Trelleborg AB
STO:TREL B
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
305.4941
432.4
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Trelleborg AB
You don't have any saved screeners yet
Welcome to the Trelleborg Q3 Report 2020. [Operator Instructions] Just to remind you, this conference is being recorded. Today, I am pleased to present Peter Nilsson, CEO; and Ulf Berghult, CFO. Please begin your meeting.
Thank you. Peter speaking. Welcome to all of you to our presentation of quarter 3 2020. As usual, I'm going to start off with some headlines and also covering comments on our business areas; and then Ulf Berghult, our CFO, will take care of the financial part of the presentation. And then we, Ulf and myself jointly then finishing up with some comments on the running quarter and also then, of course, with the Q&A session at the end. Basis for the presentation will be the PowerPoint that we released on our web this morning, so that is going to be used as the guidance through this call. And I assume all of it has it in front of you. So we're moving into that part starting with agenda page. As already stated, starting with some highlights, comments on the business areas, Ulf guiding you through the financials. And then we're jointly finishing off with a summary and some comments on the running -- outlook for the running quarter and then some Q&A at the end. Then turning to Page 3, headline for our report, earnings and cash flow level with previous year, which we are quite happy with. I mean, sales in the quarter year-on-year, decreased by some 12%, organically by 7% and then, of course, like several others on top of that, some negatives coming from exchange rates. But even though with this rather substantial decrease still, maybe -- of course, better than Q2 but still high numbers. We managed to keep EBIT more or less on par in absolute number compared to last year which then pushed up the margin actually higher than the corresponding quarter last year. We ended up with a 12.9% EBIT margin let's say, neglecting the nonrecurring costs in the quarter. Cash flow, very strong. We are happy with, of course, the management of working capital in the quarter. We are actually underproducing -- still underproducing the quarter which means that we released inventory in the quarter substantially so, both within -- especially within Wheel Systems and Sealing Solutions. And also still very good control of account receivables. And on top of that, of course, becoming more careful with the CapEx as guided earlier. So all in all, a well-managed cash flow, well in line with our expectations, which is then pushing up the cash conversion above 100%, 121%. And also basically from the Board and not from management, we're also confirming our earlier call that no dividend will be paid in 2020. Background to this is, of course, that we still see uncertainty, and we also see an opportunity here to -- in line with some legal, how should I say, legal complications still pending. We are, let's say, the Board decided for no dividends, which is then [indiscernible] remain. The company -- money will remain in the company and, of course, strengthen our balance sheet and create more flexibility going forward. Turning to Page 4, where we comment on organic sales development geographies, starting with the positives is of course, Asia and other markets where we are growing in the quarter. Very strong contribution, especially from China and also for us, good contribution actually from Australia, while we are still, like most others, suffering a little bit in Japan and India. So it's a mixed picture in Asia, but overall positive, driven, once again, primarily by China, but also supported for us with good sales in Australia. We're also starting also with some positives. We also have a good development in Central Europe. Other Europe, we are still tracking Europe in 2 parts within Trelleborg. So other Europe's strong growth coming from, let's say, from decent development before as well, while we then continue to struggle especially in Western Europe and North America. Western Europe is performing slightly less bad than North America, which I think, also is in line with the general perception in the, let's say, general industry segments. South America is very, let's say, negative for us, but we also have to note that, that it's a very small part of Trelleborg, and its individual sales, which is kind of pushing us down in this very negative territory. So this is kind of the overall ending up and summing up with minus 8 in total, minus for -- and I should say, highlight also, have to make that clear, this is just a comment on the core business where we are kind of taking out the Business Under Development. So that is why you see minus 8 on this while minus 7 on the full company then where we have Business Under Development, which is going good, primarily driven then by oil and gas -- continued good oil and gas development in the quarter. So this is some comments on the sales. Turning to Page 5, agenda point and moving over to business areas. Turning to Page 6, finishing off -- starting off with some comments on Industrial Solutions. Well-managed quarter, organic sales, minus 9%. But also with EBIT, well under control and actually beat on the margin compared to a year ago by 0.5 percentage point. Of course, here, a negative impact still from COVID-19 in most regions, and we still see the construction-related part of this business area is still very much influenced, while we then saw strong recovery in the light vehicle, automotive-related parts of this. And still also in this quarter, also good. We just not commented here, especially, but I mean also good development related to oil and gas sales coming in this business area. EBIT, of course, down by these lower volumes, but overall, very happy with the cost control and also strong price discipline here, which is kind of once again, keeping the margin or making the margin actually coming out higher than a year ago. We are still, as indicated also in end of quarter 2, we are implementing structural improvements here, and that actions are ongoing and we are continuing to implement those actions already being decided. So we are still focusing very much on cost control in order to continue to offset the effects coming from COVID-19. Sealing Solutions, we're heading -- next page on Page 7, heading very tough aerospace markets. I mean, you know Sealing Solutions, 15%, 20% of sales related to aerospace. And I mean, that is more or less more than halved in the quarter. And that, of course, the majority of the organic sales drop is actually coming from aerospace sales. We are down 13% in the quarter organically. And once again, half of that, or more or less, exactly half of that coming from the drop in aerospace. Basically the same trend everywhere, even though we are also very strong in China, especially. But in for Asia, overall, offset a little bit by the negative developments we see in Japan. Already commented on aerospace, significantly weaker. We do not expect that really to rebound shortly. And as part of these efforts initiated following Q2, several of those efforts that we then announced is addressing aerospace, but it will take some time to get these adjustments made. EBIT is influenced, by this lower -- and here also, maybe not only on this kind of overall downtrend by COVID-19, but also with this very quick drop in aerospace, which created some underutilization in that part of the business, which we are, as I commented before, are addressing, but it's going to take some time to get that corrected and then get the margin up again. Moving over to Page 8, commenting on Wheel Systems. Agri drives strong profit improvement is the heading. I mean, we had a strong development in agriculture in the quarter, continued good, was also quite good in Q2 compared to other segments. And all in all, even though strong, let's say, organic growth in the agri segment, we are still pushed down by still negative development in material handling and construction. Overall though, ending up with a positive 1% and EBIT, and then strongly up based on strict cost control and price discipline and also continued benefits from earlier implemented restructurings. So doubling the EBIT margin in the quarter, which is then, of course, a strong development on the back of the overall market development. I mean you also should note that a year ago, we were actually pushing down inventory and there were some underproduction in the quarter last year. Turning to Page 9, some comments on this Business Under Development. We have pushing down organic sales of minus 3%, but the mix development among the areas, continued. Very good offshore oil and gas performance, even though as we guided in the report, we do not expect this good development to continue in the next quarter. We expect a few tougher quarters for offshore oil and gas. But in this quarter, we are still benefiting from this. We have like a down in the other printing blankets. Technical rubbers is down, but overall, well-managed. And cost control in all operations is good and we are also continuing to implement kind of profit improvement activities all over here. And especially so in the Czech operations, which has been a burden for quite some time, but is slowly now getting better. And we are positive that we're going to continue to move in the right directions in this part of Business Under Development. So this was comments on the business areas. And now Page 9, next agenda. Point financials and turning over to Ulf on Page 11.
Thank you, Peter. So on my first slide, Page 11, sales development, you can see that the organic development in the quarter was minus 7%, which was a clear improvement versus quarter 2 and organic development of minus 19%. Our core business reports an organic development of minus 8% versus quarter 2 organic development of minus 20%. Core business area reported a sequential improvement in quarter 3, and I wanted to highlight, this is a Trelleborg Wheel Systems organic growth in quarter of plus 1% versus the quarter 2 organic development of negative 18%. Business Under Development reported organic development of minus 3%, which also was an improvement from quarter 2. Next slide, Page 12, describes the historical performance of our organic growth. On Slide 13, you will find the reported sales development for the quarter as well as rolling 12 months. Slide 14 presents our EBIT development. Our EBIT reached SEK 999 million in the quarter with an EBIT margin of 12.9%. The EBIT margin improves -- improvement shows the strength of our flexible cost base. Core business reporter -- reports an EBIT margin of 13.7%. And again, I want to highlight business area [ where we see ] consistent EBIT margin of 13.1% in the quarter. Business Under Development continues to improve on reported debt on EBIT and EBIT margin versus the same period of the year despite having a negative 3% organic growth. Currency translation impacted EBIT with a negative SEK 59 million. Slide 15 presents EBIT and margin on a rolling 12-month basis. A Stable EBIT margin looking over the period despite having exposure to many tough market condition during this period. Again, this slide shows how agile our cost base is. On a rolling 12-month basis, we are currently at 12.4% EBIT margin. Next slide presents the profit and loss statement for the total group. Items affecting comparability consist of the restructuring costs and is in line with our annual guidance. Financial net has been impacted by a positive exchange rate difference of -- and effects in previous year. And this year's financial net is impacted negatively by increased liquidity buffer, which resulted in a somewhat higher net interest. The tax rate was 23% in the quarter. Our guidance of an underlying tax rate of 25% still stands.Slide 17 presents earnings per share adjusted to comparability items, which was down by 18% to SEK 2.31. And Slide 18 describes the development of our operating cash flow. The strong focus on working capital continues to develop positively, even though the release in the quarter is lower than previous years due to our high activity in the quarter. CapEx spending is well-managed by the business areas and our full year guidance of SEK 1.2 billion is still valid. Slide 19 presents the rolling 12 months operating cash flow. The business areas have handled the cash flow very, very well. Slide 20 shows our leverage and gearing developments. Strong operational cash flow, no dividend payout and no acquisitions have strengthened the group balance sheet and readiness. Net debt was positively impacted by exchange rate movements of SEK 59 million year-to-date. Slide 21 describes the return on equity where the long-term target is 12%, including items affecting comparability. The action outcome is impacted negatively by one-off items reported in quarter 4 2019. And then finally, on Page 22, I want to highlight -- we go through the guidelines for the year. And it's still then -- the CapEx then, the guidance is SEK 1.2 billion. The restructuring cost will be around SEK 700 million. There might be a sliding to 2021 due to COVID-19, but so far, we are aiming in to charge the P&L of SEK 700 million in 2020. The underlying tax rate is 25% and then amortization of intangible assets, that is still around SEK 400 million. So that concludes the financials. So I will hand it over to Peter for the summary and the outlook of the fourth quarter.
Great. So Page 23, agenda, and quickly move on Page 24. Summary, earnings and cash flow level on previous year. I mean, we have seen a sequential improvement throughout the quarter. And I mean, the best order intake for several months was actually in September. But overall, the quarter is still down organically by some 7%. But as we already commented, both Ulf and myself, we managed to control costs and control pricing in the quarter in order to deliver actually a year-on-year improvement on margin, which we are very happy for. And with absolute EBIT, excluding nonrecurring or basically on par compared to a year ago. Very strong cash flow, still underproducing in the quarter which also, was of course, a small drag on the profit if that was not happening, but I mean, we're delivering a good cash flow. Cash conversion is 121%, and no dividend, which of course, will mean that this money stays in the company and strengthening our balance sheet and creating more options going forward. So this is kind of the overall comments on the quarter. Going forward, Page 25. Of course, we are still concerned about the COVID-19. I mean as already stated here, I mean, we see an improvement in Q3, substantial improvement in Q3 compared to Q2 when we are relatively confident going forward. But of course, we note that this COVID-19 is increasing everywhere. And I mean, we do expect some headwinds coming from that in certain areas. And that is why we are still focusing a lot on actions related to this and making sure that we are able to manage these headwinds in a good way. So that is kind of still a very high priority. We are still also now kind of getting up again on this Business Under Development to investigate structural alternatives for those businesses. I mean, we were basically ready with this beginning of the year, but then came this COVID-19 development. We kind of stopped these discussions, but we're also in the quarter, picking up these discussions again. And we have, let's say, ongoing discussions in many areas at the moment to be able to create the long-term best setup for this Business Under Development. Continue to work on our portfolio management, both in a positive and negative way, and I mean that we are still moving very firmly into some areas, while we are -- lessen our interest in other areas. Still working also on kind of bolt-on acquisitions in certain areas in order to strengthen certain parts of the portfolio. Continue to focus on operational excellence, very strong focus on operational excellence and making sure that we continue to implement efforts to improve the operations long term. And of course, without neglecting the customers here, making sure that we are continuing to be seen by the customers as the most innovative and best partner for our customers. Integration of acquisitions, also always on the agenda, even though it's kind of less acquisitions made in the last few quarters, but we are still working in integration of some of the companies we have been -- or some of the operations we've been acquiring over the last few years. Then moving to the final page before opening up for Q&A, outlook for Q4. We might be slightly -- I mean, if you look solely at the figures, it is an improvement in the quarter, as I said, let's say, a step price improvement month-by-month and September was the best month in the quarter. But we do note, of course, we read the papers and we see what is happening with COVID-19, and we do expect some further headwinds from that, which is kind of influencing our overall outlook. And that's why we're ending up -- but we expect demand to be on par with third quarter and not really improving. Well, let's say, neglecting any further outbreaks from COVID-19, we would have probably said that was going to be an improvement, but we are kind of a little bit cautious in this and considering the potential impact from these measures that will be implemented in several countries following this, if you say, second outbreak or whatever you want to call it of COVID-19. So that is also why we're adding uncertainty is high, both from -- could be better, it could also be worse, and that is kind of dependent on the development of COVID-19 that we're going to see in the next few months. So that is really some add-ons and some further comments to the outlook. With that, moving to Page 27. Final bullet on the agenda, Q&A and then moving to Page 28, where we say, questions and answers, please. Please, now we are open, Ulf and myself, to address any questions you might have.
[Operator Instructions] Our first question comes from the line of Klas Bergelind of Citi.
It's us in Citi. So first, on Wheel systems, it's a solid margin given that you are under producing in the quarter. You obviously get support from less under production year-over-year, but still solid. How much was positive price/cost looking at input costs driving the results in addition to better volumes, good execution? Or will that affect even more marked into year-end? Obviously, the margin will be seasonally lower in the fourth quarter, but interested in how pricing versus input costs are developing. I will start here.
Yes. I mean, that's a positive. I mean, we don't really want to -- because it's a mix of both aftermarket sales, OE sales and, let's say, also some regional sales development as well, which is impacting that. But there is a positive price/mix, but we don't really want to highlight that. And we don't -- we expect that to continue to be a positive for us. But I mean, I don't really want to give any kind of numbers on what it is because it gets into a fairly complicated matrix in order to explain that. So we -- I want to stand with, there is a positive price/mix in the component, which we did expect. I mean, because we have had better aftermarket sales and also better kind of geographical split of sales as well.
Yes. Okay. No, fair enough. My second one is on Sealing Solutions, excluding aerospace. And it seems like we were down around 6%, 7% year-over-year. Could you help us, Peter, with September year-over-year, and perhaps even how October has started? And I'm talking ex aero. It sort of feels like if September has been this strong, it almost seems like it was flattish year-over-year. That would be really helpful.
Yes. And I mean, [ as been ] said, it's an improvement month by month and September is the strongest month. But -- and I mean, we are going into Q4 with a fairly okay order book. But I mean, once again, I mean, we are taking a little bit cautious stance here because we see that in some of our key markets, we see the corona is increasing, and we do kind of expect some limitations on manufacturing and output in the quarter. We also -- difficulty also in this is, of course, get the full picture on what the -- kind of the pent-up demand coming from the closures in Q2, how much is that positively impacting us in Q3. In certain segments, we know that for automotive, for instance, that there is, I would say, too strong development in Q3. And that is something we do not expect really to fully continue in the same way in Q4. But overall, I mean, we are fairly confident on the development of this kind of industrial part of Sealing Solutions. While on the downside, is this kind of a little bit unknown COVID-19 effect in Q4 and going forward. And then, of course, aerospace, we do not see really an improvement in the next few quarters and that is where we are at the moment, kind of addressing this by structurally lowering our cost base. But that will take some time because also here, we have to highlight that why it takes time is, of course, that -- I mean, this requires -- if we are to move around products among our factories, it will require some customer approvals. And at the moment, we don't really get the attention for these approvals. I guess our customers within aerospace is focusing on their own operations and not really interested at the moment in kind of assisting us in any moves between factories. And that is why it's going to take some time to get that more efficient. We have the plan in place, we know what they want to do, but it will require some shift of manufacturing between factories. And that is, at the moment, not really -- we're not getting the approvals to get that done.
My third and final is on offshore oil and gas. And obviously, backlog -- the backlog is now getting depleted, and we're likely going to see more pressure on revenues at year-end, as you say, Peter. But how are the margins looking on new orders right now? Is there a lot of price pressure? Or are the order margins lower than the margins coming out of the backlog currently?
Not really. And I mean, honestly, also the order book is quite okay still. And when we say it, I mean surprisingly, high activity in certain areas of oil and gas. But this is kind of a little bit delayed, the acceleration in this industry. And that is why this has been ongoing. We had good in this one. So the order book is not really the major problem here. I mean the problem is really that some of the investments has been pushed. And that is what -- we still have a fairly good order book. We have been successful also in our, let's say, oil and gas activities, also. We've got substantial orders in renewables, which is basically the same kind of application, subsea applications that we use in the offshore. But it will take time to push that into sales. So as we look at it today, it's going to be 2 or 3 quarters with slow. But still, with then a good order book and we're looking into the second part of '21, it still looks fairly promising. And we still have a few big orders pending. And then pricing-wise, it's not really -- it looks quite okay. It's better than a year ago, if you put it like that, in the pricing in the order book. But once again, we have a softening here, a substantial softening because some of the projects have been pushed forward and some of the invoicing that we were kind of expecting yet for Q4 and Q1 has been pushed in the future. So it's not really a problem with the pricing. It's honestly not really a major problem either with the order book as such. It's more that it's a push in invoicing and sales for a few quarters.
And our next question comes from the line of Hampus Engellau of Handelsbanken.
Two questions from me. Starting on the resistance in the ag business. Would it be possible for you to maybe -- to divide the development between the OE business and the aftermarket? Are they both growing organically or how should we think about that? I presume that the industrial tire part were down a lot. Second question is related to the group EBIT margin. Very good operating leverage during the quarter. Would it be possible for you to maybe quantify what the impact was on the production and how we should think about the production coming to fourth quarter? Those are my two questions.
It's a good development, both in OE and aftermarket, but we do expect that we, in ag, easily beat pent-up demand because it was really pushed down on the manufacturing in Q2, and this is kind of a little bit artificially high in Q3. And that is why we say that the aftermarket is actually -- even though the development is fairly the same if you look at percentage-wise, but aftermarket is kind of performing stronger, once again, due to the fact that OE in the quarter was artificially high due to the push overall of manufacturing from Q2 into Q3. So that going forward, we do expect kind of aftermarket to, in the short term, at least aftermarket to outperform the OE. And then, of course, we are more -- like everybody else, if you look at the external data here, I mean this -- what the index is calling [indiscernible], the American [ Purdue ] index is becoming more positive. And we do hope or expect that to turn into a better OE market going into next year, but that is still to be seen. But I mean, that is what the indications show. But meanwhile, we do expect aftermarket continue to develop nicely. That was the first question. What's the second question? Sorry, my memory is short.
No. It was on the group operating leverage.
Okay. No. Under absorption, sorry. I mean we don't -- I mean, we are, of course, having an under absorption. And we are releasing several hundred millions of Swedish krona of inventory. And of course, there is -- we shouldn't kind of exaggerate that one, but I mean, there is, of course, some -- how should I say, tens of millions or maybe SEK 100 million or something. I mean tens of millions of under absorption in the quarter, if we would have, let's say, kept the inventory. So Ulf, I don't know if you want to...
Important that it is, we are having a high focus, and they are delivering well. And we had slightly delay on the Sealing Solutions from Q2 to Q3 because they needed them to shift all the parameters, but they had really good inventory. They had a good inventory leasing in quarter 3. And then we expect in Q4 then to continue that, not on the same level, but also then, you need to remember that in Q4, from a seasonality point of view is lower activity as well. So we would naturally have an under absorption. But we really -- to say a number on it, we don't want to do that.
Just 1 follow-up here on the Wheel Systems business. If I remember correctly, you had a quite positive mix in second quarter. How was the mix in the third quarter? And how is the mix between ag and in terms of split on sales changed between aftermarket and OE given the production changes?
We are not -- I mean it's not -- I mean, I don't want to -- I mean, there is a positive mix, Hampus, but I don't want to put that as a major thing really. So we have, let's say...
It was announced in Q2.
Yes. It was more notable in Q2 since that we were so low. Now we don't have the same kind of positive mix in Q3 as we had in Q2, if I put it like that. So -- but it's not really any major explanation on the margin improvement. The margin improvement is coming from a better underlying market overall and then also continued, let's say, improvements coming from earlier restructuring. And on top of that, also a good, let's say, price discipline in certain areas.
But also [indiscernible] we have done.
Yes.
It's not only restructuring that we have. As you know, we have put a lot of investment in Serbia, and that is up and running. And also then moving in...
Czech -- Czech Republic is also improving the setup there. That is kind of what we mean to a better operating setup in a way.
Our next question comes from the line of Erik Golrang of SEB.
Two questions, first one on Sealing Solutions. You say sorting the under absorption headwinds will take some time. Does that mean that we should expect a sequential decline in profitability into Q4 as seasonality typically dictates? And then on the second question, how much of the SEK 700 million in targeted structure savings are in Q3 earnings?
Okay, but the seasonality on Sealing Solutions, of course, is going to be there. And as we're indicating, we do not expect any kind of major improvements coming from these aerospace changes. And once again, it's not really due to the fact that we are slow, it's more that we're not really getting the -- enough customer attentions to make the changes that we want to do. So that is the way it is. And we have to expect that they have other things on the agenda at the moment, and we need to manage this setup in the best possible way. But we do expect the same kind of pattern as we had from a year ago. And I mean this is said, Erik, with some kind of cautiousness because, I mean, we need to also -- if we simply are looking at the figures at the moment of Sealing Solutions, it will kind of improve. But we do expect kind of the headwind from corona kicking in and being -- creating some negatives also in Q4, but that is really to be seen if that is happening. Second question was about the -- how much is the 700. Ulf, I don't know if you want to comment on that.
On the savings or the cost?
Of the SEK 700 million outline in savings from the accelerated cost reduction programs. How much of that is already...
We don't want to comment on an individual amount, but it has had an impact in quarter 4. And please remember that quarter 3, and then please remember that we announced it in the end of quarter 2, but we have had positive impact in quarter 3. But again, we -- we don't want to comment on that because there's also other factors moving up and down, but it has had...
I mean, once again, we have tens of millions. I mean, we're not talking about hundreds of millions, tens of millions. So the full impact is expected from 2022.
Our next question comes from the line of Agnieszka Vilela of Nordea.
I have a few questions, sealing, starting with your aerospace exposure there, which you said was down by some 50% in the quarter. When you look at your order book and the business that you have there, do you see more pressure for this exposure for the coming quarters? And also, if you could comment maybe on your decline rates in September, specifically for aerospace?
I mean, so the decline rate is the same. I mean, we have roughly 50% in Q2, and it's roughly 50% in Q3. So it's not kind of an acceleration in any way. We do not expect that really to change near-term. But we do expect it to kick back a little bit with some -- from this level, with, let's say, a slight growth actually going into '21. But then coming -- because in this kind of 50% reduction, there is, of course, both underlying kind of production cuts, but there's also some inventory adjustments with our customers. So we do expect this inventory adjustment to go away. And then we do expect kind of -- from this new basis, at the moment, our best judgment is that we will have some 10% growth year-on-year, but of course, with a substantially lower basis from going into -- at the, let's say, full year sales of aerospace in '20. So we do expect that to turn the corner, but of course, with the lower -- much lower basis going into '21. So -- but there's still a lot of uncertainty in this. And I mean, we are getting kind of mixed signals from the customers on this. So it's really a moving target in a way. But we are adjusting down. We are adjusting it down to this kind of run rate of some 50% lower. And then from this 50% lower run rate, we do expect a slight growth going into '21.
Okay. Understood. And then if I understood you correctly also, you need to have this kind of acceptance by your aerospace customers really to adjust the business and structure it and adapt it to lower volumes. Is that correct?
I mean that is part of, at least -- we can, of course, cut in the administration and the sales and all of that. But if we are to move around production, then, of course, we will need approvals to do that. And that is -- but as is normal practice, it's the same as you have in automotive and certain other customers. You cannot really move it around without having customer approvals. But at the moment, of course, the attention of our aerospace customers is not really to support us in our efforts. It's more to protect themselves.
And then if we look at the exposure for sealing, apart from the aerospace, it was down probably by some 5% in the quarter. And even here, if you could comment on the exit rates in September, what you're seeing in October. And also, did you see any kind of restocking impact in Q3 after the closures in Q2 by your customers?
I mean, I guess I should be honest here. I mean, it's really difficult because you get mixed and customers are acting in different ways, so it's really difficult to get kind of a really firm kind of analysis done here, but we do not really see any major restocking positives in Q3. I cannot say that, is has not really been the major, let's say, takeaway for us. So we do see some pent-up demand from very low production, for instance, in tractor manufacturing, automotive and all of that. But once again, that is also very difficult to get really figures on. So I don't really -- it's going to be pure speculation, and I don't really -- we have to act on the fact that we are watching the weekly or sometimes the daily order intake, and then we were adjusting according to that. So we don't really run our business at the moment with kind of several months of beliefs going forward. So we need to adapt, and customers are acting in a different way. Some customers are more focused on cash flow, others are less. So that is really the reality what we need to work with at the moment. I think we're doing it good as well. I mean we have good control, and we feel that we're staying very close to the operations and staying very close to the actual orders coming in.
Yes. And the last for me. I was a bit surprised about your automotive comments going into Q4. When we look at, for example, IHS car production forecast for Q4, it expects sequential improvement. And we're hearing a lot about the restocking needs both in the U.S. and even in Europe. So I don't really understand your cautiousness about the automotive vertical.
But automotive is fairly small to us. Of course, we see some positives on that one, but we're talking about 10% of our sales. So of course, in that area, we have had some strong growth in certain areas, but I don't see that being a major impact for us. I mean, we are not really -- we are much more concerned or focused on the aero industry than automotive. So -- but of course, I mean, we -- if the factories keep on running, if there are no factory closures, it will be positive in Q4. But once again, who knows what's going to happen with this COVID-19 and all of that? And that is probably reflecting our comment a little bit. But if of course, we're following the same figures that you do. And then -- I shouldn't say, I'm not doubting the figures. They probably have their rationale and the calculations behind that, but it's kind of assuming that there will be no factory closures implemented in Q4.
Our next question comes from the line of Johan Sjöberg of Danske Bank.
I have 3 questions. Starting off with Sealing Solutions, if you could say how much Sealing Solutions was down in September.
No, sorry. We don't want to say that.
Okay. No, that's fine. And in terms of your margins in -- or rather, when you take the initiatives within the aerospace business, what sort of margin impact should we expect coming from those measures? Is that something you can comment upon?
I mean our target is to get it above 22%, then we're going to get back there. So that's, of course, the major difference between the current margin and that one is the aerospace adjustment.
Okay. And the final thing, when you look at -- you mentioned the order books here. Could you compare the different -- the 3 different business areas? If you look at the core operations, industrial, sealing and also wheel, how do they look relative-wise there?
Could you please repeat?
Yes. My question has to do with the order books. You referred to saying that they were strong at the end of the quarter. And if you compare the 3 business areas within core operations, where -- how -- can you compare that relative, please?
First of all, we don't track really, wheels on orders. They don't really have an order book. And then within Sealing Solutions and Industrial Solutions, I would say that, that would be similar between the different exposures. As they have the automotive exposure, both of them, and they also have an aerospace exposure, both of them and general industries. I would say that we don't see any major difference in higher need of -- so similar patterns.
Our next question comes from the line of Robert Davies at Morgan Stanley.
The first one is just around the time line for the sort of portfolio optimization strategy you had around your business and then the development. I think you'd originally laid out sort of a 1- to 2-year time horizon. You mentioned that some of those negotiations have restarted. Based on where we are right now, what are your current targets or expectations around that?
We have not changed our overall guidance. We still say that it is 1 or 2 years, which means that this should be sorted here -- yes, within this time frame. So I mean, we are working on it. We lost kind of a quarter or a quarter plus. But I mean -- so it's not really changing the overall time line in any way. And I mean, also to clarify, I mean, we have structured alternatives for this business. It's more a matter of valuations and other kind of conditions in an agreement with somebody.
Okay. My second question is just -- sorry to go back to Sealing Solutions again. Just to be clear, I guess, the margin level in the quarter, around 18% versus your, I guess, kind of closer to 22%, 23% range, how much of that was coming from the drag from aerospace versus the sort of volume growth in the rest of the business? I guess the way to sort of put it is, if aerospace was normal, would you have been close to that typical range? Or was the volume enough to pull you down a bit lower than that anyway?
It probably will be slightly lower. But of course, we will be seasonally lower, but we will be, let's say, fairly close to -- because, I mean, in general also, we have the stronger margin in the first half of the year compared to the second half of the year. But I mean, of course, we would have been a few percentage points higher in EBIT. But of course, we couldn't -- we have also had a downturn in Industrial -- general industry here, as you said, with some half of this of the overall downturn in sealing. So of course, there would have been a negative impact, but I mean, it would, yes, be very few percentage points.
Understood. And then my final question was just around some -- some of the end market developments into the fourth quarter. I guess, where are you most or least concerned? I think you mentioned a couple of times, obviously, the potential uncertainty around COVID. Is that particularly more acute around automotive segments? Where do you see the biggest risks? Is it sort of due to a regional perspective of where you've got manufacturing hubs? Where does it sort of mean...
It's more a general comment. I mean, if we have some of the major countries, I don't see -- we don't see any issues in China, but we do, of course, see some potential issues in several countries in Europe. And we're also a little bit -- I don't say, U.S. is the major, major problem here, but I mean, it's mainly related to potential kind of restrictions kicking in, in Europe. I guess that is where we have most of our concerns at the moment. But I mean, once again, it's not coming really from any input from our customers. It's more a general view on the development in the last few weeks. And we see the sentiment is rapidly changing in several countries in Europe. And hopefully, it will not kind of create any further closures. But we see a risk of that happening. But I mean, once again, it's not related to Trelleborg. It's more related to the overall development of economy.
Our next question comes from the line of Karl Bokvist of ABG Sundal Collier.
So my first question has to do a bit about the portfolio optimization here and the Businesses Under Development. You mentioned that discussions had been resumed. Just -- and the time frame and so on, just a question here. I mean, are you still thinking about it's possible to divest just parts of certain businesses or divisions, i.e., it's not that you are looking for improving the entire sort of -- well you're looking to improve the portfolio, of course. But do you -- would you consider just improving or divesting certain parts of a business instead of just letting it all go in a 1-package deal, so to say?
Of course. I mean, we are open for all options. Of course, at the end, we need to have, let's say, a sustainable model, a sustainable business. But I mean in order to get there, it could be in 1 potential deal, but also it could be that we're also restructuring and keeping parts of the business. So we are open to all options and we are, at the same time, let's say, working on several options. So all options are open, too. But then, of course, some businesses in this portfolio is more coherent. If we talk about the printing blanket business, that is a coherent business. The most diverse business we have in this portfolio is probably the oil and gas business where we could potentially move it in different directions, because it's depending also on what kind of exposure. Some is more exposed to drilling, some is more exposed to production, some is exposed to seismic. And some of the businesses are actually exposed also to a substantial degree to non-offshore related businesses. So you could potentially split the offshore business in several parts. Well, while I guess the other businesses we have here, the Czech operation and the printing blanket is a more coherent business which needs to move in the same direction.
All right. And then looking at -- turning to the gas pedal instead, I mean, where are we on progress of potential acquisitions, and if you're looking into that? Or is it more now focusing on the existing portfolio improvement and potential divestments?
I mean, as we said before, I mean, our focus here is to try to expand sealing solutions. And we're working there both on kind of geographical expansion and also some kind of product portfolio extension. So that is kind of the activity working, but more bolt-on related acquisitions. We are also with the Wheel Systems, working more on what we call our Interfit, our service model there, in order also to try to find opportunities to grow that one, which is then a more kind of stable business and also with a higher-margin business, even though more smallish and local businesses. So that is also something where we try to grow that part of Sealing Solutions. And then also within Industrial Solutions, we have some small, small pockets also where we want to supplement our offering, especially. So we are working in several directions. But I mean, the priority is to find, let's say, supplementary businesses for sealing solutions, and then once again, developing this interface model of wheel systems and then some smaller parts of the Industrial Solutions.
Understood. Turning to wheels, did you see a volume improvement in North America to your key OEMs within the more Trelleborg premium tires?
There was a slight improvement. But I mean, U.S. is behind Europe in that one, to say. So we are watching now what's going to happen here. And of course, we have the election coming up and we have all of that. So there's still a little bit uncertainty related to that. But I mean, our dependency is a lot more to Europe. And that is where the kind of the improved sentiment is kicking in, for us, more than any kind of minor changes in U.S. But with that said and done, then, of course, North America was substantially better in Q3 compared to Q2, but still, it's kind of small in the total picture of improvements.
Understood. Apologies, a final question here. When you mentioned the sort of production reorganization or relocation, does it also have to do with customers? For example, if going when now that they have, when they decide to move production from Seattle to South Carolina, are these sorts of things that impact you as well?
That is not -- the impact is more, if you want to move, let's say, production of 1 product from 1 factory to another, you need a customer approval. And at the moment, this customer, which is a normal process, which kind of, we do all the time with them. But at the moment, we get slow response times, and we're not really getting attention to make these changes. I mean, I shouldn't exaggerate. It might be that, that was kind of a little bit too -- you shouldn't exaggerate that, but that is kind of slowing the activity with, let's say, a few months. It's not really a major obstacle in that way, simply that we cannot do the changes solely at our own discretion that we need to also get approval from the customers to make it happen.
Yes. Very sorry, but just the restructuring costs, you kept the full year guidance for 700, but maybe it was a bit lower in Q3. Is it more about timing? Or is there anything else here, why it was perhaps a bit...
Timing, for instance. I mean, we have some -- I mean, just to give you an example. We have, let's say, changes decided in Italy, for instance. But at the moment, the Italian government has said that you basically cannot lay people off due to the fact that there's Cassa Integrazione and they're using that. It's basically forbidden at the moment to lay people off. So we have a list of people that we have basically agreed with and everything is done, but we cannot execute it. And as Ulf hinted on before, if we cannot execute and get it done, even though we have a deal and we cannot really account for it. So there might be a slide. So the action is defined, the action is ongoing and all of that, but there is some slow development in certain areas, which also then come -- both these kind of legal complications, but also parts of these actions is also related to moving manufacturing. And at the moment, we have travel restrictions. So we cannot have people kind of traveling in between factories freely and kind of get these changes done. So this is really -- it's not any kind of -- the actions are there, and the savings are there, but it's simply that we cannot really implement it. And that means also that from, I would say, from an accounting point of view, we might not be able to account for all of it in Q4. It might have a rollover of some of the accounting into next year, but the actions are there. But due to these kind of limitations in several areas, it takes a little bit longer to get it done.
And we have 1 further question on the line. That's from the line of Klas Bergelind of Citi.
Yes. Just one, and I will be very brief. So aerospace, Peter, did you say that you expect growth in aero into 2021, i.e., already by the first quarter? Or was that a full year comment for the year? Because, obviously, the comp year-over-year is still very tough in the first quarter, just so we understand that better.
No. But at the moment, honestly, Klas, we do expect, let's say, based -- to put it like that. I mean, based on the full year sales of 2020, including a good sales development in Q1. And then, of course, roughly 50% down then if you simplify from Q2, Q3 and Q4. So that is kind of a strong growth in Q1, but then a drop of 50% Q2, Q3 and Q4. From that base, we do expect a slight growth in 2021. So that's where it's coming from.But of course, it's coming from having let's say, because the major driver on the negative in this year is going to come from the civil aircraft in the aftermarket, which is dramatically down. And the other parts like we say, military helicopters and space, which is the other segments for us, is actually performing quite okay this year, and we expect will continue to grow. So the total portfolio for us in aerospace, we do expect let's say, low single-digit growth in 2021. And of course, from the run rate, if you say the run rate from Q2, Q3 and Q4, then that's what I referred to before, then we do expect the 10% plus growth. But the year-on-year growth, we understand, Klas, it's really a little bit what you're using as the base.
Yes, yes, but just to be very clear, you're talking about full year 2021. You don't talk about third quarter 2021 year-over-year because that comp is...
No, no, no, I'm talking about full year '21. We expect [ it to grow ], yes.
Thank you. And as there are no further questions on the line at this time, I'll hand back to our speakers for the closing comments.
Thank you, and thanks for the interest. And as usual, Christofer especially, very keen on any kind of follow-up questions, and Ulf and myself. We'll run into you here in the next few days when we are kind of meeting a few investors and supporting you in your efforts to talk about Trelleborg. So please do get back to us with any kind of input or questions, and we'll be happy to support you. And if not, I'm sure we're going to meet and talk again in the near future. So thank you, and take care.