Trelleborg : Annual Report 2023

PROTECTING THE ESSENTIAL

2023 ANNUAL REPORT WITH SUSTAINABILITY REPORT

Content

Protecting

the Essenti

The Trelleborg Group is a world leader in engineered polymer solutions that protect critical applications in demanding environments.

Content

al

Trelleborg protects the essential in society - people, the environment and infrastructure. The business is built for robust growth and high profitability - all based on market- leading positions. The Group's materials and applications expertise, insights into cutting- edge fields and high innovation capacity make Trelleborg a world leader in engineered polymer solutions.

The core of the business is to offer a wide range of engineered solutions for selected industries. By following global trends and major macroeconomic shifts, the Group continuously increases its exposure to fast-growing industries, such as aerospace and healthcare & medical.

Trelleborg works in close partnership with its customers, providing a local presence, backed up by global capabilities and competencies.

Trelleborg is building on its position as the sustainability leader in its industry, increasing the share of sustainable materials in products and solutions and helping its customers transition to a low-carbon economy.

Trelleborg protects the essential for a future we can be proud of.

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Contents
Trelleborg in brief	3
Interview with the President and CEO	4
The year in brief	8
The Trelleborg share 2023	12
Global trends	16
Strategy	17
Value generation	21
The path forward - climate, circularity and people	23
Trelleborg's business areas	26
Risks and risk management	34
Foreword by the Chairman	38
Corporate governance	39
Board of Directors	46
Group Management	48
Remuneration report	50
Principles for remuneration	52
Consolidated income statements	56
Consolidated balance sheets	60
Consolidated cash-flow statements	63
Notes - Group	65
Parent Company income statements, balance sheets and
cash-flow statements	97
Parent Company notes	99
Proposed treatment of unappropriated earnings	102
Auditor's Report	103
Sustainability statement - general disclosures	108
Climate - risks, opportunities and scenarios	116
EU Taxonomy	119
Outcome of the Group's sustainability reporting	122
GRI Content Index and TCFD overview	134
Assurance Report for sustainability	135

Operations 2023 strategy and value generation

Risk management and corporate governance

Financial information and sustainability reporting

Ten-year overview: Sustainability metrics	136	Other information
Ten-year overview: Financial performance measures	138
Financial calendar 2024	139

= The audited annual accounts and consolidated accounts for the 2023 fiscal year. = Board of Directors' Report.

= Auditor's limited assurance of the sustainability report.

EXTERNAL ASSURANCE.

This is a translation of Trelleborg's definitive Annual Report for 2023 in Swedish. The Swedish-language version is the original. The audited annual accounts and consolidated accounts for the 2023 fiscal year and the auditor's limited assurance of the sustainability report are indicated as above. The Board of Directors' Report comprises pages 8-13,21-29,34-37,52-53, the proposed treatment of unappropriated earnings can be found on page 102 and page 134. The auditor has also examined the corporate governance statement in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement, which is included as a separate report.

SUSTAINABILITY REPORT ACCORDING TO GRI STANDARDS

Trelleborg reports on sustainability in 2023 in accordance with the GRI Standards: Core option. The scope of the Sustainability Report is indicated as above and is outlined in the GRI Content Index on page 134. More information and a detailed GRI Content Index can be downloaded from www.trelleborg.com.

The cover shows a polymer molecule.

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TRELLEBORG IN BRIEF

Trelleborg and 2023 in brief

Trelleborg's performance was strong in 2023, despite continuing turbulence in the external environment. The Group reported a record in terms of net sales, operating profit and earnings per share.

Key figures in this Annual Report relate to continuing operations unless otherwise stated.

34,286	6,002 1	17.5%1	16.64 1
NET SALES, sek m	EBITA, sek m (5,334)	EBITA MARGIN (17.7)	EARNINGS PER SHARE, sek
(30,095)			(13.80)
9%	12.9%1	92%	60% 2
ORGANIC AND STRUCTURAL	RETURN ON CAPITAL EMPLOYED	CASH CONVERSION RATIO (74)	CLIMATE: EMISSIONS
SALES GROWTH (17)	(15.9)		IMPROVEMENT 2023
40	30	15,6463
NUMBER OF COUNTRIES	NUMBER OF R&D CENTERS	NUMBER OF EMPLOYEES
WITH OPERATIONS

NET SALES PER INDUSTRY, %

10%	9%	16%	65%
AEROSPACE	HEALTHCARE & MEDICAL	AUTOMOTIVE	GENERAL INDUSTRY

NET SALES PER GEOGRAPHIC MARKET, %

46% 35% 19%

EUROPE	NORTH AND SOUTH AMERICA	ASIA & OTHER MARKETS

1. Excluding items affecting comparability.
2. During the period 2021-2023, the reduction in CO2emissions in relation to net sales was 60 percent. Compared to 2022, the reduction is 27 percent.
3. Number of employees including insourced staff.

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INTERVIE W WITH THE PRESIDENT AND CEO

A new Trelleborg shows stability and strength

- well equipped for new ambitious targets

During 2023, Trelleborg's net sales increased 14 percent compared with the preceding year as a result of the new platform for higher growth, completed acquisitions and a positive impact from exchange rates. The Group's sales, operating cash flow and earnings, excluding items affecting comparability, were the best to date for Trelleborg.

How would you summarize 2023 for Trelleborg?

Trelleborg had its best year to date, reporting both its highest sales and best earnings. During the year, we changed and improved Trelleborg in several dimensions. The new Trelleborg has a better growth profile and higher profitability, while we have also reduced the Group's sensitivity to business cycles and gained a better sustainability profile. Weare approaching an even distribution of our global sales across the continents, enabling closer collaboration with customers both locally and globally. We are looking forward to a continuation of this positive trend.

Can you describe what makes the new Trelleborg different from the previous one?

Let's start with what we aren't. Trelleborg has chosen to divest operations, not because of poor quality, but because of their more cyclical nature and limited growth potential. It's about products for oil and gas extraction, automotive-related products and our tire and printing blanket operations. After the divest- ments, we are a more profitable company, and a less cyclical company with a better growth profile.

The divestments also mean that we have dramatically improved our sustainability profile since they accounted for one-third of our sales but a full 60 percent of our carbon emissions and energy use. The divestments have given us a net cash position which, combined with borrowings and stable cash flows, gives us financial flexibility of just over sek 20 billion. That enables investments, acquisitions, share repurchase

programs and stable dividends for our shareholders. The level of our investments for the future is the highest to date. We are building capacity for the future, primarily in Asia, but also in Europe and North America.

New financial targets were set at the at the Capital Markets Day in May. The growth target has been raised to more than 8 percent annually. How will that be achieved?

The growth target of more than 8 percent includes both organic and acquired growth. We are making major strategic investments in our existing operations over the 2023 to 2024 period. We are building new and modern manufacturing facilities in Asia, especially Vietnam and India. This includes upgrading and increasing the capacity of our existing facilities in Europe and North America. Investments focus on what we call, speed boats, - polymer solutions for a number of selected industrial segments with higher growth, such as semiconductors, aero- space, food & beverage, electrification, and healthcare & medical. These fast-growing segments currently account for 40 percent of our sales, but with the investments we are making combined with future acquisitions, they will eventually account for more than half of our sales.

2024 opened with the large acquisition of the Australian Chinese Baron Group, an acquisition that has affected the structure

of Trelleborg.

If I start with the acquisition, this is our largest acquisition in healthcare & medical to date. Baron develops solutions in

"The new Trelleborg has a better growth profile and higher profitability, while we have also reduced the Group's sensitivity to business cycles and gained a better sustainability profile."

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INTERVIE W WITH THE PRESIDENT AND CEO

silicone for a range of medical applications and is well established in CPAP machines for sleep apnea. The condition is estimated to affect about 20 percent of men and 10 percent of women in the middle-aged population, while only two percent use the CPAP machines that are available, so this business is already in an expansion phase with great future potential. Baron also provides an ideal base for continued growth in the Asia-Pacific region, which is an interesting geographic area for the continued development of medical technology.

With the addition of more than sek 1 billion in sales from the acquisition, our healthcare & medical business is making a considerable contribution to the Group's sales. To increase the focus on continued growth and make our business visible, Trelleborg Medical Solutions will be established in spring 2024; a new business area that will be led by Linda Muroski, who will then also join Group Management. Linda Muroski is currently heading Global Healthcare & Medical as well as Industrial Americas within the business area Trelleborg Sealing Solutions. She will now be fully focused on the new business area to ensure that we leverage all of the opportunities that this platform can offer following the acquisition of Baron.

In connection with the change, Peter Hahn, who has successfully led the Trelleborg Sealing Solutions business area for many years, has decided to move to a new role as senior advisor with a focus on development projects and will be replaced by Jürgen Bosch, who will then also become a member of Group Management. Jürgen Bosch's previous role was President of Trelleborg Sealing Solutions in Europe combined with President of Global Aerospace & Marketing in the same business area.

Five acquisitions were made in 2023. Can you tell us about them?

Just before end of year, we signed an agreement to acquire South Korean MNE Group, a regional leading manufacturer of precision seals for semiconductor production equipment. This acquisition is highly compatible with Trelleborg. It gives us established customer relationships in the world's largest local market for semiconductors and a strong base for continued growth, especially in the Asian semiconductor industry, but also in other parts of the world. This market segment is expected to grow significantly in the coming years, and we are aiming for a leading position. In addition, we also completed additional bolt-on acquisitions, in areas such as aerospace seals and solutions for the rehabilitation of pipe systems.

Minnesota Rubber & Plastics (MRP) was acquired in 2022. How has progress been here?

The acquisition strengthened our position in polymer solutions considerably, especially in the North American market, and in the food & beverage, water and healthcare & medical segments

"Fast-growing segments currently account for

40 percent of our sales, but with the investments we are making combined with future acquisitions, they will eventually account for more than half of our sales."

in particular. One of the main benefits of the acquisition is the synergies that arose from greater opportunities to sell more to existing customers. We benefitted from MRP:s customer contacts and combined them with our own, while significantly broadening our product range. The business creates opportunities to increase our sales to US customers, while also offering support to US customers in Europe and Asia, where Trelleborg is already well-established. On top of the cost synergies, the most significant gains from this acquisition are primarily higher sales and increased customer satisfaction.

What does the path to the new margin target of 20 percent look like?

Trelleborg comprises two business areas, Industrial Solutions and Sealing Solutions. Both will contribute to improved profit- ability, but in different ways. Industrial Solutions has gradually increased its margin for a long time by climbing higher up the value chain and improving its production structure. This trend will continue. Sealing Solutions and the forthcoming new Medical Solutions business area, on the other hand, need to expand and accelerate their businesses and regain the level of profitability that existed in the business area before Minnesota Rubber & Plastics was acquired. This will be achieved by realizing the synergies that I referred to earlier.

The ROCE target is more than 15 percent.

The target is based on our ambition to continue growing, both organically and through acquisitions. Historically, it has been challenging to achieve the same level of ROCE from acquisitions compared with organic growth. However with higher interest rates, the price of acquisitions is also expected to fall. This should improve ROCE over time. We have set ambitious new financial targets in general, compared with both our industry colleagues and other global industrial companies.

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INTERVIE W WITH THE PRESIDENT AND CEO

"2023 was Trelleborg's most successful year to date, largely due to our long- term and strong customer relationships. In this uncertain environment, Trelleborg is considered a stable and reliable partner."

If we look back on 2023 from a broader context, it was a year of conflicts, inflation and interest rate hikes.

Unfortunately, the world is considerably more uncertain today than it was just a few years ago, especially in view of the war in Ukraine and the armed conflict between Israel and Hamas, but also due to a general increase in political uncertainty in several geographies. Increased geopolitical tensions are evident in many parts of the world and have affected us in a number of ways, particularly economically due to raised interest rates and inflation. Despite these challenges, 2023 was Trelleborg's most successful year to date, largely because of our long-term and strong customer relationships. In this uncertain environment, Trelleborg is considered a stable and reliable partner. We will continue to build unique customer relationships through long- term development partnerships. Our critical solutions generate considerable customer values, even though our solutions account for a minor share of an end product's cost. Our strong position with customers has also made it easier to adjust our prices when our costs have been affected by inflation.

China did not see the comeback that some people expected in 2023. How was Trelleborg's performance there and throughout the rest of Asia?

Although growth has slowed somewhat, it has been considerably higher than in most other geographies over time. I therefore do not agree with the view that China is not growing. Our operations in China are mainly focused on producing solutions locally for the domestic market and we still see potential for growth locally in China. The challenge for us is our dependence on imports to China, so we are planning to gradually expand local product development and manufacturing - in other words, to intensify our focus on 'China for China.' Of course we are, following developments in China closely and the ongoing discussions about trade with China in both the EU and the US, and are prepared to adjust our plans and strategies should the need arise. We are also continuously expanding our presence in other parts of Asia, especially Vietnam, South Korea, India and Japan.

Can you describe how Trelleborg works with its sustainability strategy?

Sustainability is an ongoing and natural focus area for us, and we strive to work with it because it gives us a clear advantage. I speak about Trelleborg's strengthened sustainability profile with pride when I present our future and how we are planning to increase our profitabilitywith a less cyclical business.

Lower emissions and increased circularity are obviously key aspects of our sustainability strategy, and we devote a lot of resources to these areas. Our employees are an important part of this process, and our strong decentralized leadership shows how we are taking responsibility at all levels. Many decisions have to be made locally, from energy supply choices to considering a transition to more sustainable materials in consultation with our customers.

Our emphasis on strong local governance, combined with well-established Group programs for resource efficiency in areas such as Excellence and Sustainability, are the core of our sustainability strategy. We believe that this is one of our main strengths when it comes to sustainability.

Another key dimension of our sustainability strategy is how our solutions are helping to improve our customers' sustainability performance. For example, by reducing friction, and thereby lowering the energy consumption of their end products. This

is another aspect that confirms our commitment and our contribution to a more sustainable future.

The new emissions reduction targets were validated by the Science Based Targets initiative. How will they be achieved?

Obviously the first step is to shift to renewable energy wherever possible. We do not see any major obstacles to this. For those countries or areas where this is not possible, we will continue to invest in our own renewable electricity production, where this can be justified, and then purchase electricity certificates. Our initiatives will lead to a significant reduction in emissions from the first year, well in line with our new emissions reduction targets. We will eventually sign renewable Power Purchase Agreements, as that market evolves.

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INTERVIE W WITH THE PRESIDENT AND CEO

At the same time, we will continue our ongoing efforts with energy optimization within the framework of the Energy Excellence program. One specific example is a project in our production facilities in Rutherfordton and Fort Wayne in the US where more than 100 opportunities for energy-saving measures were identified in each location. These measures are often fairly simple, like turning the electricity off automatically when the equipment is no longer in use or installing various types of sensors that automatically adapt the power output to the varying needs for electricity.

Wherever possible, we will continue to install solar panels. We already have many facilities with these and there will soon be more. In the long-term, we will also evaluate the most effective options for reducing emissions from natural gas, a fuel that is used to power most of a few steam boilers that we use in our production.

By 2030, 25 percent of the material in products will come from recycled or bio-based materials. How will that be achieved?

To promote circularity and reduce our carbon footprint, we collaborate with various development organizations. We see progress in several areas, such as the use of recycled carbon black, which is now a competitive alternative. Development of other materials is also progressing rapidly, but it is an issue of technological advancement and the price that customers are prepared to pay for an alternative. Recycled or bio-based alternatives to existing materials are still often too expensive or have a poorer performance. We believe that both costs and properties will improve within a few years, making it natural for us and others to use considerably more circular input materials.

How is Trelleborg working to increase the number of female managers?

Trelleborg works widely and actively to promote diversity, equality and inclusion. During 2023, we set an ambitious target that

30 percent of managers would be female by 2030. To approach

this target, we have to deepen the internal talent pool of women and increase flexibility in leadership. We are already moving in the right direction with the introduction of a hybrid work model where suitable, which increases flexibility consider- ably. Another key aspect for diversity is how we use our global talent pool. Regardless of nationality, everyone should have the same opportunities to make a career in Trelleborg. That is just as important as gender when it comes to diversity, and we think we have made good progress in this area.

An annual report summarizes the preceding year, but if you look forward, what do you see for the Group in the long term?

Trelleborg is striving to achieve an even better balance. Our target is to increase our share of sales in fast-growing industries and segments, such as aerospace, electrification, automation, food & beverage, healthcare & medical. When it comes to our offering, our aim is to deliver even more complete solutions, with a higher proportion of services, to create even deeper partnerships with our major customers.

I still believe firmly that globalization has positive effects and predict that the Group will establish leading positions in even more geographic markets. International trade is good for the world. Countries that were previously considered ideal for low-cost sourcing have now become high-tech and global leaders in various fields due to the progress of business. For us, this means that we are initially aiming for sales of sek 40 billion with an operating profit of sek 8 billion.

To summarize, we are demonstrating our ability in many ways to redirect our business toward more energy-efficient solutions, to develop new and sustainable products for our customers and to maintain a strong financial performance. This is a clear testament to our strong position and well-functioning organization. Finally, I would like to take this opportunity to thank our determined, driven and talented managers and employees for their hard work during the year.

IN BRIEF:

»

»

2023 was a record year for Trelleborg despite major challenges in the external environment.

Divestments of the tire and printing blanket operations were completed in May, creating a more cohesive Group, a strong balance sheet and a net cash position.

• New, more ambitious financial targets with higher aims for sales growth, profitability and return on capital employed (ROCE) were launched during the year.
• There was a higher rate of investment in existing opera- tions with new establishments in Asia, and capacity expansions in Europe and North America.
• The Group continues to allocate resources to growth areas such as aerospace, healthcare & medical as well as electrification and industrial automation, together with several other growth areas in other industry niches.
• New emissions reduction targets where Scope 1 and 2 emissions will be halved by 2030, and Scope 3 emis- sions reduced by 25 percent during the same period were, validated by the Science Based Targets initiative.

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THE YE AR IN BRIEF

Targets and outcomes 2023

The financial performance of Trelleborg was very strong in 2023. At the same time, selected key sustainability figures demonstrated a continued positive trend. In 2023, sales growth exceeded the new financial target, while the EBITA margin and return on capital employed were below target. Both financial and sustainability related targets and outcomes reflect continuing operations.

FINANCIAL TARGETS

SALES GROWTH

Annual sales growth over a business cycle should be >8 percent 1. The previous target was 5-8 percent.

Demand for the Group's products and solutions was	by 7 percent (3) and currency movements by
favorable during the year. Net sales increased	5 percent (10) compared with the preceding year.
14 percent compared to 2022 and amounted to	Total sales growth, organic as well as structural,
sek 34,286 m (30,095). Organic sales increased	averaged 7.9 percent over the past five years.
2 percent (14). Structural changes increased sales

%
20																TARGET >8%
0														>8% OUTCOME 2023
													9.0%
-20
19	20	21	22	23

EBITA MARGIN

The EBITA margin, excluding items affecting comparability, is to amount to >20 percent over an economic cycle 1. The previous target was an EBIT margin,excluding items affecting comparability, of >16 percent.

The EBITA margin was 17.5 percent (17.7). EBITA	The EBITA margin averaged 16.7 percent over the
was the highest ever for a year, but the margin was	past five years.
negatively impacted by restructuring costs and a
capital loss from a divestment in offshore oil & gas
in the US.

%

20							≥20%
15								TARGET >20%
							OUTCOME 2023
							17.5%
10
19	20	21	22	23

RETURN ON CAPITAL EMPLOYED

The return on capital employed (ROCE), excluding items affecting comparability, is to amount to >15 percent over an economic cycle 1. The previous target was >14 percent.

The return on capital employed (ROCE), excluding	ROCE averaged 13.7 percent over the past five
items affecting comparability, was 12.9 percent	years.
(15.9). ROCE was negatively affected by acquisitions
with initially lower returns.

%
16
												>15%
																TARGET >15%
12																OUTCOME 2023
												12.9%
8
19	20	21	22	23

SUSTAINABILITY TARGETS

ENVIRONMENT - CLIMATE

During the year, Trelleborg set a new climate target for 2030, refer to page 23. The previous "50 by 25" target was to - by the end of 2025 - reduce direct and indirect carbon emissions (Scope 1 and 2) by at least 50 percent relative to sales (compared with base year 2020 of 6.6 metric tons/sek m).

In 2023, the value was 2.7 metric tons (3.6) per	based target to reduce absolute CO2 emissions
sek m, which corresponds to a 27-percent decrease	(Scope 1 and Scope 2) by 50 percent by 2030, base
in emissions intensity compared with the preceding	year 2021, as well as CO2 emissions along the value
year. This yields a 60-percent reduction in emissions	chain (Scope 3) by 25 percent was validated. Find
intensity compared with the base year 2020, which	out more about Trelleborg's new climate targets and
means that the target for Scope 1 and Scope 2 has	vision on pages 23-24.
already been met. In 2023, the Group's science

tons CO2	t/SEK M
200,000		8

					TARGET
100,000					-50% 2025
				4
					OUTCOME 2023
					−60%
0	20	21	22	23	0
Share of indirect emissions CO2, continuing operations
Share of direct emissions CO2, continuing operations
CO2 (t)/Net sales, SEK M, continuing operations

ENVIRONMENT - RENEWABLE/FOSSIL-FREE ELECTRICITY

An important part of achieving the Group's climate targets is based on transitioning the electricity supply to mainly renewable/fossil-free electricity. An intermediate target for Trelleborg in this process is to have achieved 80 percent renewable/fossil-free electricity by the end of 2025.

The outcome for 2023 was that 61.9 percent (46.4)	34 percent compared with 2022. Read more
of the total electricity consumption consisted of	about Trelleborg's energy supply transition on
renewable/fossil-free electricity, an improvement of	pages 122-124.

%
60
			TARGET
30			80% 2025
			OUTCOME 2023
			61.9%
0
20	21	22	23
Renewable/fossil-free energy, proportion of
total energy, %, continuing operations

1 New target was presented at the Capital Markets Day on May 25, 2023.

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