Trelleborg AB (publ)

Hello everybody and welcome to this half-year report of Trelleborg and more focused on our quarter two performance of 2023. As usual in these calls Peter Nilsson is starting the call and also ending it and in between also I will have Fredrik Nilsson our CFO assisting with the financials and also in the room here we have also Kristoffer Sjögren, Head of Investor Relations, if there is any questions that might be directed to him as well, so you know that he might be on as well. But kicking off and as usual using the presentation that is on our webpage as a guidance throughout this call. And turning to page two in this deck, agenda, starting off with the highlights. and then some individual comments on our business areas and then Fredrik will guide you through the financials before I do the summary and also some comments on the running quarter and then as usual also finishing off with the Q&A session. Turning to page three, heading for our quarter, another strong quarter and we are performing good and we are generally satisfied with the development throughout the quarter, sales came in with 8.7 billion which is a strong increase compared to last year an increase of 18 percent which is a split for organic sales some three percent mna nine percent and currency six percent um ebta uh up by um 14 percent to to uh 1563 million Swedish kronor, which is then corresponding to 17.9%. And maybe there a comment. I saw some of the early flashes here that you're ending up at 18.0. And this is a rounding error in our calculation is actually ending up in 1794. But then when you calculated it with full millions, it's actually coming up at 18.0. So that is the discrepancy here, which might be noted by some of you. And this is the highest quarterly EBITDA to date for us. Items affecting comparability coming up at minus 194, and we're also increasing the guidance on items affecting comparability. Fredrik will get back and comment on that in his part of the presentation. Very strong cash flow in the quarter, which is, of course, very satisfactory as well, that we see that we are managing inventory and managing accountables. managing our purchasing in a good way which is basically a doubling of the cash flow compared to two year ago with a very strong cash conversion now also in the last 12 months but also that frederick will come back and comment more focused on that also a very kind of a very um what should i say a a quarter we dramatically changed trelleborg in the way that we now finally you might say we concluded in the quarter we concluded the divestments of our tyre business and as well our printing blanket operations which then let's say is leaving this finally leaving this behind us and now we can focus on the remaining Trelleborg fully and following this we also had a capital market day in the quarter where we then increased both our financial as well as our sustainability targets which I trust all of you or most of you already i noticed we don't comment a lot about that in this call but those of you who want more of that you can go back and read on the press release from this capital market day and also of course mentioned also in the quarterly report so very let's say a quarter for us with a lot of things happening and we with a strong focus on the future of trailer book back and comment on that now that we are building a new trailer board and with a strong focus on what trailer is to be meanwhile also delivering we feel strong figures in the quarter uh moving to page four and more comments on the organic sales and here also rounding just to be also clear on that our exact organic growth is actually 3.4 so a little bit closer to to to four than than maybe some of you noted in in your comments at least yourself said analyst noted in the comments but the total is 3.4 which is then Basically, even split where we have a 3% in Europe, 4% in South America, and 4% in Asia and the rest of the world. So very evenly split organic sales in the geographical regions that we are following across the world. And page five then, agenda again, business areas. And then quickly moving to page six, which is a comment on industrial solutions. We're heading here, solid quarter in all aspects. Organic sales plus six, which is somewhat, let's say, mixed performance throughout the different segments. But nevertheless, let's say a solid plus six in the quarter. Very strong sales, especially for LNG-related businesses and also for marine solutions and port and marine operations. We also see healthy growth in aerospace, also automotive, AOE. kicking back, and also we have some nice railway projects being delivered in the quarter. Somewhat weaker sales, which is, I guess, well known. Residential construction is down with fairly sizable figures, and so certain industrial segments will be less so down. But nevertheless, we continue to note that the sales that we have into kind of wholesaler distributor networks was weak for us in the quarter. Overall, EBITDA improved on sales growth and we're keeping the very strong margin from last year, which was kind of a record high margin a year ago, but we are happy to deliver a margin very well in line with this very strong quarter a year ago. And also satisfactory, we can say that inflation, which is of course hitting us both in raw material, even though raw material is flattening out, but we see this kind of labor inflation and general inflation of course still hurting the business, but we feel satisfied with the fact that we have been fully able to compensate for this. So a very solid quarter of industrial solutions, happy with the performance and well managed in most aspects. Look at ceiling, also well managed, but here the demand picture is somewhat more mixed. Organic sales up by 1%, but of course M&A kicking in with 16% up, which is and then some currency on top of that, which means there's a very strong growth of 23% in sales in the quarter in Swedish kronos. Sales growing in America, flattish in Europe, and weaker in Asia, where we have a little bit slower sales development in China, especially for us, where other markets are somewhat compensating. But China is the biggest market for us in Asia, and we have had fairly weak sales in China in the quarter. And also overall in the business areas, we will notice sales to aerospace and healthcare medical increased considerably. We say we are investing into these segments, which is also partly an expression on the lower margin that we are kind of adding resources in order to create even better growth platforms and make sure that we create solid growth in this aerospace and healthcare medical and also in some other segments that we have deemed to be our what we call speed boats for seeding solutions. We are investing in this and we are not really focusing on this individual quarter. We are very focused on creating a platform for the future. Sales automotive increased slightly, although there was some mixed performance there between AWE and aftermarket, where AWE was strong while aftermarket, a little bit surprisingly, was a bit lower in the quarter. But we see that bouncing back. Also, industrial demand is mixed. If you look at the different geographies and we look at the different segments, we note that some of the segments, like the more construction-related segments or more construction equipment-related segments, are a little bit lower, while other industrial segments are better. Here, our view in it is that we also see some inventory reduction among some of our customers in these segments, and that is something, of course, we're watching carefully and where we are a little bit, let's say, flexible in the way we are to manage this. EBITDA improved in the quarter on the higher sales and the integration of M&A, while the EBITDA margin was somewhat down. Well known that the initial lower margin that we get from this acquired growth here, and we also, which I already commented, we are also investing, so we have some sizeable number of new headcounts here in order to create better growth for the future but overall moving forward in the right direction within ceiling solutions we are building a new platform we are integrating minnesota rubber in a good way and we are refocusing the business a little bit to make sure that we are creating a better long-term growth platform for for ceiling solutions and turning them to page eight which is a sustainability kpi we are improving as you see especially intensity but we also note here that the incoming Minnesota is not as good as the rest of Trelleborg and we see future improvement possibilities there but nevertheless overall still an improvement in terms of CO2 and we are feeling more and more confident that we will be able to deliver on our long-term targets here which relates to CO2 emissions and CO2 intensity. Moving then to page nine where we especially track two other areas of sustainability and renewable energy but also here you see even though it's a one percentage point up but also here we note that Minnesota is coming up with almost zero renewable energy so if we exclude Minnesota we have a better improvement here I think we're going if I remember it correctly from 46 up to 53 and now of course we also start to work with Minnesota and we do see great opportunities to improve on this, so we still comfortable also in this aspect that we will continue to improve considerably in the next quarters. Also tracking and also monitoring externally is our lost work cases in this one also we see even though it's a small number in total, we are not overly concerned with it, but we notice satisfaction also here that this is kind of getting better and this is also an area we will continue to invest and we will continue to improve turning to page 10 agenda financials and then leaving to frederick to guide you through starting at page 11. frederick please go ahead thank you peter looking at the sales development organic sales increased by three percent in the quarter quarter with organic growth in both business area

Report net sales up 18% in the quarter. We have 9% impact from acquisitions and currency added another 6%. Moving on to page 12, showing the historical organic growth. The second quarter was another quarter above our sales growth target. And as you also can see in the graph, we have now nine quarters in a row that has been above 8%. Moving on. to page 13, showing the quarterly sales and rolling 12 months for continuing operations. The 8,696,000,000 in sales were the highest for a second quarter. And if we look at rolling 12 months, the sales reached 33.1 billion SEK. Moving on to page 14, we have a record high EBITDA for a quarter and it has reached 1,563,000,000. And it was an increase with 14% compared to corresponding quarter with profit growth, as Peter mentioned, for both industrial solution and ceiling solution. In the result, there was also positive FX translation impact of 63 million in the quarter. The EBITDA margin, 17.9% in the quarter, which was initially impacted by acquisitions with lower margin. Moving on to page 15 and looking at EBITR and EBITR margin on rolling 12 months. The positive trend on EBITR continued during the quarter while the margin declined as earlier mentioned. Looking at rolling 12, the EBITR amounted to almost 5.8 billion and with a margin of 17.4%. Moving on to page 16, going into some further details in the profit and loss. We have items affecting comparability in the quarter, 194 million. And we have taken some initiative to adjust our cost base. That's the reason why you're seeing a higher amount during the second quarter compared to the first quarter. And I will come back with the guidance for the full year a little bit later. If you continue further down in the income statement, we have a financial net which was positive in the quarter, 140 million. as it was impacted by a non-recurring income of 218 million before tax. This was related that we closed some interest rate hedges in connection with repayment of loan when we divested the wheel business. Looking at tax, tax rate was high in the quarter, 35%, compared to 24% last year, but it was impacted by a non-recurring tax expense of 150 million in the quarter, This was due to that we made some changes in the group's legal structure after the wheels divestments. So if we exclude for that one-off charge to the tax line, the underlying tax cost for the quarter was 25%. Net profit for discontinued operations includes the capital gain for the tire business and printing blanket business. the total capital gain amounts to 6 billion 189 million before tax and 6 billion 52 million after tax moving on to page 17 earnings per share if you look at items excluding affecting comparability up nicely with 30 percent to 4.71 and if we're then looking at the total group then of course it was up quite significantly due to that we have the one of gain linked to the wheels and the printing blanket business, and then it amounted to 27.67 SEK a share. Moving on to page 18, looking at the cash flow, which was really strong in the quarter, amounted to 1,585,000,000 compared to 798,000,000 a year ago. Good EBITDA improvement, but even more encouraging, a strong working capital improvement compared to last year. Then as earlier communicated, capex slightly higher compared to last year. Moving on to cash conversion. And as Peter also mentioned, we have a good cash conversion. You can also see the trend is going in the right direction since a couple of quarters back. Moving on to page 20, gearing and leverage development. And here I would like to highlight that we now are in a net cash position. KPIs here will look negative, but that is due to that we are in a net cash position. So if you look at the reported debt ratio, that becomes negative with minus 4%, and net cash in relation to EBITDA is 0.1 in the quarter. We have also continued to buy back own shares during the quarter, and that amounted to 957 million during the second quarter. Moving on to page 21, return on capital employed, reached 13.9% in the quarter. And this was impacted by acquisitions, which initially has lower returns. I will finish off this section by the financial guidelines for the full year. Most of them are unchanged. But if we start with CapEx of 1.5 billion for the full year, unchanged. Restructuring costs, we have increased from 250 to 400, and that is due to that we are adjusted our cost base to the somewhat low demand, and also that we are working with some of the acquisitions to realize some of the synergies. Amortization of internables unchanged of 500 million, and underlying tax rate for the full year remains unchanged at 26%. By that, I would like to hand back the microphone to you, Peter.

Thank you. And quickly moving on to page 23, agenda again. The summary and some finishing off and some comments on the outlook for the running quarter. Page 24, another strong quarter, a strong sales increase of 18% and a split on organic sales, M&A, up almost 10%. Currency, of course, also benefits, as we all know, from the Swedish krona's weakness. EBITDA up by 14 percent and to a margin of 17.9 or 18.0 depending on how you calculate and this is then turning out to the highest quarterly EBITDA to date. Items affecting comparities somewhat higher on a higher level with also Frederic will comment on link to some ongoing measures to adjust in the areas where we are that's a hit with the lower demand but also to make sure that we get the synergies out of the acquisitions kind of announced. Cash flow very strong almost doubling to a year ago which then turned into a very solid cash conversion and of course also we noted satisfaction with all of you already know that we have let's say fully finalized now the disposals of the tire business and the printing blankets and that is also on the Captain Marketeer day which we held a few months ago was updated our financial and sustainability targets Once again, you can read more about them in the press release from this event or in our quarterly report. Turning to page 25, we are guiding for the running quarter to have a somewhat lower end of the second quarter. We are not really seeing yet, if I say, the underlying demand deteriorating. But of course, we note with kind of some awareness that, let's say, the external macro data continues to go down and we also see our customers in some areas becoming a little more careful with focusing on inventory and also with kind of the order backlog. We also see that some of the customers being a little more careful. So all in all, we make the conclusion that it's going to continue to be a somewhat lower demand in Q3 compared to Q2. No drama in this and this is a direction which we feel is well in line with the kind of the ways all once again, all the macro data is being reported and the guidance that we usually follow ISM or VDMA or whatever, of course, pointing towards a slightly sour environment. But that is the kind of development which actually we are quite okay with as we are kind of working on integration of acquisitions and we're working in creating a better platform for growth being forward and also with the strong balance sheet we have and our ambition to continue to make M&A, which is also might be a development which is actually good for us in these aspects. And that is something, of course, we're working actively with to try to utilize this uncertainty, which we see in certain parts of the market. And then, of course, we know the political situation, as all of you know, with Russia, Ukraine and other kind of discussions ongoing there is let's say as we see it a higher degree of uncertainty in these aspects that are normally and that is why we're making a special point on that as well um turning to page 26 agenda q a and then quickly turning to page 27 and opening up for four questions so please go ahead those of you interested in uh getting some more flavor on this report. So please go ahead.