Interim report January-March 2017

"Positive market trend"

“Trelleborg noted a satisfactory first quarter with sales increasing 36 percent, of which acquisitions contributed with 30 percentage points. Organic sales increased by 3 percent. Excluding project transactions, comprising mainly oil and gas-related operations which remain depressed, organic sales rose 8 percent.

General industry improved in all regions and we noted healthy levels of activity in several of our market segments, particularly in Asia. Our tire sales to the agricultural sector and industrial and construction vehicles performed well, despite the temporary negative impact on margins in parts of our business due to the rapid and relatively steep hike in prices for raw materials. We are working intensively to compensate for the higher raw material prices, which is deemed to have a full impact particularly in the second half of the year.

Our oil and gas operation is still experiencing a weak market, and we cannot see any improvement on the horizon in the near future. We are working actively to adapt the oil and gas business to the lower level of activity and the cost base is continuing to shrink. From a Group perspective, this operation has only has a minor impact on our quarterly earnings.

Our cost and capital efficiency programs are continuing to deliver favorable results and recently acquired operations are being integrated and developed in a generally satisfactory manner. Efforts to generate growth via organic initiatives – supplemented with bolt-on acquisitions – are ongoing. During the quarter, we acquired a seal operation in the U.S., thereby strengthening our offering in this attractive niche.

We also divested a compounding operation in the Czech Republic, the majority of sales from which were to external customers, which is to be considered outside our core business. The received net purchase price of approximately SEK 650 million was used to reduce net debt. The divestment generated a capital gain of SEK 472 million.

During the quarter, we have appointed new managers in two of our business areas. We work continuously with succession planning to ensure a stable supply of managers and I view the fact that we were able to fill these positions through internal recruitment as a sign of strength.

We have also a continued strong focus on making it easy for customers to do business with us. To ensure success in this regard, we have to be innovative and be at the leading edge in the application of new technology in our interaction with customers. We are working particularly intensively with digitalization, and this will lead to a number of major changes in how we do business with customers for many years to come.

In summary, we saw signs of a general improvement in the demand situation in several of our segments during the quarter. For the second quarter, our overall assessment is that demand will be in line with, or slightly higher, than the first quarter of the year. We are continuing to carefully monitor economic developments and maintain a high level of preparedness to manage fluctuating market conditions,” says Peter Nilsson, President and CEO.

First quarter
Net sales for the first quarter of 2017 rose 36 percent to SEK 8,298 M (6,095), the highest on record for the Group in a single quarter. Organic sales increased 3 percent. Excluding project deliveries, the corresponding increase was 8 percent.

Effects of structural changes made a positive contribution of 30 percent to net sales, with the acquisition of CGS accounting for the main part of this increase.

EBIT, excluding items affecting comparability, rose 37 percent to SEK 1,154 M (841), which was the Group’s highest figure on record for a single quarter and equivalent to an EBIT margin of 13.9 percent (13.8).

During the quarter, a compounding operation was divested in Lesina in the Czech Republic, generating a capital gain of SEK 472 M. The item is recognized in items affecting comparability.

In addition to the capital gain, items affecting comparability included restructuring expenses of SEK 106 M as previously communicated.

Earnings per share for continuing operations excluding items affecting comparability totaled SEK 3.12 (2.23), up 40 percent.

Operating cash flow amounted to SEK 417 M (228), up 83 percent. The cash conversion ratio for the most recent 12-month period was 96 percent (76).

During the quarter, Trelleborg received a part payment totaling SEK 480 M relating to a receivable for the divestment of Vibracoustic, which is the component linked to Vibracoustic’s 2016 sales performance. The proceeds did not impact net debt since the amount was previously recognized as a receivable.

Market outlook for the second quarter of 2017
Demand is expected to be in line with, or slightly higher, than the first quarter of 2017, adjusted for seasonal variations.

Market outlook from the interim report published on February 1, 2017, relating to the first quarter of 2017
Demand is expected to be slightly improved compared with the fourth quarter of 2016, 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 1:00 p.m. CET on April 27, 2017.

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