CGS acquisition lifts Trelleborg Wheel Systems’ Q3 2016 sales

Sweden’s Trelleborg AB reports that net sales within its Trelleborg Wheel Systems business rose 79 per cent year-on-year in the third quarter of 2016 to SEK 1.86 billion (£179.2 million); the full consolidation of CGS during the quarter contributed to 78 per cent of this growth, with organic sales increasing by just one per cent.

Organic sales of agricultural tyres to agricultural machinery OEMs decreased in Europe during the quarter, but trended favourably in North America, albeit from low levels. Aftermarket sales rose in all regions and outperformed the underlying market. Organic sales of tyres for materials handling vehicles and construction vehicles was unchanged year on year. Organic sales to both the European and North American markets declined somewhat, but this was fully offset by the healthy sales trend in other markets. Trelleborg notes that its newly acquired units are characterised by an even more distinct seasonal pattern, whereby the first six months are traditionally stronger than the second half of the year.

The business area’s EBIT rose 55 per cent to SEK 204 million (£18.7 million), an increase driven by the consolidation of CGS. The EBIT margin declined from 12.7 per cent to 11.0 per cent, a decrease that was primarily due to integration costs related to CGS and ongoing initiatives for increasing sales in North America. Combined, these two factors are estimated to have impacted EBIT by about SEK 10 million (£917,400) during the quarter. Exchange rate effects from the translation of foreign subsidiaries had a negative impact of SEK 9 million on earnings compared with the year-earlier period.

Parent company Trelleborg AB’s net sales for the third quarter of 2016 amounted to SEK 7.1 billion (£648.8 million), representing a year-on-year growth of 18 per cent. Organic sales declined by five per cent during the quarter, mainly due to the previously announced fall-off in deliveries to the oil and gas segment. Effects from structural changes contributed 24 per cent, where the acquisition of CGS accounts for the main part of the increase.

EBITA, excluding items affecting comparability, totalled SEK 980 million (£89.9 million), corresponding to a margin of 13.8 per cent. EBIT, excluding items affecting comparability, amounted to SEK 915 million (£83.9 million) for the third quarter, a year-on-year increase of 15 per cent. The total exchange rate effects on EBIT, excluding items affecting comparability, from the translation of foreign subsidiaries had a negative impact of SEK 14 million (£1.3 million) on earnings compared with the year-earlier period. The EBIT margin, excluding items affecting comparability, amounted to 12.9 per cent.

“After an eventful second quarter, the third quarter is the first one that we are now working in the new structure. We have divested Vibracoustic and CGS is included for the first time for a full quarter. We have advanced our positions and have a good structure for the future,” commented Peter Nilsson, president and chief executive officer of Trelleborg.

Further information on Trelleborg’s Q3 2016 results can be found here.