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.