Interim report and Year-end report 2019

"Stable despite continued challenges"

“The fourth quarter rounded off 2019 in a stable manner. Sales increased by 8 percent, while organic sales remained unchanged compared with the preceding year. Operating profit – EBIT excluding items affecting comparability – also increased somewhat during the period. But the factor that dominated the quarter was the significant reorganization of the Group that we implemented.

The new organization entails that we are changing from five to three business areas, at the same time as a number of units have been transferred to a new reporting segment that we call Businesses Under Development. Our ambition is to continue developing and strengthening our three already well-positioned business areas and, at the same time, highlight operations where there must be an improvement in position and profitability.

We have been clear that the requirements on those units included in Businesses Under Development are demanding. They must achieve significant and sustainable improvements to remain part of the Group in the long term. In parallel with the operational improvement work, we will continuously evaluate various structural alternatives. For example, we already divested a small unit in January 2020 that was not a good fit for the Group in the long term.

There was no shortage of challenges for our three core businesses, where we saw a mixed trend during the quarter. Trelleborg Sealing Solutions grew and improved its margin compared with the year-earlier period. Trelleborg Industrial Solutions also performed well overall. Our tire operation, Trelleborg Wheel Systems, experienced a testing period, with continued challenging market conditions, under-production to adapt inventory levels to the lower level of demand and, as a consequence, considerably weakened margins. However, inventory adjustments led to a good cash flow.

The Group, with its globally leading positions and broad exposure to many different market segments, will always have operations that go from success to success, at the same time as other units periodically are challenged by market headwinds. When everything is tallied at Group level, earnings tend to increase over time.

It was exactly this development that we saw during the period in question. The agricultural and automotive industries, together with general industry, encountered a tougher economy. At the same time, sales to the aerospace industry, healthcare & medical, and oil & gas increased. Acquisitions made in recent years made a positive contribution to this development.

A new decade has now begun, and we are continuing on our established path. We cannot impact the overall economic trend, but we can focus on refining our long-term positions and offerings. That said, we of course adjust our operations and adapt to short-term demand.

As I look forward to the coming year, I am confident in the knowledge that I have outstanding employees and that the Group functions very well. We have a flexibility and high level of preparedness to manage shifting market conditions. In the short term, we can see a more challenging demand scenario, partly as a result of recent developments in China. Our overall assessment of demand during the first quarter of the year is that it will be somewhat lower than during the fourth quarter”, says Peter Nilsson, President and CEO.

Fourth quarter 2019

• Net sales for the fourth quarter of 2019 rose 8 percent to SEK 9,018 M (8,342).
• Organic sales were unchanged compared with the preceding year.
• EBIT, excluding items affecting comparability, amounted to SEK 1,006 M (977), which was equivalent to an EBIT margin of 11.2 percent (11.7).
• Items affecting comparability for the quarter were a negative SEK 3,431 M (neg: 98) and pertained to impairment of capital employed in Businesses Under Development of SEK 3,198 M, see also page 7, and restructuring costs of SEK 233 M in line with earlier communications. The preceding year’s items affecting comparability pertained in their entirety to restructuring costs.
• Earnings per share, excluding items affecting comparability, totaled SEK 2.45 (2.55). For the Group, earnings per share were negative SEK 9.29 (pos: 2.22).
• Operating cash flow amounted to SEK 1,530 M (1,159). The cash conversion ratio for the full year increased to 90 percent (74).
• In December 2019, Trelleborg implemented organizational changes aimed at focusing the Group on selected segments and at the same time, highlighting areas in which there must be an improvement in position and profitability. In the new organization, Trelleborg’s core business comprises three business areas, compared with the former five, and one reporting segment, Businesses Under Development. Reported comparative data was adjusted for this change. See also page 7.

Full-year 2019

• Net sales for the full-year 2019 increased 8 percent to SEK 36,588 M (34,005).
• Organic sales were in line with the preceding year.
• EBIT, excluding items affecting comparability, declined 1 percent to SEK 4,658 M (4,694), corresponding to an EBIT margin of 12.7 percent (13.8).
• EBITA, excluding items affecting comparability, was in line with the preceding year and amounted to SEK 5,020 M (5,003), corresponding to an EBITA margin of 13.7 percent (14.7).
• Items affecting comparability amounted to negative SEK 3,696 M (neg: 176) and pertained to impairment of capital employed in Businesses Under Development of SEK 3,198 M, see also page 7, and restructuring costs of SEK 498 M. The preceding year’s items affecting comparability pertained in their entirety to restructuring costs.
• Earnings per share, excluding items affecting comparability, totaled SEK 11.89 (12.34). For the Group in its entirety, earnings per share amounted to negative SEK 0.73 (pos: 11.77).
• Net loss for the Group totaled SEK 199 M (profit: 3,190).
• Operating cash flow amounted to SEK 4,174 M (3,495), up 19 percent. The cash conversion ratio increased to 90 percent (74).
   

Market outlook for the first quarter 2020
Demand is expected to be somewhat lower than in the fourth quarter of 2019, adjusted for seasonal variations.

Market outlook from the interim report published on October 24, 2019, relating to the fourth quarter of 2019
Demand is expected to be on a par with the third quarter of 2019, adjusted for seasonal variations.

Dividend 2019
The Board of Directors proposes a cash dividend of SEK 4.75 per share (4.75).

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 12, 2020.

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 solutions accelerate performance for customers in a sustainable way. The Trelleborg Group has annual sales of about SEK 37 billion and operations in about 50 countries. The Group comprises three business areas: Trelleborg Industrial Solutions, Trelleborg Sealing Solutions and Trelleborg Wheel Systems and a reporting segment, Businesses Under Development. 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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