2020
Demand is expected to be on a par with the third quarter of 2020, adjusted for seasonal variations.
The Board of Directors proposes a cash dividend of SEK 5.00 per share (–).
For further information, please contact:
Media: Vice President Media Relations Karin Larsson, +46 (0)410 67015, +46 (0)733 747015, email@example.com
Investors/analysts: Vice President IR Christofer Sjögren, +46 (0)410 67068, +46 (0)708 665140, firstname.lastname@example.org
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 February 10, 2021.
This is a translation of the company’s Interim Report in Swedish.