TRELLEBORG, Sweden—At the end of 2019, Trelleborg undertook a major restructuring effort intended to improve profitability by reducing its main segments from five to three and creating a new reporting segment for under-performing operations.
The Trelleborg Group now comprises Trelleborg Industrial Solutions, focusing on polymer products for niche applications and infrastructure; Trelleborg Sealing Solutions, with its focus on polymer-based seals; and Trelleborg Wheel Systems, which makes tires for off-road vehicles.
Trelleborg Coated Systems and Trelleborg Offshore and Construction have been discontinued, and their various operations were placed either within Trelleborg Industrial Solutions, which saw the biggest changes in business structure, or Business Under Development, the new reporting segment.
"The difference is that we have chosen to highlight operations in which we want to see an improvement in a way that we haven't done previously," a Trelleborg spokeswoman said.
The moves are meant to streamline operations and improve the bottom line for the $3.5 billion producer of polymer-engineered seals, dampening equipment and tires. Optimism, however has been replaced with uncertainty due to the global coronavirus pandemic, Trelleborg leaders said during a March 31 webcast with investors.
Under the restructuring, the five operations demonstrating weak profitability—with combined annual sales of about $410 million—that are now under the auspices of Business Under Development include the printed blankets operations of the now-defunct Trelleborg Coated Systems; the oil and gas operations of the now-defunct Trelleborg Offshore and Construction; the Swedish and Estonian operations for specialty molded products of Trelleborg Industrial Solutions; the Czech operations for specialty molded components and technical rubber products of Trelleborg Industrial Solutions; and the bicycle tire operations of Trelleborg Wheel Systems.
"It is our hope that this will be simpler and clearer for external target groups, such as shareholders and investors, that want to understand Trelleborg and where we are headed," said the spokeswoman.
The reporting segment's structure is likely to change, as the company decides on the future of those operations.
"They may also be divested, reorganized into a joint venture or become a minority holding for the (Trelleborg) Group," the spokeswoman said.
Related to the business structure changes will be a capital employment impairment of about $338 million, according to Trelleborg. There will no cash-flow impact. Total restructuring costs came to $52 million, according to company.
"These were, however, not fully attributable to the new reporting segment," said the spokeswoman. "Restructuring costs in recent years are mainly a result of the large number of acquisitions finalized. We've had some larger relocations and adjustments to production in conjunction with acquisitions, like with the integration of the industrial Group CGS's tire business, which was acquired in 2016."
Trelleborg expects 2020 restructuring costs to be roughly a bit more than $30 million, though these figures may be adjusted as industries worldwide face a slowdown.
While Trelleborg noted in its Feb. 12 interim financial report that the profitability of the offshore oil and gas operations (formerly within Trelleborg Offshore and Construction) changed from loss to profit with volume recovery in 2019, the other four operations in Business Under Development demonstrated a negative trend that "accelerated during the second half of the year," according to the spokeswoman.