Trelleborg Business report FY2007

Business Highlights

Financial overview
(SEK in million) FY2007 FY2006 Rate 
of change(%)
Sales 30,971 27,284 13.5 -
Operating profit 1,707 1,507 13.4 -
Sales 10,299 9,327 10.4 There was a relatively strong increase in volumes with organic growth of 12%. The sales trend was good in Antivibration operations with favorable growth in all markets. The sales improvement is a result of increased market shares and strong growth in underlying markets in Central Europe and Asia, where the Company has already expanded its presence.
Operating profit 203 219 (7.3) Operating profit dropped by 7%, primarily negatively affected by continued efficiency problems within parts of the operation, increased raw material prices and a lower capitalization of research and development expenses.

Action program within Trelleborg Automotive
-In recent years, the Company has experienced profitability problems due in part to its dependence on the US automotive market, which has developed negatively for domestic manufacturers, and increased raw materials costs.
In November 2006, the Company launched an action program involving a review of long-term strategic positions, cost rationalization and an efficiency enhancement program entailing closure of plants and relocation of production. Significant costs were charged to earnings for the year. The Company estimates that the measures will gradually start to yield positive earning effects from the end of 2008 and during 2009.

- In 2007, the Company closed or commenced the closure of four production units as below.
Business Area Discontinuation of unit Relocation and consolidation to
Fluid Solutions West Thurrochk, UK France/Czech Republic
Antivibration Solutions Trowbridge, UK Romania/Turkey
Antivibration Slotions Dowson, US Mexico/North America
Antivibration Solutions Fergom, Italy Spain

Joint Ventures
-With Russian ELAD within antivibration products


R&D Expenditure (Group Total)
(SEK in million) 2007 2006 2005
Total 520 522 568

R&D Structure
-During 2007, research and development expenditure amounted to SEK 520 million, corresponding to about 2% of sales. Of this amount, SEK 81 million was capitalized and recorded as an intangible asset in the balance sheet. The year's amortization and impairment of capitalized research and development expenditure amounted to SEK 94 million.

Product Developments
-The Company's solutions include noise and vibration isolation with air damping, which eliminates the need for hydraulic fluids in certain applications for active vibration damping as well as the use of thermoplastic boots for engine suspension systems. Replacement of reinforced rubber hoses with fiber-reinforced cooling hoses of plastic is the one that shortens the manufacturing process and improves recyclability.

Investment Activities

Capital expenditure
(in million SEK) FY2007 FY2006 FY2005
Automotive 441 495 474
Group Total 1,333 1,112 873

Overseas Investments
-In June 2007, the Company's Automotive business area has inaugurated a newly constructed manufacturing facility in Dej, Romania. The increased production capacity from this state-of-the-art plant serves the needs of the Company's existing customers Audi, Dacia, Ford, Peugeot and Renault by providing local supply to their Romanian and Eastern European plants. The production site in Dej will produce engine and chassis mounting systems. Initially, the plant will supply the Renault (Dacia) plant where Logan model is assembled.The Dej facility will have about 100 employees by the end of 2007 and is designed to meet stringent environmental standards.