Trelleborg prepares to weather fluctuating demand

Stockholm, Sweden—With rocky economies in place or expected in some global regions as a backdrop, Trelleborg AB's top official and others with the group remained upbeat but wary as they looked at the firm's current and future growth markets.

It is likely 2016 will bring major structural changes within Trelleborg's group of businesses as the company aims to continue strengthening its position, Peter Nilsson, president and CEO of the Stockholm-headquartered firm, said in the firm's year-end report.

He said Trelleborg is prepared to adjust its various businesses to handle fluctuating demand. “At present, there are some signs of a market improvement in certain geographic areas and some segments, such as the aerospace and automobile industries, which appear to be displaying satisfactory development.

“However, the situation looks considerably more difficult than it did last year in other parts of our business. Low oil prices, generally low raw material prices and a continued weak trend in parts of general industry and agriculture are continuing to hamper some parts of the group.

“The share of our order backlog related to oil and gas has contracted significantly, which is why we expect tougher times ahead with both fewer project deliveries and lower profitability in the segment.”

Nilsson said an adjustment to a lower level of activity already has been initiated and has been partially completed.

In a later interview, a company spokeswoman said the globalisation of the Stockholm-headquartered firm's business “involves being in the right place with the right operations.” The company focuses on developing its businesses “and localising them to areas where Trelleborg can grow, recruit the right talent and where the job can be done optimally,” she said.

In some cases, she said, that means the firm will move a unit to another geographic market while in other cases it means upgrading and developing the operation at its present location.

Trelleborg is coming off a strong year in 2015 and a record high operating profit in the fourth quarter. Sales for the year jumped 10 percent to $2.94 billion, even though organic revenues dipped 2 percent.

Nilsson said 2015 proved to be a challenge in terms of organic growth in several segments because of relatively weak market conditions and declining raw material pricing. The agriculture and oil and gas segments were particularly difficult.

Trelleborg managed to counteract both partly through tight cost controls.

Several initiatives are ongoing, and others will be launched to address the organic sales drop as the firm moves forward, Nilsson said.

Trelleborg constantly makes adjustments to different market conditions, most recently within its agricultural tire business and operations related to oil and gas, the spokeswoman said.

“If we study the organic sales trend,” she said, “there are relatively large differences between the various countries and geographic areas, although these disparities become slightly less evident when project deliveries are excluded.”

Market conditions also vary between Trelleborg's segments where, for example, sales in capital intensive industries related to agriculture were impacted by adaptations made by original equipment manufacturers to their own inventory levels and lower production levels, the spokeswoman said.

General industry displayed a weak trend during 2015, she said, particularly in North America. She noted that other market segments, including the aerospace and light vehicle industries, performed at a satisfactory level.

All of the company's current operations are considered core businesses, the spokeswoman said. “We have put a distinct emphasis on our aim to raise organic growth moving forward, and in the future we will be able to benefit from all the growth enhancement investments and initiatives made in recent years.”

She said the firm has never invested as much in its businesses as it is doing today, citing a new agricultural tire factory in the US; continuing investments in its life sciences business; development of new offerings to the aerospace industry; and a number of other initiatives.