Trelleborg braced for continued market challenges

Trelleborg, Sweden – Trelleborg AB is expecting trading conditions to remain difficult in the first quarter of 2020, following a year in which earnings remained flat despite significantly higher sales.  

While net sales for 2019 rose 8% to SEK36.6 billion (€3.5 billion), earnings (EBITA) stayed in-line with prior-year levels at SEK5.0 billion, the Swedish group reported 12 Feb. 

Earnings remained flat for the year, due mostly to the costs associated with the group’s recently launched restructuring programme.

Trelleborg said restructuring costs and the impairment of capital employed in a newly created ‘business under development’ unit impacted earnings by a total of SEK3.7 billion. 

Under the new organisational structure, which came into effect at the start of 2020, Trelleborg reduced its core business segments to three and transferred a number of ‘low profitability' operations to the new unit.

Commenting on the group’s overall performance, president and CEO Peter Nilsson said the results for 2019 were stable despite “continued challenges."

While Trelleborg Sealing Solutions (TSS) and Trelleborg Industrial Solutions (TIS) performed well, the group’s tire operation Trelleborg Wheel Systems (TWS) experienced “a testing period”, Nilsson noted.

The segment, he said, witnessed continued challenging market conditions during the year and cut production in order to adapt inventory levels to lower levels of demand.

These factors, according to Nilsson, consequently led to “considerably weakened margins.” 

For the full year TWS reported a 4% decline in organic sales to SEK2.18 billion and a 27% drop in segment EBIT to SEK913 million.

Organic sales trends for farm, material handling and construction tires were all negative, driven by a weak second half of the year, reported Trelleborg.

International trade conflicts also impacted the business climate and contributed to increased uncertainty and lower order intake, it added.

Organic sales at TIS rose 4% for the full year to SEK10.8 billion, helping segment EBIT increase 22% to SEK1.2 billion.

Segment sales were unchanged in Europe and North America, while significant growth was noted in Asia. 

Deliveries of marine and port solutions stood out due to their strong trend in the second half of the year, according to Trelleborg.

Sealing products maker TSS reported 7% growth in EBIT to SEK2.8 billion on 10% higher sales at SEK12 billion.

While sales to Europe and Asia were negative for the year, “healthy deliveries” to North America fully offset the negative impact. 

The strongest organic sales growth was seen in the aerospace industry, while sales to general industry and the automotive industry declined. 

According to Nilsson, over the fourth quarter the agricultural and automotive industries, together with general industry, encountered a tougher economy. 

At the same time, sales to the aerospace industry, healthcare & medical, and oil & gas increased. 

“We cannot impact the overall economic trend, but we can focus on refining our long-term positions and offerings,” said the group official. 

In the short term, Nilsson said he could see "a more challenging demand scenario, partly as a result of recent developments in China." 

Overall, the official anticipated that demand during the first quarter of the year would be “somewhat lower” than that in the final quarter of 2019.