Trelleborg switching to a “new normal”

Article published in ERJ's January/February issue

After an “exceptional” phase of expansion, CEO Peter Nilsson aims to leverage new market positioning and advanced technology portfolios. Shahrzad Pourriahi reports

After two years of following an aggressive acquisition strategy, Trelleborg is looking to settle down in 2017: consolidating around its new market positioning and exploiting its most advanced manufacturing and product technologies.

2016 has been an exceptional year considering the acquisition of Czech CGS/Mitas – now part of Trelleborg Wheel Systems – and a relatively large number of other strategic acquisitions, according to CEO Peter Nilsson.

“We will continue to scout for strategically attractive acquisitions, however the number and magnitude of acquisitions made in 2016 will not be the new normal,” Nilsson explained to ERJ. “Our main focus will always be organic growth.”

Trelleborg will, for instance, be “investing heavily” to leverage the substantial growth potential of digital technology when markets recover, said Nilsson. This includes smart technologies, such as devices with built-in sensors, tracking systems and seamless order-to-deliver systems, that “make life easier and increase value for customer.”

As an example, Nilsson cited the soon-to-launch Variable Inflation Pressure technology, which Trelleborg has developed in partnership with tractor manufacturer AGCO Fendt. The autonomous wheel can self-adjust the pressure of a combine harvester’s tires according to its load during operation and so optimise tire-footprint and reduce soil compaction.

CGS takeover 

However, Nilsson’s to-do list also includes more weighty matters, not least completing the integration of businesses bought during 2015-16 – a process that will involve a shift to focus on certain segments, particularly agricultural tires and anti-vibration systems for mass-transport.

The rationale behind the €1.1 billion CGS/Mitas acquisition last May, for instance, is to establish Trelleborg as “global leader within agricultural tires,” explained Nilsson. This, will involve expanding the product range and reaching into new markets in addition to introducing process and product innovations.

Trelleborg, added Nilsson, aims to enhance its position in the market through a multi-brand strategy and exploiting synergies with Mitas.

Prague-based CGS, which also includes the Rubena and Savatech businesses, generated sales of about SEK5.6 billion (€585 million) in 2015 with an operating margin of 16%.

Mitas accounts for nearly two-thirds of CGS group sales and has mid-market speciality tires brands with a particularly strong position within agricultural tires. Rubena and Savatech offer niche engineered polymer portfolios, including seals, moulded products, printing blankets and other engineered fabrics.

With a combined presence in 40 countries worldwide, another objective for Trelleborg Wheel Systems is “footprint optimisation”, said Nilsson. “For instance, we will continue to develop our footprint in China and capitalise our new capacities in the Americas and central and eastern Europe.”

Geographically, the whole group’s long-term ambition is to achieve a balance, where western Europe and the rest of the world each account for 40% of the group’s net sales, while the remaining share goes to North America.

“Asia, and specifically China, will be important contributors to further balancing Trelleborg’s geographical footprint,” the CEO added. Population growth and urbanisation in China, he said, are contributing to future investment potentials in both energy and infrastructure construction.

Automotive niche 

“The divestment of our Vibracoustic shares this summer concluded the successful journey of our former Trelleborg automotive antivibration operation,” Nilsson remarked.

Today, of Trelleborg’s net sales approximately 10% relate to the automotive market. These businesses are concentrated on global niches, such as braking, noise management and fuel-system sealing solutions.

Showing its appetite to expand within the automotive sector, the group started up an automotive polymer boots operation in Mexico in December and announced the opening of a second car parts manufacturing facility in Wuhan, China by mid-2017.

AVS segment 

The takeover of German Schwab Vibration Systems last October was a strategic move for Trelleborg, said Nilsson. The long-term aim here, he stated, is to become “the number one antivibration player within certain segments including rail and mass transit.”

Based in Velten, Germany, Schwab develops and manufactures anti-vibration and suspension products and technologies for the rail industry and off-highway products.

The purchase came three months after the company bought Loggers Rubbertechniek BV, a Dutch engineering company that provides engineered anti-vibration systems.

According to the Trelleborg boss, the antivibration business unit has set up an innovation, engineering and sales team that exclusively serves rail customers.

“We are best placed to engage with our customers in many countries in their language with local engineering service and application expertise,” explained Nilsson.