Trelleborg restructures; cuts back on business units

As part of a restructuring programme, Sweden’s Trelleborg A.B. is reducing the number of its business areas from five to three to target further strengthening of what it says are “already well-performing and well-positioned business areas” while highlighting areas where profitability is weak.

Trelleborg says it will discontinue its Trelleborg Coated Systems and Trelleborg Offshore & Construction business areas and create a “businesses under development” segment that will oversee operations with low profitability.

Trelleborg Systems, specialised in tyres for off-highway vehicles, will continue to operate under its current structure, with the exception of the unit’s Czech Republic-based bicycle tyre business, which will be reassigned to the businesses under development segment.

The revamp will affect businesses with collective sales of approximately US$410 million a year, Trelleborg said.

“We are now putting a stronger focus on our strategically well-positioned businesses,” Trelleborg President/CEO Peter Nilsson said. “This will involve continued development and investments in organic growth and various types of bolt-on acquisitions, which in different ways can complement and strengthen our positions in selected segments.”

He went on to say, “In parallel, we will be conducting an intensive strategic review of the operations that will be included in businesses under development. I want to be clear that we are demanding that profitability should be significantly improved within a 12–to 24-month period in order for these operations to be included in group. As the improvement work is in progress, we will continuously evaluate various structural alternatives.”

The Swedish firm said it is taking an “asset impairment” charge of SEK$335 million to cover the restructuring.

For the quarter ended Sept. 30, Trelleborg reported an 17.7% drop in operating income. Over the past 12 months, businesses under development had annual sales of SEK3.9 billion and weak profitability.

Trelleborg Wheel Systems reported a 34.9% drop in operating income during the same period, on 2.5% lower sales.

Trelleborg cited the “ongoing trade conflicts” as having had a negative impact on the business climate and contributed to “increased uncertainty and order intake.”