Trelleborg : Interim report April - June 2021 (PDF)

INTERIM REPORT APRIL-JUNE 2021

CONTINUED STRONG PERFORMANCE

• Organic sales increased 31 percent in the quarter compared with the preceding year, which was strongly impacted by the pandemic. Net sales during the quarter increased 23 percent, despite negatively impacted by exchange rate effects, and amounted to SEK 8,637 M (7,031).
• EBIT, excluding items affecting comparability, increased by 58 percent to SEK 1,387 M (878), corresponding to an EBIT margin of 16.1 percent (12.5). Earnings were the best to date for a single quarter.
• Operating cash flow amounted to SEK 1,279 M (1,403). The cash conversion ratio for the most recent 12-month period amounted to 112 percent (121).
• Items affecting comparability for the quarter were a negative SEK 43 M (neg: 61) and pertained to restructuring costs.
• Earnings per share, excluding items affecting comparability, totaled SEK 3.74 (2.28). For the Group as a whole, earnings per share were SEK 3.66 (2.11).
• The key figures in this report relate to continuing operations, unless otherwise stated.

SEK M		Q2 2021	Q2 2020	Change, %		6M 2021	6M 2020	Change, %
Continuing operations
Net sales		8,637	7,031	23		16,856	15,513	9
Organic sales, %		31	-20			17	-14
EBIT, excluding items affecting comparability		1,387	878	58		2,737	2,051	33
EBIT-margin, %		16.1	12.5			16.2	13.2
Restructuring costs		-43	-61			-88	-97
Capital gain on real estates		-	-			144	-
Items affecting comparability		-43	-61			56	-97
EBIT		1,344	817	65		2,793	1,954	43
Profit before tax, continuing operations		1,286	741	74		2,703	1,822	48
Net profit, discontinuing operations		12	12	0		16	49	-67
Net profit, Group		992	572	73		2,096	1,399	50
Earnings per share, SEK
Continuing operations		3.61	2.07	74		7.67	4.98	54
Discontinuing operations		0.05	0.04	25		0.06	0.18	-67
Group		3.66	2.11	73		7.73	5.16	50
Continuing operations, excluding items affecting
comparability		3.74	2.28	64		7.51	5.32	41
Operating cash flow		1,279	1,403	-9		2,241	2,135	5
Cash conversion ratio R12, %		112	121			112	121

As a result of the reorganization in March 2021, comparative figures have been restated. For further information about Group's key figures, including discontinued operations, see pages 17-18.

Published on July 22, 2021

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TRELLEBORG AB - SECOND QUARTER 2021

CONTINUED STRONG PERFORMANCE

"The second quarter was characterized by a continued strong performance. Organic sales increased 31 percent compared with the preceding year, which was strongly impacted by the pandemic. Compared with the second quarter of 2019, a period that was unaffected by the pandemic, organic sales increased 6 percent, and all three business areas contributed growth.

EBIT, excluding items affecting comparability, increased 58 percent, corresponding to an EBIT margin of 16.1 percent (12.5). Earnings were the company's best to date for a single quarter. Operating cash flow remained strong. The earnings improvement was enabled by higher volumes in all business areas, in combination with continued good cost control and effective price discipline.

In Trelleborg Industrial Solutions, most market segments and geographic markets reported an upturn in demand, which was particularly notable in the automotive industry and construction-related segments. It was also gratifying that sales growth was noted for the aerospace industry compared with both the previous quarter and a year earlier.

Organic sales in Trelleborg Sealing Solutions to general industry and the automotive industry grew significantly in all regions. Sales to the aerospace industry improved compared with the preceding quarter but remained lower year on year. However, clear signals from our customers in this segment indicate that the bottom has been reached and growth is expected to occur from the current levels going forward.

Trelleborg Wheel Systems also reported strong organic sales growth compared with the year-earlier period. Marked sales growth for tires for agricultural machinery was noted in most geographic markets. Sales of tires for materials handling and construction vehicles also displayed a significant upturn compared with the preceding quarter and the year-earlier period.

However, the margin was negatively affected by the rapid and strong price rise for raw materials and partly by the sales mix. Price adjustments to customers were implemented and will gradually offset the higher raw materials prices.

As we look toward the second half of the year, we do so with confidence. Order intake during the quarter was at a record level in many of our businesses and the order books are well filled. The level of activity is high in most of our manufacturing units and price adjustments have already been implemented to address the rising raw materials prices. In the few segments in which we are still waiting for growth, such as the aerospace industry, the market conditions are looking more promising for the remainder of the year.

However, the situation remains strained in several stages of the supplier chain, which, combined with continued development of the pandemic, represents a certain risk. If the situation escalates, it could restrict sales growth in the short to medium term, but as it stands today, it is expected that it will be possible to manage the situation satisfactorily.

As usual, we continue to adapt to changed conditions. Our general assessment at present is that demand for the third quarter will be on a par with the high level of demand in the second quarter, adjusted for seasonal variations."

Peter Nilsson,

President and CEO

MARKET OUTLOOK FOR THE THIRD QUARTER OF 2021

Demand is expected to be on a par with the second quarter of 2021, adjusted for seasonal variations. Uncertainty regarding the pandemic's impact on the coming quarters remains.

Market outlook from the interim report published on April 22, 2021, relating to the second quarter of 2021

Demand is expected to be better than in the first quarter of 2021, adjusted for seasonal variations.

Published on July 22, 2021

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TRELLEBORG AB - SECOND QUARTER 2021

NET SALES AND RESULT¹

SEK M			Q2 2021	Q2 2020	Change, %		6M 2021	6M 2020	Change, %
Continuing operations
Net sales			8,637	7,031	23		16,856	15,513	9
Change total, %			23	-18			9	-10
Organic sales, %			31	-20			17	-14
Structural change, %			0	2			0	2
Currency effects, %			-8	0			-8	2
EBIT, excluding items affecting comparability			1,387	878	58		2,737	2,051	33
EBIT-margin, %			16.1	12.5			16.2	13.2
Restructuring costs		-43	-61			-88	-97
Capital gain on real estates			-	-			144	-
Items affecting comparability			-43	-61			56	-97
EBIT			1,344	817	65		2,793	1,954	43
Financial income and expenses			-58	-76	24		-90	-132	32
Profit before tax			1,286	741	74		2,703	1,822	48
Taxes			-306	-181	-69		-623	-472	-32
Net profit, continuing operations			980	560	75		2,080	1,350	54
Net profit, discontinuing operations			12	12	0		16	49	-67
Net profit, Group			992	572	73		2,096	1,399	50
Earnings per share, SEK
Continuing operations			3.61	2.07	74		7.67	4.98	54
Discontinuing operations			0.05	0.04	25		0.06	0.18	-67
Group			3.66	2.11	73		7.73	5.16	50
Continuing operations, excluding items affecting
comparability			3.74	2.28	64		7.51	5.32	41

Net sales during the second quarter of 2021 amounted to SEK 8,637 M (7,031). Organic sales increased 31 percent compared with the year-earlier period. Exchange rate effects were negative 8 percent compared with the year-earlier period.

Sales per market. In Europe, organic sales increased by

32 percent compared with the preceding year. Organic sales in North America rose 18 percent. In South and Central America, the organic sales increase was 76 percent, and in Asia and other markets, organic sales increased by 39 percent compared with the preceding year.

EBIT, excluding items affecting comparability, totaled SEK 1,387 M (878), corresponding to a margin of 16.1 percent (12.5).

The total exchange rate effect on EBIT, excluding items affecting comparability, from the translation of foreign subsidiaries had a negative impact of SEK 59 M on earnings compared with the year-earlier period.

Items affecting comparability for the quarter were a negative SEK 43 M (neg: 61) and pertained to restructuring costs.

EBIT, including items affecting comparability, amounted to SEK 1,344 M (817) for the quarter.

The net financial expense was SEK 58 M (expense: 76). The lower financial expenses are due to reduced net debt in 2021 compared with the preceding year. Net interest income in relation to net debt for the Group amounted to 1.9 percent (2.2).

Net profit was SEK 980 M (560). The tax rate for the quarter, excluding items affecting comparability, amounted to 24 percent (23).

Earnings per share, excluding items affecting comparability, totaled SEK 3.74 (2.28). For the Group in total, earnings per share were SEK 3.66 (2.11).

• The key figures in this report relate to continuing operations, unless otherwise stated. Continuing operations pertains to the business areas Trelleborg Industrial Solutions, Trelleborg Sealing Solutions, Trelleborg Wheel Systems and Group Activities.

Published on July 22, 2021

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TRELLEBORG AB - SECOND QUARTER 2021

CASH FLOW AND NET DEBT

SEK M		Q2 2021	Q2 2020	Change, %		6M 2021	6M 2020	Change, %
EBIT, excluding items affecting comparability		1,387	878	58		2,737	2,051	33
Depreciation/write-down, property, plant and equipment		338	380	-11		680	731	-7
Amortization/write-down, intangible assets		87	94	-7		173	187	-7
EBITDA		1,812	1,352	34		3,590	2,969	21
Capital expenditure		-233	-218	-7		-473	-557	15
Sold non-current assets		10	27	-63		88	131	-33
Amortization of lease liabilities		-102	-102	0		-201	-202	0
Change in working capital		-79	345				-796	-176
Dividend from associated companies		0	0				0	0
Non cash-flow affecting items		-129	-1				33	-30
Operating cash flow, continuing operations		1,279	1,403	-9		2,241	2,135	5
Cash conversion ratio R12, %		112	121				112	121
Operating cash flow, discontinuing operations		51	37	38		141	-7	2,114
Operating cash flow, Group		1,330	1,440	-8		2,382	2,128	12
SEK M							6M 2021	6M 2020	12M 2020
Net debt, opening balance							-10,026	-14,914	-14,914
Operating cash flow							2,382	2,128	5,332
Cash impact from items affecting comparability							-21	-181	-325
Financial items							-121	-156	-319
Paid tax							-420	-437	-772
Free cash flow							1,820	1,354	3,916
Acquisitions							-174	3	3
Disposed operations							143	147	147
Capital increase associated companies							-20	-	-
Dividend - equity holders of the parent company							-1,355	-	-
Sum net cash flow							414	1,504	4,066
Exchange rate differences							-245	-38	732
Lease liability according to IFRS 16 1							-8	56	141
Pension liability 1							16	-7	-51
Net debt, closing balance							-9,849	-13,399	-10,026
Of which:
Pension liability 2							-590	-610	-603
Lease liability according to IFRS 16 2							-2,122	-2,268	-2,049
Net debt, excluding effect of lease and pension liability							-7,137	-10,521	-7,374
Debt/equity ratio, %							32	45	35
Net debt/EBITDA 3							1.5	2.4	1.7
1 Pertains to non-cash items.

2 Net debt including, as of 2019, lease liability in accordance with IFRS 16 and pension liability. 3 EBITDA including items affecting comparability.

Operating cash flow for the quarter amounted to SEK 1,279 M (1,403). Cash flow was positively affected by the higher earnings generation. Working capital increased in relation to the year-earlier period, driven by higher sales. Investments were in line with the preceding year. The cash conversion ratio for the most recent 12-month period amounted to 112 percent (121).

Free cash flow for the first six months of the year amounted to SEK 1,820 M (1,354). Net cash flow amounted to SEK 414 M (1,504). Net cash flow for the year was impacted by effects from acquisitions of negative SEK 174 M (pos: 3), effects from divested operations of positive SEK 143 M (pos: 147), capital contributions to associated companies of negative SEK 20 M (-), and a dividend to shareholders of the Parent Company of negative SEK 1,355 M (-).

Net debt at the end of the second quarter amounted to

SEK 9,849 M (13,399) and was impacted by the year's net cash flow of SEK 414 M, negative exchange rate differences of SEK 245 M and non-cash adjustments of lease and pension liabilities totaling SEK 8 M.

The debt/equity ratio was 32 percent (45). Net debt in relation to EBITDA was 1.5 (2.4).

Published on July 22, 2021

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TRELLEBORG AB - SECOND QUARTER 2021

RETURN ON CAPITAL EMPLOYED AND RETURN ON EQUITY

%			R12 2021	R12 2020
Return on capital employed, continuing operations
Excluding items affecting comparability			12.1	9.4
Including items affecting comparability			11.7	6.9
Return on equity, Group
Excluding items affecting comparability			11.6	9.8
Including items affecting comparability			11.4	-1.5

Capital employed declined year on year and amounted to SEK 39,390 M (41,735) at the end of the quarter, impacted by exchange rate effects, reduced working capital and the net of investments and depreciation/amortization for the year.

The return on capital employed, excluding items affecting comparability, was 12.1 percent (9.4).

The return on capital employed, including items affecting comparability (restructuring costs and non-recurring items), was 11.7 percent (6.9).

Shareholders' equity for the Group at the close of the period amounted to SEK 30,380 M (29,622), positively impacted by net profit for the year and translation effects, and negatively by the dividend to shareholders.

Equity per share amounted to SEK 112 (109). The equity/assets ratio was 57 percent (50). The return on shareholders' equity for the Group, excluding items affecting comparability, totaled 11.6 percent (9.8).

KEY FIGURES AND TRENDS

Net sales, SEK M

EBIT excl. items affecting comparability, SEK M / EBIT %, R12

10,000								40,000	1,500
8,000								32,000	1,250
									1,000
6,000								24,000
									750
4,000								16,000	500
2,000								8,000	250
0								0	0
Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2020	2020	2020	2020	2021	2021
			quarter (LHS)	R12 (RHS)

								18.0
								15.0
								12.0
								9.0
								6.0
								3.0
								0.0
Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2020	2020	2020	2020	2021	2021

EBIT, SEK M (LHS)		EBIT %, R12 (RHS)

Operating cash flow, SEK M

2,000								6,000
1,800								5,400
1,600								4,800
1,400								4,200
1,200								3,600
1,000								3,000
800								2,400
600								1,800
400								1,200
200								600
0								0
Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2020	2020	2020	2020	2021	2021
			quarter (LHS)	R12 (RHS)

Earnings per share, excl items affecting comparability, SEK

4.00								16.00
3.50								14.00
3.00								12.00
2.50								10.00
2.00								8.00
1.50								6.00
1.00								4.00
0.50								2.00
0.00								0.00
Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2020	2020	2020	2020	2021	2021
			quarter (LHS)	R12 (RHS)

Published on July 22, 2021

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