TRELLEBORG, Sweden — Trelleborg Wheel Systems has scaled back production of agricultural and certain industrial tires during the third quarter to keep production below the level of demand, Trelleborg A.B. President and CEO Peter Nilsson said in the firm's earnings report for the period ended Sept. 30.
Nilsson said the decision reflects a continuing decline in demand for tires in the agriculture sector and for materials-handling and construction vehicles. The move, he said, was done "in order to adapt our stock levels to a weaker market situation."
The adjusted production had a negative impact on Trelleborg Wheel's earnings in the period, he added, without being more specific. During the period, Trelleborg transferred tire production among facilities to meet new trading patterns and to create a better production structure, Nilsson said, without identifying which plants were affected.
These production transfers and inventory adjustments temporarily have led to reduced efficiency and increased costs, he added, which also will impact the business area's earnings during the fourth quarter.
Furthermore, Trelleborg said that its targeted activities relating to Trelleborg Wheel personnel "proceeded according to plan during the quarter."
Without offering specifics, Trelleborg said that it sought "to adapt the operation to the lower level of demand."
Trelleborg previously disclosed plans to reduce the number of employees by 700, mainly in the Wheel Systems and Industrial Solutions business areas.
The tire maker also reported a 17.7 percent drop in operating income during the quarter to $98.3 million on 6.4 percent higher sales of $921.5 million. Operating income for the January-September period fell 10.3 percent to $251 million on 7.4 percent higher sales of $2.98 billion.
Trelleborg Wheel's operating income plunged 46 percent in the quarter to $15.7 million on 2.5 percent lower sales of $240.3 million, which dropped the earnings ratio five points to 6.5 percent.
The company said organic sales of tires for agricultural machines declined in most markets during the quarter and for materials-handling vehicles and construction vehicles for the year to date. The trend in North America was negative, unchanged in Europe and weaker in other geographic regions.
Trelleborg cited the ongoing trade conflicts for having a negative impact on the business climate and said they contributed to increased uncertainty and reduced order intake
Operating earnings for the nine-month period fell 19 percent to $88.3 million on 3 percent higher sales of $830.2 million.