Trelleborg AB (publ)

welcome to the trelleborg q4 2024 report presentation for the first part of the presentation participants will be in listen only mode during the questions and answers session participants are able to ask questions by dialing hash 5 on their telephone keypad now i will hand the conference over to ceo peter nielsen and cfo frederick nielsen please go ahead thank you and peter speaking

I want to start by welcoming all of you to this run through or presentation of our end of the year results with the specific focus on Q4 and I will start Peter Nilsson who is let's say the CEO of Trelleborg and also supplemented in this call by Fredrik Nilsson our group CFO And also supporter for us, also Christopher Sjögren, Head of Investor Relations is also here if there is any questions which needs his attention. As usual, we have a slide deck on our homepage and we're going to use that as a guidance to the call. So that is what I'm going to refer to. So using that as a reference, turning to page two in this slide deck agenda, normal agenda for us. starting with the highlights in the quarter some highlights for each of our three business areas Fredrik will then guide us through the financials and then we are summing up with the summary of the quarter and also some comments on the outlook for the running quarter and then finishing off as already told by the introducer ending with the Q&A session so turning them to page three in the deck heading for this quarter, growth with enhanced profitability, a very slim growth, but nevertheless growth. Sales is increasing in the quarter by 4%, organic ending up slightly better than we kind of anticipated going into the quarter, driven then primarily by increased project sales, as we call, which is more one-time projects, Some of them bigger we ended up with higher invoicing than we kind of expected before the quarter in the quarter Particularly and relate to our business areas industrial solutions M&A also with satisfaction when we see that the M&A is bringing in 3% and get back to that later as well and we have been concluding a few Bolton acquisitions in the quarter and we see that this is a very good good add-on to our existing business, which is already kind of strengthening our already strong positions currency no impact in the quarter on the sales level EBIT A ending up then at almost 1.6 billion Swedish and which then gives us a margin of 18.1 percent which is more than one percentage was up compared to a year ago on basically flat sales which means that we are happy to see that we're actually running the operations in a better kind of operational way than we did last year. Items affecting comparability in line with guidance ending up then at 76 in the quarter. Very strong cash flow, actually the strongest cash flow quarter ever for us in this structure and that is also with satisfaction well managed. by my colleagues in the group, good management of working capital. And we have to notice also that this cash flow is being delivered, although we continue to invest on a record high level for Trelleborg. So very happy with the cash flow, very happy with the management of the balance sheet. A dividend up, increasing the dividend with the same amount as last year. up to Swedish 750 also already noted we also announced a few add-on acquisition Maggi I get back and comment on that and Mampai and also we finalized this acquisition of CRC in Alabama in US in ceiling solutions so a great quarter in many ways it's not a lot of extras in the quarter if I would say but I mean a good push in sales good management of the costs, good management also on the margin side in terms of sales and contribution, good management for purchasing, so overall a very good operational quarter for us, which is creating a great foundation to move on from this level. Turning to page four, organic sales, as you note it is kind of mixed, Europe down, in the quarter get back in comment on that but by that's a business area business area but a little bit challenging in parts of the business in Europe but we also have to say this is also coming from kind of portfolio actions in order to improve margin improve long-term positioning. North and South America flat is minus one also there is a mixed mixed let's say underlying market overall ending up at minus one and then a very strong development in asia for us which is basically coming from all the major economies but japan's we have strong growth in china strong growth in india strong growth in korea where korea then is coming you know we have some Semiconductor exposure there which is delivering well but primarily also coming from continued build out on the marine sector related both to kind of ship building but also LNG development which is a lot of that happening in Korea. India basically all across development good development in most segments in India. And all in all this is of course with great satisfaction We we note that we continue to grow in Asia and the share of sales from Asia is increasing in relation to total Trelleborg all in all with this mixed picture of minus 5 minus 1 and plus 19 ending up with plus 1 for the group Turning then again page 5 agenda business areas and then quickly moving to page 6 and where we comment on industrial solutions, good growth and higher margins, good organic sales, 4% up, M&A also adding another percentage points. Already noted good project deliveries in marine segments spurred by larger projects and in this as a marine definition there is also a few sub-segments of the marine which is related to LNG and oil and gas which is also pushing this segment in a good direction. Continue to struggle in the construction segments I mean it might be that is flattening out in Europe and we see some kind of see the down of that cycle that is what we see but we see continued push down in North America and that is primarily related to an area which we have we call facade seals which is kind of basically used when you build the bigger constructions and that is kind of where we see a substantial downturn in North America which is of course hitting us as well automotive in a way we say somewhat weaker but I mean overall is still continuing to be slightly better than we kind of expected and also here well managed and we in our niche positions that we have we continue to grow market share which is somewhat kind of compensating for the somewhat more challenging overall market related automotive. Overall this mixed picture managed well by our colleagues in industrial solutions and these higher sales and then in combination with continuous never-ending structural improvements is then getting us into let's say a better profit and better margin last year and we should also in this even though we don't have any slide that for those of you following Trelleborg knows also that we have some extraordinary good sales a year ago related to this project specific project which we talked about related to the Panama Canal and this is not in the figures this year and then that is also why we are kind of extra It's extra satisfactory to see that we can compensate for this, although we do not have the same kind of business this year as a year ago. Also in the quarter acquisition, a smaller acquisition, Mampai, a Dutch company with a very global exposure, which is a nice add-on to us in our what we call birthing and mooring operation. related to the marine segments so that is a nice very nice add-on which is strengthening a very strong position and creating some new inroads to some specific end markets where mampai is kind of very supplementary to what we already have so it's a good delivery on industrial solutions continued good delivery and continue this small uptick in margin which we have seen for several years now turning to page seven Medical solution our kind of newest business area big jump in profitability coming down from integration of Baron primarily but also from Good underlying development. I mean we have to note that this is still very much a business area in construction so so behind the scenes Of this what you see in this slide. We still have a lot of kind of construction work ongoing recreating new new positions and we're building kind of a new structure in order to create kind of a long-term success for these business areas but looking at the development in the quarter organic sales is still flattish as you see somewhat better in Europe somewhat weaker in North America but honestly not that much difference we still note that there are some kind of inventory reduction at some customers and it's kind of a mixed portfolio looking at the different segments and different different customers but overall once again we're ending up at the zero organic growth we note that life science which is for us in this biopharma segment is somewhat growing it's a small part of medical solutions as of today but it's in part of medical solutions so we see great possibilities and we of course with that background satisfactory to see that we see that this segment growing up again after being pushed down quite a lot let's say post COVID but now we see some signs of bounce up again EBITDA and margin increased um yeah mainly due to the baron group is how many substantial add-on and we once again satisfactory integration good synergies and a good structure being put in place to to continue to benefit for from this also going forward There was a note, which I already started with here, where we have quite a lot of new units coming on screen. We're investing on capacity in Malta, we're investing in capacity in Switzerland, putting up a new factory in Costa Rica, investing also quite a lot related to Biofarma in our, let's say, Boston facility. So a lot of activity ongoing here behind the scenes in order to develop a structure which once again we will benefit from long term and we still do not see in the figures here the kind of benefit we will have of being a very global supplier in this area. So a good start of the business area in line with our expectations but more to come especially related to sales growth but with that comment we must also note that for Q1 running Q1 there will be a somewhat let's say push down in sales and that is mainly related, Baron exposure is mainly related to China and Australia and for those of you aware then of course we have Chinese New Year coming here which is going to impact the operations in Baron in China and then we have Australia Day in Australia which is going to take away another week or something in Australia so it will be a somewhat lower run rate for medical solutions in Q1 compared to Q4. But I mean get back on that and I can show that Fredrik can guide you through a little bit more on that one. Turning to page 8. Here we call stable despite challenging markets. We are actually rather satisfied with the development of ceiling solutions. There is some of the kind of core segments of ceiling which is still being challenged. Here we have what we call diversified industry, which is related to off-highway construction equipment, which is still somewhat depressed in demand. And we also here have an impact from the auto decline. So there is some core segments of this one which has been pushed down, especially in Europe and North America. Here we're doing good in Asia, which continued bounce back and we continue to grow substantially in Asia actually here in the quarter, which is then balancing the somewhat more negative development in Europe and North America. Aerospace continues to do very well. I mean we know that we had these issues at Boeing for instance but we have not really been impacted by that on the sales level and we continue to have a good order intake and we continue to see good prospects for aerospace here also going into 2025. All in all, as I said, mixed picture in demand but well managed also here. I mean credit to our colleagues in Sealing Solutions. They are managing this somewhat mixed picture in a good way and we managed to deliver a margin in line with last year with a slight increase in EBITDA. Also in this area we have to note that we have several greenfield projects ongoing. We have a high activity level in new factories and expansions which is also of course creating some attention on that one but nevertheless also in that aspect well managed and we don't really see it in the operational delivery in the business area. Acquisition of Magee, a good acquisition for us, a bolt-on acquisition in aerospace which is kind of widening our exposure into new sub-segments of the aerospace industry which we also see it's not big but it is a good add-on and it's going to be beneficial for us in several aspects both in the aftermarket fair space but also in the OE sector of the aerospace. We also have this earlier announced acquisition of CLC finalized in the quarter which means that we now can push fully to integrate this acquisition which is going to strengthen us primarily in the southern part of the U.S. in the Alabamas, Louisiana, and of course then you know it's going to be some oil and gas related activities, but also down there, some kind of sub-segments related to that. So that's an area of U.S. where we have had a little bit sub or let's say under representation, and we hope that the CSE, and we firmly believe that CSE will, let's say, create, let's say, better opportunities for them. Turning to page nine a few comments on sustainability. We continue to improve and as you see it's a substantial improvement in CO2 emissions year on year. Slight up on quarter on quarter but that is kind of seasonality related then we continue to see good progress on this and we're actually getting down to fairly low numbers overall for CO2 and we need to Of course, we will continue to improve, but I mean, of course, we will not be able to see the same steps as we have had before in these aspects. But high attention, good activities ongoing and a very structured approach to improve it in all parts of Trello board. Page 10, major... part here as well. Our share of renewable and fossil-free electricity is improving. We are now up to 88%. Of course, there is some way to go, but we cannot really go 100%. There is some limitations in a few countries where we actually cannot buy renewable or fossil-free electricity. But we feel certain that we're going to get almost to the maximum here in 2025 and where we can get with the current, let's say, available electricity. So well managed also in this aspect. be pushing forward and without any kind of cost increase also if you'd have that that is well managed in all aspects also related to this part of Trelleborn turning to page 11 agenda slide financials and then page 12 and Fredrik's turn to give us some guidance thank you Peter let's then move to page 12 and look at the sales development

organic sales increased by one percent with organic growth in industrial solution four percent as peter mentioned flat developed in medical solutions and a small decrease of one percent for a ceiling solution if you're looking at the report net sales up four percent from eight billion four hundred twenty one million to eight billion seven hundred eighty three million As just mentioned, organic sales up one and structural changes added 3%. And then there was no net impact from currency in the quarter. If we then look for the full year, we saw a flat sales development year over year. Moving on, page 13, showing the historical sales growth. You can see that the fourth quarter was below on our sales growth target, but it was another quarter with organic growth. Moving on, page 14, showing the quarterly sales in the early 12 months for continuing operations. The sales in the quarter reached 8,783,000,000, which was the highest ever for a quarter. And if we then look at the full year, we reached 34.2 billion SEK, which was in line with last year. Moving on, page 15, looking at the EBITDA and the margin. If you start with EBITDA, exclude items affecting comparability, it's up 11% from 1,424,000 to 1,587,000. We see profit growth in all three business area. If we then start with the medical solution where we saw the highest growth, well supported with a barren integration. And then we have industrial solution up 9% and ceiling solution improved by 1%. And there was no net FX impact in the quarter from translations. Modding wise, up from 16.9 to 18.1. So an increase by 1.2 percentage points. EBIT A and margin were the highest so far for a quarter. Moving on to page 16. On rolling 12 months, EBIT A amounted to 6 billion 140 million with a margin of 18%. And we have seen an EBIT A growth of 2% during the last 12 months. Going into some further details on the income statement on page 17. Items affecting comparability, minus 76 million in the quarter compared to 260 million and this was entirely related to restructuring costs for adjusting our cost base. Financial net, you can see it's going from minus 38 to minus 86 in the quarter. And that was due to that we were sitting with a net cash position in the corresponding quarter last year. So that year we had a quite significant interest income that was not repeated in the fourth quarter this year. Tax rate for the quarter amounted to 26%, which was slightly above our underlying tax rate of 25%. But that was more of a timing issue. The tax rate for the full year was 25%. Moving on to page 18, earnings per share. We saw an increase of 4% if we exclude items affecting comparability, an increase from 4.08 up to 4.24. And for the group including items affecting comparability, it was up from 3.40 to 3.99. Moving on to page 19, As Peter mentioned, a strong cash flow generation in the quarter, starting in Q4 last year at 1,321,000,000, ended at 1,681,000,000. And that was due to, we saw a good improvement in EVDA, well-managed working capital from our business units, capex slightly higher due to all ongoing greenfield projects, And then leasing was a little bit higher last year, come back to a more normal level. And the unusual high last year was related to one of our greenfield investments. So overall, a very good operating cash flow for the quarter. Moving on, page 20, looking at the cash flow conversion. 89% in cash flow conversion for the last 12 months. Still a very high cash conversion despite the current high capex levels. Looking at the balance sheet on 21 and the gearing and the leverage development. Net debt at the end of the quarter amounted to 6 billion 735 million. We have done share buybacks of 1 billion 349 million during the fourth quarter. slightly higher than the guidance of one billion per quarter. But please remember that we on the other hand was a little bit lower during the third quarter this year. And net debt in relation to DA 0.9. In other words our balance sheet remains strong. Moving on to page 22. Return on capital employed ended at 12% and capital employed increased in the quarter due to the acquisitions and the continued high pace from our greenfield investments. Some guidelines for the financial year of 2025. CapEx 1 billion 650. Restruction costs we expect to be around 300 million. amortization of intangibles, 650 million for the full year, and underlying tax rate of 25% for the year. By that, I would like to hand back the microphone to you, Peter.

Great. Thank you, Fredrik. Turning to page 24, agenda again, summary and outlook. Turning to page 25. Looking at this, I mean, I think this is another quarter in our development of a better Trelleborg. I mean, our core Trelleborg is to create and maintain and develop the leading positions in this niche, let's say very selected areas where we want to play and I think this is a result of that. I mean we are doing this with continued focus on what we call speedboat areas. We are very kind of focused on where we want to grow and where we want to improve our positions. We are investing more than ever both to kind of create new strengths and leading positions, but also establishing ourselves in a quick way in new geographies in order to become this really global supporter of our customers and be able to globally support our customers as they grow. Supplementing this with M&A, bolt-on acquisitions, smaller supplementary M&As, which is kind of improving already strong positions, but of course the quarter is also a reflection of what we feel that our colleagues has a very good operational control we're focusing on the contribution pricing and the continuous let's say portfolio improvements factory efficiency is very important cost control and of course daily excellence efforts in this to focus on never-ending let's say focus on manufacturing purchasing whatever it might be to improve daily and also which we have noted a few things also we think is a reflection also for well-managed working capital we are not sliding in in any way in in this working capital we are not over producing and we make sure our customers pay on time so it's also a reflection you see that in a very good cash flow also on top of this with Frederick highlighted we also feel that We continue to have a strong balance sheet. We're going to continue to run buybacks. And we can do the buybacks, although we continue to invest on a high level and we continue to do M&As. So this is, quote, there's no magic in these figures. This is, let's say, a reflection and no big moves. It's a reflection of this better Kraljeborg as we're building step by step. in order to at the end deliver or not at the end but in order to reach the financials objective that we have already communicated since some time. Strong quarter and as we now move on to page 26 and look at outlook for the running quarter our best estimate I mean we all know that is kind of a little bit uncertainty in certain aspects of the world and of course this is given with some kind of reflection also on the political situation we don't know where it's going in all aspects but overall we feel at Trelleborg we are well positioned in all the three major parts of the world and we think we will continue to be well positioned in order to manage this for increased uncertainty in a good way and looking overall we do believe that the running quarter will be on par with kind of the quarter we left which means that we flattish let's say between zero or a slight growth in the quarter that is what we see in front of us and that is the way we are let's say preparing ourselves in order to be ready to continue to to make this stepwise improvement of Trelleborg also as we go into 2025. Now with that I think we'll move on to the next page agenda again Q&A and then quickly opening up with Q&A on page 28 so please go ahead those of you who want to send us some questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

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

Okay, thanks. I have two questions. First one on all the investments you're doing green fields brown fields etc what what do you see in terms of modern impact as the some of these come on stream now in 25 will there be dilution from depreciation coming up quite a bit initially before you get good load or any other impact which you think about and then the second question in industrial the Good project business you had there in marine in the quarter. Did that come with positive margin mix as well? And as an extension of that, we've seen industrial surprising on the upside more often than not for quite some time. And you said that it's been perhaps a bit too good. So the division tracking sort of ahead of its target margin trajectory. But maybe that target is a bit too cautious.

But starting on the first one, of course, it will be when we actually kick off the investments and we go ahead, there will be, let's say, initial, let's say, push down. But we don't see that as being as major as we see in a group model. There will be some challenges in some business units, yes. But we feel that we have this... Projects fairly good loaded from the beginning. But with that said, I mean, we are not naive. We know that it's going to be some operational issues on day one. But we believe it's going to be a very short period of impact. And once again, on the overall level, it's not going to be seen. It's not at all on that dimension, but it might be 0.1, 0.2. or something on individual units, but not really on group level. We don't see that as any kind of major impact. We are fairly confident that these projects that we are starting, that they will start to bring benefits already from day one. I mean, the bigger projects here, we already have them fairly good loaded already from day one. But once again, It would be naive if we didn't, if we did expect them to perform excellent from day one. That will, of course, be challenges. But once again, it will not, you will not hear us, Erik, complaining about that in the next few quarters about that the product is coming on stream and therefore we are pushing down the margin. So that is not going to be, let's say, an explanation that is going to come up on that one. On the margin, sorry, follow up on that one. No, no. And then on the margin mix, I should say that the product business is not better in a way in terms of overall margin. But of course, it comes on top. So it's more kind of a full contribution, if you may say. So when the produce comes in, of course, the benefits is a good drop through. But the overall business is not better. kind of better so i cannot say if we're looking for it but it's not really a margin push on that one this is underlying improvement which is going and that you said on industrial solutions i mean this is it is an extra business we know that i mean we have shifting a little bit but so now it's mainly the marine area which is quite a lot on this related to lng as well i mean if you build a very most of the I would say complicated big ports in the world being constructed at the moment is related to LNG. And then it might be they're used to other stuff as well. But one of the primary drivers is that. So we do see that that's going to be a continued good push in that area. But there is kind of a lack of capacity in that one. I mean, we know the chipyards in Korea is full and the construction workers doing LNG work. offloading stations or whatever it might be that they are also fully loaded so of course there is kind of a plateau being kind of established in that area on a high level but i mean the order books are good and the order books looks good but we don't expect that to to to generate kind of extra sales since simply because there is not kind of a capacity around to continue to grow it, although there is kind of very good underlying demand. And, of course, now we have the new administration in the U.S. which is going to push even further into this area. There is plenty of projects on the planning for this activity, both in U.S. and elsewhere. But, I mean, from planning to execution, it's easily a few years down the road. But we still do feel that that segment is going to be good for us. And, of course, industrial solutions are going to benefit from that. But industrial solution is a mixed bag of businesses. I mean, we must not forget also there's parts of industrial solution which is bad. We didn't talk a lot about the industrial, call it core industrial sales in Europe is not that good either. And I mean, the construction is not that good either. So it is a mix. And therefore, we need to be cautious when extrapolating any kind of continued improvement in industrial solution. Of course, we... try to improve. We will continue to try to improve. But I think our overall guidance about this half a percentage point a year is probably very much valid for industrial solutions.

Thanks. Then just one follow up on CapEx. You're seeing another high investment level this year. Are my notes wrong or have you not talked about the investment level starting to come down?

Correct. That's correct. And you can see a small decrease here going into 2025. But of course, if you sum up all the already communicated green fields that is a consequence that it will maybe be a little bit higher than we earlier communicated a year or a year and a half ago. But the intention here is of course that they will be higher in 2025 but then start to drop off a little bit more.

There's fine-tuning in this but I think we have accelerated a few projects and pulled them basically from 26 to 25. So that is where we believe that 25 will still be on a, let's say, high level compared to historical levels, but we will then see a downturn in 26. So it's more, let's say, a transfer, let's say, between 26 and 25. And then we do feel as well that, I mean, we have the balance sheet, so if we see opportunities, of course, if we invest another 100 million Swedish kronors or something to create growth, that is the level we're talking about. So it's not really kind of any major when we look at the kind of total picture.

Thank you.

The next question comes from Timothy Lee from Barclays. Please go ahead.

Hi, thanks for taking my questions. So the first one, can you also elaborate a bit more about the underlying activities in the market for now? Are you feeling some, say, pre-buy activities ahead of any potential tariffs that are happening in the market? And also in China, I think you also mentioned about quite a strong growth in China. Can you talk about what's probably the growth rate in China in the fourth quarter. And is that any benefits from the stimulus or the growth is coming from your market share gain? Just would like to have a little more color about the underlying activities in the market. And the second question is about margin. So I think you have a very strong margin development in the fourth quarter, especially for the medical solution business. I think it reached the benchmark 20% EPA margin just in two quarters of consolidation. Is there any further upside potential from here, say from the synergies for Barron Group further from the current level? And also the synergies from MRP, when do we expect to come forth in the TS assessment, please?

Let's try to follow. Pre-buys, we don't see any kind of pre-buy activity. We don't know if any customers is doing that, but I mean, we don't really see that as a drive and there's no customers talking about that and we don't see any kind of strange optics in individual customers. We cannot say, no, we cannot say that we see any pre-buys in anticipation of potential tariffs. So that is a clear no. China I mean, we don't really want to comment on individual territories. But I mean, if you see that we're growing in Asia and China is the biggest market for us in Asia. So, of course, there is a reflection on that. But we don't really want to go down and show. We have a good growth, as I said, both in China, Korea and India. Japan, if you take the fourth economy here, is actually slightly negative. I can share that with you. But overall, we have a strong growth in Asia. And I mean, once again, strong growth both in China, Korea and India. That I don't want to comment on that and it talks on the margin upside on and I call it the integration of Barrow on the medical. I mean we don't see really synergies going forward to be that much on the margin side. We do expect that we're going to get some sales synergies here by being able to offer kind of global support to the customers. I mean, look at the medical industry. There is a few very big medical companies, which is kind of capturing a larger and larger share of the global market in medical equipment. And these are our target customers. And as we are now, yeah, basically in our sub-niche, if I may say, very focused niche of liquid silicone, we are the only global company, and we do expect that, let's say, global footprint and the global capabilities to bring us synergy in terms of sales. There is a lot of discussions ongoing with these big customers, and we do expect them to give us new business, but that is something which is not starting overnight, and that is kind of a transition into kind of new platforms. So the synergies in medical will not primarily come from further modern improvement, but more from better sales growth. That is also our target. And we do not really, I shouldn't say we don't want modern expansion, but we are investing, I highlighted it before, we are investing in medical solutions in order to be able to support our customers globally. So behind the scenes here on the On the margin, there is actually a substantial cost increase in certain areas where we do not yet see any benefits. So we are investing in this area. But once again, the target going forward is not really to push the margin up. It's more to improve the sales. MRP and TSS, early ceiling solutions, I mean, that is happening. We are now fully integrated it. And we are kind of splitting it now, of course, between medical and the ceiling solutions. So this is a kind of pure synergy tracking. is getting let's say challenging but we do see synergies in terms of sales where we have kind of created more co-synergies than we kind of was aiming for when we started this project but we do still wait for kind of sales synergies and that is where we have to Well, it's a bit of a challenge that we already commented on. It's a bit of a challenge to some of the core segments here, being construction segment in the U.S. and off-road segment in the U.S. where we don't really yet see the sales synergies. We are developing a good platform presence, but the platforms used by the customers need to start to go up. So we feel very confident that if or when this market actually opens, go more north than south, then we will see a good drop through and then we have a little rapid margin expansion in ceiling solutions once again when the volume starts to get back. Because we need to remember that we are exposed to rather big negative volumes in some of the core segments here of ceiling solutions and MRP and Minnesota rubber. And that is something we do expect to bounce back and when the bounce back will come, they will come with good gross profits and good contribution margin, which means that the drop-through will be seen in the overall margin of senior solutions as well. So that is what we are aiming for and that is what we are planning for.

Very helpful, thank you.

The next question comes from Forbes Goldman from Pareto Securities.

Please go ahead.

Oh, great. Thank you. Just to follow up on what you just said there on the TSS margin, so you mainly expect to get back to the 23% run rate. That's like mainly a result of demand improving in your key markets rather than synergies than coming in from from previous m&a and then the second one is on m&a and if you could talk about give some color on on the bolt-ons what sort of valuation multiples you you are seeing there and what sort of profitability those companies you recently acquired have once they are entering your group thank you

Correct I mean there will be some improvement on the margin as volumes kick in but of course we continue I mean maybe I underestimated of course there is still some synergies that is being executed and synergies which is not kind of seen until volumes is getting back we have been rebuilding the structure a little bit in MRP and others and let's say created some factory changes and stuff so of course there is synergies being executed and being pushed through but i mean we are happy with the call it let's say gross margins that we see on on the sales that we expect to increase and we see it's better benefit benefit more beneficial for us to to wait for for this volume to kick in than to chase new new kind of minor improvements. And of course, I mean, behind the scenes, we're still running in that 20%. So it's not kind of a bad business. It is more that, of course, we're aiming for more. And this for more will primarily come from extra. We will fine tune and we could, let's say, still expand on the current volumes. But I mean, the major uptick will come as we see kind of the core industrial markets getting back and improving somewhat. I mean, we have to recognize that the core segments once again if you take this we call fluid power segment of of tss has been challenged a lot in in 24 and i mean we although with this main market being challenged we still continue to we feel manage it in a good way and if this core market is getting back then of course we

we will see let's say firm benefits in in the figure so that is i don't think i can i don't looking at frederick and and christopher there's nobody more really to comment to this i guess let's put this way that we have maintained the margin for ceiling solutions while which is no surprise the volumes have been down and the volumes have been down for quite some time all through 24 and yet we still maintain the margins of course when the market is normalizing the profitability will come back also.

I know while I was you know that while benefiting we haven't made an entrance to semiconductors benefiting from we are growing the aerospace of course there is parts of ceiling solutions which has kind of compensated for this yeah lower demand in once again in the core industrial segments so that is I think as much as we yeah we can elaborate more on that in a separate call but that is the way we look at it. What was the second question there, Forbes? I can't remember.

It was regarding the bolt-on evaluation.

Bolt-on on the valuation. I mean, generally, when we talk, let's say, at the single digit, let's say, EBITDA multiples. And then on top of that, of course, we have synergies. Generally, as you say, the bolt-ons comes in with the lower margin than our overall margin. But, I mean, on top of that, we have synergies. We don't expect them to kind of push down the overall margin over if you look let's say beyond a few quarters so we don't and we don't expect them I mean they are not on the size that are going to be kind of impacting the overall margin once we have integrated them and once we have them in then there will not be any kind of margin deterioration coming from but once they come in immediately when they come in More or less all of them is coming in with kind of a lower margin than our average margin. And that is unfortunate. We are not to highlight ourselves too much, but we are more profitable than most of our competitors. And that is also, of course, reflected when we make acquisitions.

Okay, that's great. Thank you.

The next question comes from Hampus Engelau from Handelsbanken.

Please go ahead.

Thank you very much. Two questions from me. Coming back to ceiling solutions, you highlighted off-highway construction still being weak. Where do you think you are in that cycle? We're starting to, from the OEM side, starting to see some pickup and improvement. Is there a lag between your development and how should we think about that? Second question is more related to the output for Q1, a small increase. Could you maybe share some light on which parts are slightly better sequentially? Thank you.

Looking at the off-highway, I think there is underproduction. I think several of the big OEs are clearly telling that they're underproducing and they're cutting inventory. Although I don't expect kind of the overall market for construction equipment to improve short term, I think our deliveries will improve. So we are kind of at the low end of the cycle because this quarter and the last few quarters, we've been kind of double hit but by let's say a little bit lower underlying demand and on top of that under production some of the major customers for the overall kind of construction residential construction or commercial construction is kind of difficult but we do see that for parts of the the how should I say the parts of the residential in Europe I mean looking at a little bit in a positive way we do feel that we may be at the end of the cycle but I mean it's not easy to really see through that you know we are mainly exposed in that area in Europe to kind of window manufacturing where we do see that some of the bigger window manufacturing another one is in South Sweden where I think it's turning a little bit positive on that one so there is momentum and then of course we have also in that area also an exposure to pipe seals, which is kind of sewage pipe, water pipes, where we also see the continued fairly high investment levels. So we do feel that that segment is probably going up. And then the other one in North America, we are more exposed to what is called facade seals, which is kind of more bigger house construction, sky rises. There is a more challenging and we do not see any kind of uptick on that one. So it's a mixed bag in these segments, which is negative. But overall, we do not see them at least going south anymore, so we do expect them to move up from this level, but maybe not already in Q1, but at least we don't see them continuing down. And then about the mown there, I didn't really follow your... No, it was more... Flat dish, because our guidance is flat dish and not to grow.

No exactly but I think you guided down ahead of Q3 so it's a small change on the positive side.

The small positive there is I think we said already that this what we call this LNG marine construction is slightly better but I mean it's a at the end of the day Hampus to be honest it's fine tuning I mean we talk one or two percentage points here and there and I mean it's not really a major thing for us to be honest I mean this is kind of flattish for us whether it's zero or plus one or even minus one I think this is a some tens of percentage points when you round it up. So that is not really a big thing for us. I think our guidance is flattish with this and that means plus minus one or something which is difficult to really do the full judgment I mean maybe I should I mean I was getting a little bit what should I say a little bit complicated but nevertheless I mean because I mean the uncertainty here for us to be very transparent on that one and we look of course all the bookings going into a quarter historically you have been quite a lot of order in quarter for sales in the quarter let's say now post COVID and following that due to uncertainties in global supply chains it has been let's say, the increasing number of orders before the quarter going in, let's say, executed in sales and less in quarter sales. Now, as the supply chain is getting more stable, it's getting better, we see a reversing trend again. And that is where it makes a little bit analysis for us more difficult. I mean, you follow what I mean, Hampus? So that is where we see a growth in quarter sales, but we are still not at the level which we had in kind of 18 and 19 but before 18 19 20 then it was kind of still even more in quarter orders for for sales in the quarter and that is kind of our uncertainty and that is why our guidance gets a little bit tricky at the moment since we see that the ordering pattern of some of our customers is actually changing because if we go back to what we have in 18 19 then of course it will it will create a very strong growth in Q1, but we do not expect that to happen yet. And so that is kind of uncertainty, simply to be very transparent on that. So that is why we are a little bit hesitant on the guidance in certain aspects.

Thank you very much.

The next question comes from Agnieszka Vilela from Nordia. Please go ahead.

Good day. This is Magnus here. Hi, Peter, Freddy, Christopher. A couple of questions from our side. First, on the order growth or the revenue growth momentum in aerospace, you weathered the Boeing issues very well, apparently. Could you sort of give some clarity around how you managed that in such a good manner? And separately, could you also talk a little bit about the overall momentum you have seen in aerospace this year? And if you have any color on next year, that would be very helpful. Thank you.

Overall it's still very positive. Overall there is order growth for the customers and that means order growth for us as well. Continued to be struggles in the supply chain and that is where the Boeing impact was probably less than you could have believed from the outside but because Boeing still had shortage of some components and they continued to order to fill up some gaps in in their supply chain in order to create more security for them going forward and we were kind of lucky or fortunate in that one that our products that they wanted more of those products they wanted to fill up they wanted to fill up in order to be ready to to to manufacture and i mean now i can you know continued guidance. Honestly, they're moving, they're changing it all the time. But I mean, Boeing still have in their plans substantial growth for the number of 737s being manufactured every month. Whether they will be able to execute it, the demand is there. So it's going to be more related to that all these, I don't know, 100,000 suppliers that they are able to cope with this and they're able to kind of deliver their part of the airplane so the underlying demand is there the order intake is there and then whether the actual supply will happen that has to be more related to the to kind of the execution or the running of factories in Boeing and Airbus of course as well it's the same so both of them are more challenged but a very high demand actually than than anything else so that is more for for everybody i shouldn't put blame on them but it means also that several suppliers including us in certain segments you still have substantial ramp ups and it's not easy to to grow by 15 percent or something or whatever it might be but it's still we still look at the aerospace as a very good one and on top of that of course also you have a military ramp up in certain areas although that must be very let's say must look at that with some caution because I mean the military demand which some people speak about is still a very very minor part of the overall aerospace demand I mean the aerospace demand is still primarily driven by the manufacturing or deliveries of 737s and Airbus 320 and Boeing 737. I mean, these two platforms, I don't know if it's 80% or something like that, 80% of the overall aerospace segment. So these are the two platforms and the two models that needs to be tracked. And I mean, both Boeing and I see they're giving... kind of updates on how many deliveries they've done every month so that is something and both of them have very ambitious plan to make more aircrafts let's say during 20 substantially more aircrafts during 25 compared to 24 and then whether they will be able to do it let's see I've had these ambitious plans before and then they've been challenged by strikes or a lot of issues in order not to be able to deliver. But order intake is not a problem. They have still orders for five years plus ahead.

And then we, of course, also Christopher speaking here, we also make more inroads into the aftermarket of aerospace also. For instance, represented by the latest acquisition of Magee. So that brings additional growth for us.

That is also when you look at the aerospace, I don't know how aerospace industry, because this lack of ability to deliver new aircraft means also that they are, we see more more kind of renovation or upgrades of existing aircraft simply because they recognize that I need to run them a few more years than originally planned because they cannot get the new aircraft. So in our strategy, we have good positions with Boeing, we have good positions with Airbus, we're going to grow with them for 737 and 320 as they are, let's say, ramping up. But the third kind of big growth engine for Trelleborg is that we have these entrances into the aftermarket which is offering honestly both good modules, but also offering, let's say, good growth opportunities. So the share of the overall aerospace market related to aftermarket is growing. I think if you look 10 years back, it's been more or less doubled on the totality there, simply because the inability of the big suppliers to... satisfy the demand for new aircraft so overall we are confident in the aerospace we are building good positions we have a global presence so we feel confident that we're going to benefit from the aerospace growth for several years to come perfect now thanks a lot that's very clear can you squeeze one final question is there any

possibility you can give some indication of how or what the impact was on the top line from the large orders in the quarter? Is that a meaningful way of looking at it? And anything would be helpful.

Sorry, the question again, Kristoffer maybe want to take it.

I assume you're talking about the industrial solutions orders we were talking about, the marine projects. Yes. Yes, well, Peter addressed that. The margin per se is not necessarily higher than the underlying business. It's just that we have good volume and good execution in the factories, which brings obviously a good drop through also.

But that is kind of similar as the aerospace. The demand is there. The order book is there. But it's simply a lot of lack of overall capacity to satisfy customers. it is heavily increasing demand short term so also there we feel confident that that's going to be a good market for us a few years to go but I mean the overall as a quarter on quarter uptick is going to be challenging because we are not the only supplier there are plenty of suppliers in that and there is kind of full if you take the Korean shipyards the Chinese shipyards so that they are full they cannot manufacture any more LNG carriers at the moment so that is kind of the one there is a lot of import and export terminals being let's say planned for LNG and we're going to be in all of them but these projects we know from history are going to take time and that is why we see that there is projects already now we know it's going to happen in five years and we don't have the orders yet but we know we're going to get orders so we feel confident that that's going to be also a good market for us for several years to come.

Thank you so much.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.

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

Great, thanks to all of you for listening in on this and thanks for your continued interest in Trelleborg. If you have any follow-up questions or any further comments, of course, as usual, Kristoffer always available and Fredrik and myself also almost always available and hope to catch up with you and do take care and keep up the good work. Thank you. Bye.