Trelleborg survives tough Q2, negotiating Somersworth closure

ERJ staff report (RD)

Trelleborg, Sweden - Trelleborg AB, a major rubber compounder based in Sweden, has improved its cash flow and operating margin in the second quarter  of 2009 (Q2) but reported profits down in all business segments and admitted that “the sense of uncertainty regarding the future remains great,” the company said in a 24 July press release.

Net sales were SEK 6867 million (Euro 647.5 million), down from SEK 8326 in Q2 2008 whilst operating profit was also down, falling from SEK 337 million in the same period last year to SEK 159 million. Profit for the quarter was SEK 49 million, down from SEK 173 million in Q2 2008.

Trelleborg Sealing Solutions recorded a 30 percent drop in sales to SEK 1129 million in Q2 and has initiated negotiations to close a unit in Somersworth in the US as part of cost reduction efforts. Production at the site, which has 90 employees, will be moved to other existing units, the company said, adding that a new manufacturing unit in Brazil will be inaugurated in the second half of 2009 as the company attempts to develop new markets.

The company's Engineered Systems business reported sales down 10 percent to SEK 2868 million and operating profits also declined as a result of falling volumes. However, Trelleborg said cash flow improved sequentially during Q2 as a result of improved earnings and freeing up of working capital. In Q3 2009 the company will open a new unit in China for infrastructure-related products to strengthen its presence in the Chinese market.

Following recent trends, car production in North America and Europe continued to decline sharply, although the company noted a slight increase in production towards the end of the quarter. Trelleboorg's Automotive unit reported sales down by 20 percent to SEK 2122 million compared to the same period last year. The company said capacity and cost adjustments “significantly reduced the negative earnings effect caused by the decline in volumes.

Demand for industrial tyres continued to fall sharply in Q2 as a result of “the weaker industrial economy,” Trelleborg said. The company's Wheel Systems unit recorded a drop in sales of 20 percent to SEK 782 million compared to the same period last year. Production in Harteville, US was relocated to Sri Lanka during Q2 where a new “main base” for the manufacture of industrial tyres will be officially opened in the second half of 2009, the company added.

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2009 Interim Report from Trelleborg AB