Trelleborg AB (publ)

Hello and welcome to PanneBall Audiocast for teleconference Q2 2022. Throughout the call all participants will be in listen-only mode and afterwards there will be a question and answer session. Today I'm pleased to present CEO Peter Nilsson. Please go ahead with your meeting.

Thank you and welcome to all of you to this presentation of our half-year report. Peter will start there to give you some overall headlines and some overall comments on our business areas. And then Fredrik Nilsson, our group CFO, will support us with some more financial comments. And then we will finish off with some guidance on the running quarter. And then, of course, at the end of the session also to open up for a Q&A. Proud to call, we will use the slides that's been on our web page, which is then presenting our report here for Q2. So that is what I'm going to refer to, and turning to that, turning to page two, or slide two in that presentation agenda, starting with highlights, general highlights, business areas, financial by Fredrik, then some summary on some comments on the outlook, and then some Q&A at the end. Turning to page three, our headline for this report, continuous strong growth and record margin sales increased in the quarter compared to last year by 21%, driven by very strong organic sales growth of 11, currency benefits of 8%, and also some M&A adding 2%. So in total, summing up to 21% sales growth. EBIT then growing more than that, growing by 27% up to a little bit north of 1.3 billion Swedish kronor in the quarter, which is then corresponding to this record high margin for us at 17.9% of the continuing business. And this then sums up to the highest quarterly sales for us, highest EBIT and highest margin so far for Trelleborg. We have small items affecting comparability of minus 33, which is done well within guidance for the full year. Fredrik will go back and comment on that. Cash flow at just shy of 800 million Swedish kronor, then impacted by this higher business activity, which is then obviously given naturally tying up some accounts receivables and also, let's say, higher inventory. So we are no way concerned about that. We see it as a natural, and I mean, we will get better here as the business develops. Also, a smaller acquisition in the quarter called AirMed, which is then being incorporated into Trello Box Healing Solutions, which is a company fully focused on healthcare and medical with one factory then outside of Minneapolis in U.S. Turning to page four, organic sales development biography. Very strong development in America, 23% organic growth. Of course, very, very strong. Europe, also strong, 10% organic growth in Europe, and then a little bit weaker in Asia, then heavily impacted by the shutdowns linked to COVID in China. So we are not really concerned about that either. We believe that when China is opening up again, we're going to bounce back rapidly in China. Order intake is still okay, and the order backlog in China is very good. So that will be bouncing back as the market is opening up. So overall, very strong organic sales all over. But once again, China or Asia are impacted by the Chinese lockdowns linked to COVID. Turning to page five, business areas, quickly turning to page six, and comments on industrial solutions. Very strong growth and record profitability in industrial solutions, organic sales 16%, and we're actually growing in all geographical markets and also in all market segments. Also here, we actually grow in automotive due to market share gains in our, let's say, automotive segments in this business area. Of course, heavy cost increases here as well, or here as well, all over, of course, linked to the high inflation of raw material, freight, and energy. But that has been very well upset by efficiency and pricing and, of course, with the volumes also drop through from higher volumes also benefiting this. And that means that EBIT in total and also margin increase, the record high margin, we're actually first time touching here, 15%. Of course, in the quarter, benefiting from good product sales and, once again, good development in all businesses in industrial solutions. So a strong quarter, a very strong quarter for industrial solutions. Turning to page seven, ceiling solutions, also good growth and a very resilient margin, organic sales up by 7%. Strong organic sales in general industry, both in America and Europe, but China then down by, and then that's impacting Asia in total with the COVID lockdowns in China. We note also sales to healthcare and medical and aerospace increased significantly with both sales in the quarter, but also very strong order intake going forward. In this, we have a small decline in automotive-related sales linked to, of course, known supply chain issues in the automotive industry, which is also impacting us, of course. But this is not heavily impacting us, but nevertheless, it's a slight decline linked to that. But all in all, this is still resulting for ceiling solutions, a record high EBIT and a record performance in the quarter, although the margin is down by 0.4%. percentage points, we still, with the growth and with, let's say, everything else, we are delivering the best ever EBIT for ceiling solutions. Touching also on wheel systems, since you know that we have signed an agreement to sell this to Yokohama, and we are in the process of getting this deal finalized, but until then, it's reported that assets held for sale, which is then on page eight, and then turning to page nine, to comment on the development in wheel systems. Heavy inflation or headwinds, we have to say, in wheel systems, but well managed by the team in wheel systems, let's say, resulting in organic sales of 21%, and basically healthy growth in all tire categories and all geographical areas. But we should note that sales to America, sales in America, both North and South America, are particularly strong. We have, as I commented, in this area probably the heaviest impact from raw materials, energy and transports, but once again well managed and been well compensated by pricing primarily, but also by increased efficiencies linked to the higher volumes, and well managed on these higher volumes, which is then pushing us to a margin of 15% in the quarter. Turning to page 10, which is a new slide for us, we're reporting in this, we talk about also sustainability KPIs, where you can see that our CO2 has been also well managed in the quarter, going down in absolute figures, and then of course also going down into what we call CO2 intensity, which is tons of CO2 per million, which is also going down. So it's also in this respect developing nicely in the quarter on quarter is this is not annual so this is more quarter on quarter development than comparing with a year ago then turning to next page also on sustainability we're also having another made let's say main kpi here which is linked to our share of using renewable energy in comparison to total electricity and here is a flat Quarter and quarter, you are well aware of the challenges here in purchasing and getting electricity in certain geographies, but we are at least keeping this flattish and we are running at the same level as in Q1. So that is the new slide of KPIs for sustainability. Turning then to page 12, financials, and then handing over to Fredrik to move from page 13.

Thank you, Peter. Let's then move to page 13, looking into the sales development. Organic sales increased by 11% in the quarter, with organic growth in both business areas. Report net sales increased by 21%. We have 2% impact from acquisitions during quarter, and then currency added another 8%. Moving on to page 14, showing the historical organic growth. You can see here that we have a new good quarter with a second quarter for 2022, and we now have six quarters in a row on our growth target or above. Moving on to page 15, showing the quarterly sales on a row in 12 months for continuing operations. You can see that the second quarter was a record high, 7,351,000. Moving on to page 16, we have a record high EBIT of 1,319,000, which was 27% higher than Q2 last year, with a good, strong profit growth both in industrial solution and ceiling solution. In the result, there was also positive FX impact from translation of foreign subsidiaries of 69 million compared to the corresponding quarter last year. EBIT morning for continuing operations, excluding items affecting comparability, increased from 17% to 17.9%. In both in trailable industrial solutions and ceiling solutions, there was a strong sales growth supported by price adjustments. Moving on to page 17, looking at the EBIT and EBIT modern role in 12 months, you can see that the positive trend continues with increased EBIT and higher margin. Page 18, profit and loss statement, looking at some further details. You can see we have items affecting comparability of minus 33 million in the quarter. That was entirely related to restructuring cost. Financial income expenses up from 37 to 40 million in the quarter. We have increased our net depth in the quarter, and that is mainly due to the ongoing share buyback program, but we're also seeing increased interest rates. looking at the taxes amounted to 24 percent in the quarter and as earlier communicated we have said that it will be 26 percent for the full year and that still stands and then looking at net profit for discontinued operations you can see there is a strong improvement here we have also some additional support from ifrs 5 where we have to stop the depreciation and amortization which has added 151 million in the quarter Moving on to page 19, earnings per share. For continuing operations, excluding affecting comparability, we increased EPS with 32% from 2.75 to 3.63. And for the group as total, earnings per share was up 56% in the quarter. Moving on to page 20, looking into the cash flow. We have an operating cash flow of 798, very positively affected by the higher earnings generation. And then, as Peter mentioned, we have a higher business activity, which is dragging a little bit more working capital. The accounts receivable is very logical because sales is up, but then we also have a little bit more inventory to secure stable supply to our customers. So we have both a little bit extra on the raw material side, but also on the finished goods. And then investments was also a little bit higher than the corresponding quarter. Looking into the cash conversion on page 21, you can see we have a cash conversion ratio of 69% in the quarter, and that reflects the higher business activities, which require some additional working capital. Moving on to page 22, the gearing and leverage development, the debt equity ratio was 31%, End of the quarter. And it's two items that is increasing our net debt here. And it's the dividend that we paid on 1 billion, 481 million during the quarter, and the share buyback. We have bought back almost 1.5 billion in the quarter. And then net debt in relation to EBITDA was 1.4 by end of the quarter. Looking at the return on capital employed, new record high of 16.1. we haven't higher capital employed with due to the higher sales acquisitions and exchange rates but that was very well offset by the increased profitability and then i will finish off this section with some financial guidelines for the for the rest of the year or for the full year we have said that capex will be 1.4 billion for the full year restructuring costs 300 million Amortization of intangible assets, 300 million, and underlying tax rate, 25%. And for continuing operations, it will be 26%. That is unchanged since the first quarter. And by that, I would like to hand back the microphone to you, Peter.

Thank you. Then finishing off with summary and some comments on the running quarter. Heading for the report, continuous strong growth and record margin. I mean, sales up by 21%, driven by a strong organic growth and also some assistance from FX, also some smaller add-ons on M&As. EBIT is up even more. EBIT is up by 27%, which then gives us a record EBIT margin in the quarter of 17.9%, which means that the highest quarterly sales for us, highest EBIT and highest margin to date for Trello Board. items affecting competitively at 33 million and then cash flow already commented a few times 800 which is then a little bit to push down by a higher business activity higher sales which is then consuming some working capital also a small smaller acquisition add-on acquisition for our medical healthcare business within ceiling solutions airmed been added in the quarter so this is kind of once again a very strong quarter for trelleborg and We are very, let's say, happy with the performance in this quarter. Turning to page 27 and some comments on outlook, we are guiding for a slightly lower, let's say, demand in the next quarter, in the running quarter. And, I mean, this is no drama in this, I understood here. there was some questions here between the report and our call here about our order book but we want to clarify that order book for us is still on a record high level and we have been growing the order book in the quarter so we're going into quarter three with the highest order book to date for for trailer board but nevertheless we we need to be transparent and say that i mean here at the final weeks of the quarter it was a bit slow down and then whether that is kind of continuing or not we don't really know at the moment. I mean the first weeks here of this running quarter does not indicate any kind of major downturn. It's more a flattening compared to what we have seen before but once again we have had a very strong order growth for many many quarters now and also there was a growing order book also during Q2. So this is no drama in this but nevertheless We believe that we will see a slightly lower business activity here in this running quarter compared to before. And of course, this is said with still quite high uncertainty. We still have the potential for further COVID lockdowns in China. I think we should expect that at least up until October, that we'll be very careful in China. And also, of course, we have still the war situation, Ukraine-Russia. We don't know whether that's going to give us in terms of gas supply and other stuff. So this is the best estimate we can do and the best estimate we can do for the running quarter. So this is the way we look at it. So I think I'll leave it with there and then handing over for Q&A and opening up for Q&A. So please go ahead.

Thank you. And if you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Klaas Baerlin from Citi. Please go ahead.

Thank you. Hi, Peter and Fredrik. It's Klaas from Citi. So first in the order comment, Peter, on this slowdown you talk about, I know it's early days, but I'm just trying to understand to what extent this is real demand weakness, Peter, or maybe just normalization of pre-ordering, Colin, your big price hikes, and in which segment and region do you see this as a starter?

I mean, it shouldn't really... I understood that there were some comments on this following our report, but we don't put too much drama into this. There is kind of a flattening. I mean, we've been growing the order book for, I think, for 23 months, and then we have a flattening in the 24th month here of June, but it's still on a high level. So this is something which we still, I mean, once again, we have a record high order book, and I mean, this is, of course, impacted by... Some lack of components for some areas, they're not ordering from us. It's not that we cannot supply, but since there are problems for others to get supply, they are slowing down. So we don't see that as a... We don't want to, let's say, raise anything, and we don't want... There's no difference in geographies. China, of course, is impacting. I mean, people are not ordering here in the COVID slowdown, so that's been a little bit shrinking of the ordering take in... in China particularly, but that is linked to the COVID lockdown and not really linked to the underlying demand. It's our kind of best estimate on that. Once again, it's not really any drama in this. We need to read into everything and we need to do the best estimate and the best look at it in a more let's say, look at the figures and do what we believe is correct. But once again, I mean, we are very confident on Q3 that we are going into Q3 with a record high order book and we have, let's say, very good order coverage for all the sales that we will be able to supply in Q3. So we are not really seeing that as a weakening, but nevertheless, we need to kind of address and tell what we believe.

All good. It's hard to ask, given that you signal it out in the report. But all good, I understand. My second one is on fees. It's obviously very good to see this margin. You're able to compensate well on price-cost, but it also seems like previous M&A and restructuring is now paying off. Can you talk through, Peter, to what extent is it sustainable into the second half? Of course, we have the seasonality into the third quarter, but I'm just a little bit concerned further out that pricing can roll over at cost inflation levels.

I need to understand to what extent this is going to do. Let's say benefiting in this quarter in industrial solutions is good project sales and I mean that will not be that like that in every quarter but we have been guiding that we firmly believe that industrial solutions will continue to improve but I mean I don't want to say that the continuum 15 percent here because 15 is the all-time high margin in this. I shouldn't give you the guidance that you get 15% for the second part of the year for four industrial solutions. This is a little bit extra good, but we do believe that it's going to continue with high sales growth, but then dependent on projects and that outcome will be probably slightly lower. But I mean, we are happy and the performance is good and we are not kind of sliding in any way. Good compensation for inflation and good price adjustments and good efficiencies. Very well managed and a good outcome. But we still have to wait a few more quarters before we can, let's say, put this on a 15% forever level in a way.

Yeah, that makes sense. My final very quick one is on the choice between M&A and redemption. Obviously, a very solid balance sheet at the start of next year. Will systems go through? You seem confident that this will happen, but you're already a big player in your key end markets. You say that you want to do bolt-ons, and that's the estimate that will take quite some time to redeploy that cash into growth. A good update from Peter on the choice between maybe partial redemption and M&A. or is M&A still the big focus? Thank you.

The priority will be if we can find good M&A which is long-term beneficial for us, then of course that will be the priority. But we will not spend the money simply because we want to spend the money. Then it's because we find a good M&A which we believe is more long-term beneficial for our shareholders. I mean, that is what we do. So really, we're not going to end up, I don't know. I mean, we're working on a few projects, as we always do. But of course, as you hinted, most of the M&A we're looking for is much smaller M&As, which could be made more or less with the running cash flow. So that's really the only thing that's consuming. And then there is of course a few bigger ones that you want to go for, but then it's more if that makes sense and we get it to the right valuation and with the right kind of long-term benefits for both the company and our shareholders. We are still keeping the options open and we don't really know where it's going to end up. It depends on if you find anything interesting or not.

Thank you.

It's not really about the priority in that respect. The priority is if you find a good M&A, we're going to spend it on that.

Yeah, I was just emphasizing your previous comment on bolt-ons and given the sheer size of the balance sheet, it will take some time. That was just my point. All good.

thank you and the next question comes from the line of carl bokris from abg please go ahead yes thank you and good afternoon i just wanted to ask a first question on industrial solutions uh very strong performance and i think similar to a couple of quarters ago you mentioned the strong project business and a bit of marine and a bit of other aspects and also something you you touched upon here earlier you expected strong sales to continue into the second half my question is really how much of the performance in industrial that was more or less particularly related to projects you delivered upon only in q2 and what could continue into the second half

It's always a mix on the projects. There's a little bit up in profitability. That is the business of project business, at least for us. And even though sales is not always with extraordinary margins. So that is a mix. But once again, the overall guidance is that 15 is probably a peak quarter for this year. So that is really, we don't want to give any more guidance than the 15 was probably the high side.

Understood. And then you mentioned a couple of comments here on certain end markets as such. But were there any particular end markets or anything in any of the particular divisions where you did see a bit of a decline in order intake towards the end of the quarter?

Not really, I shouldn't point out. Of course, it'd be a bit slow in some automotive-related businesses where people are kind of slowly adjusting the year-end estimates and potentially order a little bit more, a little bit less, sorry. But that is something which is not really a major. So I would say everything developed nicely, but then some automotive-related businesses and China. I mean, that is really the only two negatives we can see or basically everything others is positive understood and my final one is just where in the uh process you are when it comes to wheels exit in terms is it like empty competition or how far have you come now our estimate is still as we said before by end of the year plus minus is going to be concluded so that is really there's no uh stumbling blocks, nothing strange, nothing which is creating any kind of concerns on our side. It's running as planned and we still expect it to be closed. Hopefully before year end or just a few days into next year, that is really where we are looking at the moment. I mean, on that as well, we have also the printing solutions. I mean, you know, the final closure of printing solutions as well, with this sale to Continental. And that is also something we do expect here to be, that is to be expected, let's say, well before year end. What would you say here in the end of Q3 or beginning of Q4? So that is a little bit earlier on that one. But once again, on the wheel systems activity, nothing strange, everything going as planned. And we do expect closing and the money in our accounts here, hopefully before year end.

Understood. Thank you.

The next question comes from the line of Agneska Vilela from Nordea. Please go ahead. Thank you.

I have a few questions. I understand that automotive and China were weak in Q2, but I just wonder what you see going into Q3. We're hearing from the automotive companies that they see better supply of semiconductors and components and that they're ramping up production. So the first question here, what are your expectations for your automotive exposure going into Q3?

Exactly as you're saying Jaska, we expect it to improve and we expect both China to improve and we expect the automotive to improve. So that is kind of a positive going forward because China with some uncertainty as we know this convention coming up here in October. I think we're going to expect him to be careful up at least until October. So it could be further close downs in China, but we do not kind of expect that to be... We expect it to be better. And if you say China now, when the close downs were softening a little bit in June, it was very strong in June. So we do not expect If nothing strange, then we will be catching up China before year end. And as you already commented, we do expect some improvements on automotive as well. So that is kind of two positives if you compare to the run right here in Q2.

Perfect. And China specifically, how much was it down for you in Q2?

Actually, we did in industrial solutions. Our main activity in China for industrial solutions is in Shandong province, and Shandong was not really in the closed down measures that was going. While for ceiling solutions, we had the main activities in Shanghai, they were a little bit down. down by less than 10%. I would say that it was negative. I can't really remember the figure, 7-8% or something like that, for the China sales for ceiling solutions. But it's not really dramatic in the totality. But still, 7-8% down, we could probably have to get that back. Then, of course, it has to be growth in the second part of the year, which we do expect it's going to be.

But practically, if there are no further lockdowns in China and we see improving automotive, then you would have some support for your selling solution business in Q3.

How do we do expect it to be, to be having support from that activity in Q3?

Yeah, perfect. And then I wanted to ask about your dependence on the gas as an energy source for your factories in Europe and maybe more specifically Russian gas, if you know anything about that. And do you have any contingency plans for that?

Yeah, I mean, for the gas, I mean, we don't have a lot. We have very limited manufacturing in Germany. We sell in Germany, so the indirect impact on closed towns might be something, but there's nothing we can do about that. But for our own manufacturing in Germany, we don't see any... The only issue we have is with the gas supply in Italy for our wheel systems activity. That is the only kind of concern we have. We're working with different contingency to manufacturing in different sites if that happens. But, I mean, we don't see that as a major thing for us, honestly.

Perfect. Thank you. And then I have a last question on working capital. And I obviously understand the fact that it's going up together with sales and probably also with pricing and FX. but still you write in the report that you are building some buffer stock. So I just wonder what are your expectations for the working capital for the coming quarters? Do you expect to lower your inventories or what's your planning there?

Yeah, we expect that we should have peaked the inventory here now in June or July and then it should start to falling down step by step here during the second half of the year.

But this building extra inventory, we talk about 10-20 million euro, so it's not really a major item.

10-20 million euro, yeah.

Perfect, thank you. And the next question comes from the line of Erik Goldring from SEB. Please go ahead.

Thank you. I have three questions. The first one on CapEx, if you extrude wheel systems for this year, 1.4 billion in total, where would that be, X wheel systems?

I think there will be around two-thirds of, I mean, you can more or less take out one-third of the 1.4, and then you will be close to the full year. I think that's the best I can give at the moment.

Second question, and maybe you said it, but how much of the 11% organic growth, what's

We don't want to give the details on it, but the majority volume, let's put it like that.

Majority volume, okay. And then the final question, if you could say something about, I mean, you've only seen a bit of a stabilization in the order book towards the very end of the quarter, but still there are, I guess, decent indicators out there that would tell us that tougher times are coming. In terms of contingency planning and you preparing for a potential downturn, where are you in that thinking now? Is there always a contingency plan for every division that you can pull out, or how does that work? Do you have capex plans that you would have to execute on even if things turn worse? If you could just say a bit about how you potentially prepare yourself for week in a month.

We are always having, as you hinted, always, let's say, continuous plants, always having room. But I mean, you have to say this weakening, of course, we're coming for a very strong organic growth. And we do expect organic growth also in the second half of the year. I mean, our different scenarios is still showing a solid organic growth in the second part of the year. It's only that we do foresee that it's probably not going to be as high as it's been in the first six months of the year. So we are not kind of... at the moment at least our kind of plans does not include a dramatic downturn here in the second part of the year we're still going into the second part of the year which i already said with record i order books and we have very let's say uh uh very good coverage on on on uh current orders in in to tour let's say to be able to deliver organic growth force in the second part of the year so so we of course always look into this but we don't really see that being uh an issue here for the next six months at least. So of course things can change and if things change we will be speedy in implementing new actions. But at the moment that is not really even close to our kind of core scenario. Thank you.

And we have one more question from the line of Hampus Singelow from Handelsbanken. Please go ahead.

Thank you very much. Two questions for me. It's coming back to price increases. Have you seen the full effect of the price increases that you've implemented, or should we expect more on that moving towards the second half of the year? And given what you see cost, how should we then think about the operating leverage for the second half? That's my first question. Second question is more general. I know that you have your shortlist on potential acquisitions and some time ago you mentioned that could be up to 200 companies that you're monitoring. And my question is that given that we've seen a quite hefty market revaluation of listed companies at least, Have these guys been softening a bit on the price tag? And if that's the case, could we expect some intense activity from you guys on the back of that? Those are my two questions. Thanks.

Yeah, the price increases, we have more price increases kicking in. I mean, the overall cost inflation has been fairly substantial also in Q2. And I mean, even though we are quick and we are implementing price increases, I mean, we believe in a very let's say uh solid and quick way we do still have some pricing kicking kicking in but also some cost increases kicking in so we do expect ourselves to be uh let's say well in line with the cost increases and price increases but there is more we have not stopped increasing pricing let's put it like that which refers to uh to let's say m a i mean it's still Of course, this overall market sentiment is impacting also the M&A market. We are trying to make sure that we get benefits from that, but that is an ongoing discussion. There are still a lot of companies out there which are for sale. Since we are in most times biased, we are trying to talk down the price and the sellers right to hold on to to the price they are not increasing the pricing anymore any evaluations anymore let's put it like that they are more trying to to uh to keep the valuations where they are um so that's an ongoing discussion but also in most of the cases where we are kind of looking we have let's say quite a lot of synergies as it is bolt on and all of that so it's more to get them to execute so we believe the buying multiples is still attractive, it's more to get them to get the close. So we are working on a few smaller bolt-ons and there is also a few bigger ones out there that is something which is more where we need to watch and see if we can agree on the valuation. So it's difficult to comment on these samples but I mean for sure there is plenty of discussions ongoing and then at the end of the day we need to decide whether we believe the valuation is good for us or not.

Thank you.

We just have one more question from Calbo Chris from ABG. Please go ahead.

Thank you. I just had a follow-up on your comment about how aerospace is developing nicely for you. Just out of curiosity, do you feel that you have any relative you know, relatively strong position within narrow body compared to wide body, or if it's possible to say, you know, that you feel you have a stronger position with Airbus compared to Boeing, for example. Just how to think about the market development.

We are well positioned in kind of all kinds of aircraft. We are leading in a few landing gear. We talk actuators, which is controlling the wing flaps. We are also on the cold side of the engine. But for us, it doesn't really matter which aircraft it is. We are well positioned in all of that area. So, I mean, as I say, now it was this Harbour air show. I don't know if you know that there was an exhibition here actually early this week, which is kind of every second year, the biggest air show. And it's really booming. I'm going to say it's booming. We talk about tens of percent. I mean, I shouldn't say, but I mean, some of this figures very, very high order growth. in this area as you know there's more airplanes so it's more a matter of capacity at the moment than actually a matter of demand so it's really really booming in the aerospace industry and it's booming all over and for us we have a good position both at Boeing and Airbus so we know at the moment of course Airbus is the one Winning a little bit, but now also I saw that there was a few big, big orders being placed also to Boeing. I can't remember which airline it was who ordered 100 airplanes the other day, 737. So, of course, but for us, it doesn't really matter. I mean, we are benefiting from orders wherever they kick in. And, I mean, for us, it's, once again, very, very strong order growth in aerospace.

All right. Thank you.

And we just have a follow-up from Claes Paulin from Citi. Please go ahead.

Thank you. Thanks for taking my follow-up. I had to jump the call, maybe you covered this already, but you highlighted this depreciation effect in this continued Frederick. It looks like a 151 million boost, and that was mainly in wind systems. I just want to clarify how that was split between wind and printing blankets, which I think is the case, right?

By far, I mean, almost everything is linked to the wheel system of the 151. There is a small part, but only a small part is linked to printing.

Yeah, so the underlying margin then, I guess price-cost pressure, obviously it's the energy-intensive wheel system, but the underlying margin is more like, you know, 10-11%?

No, no, no, 15% is true operational margin.

Very good, very good.

okay including uh full uh depreciation and amortization excellent very good okay now i got a question from it i just want to clarify thank you and as i know for the questions i'll hand it back to the speakers good thank you and uh thanks i mean once again i mean travel we're very happy delivering a record quarter and i mean we also very positively looking all to the future. We're going into Q3 with a record high order book, and we feel confident that we're going to continue to deliver good results here in the foreseeable future. I mean, of course, we are not in any way trying to hide away from this higher inflation and the potential impact from higher inflation. We are preparing ourselves for a slightly lower growth in the second part of the year. Once again, we do still expect growth. in solid growth in the second part of the year, and we do expect to continue to deliver good also with the price increases and efficiency gains to compensate for this higher inflation that we see. So we are very confident going forward in most aspects, and we are in more or less all aspects. Of course, we have our challenges as well, and that is why we are here, and that is why we see possibilities to further improve. Of course, we're working hard also to close these deals for sprinting solutions and then wheel systems. And then that's a fully focus on this new, exciting Trelleborg with a better business and more stable performance and better overall margin. So hopefully keep in touch on that one. And if you have any further questions, I can Christopher always available and Frederick and myself will also attend a few investor meetings. So hopefully we'll run into you here in the next few months. So take care, enjoy the summer and speak to you later. Thank you.

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.