Supplier Trelleborg has described the second quarter of 2016 as "particularly eventful" after finalising the acquisition of CGS, announced at the end of 2015, during the period and consolidating it into its financial statements from June. The integration of CGS takes Trelleborg's expected annual sales to about SEK30bn (US$3.475bn).
"We devoted considerable time during the quarter to complete the sale of our holding in Vibracoustic to our partner Freudenberg. The transaction has now been finalised and we can look back with satisfaction on the development of the joint venture. Following the divestment, we can give our undivided attention to developing our core operations," Trelleborg added in a statement.
Q2 2016 sales were "on par with the year-earlier period" at SEK6,544m (vs SEK6,531 in Q2 2015) mainly as a result of a foreseen downturn in deliveries to the oil and gas segment. Structural changes made a positive contribution of 9%; the CGS integration explained most of the increase. The effects of exchange rate movements were -3%.
EBIT, excluding items affecting comparability, rose by 2% to SEK899m (883), which was the group's highest result to date for a quarter and equivalent to an EBIT margin of 13.7% (13.5%).
Notable items for the quarter included an expense of SEK107m, including non-recurring expenses of SEK49m, related to the CGS acquisition. In addition, net financial items were charged with financial non-recurring costs totalling SEK20m, which also were attributable to the acquisition.
Operating earnings per share reached SEK1.98 (SEK2.28) and were impacted by higher items affecting comparability in the quarter.
In late June, authorities cleared Trelleborg to finalise the sale of Vibracoustic for SEK6.9bn. The transaction resulted in a capital gain of about SEK4.1bn.
A payment of approximately SEK6.2bn was received early in the third quarter (on 5 July) and the remaining SEK0.7bn is subject to Vibracoustic's forecast sales performance in 2016 and 2017.
Net profit of SEK4,369m on discontinuing operations was recognised to IFRS standards and included a capital gain of SEK4,070m.
Q3 2016 outlook
Treeleborg said third quarter demand was expected to be on a par with, or slightly weaker, than the second quarter, adjusted for seasonal variations.
"The trend for general industry remains sluggish in several markets, particularly in the more capital-intensive sector. As in the past, our growth is instead being driven by sales to the automotive and aerospace industries, markets outside western Europe and North America and by other targeted initiatives. We are also seeing indications that the trend in the agricultural market, which has long been negative, is beginning to stabilise, albeit at a low level," the statement said.
"Overall, we expect our markets to continue to moving laterally, or slightly downward, during the third quarter, mainly due to the continued decline of our oil and gas operation. We are continuously monitoring developments and are well prepared to adjust our various businesses to match fluctuating demand," added president and CEO Peter Nilsson.