TRELLEBORG, Sweden--Regulatory News:
"Satisfactory start of the year"
“It is a sign of strength that the Group is able to deliver its best operating profit on record for a first quarter, resulting in an operating margin of nearly 14 percent. Our favorable market positions and strong culture of cost control, combined with value-generating customized solutions, are the principle drivers behind this achievement.
In the first quarter of the year, Trelleborg posted lower organic sales compared with the preceding quarter and the year-earlier period. This was expected, since the underlying reason can be attributed to our offshore oil & gas operation. While we were able to make deliveries on the back of a strong order book in the fourth quarter, the situation is more challenging for the segment this year.
Excluding these project transactions, the underlying organic growth for the Group was on a par with the preceding quarter. So generally speaking, the market situation has not changed significantly in recent months.
The business climate remains challenging in North and South America and general industry is still muted in all global markets, particularly in the more capital-intensive sector. The agricultural markets on both sides of the Atlantic are still depressed and automotive and aerospace are the segments that continue to perform the best.
During the quarter, we decided to sell the holding in Vibracoustic to our partner Freudenberg. The transaction is expected to be finalized in the first half of the summer. The journey we have made with the joint venture has been highly successful, and this divestment allows us to focus fully on our core business moving forward.
The acquisition of CGS, announced at the end of 2015, is one such core business. Subject to approval of the acquisition by the relevant authorities, the work to integrate the profitable CGS into our existing operations will then begin.
I am also pleased that we during the quarter inaugurated and commenced production of agricultural tires at the facility in South Carolina, U.S. Our local presence has been well received by both new and existing customers. We will grow in the largest agricultural market in the world for a number of years to come, which will naturally contribute to the organic growth.
Looking ahead, I still see no sign of a general economic recovery in the broader industrial sector in the near future. Raw material prices remain at low levels and, while Europe has possibly leveled off, the economic situation in much of the world is still distinguished by considerable uncertainty.
Our overall assessment of the second quarter is that our markets are continuing to move laterally, or slightly downward. We are continuously monitoring developments and are maintaining preparedness to adjust our various businesses to match fluctuating demand,” says Peter Nilsson, President and CEO.
Net sales for the first quarter of 2016 declined by 4 percent (increase: 14) to SEK 6,095 M (6,370). Organic sales declined by 4 percent (decline: 4). Effects of structural changes made a positive contribution of 2 percent (pos: 4), while the effects of exchange rate movements were negative 2 percent (pos: 14).
Operating profit, excluding items affecting comparability, rose by 1 percent to SEK 841 M (833), which was the Group’s highest to date for a first quarter, and equivalent to an operating margin of 13.8 percent (13.1).
Items affecting comparability for the quarter amounted to an expense of SEK 115 M (expense: 35), and were in line with communicated full-year levels.
The acquisition of CGS Holding is proceeding according to plan and is expected to be finalized in the second quarter of 2016.
Earnings per share declined by 4 percent to SEK 1.95 (2.03), impacted by higher restructuring costs in the quarter.
Operating cash flow amounted to SEK 228 M (59).
In April, Trelleborg signed an agreement with Freudenberg to sell its shares in Vibracoustic to Freudenberg. Trelleborg will receive a purchase consideration of approximately SEK 6.8 billion, in addition to the dividend of approximately SEK 1.4 billion received in December 2015. This corresponds to a total value of approximately SEK 8.2 billion.
The transaction is expected to be finalized in the second quarter of 2016. TrelleborgVibracoustic was renamed Vibracoustic in April.
As of 2016, Trelleborg’s participation in Vibracoustic will be recognized as a discontinuing operation and thus no further comment will be made in relation to the company in this report. Trelleborg’s participation in Vibracoustic affected earnings per share in the first quarter of 2015 by SEK 0.51, refer to page 13.
Market outlook for the second quarter of 2016
Demand is expected to be on a par with, or slightly weaker, than the first quarter of 2016, adjusted for seasonal variations.
Market outlook from the interim report published on February 4, 2016, relating to the first quarter of 2016
Demand is expected to be on a par with, or slightly weaker, than the fourth quarter of 2015, adjusted for seasonal variations.
This is information of the type that Trelleborg AB (publ) is obligated to disclose in accordance with the Swedish Securities Exchange and Clearing Operations Act and/or the Financial Instruments Trading Act. The information was issued for publication on Thursday, April 21, 2016, at 13:00 CET.
Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. Its innovative solutions accelerate performance for customers in a sustainable way. The Trelleborg Group has annual sales of SEK 25 billion in over 40 countries. The Group comprises five business areas: Trelleborg Coated Systems, Trelleborg Industrial Solutions, Trelleborg Offshore & Construction, Trelleborg Sealing Solutions and Trelleborg Wheel Systems. In addition, Trelleborg owns 50 percent of Vibracoustic, the global market leader within antivibration solutions for light and heavy vehicles, with annual sales of SEK 18 billion in about 20 countries. The Trelleborg share has been listed on the Stock Exchange since 1964 and is listed on Nasdaq Stockholm, Large Cap. www.trelleborg.com
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