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Trelleborg Interim / Quarterly Report 2019
2985_10-q_2019-04-26_3c9a4b75-5123-4614-97df-d6f2e5a1d1a7.pdf
Interim / Quarterly Report
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Interim report January–March 2019
A decent start to the year
- Net sales for the first quarter of 2019 rose 9 percent to SEK 9,381 M (8,577).
- Organic sales increased 1 percent, both for the Group in its entirety and excluding project deliveries.
- EBIT, excluding items affecting comparability, amounted to SEK 1,295 M (1,291), which was equivalent to an EBIT margin of 13.8 percent (15.1). EBIT was the highest to date in a single quarter for the Group.
- Items affecting comparability for the quarter were a negative SEK 20 M (neg: 18) and pertained to restructuring costs in line with earlier communications.
- Earnings per share, excluding items affecting comparability, totaled SEK 3.25 (3.41). For the Group in its entirety, earnings per share amounted to SEK 3.14 (3.36).
- Operating cash flow amounted to SEK 179 M (408). The cash conversion ratio for the most recent 12-month period declined to 70 percent (12 months 2018: 74), impacted by a higher level of capital expenditure and somewhat higher working capital.
| SEK M | Q1 2019 1 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 9,381 | 8,577 | 9 | 34,809 | 34,005 |
| Organic sales, % | 1 | 4 | 3 | ||
| EBITA, excluding items affecting comparability | 1,382 | 1,365 | 1 | 5,020 | 5,003 |
| EBITA-margin, % | 14.7 | 15.9 | 14.4 | 14.7 | |
| EBIT, excluding items affecting comparability | 1,295 | 1,291 | 0 | 4,698 | 4,694 |
| EBIT-margin, % | 13.8 | 15.1 | 13.5 | 13.8 | |
| Items affecting comparability | -20 | -18 | -178 | -176 | |
| EBIT | 1,275 | 1,273 | 0 | 4,520 | 4,518 |
| Profit before tax | 1,155 | 1,211 | -5 | 4,180 | 4,236 |
| Net profit, Group | 852 | 910 | -6 | 3,132 | 3,190 |
| Earnings per share, SEK | |||||
| Excluding items affecting comparability 2 | 3.25 | 3.41 | -5 | 12.18 | 12.34 |
| Group | 3.14 | 3.36 | -7 | 11.55 | 11.77 |
| Operating cash flow Cash conversion ratio R12, % |
179 | 408 | -56 | 3,266 70 |
3,495 74 |
1Q1 2019 was impacted by recognition of leases in accordance to IFRS 16.
2 Earnings per share have been adjusted referring to items affecting comparability after tax. Q1 2019 and full-year 2018 figures have also been adjusted for costs attributable to the US Tax Reform.
to the year A decentstart
"Trelleborg started the year with the highest EBIT to date for a single quarter. Despite that, we are not satisfied with our performance, as our operating margin declined during the period. Some of our operations were burdened by sales mix and certain units lagged behind in compensating for increased costs. However, it is important to note that both the economy as a whole and our own business activity remain at a generally high level. Order bookings continued to trend positively during the quarter, although certain market segments are displaying a more modest organic trend year on year.
Sales increased 9 percent, of which organic sales contributed 1 percentage point and structural growth 2 percentage points. During the quarter, the Group's organic growth slowed compared with the preceding period, in particular, there was a reduction in business from automotive-related customers.
Operating cash flow was mainly impacted by a higher rate of investment and higher seasonal working capital compared with the preceding year. We assess that cash flow will normalize moving forward.
Our largest business area, Trelleborg Sealing Solutions, registered unchanged organic sales, but with distinct differences between the various segments. Sales to aerospace were strong, at the same time as there was a downturn in sales to the automotive industry. Sales to general industry were more stable, albeit with some geographic differences. Within the business area, we continue to add resources to enable long-term growth in several segments.
Organic sales for our tire operation performed favorably, but earnings were negatively impacted by the sales mix and some imbalance between raw materials and sales prices during the quarter.
Trelleborg Industrial Solutions continues to display a favorable growth rate, and most market segments developed in a positive direction. As earlier forecast, profitability was still impacted by inefficiency in a Czech production unit. Intensive efforts are under way to improve the situation.
The delivery situation in the offshore oil & gas operation remained difficult during the quarter, but at the same time, we are seeing both market activity and order bookings continuing to increase. The business area is expected to improve its earnings during the quarters ahead, and our forecast of positive earnings in the latter part of the year stands firm.
A few acquisitions were also completed during the quarter and I particularly want to highlight Sil-Pro, which complements and broadens Trelleborg's existing offerings in healthcare & medical. Through a number of acquisitions, we have built a competitive platform in this market segment and we have now achieved a critical mass, in which global organic initiatives will increase further in scope moving forward.
In addition to acquisitions, the investments in our operations continued at an historically high level, which is aimed at strengthening our leading market positions and creating an improved platform for future growth. One example of this is that, during April, we opened a new state-of-the-art production facility in Ohio, in the U.S., where the operations of three facilities were consolidated into a shared, efficient unit. We are also continuing to position ourselves geographically, with an example of this being the establishment of another facility in India during the quarter.
During the period, we extended our syndicated credit facility, which constitutes the majority of our long-term funding, and we are thus well-financed on competitive terms for the foreseeable future.
Although our business environment is dominated by extensive uncertainty, our overall assessment is that the demand for our products and solutions will move laterally next quarter. We monitor developments continuously and stand prepared to manage our various operations according to varied levels of demand."
Peter Nilsson, President and CEO
MARKET OUTLOOK FOR THE SECOND QUARTER 2019
Demand is expected to be on a par with the first quarter of 2019, adjusted for seasonal variations.
Market outlook from the interim report published on February 13, 2019, relating to the first quarter of 2019 Demand is expected to be on a par with, or somewhat lower than, the fourth quarter of 2018, adjusted for seasonal variations.
NET SALES AND RESULT
| SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 9,381 | 8,577 | 9 | 34,809 | 34,005 |
| Change total, % | 9 | 3 | 8 | ||
| Organic sales, % | 1 | 4 | 3 | ||
| Structural change, % | 2 | 0 | 1 | ||
| Currency effects, % | 6 | -1 | 4 | ||
| EBIT, excluding items affecting comparability | 1,295 | 1,291 | 0 | 4,698 | 4,694 |
| EBIT-margin, % | 13.8 | 15.1 | 13.5 | 13.8 | |
| Items affecting comparability | -20 | -18 | -178 | -176 | |
| EBIT | 1,275 | 1,273 | 0 | 4,520 | 4,518 |
| Financial income and expenses | -120 | -62 | -94 | -340 | -282 |
| Profit before tax | 1,155 | 1,211 | -5 | 4,180 | 4,236 |
| Taxes | -303 | -301 | -1 | -1,048 | -1,046 |
| Net profit, Group | 852 | 910 | -6 | 3,132 | 3,190 |
| Earnings per share, SEK | |||||
| Excluding items affecting comparability 1 | 3.25 | 3.41 | -5 | 12.18 | 12.34 |
| Group | 3.14 | 3.36 | -7 | 11.55 | 11.77 |
¹ Earnings per share have been adjusted referring to items affecting comparability after tax. Q1 2019 and full-year 2018 figures have also been adjusted for costs attributable to the US Tax Reform.
Net sales for the first quarter of 2019 amounted to SEK 9,381 M (8,577). Organic sales increased 1 percent during the quarter. Structural changes contributed 2 percent. Exchange rate effects accounted for a positive 6-percent impact on sales compared with the year-earlier period.
Excluding project deliveries¹, the Group's organic sales increased 1 percent year on year. Organic sales excluding project deliveries rose 3 percent in Western Europe, while they declined 3 percent in the rest of Europe. In the North American market, organic sales rose 3 percent, excluding project deliveries. In South and Central America, organic sales, excluding project deliveries, declined 2 percent, as in Asia and other markets, where the decline was also 2 percent.
EBIT, excluding items affecting comparability, totaled SEK 1,295 M (1,291), corresponding to a margin of 13.8 percent (15.1). EBIT is the highest to date for the Group in a single quarter.
The total exchange rate effect on EBIT, excluding items affecting comparability, from the translation of foreign subsidiaries, had a positive impact of SEK 53 M on earnings compared with the year-earlier period.
An interest expense for leases was recognized for 2019 as a financial expense in accordance with IFRS 16, which is a difference compared to the preceding year, when this was included in lease expenses for operating leases. Accordingly, EBIT increased SEK 20 M compared with the preceding year.
The quarter was impacted by items affecting comparability of negative SEK 20 M (neg: 18), which pertained to restructuring costs in its entirety.
EBIT, including items affecting comparability, amounted to SEK 1,275 M (1,273) for the quarter.
¹ Project deliveries refer to the whole of Trelleborg Offshore & Construction and minor parts of Trelleborg Industrial Solutions operations. Overall, project deliveries account for less than 10 percent of the Group's net sales.
The net financial expense was SEK 120 M (expense: 62), impacted by somewhat higher interest rates, negative exchange rate differences of SEK 24 M and effects from interest expenses on leases recognized in accordance with IFRS 16 of SEK 20 M. In addition, interest expenses from pension liabilities, which are classified as financial items as of 2019, impacted the financial net negatively in an amount of SEK 4 M. Net interest in relation to net debt was 2.3 percent (2.0), excluding effects from leases and pension liabilities.
Net profit for the Group totaled SEK 852 M (910). The tax rate for the quarter for the Group amounted to 26 percent (25). Excluding items affecting comparability, the underlying tax rate was 25 percent (25).
Earnings per share, excluding items affecting comparability, for the first quarter totaled SEK 3.25 (3.41). For the Group in total, earnings per share amounted to SEK 3.14 (3.36).
CASH FLOW AND NET DEBT
| Net debt, opening balance -10,499 -9,593 -9,593 Operating cash flow 179 408 3,495 Cash impact from items affecting comparability -61 -65 -263 Financial items -165 -71 -245 Paid tax -235 -276 -919 Free cash flow -282 -4 2,068 Acquisitions -1,099 -116 -440 Disposed operations - 4 4 Dividend - equity holders of the parent company - - -1,220 Sum net cash flow -1,381 -116 412 Financial liability for dividend – Parent Company shareholders 1 -1,288 - - Exchange rate differences -179 -366 -797 Lease liability according to IFRS 16 2 -2,419 - - Pension liability 2 - -579 -521 Net debt, closing balance -15,766 -10,654 -10,499 Of which: Pension liability 2 -529 -579 -521 |
|---|
| Lease liability according to IFRS 16 2 -2,419 - - |
| Net debt, excluding effect of lease and pension liability -12,818 -10,075 -9,978 |
| Debt/equity ratio, % |
| Group 52 36 35 |
| Group, excluding effect of lease and pension liability 42 34 33 |
| Net debt/EBITDA 3 |
| Group 4 2.5 1.9 1.8 |
| Group, excluding effect of lease and pension liability 2.2 1.8 1.7 |
¹ Resolved, but not distributed dividend.
2Net debt including, as of 2019, lease liability in accordance with IFRS 16 and pension liability. Accordingly, comparative figures were adjusted by SEK 579 M for Q1 2018 and by SEK 521 M for full-year 2018 for pension liabilities.
3EBITDA including items affecting comparability.
4 EBITDA for 2019 adjusted to reflect full-year impact of the effects of IFRS 16.
Operating cash flow for the quarter was lower year on year and amounted to SEK 179 M (408), mainly affected by a somewhat higher rate of capital expenditure and higher seasonal working capital, primarily pertaining to accounts receivable. The cash conversion ratio for the most recent 12 month period was 70 percent (12 months 2018: 74).
Free cash flow amounted to negative SEK 282 M (neg: 4). Net cash flow, after the impact of acquisitions, amounted to negative SEK 1,381 M (neg: 116) during the quarter.
Net debt amounted to SEK 9,978 M at the beginning of the year. The opening balance was then adjusted due to the reclassification of the pension liability from capital employed to net debt in the negative amount of SEK 521 M.
Closing net debt was impacted by the effects of the introduction of IFRS 16, net cash flow for the year as well as negative exchange rate differences. Net cash flow was impacted by the acquisition of Sil-Pro in the U.S. (see also page 6) among other factors. Net debt also includes an accrued dividend of SEK 1,288 M resolved at the Annual General Meeting on March 27 with payment taking place on April 3, 2019. The first quarter of 2018 was not impacted by the dividend, as this was resolved and distributed in the second quarter. Closing net debt at the end of the quarter amounted to SEK 15,766 M.
The debt/equity ratio, excluding the impact of leases recognized according to IFRS 16 and pension liabilities, amounted to 42 percent (34) at the end of the period. Including these items, the debt/equity ratio was 52 percent (36).
Net debt in relation to EBITDA, excluding the impact of leases recognized in accordance with IFRS 16 and pension liabilities, amounted to 2.2 (1.8) at the end of the period. Including these items, the ratio amounted to 2.5 (1.9).
RETURN ON CAPITAL EMPLOYED AND RETURN ON EQUITY
| % | R12 2019 | R12 2018 | 12M 2018 |
|---|---|---|---|
| Return on capital employed 1 | |||
| Excluding items affecting comparability | 11.0 | 11.0 | 11.4 |
| Group | 10.6 | 9.8 | 11.1 |
| Return on equity 2 | |||
| Excluding items affecting comparability | 11.1 | 10.8 | 11.7 |
| Group | 10.5 | 9.2 | 11.1 |
1 Comparative figures for capital employed were adjusted due to reclassification of pension liability from capital employed to net debt. In addition, capital employed for 2019 was impacted by recognition of leases in accordance with IFRS 16.
2Equity for 2019 was affected by the resolved but not distributed dividend and a nonrecurring item attributable to IFRS 16.
Capital employed increased year on year to SEK 46,678 M (40,282), mainly impacted by higher working capital, acquisitions completed, investments and the effect of leases recognized in accordance with IFRS 16.
The return on capital employed, excluding items affecting comparability, was 11.0 percent (11.0).
Shareholders' equity for the Group at the close of the period amounted to SEK 30,352 M (30,126 at year-end). Equity for 2019 is impacted by resolved, unpaid dividends, and a nonrecurring item attributable to IFRS 16.
Equity per share amounted to SEK 112 (108). The equity/assets ratio was 52 percent (57). The total return on shareholders' equity for the Group was 10.5 percent (9.2).
Net sales, SEK M
SIGNIFICANT EVENTS DURING THE QUARTER
Completed acquisition of manufacturer of silicone
components. Trelleborg Sealing Solutions finalized the acquisition of Sil-Pro, LLC., a U.S.-based privately owned contract manufacturer of high-tolerance silicone and thermoplastic components. The acquisition complements and broadens Trelleborg's current offering in the healthcare & medical industry.
The company has its head office and production facility in Delano, Minnesota, in the U.S. Total sales amounted to about SEK 350 M in 2017. This bolt-on acquisition is part of Trelleborg's strategy to strengthen its positions in attractive market segments.
The transaction was consolidated as of January 2, 2019.
Press releases were published on August 6, 2018 and January 3, 2019.
Long-term financing. Trelleborg AB and Trelleborg Treasury AB jointly concluded an agreement regarding an extension of the existing syndicated credit facility established in 2013. The extended credit facility totaling EUR 450 M and USD 625 M, equivalent to a total of approximately SEK 10,460 M, has a tenor of five years and will mature in February 2023, with an option of extension thereafter for a maximum of two further years.
A total of 13 financial institutes from nine countries are participating in the credit facility. Commerzbank Aktiengesellschaft, DNB, Nordea, SEB and UniCredit Bank Austria AG acted as Co-ordinating Bookrunners.
SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD
No significant events were reported after the close of the period.
OTHER
Effects of Brexit and trade tariffs. All of the business areas have analyzed the effects of Brexit and other current trade barriers for customers and suppliers regarding the supply chain and tariff charges. The conclusion is that the Group overall is well prepared to manage various scenarios and any directly negative effects for the Group are expected to be limited.
However, it is not possible to estimate indirect negative effects of Brexit, and other current trade barriers, due to the amount of variables such an assessment would include.
RISK MANAGEMENT
Trelleborg serves a broad range of customers in a variety of market segments and niches. The business has a wide geographic spread. The Group has operations in about 50 countries, sales are conducted in just over 150 countries worldwide and manufacturing operations are carried out at more than 100 production sites. The business is diversified, which provides Trelleborg with an effective underlying risk spread.
Demand for the Group's products and solutions largely moves in line with fluctuations in global industrial production. Trelleborg focuses on maintaining an exposure to its market segments that has a good balance between early and late cyclical industry, meaning general as well as capital-intensive industry, the demands from which often balance each other out. Seasonal effects occur in the various market segments,
particularly in the agricultural segment, which normally experiences higher demand for tires for agricultural machines during the first half of the year. For the Group, demand is usually higher in the first half of the year than in the second half of the year.
Trelleborg has identified the relevant areas based on strategic risks, operational risks, regulatory compliance risks and financial risks that may result in damage or loss with substantial impact on the entire Group and therefore justify management of the risk exposure at Group level.
For information regarding the Group's risks, risk exposure and risk management, refer to the latest Trelleborg Annual Report, www.trelleborg.com and the information published in this interim report.
Trelleborg, April 26, 2019 Board of Directors of Trelleborg AB (publ)
Trelleborg Coated Systems is a leading global supplier of unique customer solutions for polymer-coated fabrics deployed in several industrial applications.
| Excluding items affecting comparability, SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 986 | 890 | 11 | 3,747 | 3,651 |
| Change total, % | 11 | -2 | 8 | ||
| Organic sales, % | -3 | -4 | -2 | ||
| Structural change, % | 7 | 3 | 7 | ||
| Currency effects, % | 7 | -1 | 3 | ||
| EBIT | 119 | 113 | 5 | 429 | 423 |
| EBIT, % | 12.0 | 12.7 | 11.4 | 11.6 |
Organic sales declined 3 percent year on year. Coated fabrics were unchanged compared with the year-earlier period, with weaker sales in Europe being offset by a stronger trend in Asia and an unchanged performance in North America. Printing blankets noted weaker organic sales in most major geographic markets.
EBIT increased as a result of acquisitions completed earlier. The EBIT margin declined somewhat year on year, primarily impacted by the sales mix. Exchange rate effects from the translation of foreign subsidiaries had a positive impact on earnings of SEK 7 M compared with the year-earlier period.
Integration of acquisitions. The preceding year's acquisitions in polyurethane coated fabrics led to organizational changes, with the new structure enabling enhanced development and expansion opportunities in several segments, niches and geographies.
Train bellows. The business area gained certification for coated fabrics used for fire resistant train bellows that are adapted to new, more demanding train standards.
Trelleborg Industrial Solutions is a leading supplier of polymer-based critical solutions in such industrial application areas as selected hose and sealing systems and antivibration solutions for rail vehicles, vessels and industrial equipment.
| Excluding items affecting comparability, SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 2,069 | 1,923 | 8 | 7,811 | 7,665 |
| Change total, % | 8 | 10 | 11 | ||
| Organic sales, % | 4 | 8 | 8 | ||
| Structural change, % | - | - | - | ||
| Currency effects, % | 4 | 2 | 3 | ||
| EBIT | 204 | 212 | -4 | 767 | 775 |
| EBIT, % | 9.8 | 11.0 | 9.8 | 10.1 |
Organic sales increased 4 percent year on year. The organic sales trend was positive in both Europe and Asia, but somewhat weaker in North America. Organic sales to general industry were mixed, while deliveries to the automotive industry and the oil and gas industry remained favorable. Sales to construction-related segments were positive compared with the year-earlier period.
EBIT and the EBIT margin continued to be negatively affected by inefficiencies in a Czech production unit, which have had a dampening effect on sales and earnings in parts of the business area. Exchange rate effects from the translation of foreign subsidiaries had a positive effect of SEK 3 M on earnings compared with the year-earlier period.
Joint venture in Malaysia. During the quarter, an agreement was signed to form a joint venture in Malaysia, which will manufacture and sell industrial hoses in composite materials.
Increased presence in India. Following the end of the period, an expanded production facility was opened in India for antivibration solutions mainly for the railway industry. As well as increased capacity, the investment will also entail improved distribution and reduced lead times for customers in the region.
New state-of-the-art facility in the US. The business area consolidated its sealing profiles operation in the U.S. and after the end of the period, opened a completely new production facility that has the capacity to address future growth opportunities in the aerospace, construction and automotive industries.
Trelleborg Offshore & Construction is a leading global project supplier of polymer-based critical solutions deployed in highly demanding offshore oil & gas and infrastructure construction environments.
| Excluding items affecting comparability, SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 562 | 576 | -2 | 2,372 | 2,386 |
| Change total, % | -2 | -20 | -16 | ||
| Organic sales, % | -8 | -18 | -18 | ||
| Structural change, % | - | - | - | ||
| Currency effects, % | 6 | -2 | 2 | ||
| EBIT | -42 | -34 | -24 | -173 | -165 |
| EBIT, % | -7.5 | -5.9 | -7.3 | -6.9 |
Organic sales declined 8 percent year on year. The decline was driven by fewer project transactions primarily in the offshore oil & gas market segment. Organic sales were also slightly negative in the infrastructure segment.
EBIT and the EBIT margin declined year on year, due to fewer project deliveries, which resulted in under-absorption in production. The order book at the end of the quarter indicates continued improvement for the business area during the second half of the year. Exchange rate effects from the translation of foreign subsidiaries had a negative impact on EBIT of SEK 3 M compared with the year-earlier period.
Deliveries to wind farms. During the quarter, the business area secured a contract for cable protection for an offshore wind farm off the coast of Portugal, with delivery during the year.
Smart port solutions. The business area signed a contract with Port of Långnäs, on Åland, for the delivery of vacuum technology that enables faster and safer berthing processes. The same solution was recently successfully installed in Melbourne, Australia.
Tunnel seals in China. A significant order for seals to an immersed tunnel was secured in China, an application where Trelleborg is a global leading supplier.
Trelleborg Sealing Solutions is a leading global supplier of polymer-based critical sealing solutions deployed in demanding general industry, light vehicle and aerospace environments.
| Excluding items affecting comparability, SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 3,118 | 2,800 | 11 | 11,367 | 11,049 |
| Change total, % | 11 | 7 | 11 | ||
| Organic sales, % | 0 | 8 | 7 | ||
| Structural change, % | 4 | 1 | 1 | ||
| Currency effects, % | 7 | -2 | 3 | ||
| EBIT | 724 | 684 | 6 | 2,599 | 2,559 |
| EBIT, % | 23.2 | 24.4 | 22.9 | 23.2 |
.
Additional key ratios on pages 16 - 17
Organic sales were unchanged year on year. The organic sales trend was favorable in North America, but somewhat weaker in both Europe and Asia. Deliveries to general industry were unchanged or somewhat weaker year on year. Organic sales to the automotive industry were negative during the quarter, with deliveries to Europe and Asia declining, while deliveries to North America were somewhat positive. Organic sales to the aerospace industry were strong in all geographic regions during the quarter.
EBIT improved as a result of increased sales and implemented acquisitions. The EBIT margin decreased somewhat year on year, primarily impacted by the acquired units and costs for market activities. Exchange rate effects from the translation of foreign subsidiaries had a positive impact of SEK 40 M on earnings compared with the year-earlier period.
Acquisition in healthcare & medical. During the quarter, the acquisition was completed of a manufacturer of high-tolerance silicone and thermoplastic components, see more on page 6. The acquisition, together with previous acquisitions, creates a competitive platform and critical mass for global organic initiatives in the segment going forward.
Seals for electrification. During the quarter, the business area launched new seals that are specially developed for electric vehicles. In addition to electric cars, the increased electrification of machines, tools, e-bikes and batteries is a focused segment for the business area.
Growth in chemicals transport. Earlier acquisitions in the rapidly growing sub segment for transportation of chemicals have laid the foundation for new sealing solutions for various transport methods, customer categories and geographies.
Trelleborg Wheel Systems is a leading global supplier of tires and complete wheels for agricultural machines, material handling and construction vehicles and two-wheeled vehicles.
| Excluding items affecting comparability, SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| Net sales | 2,773 | 2,505 | 11 | 9,956 | 9,688 |
| Change total, % | 11 | 8 | 9 | ||
| Organic sales, % | 3 | 4 | 2 | ||
| Structural change, % | 2 | 1 | 2 | ||
| Currency effects, % | 6 | 3 | 5 | ||
| EBIT | 351 | 368 | -5 | 1,238 | 1,255 |
| EBIT, % | 12.7 | 14.7 | 12.4 | 13.0 |
Organic sales increased 3 percent, compared with the yearearlier period. Organic sales of tires for agricultural machinery were positive during the quarter; the trend in both Europe and North America was positive, while organic sales had a weaker performance in Asia. Organic sales of tires for material handling vehicles and construction vehicles rose year on year, with healthy deliveries in Europe and North America, but weaker sales in Asia.
EBIT and the EBIT margin decreased mainly as a result of timing of price increases at the beginning of the year, but the situation improved at the end of the quarter. Exchange rate changes from the translation of foreign subsidiaries had a positive impact of SEK 7 M on earnings compared with the year-earlier period.
Italian acquisition. During the quarter, a distributor of agricultural tires in Italy was acquired, enabling the development of the business area's service concept for agricultural tires in Europe.
Loyalty program for agricultural tires. The business area launched its loyalty program in new markets during the quarter. The program rewards customers for the purchase of agricultural tires or participation in various types of training courses.
IoT in construction vehicles. A sensor-based smart wheel that monitors tire pressure and temperature of the tires in construction vehicles has been developed by the business area and was launched after the end of the period.
NOTES
This report has been prepared in accordance with IAS 34 Interim Financial Reporting and the applicable rules of the Swedish Annual Accounts Act. Disclosures in accordance with IAS 34.16A appear in addition to the financial reports and their accompanying notes also in other parts of the interim report. The Parent Company applies recommendation RFR 2, Accounting for Legal Entities of the Swedish Financial Reporting Board and Chapter 9 of the Swedish Annual Accounts Act, Interim Reports. The accounting policies applied by the Group and Parent Company correspond to the accounting policies applied in the preparation of the most recent annual report, with the exceptions presented below regarding IFRS 16.
New standards to be applied as of January 1, 2019
IFRS 16 Leases replaces IAS 17 Leases and will be applied as of January 1, 2019. The new standard entails that most leases will be recognized in the balance sheet, since the difference between operational leases and financial leases is being removed.
The Group assesses whether a contract is, or contains, a lease at the beginning of the year. The Group recognizes a right-of-use asset and a corresponding lease liability for all leases for which the Group is the lessee, except for short-term leases, (leases with a maximum term of 12 months) and for leases in which the underlying asset is of low value. For leases that meet the criteria of exemption rules, the Group recognizes lease payments straight-line over the term of the lease. The lease liability is initially recognized at the present value of the future lease payments that have not been paid at the starting date of the lease, discounted by an incremental borrowing rate that is set quarterly at Group level by country. Lease payments that are included in the measurement of the lease liabilities comprise the following:
- fixed payments, less any benefits in conjunction with the signing of the lease to be obtained,
- variable lease payments that are dependent on an index or a price, initially measured using an index or price on the start date,
- amounts expected to be paid by the lessee according to residual value guarantees,
- The redemption price for an option to buy if the lessee is reasonably certain to exercise such a possibility, and
- penalties arising from the termination of the lease if the term reflects that the lessee will exercise the possibility to terminate the lease.
Lease liabilities are included on the lines for interest-bearing liabilities in the statement of financial position and are recognized in subsequent periods by the liability being increased to reflect the effect of interest and reduced to reflect the effect of lease payments made. Lease liabilities are
restated by a corresponding adjustment of the right-of-use asset in accordance with the rules contained in the standard. The right-of-use asset is initially recognized at the value of the lease liability, with the addition of lease payments made on or before the initial date of the lease and initial direct payments. The right-of-use asset is recognized in subsequent periods at cost less amortization and impairment. If the Group incurs obligations for the dismantling of a leased asset, remediation of land or restoration and renovation of an asset to the state agreed in the contract, a provision is recognized for such obligations in accordance with IAS 37. Such provisions are included in the cost of the right-of-use asset insofar as they are not connected with the production of inventory. Right-of-use assets are amortized over their anticipated useful life, or if it is shorter, over the agreed lease term. If a lease transfers ownership rights at the end of the lease term or if the cost includes the probably exercise of a call option, the right-of-use asset is amortized over its useful life. Amortization commences on the start date of the lease. Right-of-use assets are included on the line for tangible assets in the statement of financial position. The Group applies the principles in IAS 36 for the impairment of right-of-use assets and recognizes this in the same manner as described in the policies for property, plant and equipment recognized in accordance with IAS 16. Variable lease payments that are not dependent on an index or price are not included in the measurement of lease liabilities and right-of-use assets. Such lease payments are recognized as a cost in operating profit/loss in the periods as they arise. The Group applies a practical exemption that entails that service components are not separated from the lease payments for leases that do not pertain to asset classes for office and production premises, unless this is specifically stated in the invoice.
The effects of opening balances for 2019 and earnings impact for the first quarter of 2019 are presented in the table below. For further description of transition effects and transition rules for the transition to IFRS 16, see Note 1 in the Group's 2018 Annual Report.
| SEK M | January 1, 2019 | SEK M | Q1 2019 |
|---|---|---|---|
| Impact on opening balance | Earnings impact, IFRS 16 | ||
| Right-of-use assets 1 | 2,295 | Amortization of right-of-use assets | -96 |
| Lease liabilities | 2,472 | Interest on lease liability | -20 |
| Equity | -138 | ||
| Deferred tax assets | 39 |
190% pertains to office and production premises.
This report has not been subject to a brief review by the company's auditor.
Condensed Income Statements
| Income Statements, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Net sales | 9,381 | 8,577 | 34,809 | 34,005 |
| Cost of goods sold | -6,320 | -5,730 | -23,638 | -23,048 |
| Gross profit | 3,061 | 2,847 | 11,171 | 10,957 |
| Selling expenses | -800 | -668 | -2,801 | -2,669 |
| Administrative expenses | -778 | -776 | -3,363 | -3,361 |
| Research and development costs | -152 | -133 | -584 | -565 |
| Other operating income/expenses | -37 | 18 | 274 | 329 |
| Profit from associated companies | 1 | 3 | 1 | 3 |
| EBIT, excluding items affecting comparability | 1,295 | 1,291 | 4,698 | 4,694 |
| Items affecting comparability | -20 | -18 | -178 | -176 |
| EBIT | 1,275 | 1,273 | 4,520 | 4,518 |
| Financial income and expenses | -120 | -62 | -340 | -282 |
| Profit before tax | 1,155 | 1,211 | 4,180 | 4,236 |
| Tax | -303 | -301 | -1,048 | -1,046 |
| Total net profit | 852 | 910 | 3,132 | 3,190 |
| - equity holders of the parent company | 852 | 910 | 3,132 | 3,190 |
| Earnings per share, SEK ¹ | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Excluding items affecting comparability 2 | 3.25 | 3.41 | 12.18 | 12.34 |
| Group | 3.14 | 3.36 | 11.55 | 11.77 |
¹ No dilution effects arose.
¹ Earnings per share have been adjusted referring to items affecting comparability after tax. Q1 2019 and full-year 2018 figures have also been adjusted for costs attributable to the US Tax Reform.
Number of shares
| End of period | 271,071,783 | 271,071,783 | 271,071,783 | 271,071,783 |
|---|---|---|---|---|
| Average number | 271,071,783 | 271,071,783 | 271,071,783 | 271,071,783 |
| Statements of comprehensive income, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Total net profit | 852 | 910 | 3,132 | 3,190 |
| Other comprehensive income | ||||
| Items that will not be reclassified to the income statement | ||||
| Reassessment of net pension obligation 1 | - | - | 49 | 49 |
| Income tax relating to components of other comprehensive income | - | - | -9 | -9 |
| Total | - | - | 40 | 40 |
| Items that may be reclassified to the income statement | ||||
| Cash flow hedges | -59 | 44 | -88 | 15 |
| Hedging of net investment | -295 | -561 | -354 | -620 |
| Translation difference | 1,085 | 1,590 | 888 | 1,393 |
| Income tax relating to components of other comprehensive income | 69 | 111 | 78 | 120 |
| Total | 800 | 1,184 | 524 | 908 |
| Other comprehensive income, net of tax | 800 | 1,184 | 564 | 948 |
| Total comprehensive income | 1,652 | 2,094 | 3,696 | 4,138 |
¹ Remeasurement is carried out in connection with preparation of the six-month and full-year financial statements and thereafter only in the event of significant changes.
| EBIT specification, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Excluding items affecting comparability: | ||||
| EBITDA | 1,755 | 1,614 | 6,118 | 5,977 |
| Depreciation, property, plant and equipment | -277 | -249 | -1,002 | -974 |
| Amortization of right-of-use assets | -96 | - | -96 | - |
| EBITA | 1,382 | 1,365 | 5,020 | 5,003 |
| Amortization, intangible assets | -87 | -74 | -322 | -309 |
| EBIT | 1,295 | 1,291 | 4,698 | 4,694 |
| Items affecting comparability | -20 | -18 | -178 | -176 |
| EBIT | 1,275 | 1,273 | 4,520 | 4,518 |
Condensed Balance Sheets
| Balance Sheets, SEK M | Mar 31 | Mar 31 | Dec 31 |
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Property, plant and equipment 1 | 13,282 | 9,703 | 10,612 |
| Goodwill | 20,203 | 18,862 | 19,100 |
| Other intangible assets | 5,268 | 5,063 | 5,013 |
| Participations in associated companies | 93 | 82 | 81 |
| Financial non-current assets | 52 | 51 | 67 |
| Deferred tax assets | 792 | 780 | 692 |
| Total non-current assets | 39,690 | 34,541 | 35,565 |
| Inventories | 6,510 | 5,649 | 6,142 |
| Current operating receivables | 8,166 | 7,429 | 6,657 |
| Current tax assets | 1,059 | 1,077 | 970 |
| Interest-bearing receivables | 164 | 297 | 74 |
| Cash and cash equivalents | 2,384 | 2,446 | 2,341 |
| Total current assets | 18,283 | 16,898 | 16,184 |
| Total assets | 57,973 | 51,439 | 51,749 |
| Equity | 30,352 | 29,302 | 30,126 |
| Interest-bearing non-current liabilites 1 | 12,369 | 9,715 | 9,367 |
| Other non-current liabilities | 136 | 53 | 99 |
| Pension obligations | 538 | 588 | 530 |
| Other provisions | 219 | 229 | 227 |
| Deferred tax liabilites | 1,103 | 849 | 944 |
| Total non-current liabilities | 14,365 | 11,434 | 11,167 |
| Interest-bearing current liabilities 1 | 5,418 | 3,105 | 3,028 |
| Current tax liabilites | 1,160 | 1,262 | 1,098 |
| Other current liabilites | 6,360 | 5,893 | 6,041 |
| Other provisions | 318 | 443 | 289 |
| Total current liabilities | 13,256 | 10,703 | 10,456 |
| Total equity and liabilities | 57,973 | 51,439 | 51,749 |
1 Includes leases according to IFRS 16 as of 2019.
| Specification of changes in equity, SEK M | Mar 31 | Mar 31 | Dec 31 |
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Opening balance, January 1 | 30,126 | 27,216 | 27,216 |
| Non-recurring item relating to IFRS 9 | - | -8 | -8 |
| Non-recurring item relating to IFRS 16 | -138 | - | - |
| Total net profit | 852 | 910 | 3,190 |
| Other comprehensive income | 800 | 1,184 | 948 |
| Dividend 1 | -1,288 | - | -1,220 |
| Closing balance | 30,352 | 29,302 | 30,126 |
1 2019 includes resolved, but not distributed dividends.
| Specification of capital employed, SEK M | Mar 31 2019 |
Mar 31 2018 |
Dec 31 2018 |
|---|---|---|---|
| Total assets | 57,973 | 51,439 | 51,749 |
| Less: | |||
| Interest-bearing receivables | 199 | 334 | 119 |
| Cash and cash equivalents | 2,384 | 2,446 | 2,341 |
| Tax assets | 1,851 | 1,857 | 1,662 |
| Operating liabilities | 6,861 | 6,520 | 6,509 |
| Capital employed 1 | 46,678 | 40,282 | 41,118 |
1 Comparative figures for capital employed were adjusted due to reclassification of pension liability from capital employed to net debt. In addition, capital employed for 2019 was impacted by recognition of leases in accordance with IFRS 16.
Cash-flow statements
| Cash flow statements, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Operating activities | ||||
| EBIT incl part in associated companies | 1,275 | 1,273 | 4,520 | 4,518 |
| Adjustments for items not included in cash flow from operating activities: | ||||
| Depreciation, property, plant and equipment 1 | 370 | 248 | 1,148 | 1,026 |
| Amortization, intangible assets | 87 | 74 | 322 | 309 |
| Impairment losses, property, plant and equipment | 3 | 1 | -35 | -37 |
| Impairment losses, intangible assets | 0 | 0 | 0 | 0 |
| Dividend from associated companies | - | 1 | 1 | 2 |
| Participations in associated companies and other non cash-flow affecting items | -3 | -6 | -6 | -9 |
| Interest received and other financial items | 8 | 8 | 52 | 52 |
| Interest paid and other financial items | -173 | -79 | -391 | -297 |
| Taxes paid | -235 | -276 | -878 | -919 |
| Cash flow from operating activities before changes in working capital | 1,332 | 1,244 | 4,733 | 4,645 |
| Cash flow from changes in working capital | ||||
| Change in inventories | -112 | -73 | -502 | -463 |
| Change in operating receivables | -1,206 | -902 | -447 | -143 |
| Change in operating liabilities | 126 | -25 | 181 | 30 |
| Change in items affecting comparability | -41 | -47 | -96 | -102 |
| Cash flow from operating activities | 99 | 197 | 3,869 | 3,967 |
| Investing activities | ||||
| Acquisitions | -1,099 | -116 | -1,423 | -440 |
| Disposed/discontinuing operations | - | 4 | 0 | 4 |
| Capital expenditure, property, plant and equipment | -268 | -193 | -1,897 | -1,822 |
| Capital expenditure, intangible assets | -30 | -23 | -128 | -121 |
| Sale of non-current assets | 7 | 15 | 36 | 44 |
| Cash flow from investing activities | -1,390 | -313 | -3,412 | -2,335 |
| Financing activities | ||||
| Change in interest-bearing investments | -90 | 548 | 132 | 770 |
| Change in interest-bearing liabilities 1, 2 | -198 | -158 | -705 | -665 |
| New/utilized loans | 1,678 | 1,885 | 2,530 | 2,737 |
| Amortized loans | -148 | -1,747 | -1,350 | -2,949 |
| Dividend - equity holders of the parent company | - | - | -1,220 | -1,220 |
| Cash flow from financing activities | 1,242 | 528 | -613 | -1,327 |
| Cash flow for the period | -49 | 412 | -156 | 305 |
| Cash and cash equivalents | ||||
| At beginning of the period | 2,341 | 1,994 | 2,446 | 1,994 |
| Exchange rate differences | 92 | 40 | 94 | 42 |
| Cash and cash equivalents at end of period | 2,384 | 2,446 | 2,384 | 2,341 |
1Includes leases according to IFRS 16 as of 2019.
22019 includes resolved, but not distributed dividends.
Key figures
| SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Net sales | ||||
| Trelleborg Coated Systems | 986 | 890 | 3,747 | 3,651 |
| Trelleborg Industrial Solutions | 2,069 | 1,923 | 7,811 | 7,665 |
| Trelleborg Offshore & Construction | 562 | 576 | 2,372 | 2,386 |
| Trelleborg Sealing Solutions | 3,118 | 2,800 | 11,367 | 11,049 |
| Trelleborg Wheel Systems | 2,773 | 2,505 | 9,956 | 9,688 |
| Group items/Eliminations | -127 | -117 | -444 | -434 |
| Total | 9,381 | 8,577 | 34,809 | 34,005 |
| EBIT, excluding items affecting comparability | ||||
| Trelleborg Coated Systems | 119 | 113 | 429 | 423 |
| Trelleborg Industrial Solutions | 204 | 212 | 767 | 775 |
| Trelleborg Offshore & Construction | -42 | -34 | -173 | -165 |
| Trelleborg Sealing Solutions | 724 | 684 | 2,599 | 2,559 |
| Trelleborg Wheel Systems | 351 | 368 | 1,238 | 1,255 |
| Group items | -61 | -52 | -162 | -153 |
| Total | 1,295 | 1,291 | 4,698 | 4,694 |
| EBIT %, excluding items affecting comparability | ||||
| Trelleborg Coated Systems | 12.0 | 12.7 | 11.4 | 11.6 |
| Trelleborg Industrial Solutions | 9.8 | 11.0 | 9.8 | 10.1 |
| Trelleborg Offshore & Construction | -7.5 | -5.9 | -7.3 | -6.9 |
| Trelleborg Sealing Solutions | 23.2 | 24.4 | 22.9 | 23.2 |
| Trelleborg Wheel Systems | 12.7 | 14.7 | 12.4 | 13.0 |
| Total | 13.8 | 15.1 | 13.5 | 13.8 |
| Net sales per market, share and organic growth, % | Q1 2019 | Q1 2018 | 12M 2018 |
|---|---|---|---|
| Western Europe (48%) | 3 | 4 | 4 |
| Other Europe (10%) | -3 | -2 | -3 |
| North America (22%) | 2 | 2 | 3 |
| South and Central America (4%) | -12 | 13 | 21 |
| Asia and other markets (16%) | -1 | 5 | 0 |
| Total (100% refer to share 2018) | 1 | 4 | 3 |
| Net sales per market excluding project related ¹, organic growth, % | Q1 2019 | Q1 2018 | 12M 2018 |
|---|---|---|---|
| Western Europe | 3 | 6 | 4 |
| Other Europe | -3 | -5 | -4 |
| North America | 3 | 6 | 6 |
| South and Central America | -2 | 8 | 19 |
| Asia and other markets | -2 | 9 | 6 |
| Total | 1 | 5 | 4 |
¹ Project deliveries refer to the whole of Trelleborg Offshore & Construction and minor parts of Trelleborg Industrial Solutions' operations.
| SEK M | Q1 2019 | Q1 2018 | Change, % | R12 2019 | 12M 2018 |
|---|---|---|---|---|---|
| EBITDA, operating profit before depreciation | 1,755 | 1,614 | 9 | 6,118 | 5,977 |
| Capital expenditure | -298 | -216 | -38 | -2,025 | -1,943 |
| Sold non-current assets | 7 | 15 | 36 | 44 | |
| Amortization of lease liabilities | -90 | - | -90 | - | |
| Change in working capital | -1,192 | -1,000 | -768 | -576 | |
| Dividend from associated companies | - | 1 | 1 | 2 | |
| Non cash-flow affecting items | -3 | -6 | -6 | -9 | |
| Operating cash flow | 179 | 408 | -56 | 3,266 | 3,495 |
TRELLEBORG AB – FIRST QUARTER 2019
| SEK M | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
|---|---|---|---|---|---|---|---|---|---|
| Net sales | |||||||||
| Trelleborg Coated Systems | 986 | 959 | 913 | 889 | 890 | 812 | 768 | 885 | 912 |
| Trelleborg Industrial Solutions | 2,069 | 1,890 | 1,870 | 1,982 | 1,923 | 1,706 | 1,609 | 1,813 | 1,756 |
| Trelleborg Offshore & Construction | 562 | 649 | 558 | 603 | 576 | 741 | 647 | 735 | 718 |
| Trelleborg Sealing Solutions | 3,118 | 2,622 | 2,787 | 2,840 | 2,800 | 2,349 | 2,388 | 2,596 | 2,623 |
| Trelleborg Wheel Systems | 2,773 | 2,320 | 2,280 | 2,583 | 2,505 | 2,198 | 1,992 | 2,360 | 2,328 |
| Group items/Eliminations | -127 | -98 | -108 | -111 | -117 | -98 | -94 | -124 | -39 |
| Total | 9,381 | 8,342 | 8,300 | 8,786 | 8,577 | 7,708 | 7,310 | 8,265 | 8,298 |
| EBIT, excluding items affecting comparability | |||||||||
| Trelleborg Coated Systems | 119 | 114 | 92 | 104 | 113 | 89 | 77 | 93 | 102 |
| Trelleborg Industrial Solutions | 204 | 166 | 174 | 223 | 212 | 170 | 146 | 191 | 186 |
| Trelleborg Offshore & Construction | -42 | -61 | -45 | -25 | -34 | -12 | -33 | -21 | 5 |
| Trelleborg Sealing Solutions | 724 | 535 | 647 | 693 | 684 | 469 | 533 | 611 | 618 |
| Trelleborg Wheel Systems | 351 | 246 | 268 | 373 | 368 | 240 | 215 | 278 | 283 |
| Group items | -61 | -23 | -3 | -75 | -52 | -28 | -18 | -63 | -40 |
| Total | 1,295 | 977 | 1,133 | 1,293 | 1,291 | 928 | 920 | 1,089 | 1,154 |
| EBIT %, excluding items affecting comparability | |||||||||
| Trelleborg Coated Systems | 12.0 | 11.9 | 10.1 | 11.7 | 12.7 | 11.0 | 9.9 | 10.5 | 11.2 |
| Trelleborg Industrial Solutions | 9.8 | 8.8 | 9.3 | 11.3 | 11.0 | 9.9 | 9.1 | 10.5 | 10.6 |
| Trelleborg Offshore & Construction | -7.5 | -9.4 | -8.0 | -4.2 | -5.9 | -1.6 | -5.2 | -2.8 | 0.7 |
| Trelleborg Sealing Solutions | 23.2 | 20.4 | 23.2 | 24.4 | 24.4 | 20.0 | 22.3 | 23.5 | 23.6 |
| Trelleborg Wheel Systems | 12.7 | 10.6 | 11.8 | 14.5 | 14.7 | 10.9 | 10.8 | 11.8 | 12.1 |
| Total | 13.8 | 11.7 | 13.6 | 14.7 | 15.1 | 12.0 | 12.6 | 13.2 | 13.9 |
| Items affecting comparability | -20 | -98 | -28 | -32 | -18 | -314 | -45 | -76 | 366 |
| EBIT | 1,275 | 879 | 1,105 | 1,261 | 1,273 | 614 | 875 | 1,013 | 1,520 |
| Bridge net sales SEK M, % | Q1 2018, SEK M |
Organic sales, % |
Structural change, % |
Currency effects, % |
Q1 2019, SEK M |
|---|---|---|---|---|---|
| Trelleborg Coated Systems | 890 | -3 | 7 | 7 | 986 |
| Trelleborg Industrial Solutions | 1,923 | 4 | - | 4 | 2,069 |
| Trelleborg Offshore & Construction | 576 | -8 | - | 6 | 562 |
| Trelleborg Sealing Solutions | 2,800 | 0 | 4 | 7 | 3,118 |
| Trelleborg Wheel Systems | 2,505 | 3 | 2 | 6 | 2,773 |
| Group items/Eliminations | -117 | - | - | - | -127 |
| Total | 8,577 | 1 | 2 | 6 | 9,381 |
| Exchange rate differences impacting EBIT excluding items affecting comparability ¹, SEK M | ||
|---|---|---|
| Trelleborg Coated Systems | 7 | |
| Trelleborg Industrial Solutions | 3 | |
| Trelleborg Offshore & Construction | -3 | |
| Trelleborg Sealing Solutions | 40 | |
| Trelleborg Wheel Systems | 7 | |
| Group items | -1 | |
| Total | 53 |
¹ Impact on EBIT excluding items affecting comparability in translation of foreign subsidiaries.
TRELLEBORG AB – FIRST QUARTER 2019
| Condensed Income Statements, SEK M | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
|---|---|---|---|---|---|---|---|---|---|
| Net sales | 9,381 | 8,342 | 8,300 | 8,786 | 8,577 | 7,708 | 7,310 | 8,265 | 8,298 |
| Cost of goods sold | -6,320 | -5,799 | -5,664 | -5,855 | -5,730 | -5,288 | -4,959 | -5,586 | -5,565 |
| Gross profit | 3,061 | 2,543 | 2,636 | 2,931 | 2,847 | 2,420 | 2,351 | 2,679 | 2,733 |
| Selling expenses | -800 | -674 | -651 | -676 | -668 | -630 | -599 | -670 | -657 |
| Administrative expenses | -778 | -930 | -815 | -840 | -776 | -801 | -733 | -797 | -778 |
| Research and development costs | -152 | -143 | -143 | -146 | -133 | -134 | -122 | -131 | -129 |
| Other operating income/costs | -37 | 183 | 105 | 23 | 18 | 71 | 20 | 6 | -18 |
| Profit from associated companies | 1 | -2 | 1 | 1 | 3 | 2 | 3 | 2 | 3 |
| EBIT, excluding items affecting comparability | 1,295 | 977 | 1,133 | 1,293 | 1,291 | 928 | 920 | 1,089 | 1,154 |
| Items affecting comparability | -20 | -98 | -28 | -32 | -18 | -314 | -45 | -76 | 366 |
| EBIT | 1,275 | 879 | 1,105 | 1,261 | 1,273 | 614 | 875 | 1,013 | 1,520 |
| Financial income and expenses | -120 | -78 | -72 | -70 | -62 | -57 | -66 | -56 | -51 |
| Profit before tax | 1,155 | 801 | 1,033 | 1,191 | 1,211 | 557 | 809 | 957 | 1,469 |
| Tax | -303 | -200 | -251 | -294 | -301 | -284 | -174 | -220 | -240 |
| Net profit | 852 | 601 | 782 | 897 | 910 | 273 | 635 | 737 | 1,229 |
| - equity holders of the parent company | 852 | 601 | 782 | 897 | 910 | 273 | 635 | 737 | 1,229 |
| - non-controlling interest | - | - | - | - | - | - | - | - | - |
| Earnings per share, SEK | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
| Excluding items affecting comparability | 3.25 | 2.55 | 2.98 | 3.40 | 3.41 | 2.31 | 2.47 | 2.92 | 3.12 |
| Group | 3.14 | 2.22 | 2.88 | 3.31 | 3.36 | 1.01 | 2.34 | 2.72 | 4.53 |
Acquisitions
Carrying amounts of identifiable acquired assets and assumed liabilities
2019
First quarter 2019
Trelleborg has, through its Trelleborg Sealing Solutions business area, signed agreements and finalized the acquisition of Sil-Pro, LLC., a U.S.-based privately owned contract manufacturer of high-tolerance silicone and thermoplastic components, which also offers assembly of medical devices.
Trelleborg has, through its Trelleborg Wheel Systems business area, signed an agreement and finalized the acquisition of the Canadian based privately owned company Pneus ICM Inc. The company specializes in distribution and service of industrial tires to customers in eastern Canada.
Trelleborg has, through its Trelleborg Wheel Systems business area, signed agreements and finalized the acquisitions of Provana Solutions srl and Provana Quality Center srl. Provana Solutions specializes in the distribution and service of tires and complete wheels to tractor dealers and farmers in Italy. Provana Quality Center provides testing of various tire solutions to original equipment manufacturers (OEMs) of agricultural machinery.
2018
First quarter 2018
One acquisition was finalized during the quarter.
Dartex Holding Ltd.
In addition, final settlement of earlier acquisitions took place and certain adjustments were also made to acquisition analyses attributable to acquisitions in 2017.
| Acquisitions, SEK M | Q1 2019 | Q1 2018 | ||
|---|---|---|---|---|
| Acquired 2019 | Acquired 2018 | |||
| Adjustments to Acquisitions 2017 | ||||
| Developed technology ¹ | - | 29 | ||
| Trademarks ² | - | 18 | ||
| Customer relationships ³ | 216 | 11 | ||
| Other intangible assets | 0 | - | ||
| Property, plant and equipment | 167 | 16 | ||
| Interest-bearing receivables | 5 | 5 | ||
| Inventories | 86 | 15 | ||
| Operating receivables | 70 | 20 | ||
| Current tax asset | - | - | ||
| Cash and cash equivalents | 9 | 2 | ||
| Deferred tax liabilities | -51 | -12 | ||
| Interest-bearing liabilities | -42 | -19 | ||
| Post employment benefits | -1 | - | ||
| Provision obligations | - | -1 | ||
| Current tax liability | - | -1 | ||
| Operating liabilities | -40 | -16 | ||
| Net assets | 419 | 67 | ||
| Goodwill | 651 | 37 | ||
| Total purchase price | 1,070 | 104 | ||
| Cash and other net debt in acquired operations | 29 | 12 | ||
| Impact shown in cash flow statement | 1,099 | 116 | ||
¹ Excess value of developed technology is amortized over 10 years.
² Trademarks have an indefinite useful life, no amortization takes place.
³ Excess value of customer relationships are amortized over 10-12 years.
The above goodwill for 2019 is attributable to acquired non-separable customer relationships and synergy effects expected after the acquisition. The fair value of acquired, identifiable, intangible assets is provisional pending final measurement of these assets.
Financial assets and liabilities measured at fair value
A description of how fair value is calculated is provided under Accounting policies and in the below table.
| At March 31, 2019, SEK M | Assets at fair value in profit and loss |
Derivatives used for hedging purposes |
||||
|---|---|---|---|---|---|---|
| Assets measured at amortized cost |
Carrying amount |
Measurement level |
Carrying amount |
Measurement level |
Total | |
| Assets in the balance sheet | ||||||
| Derivative instruments | - | 36 | 2 | 146 | 2 | 182 |
| Financial non-current assets | 2 | - | - | 2 | ||
| Accounts receivable | 6,667 | - | - | 6,667 | ||
| Interest-bearing receivable | 3 | - | - | 3 | ||
| Cash and cash equivalents | 2,384 | - | - | 2,384 | ||
| Total | 9,056 | 36 | 146 | 9,238 |
| Liabilities at fair value in profit and loss |
Derivatives used for hedging purposes |
|||||
|---|---|---|---|---|---|---|
| Liabilities measured at amortized cost |
Carrying amount |
Measurement level |
Carrying amount |
Measurement level |
Total | |
| Liabilities in the balance sheet | ||||||
| Derivative instruments | - | 219 | 2 | 168 | 2 | 387 |
| Interst-bearing non-current liabilities | 10,231 | - | - | 10,231 | ||
| Interst-bearing current liabilities | 3,290 | - | - | 3,290 | ||
| Accounts payable | 3,515 | - | - | 3,515 | ||
| Total | 17,036 | 219 | 168 | 17,423 |
Financial assets and liabilities fair value at the balance sheet date are, essentially, based on observable data (level 2 in accordance with the fair-value hierarchy).
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives comprise forward foreign contracts and interest rate swaps and are used mainly for hedging purposes but also for proprietary trading. These forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. Interest rate swaps are fair valued using forward interest rated extracted from observable yield curves.
Disclosure of fair value for debt and other financial instruments
Financial interest-bearing liabilities, with the exception of financial derivatives that adjust the loans, are recognized at amortized cost. Changes in interest rates and credit margins create differences between the fair value and amortized cost. A calculation at fair value would increase the Group´s long-term loans by SEK 55 M. The Group´s current loans were not remeasured because the carrying amount is considered to be a good estimation of the fair value due to their short maturity.
| At March 31, 2018, SEK M | Assets at fair value in profit and loss |
Derivatives used for hedging purposes |
||||
|---|---|---|---|---|---|---|
| Assets measured at amortized cost |
Carrying amount |
Measurement level |
Carrying amount |
Measurement level |
Total | |
| Assets in the balance sheet | ||||||
| Derivative instruments | - | 275 | 2 | 70 | 2 | 345 |
| Financial non-current assets | 3 | - | - | 3 | ||
| Accounts receivable | 6,046 | - | - | 6,046 | ||
| Interest-bearing receivable | 2 | 3 | 3 | - | 5 | |
| Cash and cash equivalents | 2,446 | - | - | 2,446 | ||
| Total | 8,497 | 278 | 70 | 8,845 |
| Liabilities at fair value in profit and loss |
Derivatives used for hedging purposes |
|||||
|---|---|---|---|---|---|---|
| Liabilities measured at amortized cost |
Carrying amount |
Measurement level |
Carrying amount |
Measurement level |
Total | |
| Liabilities in the balance sheet | ||||||
| Derivative instruments | - | 136 | 2 | 532 | 2 | 668 |
| Interst-bearing non-current liabilities | 9,619 | - | - | 9,619 | ||
| Interst-bearing current liabilities | 2,640 | - | - | 2,640 | ||
| Accounts payable | 3,158 | - | - | 3,158 | ||
| Total | 15,417 | 136 | 532 | 16,085 |
Financial assets and liabilities fair value at the balance sheet date are, essentially, based on observable data (level 2 in accordance with the fair-value hierarchy).
Parent Company
| Condensed Income statements, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Net sales | 62 | 51 | 487 | 476 |
| Administrative expenses | -79 | -62 | -365 | -348 |
| Other operating income | 0 | 0 | 2 | 2 |
| Other operating expenses | -23 | -25 | -323 | -325 |
| EBIT | -40 | -36 | -199 | -195 |
| Financial income and expenses | -12 | 62 | -786 | -712 |
| Profit before tax | -52 | 26 | -985 | -907 |
| Appropriations | - | - | 1,822 | 1,822 |
| Tax | 24 | 20 | -80 | -84 |
| Net profit | -28 | 46 | 757 | 831 |
| Statements of comprehensive income, SEK M | Q1 2019 | Q1 2018 | R12 2019 | 12M 2018 |
|---|---|---|---|---|
| Net profit | -28 | 46 | 757 | 831 |
| Total comprehensive income | -28 | 46 | 757 | 831 |
| Condensed Balance sheets, SEK M | Mar 31 | Mar 31 | Dec 31 |
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Property, plant and equipment | 14 | 15 | 15 |
| Intangible assets | 15 | 8 | 6 |
| Financial assets | 37,780 | 36,060 | 36,679 |
| Total non-current assets | 37,809 | 36,083 | 36,700 |
| Current receivables | 132 | 112 | 108 |
| Interest-bearing receivables | 261 | 1 | 1,822 |
| Cash and cash equivalents | - | - | - |
| Total current assets | 393 | 113 | 1,930 |
| Total assets | 38,202 | 36,196 | 38,630 |
| Equity | 7,877 | 9,628 | 9,193 |
| Interest-bearing non-current liabilities | 85 | 4,430 | 85 |
| Other non-current liabilities | 58 | 26 | 56 |
| Total non-current liabilities | 143 | 4,456 | 141 |
| Interest-bearing current liabilities | 30,052 | 22,003 | 29,084 |
| Current tax liabilities | 1 | - | 2 |
| Other current liabilities | 129 | 109 | 210 |
| Total current liabilities | 30,182 | 22,112 | 29,296 |
| Total equity and liabilities | 38,202 | 36,196 | 38,630 |
FINANCIAL DEFINITIONS
Trelleborg uses the following alternative performance measures relating to its financial position, return on shareholders' equity and capital employed, net debt, debt/equity ratio and equity/assets ratio. The Group believes that these performance measures can be utilized by users of the financial statements as a supplement in assessing the possibility of dividends, making strategic investments and assessing the Group's ability to meet its financial commitments. Trelleborg also uses the cash flow metrics of operating cash flow and free cash flow to provide an indication of the funds generated by the operations in order to conduct strategic investments, carry out amortizations and generate a return for its shareholders. Trelleborg uses the performance metrics of EBITDA, EBITA and EBIT excluding items affecting comparability, which the Group considers to be relevant for investors seeking to understand its earnings generation before items affecting comparability. The Group defines its key figures as follows.
Capital employed Total assets less interest-bearing financial assets and non-interest-bearing operating liabilities and excluding tax assets and tax liabilities.
Cash conversion ratio Operating cash flow as a percentage of EBIT.
Debt/equity ratio, % Net debt divided by total equity.
Discontinuing operations Profit from discontinuing operations is recognized net in the consolidated income statement under the item "Net profit in discontinuing operations".
Earnings per share Net profit for the period, attributable to shareholders of the Parent Company, divided by the average number of shares outstanding.
EBIT Operating profit including items affecting comparability.
EBIT, excluding items affecting comparability Operating profit excluding items affecting comparability.
EBIT margin excluding items affecting comparability, % EBIT excluding items affecting comparability as a percentage of net sales.
EBITA Operating profit excluding amortization and impairment of intangible assets and excluding items affecting comparability.
EBITA margin, % EBITA as a percentage of net sales.
EBITDA Operating profit excluding depreciation/amortization and impairment of PPE (including right-of-use assets) and intangible assets as well as excluding items affecting comparability.
Equity/assets ratio, % Total equity divided by total assets.
Equity method Associated companies and joint ventures in the Group are recognized in line with the equity method, implying that the initial participation is changed to reflect the Group's share in the company's profit or loss and for any dividends.
Free cash flow Operating cash flow reduced by cash flow from financial items, taxes and the effect of restructuring measures on cash flow.
Items affecting comparability The total of the restructuring costs approved by the Board of Directors and major other nonrecurring items.
Net debt Interest-bearing liabilities less interest-bearing assets and cash and cash equivalents.
Net debt/EBITDA Net debt divided by EBITDA.
Operating cash flow EBITDA excluding other non-cash items, capital expenditures, divested PPE, amortization of lease liabilities and changes in working capital. The key figure excludes cash flow from items affecting comparability.
Organic growth The sales growth in comparable exchange rates that is generated by the Group itself on its own merits and in the existing structure. An acquisition is reported only as organic growth if it is included in an equal number of months in the current period and the corresponding period of the previous year. Otherwise, it is reported as structural growth.
Return on capital employed, % EBIT divided by the average capital employed calculated on 12 months revolving basis.
Return on shareholders' equity, % Profit for the period calculated on 12 months revolving basis, attributable to shareholders of the Parent Company divided by average equity, excluding non-controlling interests.
For further description and calculation of key figures go to www.trelleborg.com/en/investors/financial--definitions.
GLOSSARY
OEM (Original Equipment Manufacturer) A company that manufactures an end-product that can be sold on the open market. The product often consists of a combination of proprietarily manufactured and purchased components from suppliers that are assembled by the OEM company to make the final product.
Plastics can be divided into two main groups: Thermoplastics are non-cross-linked plastics that are solid at room temperature but become soft and moldable when heated, and Hard plastics are cross-linked plastics that disintegrate upon heating and do not regain their properties.
ABOUT TRELLEBORG
Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. Our innovative solutions accelerate performance for customers in a sustainable way.
Business concept
Trelleborg's business concept is to seal, damp and protect in demanding industrial environments.
Strategy
Trelleborg's strategy is to secure leading positions in selected segments. This means that Trelleborg seeks segments, niches and product categories that – by virtue of the Group's market insights, core competencies and offering of advanced products and solutions – provide market leadership. In this manner, long-term shareholder value and added value are generated for customers. Trelleborg works with the strategy, both Groupwide and in the business areas, supported by four strategic cornerstones that – individually and in combination – underpin the strategy. The strategic cornerstones are: Geographic balance, Portfolio optimization, Structural improvements and Excellence.
Polymer The word is derived from the Greek "poly," meaning "many" and "meros" meaning "parts." Polymers are made up of many small molecules – monomers – that are linked in long chains. Examples of polymers are plastics and rubber.
Polymer technology The technology relating to manufacturing processes for polymers in combination with their unique properties.
Value drivers
Polymer engineering. Trelleborg should be best at developing polymer-based solutions that optimize and accelerate customers' applications and processes.
Local presence, global reach. Trelleborg leverages global strength and capabilities, while acting as a local partner to customers.
Application expertise. Trelleborg should be best at understanding customers' applications, thereby adding the most value.
Customer integration. Trelleborg makes it easy to do business with the Group and integrates in close partnerships with its customers.
Business accelerator. Powered by these core capabilities, the aim is always to improve, accelerate and grow customers' businesses. Trelleborg grows with its customers.
Trelleborg's market segments:
| Business area/Segment distribution | General industry |
Capital intensive |
Light Vehicles |
|||||
|---|---|---|---|---|---|---|---|---|
| Oil & gas | Transport equipment |
Agriculture | Infrastructure construction |
Aerospace | industry | |||
| Trelleborg Coated Systems | 85% | 1% | 13% | 14% | 1% | |||
| Trelleborg Industrial Solutions | 53% | 3% | 18% | 13% | 34% | 13% | ||
| Trelleborg Offshore & Construction | 41% | 59% | 100% | |||||
| Trelleborg Sealing Solutions | 44% | 2% | 11% | 4% | 15% | 32% | 24% | |
| Trelleborg Wheel Systems | 42% | 58% | 100% | |||||
| Total | 34% | 4% | 20% | 18% | 7% | 6% | 55% | 11% |
Net sales per market segment and business area based on annual accounts 2018. Historically, these percentages have not changed substantially between the quarters, the full year figures of 2018 will therefore give a good approximation.
TELEPHONE CONFERENCE ON APRIL 26
A telephone conference will be held on April 26 at 3:00 p.m. CET. To participate in the telephone conference, call +46 8 505 583 65 (Sweden), +44 333 3009 261 (U.K.) or +1 833 526 8383 (U.S.). Code: "Trelleborg". The conference will also be broadcast on the Internet in real time. Visit our website www.trelleborg.com for the Internet link and presentation materials.
FINANCIAL CALENDER
Interim report April-June 2019 July 18, 2019 Interim report July-September 2019 October 24, 2019 Year-end report 2019 February 12, 2020 Interim report January-March 2020 April 23, 2020
FOR FURTHER INFORMATION
Investors/analysts Media Christofer Sjögren, VP Investor Relations Karin Larsson, VP Media Relations Phone: +46 (0)410 - 670 68 Phone: +46 (0)410 - 670 15 Mobile: +46 (0)708 - 66 51 40 Mobile: +46 (0)733 - 74 70 15
E-mail: [email protected] E-mail: [email protected]
For information about the Trelleborg Group, Annual Reports, the stakeholder magazine T-TIME and other information, please visit the Group's website www.trelleborg.com.
Trelleborg AB (publ) Corp. Reg. No. 556006-3421 PO Box 153, SE-231 22 Trelleborg, Sweden. Phone: +46 (0)410-670 00 www.trelleborg.com
This report contains forward-looking statements that are based on the current expectations of the management of Trelleborg. Although management believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Accordingly, results could differ materially from those implied in the forwardlooking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions, fluctuations in exchange rates and other factors.
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 26, 2019.
This is a translation of the company's Interim Report in Swedish.