Trelleborg AB (publ)

welcome to the trellborg q4 report 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 pound key 5 on their telephone keypad now i will hand the conference over to the speaker ceo peter nelson cfo frederick nelson cfo frederick nelson please go ahead

Hello everybody, Peter Nilsson speaking. Sorry for the mishap here. We don't know exactly what went wrong, but something went wrong. But now we are live. And as usual then we would like to refer to the presentation which is on our webpage and where we are presenting the results for Trelleborg in Q4. October, December 2023. Rapidly moving then to page two with the agenda page, where we're then going to talk about the highlights, business areas. Fredrik Nilsson, our CFO, will then guide us through the financials and then we will sum up with a summary and some comments on the outlook for the running quarter. And then of course, as usual, also open up for Q&A. Turning then to page three, solid end to the year we feel that we have had a very solid Q4 very much in line with our expectations and yeah according to our expectations basically all across sales at a little bit north of 8.4 billion Swedish which is an increase of 4% compared to a year ago where organic sales is unchanged Acquisitions adding 3% and currency adding another percent when we report in Swedish Kronos. EBIT A up by 6%, which is kind of a nod above the sales, which then means also that the margin will be a slight uptick compared to a year ago. Items affecting comparability. At 260, we're restructuring charges 173, and we also have recorded a non-cash loss on a divestiture done in the quarter. Cash flow is strong at 1.3, not as strong as a year ago, but a year ago it was a very strong cash flow. And basically everything in our balance sheet managed in a good way. I mean, we managed inventory in a good way. Payables is good. Receivables is good. but of course impacted once again by tough comps and also with a slight uptick in capex in the quarter compared to a year ago. We also note in the quarter a very satisfying acquisition made in South Korea where we bought a company, a local company, very specialized in special seals for Semicon equipment and that we see as a strategically very nice acquisition for us. We were just creating a strong position in the biggest semiconductor market in the world and also creating a great foundation for us to use this technology and this experience that this company has in order to bring it also into other markets, primarily in Asia, but also providing benefits for us and supplementing what we have in our range today also and making it possible also to create a foundation also for this interesting segment also in Europe and North America eventually. Also maybe worthwhile mentioning here also, we probably should have been on the page, but sometimes you do mistakes. Dividend is also, dividend is proposed at 675, which is an up compared to a year ago, of course, subject to a confirmation at the upcoming annual general meeting. Turning to page four, Organic sales relatively flattish all across. Zero, as we already commented on the total. We were a slight uptick in Europe. And of course, still down in Asia, but substantially better compared to last quarter. And also then North and South America, let's say, a slight negative. But overall, relatively flattish, as you see everywhere. And I mean, in comment, we going forward a little bit, we see Europe Basically continuing the same way, maybe slightly more negative view on North and South America, but then a positive view in Asia, where we see an uptick in the order intake in China, where we are believing in an improvement in Asia. Of course, with the note that we now have Chinese New Year coming up, and that it's also difficult to judge that one for quarter one, but nevertheless, overall, Going into 24, we see that Asia, especially China, is improving. Turn to page five, agenda page. Going to the business areas and quickly turning to page six, comment on industrial solutions. Organic sales minus one, M&A adding 2%. basically same development that we saw in last quarter still weak sales in especially residential construction both in europe north america and also in certain industrial segments we still see soft demand in the more kind of distribution related segment but also slightly tougher in in some of the core machinery segments especially in europe no change basically compared to to a quarter ago says the marine segment continues to be strong i mean we already commented on this special law in panama for us but also in other areas related to lng and related to the marine port construction in general performed well in the court continued to perform well automotive also remain high and surprisingly high if i may say but it continuing in a good way and we also see Relatively good momentum in this segment here going into running quarter. Overall, EBITDA up on structural improvements. I mean, you know that we've been investing quite a lot in improving the overall business setup in natural solutions. We see benefits from that and also continue to see a positive sales mix as in the last quarter. And we also note with satisfaction, of course, that this is the highest margin we have had on industrial solutions ever in Q4. Moving then to page seven, and commenting on Trelleborg ceiling solutions. Again, sales slightly up, 1%, M&A adding 4%. Also basically comments very much in line with what we see in industrial solutions. We see the general industry declined in most markets, as I mean we see also Europe and Core industrial demand is a little bit softening. We read into that continued inventory reductions and not really much change compared to last quarter. Automotive demand also here, up. And then we continue to see strong sales in aerospace and also satisfactory development also in healthcare and medical, although we see some hints in certain parts of this that we see some customer inventory adjustment kind of continuing there as well, but we see a good underlying demand, a good continued lesser order intake. EBITDA and margin declined, mainly linked then to as we have commented before, also acquisitions coming in with lower margin. We see the integration is running good and we are getting closer to what we had before. We see this as we expect is to continue to move in the right direction also noting highlighting again that we continue to invest especially aerospace healthcare medical semi-con some automation and some other segments where we would like to create a better foundation for growth going forward which is also continue to hurt the let's say the operational result in ceiling solutions um so that is kind of no surprises here either and that's a basically a movement very much in line with our expectations and and with our guidance and then turning to page eight a few slides here on sustainability continue to improve in all dimensions or let's say co2 intensity continue to improve and our kind of total consumption of co2 or emission of co2 is continuing also downwards. So turning then to page nine, I mean, the biggest driver for this is the share of the renewable and fossil free electricity, which is continuing to improve. And we also here highlight also lost work cases where we also continue in a good way. So also well under control in terms of sustainability. And we are, let's say, performing well ahead of our previous targets for especially for CO2. And, of course, we're now moving also the science-based target initiative also, as you note, has been approved. And we are now kind of moving away from the previous fulfilled target and launching. We have launched a new target, but we're now running into that in a more formal way. Turning to page 10, agenda slide again, financials, and quickly turning to page 11, where I hand over to Fredrik to guide you through this.

Thank you, Peter. Moving on to page 11, looking at the sales development. We have a flat organic sales in the quarter. Sealing solution reported growth with 1%, while industrial solution declined by 1%. And as Peter mentioned, reporting net sales up 4%, 3% impact from acquisition, and currency added 1%. Moving on to page 12. Looking at the historical organic growth trend, we were below our sales growth target in the fourth quarter. But please remember that we reported 15% organic growth and 23% in total growth in Q4 2022. Moving on, page 13 showing the quarterly sales and rolling 12. The 8.4 billion in sales were the highest to date for fourth quarter. And if we look for the full year, the sales reached 34.3 billion with an organic growth of 2% for the full year. Moving on, page 14, looking at the EBITDA and EBITDA margin. EBITDA excluding items affecting comparability increased with 6% to 1,424,000,000 with profit growth in industrial solutions while ceiling solution was on par with prior year. In the result, there was also small translation impact of four million SEK in the quarter. Margin 16.9 compared to 16.5 the prior year. And this is despite this was Peter mentioned with initial impacting from acquisition with lower margin and the investments we are making in the organization on fast growing markets. Moving on to page 15. Looking at the margin, the positive trend continued with increased EBITDA. And if we look for the full year, we were for the first time above 6 billion, with 6 billion 2 million in EBITDA for the full year, with a margin of 17.5%. And EBITDA and the margin were the highest to date also for quarter. Moving on to page 16. looking at some details in the income statement we have items affecting comparability of 260 million in the quarter which was higher than last year or 115. looking into some details here we have restructuring cost of 173 million and that is due to that we are adjusting our cost base due to the lower demand and we are also divested as early communicated our offshore and oil and gas operation in the u.s which generated a loss of 87 million financial net reached minus 38 million which was an improvement compared to minus 76 last year and that was related to of course that we're now sitting with a net cash position so higher interest rates cost but it's offset by interest income tax rate for the quarter amounted to 25 percent which is slightly below what we have communicated of 26 for the full year Here we will make an update and I will come back to that when we're talking about the outlook that we're now guiding for an underlying tax rate for continuing operation of 25%. Moving on, earnings per share for continuing operation excluding items affecting comparability, up 20% from 3.4 to 4.08. For the group as a whole, you can see that we are down But that is due to that we have a divested wheel system and the printing blankets that was included in last year's number with 1.68. Moving on to page 18 and the cash flow. And as you can see here, we have a cash flow last year of 1,678,000,000. This year, 1,321,000,000. Good continued improvement in EBITDA. little bit less positive from working capital but as you can see on the table on the right side it's still positive 300 million improvements from working capital in the quarter and then as peter was also mentioned we are investing more and that you can see when you're looking at the net capex and leasing together so all all in all a good cash flow for the fourth quarter looking in to page 19 the cash conversion A good cash conversion of 92% for the full year compared to 74% in 2022. Moving on, H20, gearing and leverage development. We are now sitting in the net cash position and the reported debt ratio becomes negative and amounts to minus six compared to 56 a year ago. And the net cash in relation to EBITDA was minus 0.2 compared to 2.4 a year ago. And we have also continued to buy back shares during the quarter of 1,078,000,000. Moving on to page 21, return on capital employed amounted to 12.9 compared to 15.9 a year ago. And the capital employed has been impacted by acquisitions with lower returns. And then finally, moving on to page 22 the financial guidelines for 2024 we estimate capex to be 1.6 which is in line what we saw during 2023 restructuring cost of 250 which is a reduction of 50 percent compared to what you saw here during 2023 internables in line with the numbers we reported 2023 So we estimate that to be around 500 million SEK. And as I said, underlying tax rate, 25% compared to previously communicated 26%. By that, I would like to hand back the microphone to you, Peter.