Trelleborg AB

STO:TREL B

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, welcome to the Trelleborg Audiocast Q1 2022. Today, I'm pleased to present Peter Nilsson, CEO; and Fredrik Nilsson, CFO. [Operator Instructions]

Speakers, please begin.

[Peter Nilsson, executive]

Thank you. Yes, Peter speaking, Peter Nilsson speaking, CEO and also joined here on the call by Fredrik Nilsson, our group CFO. Here to discuss and present our interim report for the first quarter of 2022. And as usual, we are using a deck of slides, which has been our homepage for some time. And we will follow that, of course, throughout the call.

So starting there quickly on Page #2, agenda, our usual agenda for our calls. Starting with some highlights and the business area, some comments on the business areas commented by me. And then Fredrik will support by giving some further guidance on our financials. And then somewhere at the end and then finishing off with an outlook -- some comments on the outlook for the running quarter and then also presenting the call as usual with a Q&A session.

So then quickly moving to Page #3, headlines for the quarter. Strong growth and profitability. All in all, a very good quarter for us when we look at the figures delivered in the quarter. Sales ending up a little north of SEK 7 billion, which is an increase of 22%. Also maybe before -- sorry, just to clarify this is, of course, figures related to continuing operations, which we're going to comment a little bit further on as we now I mean, following this agreement, the design Wheel Systems, it's get -- this quarter is a new set of figures, a new set of comps here as well. But I'll get back to that and I trust all of you is aware of this. But just to clarify and to avoid any kind of early misunderstandings.

So once again, the sales in the quarter, a little bit north of SEK 7 billion, an increase of 22%. Organic sales up by 30% and then currency supporting by 7% and a smaller M&A impact as well providing a support of plus 2%. EBIT is up by 25% to a little bit north of SEK 1.2 billion, corresponding to a margin of 17.3%. And all in all, this is then the best sales in terms of -- the best quarter in terms of sales as well as EBIT as well as EBIT margin.

Items affecting comparability ending up at minus SEK 25 million, which is a mix of some pluses and minuses, which is further elaborated on in the report.

Cash flow, a little bit weak in the quarter. But nevertheless, let's say, firmly positive. Impacted -- cash flow impacted by the substantially higher sales, of course, but also on top of that, we have also, let's say, on purpose building inventory in order to address this increasing uncertainty throughout the quarter.

Also, as I already commented on, I mean, we also -- during the quarter, we signed an agreement to divest Wheel Systems, Yokohama Rubber Company, and therefore, it's reported in this set of figures as assets held for sale. Nevertheless, of course, I'll get back and comment on it.

And also to note, yesterday we signed an acquisition, a smaller acquisition, but nevertheless strategically very interesting for us and then adding some new capabilities and, of course, new sales into Sealing Solutions, Medical and Healthcare segments, this company, EirMed, once again where a press release on that one was sent yesterday.

Then looking -- moving to Page 4, commenting on organic sales. As already stated, strong organic sales basically everywhere. Europe, strong at plus 12%. Americas, very strong at plus 21%, supported then by very strong sales primarily in North America. And then Asia and other markets also solid plus 8%. Although where we have Asia impacted by the clear softening in China linked to these new restrictions and measures connected to this continued outbreaks of COVID-19. But nevertheless, all in all, a very solid quarter where organic sales in total for continuing operations is up by 13%.

Maybe also commenting on this slide, I know Fredrik will get back to it, but a few comments on organic sales, which is the question we already received here in between our report and the presentation is roughly 2/3 of the organic sales coming from volume and 1/3 coming from pricing. Of course, there were some differences between different segments, but that is kind of the overall split that we see from the organic sales.

Turning to Page 5 and the next agenda point, business areas.

Moving then quickly to Page 6, to comment on Industrial Solutions. Very strong growth and record profitability in the quarter. Organic sales up by 21%, very strong organic growth on the backing of this solid order book that we've been building at the end of '21.

Sales up significantly in all geographical areas fairly evenly split. And also, I mean, I must say also sales to all market segments increased, which then includes also automotive actually for us where we have been building or improving our market share since in this business area due to that we have a good representation on new platforms being launched in the quarter or growing in the quarter.

So all of the segments growing, all of geographical areas growing. And then also we -- as everybody else, we've been hit with a fairly strong cost increases coming both from raw materials and freight and energy. But overall, we have shown that we have a very good pricing power, and we've been able to offsetting more or less everything or everything in the quarter isolated. And then as a result of all of this, EBIT and EBIT margin increased to new records for Trelleborg Industrial Solutions.

Moving to Page 7 and commenting on Trelleborg Sealing Solutions. Organic sales 8% where we have good growth, good growth in Americas and Europe, but a little bit lowering the sales in Asia. Then as a result, already commented in this area as due to new restrictions and measures in China linked to COVID-19. So a little bit mix here between geographies. We see sales general industry, health care and medical and aerospace increased significantly and supporting this good growth figure.

Deliveries to automotive also in this area actually grown a little bit more. But there, this is due to the fact that we have more exposure here to the aftermarket for certain products, and we've been able to offset sales -- lower sales with higher sales to the aftermarket. And thereby actually overall been able to grow the automotive, even due this segment being somewhat challenged in the quarter.

EBITDA margin improved to higher volumes and price adjustments generally well-managed and also showing that we are having a good pricing power. And we are able in a quick way to manage this, let's say, inflationary pressures hitting us, yes, more or less all over. All in all, a very good quarter for Sealing Solutions and delivering a very solid 24% on the back of a solid organic growth.

Moving to Page 8. And now just to clarify, I mean this has been not any news, of course, for those of you following us, but nevertheless, it's the first report where we comment, let's say, where we're reporting Wheel Systems as an asset held for sale.

Then turning to Page 9, just a quick refresh here. I mean we are doing these divestments since we feel that the divestment of Wheel Systems will, let's say, deliver a more profitable, less cyclical and also with a substantially improved sustainability profile for the remaining of Trelleborg. We're also getting more coherency in the portfolio, market exposure and drivers for the remaining Trelleborg. And of course, also providing us quite a lot of strength to continue to accelerate growth in selected segments. And of course, on top of this, also, we wouldn't have done that this deal unless we believed it was an attractive valuation for Trelleborg.

So turning to Page 10, just also on the same topic. Buyer Yokohama, it's a good add-on for Yokohama. So I have understand their interest fully in Wheel Systems, in supplementing their offering and also creating a more balanced program for Trelleborg. So good for Yokohama, so a good fit for Yokohama and we feel also that this valuation that we're getting here is showing that this is a good asset, which is then good for us and good for Yokohama. Purchase price SEK 2.1 billion, with a smaller part of that linked to the performance in 2022. And that is when this is kind of concluded at the end of '22, that is our best guess today. Then that will also result in a capital gain of some SEK 6 billion for Trelleborg. So this is about the deal.

And then moving over to Page 11, to comment on the performance of Wheel Systems. Very strong growth in the quarter, organic sales up by 33%. And I mean just a quick comment on that. I mean, as I said, for the other part of Trelleborg for kind of the continuing operations in Trelleborg, we say that 2/3 is linked to volume and 1/3 linked to pricing here is roughly the opposite where 2/3 is linked to pricing and 1/3 is linked to volume. That is what we see.

Strong demand basically for all segments and for all geographies actually, especially Americas, we've seen now that the increasing demand for special agricultural tires in Americas is supporting us strongly. Cost has been increasing a lot for raw materials, energy and transportation, but we believe also that this figure shows that we actually have also in this segment, a good pricing power and good models in place to compensate ourselves for this increasing input costs, of course, on top of this.

But besides the pricing, we have also been running the factories within Wheel Systems at high efficiency and thereby also making some positives coming also from these higher volumes, of course.

So that was kind of my comments on the business areas and Trelleborg Wheel Systems on Page 12, the agenda point moving to financials and leaving to Fredrik to start on Page 13 then.

[Fredrik Nilsson, executive]

Thank you, Peter. Let's then move to Page 13 and talk about the sales development. Organic sales increased in the quarter by 13%, and total sales grew by 22%, and we had 2% impact from acquisitions and we have 7% impact from currency translation.

Let's move on to Page 14. As you can see on the page, this was another good, solid quarter with strong organic growth in historical context. And as you also can see on the graph, this was the fifth quarter in a row where we were on par or above our growth targets.

Moving on to Page 15. Showing the sales development on a rolling 12-months basis for the continuing operations. And as you can see here, we are also on the highest level, so a new all-time high.

Moving on to Page 16. Looking at the EBIT that increased by 25% in the quarter from SEK 982 million to SEK 1.23 billion. And also margin went up from 16.9% to 17.3%. We had a positive translation impact from foreign subsidiaries by SEK 55 million in the quarter comparing to the corresponding quarter last year.

And looking, as Peter mentioned in the business areas, we saw a solid margin improvement in both Industrial Solutions and in Trelleborg Sealing Solutions.

Moving on to Page 17. As you can see, the positive trend continues with increased EBIT and higher margins.

Moving on to Page 18, some further details in the profit and loss statement. Peter mentioned that we have items affecting comparability of minus SEK 25 million in the quarter. It comprises of restructuring cost of SEK 75 million in the quarter. We have made some capital gains on sales of some assets of SEK 140 million. And then we have also made a provision of SEK 90 million attributable to the group's capital employed exposure in the Russian market. So that sums up to the minus SEK 25 million.

You can also see that we have a slightly higher financial net in the quarter. We are seeing increased interest rates, but we also have some impact from preparing capital structure because we are now selling, as you know, the printing blanket business and Trelleborg Wheel Systems.

The tax rates in the quarter was just below 26%, which is in line with our earlier communicated guidance. And you can also see on this profit and loss statement that the net profit from discontinued operations shows strong improvement due to the profit growth in Wheel Systems.

Moving on to Page 19, earnings per share. For continued operations, excluding items affecting comparability, it went up with 21% from 2.68% to 3.25%. And if we look at the group as total, we were up 18% in the quarter.

Moving on to Page 20. Looking at the operating cash flow amounted to SEK 328 million in the quarter, SEK 484 million last year. As you can see here, we had a positive impact from the higher earnings generations in the quarter. And then we have a little bit of higher working capital in the quarter linked to the increased sales, which ties up more accounts receivables.

And as Peter earlier mentioned, we also have built a little bit of strategic inventory to secure a stable supply to our customers. And then we are also back to a more normal CapEx level in 2022.

Cash flow conversion, 76% on a rolling 12-months basis on Page 21.

Moving on to Page 22. Looking at the gearing and leverage development. As you can see, the net debt-to-equity ratio 23% in the quarter, so very low, very solid balance sheet. And then also looking at the net debt over EBITDA, we are now down to 1.1.

Moving on to the next page. Looking at return on capital employed, up to 15.7%, which is the highest for a long time. And that is, of course, linked to the strong profit generation.

Moving on then to Page 24. I will finish off with some financial guidelines for the full year of 2022. And this is for the total group, including assets held for sale. CapEx unchanged of SEK 1.4 billion. Restructuring costs also unchanged to SEK 300 million. Amortization in tangible assets is reduced from SEK 375 million to SEK 300 million, and that is because we are according to IFRS obliged to stop amortization of assets when you put them as assets held for sale.

Underlying tax rate 25% for the group. As earlier communicated, it will be 26% for continuing operations.

By that, I would like to hand back the microphone to you, Peter.

[Peter Nilsson, executive]

Thank you, Fredrik. So Page 25, the next agenda point summary and some comments on the outlook for the running quarter.

Page 26, as already commented on a strong quarter for us in most comparisons. Sales up by 22%, supported by strong organic sales. Organic sales once again on this level, roughly 2/3 of volume and 1/3 of price. Currency supporting by 7% and a smaller portion of M&A as well, both for -- which is then supporting both Sealing Solutions and Industrial Solutions with a small percentage.

EBITDA by 25% and the margin 17.3%. Record high sales, record high EBIT and record high margin in the quarter. Items affecting comparability at minus SEK 25 million, where Fredrik also commented and shared a little bit further information on how that is different items getting to this minus SEK 25 million.

Cash flow is slightly lower than last year, impacted by higher working capital linked to higher sales and also a higher CapEx activity in the quarter compared to a year ago.

Also in the quarter, of course, very important in a new kind of Trelleborg being developed as we have signed an agreement to divest Trelleborg Wheel Systems Yokohama. And also, let's say, of course, a lot smaller, but nevertheless also important an acquisition of EirMed bases in U.S. -- with base in U.S. outside of Minneapolis, which is then adding some capabilities to our medical and health care segment within Sealing Solutions. So this is the quarter. Once again, a strong quarter with good growth and good profitability.

And looking then at the running quarter, we estimate, we believe that demand is to be -- remain on the same high level, slightly less price impact on -- pricing impact in this quarter compared to the previous quarter. But nevertheless, on a volume impact, we expect it to stay on the same high level as we've seen in Q1. And supported by very strong order books and also very -- continued very high demand from our customers.

Although, of course, this very sad development that we've seen in Ukraine is, of course, creating new uncertainties for us, and we don't know exactly what that will -- if that will create some further impact. But of course, it creates some higher degree of uncertainty. And we have to note that. But once again, even including that, we believe and firmly believe that with, let's say, the demand in the running quarter will remain on the same high level as in Q1 for us.

So with that, I think we are moving to the next -- to the agenda point again on Page 28, the Q&A and then quickly turning to Page 29 and opening it up for questions. So please go ahead.

[Operator]

[Operator Instructions] And our first question comes from the line of Hampus Engellau from Handelsbanken.

[Hampus Engellau, analyst]

I'll start off where you ended, Peter, in the outlook. If you maybe -- with orders being on record level for Q1, to me the outlook sounds a bit soft for Q2. If you look at the underlying demand, maybe you could add what kind of worries you have for that? And second question is more relating to pricing. With Wheel Systems now being out of the box and you're focusing on Industrial and Sealing, I guess the pricing power has improved. If maybe you could elaborate a bit on the time lag versus cost increase and how if there's a faster pace here in increase in pricing when you see material costs moving? Those are my 2 questions.

[Peter Nilsson, executive]

Yes. No, I mean, relating, I mean if we were to kind of be a normal quarter in that way, looking at the order book and looking at the sales, I mean, the normal -- when we talk about order book conversion in the, let's say, coming quarters, then I mean our normal estimate would be in a growth in sales, growth in demand. But we need to take in as we've mentioned here, Ukraine, where we have also commented on the China situation, which is also a little bit troubling and what we need to look at.

So all in all, we end up with this kind of overall assumption. Very good order book, yes, all-time high order book, but still we need to consider also this uncertainties coming from China, Ukraine and also, of course, also the growing inflation will have an impact. But overall, we feel that the order book is supporting us into Q1 -- into Q2, let's say, in a very good way.

And then to try to speculate about the second part of the year, that is something we kind of delay a little bit. Of course, we're looking on all kind of signals, all kind of KPIs on potential changes in the second part of the year. But honestly, we don't see anything at the moment, but we need to be open, keep our eyes open and be aware of this growing uncertainty in a multiple of dimensions. So that is kind of why we end up with this, if you say careful estimate, but we don't feel it in that way, I mean, considering all the uncertainties which is hitting us from all directions.

About the pricing power, I mean we have always felt that we have a good pricing power also including Wheel Systems, simply that the delay in Wheel Systems slightly longer since you have to push that pricing through a distributor level and also with this preselling of tractors. So that is core pricing model in Wheel Systems, while it's a more direct pricing on the other businesses.

I mean, in most of the businesses that we -- outside of Wheel Systems, we are kind of single sourced. And as long as we are fair with our customers, which, of course, we always are and we have an open conversation with them, supporting them in various ways. We believe they are also, let's say, open to us and supportive to us. So we feel that this is the way it's going to be going forward.

There will be less of a pricing impact in Q2, of course, since we -- there will be continued inflationary pressure kicking in, but we believe, let's say, year-on-year comparison the biggest pricing impact as it looks today, will be in Q1 when we talk about kind of organic sales development.

[Hampus Engellau, analyst]

And in the quarter, are you compensated fully for the cost and the price increase? Or is there also maybe some bit margin in the pricing?

[Peter Nilsson, executive]

No. We are fully compensated, I should say. I mean, there is always some mix and some overcompensation in certain areas, but we also have some under compensation, especially like in energy. So I think we are more or less, I don't know, Fredrik, fully compensated in all aspects for the raw materials, but there still is some delay in the energy cost increases.

But I mean, this is -- overall, we feel that we are fully compensated. I mean we don't -- not kind of any meaningful difference on that one, even though we may be some overcompensation on some raw materials and some small under compensation in some of the energy-related cost areas.

But overall, we feel -- we don't have any kind of remaining price increases to be implemented. Of course, we were always working on it always adjusting, but we don't feel that we are kind of behind in any way at the moment.

[Operator]

Our next question comes from the line of Erik Golrang from SEB.

[Erik Pettersson-Golrang, analyst]

I have 3 questions. The first one, returning to pricing and what you're saying on price impact year-on-year being lower ahead compared to Q1. But if we think of the balance between cost and pricing ahead, was there a larger increase at the start of the year on prices to sort of cover for costs coming up a bit further out on the curve, meaning that the balance between cost and pricing is particularly favorable here in Q1? That's the first question.

And the second on M&A. I mean, you've been a bit put off over the past few years by high valuation levels. Are you already now seeing perhaps some more deals that are within reach? Or is it too soon?

And then third one, on the strategic buildup of inventories, could you put the number on that? How much are you increasing inventories to sales for strategic reasons?

[Peter Nilsson, executive]

Pricing is always a little bit stronger in Q1 since you -- I mean, even though we shouldn't have it, but you still have this calendar year pricing. So of course, it's a higher impact generally in Q1. But I mean if I understood you correct, Erik, we don't see any kind of -- there is price increase has been kicking in throughout Q1.

And as we see it today, we're not going to be hit by kind of higher cost increases. And so we still believe, let's if we look at the gross profit, which, of course, we're following, we believe that we're going to continue with the same gross profit going into Q2 as we had in Q1. So we don't see really any pricing once again, I mean we don't see overall -- of course, there is always individual differences between the different businesses.

But we don't really feel that we have any pricing. We, of course, keep doing pricing actions, but we feel that we are well aligned with also cost increases going forward. But then, of course, we need to monitor and there is still quite a lot of volatility, and we are, of course, still standing on our toes to be ready to do further adjustments. But at the moment, we feel we are well balanced.

M&A, I mean, we -- early signs of a little bit more carefulness for some of the sellers. I mean, I shouldn't say the big sellers, they are a little bit waiting. But I mean, we also have fairly large number of smaller deals, more kind of family selling, private owner selling. And they're of course, getting a little bit concerned about this uncertainty related to Ukraine, Russia or not call it uncertainty, disaster in Ukraine and Russia and also the China situation.

So we do feel there is a little bit softening on a few of the smaller deals, even though the bigger deals is still kind of waiting for -- to see what is happening. So we do expect that we will be able to conclude a few more deals here in the next quarters in the kind of the smaller dimension.

But that is something also we monitor, of course. We have daily. I mean, I trust you're aware. And since we have announced this divestiture of Wheel Systems, we've been approached. So we have plenty of discussions ongoing, and we have to do the best of them and make sure that the deals we do are actually creating value for Trelleborg.

And of course, we're not going to use this money to overpay. And that is -- I mean -- and for sure, this development, you've seen lately has not increased valuations, if any, it has decreased the valuations. So that is a clear direction.

I don't know on the inventory, do you want to say on that, Fredrik? I mean it's difficult to say, give an exact number. Of course, but it's also if you look from an inventory point of view, there is also a quite significant value increase in inventory. So if I should give you some kind of indication, I would say, around maybe 1/3 or something like that is linked to this strategic inventory buildup.

And then the big part of it is linked to higher cost for buying in raw materials. So it's not a lot on that one. There is -- I don't know we can give some figures Fredrik. I don't know what you're going to say. I mean what we talk about millions of SEK. I mean we are talking about the total outflow from inventory from a cash flow point of view of SEK 289 million in the quarter.

[Fredrik Nilsson, executive]

Yes. So maybe 100 million or something is that is a strategic inventory, something like that. Without -- I don't know. I don't have the detailed figures in front of me, but that is kind of our estimate.

[Operator]

Our next question comes from the line Our next question comes from Agnieszka Vilela with Nordea.

[Agnieszka Vilela, analyst]

I also have 3 questions, and I will ask them one by one. Starting with the lockdowns in China. You said that it affected the growth in Sealing Solutions. And I wonder if you could quantify what the impact was? And also, if you could just tell us what happened with your operations in China with your factory in Shanghai. That's my first question.

[Peter Nilsson, executive]

I don't know if you can say -- looking at Fredrik, I don't know if you -- I don't have the figures here in front of me. But I mean it's not really any big figures we're talking about here. I don't know I'm looking at Christofer as well sitting here.

[Christofer Sjögren, executive]

What we can say is that we have most -- we have growth all in all other countries, but China in Asia, basically.

[Peter Nilsson, executive]

But also for Industrial Solutions, it was actually growing in China as well, but that is linked to project sales and linked to other things. So in total, for us, -- but once again, I mean, we will dig through the papers here and I will give you a figure later on, Agnieszka.

But I mean, it's not really any meaningful impact. Then we talk about -- we of course, we have one factory base in Minhang District in Shanghai, and that has been closed for a few weeks. And we also have one factory actually in not continuing in the printing blanket business, which is now, let's say, also we are concluding that which also been closed in the Pudong area. But Wuxi factory has been up and running. Our Cinda factory has been up and running.

So it's been mixed and it's been a little bit up and down. But I mean we are monitoring this, and we don't really see -- it will continue to hurt us, but I mean all in the total scheme of things it's not really a big thing.

[Agnieszka Vilela, analyst]

Then on the bottlenecks, Peter, you write in the report that you see some bottlenecks stemming from raw materials and workforce. And I just wonder if you could tell us if the situation is getting worse. Is it improving? What are your expectations there?

[Peter Nilsson, executive]

For raw materials, it’s improving. I mean this is a little bit of Russia situation. We're finding new sources and new volumes coming into the market. So that is kind of in that respect is softening, but there's still certain, let's say, raw materials with using like PTFE, PDM, some silicones, but I feel is very tight. But we don't really see losing any orders on that one because, I mean, if anything, I think not to be bragging, but I think we're doing better than others.

And I mean, in the quarter, we have actually been gaining some sales linked to the fact that some of our competitors have even had higher let's say, bigger challenges than we had. So we feel we are managing in a good way, and we're not losing any sales even though we probably would have been able to sell 1% or 2% more if we would have had, let's say, access to everything. And with labor is the same thing. We are managing it, but we are short in certain areas in U.S. We are short in Czech Republic, we are short in certain areas in Sweden actually. So we are running a little bit short on labor, but there as well, we shouldn't exaggerate this kind of impact. We're talking in total about this that I don't know, Fred, what do we say? 1%, 2% of sales or something like that.

But it's not that we're losing the sales. If anything, actually, we've been gaining sales. I mean to take out the motive sales in Sealing Solutions, especially. That there actually we've been doing a lot better than our competitors. And we've been gaining market share due to the fact that we've been able to supply and our competitors have not been able to supply. So therefore, it's a mixed bag when you look at it.

But nevertheless, we want to highlight that we're still bottlenecks in certain raw materials, certain supply freight has also been an issue in certain areas that we've not been able to find trucks to deliver goods. So deliveries' running very tight in the multiple of mentions.

[Agnieszka Vilela, analyst]

And then lastly for me, I wonder if you could quantify in any way the order book that you have in terms of sales, how much does it cover or timing to deliver these kind of things.

[Peter Nilsson, executive]

Let's put it like that. It's tens of percent higher than last year. I mean, because also if we get into that Agnieszka, then it gets very complicated to explain because it's also the length of the order book and all of that. But we're talking about substantially higher order book, but it's also -- but it's not that much longer.

It's more that we get instead of having the order safety, if you put it like that for the next quarter looks very solid. But I mean -- sorry, I cannot really give you because if I give you a figure, then I also have to explain exactly what quarters and what segments and then it gets fairly complicated. So we have decided not to comment on it for the time being.

And I mean, of course, we noticed other industrial companies giving order books. But I mean, if you look at the order book, you need also to look at the length of the order book, you cannot simply you look at the size of it.

And therefore, we, for at least for the time being, we decided not to elaborate on that further, then the order book is the strongest as ever, and it's a very creating a great comfort for our sales in the running quarter and in a way also for the Q3, if you look at that and have a kind of a normal sales -- normal development out of sales out of order book is also. But also with that said, I already highlighted, there is a kind of growing number of uncertainties that could potentially impact this.

[Operator]

Our next question comes from the line of Douglas Lindahl from DNB Markets.

[Douglas Lindahl, analyst]

I have one. I was wondering a bit on the Industrial Solutions organic growth, if it's possible. I realize it's difficult, but to give any sort of clarification on how much of the strong organic growth we saw in the quarter that's coming from more sort of a project-driven business and how much is more sort of spread and butter business, just to try to understand the strength that's coming from the underlying market and how much is driven by sort of legacy projects. That's my question.

[Peter Nilsson, executive]

I mean to say we have a strong growth from project business, but we also have a strong growth from the kind of the standard business. So it's fairly spread. We have, of course, substantially lower. I mean, it is automotive part, how much is automotive in Sealing?

[Fredrik Nilsson, executive]

8%.

[Peter Nilsson, executive]

8%. That is a slower growth. That is, let's say, very shy into positive territory, but which we are kind of happy with. But otherwise, the other business is fairly good performing. We have been -- it's evenly spread.

But there is impact from good, let's say, project orders, but there's also a good construction business in general. I mean, if you highlight housing construction is running very well, both normal kind of house construction, if I may say, where we have the seals for windows and stuff like that running very well, but also seals for infrastructure has been very well.

We have good -- also good sales for harbor construction, but we also have good sales in things in distributor levels for industrial houses.

So it's been a very, very, let's say, evenly spread sales growth with kind of -- the only thing which is kind of sticks out a little bit is the lower sales or lower sales growth for automotive. But once again, that is less than 10% of sales. So that is not really, but that is kind of the only thing which sticks out as negative compared to the others. And then highlight as well that also pricing has an impact. So we still have some 1/3 of it’s pricing and 2/3 coming roughly from volume.

[Douglas Lindahl, analyst]

And I guess maybe not a question from my side, but maybe just a remark, obviously, now you have 90% or almost 90% of your industrial exposure within Industrial Solutions coming from what you call general industry, but I realize you comment on the construction industry and [indiscernible] industry would be super useful in the future maybe to get a further breakdown of your industrial exposure if possible.

[Peter Nilsson, executive]

Yes. But there is a reason for not giving that. I think you could get them on that in another forum.

[Douglas Lindahl, analyst]

Absolutely.

[Operator]

Our next question comes from the line of Karl Bokvist from ABG Sundal Collier.

[Karl Bokvist, analyst]

More of a follow-up to Douglas' question on Industrial Solutions. The -- not only the growth was very strong, but also margin development. So I'm just a bit curious here if there were anything in particular that's sort of aligned in a good way in this particular quarter that might not repeat itself for the next -- for the rest of the year.

Otherwise, the second follow-up question then, do you feel comfortable with the divestments made, focus on more profitable areas that this kind of 13%-plus level is something we might be now seeing going forward?

[Peter Nilsson, executive]

We have said that, I mean, with Industrial Solutions, we're focusing on improving the margin. And now, of course, in this quarter is both impact from early restructurings kicking in and improving. And then, of course, the volume is assisting also creating efficiency. So if the volume keeps up, I mean, this should be, let's say, kind of the margin level. And then there is still some positives coming from some projects and deliveries kicking in end of the quarter or beginning of next or something like that.

But I mean, this is the level if we should, let's say, increase the margin from where we were before, then, of course, we need to go in this direction. But then whether it exactly ends up at 13.3% or what was it -- 13.3% that we had in this quarter and next quarter, I don't know. Honestly, I don't know. But of course, we feel that we're moving in the right direction. And once again, if the volumes continues, we should keep ourselves at least on this level.

[Karl Bokvist, analyst]

And then most of my questions have been answered. So just 2 technical ones. You highlighted the amortization of SEK 300 million. Maybe I misheard you there or didn't fully catch the comment, but SEK 300 million for this year and then that this number should come down quite a bit for the next few years or given that the parts of amortization is related to wheels? Or how should we think about it?

[Peter Nilsson, executive]

Yes. You should think about that the reduction from SEK 375 million to SEK 300 million is linked to the Wheel Systems. So you have the new underlying run rate with the SEK 300 million.

[Karl Bokvist, analyst]

And then finally, the share buyback mandate and program that we will likely be renewed after the Annual General Meeting. Do you expect this just to keep on going? Or will there be any kind of temporary pause or just is the buyback rate we should focus now.

[Peter Nilsson, executive]

There is actually a press release sent out on our call an hour ago something like that we're continuing. So that is something which came after the AGM this morning. Probably missed it because I know that you are missing other stuff. So we will continue, and there's been a press release on that one an hour ago or whatever it was. So we can continue from tomorrow.

[Operator]

And as we have no more questions registered, I hand back to our speakers.

[Peter Nilsson, executive]

Okay. Great. Thanks to all of you for your interest in our Q1, year 2022. A very strong quarter for us, good sales growth and generally good drop-through and good management of this, yes, fairly sizable inflationary pressure that we've been, let's say, hit with. And we feel confident going forward.

We have a strong order book. We note that the uncertainty is increasing, both linked to this disaster happen in Ukraine, but also linked to further measures and restrictions related to COVID in China. But nevertheless, we feel with this backing of the stronger Board, we can continue in a good way, and we continue kind of sideways here in terms of volume growth into a running quarter. And of course, we also feel confident that we will be able also to manage the continued inflationary pressure.

On top of that, also, of course, we're working hard also to conclude the Wheel Systems deal. But also on that, just as highlighted before, we still estimate that it's going to take the remainder of this year to get this closed, working hard on merger filing in a lot of territories, but it's a kind of administration of process that takes time. So our best estimate today that we're going to hopefully conclude it within this calendar year.

And also a smaller comment, which we don't really talk a lot about on this one, it's also Printing Solutions, where we have a deal with Continental sales. That filing is also in the final stages, if I may say, we don't have all the approvals and our best estimate at the moment is that that's going to be closed here by the end of this quarter or beginning of quarter 3. I mean that is the best estimate.

It could change depending on feedback that we're getting from different countries, different kind of different, let's say, different countries, basically, but we're managing in a good way, and we feel that that's getting concluded. But then still, we have to wait for the formal approval before that can close. So best estimate on that one end of Q2 or beginning of Q3.

That is what we see at the moment, which relates to Printing Solutions. So with that, thanks a lot. And I mean, if there are any follow-ups, then of course, Christofer is the first point of contact. But of course, Fredrik and myself will also be available for a follow-up questions and discussions, if you want. So do take care and have a nice evening. Thank you. Bye.

[Operator]

This now concludes our conference. Thank you all for attending.