Despite ‘timid growth’, Trelleborg reports record profit in Q2

Sweden’s Trelleborg AB states that its net sales increased two per cent year-on-year in the second quarter of 2014 to SEK 5,725 million (£490.5 million) despite a one per cent decline in organics sales. Operating profit, excluding the company’s items affecting comparability, rose by 11 per cent to SEK 802 million (£68.7 million), equivalent to an operating margin of 14.0 per cent and the group’s highest ever for a single quarter. Earnings per share rose 38 percent to SEK 1.95 (£0.17) while operating cash flow amounted to SEK 539 million (£46.2 million).

Operating profit in the quarter for TrelleborgVibracoustic, excluding items affecting comparability, rose 26 per cent to €39 million, an operating margin of 8.9 per cent and also the highest to date for the company for a single quarter.

“Sales performance was favourable in all geographic markets except for Europe. The negative trend in Europe was primarily due to a weaker OEM market for agricultural tires, delays of deliveries of projects and ongoing repositioning to more value-creating niches in certain product segments,” commented Trelleborg president and CEO Peter Nilsson. “We maintained our focus on value creation and generating growth via organic initiatives and bolt-on acquisitions. During the quarter, we decided on an investment in a production facility for agricultural tyres in the US, which will provide us with local presence in North America and a global position in the market. Furthermore, Trelleborg acquired a company in Turkey, which consolidates our leading market position in industrial hoses.

“As yet, we have not received any indication of a general improvement in the demand situation, and we believe that third-quarter demand for the Group as a whole will be on par with the second quarter of the year. We are continuing to carefully monitor the economic developments and are maintaining high preparedness to address fluctuating market conditions,” added Nilsson.

Net sales within the Trelleborg Wheel Systems business declined five per cent year-on-year to SEK 1,057 million (£90.6 million), while organic sales were down nine per cent. After years of high investment levels, the company reports that “the European agricultural market has reached a temporary point of saturation in relation to investments in tractors.” As a result of falling sales volumes, leading tractor manufacturers made inventory adjustments during the quarter and the production of tractors fell approximately 15 per cent compared to a year earlier. Therefore, agricultural sales to the OEM segment also declined, even though aftermarket sales remained stable.

Operating profit increased seven per cent year-on-year to SEK 147 million (£12.6 million), with operating margin rising from 12.4 per cent to 13.9 per cent.