Interim report July–September 2024

Mixed performance

“Trelleborg’s third quarter was marked by a trend in which some market segments and geographies, respectively, moved in different directions. Organic sales increased 1 percent and acquisitions contributed 2 percent while exchange rate effects impacted sales negatively by 3 percent. EBITA, excluding items affecting comparability, declined 2 percent, corresponding to a margin of 17.3 percent (17.6).

The quarter generally developed in line with our expectations. However, during the latter part of the period, the macroeconomic environment weakened, particularly affecting some industrial segments. This mainly impacted our deliveries to construction and agricultural machinery. In the aerospace industry, underlying demand remained at a good level.

Overall, net sales were on par with the preceding year. We benefited greatly from our flexible structure, which allowed the Group to quickly adjust and offset a somewhat weaker economic climate. Additional measures are planned for the fourth quarter. Despite the macroeconomic developments, all three business areas showed slight organic growth, which is a sign of strength in this context.

Organic sales in Trelleborg Industrial Solutions were somewhat higher despite a strong year-earlier period. Demand among the industrial market segments was varied, with primarily sales to LNG and larger infrastructure projects distinguishing themselves positively. By contrast, sales to the construction industry remained sluggish in both Europe and North America. The operating margin declined, due primarily to a favorable impact in the comparative period from extraordinary business related to the Panama Canal.

Performance in Trelleborg Medical Solutions was stable, with organic sales of polymer solutions largely unchanged in both Europe and North America. The previously announced acquisition of Baron Group was finalized a few weeks into the quarter, which resulted in a one-third increase in the business area’s sales while the operating profit increased by as much as two thirds. Integration of the acquisition has proceeded successfully and supported the improved margin. New capacity in several different geographic regions is being built up in the business area in order to meet an expected increase in demand in coming years.

Organic sales for Trelleborg Sealing Solutions increased marginally compared with the preceding year. Profitability was also reassuringly stable. Sales to the aerospace industry remained favorable, impacted only marginally by an ongoing strike in the industry. Deliveries to the automotive industry increased in Europe and Asia but declined in North America. In the general industry market segment, the weaker performers were primarily deliveries to construction vehicles and agricultural machinery in North America.

Substantial investments in the organization continues within a number of rapidly expanding market segments and are expected to have a positive effect in several dimensions in the long term. We can see favorable prospects for further growth through a stronger local presence. Our build-out of new production units continues in several geographic regions with good growth and cost structure. Examples are Costa Rica, Morocco, Vietnam and India. Additionally, we are expanding and upgrading several existing production units in, for example, in the US, Bulgaria and Malta.

External factors are continuing to create significant uncertainty regarding market developments moving forward. Meanwhile, we are highly confident in our ability to address the fluctuations in the market. Due to our leading market positions and our financial status, Trelleborg stands very strong. For the fourth quarter, our overall assessment is that demand will be slightly lower than in the third quarter of the year,” says Peter Nilsson, President and CEO.

Third quarter 2024 – continuing operations

• Net sales for the quarter were on par with the preceding year at SEK 8,442 M (8,458). Organic sales increased 1 percent compared with the preceding year, structural changes increased sales by 2 percent, while currency reduced sales by 3 percent compared with the preceding year.
• EBITA, excluding items affecting comparability, decreased 2 percent to SEK 1,464 M (1,487). The EBITA margin was 17.3 percent (17.6).
• EBITA, including items affecting comparability, amounted to SEK 1,391 M (1,376) for the quarter.
• Items affecting comparability for the quarter totaled SEK -73 M (-111) and pertained to restructuring costs.
• Earnings per share for continuing operations, excluding items affecting comparability, amounted to SEK 3.78 (4.19), down 10 percent. The decrease is mainly due to the fact that the comparison figure was positively impacted by interest income attributable to the Group’s net cash position at that time.
• For the Group as a whole, earnings per share were SEK 3.54 (3.84).
• Operating cash flow amounted to SEK 1,422 M (1,608), down 12 percent. This is due primarily to a higher rate of investment in new production facilities and changes in working capital.
• The cash conversion ratio for the most recent 12-month period was 85 percent (99).
• The key figures in this report relate to continuing operations, unless otherwise stated.

Market outlook for the fourth quarter of 2024
Demand is expected to be slightly lower compared to the third quarter of 2024, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty.

Market outlook from the interim report published on July 18, 2024, relating to 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.

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