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INTERVIEW WITH THE PRESIDENT AND CEO PETER NILSSON “We are continuing to invest to improve our structure” Trelleborg has become a focused polymer Group, and is now a world leader in engineered polymer solutions. 2015 turned out to be an eventful year for Trelleborg, and despite the challenging market conditions in several segments, the Group once again succeeded in achieving record results. During the year, Trelleborg signed an agreement to acquire the Czech-based CGS Holding, which has leading positions in agricultural and specialty tires, as well as engineered polymer solutions. Peter Nilsson, President and CEO of Trelleborg. Could you cite examples of activities or events in 2015 of key significance for earnings for the year and the Group’s future? Trelleborg saw a very healthy trend in 2015 in terms of operating profit and margin. We view this as a show of strength against a backdrop of sluggish macroeconomic growth, and also the result of stringent cost control and robust market positions. We focused on small, everyday operational improvements.” We focused on small, everyday operational improvements through our Excellence programs in manufacturing, purchasing, capital management and sales. Our processes have become increasingly efficient, in parallel with the continuing enhancement of capital and organizational structures. Also, during 2015 we continued efforts to create growth via organic initiatives and bolt-on acquisitions. Acquired operations providing a positive boost to earnings development in 2015. We also continued to have a distinct focus on making it easier for customers to do business with us. Simpler processes, combined with our multi-dimensional innovation, provide the basis for increased value creation and for our position as a premium partner. Toward year-end, we signed an agreement to acquire CGS for a total cash consideration of some sek 10.9 billion, making it one of Trelleborg’s largest acquisitions for decades. The transaction – which is subject to approvals from relevant authorities and is expected to be completed in the first half of 2016 – will strengthen Trelleborg as a world leader in engineered polymer solutions. You exceeded your operating margin target three years ago. Is it time to raise this target? This is one of our three financial targets. It is true that for some time now we have reached our operating margin target, which is at least 12 percent or more. However, we do not disclose in advance whether we intend to adjust our financial targets, but instead we will provide information about this if and when it is relevant. Can you comment on the situation at TrelleborgVibracoustic? Since its inception in summer 2012, the TrelleborgVibracoustic joint venture has developed very favorably. The company has focused on operational activities, meaning boosting profitability and implementing restructuring measures. During 2015, efforts commenced to prepare the company for a potential public listing. This means that the company introduced and created routines and processes for accounting, control, communications and so forth, all the features required of a listed company. But no definite decision has been made to actually list Trelleborg- Vibracoustic. We’ll revisit this issue if and when it arises. How well did Trelleborg handle the situation during 2015, with low demand for oil and for agricultural products? Market conditions both in agriculture Significant events 2015 February 4, 2015 Nomination Committee proposes the election of Anne Mette Olesen as new Board member February 6, 2015 Acquisition of industrial tire distributor in France February 13, 2015 Fourth-quarter and year-end report 2014 Q2 April 2, 2015 Acquisition of remaining stake in Liquid Silicone Rubber (LSR) operation in Bulgaria April 23, 2015 Interim report January-March 2015 April 23, 2015 Press release from 2015 Annual General Meeting January 22, 2015 Frank Müller announced as new CEO of TrelleborgVibracoustic April 10, 2015 Acquisition of agricultural tire business in Australia finalized 2 Annual Report 2015 Trelleborg AB GRI: G4-1, G4-13
INTERVIEW WITH THE PRESIDENT AND CEO PETER NILSSON and oil & gas in 2015 were challenging, which we managed to counteract partly through tight cost control. Lower oil prices resulted in more intense competition for outstanding projects. And, as noted in our year-end report in February, uncertainty remains regarding future market trends. As a result, a number of adjustments were made in 2015 in response to current market conditions in oil & gas. Relatively low production levels among agricultural machinery manufacturers contributed to a fall in agricultural tire sales in 2015. We’re convinced the market will eventually recover, giving Trelleborg a highly favorable and attractive market position when it does. What about the progress of your efforts to enhance organic growth? Our main focus will always be organic growth. The target of 5 percent organic growth should be viewed over a business cycle. In recent times, we have failed to attain this level due to a sluggish trend in the global economic recovery, notably in Europe. To a certain degree, organic We have put a distinct emphasis on our aim to raise organic growth moving forward.” growth has also taken a back seat to superior margin growth. In the current low-growth context, we have given shortterm priority to margin discipline, which we achieved at some expense to volume, of course. But we have put a distinct emphasis on our aim to raise organic growth moving forward, and in the near future we will be able to benefit from all of the growth-enhancement investments and initiatives made in recent years. We have never invested as much as we are doing today. I refer to just a few: investments in a new agricultural tire facility in the U.S.; continuing investments in our life sciences business; development of our offering to the aerospace industry through, for example, powerful testing equipment; the Pit Stop Line concept, which indicates when an industrial tire needs replacing; plus the development of apps, web design programs and so on. In other words, Trelleborg works actively on being ahead of customers in terms of knowledge of the business potential of technical advances and to understand how the customer can better satisfy its end-customers and make more sales. However, bolt-on acquisitions may sometimes offer a better and faster alternative to organic growth for establishing ourselves, or strengthening our positions in selected geographic areas or prioritized segments. Looking ahead, how will the acquisition of CGS Holding affect Trelleborg’s main focus? Is it wise to invest in the agricultural market as it moves through a slow period? We feel that global megatrends – notably globalization, sustainability, industrialization and demographics – offer long-term support for the agricultural tire market. The acqusition of CGS is expected to be finalized in the first half of 2016. CGS, with its subsidiary Mitas, will establish Trelleborg as global leader in agricultural tires. For Trelleborg Wheel Systems, the transaction will mean that the business area will nearly double its sales, extend its geographic range and gain new positions in complementary tire niches, including industrial tires. This will further strengthen our position as a global industrial Group. July 21, 2015 Interim report April-June 2015 September 3, 2015 Nomination Committee ahead of the 2016 Annual General Meeting appointed October 16, 2015 Acquisition of marine fender systems company finalized November 9, 2015 Agreement signed to acquire CGS Holding December 1, 2015 Acquisition of industrial tire manufacturer in Brazil Q3 Q4 August 25, 2015 Paolo Astarita announced as new Senior Vice President, Human Resources October 22, 2015 Interim report July-September 2015 All of Trelleborg’s press releases and information on its products and solutions are available at www.trelleborg.com. November 4, 2015 New CFO and CTO announced for TrelleborgVibracoustic December 30, 2015 Acquisition of company in marine navigation and piloting systems finalized GRI: G4-1, G4-13 Annual Report 2015 Trelleborg AB 3
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