Trelleborg AB (publ)

Welcome to the Trelleborg Q3 2025 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 pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Peter Nielsen and CFO Frederick Nielsen. Please go ahead.

Hello everybody, Peter Nilsson speaking. Welcome all of you to this Q3 of 2025 results. We're going to give you some of our, let's say, input on how the quarter developed. And joining me on this call is also Fredrik Nilsson, our group CFO, and also Christopher Sjögren, who is heading our investor relations. So as usual we're going to refer to a slide deck from our web page and then on that turning to page two on that section the agenda slide and the normal starting with some general highlights. some comments on the business areas and then frederick's gonna guide us through the financials and then finishing off with the summary and some comments on the outlook for the running quarter and then finally ending our call with the q a session so that's the the agenda for this call this morning turning down to page three heading of our report organic growth with higher margin so a solid quarter in more or less all aspects a development in the right direction in more or less all aspects sales ending up relatively flat compared to last year in Swedish kronos an increase of one percent but behind this a very solid organic growth plus four percent which is something we have not seen for for quite some time m a also benefiting we have done several acquisitions several smaller bolton acquisitions here in the last 12 months and that is of course also bringing in some sales so that is adding three percent and then we have a currency headwind well known by everybody which is a six percent in the quarter which is then Once again ending up with a 1% on the total sales. EBITDA also up and also with an improved margin which is an all-time high margin and results for a third quarter. We are let's say a notch above 18% EBITDA margin in the quarter. And this is, as I already said, it's a stronger third quarter to date for us, both in terms of profit and margin. So solid. And I mean, the great thing you're going to see later also is coming from all business areas. We have a substantial negative effects on EBITDA, almost 100 million or 90 million Swedish, bringing us in the wrong direction, if you may say. Items affected comparability running as planned relatively high level this year, but also coming from from this rather high number of acquisitions, which is then kind of creating opportunities to improve the structure and then make sure we get all the benefits from these acquisitions as we move forward. Cash flow, very strong. I mean, we have to admit, surprisingly strong ending of the quarter on the cash flow, which of course is going to bounce back a little bit here in Q4. But nevertheless, we are happy to have the money in our pockets instead of sitting somewhere else. So very solid cash flow, which is creating a stronger balance sheet and overall better business. We've done a smaller acquisition, small but important acquisition in Singapore called MasterSeal, which is an acquisition which is strengthening a little bit oil and gas markets and generally in more in the kind of aftermarket related markets. segments of ceiling solutions, which is an area which we are developing at the moment, an area we're growing into kind of a global business for us. Also note continued share buyback on a level slightly north of 500 million Swedish kronor being spent on share buybacks in the quarter. So this is the quarter. This is what it is. And I mean, overall, once again, a solid quarter. So turning then to the next page, page four, where you see... a new slide for us which I hope you will give some more input on the sales split per geography which I'm not going to comment that much on. but we also more importantly here we see organic growth in all three major geographical areas with Europe for us being the softest slightly better in America so five percent organic growth in America which is kind of on a high level driven a little bit by priority deliveries but that's the way it is but nevertheless good solid quarter and a very solid quarter also for Asia and particularly strong in China for us But overall strong in Asia and kind of a little bit bounce back in America and then Europe a little bit softer. So this is in all areas on levels which I mean we have not seen for some time especially if you talk about America and Europe while Asia continues on a good level as you've seen throughout the year for Trello Ball. Turning to page five, the agenda slide, business areas, and then quickly turning to page six with some more detailed comments on industrial solutions, organic growth, and then we say stable margins, slight uptick in margin. Organic says 2%, M&A adding 4%. And then, of course, also as others here, a negative exchange rate of some 6%. Also behind these figures, we see oil and gas product declined in the quarter, sales declined in the quarter. But that is mainly due to a rather tough year-on-year comparison. Overall market still developing well. and a very solid cash flow but that some of these sales is rather project heavy it is that it sometimes goes a little up a little bit and sometimes a bit down and this quarter was a little bit down in the sales but it's not once again it's not a reflection of overall lower activity in this part of the business. Construction industry still muted, but we noted satisfaction that is getting slightly better if you look sequentially, although still, let's say, quite strong decline if we compare year on year. But once again, some some light in the tunnel and some improvements kicking in. Automotive sales increased in the quarter. I mean, it's been a little bit. how should I say, a little bit strange quarter, if I may say, for automotive. Those of you following automotive see that it's still relatively... tough sales in Europe and North America. Well, China was extraordinary in the quarter, which is a 10% plus organic growth. And I mean, the business that we have in industrial solutions has a very good market share in China. And that is where we benefit from this. So we have actually a strong development in automotive within industrial solutions in this quarter. And then EBITDA and margin improves slightly. You know, I mean, industrial solutions is a fairly diverse business and there are some ups and downs always. But overall, we continue to move in the right direction. We continue to improve. It's not major steps. It's a hard work. coming from from kind of operational focus and also some of these structural investments structural improvements kicking in overall a good quarter well managed in more or less all aspects and then we also should note that when we look at the margin here this acquisitions that we've been doing is on a lower margin than the overall and we have some some tens of a percent negative kicking in for that. It could be 0.3, 0.5% on the margin actually coming from kind of this acquisition kicking in and it will take us a year or so before we can get them back to the overall margin of industrial solution. But that is also something that you need to note when you look at the margin development within industrial solutions turning to page seven and Trelleborg medical solutions strong organic sales growth organic sales is up by 13 percent M&A not doing any changes so zero impact from that but we have to note here as well that we have some project deliveries related to one of our major customers, which is, let's say, boosting the sales dramatically in the sales. I mean, if you look underlying and try to kind of neglect these organic sales, I mean, the more correct probably underlying organic sales is more in the kind of the mid single digit. territory. Methex sales we see also Methex sales in Europe developing well. North America we still struggle is the wrong word but we still see some negative development where we still have some inventory issues. We don't see the overall activity going down but we still see our sales is a little bit below where it should be. So we are Pretty certain that we still impacted by inventory reductions in especially North America, which we have been for some time. And we honestly, we believe that it's going to turn the corner, but we see it continues. And it's difficult to really see through exactly when it will turn. But we continue to gain business. We continue to gain orders. And we are overall satisfied with the development, even though the sales, we would like to sell more, of course, in America as well. going forward. Life science which is a kind of the smaller segment of medical is developing if I may say very nice and we are growing that and we are starting we have been investing in that segment with new factories both in North America and in Europe and we with satisfaction we see that these investments is slowly let's say benefiting us and that is in the area also where we see continued growth going forward. EBIT margin up and also let's say in absolute terms we have EBITDA up I mean it's higher volumes as you expect but also continuous structure improvements especially starting to benefit from or continuing to benefit from this acquisition of Baron that was made let's say a year ago now. Turning then to page eight, ceiling solutions. If I may say very solid organic growth in the quarter coming from several areas but I mean if I should highlight something it's really that we have underlying kind of industrials the big kind of industrial segment of TSS is starting to do better we see now growth in Europe kicking in Asia continued on a good level which has been good for us for quite some time we continue to see some weakness in North America but overall this core segment of ceiling solutions improved in the quarter, both with sales and also kind of a higher activity level. Automotive for TSS is still below last year, particularly still impacted by, let's say, very soft development, very soft development in the aftermarket business. And we cannot, I mean, it's not like the aftermarket in itself is... is down it's more that we see very let's say uncertainty especially the north american market this is we see that they are downsizing in stock inventories is down and we do expect it to to kick back but once also here we don't know exactly when but but it is kind of we are supplying substantially below the market demand for a few quarters here. And we do expect that to bounce back eventually. We note in automotive here as well, as we also commented on TSS, very good development in China. We have a good market share for some of the products in TSS, especially that's our shim business, our brake business has a solid market share in China. And of course we are benefiting from that as the Chinese market has been developing very, very good in the quarter. Aerospace, very strong all over. We continue to, let's say, get more orders than we sell. So let's say order book is growing and activity level is growing. Of course, we note, as I trust the ones of you who are following aerospace, that both Airbus and Boeing is very ambitious in the growth plans going forward. And we, of course, do our best to follow that. So good development in aerospace. And overall, this means that EBITDA and margin is improving, higher production volumes kicking in. We have been underproducing for some time and we see also the benefits from the operation improvements. But we also have to note also here we have a negative impact from acquisitions being made and with this kind of the same dimension as we see in industrial solutions from 0.3 0.5 negative impact on the margin if we are we're trying to kind of adjust for the acquisitions but we're doing acquisitions of course because we believe they are good for us and they are improving the business overall but it will take some time to get all these improvements into the margin already comment on the master seal acquisition in singapore that is part of small acquisition but it's part of an overall game plan to strengthen our activity within let's say aftermarket for seals and especially related to oil and gas and mining and other segments which is more kind of project related where you need uh say local presence in order to get this business into our books so that's happy with that and we think it's a good strategic add-on although once again on a very minor level compared to the overall sales of Trellable. Turning to page nine some comments on sustainability continue to improve substantially I mean we say here we are not getting to the end of the game but we are getting down to levels of CO2 emissions from our scope one and scope two, which is kind of becoming very low. We of course are going to continue to improve and continue to do better also in this aspect but I mean do not expect these kind of improvements steps going forward. Next page, page 10 and it's basically the same here. We have a substantial tick up in the share of renewable and fossil free electricity. We are now up to 92%. And I mean, the remainder here is very difficult because in some geographies, you actually cannot get it. And we are getting also here to a situation where we cannot improve that much anymore, to be honest, because we are, let's say, stopped either by very major investments to turn it around or that is simply not available in a few geographies. So very good development. Very happy to... to show this there were continued good developments in sustainability and we are doing good in these aspects and I mean once again the focus we cannot improve on this criteria so the focus going forward will be more smaller steps and more kind of what we call say energy excellence programs we'll be working hard with all the factories in order to improve and to do better in in more minor aspects. So these big steps, you will not see these big steps going forward, but we're getting to a situation, I don't say being perfect, but we're getting to a level where we cannot justify the final steps to get it even better. Turning down to agenda slide again, page 11, financials, and page 12, I'll leave it over to Frederick to guide us through this section. Thank you, Peter.

Let's then start on page 12, looking at the sales development. Reporting net sales increased by 1% from 8,442,000 to 8,532,000. We have organic sales growth in all three business areas in total 4%. Structural changes added 3% growth in the quarter. And then as Peter mentioned, we have negative translation effects that reduced the growth by 6% during the quarter. If we then move to page 13, showing the historical sales growth. In the third quarter, we were close to our sales growth target, achieving 7% sales growth at constant FX. Looking at page 14, showing the quarterly sales and rolling 12 for continuing operations. The sales in the quarter, as I said, reached 8.5 billion at that rolling 12 months. It's reached 34.7 billion. Moving on to page 15, looking at the EBITDA and the EBITDA margin that continue to improve further. EBITDA exclude items of victim comparability increased by 5% to 1 billion 541 million in the third quarter. We saw profit growth in all three business areas. And looking at, we start with industrial solution, which was up 1% in EBITDA due to operational structure improvements, which was partly offset by negative translation effects. And then medical solution up 10% in the quarter. And then finally, ceiling solution was up 6% in the quarter due to higher production volumes and operational improvements. And model wise, we rose from 17.3 up to 18.1, supported by the organic volume growth and the operational improvements. Looking at the EBITDA and EBITDA margin on a 12-month basis, EBITDA amounted to 6,331,000,000 with a margin of 18.2%. And EBITDA has been growing with 6% during the last 12 months. Moving on to profit and loss statement looking into some more details in the income statements I think affected comparability 72 million in the quarter which was entirely related restructuring cost for adjusting our cost base and due to the recent acquisition. Financial net I would say on par compared to last year 126 million compared to 128 million This is actually despite that the debt level is higher this year. So that is also a good achievement. Tax rate for the quarter excluding items affecting comparability amounted to 26%, a slight increase due to timing. Page 18, earnings per share. Excluding items affecting comparability amounted to 4.20 in the quarter and increased by 11% and that was due to the higher profitability and the effect of the ongoing share buyback program. And for the group including items affecting comparability earnings per share were up 3.94 also 11% up. Moving on to page 19, as Peter mentioned, we have a very strong cash flow in the quarter, which reached 1,741,000,000. On a high level, half of the improvement came from the higher EBDA and the rest from efficient management of the working capital. CapEx is well aligned with the communicated guidelines for the full year, but marginally higher than Q3 last year. Moving on to page 20, the cash flow conversion. The cash flow conversion was 92%, so we continue to deliver a high cash conversion ratio. Moving on, page 21, the gearing and the leverage development. Net depth at the end of the quarter at $8,280,000. Share buyback during the quarter was $554 million. ended the quarter with a debt equity ratio at 22%, so a small improvement compared to Q2, and then net debt in relation to EBITDA, 1.1, which was slightly higher than year-end, but of course we had also paid out the dividend during the second quarter, and we had continued the share-buy-back program. In other words, our balance sheet remains strong. Moving on to page 22, return on capital employed reached 12% for the quarter. And our capital employed has increased compared to last year, mainly due to the acquisitions. But I think also I would like to note that our return on capital employed has sequentially increased from Q2 to Q3. And then finally, the financial guidelines for 2025 unchanged compared to what we communicated after our second quarter. CapEx, 1,650,000,000 for the full year. Restructuring cost around 500 for the full year as well. Amortization of internables, 650,000,000 and underlying tax rate for the full year around 25%. And by that, I would like to hand back the microphone to Peter.