Interim report July-September 2016

"Advancing our positions"

“After an eventful second quarter, the third quarter is the first one that we are now working in the new structure. We have divested Vibracoustic and CGS is included for the first time for a full quarter. We have advanced our positions and have a good structure for the future.

Trelleborg reported an increasing operating profit and sustained its margin at the same high level as in the strong third quarter of last year. Sales rose by 18 percentage points compared with the preceding year, predominantly driven by the acquisition of CGS in addition to other bolt-on acquisitions. EBIT excluding comparable items increased by 15 percent.

We achieved these favorable results through our focus on securing leading market positions and effective cost control in an environment distinguished by a continued weak trend for several market segments. Offshore oil & gas was the main factor underlying the fall-off in organic sales, at the same time as a more positive trend was noted for our aerospace and automotive-related operations. Organic sales were lower year on year, but slightly better than in the preceding quarter.

In historical terms, the second half year is a seasonally weaker period due to our customers’ purchasing patterns and vacation periods. Now that CGS is included for the first time for a full quarter, we can see that this seasonal pattern has been accentuated.

We are now working to integrate CGS and other acquisitions in a long-term, sustainable and structurally appropriate manner. Naturally, these activities affect both sales and earnings during a period as we build the platform for the future. I would like to emphasis once again that Trelleborg’s focus is always on the end result, sometimes at the expense of short-term quarterly figures.

During the quarter, we signed an agreement to acquire four companies which, combined, will contribute just under SEK 900 M to our sales on an annual basis. These acquisitions strengthen and complement us in niches where we have ambitions to grow and they should be perceived as building blocks for the establishment of leading market positions in already focused segments.

We are particularly pleased with the acquisition of Schwab in industrial antivibration and the fact that we successfully completed a number of exciting bolt-on acquisitions in Trelleborg Sealing Solutions. Our strategy continues to primarily rest on organic growth initiatives, and thus bolt-on acquisitions should be viewed as a complement to this strategy.

The trend in several segments remains subdued in most markets, primarily offshore oil & gas, but also heavy general industry and agriculture. As previously, our growth is instead being driven by other segments, such as the automotive and aerospace industries. Our assessment is that the trend in agricultural markets, albeit clearly weaker than in the preceding year, is starting to plateau at a low level.

Market outlooks are associated with a high degree of uncertainty. However, our general assessment is that demand for the fourth quarter will be on a par with the third quarter. As in the past, we are carefully monitoring economic developments and continue to maintain a high level of preparedness to manage fluctuating market conditions,” says Peter Nilsson, President and CEO.

Third quarter
Net sales for the third quarter of 2016 amounted to SEK 7,072 M (5,975). Organic sales declined by 5 percent, mainly as a result of the foreseen downturn in deliveries to the oil & gas segment. The effects of exchange rate movements on sales were negative 1 percent.

Effects of structural changes made a positive contribution of 24 percent, where the acquisition of CGS accounts for the main part of the increase.

EBIT, excluding items affecting comparability, rose by 15 percent to SEK 915 M (798), which was the Group’s highest result to date for a quarter and equivalent to an EBIT margin of 12.9 percent (13.4).

Items affecting comparability for the quarter amounted to an expense of SEK 51 M (expense: 109).

Earnings per share for continuing operations totaled SEK 2.33 (1.80), up 29 percent.

Operating cash flow amounted to SEK 1,066 M (766), up 39 percent.

Discontinuing operations
A payment of SEK 6.2 billion was received in the third quarter related to the divestment of Vibracoustic. The corresponding amount was recognized as a financial receivable in the second quarter.  

Market outlook for the fourth quarter of 2016
Demand is expected to be on a par with the third quarter of 2016, adjusted for seasonal variations.

Market outlook from the interim report published on July 19, 2016, relating to the third quarter of 2016
Demand is expected to be on a par with, or slightly weaker, than the second 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 7:45 am CET on October 25, 2016.

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