Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Trelleborg AB (TBABF, Financial) managed to maintain a stable EBITA margin of 17.3% despite currency headwinds and a challenging market environment.
- The company successfully closed the acquisition of Baron Group, significantly enhancing its position in the medical business and expanding its geographical reach.
- Strong growth was observed in Asia, particularly in LNG and infrastructure projects, contributing positively to the overall performance.
- Trelleborg AB (TBABF) continues to focus on sustainability, achieving 87% renewable and fossil-free electricity usage.
- The company is actively investing in new factories and expanding its global footprint, with projects in Costa Rica, Vietnam, and India, positioning itself for future growth.
Negative Points
- Overall sales were flat compared to the previous year, with a slight decline in EBITA due to unfavorable currency movements.
- The North American market experienced a downturn, particularly in the fluid power business related to construction and agriculture equipment.
- Central costs were high in the quarter, attributed to increased M&A activity, impacting overall profitability.
- The company anticipates a slightly lower outlook for the next quarter, citing potential early holiday shutdowns and continued inventory adjustments in key markets.
- Organic sales growth in the medical solutions segment was only 1%, reflecting ongoing challenges with inventory management among customers.
Q & A Highlights
Q: Can you provide more color on the growth dynamics in Asia and the visibility on your investment projects?
A: Growth in Asia is widespread, driven by LNG and infrastructure projects, as well as offshore windmill projects. We are expanding our presence and improving project specifications. The investments are not speculative; they are based on solid business cases with strategic rationale. We expect these investments to be profitable once operational. (Peter Nilsson, CEO)
Q: How is the integration of the recent acquisition progressing, and what is the trajectory for reaching the 23% margin target?
A: The integration is progressing well, with parts of the business being integrated into medical and sealing solutions. We expect the acquisition to improve profitability and organic sales in North America. Despite some headwinds, the acquisition is developing in line with expectations. (Peter Nilsson, CEO)
Q: What is driving the increased M&A activity, and what can we expect going forward?
A: We have a high level of M&A activity with several projects pending. The focus is on smaller, strategic acquisitions that improve existing positions. We are not looking to expand beyond our current scope but aim to capitalize on opportunities with favorable valuations. (Peter Nilsson, CEO)
Q: Can you elaborate on the impact of strikes on the aerospace business and the outlook for Q4?
A: The impact from strikes has been limited, with no downturn in orders. The industry still faces manufacturing capacity constraints, and we expect any impact to be temporary. The order book remains strong, and we anticipate resolving these issues soon. (Peter Nilsson, CEO)
Q: What are your expectations for the medical solutions business in terms of demand and margin development?
A: The medical solutions business is experiencing some residual COVID-19 impacts, but we expect these to diminish. The business is positioned for long-term growth, and we aim to maintain margins close to 20% while continuing to invest in new facilities and organizational growth. (Peter Nilsson, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
