Trelleborg AB (publ)

Thank you. Peter Nilsson speaking and also joining me here on the call is Fredrik Nilsson, our Group CFO and also eventually also Kristoffer Sjögren, our Head of Investor Relations. Welcome all of you to this presentation of the Q2 report for Fortalaborg of 2025. As usual we're going to start up with the presentation and then finishing up with the Q&A session and also as usual we're going to use a slide deck which is on our web page to guide us through this call and I trust all of you has that in front of you and if not you can also follow it here on the call. So using that slide deck and then turning to page two in that one, the agenda slide, where we're starting off as usual as well with the highlights and then some individual comments on the business areas. Fredrik then will guide us through the financials and then I'll sum it up myself again with the summary and also some comments on the outlook for the running quarter. And then, as I said before, finishing up with the Q&A. So turning to page three, headline. of the highlights, improved margin and the tentative market. I will elaborate a little bit more, of course, on this tentative market. It's actually, behind this, is a generally a very good development in quarter, with one exception, and that is automotive, we're going to comment on later on. Sales in the quarter at 8.5 billion, a decrease in Swedish krona by 2%. And behind that, we have organic sales development, minus one M&A adding six percent and then we have currency which is bringing us down another seven which is ending up with this 8.5. EBIT A at the 1587 fairly close to last year corresponding to margin 18.7 almost the record margin for Trelleborg we have one quarter before 18.7 so good margin development although this little bit slim organic development in the quarter, organic sales development in the quarter. We have a substantial negative FX, not unexpected, of a little bit north of 100 million in the quarter. As usual, we continue to improve the structure and we're investing in improved efficiency overall, 80 million in the quarter, slightly lower than a year ago. cash flow at exactly one billion and also slightly south of last year but it's actually good performance also in terms of cash flow where we had there's a good management of working capital and then also continued fairly high capex level it's also in basically an impact of a much higher running at the end of the quarter than compared to the beginning of the quarter. I'll get back and comment on that a little bit later. We're also happy to continue to execute acquisitions, smaller acquisitions, but nevertheless, very nice add-on, the National Gummi in Sweden. Sicco in Germany, Czech Republic, and then Aeroplastic in North America. So it's a good spread among our business units, all of them adding and strengthening our overall position. Also, let's say here post the ending of quarter two, also acquired a smaller company in Singapore called Masterseal, which is then adding some capabilities which we don't have in that region. And that's strengthening our position, especially towards the energy sector, oil and gas sector. an area where we are let's say improving our presence not only here it's also for those of you following up remember also the crc acquisition in alabama in us which is basically another strengthening on this initial segment within ceiling also here post actually earlier today you also notice that we continue to run our share buyback program as before so overall a good quarter And then moving on to page four organic sales development biography and I'm into starting here with the totality where you see minus one and actually all of the negative is by far explained by a substantial downturn in our automotive sales where we have a let's say, double digit negative organic sales, which we a little bit struggle to fully understand, but we read in, which is the substantial inventory reduction and some hesitation, especially in the aftermarket. If you look at the total organic sales and we exclude the automotive impact, we are actually firmly positive in organic sales. So in all, as you say, organic sales development, we started up fairly poor for us in April and then with a strong development in May and June so the run rate going into Q2-3 is actually substantially better than we saw going into the quarter and we also see basically improvements in more or less all segments but automotive again But we do read that this automotive downturn, it cannot continue to have this double digit negative organic sales. So we don't really expect that to continue. But we notice a high uncertainty in that segment. And the people are, as we read it, they are, let's say, cutting inventory heavily. And we have been in the quarter. quite dramatically actually under delivered in relation to actual car manufacturing. And that is something, of course, we're watching carefully. So that is kind of few, let's say, developed comments on the overall organic growth. And we look at the regions. Asia continuing strong for us. Most market in Asia actually developing favorably. and we yeah we are satisfied with development and we look forward also to continue good development in this part of the world. Europe a little bit hesitated both Europe and North and South America more impacted by this automotive downturn but as we see in both of this area actually the underlying PMI and the underlying let's say underlying demand is actually improving but once again we have a dramatic downturn especially in Europe and North America related to automotive so that is kind of the overall comment actually so in a way we can say that at the quarter has actually been a better quarter than the figures shows when we look at the full quarter with the strengthening of the business throughout the quarter turning to page five business areas and then quickly Turning over to page six and more focused comments on industrial solutions. Industrial solutions developed well. Organic sales positive. Less automotive here. And we have also M&A adding. Strong performance in especially marine solutions. LNG projects continuing good. And then water infrastructure is also continue to develop nice. So basically development as before. Certain construction segments for us continue to be challenging, especially both residential, actually non-residential is still continuing a little bit. We saw some signs of improvement in quarter one this year, but it's actually turned a little bit more sour again here in Q2. But we do feel that we are hitting the bottom here and we hope that it will be going up from this level. It's not continuing down, at least overall, if you look on the overall development but nevertheless is still challenging and there is not any kind of certainty that it will improve already in the next quarter sales to aerospace developing nice both in industrial and get back to that and comment on ceiling solutions as well and we continue to slide upwards here on the margin well managed throughout the business areas good cost control good margin control goes good kind of mix control and also benefiting from continued investments in what we call structural improvements we continue to structurally improve the cost base in order to become more profitable as well as more competitive We also here continue to add small acquisitions of National Gummi in Sweden which is kind of strengthening us within kind of a speciality range of extruded seals and SICKO which is then adding some complementary technology mainly related to silicone rubber. And in this aspect, I mean, there is also different kinds of silicon. We get back to that. As you know, we've been investing in medical, which is then called liquid silicon. And SICO is basically more focusing on hard silicon. So slight different segment is also linked to extrusions. It's a lot to look to extrusion sealing, but also some supplementary we call hard silicon molding which is then adding capabilities which we did not really have at this level in our portfolio before so overall good development good solid stable development industrial solutions good ordering take overall as well if we look at turning to the next page page seven which is then addressing medical solutions is also generally a good development. We have some softening in North America market, but we do read that as a kind of a temporary downturn and that is pushing organic sales negative, but overall order intake is good. And M&A continue, I mean, for another quarter to add. This is basically Baron kicking in, which is showing the year-on-year improvement and We are also noting good development in Europe, where we are substantially smaller in North America. This globalization of this business is strengthening us in Europe, and we see benefits here, good order intake. And we say North America is a little bit volatile. Overall development is still good. And as I said, order intake is good. But in this quarter, we had a little bit more negative purchasing from some of the key customers, which we do not expect to continue. um then we are also for those of you following us we've been focusing on this life science segment which is basically biopharma focused which we continue to see a substantially smaller part than the kind of med tech part of the medical solutions but nevertheless very good development and be growing in those areas where we would like to grow um ebit and margin up of course mainly or of course mainly the acquisition integration of baron will continue to to run in a good way and we also continue to invest in this we have malta production facility inaugurated uh targeting on this what you call life science segment inaugurated in the quarter which is strengthening our presence in this area in europe and we also outside not commented on the slide is also we continue of this strategically important kind of investment in Costa Rica, where we now keep that fully in line and we're looking forward to inaugurate that by the end of the year. So overall, good development, although a little bit slower on sales in North America. Turning to page seven, ceiling solutions, organic sales minus four, as already commented, fully explained but by the downturn in automotive while more or more or less all the other segments actually developing favorably and we also see with satisfaction that this segment where we've been struggling a little bit if you say construction related segment or hydraulic seals segment is actually improving as well so we have good order intake in that area, but of course not fully, let's say, impacting the sales in this quarter. M&A also adding here. We have added a few acquisitions last 12 months, and we have a 3 percentage points up there. And as I said, overall, the sales in industrial segments overall have changed with strong Asia and slightly lower volumes in Europe and North America. But overall, industrial segments actually developing favourably in the quarter with a very soft start. and let's say stronger may and june and also with let's say better order intake than we have seen before automotive expected dramatically down and primarily growing to off the market as well which is impacting and we read that as i said we substantially under deliver in relation to the cost manufactured and we also as you comment on our sales series the majority vast majority of the sales is actually not linked to any specific car brands or specific car models we are generally supplying all over and that is why we feel very confident that this this let's say low sales in the quarter it mainly to to inventory reductions and uncertainty were kind of the car makers a little bit uncertain exactly what to believe and how the tariffs will impact let's say the cross continent supply which is then bringing down the inventory from us of course and I mean also their focus on inventory increasing so that is something we're watching but once again something we feel will improve going forward. Aerospace continue good. I mean, we have high ambitions, continued high ambitions to our main end customers, Airbus and Boeing, and we don't see kind of any downturn in that, which is then further supported by this let's say growth in the more defense related aerospace segments although the defense in terms of volume is very small in comparison to the commercial aerospace segments. EBITDA margin, slightly lower than a year ago, impacted by lower production, but also by these recent acquisitions, which is initially lower margin, which we then, of course, going to correct, but nevertheless impacting us in this quarter. Good acquisition of aeroplastics, which is then especially strengthening us in interior seals and interior components in aerospace and opening up a new kind of segment within aerospace for us together with earlier acquisitions of Maggi and the German acquisition we did for more window sealing for aircrafts a year or so ago. So that is an area where we now feel that we're developing a leading position which we're going to benefit from as the market develops. And also, as I already commented, we acquired this master seal targeting on more short cycle or short delivery time seals and more kind of server related seal markets, especially targeting the energy sector, but also some other sectors. segments benefiting from short deliveries which is then also opening up kind of a new segment for us within ceiling solutions where we also believe that we're going to be able to continue to deliver overall satisfaction with ceiling solutions a fairly as you say sour organic sales but once again solely explained by the dramatic yeah rather dramatic downturn we have seen in the quarter in the automotive supply Then turning to page nine, a few comments on sustainability. We continue to improve in terms of absolute carbon dioxide emissions, continued focus on that, but we are approaching a level where it will be more challenging to improve. Of course, we have continued improvement plans. We have already delivered on our long-term objectives here and we are reviewing and you will see before end of the year that we're going to release new targets for this area. But once again, we are going down to fairly low levels of impact. Next page, page 10, is the same here, looking at share of renewable and fossil-free electricity, keeping it on the same level as last year. But also here, we are approaching a level where it doesn't really make sense to improve anymore. And that's, of course, also being targeted. We still have some ways to improve, but as we are starting at 91%, there is not that much more actually to do on this. But we keep it under control. We are continuing to be, as I said, a sustainability leader in our industry. And of course, as part of that, we will continue to improve, although the steps going forward will be slightly less than you have seen the last few years. Turning to page 11, financials is the next agenda point. And then I'll leave that to Fredrik to guide us through on page 12 and forward.

Thank you, Peter. starting with the sales development on page 12 reporting net sales declined by two percent in the quarter from eight billion seven hundred eleven million to eight billion five hundred fifty one million and as peter mentioned earlier it's mainly driven by negative translation effects impacting sales negatively by seven percent m a added six percent in the quarter and then we have organic sales decreased by one percent with organic growth in industrial solution, where the other two distance areas, medical solution and ceiling solution, showed a decline. Moving on to page 13, showing the historical sales growth. The second quarter was somewhat behind our sales growth target, but 5% sales growth at constant FX in the quarter. Moving on to page 14, showing the rolling 12 months for continuing operations. We have a sales of 34.6 billion SEK in the quarter on the rolling 12 months basis. Moving on to page 15, looking into the EBITDA, which, as Peter mentioned, decreased slightly, but we saw improved margin. So we have an EBITDA of 1 billion 587 million in the quarter. But have in mind that we have negative translation effects of 104 million this quarter compared to the corresponding period last year. Industrial solution. was up 1% despite negative translation effects in the quarter. And medical solution shows strong profit growth due to the acquisition and integration of the Barron Group. And then, as Peter also mentioned, the ceiling solution decreased and that was mainly due to the negative translation effects and the lower sales. Modium wise, this was the second best quarter at 18.6 compared to 18.4 last year and that was supported by good pricing and continued operational improvements looking at page 16 the more long-term trend and then you can see on the rolling 12 months basis ebitda amounted to 6 billion 254 million with a margin of 18.1 percent and there has been an ebitda growth of four percent during the last 12 months Moving on to page 17, the profit and loss statement, looking into some more details. We have an item effectiveness comparability for the quarter of minus 80 million, which was entirely related to restructuring costs for adjusting our cost base. Financial net increased from minus 63 to minus 125. And then it's very important to have in mind that last year, Part of the quarter, we were sitting with a net cash position, which was generating an interest income of 59 million. This year, we have a higher net debt, so that has also resulted in an increased interest expense in the second quarter. Tax rate for items excluding items of effect and comparability amounted to 25%, which was in line with our underlying tax rate. Moving on to page 18, earnings per share, excluding items affecting comparability amounted to 4.31, which was an increase, decrease of 4%. And that is mainly due to the higher financial net that I just explained and the negative translation that has also impacted the net result. For the group, including items affecting comparability, earnings per share reached 4.036. Moving on to page 19, the cash flow. The operating cash flow for the quarter amounted to exactly one billion SEK. And here you can see that we have a little bit of a negative outflow from working capital. But as Peter said, we saw an uptick in sales during the second half of the quarter, which has impacted then our accounts receivables. Otherwise, you can see that it's only smaller movements between the two quarters. Moving on, page 20, cash conversion still running at a high and good cash conversion of 87% on a 12-month basis compared to 88%. Moving on to page 21, the gearing and the leverage development. We ended the quarter with a net depth of 8,937,000,000. We have done share by back of 577 million during the second quarter. Looking at the debt equity ratio, we are at 24% and the net debt in relation to EBITDA was 1.2. So that was slightly higher than year end, but we have also paid out the dividend in this quarter. In other words, our balance sheet remains strong. Moving on to page 22, return on capital employed. It ended up at 11.6 compared to 12.7 last year. And the main reason here is that the capital added from the acquisition made over the last 12 months. Page 23, looking at the guidance for the full year. CapEx unchanged, 1,650,000,000. Restructuring cost increased from 300 to 500, and the increase is entirely related to accelerated activities to optimize our cost base. Amortization of internables unchanged, 650, and underlying tax rate also unchanged at 25%. By that, I would like to hand back the microphone to Peter.

Thank you. Page 24, summary and outlook is the next action item point on the agenda. Turning to page 25 and get back to where we started, improved margin in the tentative market. As I or Fredrik and myself elaborated a few times, we actually see this as a quarter very much in the right direction. We are seeing more or less all our markets developing favorably. We see also an improvement in PMI. One exception is actually automotive, where we see a dramatic downturn in the quarter. A little bit surprising, to be honest, when we went into the quarter. We didn't fully expect that. We see, let's say, very short buying from our customers and we see some hesitation in the aftermarket and we see also some hesitation on some of the AOEs. And overall, we see this, we're reading this as we are substantially delivering below the production rates and we are for sure not losing market share. I mean, our products is in the the vast majority of them is kind of let's say supply generic supply that goes into all automotive manufacturers so it's not really related to individual oes so we believe in a bounce back there but nevertheless let's say a double digit negative organic growth in our automotive business in the quarter and that is pushing down the overall organic sales into negative territory but with this let's say lower volumes we feel we manage that in a good way very good cost control good margin control good control of the cash in the quarter solid cash flow Fredrik said I mean all this deviation basically coming from higher sales end of the quarter the beginning of the quarter And also no increase at all on, let's say, bad receivables or anything. So this is simply a working capital issue which will get back. Continued acquisitions, smaller Bolton acquisition, feel confident integrating them. We know what you're going to do with them. And we, of course, know why we buy them. And we feel confident that that's going to continue to speed up the focus on developing a better and stronger Trelleborg. and also some post Q2 ending action series to highlight with master seal in Singapore and also continuation, board decision to continue with a buyback on the current levels. Turning to phase 26, a few comments on the outlook. We do expect the demand to be somewhat higher. in the running quarter compared to their current quarter. There is, of course, continued geopolitical situation with the tariffs and everything, but we do feel confident that we're going to see a better in terms of organic growth, a better Q3 than we saw Q2 for Trelleborg. And we also feel confident that we will continue to be able to manage our cost base and our, let's say, mix in a very good way to continue to develop a solid performance also going forward. So that is kind of the way we look at it. And then turning to page 27. Next, again, the point Q&A and then quickly turning to page 28 and opening up for the Q&A. So please. Go ahead, those of you who want to address some questions.