Interim report April–June 2024

“The Group continued to perform well in the second quarter, and it is pleasing to note that we returned to organic growth after a few quarters in which we reported a slight organic decline. We also delivered the highest operating profit (EBITA) to date for a single quarter.

Organic sales increased 1 percent year-on-year. EBITA, excluding items affecting comparability, increased 2 percent, and the corresponding margin improved to 18.4 percent (18.0).

Organic sales for Trelleborg Industrial Solutions slowed marginally. Sales to the construction industry are still weak in most geographical markets, while demand within several industrial segments remains at a lower level. However, project transactions for LNG-related solutions and deliveries to customers in renewable energy continued to grow significantly. Sales of solutions to major infrastructure projects also performed well. Deliveries to automotive manufacturers continued to grow. Finnish company BP-Tech Group was acquired during the period, and its sealing solutions complement our offering well in the rapidly growing pipe repair segment.

Organic sales for Trelleborg Medical Solutions increased a couple of percentage points. Sales to the North American medtech market performed well, primarily in the latter part of the period. Although customers continued to adjust their inventories during the quarter, this activity is considered to have eased compared to the beginning of the year. Accordingly, the outlook for the autumn is slightly more positive. We finalized the acquisition of Baron Group after the end of the quarter. This acquisition strengthens both the business area’s application expertise and manufacturing capacity. It provides a platform for continued growth and positions us as a global partner to producers of a variety of medical devices.

Trelleborg Sealing Solutions reported a solid increase in organic sales. In contrast to the preceding year, the absence of the Easter holiday in the second quarter contributed to this positive trend. Organic sales to the general industry declined slightly, though development in Asia was positive. Deliveries to the automotive industry increased across all regions, while sales to the aerospace industry continued to grow significantly. During the quarter, we finalized the acquisition of South Korean MNE Group, which manufactures precision seals for semiconductor production equipment.

During the quarter, we decided to invest in a new production facility in Morocco, focusing on sealing solutions for the aerospace industry. The new facility will establish a local presence for several customers in the country while increasing capacity to meet the industry’s strong global growth.

The share buy-back program will continue following the authorization granted by the Annual General Meeting. We are now in our third year of buying back shares via the stock market. Since we cancel these acquired shares, the number of shares in circulation decreases, thus resulting in higher earnings per share. Earnings per share for continuing operations increased a full 17 percent during the quarter. We consider the repurchase program to be an effective way of transferring value to shareholders, and it serves as an excellent supplement to our operational efforts to improve the Group’s profitability and capital structure.

The Group’s order intake is solid and suggests a more positive performance moving forward. However, the picture being painted is not clear-cut, as our market segments and geographies are developing in slightly different directions.

We remain committed to our aim of increasing the Group’s profitability. Our margin target of 20 percent is within reach as the markets improve and the synergies from previous acquisitions are realized according to plan. Our general assessment of the current situation is that demand in the third quarter will be somewhat higher than in the second quarter,” says Peter Nilsson, President and CEO.

Second quarter 2024 – continuing operations

• Net sales for the quarter were on par with the preceding year at SEK 8,711 M (8,696). Organic sales increased by 1 percent compared with the preceding year, structural changes reduced sales by 1 percent, and currency was unchanged compared with the preceding year.
• EBITA, excluding items affecting comparability, increased 2 percent to SEK 1,599 M (1,563). The EBITA margin was 18.4 percent (18.0). Earnings were the best to date for a single quarter.
• Operating cash flow amounted to SEK 1,190 M (1,585), down 25 percent. This is due primarily to a higher rate of investment and a greater need for working capital driven by increased demand. The cash conversion ratio for the most recent 12-month period was 88 percent (88).
• Items affecting comparability for the quarter totaled SEK -111 M (-194) and pertained to restructuring costs.
• EBITA, including items affecting comparability, amounted to SEK 1,488 M (1,369) for the quarter.
• Earnings per share for continuing operations, excluding items affecting comparability, totaled SEK 4.49 (4.71), down 5 percent attributable to non-recurring financial income (SEK 173 M after tax) that impacted earnings per share for the preceding year by SEK 0.68.
• For the Group as a whole, earnings per share were SEK 4.14 (27.67). The comparable figure in the year-earlier period included a contribution of SEK 24.12 from discontinuing operations. Discontinuing operations included capital gains attributable to the divestment of the Group’s tire and printing blanket operations.
• The key figures in this report relate to continuing operations, unless otherwise stated.

Market outlook for the third quarter of 2024
Demand is expected to be somewhat higher compared to the second quarter of 2024, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty. For further information, refer to page 12.

Market outlook from the interim report published on April 24, 2024, relating to the second quarter of 2024
Demand is expected to be on a par with the first quarter of 2024, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty.

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