Trelleborg AB (publ)

Welcome to Trelborg Q4 presentation 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speaker's CEO Peter Nilsson and CFO Frederick Nilsson. Please go ahead. Thank you.

Welcome to all of you to this call where we're going to present our year-end closing figures and then with a particular focus on the Q4 performance and as usual I'm going to kick off giving some overall intro and then also some comments on the business areas and then hand over to Fredrik to guide you through the more financial part of the report and then we're finishing off with some let's say headlines on the running quarter and then also finishing off of course with the Q&A session. So as usual also we're going to use the slide deck which has been on our web page for some time. We're going to use that slide deck to guide you through this presentation. So I'm going to refer to that one and starting with that On the first page, Trelleborg Interim Report for Q4, October-December 2022. And then turning to page two, Agenda, which I already introduced, starting with some highlights, talk about the business areas, Frederick, go through the financials, and then do a summary with some comments also on the outlook for the running quarter, and then finishing off with the Q&A. So quickly then moving to page number three. heading record year close with the strong quarter we're finishing off in a good way a very good quarter for us sales ending up at all-time high quarterly sales at a little bit north of eight billion swedish for continuing operations of course that is something also that aware that this is kind of excluding wind systems i'm going to comment a little bit about that specifically but looking at continuing operations we have a very strong increase of some 35 percent organic then is 15 currency still a big beneficiary adding 12 and then also m a which is then primarily driven to two months of minnesota rubber and plastic which we're also going to comment a little bit more specific about ebit growing with the same as the sales ending up at the a little bit north of 1.2 billion swedish which is then corresponding to a margin which is 50.3 which is kind of equal to 50.4 we had a year ago so same same margin in the quarter and already commented and this is the highest quarterly sales ever and also highest ebit for q4 we still have some items affecting comparability ending up in quarters 115 which is well within the guidance we have for this for the full year um also finishing off the year with a very strong cash flow i mean we are happy of course with overall performance but kind of particularly on on the cash flow with ending up very strong which is then in total then pushing us to have a less a better operating cash flow for the full year uh than last year so so very strong cash flow in the quarter and we also know it with i trust all of you know that we also in the quarter I've had Minnesota rubber and plastic in the figures for two months, consolidated from October 27th. I'm going to comment a little bit more about that also later on. There are also two minor acquisitions, consolidating quarter MG Silicon, which is then adding some aerospace capabilities for TSS and some other industrial applications, and then also for IST, which is focusing on the aftermarket for pipe repair, pipe seals. which is also consolidated, but not really impacting the figures that much. Turning on page four, commenting about organic sales, fairly equal organic growth all over our three regions. Europe growing by 13%, Asia and other markets by 14%, even though, of course, like everybody else, China has been some kind of subdued, even though we managed it fairly well. I must say, but overall Asia doing good. America stands slightly stronger than Europe and Asia. But overall, as I already started on, the average here, we talk about 15 organic, which is fairly equal all across the regions. Moving to page five, agenda slide, and moving quickly over to comments on the business areas. On page six, Then talking about industrial solutions, we have a heading, strong sales in EBIT growth, which is actually the same heading as we have on this slide, as we haven't seen in solutions. Fairly good development all over, organic sales plus 18%, very strong. In the quarter, we have particularly strong sales in Europe and North America, and then we have solid development in Asia. So overall, good development in all geographic regions. Continue to see this, which you already commented in the last quarter, slow down in european residential construction which is hitting industrial solution and also a little bit slow down also in order intake into the infrastructure part of it but for there we are not really reading in the lowest overall demand it's more that we have very strong order book in that area and that is always a bit bumpy but nevertheless it's a bit slower order intake also in that area in the quarter ebit and margin um well managed here also as everybody else i guess we are hit here but also inflation in a multiple of aspects but that didn't manage in a good way and we managed them to grow ebit in line with with sales or slightly slightly better which is then putting the margin to 0.2 percentage points higher than last year so well managed in a quarter and especially then managing these higher costs which is then fully offset by pricing and efficiency Acquisition of ICT being added here, very short in the month, which is short in the quarter, but that is something we're going to see more benefits from going forward. Then moving to page seven, and talk about steel and solutions, same heading as on industrial solutions, strong sales and EBIT growth. Organic sales up by 12%, and of course our M&A adding, especially Minnesota, rubber and plastics then adding sales in the quarter. Also fairly even from a geographical point of view, good growth in all major geographies. And the major here is basically saying that China was a little bit subdued, but that was compensated by good growth in other parts of Asia. We also note that especially sales to healthcare and medical and aerospace increased significantly, which is kind of a strong growth in sales and also strong water intake in these two segments. We also note a little bit slight change in the quarter related to automotive, which is also, we say, a development favorably. We also see a pickup from some well-known issues earlier in the year. Solid demand in industrial in the quarter, even though we note also with this much smaller dimension than if we look at the residential construction, but we see a little bit slower on industrial, which we read in Maybe not that much down in the underlying demand, but we do believe there is some inventory reductions hitting us, and it's also going to hit us a little bit going into Q1. So the underlying demand is still seen as fairly solid in most segments, but once again, we see a little bit slowdown in Q2. in the kind of demand for this running quarter and potentially also for Q4 and also for Q1 which we once again read in a little bit to be some inventory adjustments. EBIT growing slightly lower than the sales but nevertheless good and we also note that the margin which is already in common as well is somewhat impacted by the integration of MRP which is coming in then with with a high PPA and also with, let's say, not a lower margin than the overall ceiling solution. So that is kind of pushing down the margin. So if you look kind of outside of MRP, the underlying margin of solution was basically spot on compared to two years ago. We also know with satisfaction, even though MRP is the biggest one but also MG Silicon is a nice bolt-on acquisition for us which is kind of strengthening in some aerospace niches and also creating opportunities to leverage the technology we have in them or adding by acquiring MG Silicon is also something that we're going to benefit from in other parts of the world and Europe as MG Silicon has been primarily focused on Europe before. So we're all a very solid Jone Peter Reistadler, quarter for ceiling solutions, but of course heavy influenced by by the integration of Minnesota rubber and plastic and with that topic move to page eight a few comments on on Minnesota rubber and plastic, as I already commented. Jone Peter Reistadler, If you move to page eight coming here and Minnesota rubber plastic, as I already said consolidated from 27th of October. And we also note, although minor, but we have here in the first few months, we have some extra acquisition integration costs in the quarter, which we estimate in the range of a million dollars, roughly 10 million Swedish, which is kind of extraordinary costs in the quarter hitting the underlying performance. We also more or less completed now the PPA allocation, and we can now give a figure for that. So it's roughly, we estimate it to be 225 million Swedish for full year 23, which means the running rate for these two months that they had in Q4 is 37. And then also, which I already commented, the ceiling solutions kind of excluding MRP was spot on to Q4 a year ago. We also see here already now in the early integration, we say we have committed substantial synergies by integrating rubber and plastic, and this is being confirmed here in the first few months of full ownership. Of course, it's going to take some time. get it fully into the books but we are definitely we are not changing our view on this and we still believe firmly in that this is going to be delivered in the next two to three years. So we're very happy for owning Minnesota Rubber and Plastic and we're eagerly looking forward to integrate this into Sealing Solutions in a good way. uh moving over to page nine and talking then about the tradable wheel systems and as i already mentioned in the beginning of course that is reported as ssl for sale but we still own it and if you then move to page 10 to take the performance of wheel systems uh very strong development in the quarter on the back of good demand and good let's say price capitalization organic sales up by 10% and especially we are kind of benefiting in compared to the market that we are more exposure to the original equipment which is then growing in basically all tire categories and most geographical markets also here most means that China is a little bit impacted by the China situation but for the rest of the world if you're growing we note also with satisfaction that North America is developing very nicely for us and that is softening, that's a noticeable softening is in the aftermarket, especially for agricultural tires, but also material handling tires. And that is something also, which is in a way always happening when people are starting to believe in lower raw material pricing and all of that, and they start to speculate that they are not buying kind of in line with underlying demand since they are focusing on lowering inventory and then try to buy the tires a bit later at a lower prices. Nevertheless, well managed in total and we are also with satisfaction here growing the margin from 10 percent a year ago up to 12.6. So good performance in the interleaved wheel systems in Q4. Turning to page 11 and some brief comments then on sustainability. This is kind of something that we now put on report and we are working on and we know Good development in those areas. This is, of course, new KPIs. And I trust you're aware that, I mean, we're always going to live a bit higher in Q4 and Q3 due to the seasonality. Since we are mainly exposed to the northern hemisphere, then, of course, this colder climate is adding some CO2 in the quarter. But we look on a year-on-year performance. It has been a very good development for Trelleborg in the air. And overall, our CO2 is down by some 10%. uh year on year for the full year so turning into page 12 which is one of the biggest drivers for for this and that is the share of kind of renewable and fossil free electricity in relation to total electricity which you see here that also q4 i've had a very strong strong growth and this is something we continue to focus on and something we continue to believe or or fully trust that we're going to continue to see improvements in this area as we move on. So good development also in this main sustainability related KPIs. Turning to page 13 agenda slide again and financials and then handing over to Fredrik to comment on this. Thank you Peter.

Let's then move to page 14 and looking at the sales development. Organic sales increased by 15% in a quarter with organic growth in both business areas. looking at the report net sales increased by 35 percent we have eight percent growth from acquisition during the quarter while currency added 12 percent and then if we look at year to date sales were up 27 percent with an organic growth at 14 percent if we then move to page 15 looking at the historical organic growth we can see that the fourth quarter was another good quarter with organic growth And as you can also see in the graph, we have now been on or above our sales growth targets for the last eight quarters. Looking at page 16, showing the quarterly sales around 12 months for continuing operations. Sales in the quarter amounted to 8.1 billion, which was an all-time high for continuing operations. Moving on to page 17, We had a record high EBIT and EBIT margin for fourth quarter. EBIT in the quarter increased by 34% to 1.2 billion with a strong profit growth in both industrial solution and ceiling solutions. In the result, there was also positive FX effect from translation of foreign subsidiaries of 75 million compared to the corresponding quarter last year. EBIT margin for continuing operations, excluding items affecting comparability, reached 15.3 compared to 15.4 for the corresponding quarter last year. In both industrial solutions and ceiling solutions, there was a good sales growth supported by price adjustment to offset the higher costs. If we then move on to page 18 and looking at the EBIT and EBIT margin on rolling 12 months, we can see that EBIT continued to increase while the margin was flat in the quarter. If you look at the full year EBIT of 5 billion 66 million with a margin of 16.8%, which was a very good improvement compared to prior year. Going to page 19, profit and loss statement, looking at some more details in the income statement. Some items affecting comparability in the quarter, $115 million, and that was entirely related to risk-assuring costs. Continue down in the P&L, the financial net increased from $34 to $74 million in the quarter. This was mainly related to higher interest costs linked to the acquisition of Minnesota rubber and plastic. The acquisition is then financed with a short-term loan that, of course, will be repaid as soon as we receive the proceeds from the wheel divestments. We have also continued to buy back shares in the quarter. And finally, we are seeing increased interest rates. The tax rate in the quarter amounted to 27%. I would just like to reemphasize that the underlying tax rate and the guidance we have for continuing operations still is 26% for the full year. And then if you look for the net profit for this continuing operation, we see a good, as Peter mentioned, good improvement for wheel systems, but there is also support from this where IFRS 5, where you stop the depreciation duties as it held for sale, which was impacted by 167 million in the quarter. Moving on to page 20, earnings per share. For continued operation excluding items affecting comparability, earnings per share was up 49% from 2.28 to 3.40 in the quarter. And if we look at the total group, earnings per share increased by 68%. If we are moving on to page 21, looking at the cash flow, we have a strong cash flow in the quarter, reaching 1,678,000,000. Cash flow was positively impacted by the higher earnings generations, and then also very efficient working capital management in the quarter. And then finally, it was slightly offset by a little bit higher investment, which was in line with expectation. Moving on to page 22, the cash flow conversion. Over the last 12 months, we have a cash conversion of 74%, and that just reflects the higher business activities, which has required some additional working capital during 2022. Moving on to page 23, gearing and leverage development. You can see an increase here up to 56%, which is entirely related to the acquisition of Minnesota rubber and plastics. Net debt was of course also impacted with our share buyback. which amounted to 384 million during the fourth quarter. And net debt in relation to EBITDA reached 2.4 by the end of the year. Moving on to page 24, returning capital unemployed. You can see it's reached 15.9% in the fourth quarter. And the capital employed increased due to acquisitions, a little bit higher working capital due to the higher sales. FX rates also have an impact, but that was well offset by increased profitability up to the fourth quarter. And then I will finish off on page 25 with some financial guidelines for 2023, and this is continuing operations. CapEx of around 1.5 billion, restructuring costs estimated to be around 250 million, amortization of intangible assets 500 million, and then underlying tax rate of 26%. By that, I would like to hand back the microphone to Peter.

Great, then moving to page 26. Agenda, moving over to summary and some comments on the auto for the running quarter. Page 27. Record year in many aspects for us. Good sales. a little bit north of a billion which is a strong increase of 35% which is then both organic sales primary driver but also currency and then also some M&A then once again primarily coming from Minnesota rubber and plastics EBIT growing with the same which is then roughly coming up with the margin as we had a year ago and this means that the highest quarterly fourth quarter sales and EBIT to date for us Jone Peter Reistadler, Items affecting comparability in line with guidance and a very strong crash flow in the quarter, which is then of course benefiting us with getting our balance sheet even stronger and. Jone Peter Reistadler, But then already commented also Minnesota important acquisition for us, which is kind of changing the game plan a little bit game plan for ceiling solutions, which is. making us as strong in North America or in Americas as we are in Europe already with our ceiling operations and on top of that also creating some further strengths in specific industrial niches so a very nice acquisition for us which is highly synergistic which is now we are working hard to get these synergies into the P&L also two smaller bolt-on acquisitions Both of them strategic and reinforcing us in interesting areas but still on a bolt-on kind of acquisitions. Moving on to page 28. It comments on the outlook. We changed outlook a little bit. The demand is expected lower. We are running with a very high organic sales and we don't believe the organic sales to be the same in running quarter. um so this is no drama in this and we see that the the only kind of area where we see let's say a firm underlying demand going down is still in the residential construction but we also know that this is a bit small downtick also in industrial sales which we are reading not really linked to the underlying demand but more to more inventory focus or more cash flow focus from some of our customers which is kind of lowering the the sales here in the first few months of this year but also to say that we see also continued yeah very strong development both in aerospace healthcare medical but also now automotive also beneficial in running quarters a mixed bag but overall we believe it's going to be lower sales lower demand in in this running quarter and then of course with this small add-on we still live in a very uncertain world and of course there is this your political situation in a few dimensions which needs to be also considered so with that leaving this and moving over to page 29 and then quickly to page 30 and maybe before opening up on q a and a few comments on the divestment here we didn't comment that on wheel systems i mean this is running according to plan and we believe that the wheel systems divestiture will be executed let's put it that in the next few months we are waiting only for a few let's say final approvals from a few jurisdictions on terms of getting the acquisition let's say approved we still firmly believe that there is no issues in this. It's more a matter of timing and capacity for some of the authorities looking at this. We do have approval already in place for the vast amount of the approvals needed, but we're still waiting for a few minor... Not a minor, I shouldn't say. We are waiting for a few approvals from a few authorities. But once again, no change in our view on this. So with this final comment, we're opening it up for a Q&A session and invite everybody who wants to address questions to us. So please go ahead.

Thank you. If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Klaas Bergland from Citi. Please go ahead.

Thank you.

Hi, Peter and Fredrik Klaas at Citi. So first on the outlook of lower demand into the first quarter, I get this to slight growth organically year over year. And I'm curious if you could help us with the price mix within that, if you think this is still I single-digit 8% to 10% into the first quarter. Yes, we get a sense for the volume development now into the first, whether this is trending down perhaps negative 5%. And if you could comment on how much this is, as you alluded to, destocking in the construction end of your end markets relative to any softness on the industrial side, effects from earlier pre-ordering, et cetera. I'll start there.

Hello.

Class Burge Line City, your line is now unmuted. Please go ahead.

Hello. We're having some technical issues with the speakers. We'll be back soon. So,

This call is being recorded.

Hello, we are back now. I don't know what happened. Claes, can you hear us?

The next question comes from Claes Bergland from Citi. Please go ahead.

All right, let's give it a go again. Can you hear me?

Yes, can you hear us now, Claes?

Yeah, now we can hear you, finally. Sorry for that.

I'm happy that you take the blame for it. Exactly, now I heard it.

I heard from clients that they couldn't hear you either, so it wasn't only me. So, thank you. First, maybe you heard me then.

Sure, sure.

Just to keep it short, the price mix relative to the volume here into the first quarter.

I'll start there. The vast majority, I mean, we expect the volumes to be relatively flat in Q1. Might be a slight positive, but I mean, we talk low single-digit volume growth. So that is kind of what we believe at the moment.

But does that include the pricing? So obviously pricing, you have a carryover.

Then pricing comes on top of that.

Got it. OK, so organic can be higher than the low single digit class. OK, cool. OK. My second one is I'm thinking about the backlog and how this extends through the year coming back. on potential pre-ordering. We've seen several companies in the sector missing expectations on orders following early pre-ordering ahead of price increases. If sales are then up high single leaders, including pricing, what do you see on incoming orders, Peter? And how long does your backlog extend when you look at the current lead?

But honestly, I mean, to be very open about this, it's a bit tricky to evaluate at the moment. I mean, what we see, the order intake kind of for short-term orders is still very solid what we are a little bit missing is the long-term orders which we had a year ago we had kind of six to nine months pre-ordering and we don't have that anymore so that is why we look at the order book it's actually on a year-on-year basis still higher than a year ago the order book and i mean but what we are kind of missing is the long-term orders which we had a year ago and that was kind of more as you say pre-ordering early ordering that is why we see kind of the short-term demand in the demand we don't estimate or believe that to be down but but people are a little bit more careful buying just to put on stock to to be feel safe but it's still if the early days and this is something which is kind of changed in in the last 30 days in a way so so that is something where we still have to wait and see really how it develops as we are not kind of concerned about uh the start of 2023 really but I mean of course there is still some uncertainty if you look beyond the first two quarters. A year ago we had the same longer order book if you understand what I mean but I mean the short-term orders is not really any big change.

I understand it is very tricky to know. I just wanted to make sure I got that right on

We read it that some of our customers, especially in the industrial area, is becoming more careful on pre-ordering and they are kind of lowering the inventory somewhat.

My very final one is on the cost inflation. I'm trying to think about the gap here versus pricing. And yet again, a solid drop through and you still have a lot of cost running through the P&L. Pricing is still solid. When you think about the cost development now into the first quarter, what areas do you think can start to improve? We know component costs are valued at a still high, but you're thinking of energy, whether that will help you already in the first quarter. I mean, ex-wheel systems are not that intense on energy, but still. And then if any, raw mats can also help you support. There could be even more margin expansion if you could hold on to the pricing there.

But the energy is not really a big thing for us. It's very small figures, honestly, for us, let's say outside of wheel systems. Okay, we're monitoring it, but it's not really a big issue for us. So we are working more in the raw materials where we see indications that the raw materials is going down, but it's going to take a few months before it's really coming into the accounts. We are also slightly high on inventory, even though we have good cash flow in the quarter, we still have, let's say, a few tens of millions of euros that we want to lower inventory. And so we have also bought up a little bit on raw materials to be safe. So I think it's going to make this kind of lower inventory takes a little bit longer to get through the P&L. But we do see a deflation in overall in kind of raw materials. I mean, we have some still some raw materials supply to Europe, especially where they're still or high on energy costs and try to push that through to us. That is a discussion we have. But I mean, if you see raw material supply outside of Europe, we already see a clear tendency that that is going down. But it's still difficult really to read how much it will go down, but it will not continue up. And then, of course, we have the salary inflation that we are watching carefully. I mean, it's already kind of been hitting us in North America and in Asia. And there, of course, Europe, where there are some uncertainty here in the next few months, exactly what's going to happen on that one. So that is an area where we need to watch. But I mean, it's not for us, not as important as the raw material inflation. So we think that overall balance here is actually, in a way, maybe not for the very first few months of 23. But I mean, if you look a little bit further into 23, We believe that we're going to see a positive mix from this kind of deflation raw material, even though we have a push up on some labor costs and salary inflation. So that is the way we look at it.

Perfect. Thank you.

The next question comes from Eric Gorang from SEB. Please go ahead.

thank you a couple of follow-ups on a discussion on pricing here uh wheel system obviously a business where you need to cut prices if all materials comes down a bit but what about the industrial and ceiling now do you think you'll be able to hold on to it all the increases you've done or or any chance you would have to follow to the extent uh costs or to to come down material here at some point during the year um and then the second question i appreciate the comments on on demand trends here and in general industry if you go a bit far

give a bit more color if there's a specific segment where you see a bit more of this sort of the stocking inventory cash flow focus and also from a regional perspective what you're what you're experiencing thank you um on the the let's say the price capitalization i mean generally uh excluding well systems as you already said eric i mean then then we have we are spec'd in i mean the switching costs are high so we believe that we will they hold on to to the raw materials raw material potential let's say deflation in a fairly good way and then of course that needs to be balanced also with the new orders it's always a discussion with the customers so that's going to be individual cases where we might give something back but we will only give back if that is a benefit for us if we don't have a benefit we don't feel that we need to give back so we firmly believe that we're in a good position generally in this situation going up raw material going down raw material we believe that we will be able to manage that in a good good way both ways um and the second question sorry i'm a little bit short uh segment regional regional if you talk regions then i mean for demand i mean u.s fairly strong even though it's some weakening and maybe not as strong as it was earlier but it's still let's say a strong demand overall Europe is, of course, soft with uncertainties, and Asia is actually quite good with the exception of China, but we are actually quite positive on China here now. Of course, we have Chinese New Year, we have this COVID, but our kind of reading of the situation in China is that we at the moment believe that the second part of China is actually going to be very strong. We see there is a good underlying demand, and then whether that's benefit. I mean, it's not going to see anything in Q1. I mean, that's going to be a very soft Q1 in China, both related to COVID and Chinese New Year and probably a combination thereof. And then going into Q2, we expect it to improve in China and then expect how much is kicking in in Q2 or Q3, Q4. But we expect China to be strong if you look at the full year 23. So generally positive in Asia, generally relatively positive in north america and then europe is the kind of the little bit question mark on on uh overall kind of inflationary impact so that is the way we look at it and looking at the segments uh industrial segments then of course there's a lot of sub segments but if you can say some sub segments where we see a weakening or a destocking is something which is related to more consumer we have a a market in trelleborg where we coffee machines and electrical bikes and showers, let's say high-end shower heads and stuff like that. It's very specific segments. This is more kind of segments with more consumer oriented. And there we see this talking taking place and people are becoming more careful on that one. And then, I mean, the overall big market for us in this area, is more what we call fluid power, which is hydraulic and pneumatics, which is a lot of construction equipment and hand tools and this kind of stuff. And that's also where we see a destocking. And that is where we see the underlying demand is actually quite good. I mean, as you know, the construction equipment, original equipment makers of that is still holding up fairly well. Mining is holding up fairly well. So we don't really see the underlying segments there struggling at the moment. But that is also where we see a destocking from some of our customers and that is something we're of course we're watching carefully so but once again so this is i think what we can comment i don't know if frederick want to add anything or if you have a follow-up question on that eric i mean i try to be no that's that's that's fine much appreciated i have one question for frederick though on the billion and a half in capex for this year is that

Is that somewhere where you expect continuing operations to be relative to sales? Or is it higher or lower? What kind of precedent does that CAPEX guidance set for the next couple of years?

It's higher because there will be some additional CAPEX 2023 linked to Minnesota rubber and plastic. And then we're also in our internal plans have some further expansion in Asia.

As I say, we have not really commented in detail, but we have a few plans or new investments, especially aiming at Asia to expand our capacity in Asia. I mean, we are outgrowing our facilities in Asia and we need to expand the basic capacity. We have not yet announced it, but in the estimates we have put in, we can say two, three new factories in Asia. So, and that is kind of extraordinary investment simply to upgrade the presence in, especially in Asia.

Okay. Thank you.

The next question comes from Carl Bockwist from ABG. Please go ahead.

Thank you. Good morning. Two questions. The first one on there on Minnesota and the 250 million in synergies, just to reiterate, that's just the cost synergies that you were talking about here and not the kind of total potential synergy benefits from revenue, et cetera. And number two, the timeline of these synergies, when do you think they will start to actually have an impact if already in 2023?

The majority of the synergy is actually linked to sales so that is a misunderstanding and that is where we see strong synergies in the way that we are cross-selling that Minnesota is very well represented in some of the kind of fully blue-chip American customers where we are not that well represented but we combining the offering of Trelleborg in Minnesota we have a much wider offering and we Previously, we used the example of having kind of ACCA in Europe, where we sell some thousand products to them, while to Yonder in the US, we only sell 300 at the moment, together with Minnesota. So we see substantial kind of cross-selling opportunities in that. And also, especially Minnesota has been very focused on the North America, and they're very strong in certain segments, especially, let's say, potable water, drinking water, and also very good in some food and beverage applications. And by kind of utilizing their skills in this, we believe that we can also globalize that offering in a completely different way. And the third kind of big sales unit is actually following the American customers abroad, where we, by having this very strong footprint and presence with them in North America, we're also going to cross-sell to them in Asia. I mean, Minnesota has not really had a good presence in Europe or Asia, while now, together with Trelleborg, they will get, let's say, more, as we always tell them, in a local presence, global reach, what they have been doing. So we firmly believe, and there's, of course, very strong kind of actions already being implemented on that one, but it's going to take some time. It's going to be, so that is why we said two, three years. while on the cost side of course we have some cost synergies as well we have not given that but there's also substantial cost synergies and these cost synergies is kind of already starting to be seen in the figures and that is something that's going to be implemented fairly fairly soon so that is i mean so the cost side of it is going to be fairly quick on that one even though we have not we have done the reorganization internally and done some cost savings here in some management levels and stuff but but we are still waiting for um announcing of some further synergistic kind of actions in in terms of cutting the costs so that is the way i mean also once again try to be fully transparent on this one and that is the way we look at it with minnesota understood a quick follow-up just on the comment you made on on the orders there and the pre-ordering tendency before

Could you give some kind of guidance of the duration of your backlog now? I understand the differences between sealing and industrial, but are we talking kind of like normal time from order to delivery now in sealing, for example?

We are still tight in some areas, but we still have a good loading. And of course, once again, we have a bigger order book in total going into Q1 this year than we had a year ago. But we had very strong orders a year ago, but that was once again, it was more longer term orders. So we have a good visibility both in ceiling solutions, industrial solutions, at least for the next three months, and then potentially a bit beyond that as well. And it's still, even though I say it's kind of getting a bit easier and these component problems, for us at least, for raw materials and stuff like that, that has been going away, but they still do exist in a few areas. uh so it's not like the kind of back to i don't know what normal is but but it's not back to where it were a few years ago so we're still suffering from lack of lack of capacity and lack of raw material in a few areas but it's definitely getting a lot softer compared to kind of six months back if you put like that but but it's still not kind of fully out of the woods in that respect but it's getting better and i think that is also uh way we read it at least that is also why the customers is a bit more reluctant to put pre-orders because they see that we our delivery times is going down and i don't need to order six months in advance anymore and of course beyond that it's also like every like ourselves of course we are also kind of believing that the raw material is going to go down and then of course we want to wait a little bit and order is as late as possible so it's also some it's not only about um of availability of components and products is also a matter of kind of tactical tactical actions in order to try to get slightly lower pricing going forward if you order a little bit later so it is a that is the way we read it and the way we look at it understood thank you

The next question comes from Hampus Engelhau from Handelsbanken. Please go ahead.

Thank you very much. My question is more related to Minnesota. Would it be possible for you guys to add some more flavor on the performance in Minnesota during the quarter, like organic growth, sales, and also EBIT margin during the quarter? And if you have some more visibility on the PPA,

just to have a sense for how the underlying performance is in ceiling yeah that's my only question thanks yeah i mean two two months in and then the first month was kind of messy if i may say humpers so of course it was a bad month in in november uh but also a burden by a lot of one of course some cutoff course and all of that so we don't cannot see really let's say really on November, performance as a normal month. And then comes December with Christmas and also God. But if you look at performance in Minnesota alone compared to a year ago in Minnesota, independence is kind of roughly the same with the exception of that they're having problems in China. Because China, for them, has been a bigger problem for Minnesota than it's been for Portugal. But overall, Or should I say, we don't really want to give any details here because we are still working through it. And of course, we will get more favor on this. But of course, from an EBIT point of view, they are fairly low due to that they have a very high PPA. So, of course, I mean, here we're looking at there is a few percentage points lower than overall ceiling solutions, which was the case as we, let's say, made acquisition. I don't really, I don't know Fredrik if you want to add anything on this one or Kristoffer if you want to let's say put some more flavor on this one.

No, I think it's more to looking at if you look at ceiling solution excluding MRP, the margin was flat compared to Q4 in 2021. And then you have the impact in the quarter. And that's also what I was looking for, thank you very much.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thanks. Thanks all of you for listening in on this call. When we talked about our Q4 performance, we are of course excited here in Trelleborg, leaving a good quarter, but also with a lot of action also going to happen here in the next few months as we close wheel systems. And of course, we're going to get money and we're basically going to be debt free. I mean, that is money we're going to get for this is more than we have in net depth at the moment so that is of course creating possibilities for us going forward which we're gonna of course looking at now and try to use that we make sure that we use that wisely in a way of course we're still tracking potential acquisitions but we're only going to do good acquisitions of course and if you cannot find it then of course we need to find other ways of creating benefits for our shareholders so that's going to be few exciting it's going to be exciting here for Trelleborg because we are kind of into this stage where we're going to change the setting completely and and open up new opportunities for us so we are eagerly looking forward to keep contact with you and getting back if you don't hear then of course we're going to get back at least after q1 so do take care and if any follow-up questions then of course i'm available Fredrik is available and especially Christopher is available to support you in any way he can or we can. So do take care and keep in touch. Thank you.