STOCKHOLM—Trelleborg A.B. reported a strong third quarter as it enters the final quarter of 2021, but the global company said it expects challenges with rising costs of freight, raw materials and more.
The Swedish company, which processes polyurethane and rubber into industrial components, generated sales of $951 million (SEK 8.2B) in the third quarter of 2021. This is up 15.21 percent on the same period last year.
EBIT across the business rose 24.7 percent and reached $139 million.
"There were challenges during the quarter," CEO Peter Nilsson said. "The prices of raw materials continued their upward movement. The supply chains were disrupted by shortages of some components and raw materials, occasionally with temporary production stoppages as a result. A continued shortage of containers in some regions and historically high freight costs continued to present challenges, at the same time as the sudden and clear increase of energy costs pose an additional test."
But, he added, the company is entering the fourth quarter with well-filled order books, and with a high level of activity in most of its manufacturing units.
In its industrial business, sales rose by 9.1 percent between the third quarter of 2020 and the third quarter of 2021 at $314 million, up from $291 million. EBIT in the division rose 19 percent and hit $37.9 million. In the third quarter of 2020 it was $31.8 million.
Higher volume sales and strict cost controls drove EBIT and the EBIT margin improvements.
Sales to the construction and industry-related market segments were significantly higher compared to the preceding year. The shortage of chips, however, hit demand from the automotive industry, and sales were down in the third quarter. This is likely to get worse in the last quarter of the year, Trelleborg said.
Although EBIT rose year on year, rising freight costs, raw materials prices and energy slowed the rate of margin growth in the quarter.
Quarterly sales in the company's wheel systems business rose by 14.2 percent at $279 million, which contrasts $244 million in the equivalent period last year. EBIT in the division fell to $27.7 million, from $31.6 million in the equivalent period in 2020.
Sales to all tire categories grew in the quarter, with agricultural machinery taking the lead through strong demand from North America and South America. EBIT decreased for the same reasons as the industrial segment, according to Trelleborg. The company said it made a priority of supplying its long-term original equipment customers to protect the business and will inch up prices to try and improve profitability.
In sealing, sales were up by 22.8 percent at $360 million in the third quarter from $290 million last year. EBIT rose by 58.6 percent at $83.8 million.
Trelleborg said sales to all segments and geographies displayed uniform and high growth. But production disruption at automotive customers hit the business towards the end of the quarter, and this is likely to get worse in the final quarter for the year.
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