Interim report and Year-end report 2016

"New platform – focus on profitable growth"

“2016 was a very eventful year in Trelleborg’s history. The Group was reshaped by major acquisitions as well as a significant divestment. We reported our best profit on record for a single year, despite a number of our operations fighting an uphill battle throughout the period due to challenging market conditions.

On this basis, there is a significant potential to become even more profitable and grow faster than we have had in recent years. Several initiatives are ongoing and more will be launched to address the sales and profitability trend moving forward. As a consequence of this, we raised our EBIT margin target at the end of the year from 12 to 15 percent over an economic cycle.

This does not mean we haven’t encountered any challenges. Following a protracted downward trend, raw material prices have started to move upward and we will address this trend by further improving efficiency, but also by leveraging our strong market positions and offering competitive solutions at the right price.

Our investments during the year totaled about SEK 1.1 billion. Our level of investment will remain at a relatively high level over the next few years, and this should be seen as confirmation of our growth ambitions as well as our endeavor to continuously increase our efficiency.

We completed seven acquisitions in 2016, contributing nearly SEK 7 billion to sales on an annual basis. The largest of these was of course CGS Holding, Trelleborg’s largest acquisition in decades, which reinforces our overall offering and our market positions in several segments. Although we will now temporarily reduce our pace of acquisition slightly, we will continue to acquire companies that complement our organic growth initiatives. Having jointly owned Vibracoustic during a successful journey toward higher profitability, we divested our share in the company as planned during the summer. In terms of timing, this divestment coincided well with the acquisition of CGS.

We can see some signs that markets in certain geographies and in some segments are starting to improve. In general industry in Europe, for example, we reported organic growth in the fourth quarter, which is the first time this has occurred for some period of time. Our sales to the aerospace and automotive industries are continuing to develop at a satisfactory level. The signals from the agricultural markets in various regions are somewhat ambivalent. The assessment is that the recovery in South America has already begun, while the downward trend in the OE market, particularly in North America, is continuing. In Europe, there are signs of an improvement mainly in the aftermarket.

The share of our order backlog related to oil/gas remained at a low level, why we expect fewer project deliveries and lower profitability in this segment at least for the first six months of 2017 . Adaptations to the lower level of activity have been made and further measures are ongoing.

2017 will be characterized by intensive efforts to integrate all recently acquired operations, at the same time as we will ensure that synergies are realized, thereby further improving the Group’s market positions. We are in the process of building a stronger Trelleborg with our sights set on a long-term plan, which is a strategy that could potentially impact earnings for an individual quarter.

We are maintaining a high level of preparedness to adjust our various businesses to fluctuating demand. My colleagues and I are looking forward to further developing Trelleborg in 2017, making it into an even bigger and more profitable company”, says Peter Nilsson, President and CEO.

Fourth quarter 2016

Net sales for the fourth quarter of 2016 amounted to SEK 7,434 M (5,927), the highest on record for the Group in a single quarter. Organic sales declined by 4 percent, mainly driven by the anticipated downturn in deliveries to the oil/gas segment. The effects of exchange rate movements on sales were positive 3 percent.

Effects of structural changes made a positive contribution of 26 percent on net sales, with the acquisition of CGS accounting for the main part of this increase.

EBIT, excluding items affecting comparability, rose by 19 percent to SEK 841 M (705), which was the Group’s highest figure on record for a fourth quarter and equivalent to an EBIT margin of 11.3 percent (11.9).

Items affecting comparability for the quarter amounted to an expense of SEK 118 M (expense: 90), in line with earlier communication.

Earnings per share for continuing operations totaled SEK 1.92 (1.62), up 19 percent.

Operating cash flow amounted to SEK 1,331 M (854), up 56 percent. The cash conversion ratio for the most recent 12-month period was 99 percent (71).

The Board of Directors and President propose a cash dividend of SEK 4.25 per share (4.00).

Full-year 2016  

Net sales for full-year 2016 increased by 9 percent and totaled SEK 27,145 M (24,803). Organic sales declined by 5 percent. Effects of structural changes made a positive contribution of 15 percent, while the effects of exchange rate movements had a negative impact of 1 percent on sales. Sales were the highest on record for the Group for a full year.

EBIT, excluding items affecting comparability, rose 9 percent to SEK 3,496 M (3,219) and was the highest figure on record for the Group for a full year. This corresponds to an EBIT margin of 12.9 percent (13.0).

Earnings per share for continuing operations rose 6 percent to SEK 8.18 (7.73).

Net profit for discontinuing operations for full-year 2016 amounted to SEK 4,369. This amount included a capital gain of SEK 4,070 M and a reclassification of shareholders’ equity of SEK 299 M. The net effect on shareholders’ equity was SEK 4,070 M. Both items are attributable to the divestment of Vibracoustic.

Net profit for the Group totaled SEK 6,585 M (2,605), positively impacted by the divestment of Vibracoustic.

Operating cash flow for continuing operations amounted to SEK 3,460 M (2,282), up 52 percent. The cash conversion ratio was 99 percent (71).

Market outlook for the first quarter of 2017
Demand is expected to be slightly improved compared with the fourth quarter of 2016, adjusted for seasonal variations.

Market outlook from the interim report published on October 25, 2016, relating to the fourth quarter of 2016
Demand is expected to be on a par with the third quarter of 2016, adjusted for seasonal variations.

Proposed dividend 2016

The Board of Directors and President propose a cash dividend of SEK 4.25 per share (4.00).

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 7:45 a.m. CET on February 1, 2017.

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

Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. Its innovative engineered solutions accelerate performance for customers in a sustainable way. The Trelleborg Group has annual sales of about SEK 30 billion in over 40 countries. The Group comprises five business areas: Trelleborg Coated Systems, Trelleborg Industrial Solutions, Trelleborg Offshore & Construction, Trelleborg Sealing Solutions and Trelleborg Wheel Systems, and the operations of Rubena and Savatech. The Trelleborg share has been listed on the Stock Exchange since 1964 and is listed on Nasdaq Stockholm, Large Cap.
www.trelleborg.com

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Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. Its innovative engineered solutions accelerate performance for customers in a sustainable way. www.trelleborg.com