Trelleborg AB (publ)

So, welcome all of you to this Q2 presentation of Trelleborg in 2026. I'm Peter Nilsson speaking, CEO of Trelleborg, and joined here on the call is Fredrik Nilsson, our Group CFO. And also supporting us on the call is Christopher Sjögren, our Head of Investor Relations. As usual, when we present our quarterly results, we're going to use a slide deck which has been on our webpage for some time, or for a few hours. So that is what was I going to refer to throughout the call and using that turning them to page number two Agenda Agenda page number two, please So page number two agenda we're talking about the highlights and And then commenting on the business areas. Then commenting on the financials. Fredrik gonna guide us through that financial part of the slide deck. And then finishing off with the summary and some comments on the outlook for the running quarter. And then finishing off with the Q&A as usual. So then turning to page number three. Heading for our report this time. Strong growth and record high margin. Coming sales in the quarter. ending up a little bit north of 9 billion Swedish, which is an increase of 7% compared to a year ago, which is also to be noted the highest sales we have had to date for a single quarter in Trelleborg. Organic sales in the quarter ending up at a high, 8%. M&A adding another 1% and then currency bringing us down with 2 percentage points. So that is the kind of the sales development. And if you look at the results EBITDA ending up at 1761 million Swedish kronors, which is corresponding to a margin of 19.2 and both of these both EBITDA and the margin is also the highest to date for a single quarter for Trelleborg. We have some still some negative currency relation effects on the EBITDA, which is bringing that down by 24 going down, but nevertheless negative earnings per share increasing more than the EBITDA. BENEFITING FROM IMPROVED FINANCIAL NET AND ACTUALLY INCREASING IN THE QUARTER BY 18% OF COURSE ALSO SUPPORTED BY THE SHARE BUYBACKS WHICH I WILL COMMENT ON ALSO A LITTLE BIT LATER ITEMS AFFECTING COMPARABILITY a link to restructuring, a link to integration of M&A of some 67 million Swedish kronor. Cash flow, solid cash flow, good cash flow, a bit north of 1.2, which is up by some 20% compared to a year ago. Good management of working capital in a growing environment. And I mean, on a rolling 12 basis, we keep the operating cash flow CASH CONVERSION ABOVE 90% SHARE BUY BACKS CONTINUE AT THE SAME PACE AS BEEN COMMITTED BEFORE LITTLE BIT SOUTH OF 500 MILLION IN THE QUARTER AND ALSO IN THE QUARTER WE ANNOUNCED AN ACQUISITION OF A COMPANY CALLED GOMET AN ITALIAN BASE COMPANY FOCUSING ON THE AFTERMARKET OF NICHE AUTOMOTIVE CEILING PRODUCTS CALLED BOOTS WHICH IS OVERALL Our position within Boots is strong globally, and this is kind of adding capabilities and adding a product range, more focus on the aftermarket. It's a very good supplementary acquisition to us, which we're going to benefit from in this niche application and this kind of what we call a business unit within Trellable. Turning to page four. commenting with more in detail on the sales development in the quarter. We have, let's say, fairly solid organic growth in all main geographical markets. Europe growing by 6%, which is substantially higher than a year ago. Americas and Asia, both of them close to or even slightly higher than 10%. Good development in US and Asia. We note the satisfaction as well we have behind this. 10% growth. We have good growth figures both in India and in all main markets in Asia, India, China, Japan, and Korea. Overall, summering up on 8% organic, so good organic sales development in the quarter, which is fairly equally spread globally as well.

Page five.

On the agenda slide, commenting on the business areas, quickly turning to page six. and commenting on industrial solutions, solid organic growth, organic sales up by 4% and M&A adding another 1% and behind this is still a little bit lower project deliveries in the quarter which we have announced before and we keep to that guidance that it was a little bit lower in the quarter and we do expect that to pick up more here in the second part of this year. We also noted satisfaction that construction industry sales is actually showing some improvements. It's been a fairly bad market for quite some time and although running substantially below the peak a few years ago, we noted satisfaction that we see the first signs of an improvement. Also, good performance within aerospace within industrial. We have an aerospace exposure with our own industrial solutions, although the biggest aerospace exposure within ceiling solutions, but we also notice satisfaction that, I get back to that later, it's developing very nice in ceiling solutions and developing also nice within industrial solutions. Overall this kind of boils down to an improvement, a slight improvement must say in EBITDA and margin owing to higher sales volume and operating efficiency and behind this figure is actually slightly better as we see it because also with this mix that we have mixed development within the quarter we have had a slightly negative mix on the sales development here so we are let's say, happy with the development of industrial solutions in the quarter. Also here, of course, this acquisition of government is kicking in when that being fully integrated, this government acquisition, which I already commented on. Turning to page seven, on Trelleborg Medical Solutions, stable organic growth, we are growing by 2%. Some mixed, let's say sales development with a good development in Europe and North America, WHILE ASIA WAS TEMPORARILY SOMEWHAT LOWER LIFE SCIENCE SEGMENT A SMALLER PART SMALLER PART OF MEDICAL SOLUTIONS BUT THE FOCUSED AREA FOR US CONTINUE TO DEVELOP NICELY AND DEVELOPING IN A VERY ROBUST WAY SLIGHT IMPROVEMENT BASICALLY ON PAR WITH LAST YEAR FOR EBITDA BENEFITING FROM THIS SLIGHTLY HIGHER SALES BUT WELL MANAGED AND GOOD DEVELOPMENT OVERALL And we have a slight downturn and that is mainly a mixed effect, but no big things here. Stable performance and solid performance for medical solutions. Turning to page eight and commenting on Trelleborg ceiling solutions. Yeah, we say very strong sales growth and also let's say with a nice uptick also in the EBITDA. Good development in most segments within ceiling Solutions, good development in industrials generally with especially good performance in Europe and Asia. Automotive actually growing very nicely for us in the quarter. We are benefiting from our global Global presence, global balance within this segment, and of course also, as most of you are aware, good development within truck and buses, and also recovery in the aftermarket sales where we've been suffering a little bit the last few quarters, but that's a bounce back in this quarter. So good development overall for us within automotive, aerospace, developing very good growth on a global scheme, which is also creating good benefits for us in the quarter. So overall, very good development in Sealy Solutions, which is then, let's say, delivering very good results. Very good development in EBITDA and good margin development, good performance overall, also creating a solid foundation for at least for the rest of the year. Turning to page nine, a few comments on the sustainability before entering into the financials. Continue to bring down our CO2 emissions within the group, down by 19% year-on-year, solid development. Of course, as it gets lower, it gets more challenging to deliver it further, but nevertheless, it is a high priority also going forward, and we're going to continue to improve, but although maybe not with this kind we have seen. in this quarter. Same, page 10, same applies here. We have also another KPI on the next page, page 10. Is then also a share of electricity, which is also a good development here, where we see that we are more or less now up to 100% of all electricity used is coming from renewable or fossil-free electricity. But as we go close to 100, then of course we cannot go above 100, so you should not expect too big improvements here. We're going to make sure that we keep it on this level and continue to deliver good results also in these aspects. Turning to page 11 and the agenda slide and the financials, turning over to Fredrik, who is then starting on page 12.

Thank you, Peter. Starting then on page 12 looking at the sales development. We have reported 7% increased sales in the quarter from 8,511,000,000 to 9,161,000,000, which is the highest sales for a quarter. If you look on the right side of the slide, you will see an organic sales growth of 8% in the quarter with growth in all three business areas. And then we have 2% negative from currency in the quarter and M&A added 1% growth in the quarter. Moving on to page 13. Here you can see in the second quarter, we achieved 9% sales growth at constant FX, which is above, you can say, the sales growth target we have over a business cycle. And as you can see here on the chart, that it's quite some time ago since we were above that target, so it's nice to see that we are hitting that level. Moving on to page 14, looking at the quarterly sales for the rolling 12 months for continuing operations. You can see here on the rolling 12s that we reached 34.7 billion SEC in the quarter. Moving on to page 15, zooming in on the EBITDA and EBITDA margin. If we then start with EBITDA excluding items affecting comparability, we have a nice increase of 11% to 1,761,000,000. And in the quarter, as Peter mentioned, we have minus 24,000,000 sick in negative translation effects. If we're then looking on the margin side, you can see a nice increase from 18.6 to 19.2. And this was the highest margin that we have had for a quarter. And the margin improvement was due, of course, to the good organic sales growth, but also continued operational improvements. Moving on to page 16. looking at the EBITDA and EBITDA margin on rolling 12 months. You can see an EBITDA of 6 billion 430 million. And then we had a margin of 18.5 on a rolling 12 months basis. It's an increase of 3% of the EBITDA over the last 12 months, but you need to have in mind that we have had significant negative translation impacts during the last 12 months. Moving on to some details in the profit and loss statement. Looking into the items of comparability. We have minus 67 in the quarter. And that was entirely relating to restructuring projects. Looking at the financial income and expenses, you can see that it was lowering from 125 negative to minus 109. So nice improvement, and the tax rate for the quarter at 25%, which is also in line with the earlier communicated guidelines. Moving on to page 18, looking at the earnings per share, and if you're looking at the earnings per share excluding items affecting comparability, the good improvement from 431 up to 507, which was an increase by 18%, And that was of course due to the higher EBITDA, improved financial net and the share buybacks. And then if we include items affecting comparability, it was an improvement from 403 to 485. Moving on to the next page, page 19, looking at the cash flow. Improvement of 22% in the quarter. from 1 billion to 1 billion, 217 million. And then you can see here that the capex level has coming down. So there's a nice improvement year over year from the net capex. And then you can see an increase on the working capital side. And that is of course, partly related to that you see the good organic sales growth. We're tying up a little bit more in accounts receivables. And we have also temporarily built up some strategic inventory of some important raw materials to secure that we can supply with a strong organic growth. Moving on to page 20, looking at the cash flow conversion. And very good cash flow conversion continue and you can see here a year ago we have 87% and now we are ending quarter with 96% cash conversion over the last 12 months. Moving on to page 21 the gearing and the leverage development. We're ending the quarter with a net depth of 10 billion 31 million and that's an increase compared to prior quarter, but please have in mind that we paid out our dividend in late April. We have also done share by backs of 458 million in the quarter. So then zooming in on the ratios, you can see on the slide and net debt over equity, 27% and net debt over EBITDA has gone up to 1.3. In other words, our balance sheet remains strong. Page 22, looking at the return on capital employed. You can see here for a year ago, we're at 11.6. Now we're at 12.6. So you can see that the trend from the third quarter in 2025 continue. And the main reason here is the higher profitability that is improving our return on capital employed. Moving on to page 23, the financial guidelines for the full year. It's unchanged compared to what you saw end of first quarter. But looking into the details here, CAPEX, 1 billion 450 million. Restructuring cost, we expect that the year will end around 375 million. Amortization of internal assets, 650 million. And the underlying tax rate should stay at the current level of 25%. With that, I would like to hand back the microphone to Peter.

Thank you. and turning to page 24 back to the agenda slide and going in for summary and some comments on the running on outlook for the running quarter turning to page 25. Overall we see an improved demand in a lot of our end markets and basically struggle to see areas where we see not an improvement so it's looking good and we see once again most of the areas moving in the right direction We also have a wide, good development. All business areas recorded solid organic growth. And we also see that sales in the quarter were also the highest date for a single quarter for us. So good demand overall, both running quarter and also the way we look at the future. Improved earnings, we also get a reasonable good drop through on this one, which is also this higher sales is turning into the best EBITDA and the best margin for a single quarter that we had to date. Cash flow following, we are managing, we feel we're managing the working capital in a good way in this growth environment. Although, let's say we are also, of course, cautious here. We have had some uncertainty related. I mean, I couldn't say that we have any problems yet, But at last, we don't know what's going to happen with some of the raw materials. We've been a bit careful building some inventory to make sure we get both availability and also to safeguard a little bit of the pricing. So that's been impacting us. But good management of accounts receivable, good management of payables. And on top of that, as we have been guiding before, also CapEx is going down, which is also benefit, so good cash flow, good cash conversion, above 90% looking at the last 12 months. We also continue to do the share buybacks after roughly 500 million Swedish kronors per quarter, slightly lower in this quarter, but the overall kind of guidance in relation to share buybacks is the same as before. Turning to page 26 on the outlook of the running quarter, and we should be open here that was a little bit struggle to get it right we see an improved demand actually quarter on quarter but also that we have let's say the the comparable comparative figures going into q3 is a little bit more challenging so you should read this that actually we see that the organic growth figure from eight might not be eight in in the q3 it will be a bump down on that but we still remain in a in a very positive territory so we feel confident on the demand and we have good order books going into the quarter so happy to answer more questions about that but I mean that this is the way we would like to send a message demand is solid demand is good demand is actually sequentially improving but as let's say if you're looking into Q3 we do expect the organic growth figure to be a tad down compared to what you saw in Q2. And then, of course, a normal add-on. We are living in a little bit uncertain territory at the moment in terms of your political situation. Of course, things might change and things might be different, but that is, cannot do anything about that. And we are ready to adjust, but nevertheless, we need to add this comment to highlight the uncertainty we see around us. Turning them to page 27, and then Q&A quickly turning to page 28 it is, I guess, and opening up for questions. Please go ahead.

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 Chit Sinha from JP Morgan. Please go ahead.

Good afternoon. Thank you for taking my questions. I have three, please. Maybe just firstly on ceiling solutions and maybe just commenting on the margin from here. Clearly a strong development organically year-on-year and a good drop-through. But perhaps if you could just shed a bit more light in terms of how we should think about the margin development as we head into a quarter with tougher comps. Thank you.

Starting with that one, I don't say tougher comps in that respect for TSS. We still believe we can improve from the running margin. We expect a good demand overall and we're running with fairly high gross profits here. So if the volume continues as is,

we are kind of positive also about the future.

Of course, we're not talking about another two percentage points or whatever up, but they're running on a good level and we expect it to remain at this level or even somewhat better for the second part of the year.

Very clear, thank you. My second question is just regarding your commentary on the product deliveries. So you pointed to a bit of a sequential increase in deliveries and obviously have communicated a bigger pickup in H2. Just wanted to clarify whether the deliveries in the quarter were in line with expectations and then how are things developing on the demand side here?

Are you referring now to industrial solutions? Is that the question related?

Yeah.

So I mean that is a long order but generally that business that we refer to is very long orders and we know that we we know the order book well in advance so it's a very let's say low turn in the quarter if I may say so that is why we feel confident that this deliveries will be it's developed as expected and it's well in line with what we guided for and believed in so we don't see any you never know there could be some let's say delays in certain areas, but we don't know that at all. So it's not really a problem about availability or lack of orders. It's more a matter that the customers did not ask for the products here in the first part of the year and we see an increased project activity here in the second part of the year. So nothing really surprising or nothing kind of no challenges as we see it today.

I'm sorry, just on the demand side?

I mean, if you look at the project business, the demand is still, let's say, flat positive. We do, I mean, we are, I mean, on this project part of industrial solutions, the main exposure is not the only one, but if you pick someone, it's LNG development and all of that, and that is kind of still, so overall, let's say, the activity level is high, and then, of course, it's always a bit bumpy on this kind of big project business. It goes a little bit up and down and there is always a phasing in the projects and all of that but we are a solid order book we have a I may say for that business an all-time high order book and so that is more a matter of executing and making sure so it looks good and that's not only for the next quarter that looks good for kind of the next year plus in that part but it will be a little bit fluctuations in between quarters since this kind of sizable project delivers

Thank you. And my final question is just on pricing. I just wanted to get a bit more color with regards to development in Q2 and then just what you're seeing at the moment as well.

Of course a lot of suppliers are indicating let's say cost ups and there's also some freight costs going up but I mean we are confident in managing that in a good way we are using kind of resourcing where that is beneficial for us and we do of course also do some pricing but we believe the acceptance for price increases, well-motivated price increases is good in a way, so we don't see a challenge in adapting for this potentially higher raw material pricing. We should say that most of these raw material pricing are not really kicked in yet, but also Nader has our price increases, so we feel going forward we don't feel any kind of, we don't see that as a risk for us going forward on this The next question comes from Alex Jones from BOFA. Please go ahead.

Thank you. If I can start on the outlook statement for Q3, you're talking about demand sort of an underlying basis being sequentially better. Are there particular regions or end markets where you're seeing that or is that sort of across the board? And then you're also talking about sort of putting that to one side, the comp impact on Q3 growth. Is there any way to think about the magnitude of that and therefore the potential step down from the 8% this quarter?

The demand is surprisingly good more or less all over. Of course, some automotive pockets, which is weak, if I say that. But overall, the global automotive is good. And also, as I said, truck and buses is good. We see the aftermarket automotive picking up. So there is, of course, but we don't really have this exposure, direct exposure to the weak areas of that. But overall, we see aerospace is good. Semiconductors continue to deliver very well. We have the oil and gas, LNG. delivering good. We see also some uptick in this, what we call industrial automating, robotics and stuff also, where we see higher demand. I mean, the area, construction industry are all recommended, although on a lower level, we see slight kind of lights in the tunnel here for both commercial and residential construction. And the big segment for us, which is hydraulic pneumatics, which is then driven by off-highway and agriculture also, where we, after some kind of challenging quarters, we see also an uptick in this. So I have to say, Alex, that we're looking fairly bright at the moment, wherever you look. Now, medical solutions is the one, but it's a little bumpy on, I think, as you say, the start of programs and they're a little bit bumpy in the ordering. So that is what we have. And that is also maybe, if I stay on that, the main one of the main things here going on Q3 if you look at our Q3 figure last year we had I think 13% or something organic growth in medical solutions and we did comment already then that that was kind of abnormally high and that is where we had to bring with us here now going into this quarter where we have a comp with a fairly let's say high so we talk about a couple of percentage points down from this eight so we still let's say, expected to stay on a very solid number above our kind of long-term guidance of four. But then when it ends up, if I can be very direct, if it ends up five, six, or seven, I don't know. But we don't believe it's going to reach eight. But we neither believe, we don't see it going to go below four. So that is kind of the ballpark figure to give some more clear guidance on that. As I understand, there was some confusion or some questions around it.

That's really helpful. And if I can just follow up one more on margins, you talk in the release about pricing and sort of cost efficiencies having covered extra costs due to the geopolitical situation. And I'm aware that you're particularly proactive, you know, as a business on both those pricing and efficiency points. Was there any benefit in the quarter that you were able to sort of mobilize the company to price and to be more efficient on cost ahead of some of those raw mat inflations?

hitting the business or was it more sort of a neutral effect on margins this quarter thank you I would say it was neutral to positive but a very slim positive if that I mean also when you have all of this kind of turbulent situation I mean change management gets a little bit easier you can speed up a few actions you can do the adjustments a little bit quicker both in terms of pricing and and kind of own cost actions but I mean overall This is not kind of an explanation on the margin. It's not an explanation on growth. And we don't... I've got some questions also on pre-buying. We don't see any sizable pre-buying. We don't see really customers protecting themselves on pre-buying. So we cannot... Of course, we're watching it carefully, but we cannot really see that driving sales growth or driving the development in any meaningful way. Then, of course, there could be individual cases. But, I mean, if you look at overall... development, we cannot see that being kind of any kind of meaningful impact in any way.

Great, thank you.

The next question comes from Op Otani from GS. Please go ahead.

Hi, good afternoon, Peter, Frederick, and Christopher. Two questions for me. Most of my initial questions have been answered already, but maybe just the medical, so low organic growth there. Could you just maybe talk through what's driving that? I think we've previously talked about that being driven by life sciences, but sort of any idea what the run rate is, maybe from when you speak to customers, especially in light of the fact that you've expanded capacity and that should be supporting organic growth.

I know you're looking at the figures in detail and we do as well but I mean it's really a small deviations here and that's a kind of a weekly delivery here and there where people let's say fill up their inventory or lowering their inventory we don't see that it's kind of linked to an activity level and I think it's been a little bit it is a little bit bumpy in medical I must say and we need to look at the rolling 12 12 in more to get the guidance it will be let's say bouncing a little bit in between the quarters. We still remain in a solid positive territory and we don't see that changing going forward. Now, of course, it gets tough comps in Q3 here as we had a plus, was it 13 last year? So now, and that was kind of linked. So maybe we will get into a negative here in Q3, but I mean, that is not going to kind of influence the rolling 12 figure that much. I cannot really give you any more guidance on it. We need to accept that this is the way it is, and we need to look more on the rolling 12 figure.

Great, thanks.

We are not concerned. We see the development. We're keeping the customers. We're keeping the programs. We're growing in the programs, but the customers are ordering a little bit. They go a little bit up and down sometimes in the orders, which we honestly do not fully understand why.

Great, thanks. And maybe just on ceiling Solutions, plus 12% organic growth is pretty strong, and I know the guide kind of reflects this in the go-forward that you therefore have tough comparables, but could you just give a sense of if that sort of, if there's any actual pull-forward demand, and particularly like what, effectively, whether plus 12 came versus your initial expectations going into the quarter?

I mean let's say the order book supported this going into the quarter it was slightly was it was a kind of slight acceleration in the quarter but not really meaningful we had a very good order intake in Q1 we have a good order intake in Q2 so we feel confident also going into Q3 Just a few segments pushing we have aerospace continue developing very nice semiconductors is a lot up as well for us, although a small part of the talent here but but it's growing rapidly within ceiling solutions going developing nice way if there's anything which is more that's a meaningful positive in the quarter is probably the. development within this what we call hydraulics pneumatics which is off highway agriculture where we see an improvement in the quarter otherwise it's kind of the same a little bit slight in automation robotics but these are these two areas by both kind of hydraulics off highway and automation has been a little bit negative development the last quarter we've been waiting for the uptick in there and there and now it's kind of Yeah, we're seeing it, but it's not kind of dramatic changes. So we see the solutions is very wide in exposure. So it's a kind of a very wide growth in a lot of segments and also in a lot of geographies. So it's in a kind of a broad-based growth that we see in ceiling.

Great. And maybe just one last one, just on margins. really strong in sealing solutions but sort of flattish in industrials and medical versus quite strong organic growth. Could you just help us understand sort of why the drop-through was maybe less than expected in those two segments despite decent organic growth?

I comment on that. The industrial solution is slightly say internal. You don't see it but we guide you on that one. It's a slight negative mix that we have a little bit unbalanced growth in a few areas. We do expect it to be better in the second part of the year but but nevertheless in the quarter that is why you don't really get the drop through that we that we should be getting but that is that is the way it is sometimes in in medical once again it's a fairly small business so it's individual orders individual customers that's with driving it and we are kind of happy as long as it stays above 20 and that is what we're aiming for and that is what we do and we were The next question comes from Forbes Goldman from Pareto Securities. Please go ahead.

Hi, good afternoon. Just one follow up on what you said there on the semiconductor exposure. Could you give us any sense of the current revenue run rate or share of group sales and give some color on how that is growing and perhaps margins as well?

It's a low single digit, let's say, compared to the overall group sales. But I mean, the growth rate is tens of percent. in organic growth. And of course, we're also looking there to be fully transparent on that one, looking also for acquisitions and we're doing investments. We are building a new... We're expanding, for instance, our factory in China in order to support organic growth there. We have recently inaugurated a new facility for semiconductors also in Malta for Europe. And we're looking also for a setup in US. So we are investing into that and we're looking for... Continued kind of Tens of percent of organic growth of let's say kind of foreseeable future. So this is going to be a growing part of Trelleborg. Of course, we're focusing on organic growth, but also hopefully be able to support it also with some supplementary acquisition. So it's a priority segment for us. It's not as big as we want it in Trelleborg today, but it will be will be a substantially bigger part of Trelleborg if you look for the next kind of three, five years. So that is kind of the horizon where you're going to see this growing part of Trelleborg.

Great. One more final one for me. On aerospace, the capacity investments you've been doing in Morocco, when do you see those ramping up and how much capacity are you adding in total?

I mean, on that one, we are not only adding in Morocco. Morocco is kind of a little specific to Airbus and Safran investment here to support them locally. So that is kind of more part of a global supply chain from them and being able to deliver products to them with the same kind of quality systems and same quality control. We are investing in a lot of sites to grow with aerospace activity. I don't really want to give a guidance there, but we're also talking here, let's say, two-digit organic growth for the foreseeable future.

Great, thank you.

The next question comes from Vivek Mita from Citi. Please go ahead.

Thank you very much, everyone. Good afternoon. I have two questions that relate, if I'll ask them together, just around the Z-Link Solutions business. Firstly, on the margins, good incremental margins off the back of the very strong growth, taking to 22.5%, not far off the 23% level you've targeted in the past. Now, that's one quarter, and recognizing the TSS margins typically lower in the second half of the year. So I'm interested in the timeline you now see for getting to that 23% level. Would you see that as feasible in 2027, for example? And then a related question, following up on your comments about the hydraulic segment, the fluid power business, I think my understanding is that you've generally outperformed the broader customer base. It would be interesting to get an update on where you see yourselves now versus before that market went into a slowdown. How far away are we from any peaks? Or are we now above prior peaks? That would be very helpful. Thank you.

Starting with the hydraulics, I think we are quite some way away from the peak, actually. We are not yet. I mean, agriculture, construction equipment improving, but agriculture, which is another big sub-segment, say, construction equipment and mining is kind of on a good level. Mining on the top level, if I may say, but construction equipment still growing and agriculture still down. So I don't see that happening. And also when you look at these previous peak levels, there is also quite a lot of kind of aftermarket in that part as well. And we feel that the inventory levels there is still relatively low. So there is kind of a double up which we do expect to continue for some time. So we are difficult to give a guidance, but I don't feel that we are, let's say, not even close. I don't think we are close to the kind of peak on that one. That's going to take some time before we get that fully into the books. And then talk about the margin in sealing solutions. I mean, we have a good development. We do expect it to continue to improve, as you say. We are not kind of at the peak level here of 22 and a half but then whether to give guidance for individual quarters and stuff is difficult but we do expect there is improvement possibilities and of course if you have 23 over a cycle that there should be a few quarters which should be above 23 in order to get into that so say there is some seasonality there is some DIFFERENCES BETWEEN QUARTERS AND BETWEEN THE BUSINESSES SO WE ARE NOT SEEING KIND OF THE CEILING BEING 23 WE NEED TO IF WE GET TO LET'S SAY A STABLE LONG-TERM MARGIN OF 23 WE WILL HAVE TO HAVE A FEW QUARTERS WHICH IS ABOVE 23 SO I DON'T KNOW IF YOU WANT TO ADD SOMETHING TO THAT BUT THAT'S I THINK WHAT I WANT TO SEE WHAT I WANT TO SAY ABOUT THAT ONE

No, that's very helpful. Thank you very much.

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

Thank you, and hi, Peter, Frederick, and Christopher. Maybe starting with your gross margin, it was record high now in the quarter, 38.5%, and we've seen that you've made very good progress on your fixed cost base, and you always address your production footprint, but looking at your OPEX costs, it has been quite sticky at 20% of sales and my question really is if you're looking into it and especially maybe on the admin side, which is actually higher as percentage of sales compared to other industrials.

Yeah, I mean, if you're looking at the quarter, it was a little bit higher year. It was higher year over year. But if you look sequentially from Q1 to Q2, it was more on the same level. But of course, that's also dependent on other activities that we are doing, for example, M&A projects and so forth. So that's a little bit ups and downs, Jessica, from that point of view, if you're looking at the central costs.

No, not really central costs, more like your OPEX, so more of the kind of administration costs that you present in your P&L.

I mean, We have a different setup also you can say well with the ceiling solution that we are running with a higher gross profit because we have that kind of more solution selling which is adding more sales and admin costs. So I mean that is a part of our business model and also creating more margin on the bottom line. So it's difficult to have an review when you benchmark But of course we can always improve and that is what we are always doing. You see restructuring cost when we try to get out synergies when we are acquiring companies. But of course it's different to compare other industries we're running with a different business model.

Please go ahead, Jessica. No, maybe if you can add a comment, it would be appreciated.

No, no, it's more a matter of a push on that. And I mean, this is part of the way that we are able to get a better gross profit is because we're adding more, especially sales costs. We know that we're having quite a lot of application engineering. We are generally bypassing distributor sales, and that means that we need to carry a higher a higher fixed cost, but getting that back on a higher gross profit. So that is always the balance. If we cannot get the higher gross profit, then we have to lower the administration and the OPEX. But if we can get it up to higher, we think the overall net is better in this way. But of course, we're looking at it all the time and we're looking for ways to improve it and looking to become more efficient without bringing down the support to our customers in other ways.

Yeah, fair point. Thank you. And then my last question is on capital allocation. If I look at your M&A activity last year, by this time point, you completed four acquisitions. I think this year we're running at two now. So can you just maybe talk a bit about your pipeline? What do you see and what do you expect? Do you expect any deals to happen until the year end?

Pipeline in M&A is improving. There is a lot of activity at the moment. So we are debated here before it will be any summer holiday or not for us because there's a lot of activity level. And then of course, you never know in these acquisitions on whether you're actually able to make the deal at the end. I mean, the valuations are in some areas quite challenging and we are not kind of willing to overpay. Private equity is back in the market, very eager to make deals. We are of course here long term or forever and we will be more cautious in certain areas than we feel that they are. So we are losing some deals just to be transparent but once again the activity level is high and we are confident that you're going to see us doing a number of M&A's before year end. I shouldn't say pipeline is bigger than ever but it's on a kind of a number of projects ongoing at the moment is on a very high level in historic comparisons. And then once again with that said, you never know if a deal is done until it's actually done.

Thank you for the caller.

The next question comes from Hampus Engelau from Handelsbanken. Please go ahead.

Thank you very much. Two questions for me. I'm sorry for coming back to your outlook but normally your guide with adjustments for season evaluations now you're bringing it in as a reason for somewhat weaker demand but also bringing in that you should probably have some more price contribution in Q3 for compensating for raw material and also that you see better project business could you maybe please add some more flavor on this subject just for me to understand what part is is is weaker is there as someone earlier asked about maybe some more business on pre-buying in the quarter related to ceiling or how should I think about this sorry the guidance is actually if you look sequentially the business activity is up but I mean if I remember the figures correct we had a minus one percent

in Q2 organic growth and then we had a plus three plus four even in Q3 next year so this is a five percentage points difference and then if you're adding that to this eight then of course it gets a very tough comparison if you take that eight and then five in difference is three so we actually see it's going to be better than three so we actually see an increased activity quarter and quarter that is the way we calculate campus if you did you follow my So that is the way we look at this. So just to clarify, we actually see an improvement quarterly, quarter on quarter, we see an improvement activity, but tougher comes means that we will most likely not be able to deliver 8% in Q3. But it will be, as we see today, very solid organic growth also in Q3. And then, of course, there is some positives, there is some negatives. You're mentioning some positives, maybe a little bit more pricing, maybe a little bit higher productivity. But then we know medical is not going to be, that's going to be negative because it's very, very tough comps in there. We have a high activity level in certain parts of ceiling solutions, which is going to be challenging to actually bring more capacity on stream. So there is some negatives, some positives, but it boils down Once again, there is a couple of percentage points down on organic growth compared to this quarter. But once again, it's a very solid, we expect a solid quarter also in Q3.

Fair enough. Maybe the last one question on the authors, a very positive take on the quarter for you guys. At the same time, when I look at the different parts, the OE business generally has been much tougher in Q2 than compared to Q1. So, from your perspective, is it... I mean, trucking is up, I know, but is it aftermarket that has stepped up further, or what is driving your auto business being broad-based good in the quarter, given how OE business has been?

I'd say aftermarket is up, trucking buses is up. And then of course we have global exposure so we still feel that the China Asian market is developing nicely North America also quite okay more sour in Europe but overall I mean most of our automotive exposure is linked to kind of global technology more than global platform so we are very wide exposure and if it's growing in China and growing in North America then I mean We grow with that and then of course we absorb some lowering activity in Europe sometimes but overall we feel that it's a global exposure which is fully global exposure which is benefiting us in terms of passenger car automotive. So that is the way.

Are you gaining market share in China? Because I mean the light vehicle production in China is down 8% in the quarter.

Yeah, I think we do that somewhat that we are in certain areas growing in that activity. So that is But it is the way it is, Hampus, and that is the way we can explain it. We can only explain it after marketing it up, but we see also our kind of sales to brake systems and these constant velocity joints and all of that, that is actually, it is improving in the quarter. There is some kind of probably market share gains, but overall we feel the market is fairly high activity in most of the areas within automotive. That is why we look at it.

Fair enough. Yeah.

Super. Thank you very much.

Thank you.

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

Hi. Thanks for taking my questions. Actually, my first question, a little bit follow-up on the question before, you know, on the automotive recovery and also related to the recovery on construction. that you also mentioned in the slides. So this segment has been weak for a while and then we are seeing some improvements. So how do you see the sustainability of the recovery based on what you discussed with your customers? How do you think these segments will continue to be kind of improving in the future?

If you say the construction segment I mean I don't know if you're following there is a Sweden there is this company Invido which is kind of the biggest window and door maker which recorded a record high order intake actually was yesterday or something which is well in line we see an uptick in that one we see an uptick on the in the kind of house construction, especially residential construction. And that is because that's the main exposure we have within TIS. It's actually ceiling profiles for windows and doors. And that is where we see an uptick from low levels, but nevertheless an uptick on that one. Overall, construction, infrastructure construction, if you may say that, has been on a high level for some time. We have rail expansions, we have tunnels, we have harbors. So that part of the industry has not really been downed, so that is kind of developing nicely. I think that automotive team, what do you want more on that one? What do you want to ask about automotive development, if I got it right from you?

Yeah, I mean, I was just wondering how sustainable for this kind of recovery will be based on what you discussed with your customers, because these segments have been weak for a while, right?

Yeah, but I think automotive could potentially be, if I may say, that there was an uptick because we were boosted in the quarter by some aftermarket pickup. Trucking buses and that segment is kind of looking solid also going forward. But it could be that it was an overly positive link to this aftermarket bounce back, but it's not a major part of Trelleborg anymore, and that is a very small part of our exposure. But it could be that there's kind of good development. I don't know, Kristoffer wanted to add something as well.

Yeah, well, Tim, you know that last year in Q2, we fell quite significantly in the aftermarket on our break shims due to the the tariffs, basically. And then the market has slowly come back in Q3, Q4, Q1, and now also in Q2. So we're basically back where we started in the aftermarket. So it's more a situation where we took a big hit last summer and now are back to normal.

understood. Yeah, that makes sense. And then a little bit follow up on the organic growth expectation as well. So first of all, regarding the the delayed projects which is going to deliver in the second half. Do you have a sense of whether it will be more in the third quarter or in the fourth quarter? Given that you are expecting the organic growth in the third quarter to be slightly lower quarter-on-quarter because of base, obviously, but does that imply that it is likely for the delayed projects delivery would be more towards the fourth quarter?

We don't want to split there and we say I mean sorry that we need to say that we see an improvement on that one but it's not really neither it's an important part but it's not kind of explanatory part of TIS it will improve and it will be creating some positives but not really any major difference to the overall figures so that is yeah I think the way I want to yeah to comment on that one

The next question comes from Op Otani from GS. Please go ahead.

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.

Thank you. Thanks to all of you for listening in and thanks again for your continued interest in Trelleborg. Happy to support you with further comments. Christopher, main contact point, and he's happy to take your calls and take your questions. And of course, Fredrik and myself happy and eager to support as well. if need and if we can kind of be helpful to contact us. So do take and speak to you soon, all of you. Thank you.