Trelleborg as an investment

Trelleborg is working continuously to create value for all of its stakeholders. For those considering an investment in Trelleborg, there are a number of factors that form the basis for the Group’s value creation.

Leading positions in selected segments
Trelleborg’s strategy focuses on developing and holding leading positions in carefully selected segments. These positions promote improvements to Trelleborg’s growth profile, increase profitability and make the business less cyclical. With leading positions, Trelleborg will often become a development partner for its customers, which creates business insights at an early stage, customer loyalty, recurring sales and good pricing capability. This business strategy also creates the conditions for Trelleborg to become an industry leader in sustainability.
Innovations ensure competitive advantages
Trelleborg’s leadership in innovation rests on the strong positions enabled by our strategy. Applying a market-driven approach, we develop a diverse portfolio of polymer solutions to meet tomorrow’s needs. The in-depth expertise of employees, in close collaboration with leading industry partners, promotes innovative and sustainable solutions for complex challenges. Our advanced testing and simulation capabilities at our global R&D centers provide a solid basis for the Group’s innovations and competitive advantages.
New platform for higher growth

Trelleborg is a Group with a long, venerable history that in recent years has undergone significant changes. Product areas with less growth potential have been divested, which has resulted in a more coherent portfolio with similar business characteristics. The focus is now on increasing the proportion of income from industries and market segments with strong structural growth such as medical technology, industrial automation, aerospace and semiconductors. This can be achieved through increased investments in existing operations, in both the organization and production capacity as well as through strategic acquisitions.

Reduced cyclical exposure
Trelleborg has drastically reduced its exposure to segments with large cyclical fluctuations in their earnings. For example, the tire operation has been completely divested and exposure to oil and gas has been markedly reduced in recent years. A decentralized structure also makes it possible for the operation to quickly react to market trends, business cycle fluctuations and changing customer needs. This has resulted in a Group that is significantly less cyclical than before, even if certain parts of Group’s broad industry exposure remain cyclical in nature.
Strong balance sheet

Trelleborg’s strong balance sheet and stable cash flows permit investments in organic, capacity increasing initiatives and acquisitions in selected rapidly growing market segments, in addition to the continued share buybacks. The strong financial position of the Group also provides scope for maintaining our dividend policy in parallel with the share repurchase program.

Q&A

  • Why is Trelleborg an interesting investment?
    Trelleborg is a group with a long history that has undergone major changes in recent years. Areas with lower growth potential and a high proportion of cyclical revenues have been divested, creating a more cohesive portfolio with similar business characteristics. The focus is now on increasing the share of revenue from fast-growing industries and areas, such as medical technology, industrial automation, aerospace, and semiconductors. This is being achieved both through increased investments in existing operations and through acquisitions.

    Profitability will be strengthened in the coming years to an EBITA margin of over 20 percent and a return on capital employed of over 15 percent. In the long term, Trelleborg's dividend should amount to 30-50% of profit after tax. Trelleborg also has a long-term share buyback program.
  • Who are Trelleborg's competitors?
    Trelleborg operates globally in many industries and market segments and, therefore, has few equivalent competitors. Competition within markets or geographies comes mainly from smaller companies specializing in one or more niches or product categories.

    As a comparable investment, Trelleborg's peers are Swedish international major industrial companies such as Atlas Copco, Alfa Laval, SKF, and Sandvik and foreign companies such as Dupont, Enpro, Diploma, and Dätwyler. Outside the stock exchange, there are, for example, Freudenberg, Hutchinson, and parts of Contitech within Continental.
  • What is Trelleborg's market share?
    Trelleborg is globally active in many industries and market segments and a general market share is difficult to determine. However, the Group's strategy aims to build or maintain leading positions in selected industries. Trelleborg is in a top-three global market position in virtually all segments in which we operate.
  • What is the company's strategy?
    Trelleborg's strategy aims to develop or maintain leading positions in carefully selected industries. These positions should contribute to Trelleborg's better growth profile, higher profitability, and less cyclicality.

    The positions are developed by continuously working on portfolio optimization, structural improvements, geographical balance, and excellence in our core processes, focusing on innovation and partnerships with leading industrial players. Each business within the Group has its tailored strategy, unique offering, and close collaboration with customers.

    Our leading positions often make us a development partner to our customers and generate early business insights, customer stickiness, recurring sales, and pricing power.
  • What are the Group's financial targets?
    In connection with the Capital Markets Day in May 2023, Trelleborg updated the financial targets to:

    1. Sales growth
    Total annual sales growth over a business cycle should be >8 percent, which is what Trelleborg has delivered over time, so this is not a new ambition, although the previous target was 5-8 percent.

    2. EBITA margin
    Over a business cycle, the EBITA margin, excluding items affecting comparability, is to amount to >20 percent. The previous target was an EBIT margin of >16 percent.

    3. Return on capital employed
    Over a business cycle, return on capital employed (ROCE), excluding items affecting comparability, is to amount to >15 percent. The previous target was >14 percent.
  • Trelleborg is in a period of high investment. How does that affect cash flow?
    In 2023 and 2024, Trelleborg has a high investment rate as we expand our capacity through new production facilities and by upgrading existing ones. This activity is aimed at getting a better production base to meet increased demand in the future. Despite the investments, we had a strong cash flow in 2023, with a cash conversion ratio of 92%, which is above our long-term financial guidance of 90%. In 2025, our investment rate is expected to decrease towards a more normal level, which will positively impact cash flow.
  • Why is Trelleborg establishing a new business area in the field of medical technology?
    The healthcare & medical segment has been growing successfully in the Group for number of years. We have now established a platform on which we intend base our continued growth. With the recently agreed acquisition of Baron Group and the upcoming new facility in Costa Rica, the market segment will account for a significant share of the Group’s sales. By establishing a business area, we can further increase visibility and focus on the fast-growing medical technology segment.
  • In what other ways has the Group changed in recent years?
    We are intensifying our focus on segments, industries, and geographies with high structural growth. We are doing this by increasing the pace of investment in our existing business and through acquisitions such as the South Korean MNE Group, the Australian-Chinese Baron Group, Minnesota Rubber & Plastics and a 4M company in the US.
    We have also reduced our exposure to segments with weaker growth prospects and/or large cyclical earnings swings. For example, we have divested the tire business and sharply reduced our exposure to oil and gas.
  • How will you achieve the growth target of over 8 percent over a business cycle?
    We are making major strategic investments in our existing operations in the 2023–2024 period. Trelleborg has never invested more in organic growth than we are doing now. We are building new, state-of-the-art manufacturing facilities in Vietnam, India, and Costa Rica. We are also upgrading and increasing the capacity of our existing facilities in Europe and North America. We are guiding these investments toward what we call speed boats – polymer solutions for a number of selected industrial segments with higher growth, such as semiconductors, aerospace, food, electrification, and healthcare & medical. These fast-growing segments currently account for 40 percent of our sales, but with the investments we are making combined with future acquisitions, the ambition is that they will eventually account for more than half of our sales.
  • Is Trelleborg less cyclical today than in the past?
    The divestments completed in recent years have been mainly of businesses that were characterized by substantial fluctuations in sales, so we are much less cyclical than before. We are also increasing our exposure to industries with strong structural growth, thus providing greater stability. But Trelleborg still has broad industrial exposure, some of which remains cyclical.
  • How does each business area support the profitability target?
    Trelleborg comprises three business areas: Trelleborg Industrial Solutions, Trelleborg Sealing Solutions and, as of April 1, Trelleborg Medical Solutions. They will all contribute to improved profitability, but in different ways. Industrial Solutions has been gradually improving its margin for a long time by climbing higher in the value chain and improving its production structure. This trend will continue. Sealing Solutions, on the other hand, needs to expand and accelerate its business and regain the level of profitability that existed in the business area before Minnesota Rubber & Plastics was acquired. This will be achieved by realizing sales synergies, above all. Trelleborg Medical Solutions must also expand and accelerate its operations with the aim of achieving profitability on a par with the Group as a whole.
  • You currently report exposure to different segments for automotive, aerospace, healthcare & medical and general industry, the latter which accounts for the largest share. Shouldn’t you be more specific, given your focus on growth industries?
    We have chosen to highlight our largest industries – and in the case of medical, we will be even more transparent when this is reported as a separate business area. We also state that about 40 percent of sales is derived from industries and segments with underlying annual growth of more than 5 percent, and that we aim for this figure to reach 50 percent within a few years.
  • How is the Group governed?
    Trelleborg's decentralized organization creates a fast-paced and entrepreneurial spirit that promotes high responsibility for employees, customers, and the business. This also creates a close relationship with customers and the market. Our business governance is based on transparency, where business ethics are highly prioritized and affect all parts of our value chain.
  • How does Trelleborg work with talent?
    Trelleborg is a global group with a decentralized operational organizational structure. This creates proximity to customers and the market with a culture that promotes high commitment and responsibility. As an employee, you help shape our industry from the inside - and have great opportunities to both develop in the role and to make an internal career in a global company.
  • You established new sustainability targets in 2023. What was the reason for this?
    Regarding the climate target, we wanted one that had been validated by the Science Based Targets initiative. As a result, we now aim to achieve a reduction in our Scope 1, 2 and 3 emissions that is in line with the Paris Agreement. The previous climate target for the Group – to reduce emissions by 50 percent in Scope 1 and 2 by 2025 – was achieved in 2023.

    Another target is to increase the share of recycled or renewable raw materials in the materials we use, with the aim of reaching 25 percent by 2030. We also have a target for the same year that 30 percent of our managers at levels 1-5 in the Group will be women. More information on our sustainability targets and our progress can be found in our Annual Report.
  • Will the share repurchase program continue?
    Yes, Trelleborg's Board of Directors has decided to exercise the authorization granted by the Annual General Meeting on 24 April 2024 to acquire own shares of series B. The buy-back program aims to optimize the balance sheet and create stability for our shareholders over time.

Contact

Christofer Sjögren

Vice President Investor Relations
tel: +46 410 670 68
mob: +46 708 66 51 40

E-mail: christofer.sjogren(at)trelleborg.com


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