Interim report and year-end report 2022

Record year closed with a strong quarter

“We end the record year of 2022 by reporting yet another strong quarter. It is with confidence and great enthusiasm that we continue to improve Trelleborg. The aim to increase sales and further raise profitability stands firm. We will continue to invest in our polymer solutions for fast-growing segments in the aerospace industry, healthcare & medical and other selected industrial niches through a combination of acquisitions and focused organic initiatives.

Sales in the fourth quarter increased by a full 35 percent, with organic sales increasing 15 percent. Acquisitions contributed 8 percent. EBIT, excluding items affecting comparability, increased 34 percent, corresponding to an operating margin of 15.3 percent. Both sales and earnings were by far the best to date for a fourth quarter.

Organic sales for Trelleborg Industrial Solutions grew in most market segments and geographies, with healthy profitability. However, we noted a fall-off in order intake in primarily construction-related segments in the latter part of the year compared with previous quarters. Meanwhile, we have a strong order book that provides security for the year ahead.

Organic sales for Trelleborg Sealing Solutions were also favorable in most market segments and geographies. Here we also noted a slowdown in order intake in some segments, such as general industry, compared with the first few quarters of the year. In parallel, order intake and deliveries to aerospace, automotive and healthcare & medical continued to grow substantially.

Trelleborg Wheel Systems recorded good organic sales growth in all tire categories and most geographies during the quarter, which was primarily underpinned by solid deliveries to OE manufacturers. In contrast, we noted falling sales to the aftermarket. Profitability increased as a result of effective cost control and price adjustments to counter rising costs.

Minnesota Rubber & Plastics has been part of the Group since the end of October. The acquisition significantly improves Trelleborg Sealing Solutions’ position in the North American market while strengthening us globally in a number of attractive niches. The acquisition will initially slightly dilute the EBIT margin, but as we realize the synergies we have identified, the business area will – in the not-too-distant future – once again reach the high margin levels we have enjoyed for more than a decade.

In the near term, we will receive more than SEK 20 billion from previously announced divestments, which opens up several options to develop the Group further. Our strong balance sheet has enabled us to once again recommend that the Annual General Meeting raise the ordinary dividend. In parallel we have repurchased own shares on the stock exchange for more than SEK 3 billion.

At the time of writing, there are several macroeconomic signs that we are approaching a cooler period compared with the strong growth seen in 2021/2022. Our committed employees are ready to meet the challenges in whatever form these may take, and I am convinced that Trelleborg is heading for yet another successful year. Our general assessment in the current situation is that demand in the first quarter will be lower than in the fourth quarter,” says Peter Nilsson, President and CEO.

Fourth quarter 2022 – continuing operations

• Net sales for the quarter increased 35 percent to SEK 8,113 M (6,016). Sales were the highest to date for a quarter. Organic sales increased 15 percent compared with the preceding year, while acquisitions increased sales by 8 percent and currency by 12 percent.

• EBIT, excluding items affecting comparability, increased 34 percent to SEK 1,239 M (928). The EBIT margin was 15.3 percent (15.4). Earnings were the highest to date for a fourth quarter.

• Operating cash flow was SEK 1,678 M (936), up 79 percent. The cash conversion ratio for the most recent 12-month period amounted to 74 percent (85).

• Items affecting comparability for the quarter totaled SEK -115 M (-128) and pertained to restructuring costs.

• EBIT, including items affecting comparability, amounted to SEK 1,124 M (800) for the quarter.

• Earnings per share, excluding items affecting comparability, amounted to SEK 3.40 (2.28), up 49 percent. For the Group as a whole, including discontinuing operations, earnings per share were SEK 4.66 (2.78), up 68 percent.

• The acquisition of Minnesota Rubber & Plastics, with annual sales of around SEK 2,250 M, was consolidated as of October 27, 2022. With this acquisition, the business area Trelleborg Sealing Solutions’ position becomes as strong in North America as its previously established position in Europe. Refer to pages 4 and 10.

• An agreement was signed in March 2022 to divest the business area Trelleborg Wheel Systems to Yokohama Rubber Company. It is reported as discontinuing operations in the financial statements. The divestment is expected to be finalized in the first half of 2023, most likely in the first few months of the year.

• The key figures in this report relate to continuing operations, unless otherwise stated.

Full-year 2022 – continuing operations

• Net sales for full-year 2022 increased 27 percent to SEK 30,095 M (23,789). Organic sales increased 14 percent, while structural changes increased sales by 3 percent and currency movements by 10 percent compared with the preceding year.

• EBIT, excluding items affecting comparability, increased 30 percent to SEK 5,066 M (3,903), corresponding to an EBIT margin of 16.8 percent (16.4). Earnings and the margin were the highest to date for a full year.

• Items affecting comparability totaled SEK -241 M (-83) and pertained to restructuring costs of SEK -381 M (-260) and capital gains from the sale of assets totaling SEK 140 M (177).

• Earnings per share, excluding items affecting comparability, amounted to SEK 13.80 (10.26), up 35 percent. For the Group as a whole, earnings per share were SEK 19.94 (13.72), up 45 percent.

• Operating cash flow amounted to SEK 3,732 M (3,298), up 13 percent. The cash conversion ratio was 74 percent (85).

• At the end of the year, Trelleborg had repurchased Series B shares corresponding to 5.1 percent of the number of shares outstanding at a value of SEK 3,079 M.

Market outlook for the first quarter of 2023
Demand is expected to be lower than in the fourth quarter of 2022, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty. For further information, refer to page 14.

Market outlook from the interim report published on October 26, 2022, relating to the fourth quarter of 2022
Demand is expected to be slightly lower than in the third quarter of 2022, adjusted for seasonal variations. The geopolitical situation entails a heightened degree of uncertainty.

Dividend 2022
The Board of Directors proposes a cash dividend of SEK 6.00 per share (5.50).

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