Trelleborg posts record Q1 margin amid currency headwinds

Trelleborg, Sweden – Trelleborg Group reported a “good start to the year” in the first quarter, with all three business areas delivering organic growth and the highest operating margin on record for a first quarter.

Net sales for the three months to end of March fell 3% year-on-year to SEK8.6 billion (€800 million), impacted by a negative currency effect of 9%, the group said 23 April.

Organic sales, meanwhile, increased 4%, with acquisitions contributing a further 2%.

Earnings (EBITA, excluding items affecting comparability), declined 2% year-on-year to SEK1.59 billion, mainly due to negative currency translation effects of SEK132 million.

Earnings margin improved to 18.4% from 18.2% the year before, marking a record level for a first quarter.

“Despite the continued uncertainty in our external environment, our assessment is that demand in the second quarter will be somewhat higher than in the first quarter,” said president and CEO Peter Nilsson.

By business area, Trelleborg Industrial Solutions reported a 1% organic sales growth year-on-year, but revenue was down 4% year-on-year at SEK3.73 billion, due to currency headwinds.

Sales to infrastructure and marine projects were “temporarily lower” but are expected to increase in the second half of the year.

While deliveries to the construction industry remained subdued, sales to the automotive industry increased slightly.

Deliveries to the aerospace industry noted “a positive performance.”

Segment earnings fell 9% year-on-year to SEK585 million, due to “an unfavourable sales mix, which deviated from historical averages.”

Exchange rate effects also had a negative impact of SEK47 million on earnings.

In the Trelleborg Medical Solutions, a 5% organic growth in sales was more than offset with an 11% negative currency effects as revenue fell 6% year-on-year to SEK800 million.

The segment saw favourable trends in Europe and improving sales in North America.

However, sales in Asia declined year-on-year, while the smaller life science operations continued to show strong growth.

Segment earnings declined 5% year-on-year to SEK162 million, strongly impacted by a SEK15 million negative currency impact.

Trelleborg Sealing Solutions was also hit by a 10% negative currency effect, offsetting a 6% organic growth in sales.

Segment revenue dropped 2% year-on-year to SEK4.25 billion, but positive trends were seen in the industrials segment across all major regions.

The automotive unit declined overall, mainly due to a softer aftermarket, while aerospace sales continued to grow strongly, outperforming the broader market trend.

Segment earnings rose 6% year-on-year to SEK917 million, “primarily as a result of higher production volumes and operational improvements.”

During the quarter, Trelleborg Sealing Solutions completed the acquisition of Austria-based Nexus Elastomer Molds, a specialist in advanced tooling solutions and automated manufacturing cells for liquid silicone rubber.

According to Nilsson, the acquisition would “strengthen and expand the capabilities” of the division and is also expected to benefit the group’s other business areas.

Trelleborg is also advancing capacity expansion projects, with new facilities planned in North Carolina for engineered polymer-coated fabrics and in Morocco for aerospace sealing solutions.

Both projects are scheduled for inauguration in the second quarter of the year, according to Nilsson.

Looking ahead, the group expects demand in the second quarter to be “somewhat higher” than in the first, adjusted for seasonal variations.

Nilsson, however, cautioned that the outlook remains “associated with continued uncertainty” due to the geopolitical situation.