annual report trelleborg -98 - ku leuven · 2 annual report trelleborg 1998 w growth a year of...

Environ-ment

Safety

Comfort

Trelle

borg A

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nnual R

eport 1998

Trelleborg AB (publ), P.O. Box 153, SE-231 22 Trelleborg, SwedenPhone: +46 410 670 00 • Fax: +46 410 427 63

E-mail: [email protected]: www.trelleborg.com

Trelleborg is aglobal industrial and distribution group.

With a focus on comfort,safety and the environment, we make the job

easier and more convenientfor our customers and

our customers’ customers.

The Trelleborg Group has a turnover of 25 billion and13,800 employees in 35 countries.

The Trelleborg Group is organized in eight business areas:Trelleborg Automotive, Trelleborg Wheel Systems,

Trelleborg Engineered Systems, Trelleborg Buildings Systems,Ahlsell, Bröderna Edstrand, Reynolds and Starckjohann.

The Trelleborg shares have been traded onthe Stockholm Stock Exchange since 1964.

Annual Report 1998

Highlights 1998

Key figures, Trelleborg Group 1

Group review

Net sales distributed by business area 5

Key operating ratios 6

Cash flow report 7

Earnings per share after full tax andprofit margin 1994–1998 7

Operating profit by business areaper quarter 8

Flow exposures 10

Net assets abroad 11

Committed credit facilities andmaturity structure 11

Average number of employees 16

Industrial sector

Net sales and operating profit 19

Distribution sector


Trelleborg Automotive

Key figures 22


Net sales by geographic market 24

Trelleborg Wheel Systems

Key figures 26



Trelleborg Engineered Systems

Key figures 30



Trelleborg Building Systems

Key figures 34



Ahlsell

Key figures 38


The Swedish electrical, heating & plumbingmarket and the Nordic refrigerationmarket by player 40

Bröderna Edstrand

Key figures 42

Net sales and perating profit 43

Net sales by product group 43

The Swedish wholesale market for steeland aluminum 43

Reynolds

Key figures 44



Starckjohann

Key figures 46


Net sales by division 48

Associated companies

Boliden’s mining production 50

Financial reporting

Consolidated income statement,and comments 54–55

Consolidated balance sheet,and comments 56–57

Statement of changes in financialposition and comments 58–59

Income statement and Statement of changesin financial position, Parent Company 60

Balance sheet, Parent Company 61

Pro forma, remaining operations 62

Notes, no 1–57 65–74

Five-year review 79

The Trelleborg share 80

Trelleborg AB (publ)P.O. Box 153,SE-231 22 Trelleborg, SwedenPhone: +46 410 670 00Fax: +46 410 427 63E-mail: [email protected]: www.trelleborg.comCompany reg no: 556006-3421

This Annual Report is also available inSwedish. Denna årsredovisning finns även ien svensk version.

Cover: Employees of the Trelleborg Group.

Reader informationFigures in parantheses refer to 1997 unlessotherwise stated. An internal reorganizationwas carried out in 1998 in which businessunits were transferred between businessareas within the Industrial sector. All com-parable figures for 1997 are adjusted toreflect this. The abbreviation SEK forSwedish kronor is used throughout.“Millions of kronor” is abbreviated SEK M.“Trelleborg” refers to both Trelleborg ABand the Trelleborg Group.

Annual Report 1998This Annual Report is typeset inAGaramond and GillSans. Paper: coverGothic Silk 250 g, maps Multifine 130 gand text pages Gothic Silk Web 150 g. ThisAnnual Report meets the criteria for NordicEnvironmental Marking.Production: Trelleborg AB. Graphic design:RHR Reklambyrå AB, Malmö. Photogra-phers: Lars Owesson, Lars Strandberg, andother. Repro and printing: AB Ruter Press,Laholm, Sweden, March 1999.

Contents

Highlights 1998 1

Comments by the Chairmanof the Board and the President 2–3

Group review 4–74

IT-strategy 8

Year 2000 9

EMU and euro 9

Trelleborg Treasury 10–11

Environment, health and safety 12–15

Skills and commitment 16–17

Presentation by business area

Trelleborg Automotive 22–25

Trelleborg Wheel Systems 26–29

Trelleborg Engineered Systems 30–33

Trelleborg Building Systems 34–37

Ahlsell 38–41

Bröderna Edstrand 42–43

Reynolds 44–45

Starckjohann 46–49

Associated companies 50–51

Financial reporting

Administration report 52

Proposed dispositionof unappropriated earnings 53

Consolidated income statement,and comments 54–55

Consolidated balance sheet,and comments 56–57

Statement of changes in financialposition and comments 58–59

Income statement and Statement ofchanges in financial position,Parent Company 60

Balance sheet, Parent Company 61

Pro forma, remaining operations 62

Accounting and Valuation principles 63–64

Notes, no 1–57 65–74

Auditors’ report 75

Board of Directors and Auditors 76–77

Group management 78

Five-year review 79

Share capital and ownership 80–82

Shareholder information 83

Annual General Meeting 84

Group addresses V

Diagrams and tabels

Trelleborg Group

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A n n u a l R e p o r t Tr e l l e b o r g 1 9 9 8

Trelleborg Group

in Europe

Group Center

• Trelleborg Automotive

• Trelleborg Wheel Systems

• Trelleborg Engineered Systems

• Trelleborg Building Systems

• Ahlsell

• Bröderna Edstrand

• Reynolds

• Starckjohann

II

North America 10%

Latin America 1%Asia & Australia 1%

Other 1%

Europe 87%

Group’s net sales by geographic market

Net sales in euro countries: SEK 10,654 M


1A n n u a l R e p o r t Tr e l l e b o r g 1 9 9 8

Highlights1998

Trelleborg is a

global industrial and

distribution group.

With a focus on comfort,

safety and the environment,

we make the job

easier and more convenient

for our customers and


Key figures, Trelleborg Group 1998 1997

Net sales, SEK M 25,041 20,825

Operating profit, SEK M 736 2,609

Profit after financial items 616 2,550

Net profit for the year 492 2,038

Return on shareholders’ equity, after full tax, % 4.5 19.9

Return on capital employed used in operations, including associatedcompanies but excluding items affecting comparability, SEK M 5.7 12.6

Equity/assets ratio, % 54.3 53.8

Earnings per share, after full tax, SEK 4.20 17.40

Ditto, excluding items affecting comparability, SEK 4.05 7.65

Earnings per share, after full tax and after full conversion, SEK 4.20 —

Shareholders’ equity per share, SEK 93.55 94.20

Financial assets, minus liabilities at end of period, SEK M –3,287 –868

Investments in plant, SEK M 806 963

Average number of employees 13,895 13,525

Dividend per Series A and Series B share, SEK 2.001) 3.502)

Market price at December 31, Series B share, SEK 66.00 100.00

1) For 1998, as proposed by the President and Board of Directors. It is also proposed that Trelleborg’s entire holding of Bolidenshares be paid as a dividend to shareholders. The market value of the Boliden holding on December 31, 1998 was SEK 917 M.

2) Excluding bonus of SEK 1.50 per Series A and Series B share.

For a more detailed summary of the financial developments and other key figures as well as definitions, see page 79.

• Combined net sales for the Group’s Industrial and Distributionoperations increased by 51 percent.

• Trelleborg Wheel Systems S.p.A., a joint venture with Pirelli,positions Trelleborg as Europe’s third largest supplier of tires forfarm and forest machines.

• The acquisition of ETM in Germany makes Trelleborg BuildingSystems Europe’s leading supplier of extruded sealing profiles.

• Profit after financial income and expense for the year amountedto SEK 616 M. Net profit for the year totaled SEK 492 M,corresponding to earnings per share of SEK 4.20.

• The proposed dividend is SEK 2.00 per A and B share. It is alsoproposed that Trelleborg’s entire holding of Boliden shares be spunoff to shareholders in the form of an additional dividend – in propor-tion to their holdings of common stock in Trelleborg AB.


W

growthA year of

Nineteen ninety-eight was a year char-acterized by growth, not only throughacquisitions, but also through theestablishment of new operations andorganic growth. All of the businessareas noted positive sales gains and netsales for the Group’s core operationsincreased by a full 51 percent.

Within the Industrial sector, new operationswere acquired with combined sales of SEK 1.3billion. The largest acquisitions were madewithin the Trelleborg Building Systems andTrelleborg Wheel Systems business areas.

European leaderFollowing the acquisition of Germany’s ETM,Trelleborg Building Systems is now by farEurope’s leading supplier of extruded sealingprofiles for the building-related industry.ETM is Germany’s leading producer in thissegment and has world-class technologicalknow-how.

The acquisition of Sweden’s Trebolitsignificantly expanded the range of bitumen-based waterproofing products. It also broad-ened the base for further developments in theexport area, particularly within the bridgemembranes product area, which offers majorgrowth potential.

The establishment of Trelleborg WheelSystems S.p.A., a joint-venture with Pirelli ofItaly, immediately boosted Trelleborg WheelSystems business area to a position as thethird largest European producer of tires forfarm and forest vehicles.

At the hub of theEuropean automotive industry

During the year, Trelleborg Automotiveopened an office in Frankfurt thereby secur-ing a position at the hub of the Europeanautomotive industry. Several investmentswere also made during 1998 in new research

and development centers. As part of Trelle-borg Automotive’s strategy, which is to be astrong development partner for its automo-tive customers, the company acquired a25 percent holding in the Swedish engineeringconsulting firm, Ingemansson Automotive.This company has leading-edge skills withinthe areas of vehicle acoustics and vibration.

Extensive production relocations andpersonnel reductions, especially in Palport,France, were conducted within TrelleborgEngineered Systems during the year. Withthe aim of increasing capacity and reducingcosts, a number of significant investmentswere made at several business area units, forexample in Spain, the Netherlands andMexico.

Acquisition of majorityholding in Starckjohann

Nineteen ninety-eight was also a growth yearfor the Group’s Distribution sector opera-tions. This was largely due to the acquisitionof a majority holding in Finland’s Starck-johann at the end of 1997, but supplementaryacquisitions and the establishment of newoperations in all four business areas also con-tributed to the sector’s overall growth.

The Starckjohann group, which notedsatisfying levels of increased demand withinall divisions, reported a 15 percent increase innet sales, compared with 1997. In its ongoingwork to streamline operations, a wholesalecompany and an export company weredivested. Starckjohann Steel expanded itsrange of pre-treatment services through theacquisition of Suomen Teräspalvelu.

Within Ahlsell, the integration of SkoogsElektriska’s operations was concluded inScandinavia during the first few months of1999 and synergy effects are already generat-ing a substantial contribution to earnings.

Expansion in Scandinavia continued,through the acquisition of Swedish heatingand plumbing supplies wholesaler, Värme-källan, Norwegian electrical supplieswholesaler, Elektro-Energi, and DanishDIY company, VVS-Trading, among otherdevelopments.


During the year, the resources of the newData & Tele product area were strengthened.This unit will in future be marketed underthe new name, Ahlsell Network Systems.

Expansion in Baltic sea areaBröderna Edstrand implemented a number ofimportant steps in its strategy to expand inthe Baltic sea region. Companies, warehousefacilities and sales offices were started inPoland and Latvia and a representationaloffice was established in Lithuania. Part ofthe strategy also includes expanded coopera-tion with Starckjohann.

During the year, Reynolds acquired Frenchmetals wholesaler, Testas. The focus on

providing products with added value,through further processing to meetcustomer needs, continued.

Boliden to be spun offto shareholders

At the beginning of 1999, the Trelle-borg AB Board decided to proposethat the Annual General Meetingvote to spin off the existing holdingof common stock in Boliden toTrelleborg AB’s shareholders. Thespin-off is a natural final step inTrelleborg’s decision to withdrawfrom the capital-intensive miningsector, which was announced at thetime of Boliden’s listing in 1997. Trelleborg has undertaken toretain its holding of preference sharesin Boliden until further notice.

Good potential foradded value

The Trelleborg Group is now enter-ing a new, intensive phase of develop-ment. The process of change we nowface was started during Kjell Nilsson’stenure as company president and theBoard would like to take this oppor-tunity to express its appreciation ofthe contribution he made to the

company over a period of many years.Trelleborg’s new President and CEO took

up his post as recently as the beginning ofFebruary 1999, which is approximately whenthis message was written. For natural reasons,it is therefore impossible to include a mani-festo of future plans at this time.

However, the Board of Directors and thecompany’s executive management will informTrelleborg stakeholders about plans andintentions for the future and will presentideas on potential development opportunitiesduring the spring and early summer of 1999.

Without wishing to anticipate events, itcan be claimed that the Trelleborg Group hasexcellent potential and will, in its futuredevelopment, assign priority to concentrationwork and shareholder value.

Rune Andersson (left), Trelleborg’s Chairman for many years, withFredrik Arp, who succeeded Kjell Nilsson as president of Trelleborg ABon February 8, 1999.


Group review

The Trelleborg Group is organized ineight business areas that are based onproducts and services in industry anddistribution. In turn, each of the eight business

Group management

President and CEO:Fredrik Arp

Vice President and COO:Hans Porat

Senior Vice President, Finance:Gertrud Andersson

Senior Vice President, Group Treasury:Lars Olof Nilsson

Favorable growth incore operations

areas consists of a number of businessunits and product areas or similar units.The operating organization does notalways correspond with the legalorganization.

The business areas are individuallyresponsible for development, qualityand marketing and have access tothe Group’s combined expertise andresources.

Senior Vice President, Taxes andGroup Structure:Claes Jörwall

Senior Vice President, General Counseland Corporate Secretary:Lars Wallenberg

Senior Vice President, Investor Relationsand Corporate Communications:Leif Öberg

Senior Vice President, Human Resources:Sören Andersson

Senior Vice President, President of Ahlsell:Bo Hedenström

Corporate functions

Environmental Affairs:Torbjörn Brorson

Information Technology:Christer Kjörning

Trelleborg Group1999

Industrial sectorOperations of the Industrial sector’sfour business areas were again char-acterized by expansion in 1998.Acquisitions and organic growthstrengthened Trelleborg’s position asone of the market’s leading manufac-turers. One of the Group’s goals is tobecome a leading global producer ofindustrial rubber.

To establish operations as a largeinternational company with strongprofitability is not a goal in itself; itis a basic requirement for futuregrowth and business development.

Meeting market demandsOperations are divided into fourbusiness areas:





All four business areas serve customerswhose needs are becoming increasinglyglobal. In addition to offering competi-tive prices, globalization places demandson Trelleborg as a supplier to meet cus-tomer requirements in terms of globalpresence, high-tech competence andquality assurance.

With its market presence in the formof production and sales companies in35 countries, Trelleborg offers productsadapted to meet the specific require-ments of customers in local markets, aswell as production and service.

Common goalsThe common goals shared by all fourbusiness areas of the Industrial sectorare:

• international leadership in anumber of clearly definedproduct areas,

• average annual growth of 15percent, with the aim of creatingthe necessary benefits of scale inresearch and development, pro-duction and marketing,

• sustained and satisfactory profit-ability over a complete economiccycle, yielding a long-term returnof 15 percent on capital employedin operations, and an operatingmargin of about 8 percent.

DistributionIndustries

President & CEO

Group managementAssociated companies

TrelleborgAutomotive

TrelleborgWheel

Systems

TrelleborgEngineered

Systems

TrelleborgBuilding Systems

AhlsellBröderna Edstrand Reynolds

Sector President: Fredrik Arp Sector President: Hans Porat

Starckjohann


Net sales and operating profit/loss by business areaNet sales Operating profit/loss1)

SEK M 1998 1997 ± % 1998 1997 ± %

Trelleborg Automotive 2,219 1,708 30 222 178 25Trelleborg Wheel Systems 2,168 1,988 9 127 97 31Trelleborg Engineered Systems 2,571 2,529 2 119 106 12Trelleborg Building Systems 1,178 928 27 135 112 21Other –446 –371 –45 –47

Industrial sector 7,690 6,782 13 558 446 25

Ahlsell 5,342 4,137 29 260 166 57Bröderna Edstrand 2,328 2,146 8 85 98 –13Reynolds 1,054 966 9 9 16 –44Starckjohann 6,068 — — 182 — —Intermarket (1997) — 1,130 — — 85 —Other — — –8 –6

Distribution sector 14,792 8,379 76 528 359 47

Boliden2) — 4,203 –224 589Other3) 2,651 1,792 –123 –94Items affecting comparability — — 17 1,309Eliminations –92 –331 — —

Group total 25,041 20,825 20 736 2,609 –72

Group’s industrial anddistribution operations 25,041 16,622 51 980 711 381) Including shares in profit/loss of subsidiaries.2) As of July 1, 1997, Boliden Ltd is reported as an associated company. (As of August 1998: 42.9%).3) Includes Group-wide costs. Also includes Sorb Industri AB, Metech International, Inc.,

Intermarket (Jan–Mar 1998), Trelleborg NV-SA, Chapman and Velox.

Distribution sectorThe Distribution sector consists ofseveral strong brand names, mainlyin the Nordic market: Ahlsell,Bröderna Edstrand, Reynolds andStarckjohann.

Operations of all four businessareas showed strong growth in 1998,supported by full-year effect of theacquisition of Skoogs Elektriska andStarckjohann. The Distributionsector’s image as a principally strongNordic and Baltic player in coreproduct areas that include heatingand plumbing, electrical, refrigera-tion and steel was strengthenedthrough the acquisition of a Nor-wegian electrical wholesaler, a Frenchdistributor and the establishment ofown sales operations for steel prod-ucts in Latvia and Poland.

The acquisition also includes aFrench metals distributor, Testas.

Success factorsDistribution is the common denomi-nator for all four business areas, andcritical success factors are:

• Rational flows

• Local presence

• Composition of product range

• Accessibility

Integration of Skoogs Elektriska andthe start-up of Bröderna Edstrand’snew installation in Norrköping willbe completed in the beginning of1999. Combined with greater activ-ity in the Swedish constructionmarket, sales are expected to increasemarginally, most notably withinAhlsell’s operations.

Prices for steel and steel productsare expected to show weak trends in1999.

Net salesThe Group’s net sales for 1998totaled SEK 25,041 M (SEK 20,825 M,or SEK 16,622 M excluding Boliden).Combined net sales for the Group’sindustrial and distribution opera-tions increased by 51 percent.

Industrial sectorAll business areas of the Industrialsector reported higher net sales in1998. Net sales invoiced by indus-trial operations totaled SEK 7,690 M(6,782), up 13 percent.

Most of the increase is attributableto recently acquired companies.Trelleborg Automotive reportedorganic growth of approximately13 percent.

Distribution sectorNet sales by the Distribution sectorrose to SEK 14,792 M (8,379), of whichSEK 6,068 M was attributable to salesinvoiced by the acquired operations ofStarckjohann. Most of the increase inAhlsell’s net sales was attributable tothe acquisition of Skoogs Elektriska.

Bröderna Edstrand’s sales increasedduring the first few months of theyear, but then leveled off anddeclined in the fourth quarter.

EarningsGroup operating profit totaled SEK

736 M (2,609).Operating profit for 1998 included

participations in the pretax result ofBoliden Ltd, amounting to a loss of


Group review

SEK 244 M (profit: 589), and a capitalgain of SEK 17 M from the divestmentof Intertrade and Chemtrade.

Operating profit for 1997 includeda capital gain from the divestment of55 percent of the shares in Bolidentotaling SEK 1,309 M, after relatedrestructuring costs.

Operating profit for the Group’sindustrial and distribution operationstotaled SEK 980 M, compared withSEK 711 M in 1997, an improvementof 38 percent .

Industrial sectorOperating profit for the Group’sindustrial operations improved fromSEK 446 M in 1997 to SEK 558 M in1998, an increase of 25 percent .

All business areas reported improved

earnings in 1998, compared with thepreceding year.

The Trelleborg Automotive busi-ness area reported a 25 percentimprovement in earnings. About halfthe increase was attributable toorganic growth, with the other halfattributable to the full-year effects ofacquisitions in 1997.

The earnings of Trelleborg WheelSystems rose by 31 percent to SEK

127 M (97), due mainly to an effec-tive integration of Vorwerk, whichwas acquired in 1997.

The operating profit of TrelleborgEngineered Systems amounted toSEK 119 M (106), an increase of 12 per-cent . Production transfers andpersonnel cutbacks contributed to theimprovement.

Trelleborg Building Systems reportedearnings of SEK 135 M (112), anincrease of 21 percent, attributableprimarily to sealing profiles.

Distribution sectorDistribution operations’ operatingprofit amounted to SEK 528 M (359).Results of the Starckjohann businessarea are included in earnings for1998 and, for comparative purposes,results of the divested operations ofIntermarket are included in figuresfor 1997.

Ahlsell reported operating profitof SEK 260 M (166), an increase ofSEK 94 M. Recently acquired compa-nies accounted for SEK 53 M.Significant earnings contributionswere generated by synergy effects

Key operating ratios

Average capital employed Operating Return on capitalin operations, SEK M margin, % employed in operations, %1998 1997 1998 1997 1998 1997

Trelleborg Automotive 1,325 1,046 9.4 9.2 16.7 16.9Trelleborg Wheel Systems 1,182 1,001 5.9 4.9 10.8 9.7Trelleborg Engineered Systems 1,132 1,030 4.6 4.2 10.5 10.3Trelleborg Building Systems 611 446 11.4 12.1 22.0 25.1Other 53 19 — — — —

Industrial sector 4,303 3,542 7.1 6.3 13.0 12.6

Ahlsell 1,361 820 4.9 4.0 19.1 20.2Bröderna Edstrand 390 337 3.7 4.6 21.8 29.1Reynolds 227 191 0.9 1.7 4.1 8.4Starckjohann 2,026 154 3.0 — 9.0 —Intermarket (1997) — 243 — 7.5 — 35.1Other 15 91 — — — —

Distribution sector 4,019 1,836 3.6 4.3 13.2 19.5

Boliden1) 2,394 3,760 — 7,8 — 15.7Other2) 1,834 1,170 — — — —

Group total 12,550 10,308 3.7 11.0 5.9 25.3

Group’s industrial anddistribution operations 10,156 6,548 3.7 3.9 9.6 10.6

1) Including shares in profit/loss of subsidiaries.2) As of July 1, 1997, Boliden Ltd is reported as an associated company. (As of August 1998: 42.9%).3) Includes Group-wide costs. Also includes Sorb Industri AB, Metech International, Inc., Intermarket (Jan–Mar 1998),

Trelleborg NV-SA, Chapman and Velox.


Cash flow report

1998 Profit/loss Depre- Gross Other Total Acqui- Divest- Totalexcluding ciation invest- changes operating sitions ments cash

associated ments in capital cash flow flowcompanies employed excluding

acquisitions/SEK M divestments

Trelleborg Automotive 209 100 –149 –48 112 –3 — 109Trelleborg Wheel Systems 127 95 –93 –117 12 –355 — –343Trelleborg Engineered Systems 119 74 –115 –42 36 –30 — 6Trelleborg Building Systems 134 51 –34 –3 148 –281 — –133Other –45 7 –8 –48 –94 — — –94

Industrial sector 544 327 –399 –258 214 –669 — –455

Ahlsell 260 64 –71 –88 165 –37 — 128Bröderna Edstrand 85 23 –31 52 129 — — 129Reynolds 9 8 –5 6 18 –10 — 8Starckjohann 182 97 –141 –59 79 –255 — –176Other –8 — –7 — –15 — — –15

Distribution sector 528 192 –255 –89 376 –302 — 74

Other/Group items* –153 102 –152 –95 –298 –326 247 –377

Operating cash flow 919 621 –806 –442 292 –1,297 247 –758

Dividend to shareholders –587Other (financial transactions, taxes, etc) –1,074

Change in financial net assets/liabilities –2,419

*) Includes Group-wide costs. Also includes Sorb Industri AB, Metech International, Inc., Intermarket (Jan–Mar1998),Trelleborg NV-SA, Chapman and Velox.

0

5

10

15

20

25

30

24.40 8.60 17.40 4.405.60

1994Year 1995 1996 1997 1998

SEK %

0

2

4

6

8

10

12

3.6

7.3

4.96.0

2.4

Earnings per share, SEK

Profit margin, %

Earnings per share after full tax andprofit margin 1994–1998

following the integration of SkoogsElektriska.

Heating and plumbing operationsin Sweden also showed improvedearnings, compared with 1997, dueto higher volumes and cost-efficiencymeasures.

Bröderna Edstrand reported operat-ing profit of SEK 85 M (98). Earnings in1998 were charged with nonrecurringexpenses for a new computer systemand other development investments.

Earnings by Reynolds amounted toSEK 9 M (16). The decline was causedby lower metal prices and reduceddemand in the German market.

Starckjohann’s operating profittotaled SEK 182 M. With the excep-tion of the steel division, all divisionsof Starckjohann reported improved

earnings in 1998, compared with thepreceding year.

Other companiesThe Trelleborg Group’s 42.9 percentshareholding in Boliden Ltd gener-ated an adverse effect on earnings ofSEK 244 M (profit: SEK 589 M; Trelle-borg owned 100 percent of Bolidenduring the first half of 1997). Lowmetal prices and costs arising inconnection with the dam accident inSpain were major factors in thecompany’s negative result.

Other consolidated items yieldeda deficit of SEK 123 M (deficit: 94).In addition to Group-wide expenses,this item included Sorb Industri,Chapman, participation in the resultof the associated company BPA, etc.

Financial positionThe net of financial income andexpense resulted in an expense ofSEK 120 M (expense: 59). The cost


Group IT-strategyThe Trelleborg Group’s overall strategy andregulations for IT issues cover areas of mutualinterest for all Group activities. Every businessarea has supplemented the strategy and regula-tions with its own IT-strategy, based mainly onhow IT should be introduced and implementedto provide the best possible support for theirrespective operations.

Trelleborg’s IT-strategy includes standards forhardware, software and communications (techni-cal infrastructure). The objective of the strategyis to simplify and improve the efficiency ofpurchasing, maintenance, support and manage-ment routines and reduce the total costs of aPC workplace.

With a global network, Trelleborg Groupunits are able to communicate electronically.The network is now being expanded to createthe potential for improved coordination andmore effective integration, a basic prerequisitefor rapid achievement of profitable expansion.

TrellNet, the intranet established in 1997, isan important tool used to facilitate e-mail corre-spondence, usages of databases and support fordocument processing and quality assurance.

Operating profit by business area1), 1998SEK M Jan–Mar Apr–Jun Jul–Sep Oct–Dec Full-year (1997)

Trelleborg Automotive 58 57 47 60 222 178Trelleborg Wheel Systems 40 32 34 21 127 97Trelleborg Engineered Systems 31 36 27 25 119 106Trelleborg Building Systems 11 39 54 31 135 112Other –12 –7 –16 –10 –45 –47

Industrial sector 128 157 146 127 558 446

Ahlsell 37 67 60 96 260 166Bröderna Edstrand 26 21 22 16 85 98Reynolds 4 3 8 –6 9 16Starckjohann 11 59 84 28 182 —Intermarket (1997) — — — — — 85Other –1 –5 –2 0 –8 –6

Distribution sector 77 145 172 134 528 359

Boliden 30 –160 –66 –48 –244 589Other2) –14 –25 –47 –37 –123 –94Items affecting comparability 0 17 0 0 17 1,309

Group total 221 134 205 176 736 2,609

Group’s industrial anddistribution operations 191 294 271 224 980 711

1) Including shares in profit/loss of subsidiaries.2) Includes Group-wide costs. Also includes Sorb Industri AB, Metech International Inc., Intermarket(Jan–Mar 1998), Trelleborg NV-SA, Chapman and Velox.

Group review

increase was attributable to the Group’sincreased debt in 1998.

Profit after financial income andexpense amounted to SEK 616 M.Excluding Boliden’s effect on earn-ings, the corresponding figure wouldbe profit of SEK 860 M (652), animprovement of 32 percent.

Tax charges for the year totaled SEK

81 M (510), including taxes paid inan amount of SEK 39 M.

Net profit for the year totaled SEK

492 M (2,038), corresponding to SEK

4.20 per share. Excluding Boliden,net profit was SEK 742 M, or SEK 6.35per share.

The Group’s net debt at year-endamounted TO SEK 3,287 M (868), anincrease of SEK 2,419 M.

Recent acquisitions accounted forSEK 1,297 M of the increase in netdebt, with dividends to shareholdersaccounting for SEK 587 M.

Gross investments amounted toSEK 806 M.

The equity/assets ratio at year-end1998 was 54.3 percent (53.8).Adjusted for the proposed spin-offof Trelleborg’s remaining shares inBoliden, the equity/assets ratio was48.6 percent.

New issue of Boliden sharesWith regard to a decision by BolidenLtd to float a new issue of preferredshares, the Board of Directors ofTrelleborg AB has decided to subscribefor its allotment of the issue (corre-sponding to a maximum of CAD 96.5M). The issue is intended primarily tofinance ongoing expansion of theRönnskär smelting plant.

Preference shares do not carryvoting rights, but carry the right toconversion. The Trelleborg Group’sparticipation in the issue is condi-tional upon the acceptance of theconversion terms and annual yieldon the preference shares.

Spin-off of Boliden sharesAs a critical step in the TrelleborgGroup’s concentration of operationsto its core business within the Indus-trial and Distribution sectors, theBoard of Directors of Trelleborg ABis proposing that the Annual GeneralMeeting of shareholders on April 22,1999, vote to spin-off Trelleborg’sholding of common stock in Boliden.

The Group has pledged to retainthe preference shares in Boliden untilfurther notice.


information and links with IT-suppliersand their products as well as informa-tion concerning Y2K problems.

The large business systems used bythe Group’s business areas are eitheralready Y2K compliant or will be up-graded to secure versions in the nearfuture. In cases that require upgrades,the work will be conducted in accord-ance with an established plan, with atarget completion date of June 30,1999.

A number of individual audits wereconducted in 1998 and, in the autumn,specific dates were established forfinal audits to be conducted as eachsubsidiary’s Y2K compliance measuresare completed. The Group plans toissue internal certificates to Trelleborgcompanies that have completedtheir compliance measures and areregarded as Y2K-secure.

Estimated costs for the Y2K compli-ance measures described aboveamount to a total of SEK 150 M.

Year 2000Comprehensive efforts are now beingmade by the Trelleborg Group toensure that all computers used intechnical and administrative systems,as well as so-called embedded sys-tems, will function in conjunctionwith the shift to year 2000. The workcovers both internal informationsystems and relations with customersand suppliers.

During 1997, an inventory andprogress analysis was conducted byan independent consultant company.The analysis resulted in a clearlydefined division of responsibility androutines for continued work efforts.In January 1998, a reporting routinewas established to monitor the cur-rent status and progress of the work.The objective is to complete thework by the end of June 1999. Thepresidents of Group subsidiaries havebeen assigned responsibility forimplementation.

A document database has alsobeen developed. In addition toreporting, the database includes

Trelleborg conducts a substantialpart of its operations in those coun-tries forming the European Economicand Monetary Union (EMU)*.These countries account for 42.5percent of the Group’s net sales.

To prepare the Trelleborg Groupfor introduction of the euro, aproject group was established duringthe past year. It consists of repre-sentatives of the Group’s businessareas and corporate managementfunctions. Trelleborg’s Chief Finan-cial Officer is the project manager.

The group was established tomonitor developments in conjunc-tion with the euro’s introduction, tocoordinate adjustment to the eurowithin the Trelleborg Group, takeGroup-wide decisions on, and serveas an advisory group, in all euro-related issues.

A euro manager has also beenappointed in all subsidiaries affectedby EMU, with responsibility to iden-tify euro effects on his/her respectivecompany’s functions and secure

ACQUISITIONSCompany (Business Area) Net sales

1996 SEK MCMPP (TES) 600Horda (TRA+TBS) 360Ibercaucho (TRA) 300Snowden Rubber och AndersonCP Rubber (TES) 300Gelia Industri (AHL) 1601997 SEK MTornab (AHL) 100Yale-South Haven (TRA) 1,000Pe Fo (AHL) 25Hillco (AHL) 25Vorwerk & Sohn (TWS) 250HPT (TES) 4.5Wheelbond Africa (TWS) 25Projetos e Aplições de Vibrotécnicae Vedação (TRA) 55Elwar (AHL) 100Skoogs Elektriska (AHL) 2,100Starckjohann (54%) 5,300Landol (AHL) 90Värmekällan (AHL) 251998 SEK MSRG Bevco (TES) 70VVS-Trading (AHL) 70Suomen Teräspalvelu (STA) 38Elastomer-Technik-Mosbach (TBS) 300Elektro-Energi (AHL) 200Testas (REY) 135Trebolit (TBS) 100Ingemansson Automotive(25%) (TRA) 20Dach Baustoff Vertrieb(TBS) 20Joule (TBS) 30Starckjohann (+ 31 percentage units)Trelleborg Wheel Systems S.p.A(60 %) (TWS) 800

The abbreviations in parantheses for thevarious business areas:

(TRA) Trelleborg Automotive

(TWS) Trelleborg Wheel Systems

(TES) Trelleborg Engineered Systems

(TBS) Trelleborg Building Systems

(AHL) Ahlsell

(REY) Reynolds

(STA) Starckjohann

implementation of necessary changes.Euro managers of subsidiaries reportdirectly to the euro project group.

Trelleborg plans to introduce theeuro gradually throughout theGroup. In compliance with theseplans, subsidiaries will convert toeuro in accordance with separatetime plans based on each unit’sspecific situation. Different strategiesmay be pursued, depending on theeuro’s strategic importance to thecompany and each company’s accessto internal resources.

The Group’s finance functionmade preparations during 1998 forthe euro’s introduction in the finan-cial market. Strong focus was placedon such areas as payment systems,currency exposure and the Group’snetting system.

EMU and euro

* Members of EMU: Austria, Belgium,Finland, France, Germany, Ireland,Italy, Luxemburg, the Netherlands,Portugal and Spain.


Group review

The Trelleborg Group is exposed tovarious financial risks through itsbusiness activities. Financial risksinclude fluctuating exchange rates,interest rates and raw material prices,as well as borrowing and credit risks.

Trelleborg’s treasury activities andfinancial risks are managed in ac-cordance with guidelines establishedby Trelleborg AB’s Board of Directors.

The Trelleborg Group’s treasuryactivities are centralized at TrelleborgTreasury in Stockholm. By concen-trating all treasury activities in a singleunit, Trelleborg is able to benefit fromsubstantial economies of scale, lowerfinancing expenses and professionalmanagement of the Group’s risks.

The activities are divided into threemain areas: an internal bank, financialservices and risk management.

The internal bank is responsible fordaily contacts with Trelleborg Groupcompanies, managing deposits andloans, currency transactions, nettingof intra-Group payments, advisoryservices and other bank services.

Financial services is responsible forthe Group’s medium and short-termfinancing and offers consultantactivities to Group companies inareas such as capital rationalizationand cash management.

Risk management’s task isto identify and managevarious types of financialrisks in Trelleborg Groupoperations.

Working within theframework of establishedguidelines, TrelleborgTreasury conducts sometrading activities incurrency and interestinstruments.

A positive result wasreported in 1998 fromtrading activities.

Currency risks

Transaction exposure

The Trelleborg Group’stransaction exposurelies in the commercialcurrency flow after netcalculation of counter-flows in the same curren-cies. Trelleborg’s policystates that hedging ofthese flows can be madeat a volume equivalent of up to two-years’ flow, distributed over a periodnot exceeding three years.

The net flow of foreign currenciesinto Swedish kronor amounts toSEK 658 M. The currencies in whichTrelleborg has its greatest exposureare presented in the diagram in thispage.

Industrial sector

The net inflow of foreign currenciesfrom Sweden for Industrial sectoroperations amounts to aboutSEK 180 M.

Currency hedging varies depend-ing on market trends. At year-end1998, the net of currencies sold andpurchased on forward contracts wasSEK 1,361 M. On average, hedgingwas conducted at an exchange rateequal to a TCW* index of approxi-mately 124.5.

Trelleborg Treasury manages the Group’sfinancial risks

0

50

100

150

200

250

300

350

400

ÖvrigaEuroGBPUSA och CAD

USD and GBP Euro OtherCAD

SEK M

399 136 49 74

Trelleborg has a net inflow of foreigncurrencies of SEK 658 M, of whichDistribution sector operations have anet outflow of SEK 180 M in euro.

Group transaction exposure

Distribution sector

The net outflow of foreign currenciesfrom Sweden amounts to about SEK

180 M. This exposure is not hedged.

Translation exposure

In conjunction with translations ofGroup assets and liabilities in foreignsubsidiaries into Swedish kronor,there is a risk that fluctuations inexchange rates could affect the con-solidated balance sheet.

In accordance with the Group’scurrency policy, net assets in foreignsubsidiaries and associated compa-nies are hedged. The extent ofcurrency hedging varies, but may notexceed investment value, includingtax effects.

Excluding Boliden, net assets inforeign subsidiaries and associatedcompanies amounted to SEK 2,697 M

Outstanding currency contracts for com-mercial flows in the Industrial sector during1999 and 2000, as at December 31, 1998.

Net Hedging Hedged,exposure, contracts, %

SEK M SEK M

USD and CAD 399 515 129Euro 229 455 198GBP 136 268 197Other 74 123 167Total 838 1,361

Gross loan liability by currency, SEK M.Taking into account currency swaps andother derivative instruments, the TrelleborgGroup’s gross loan liability is distributed asfollows:

1998 1997Euro –2,312 –2,648USD –1,508 –1,624GBP –529 –467DKK –68 –188NOK –260 –134CHF 59 —Total –4,618 –5,061


(2,672) at year-end 1998, of which96 percent was hedged.

The decision has been taken not tohedge net assets in EMU countriesfor the time being, since interest ratemargins have decreased and the SEK isexpected to stabilize against the euro.

The distribution of currencies isshown in the diagram in this page.

Financial exposure

Group companies work in local cur-rencies. Since most loans and invest-ments are made in local currencies,the companies avoid financial expo-sure. Companies with loans andinvestments in foreign currenciesnormally hedge their risks in accord-ance with Trelleborg’s policy, whichlimits risk assumptions.

Emerging markets

The Trelleborg Group’s expansionstrategy in various “emerging mar-kets” places new demands on theCompany’s finance function.

Most of these countries are charac-terized by regulated currency andcredit markets. In many cases, there-fore, it is necessary to find localfinancing solutions or financing in

currencies other than local currencies.A commercial evaluation is made ineach individual case.

Interest risksInterest risks are defined as the riskof consolidated earnings being nega-tively affected by fluctuations inmarket interest rates. Based on Trel-leborg’s policy, interest on loans andon the investment of liquid fundsmay be fixed for periods of up tofour years.

Financial instruments such as for-ward contracts, FRAs and swaps areused only to extend or shorten theaverage period of fixed interest rateswithout changing the underlyingloan or investment.

At year-end, the fixed-interestperiod for loans was 8 months and3 months for investments.

The effect on earnings created by achange of one percentage point ininterest rates is about SEK 17 M,calculated on an annual basis.

Financing risksFinancing risks are defined as risksarising when the refinancing ofmaturing loans could be difficult orexpensive. Trelleborg’s policy statesthat most of the Group’s net debtshall be covered by medium- andlong-term loans.

The Group’s gross loan liability asper December 31, 1998 amountedto SEK 4,618 M (5,061).

After deductions of liquid fundsand short- and long-term invest-ments, net financial debt amountedto SEK 3,287 M (868). The averagematurity of loans at year-end 1998was 8 months, and the average matu-rity period for short- and long-terminvestments was 3 months.

For the Group’s continued expan-sion, long-term credit commitments(more than one year) amounting toapproximately SEK 10 billion havebeen granted; see diagram in this

page. These credit commitments hadnot been utilized at year-end.

Credit risksCredit risks in treasury activities arisefrom investments of liquid funds andfrom counterparty risks when trad-ing in financial instruments.

To reduce credit risks, trading isrestricted to a limited number ofcounterparties and within the limitsestablished by Trelleborg’s Board ofDirectors. The Group’s policy is towork with banks that have highcredit worthiness and participate inthe Group’s medium- and long-termfinancing.

The Group’s liquid funds aremanaged primarily at corporate levelwithin Trelleborg AB. These fundsare invested in monetary and capitalmarkets. Group liquid funds at year-end 1998 amounted to SEK 855 M.

No credit losses were incurred in1998.

*TCW Index = Total CompetitivenessWeighted Index. Weighted trade indexcalculated by the International MonetaryFund. It shows the trend of the SEK inrelation to the trend of Sweden’s mostimportant trading partners.

Financeactivities

USD 308GBP 55

Euro 2,090

DKK 66CHF 150

Other 28

Excluding Boliden, the Trelleborg Grouphas total net assets outside Swedencorresponding to a value of about SEK

2.7 billion.

Net assets abroad, SEK M

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000SEK M

549 746 1,973 3,267 3,513

1999 2000 2001 2002 2003Year

The Trelleborg Group has access toabout SEK 10 billion in the form ofcommitted medium- and long-termcredit facilities.

Committed credit facilities andmaturity structure, December 31, 1998


Group review

Environmental issues are the focus ofrapid development and change inmost countries. There is a clear trendfor these issues to affect an increasingnumber of sectors in society and toassume an increasingly internationalperspective.

Based on a long-term strategicperspective, the Trelleborg Groupmonitors external changes and adaptsoperations to both customer require-ments and the changed attitude insociety regarding environmentalissues.

The change processesThe following change processes areof special interest both to Trelleborgand to other companies:

A common perspective

As internationalization gathers pace,environmental problems demand in-creasingly global solutions. However,in order to avoid creating obstaclesto trade, international rules anddecisions are required in the area ofenvironmental policy.

Within Europe, the EU is becom-ing increasingly involved in environ-mental matters, thus causing the

influence of international environ-mental policy to diminish.

At the global level, agreementssuch as the Kyoto Protocol aimed atdecreasing emissions of “greenhousegases” can be expected to have amajor impact.

A key factor for Trelleborg is theharmonization between differentcountries of requirements relating torestrictions in the use of certainchemical products, emissions to airand water, installation of water-treat-ment and cleaning equipment and theimposition of emission limit values.

Through its involvement in vari-ous industry organizations and bod-ies of experts, Trelleborg participatesin activities aimed at developing acommon perspective.

Redistribution of power

In many countries, an increasingsectorization of environmental policycan be discerned. Power is beingredistributed in such a way thatenvironmental issues are no longercontrolled by central environmentalauthorities but are part of thedecision-making process in manydifferent sectors of society – at boththe central and locallevels.

Trelleborg is repre-sented in a number ofcountries in networkswith participantsfocusing on authori-ties, universities andother companies.

Depoliticization

Market forces areincreasingly takingcontrol, resulting in adepoliticization ofenvironmental policy.In many cases, thedriving forces in theenvironmental areaare now industrial

companies and various industryorganizations.

Depoliticization of the issues isfurthered by the fact that the politi-cal parties are more or less in agree-ment on environmental objectives,with the result that political clashesseldom materialize in this area.

Surveys conducted within theTrelleborg Group indicate increasinginterest in environmental issues onthe part of customers, suppliers andthe authorities.

Personal commitment

The role of the environmental organi-zations in sounding the alarm onsociety’s behalf is diminishing. Instead,these organizations are becoming moreinvolved in the normal, public deci-sion-making processes. While the sup-port they receive from their membersis declining, politicians and companiescooperate with them to an increasingextent. The decline in ordinary peo-ple’s direct interest in environmentalpolicy is paralleled by an increase intheir personal commitment.

As an example, people are becom-ing increasingly environmentallyaware as consumers, and the mass

Vice President, Environmental Affairs:Torbjörn Brorson

The links between environmental, ethicaland financial spheres

0

10

20

30

40

50

60

70

Decrease

SuppliersCustomers

AuthoritiesMass media & NGO

No change

Increase Significantincrease

5

3236

8

40

25

65

32

20

45

36

60

Change in intrest

% o

f T

relle

borg

pla

nts

%Increasing environmental awareness

Most of the Trelleborg units have noted an increas-ing interest in the Group’s environmental work.


The various components in the ISO 14000 environ-mental management system are included as a naturalpart of the Group’s ongoing environmental work.

Environmentalaffairs

media’s interest in environmentalissues is likely to remain at a highlevel for the foreseeable future.

During 1998, mass media interestin the environmental consequencesof the dam collapse at Boliden’s minein Spain was intense. The media alsofocused during the year on occupa-tional health and safety issues at theplant in Trelleborg, Sweden.

Sustainable development

The content of environmental policyhas changed focus during recentyears, from direct emissions fromplants to the spread of harmful sub-stances and ecocycle-related issues.This trend is continuing, andconcepts such as “sustainable devel-opment” and “factor 10” are nowgenerally accepted. These conceptsrepresent the underlying view thatpeople living now should not utilizenatural resources in such a mannerthat the living conditions of futuregenerations are jeopardized.

Society’s endeavors to reduce expo-sure to chemicals that are hazardousto the environment and to people’shealth, to reduce emissions to air andwater, to clean up soil contaminationand to ensure that producers assumemore extensive responsibility fortheir products, both during use andwhen they become waste, are issuesof considerable strategic interest toTrelleborg.

Reporting requirements

During recent years, demands haveincreased for companies to reportnot only on their financial situationbut also on their environmental workand their handling of their socialresponsibilities. An increasing numberof companies are becoming aware ofthe links that exist between theenvironmental, ethical and financialspheres. As a result, the demandsplaced on companies today often gobeyond the legal requirements, and it

is clear that companies and otherorganizations must also accept theirresponsibility and be good citizens.

During the operating year, Trelle-borg collected information relating tothe environmental situation at theGroup’s plants throughout the world.This information will be made avail-able both to employees and to thegeneral public during 1999. Some ofthe information is presented below.

Environmental managementwithin the Trelleborg Group

The Trelleborg Group’s environmen-tal management system is basedon the ISO 14001 inter-national standard. TheGroup has acertified LeadEnvironmentalAuditor in ac-cordance withthe require-ments stated inISO 14012.

The Group’sEnvironmentalPolicy and Environ-mental ManagementManual, presentedduring 1998, forms thebasis for environmental workat the various plants.

Each plant then prepares a locallybased environmental policy and devel-ops its environmental managementsystem in accordance with the require-ments set out in ISO 14001. Currentlyone plant has been certified in accord-ance with ISO 14001, namely theMjöndalen plant in Norway.

In order to achieve the objectivethat all Group plants should be certi-fied by the beginning of the twenty-first century, extensive work is inprogress to complete environmentalreviews, training and practical activi-ties at the various plants.

Environmental reviews, which inpractice involve detailed analyses of

the environmental situation and themanner in which environmentalmatters are organized, were conductedat some fifteen plants in Europe. Theassessments are performed in accord-ance with a standardized model andgenerate valuable information tosupport continued environmentalwork. During the period 1999–2000,environmental reviews will have beenconducted at all Group plants world-wide.

It normally takes 12–16 months tointroduce ISO 14001 at a plant, andin order to facilitate the process,

some twenty plants in Sweden,Belgium and the Netherlands partici-pated in seminar-based instructionprograms on ISO 14001 during theyear.

During 1999, similar seminars willbe held for project managers at theremaining plants in Europe and USA.Another ten units within the Trelle-borg Group are working independ-ently or with the help of externalconsultants to introduce environ-mental management systems.

In association with the work onthe environmental managementsystem, a number of training andinformational activities are beingconducted, such as the “Purchasingand the Environment” seminar,


which was arranged for some fortypurchasers and product managers atAhlsell.

Important eventsduring the year

As a result of the intense interestfocused on the environmental conse-quences of the dam accident in Spain,which involved the release of largequantities of metal-contaminatedsludge and water into nearby water-courses, Trelleborg, as Boliden’s mainowner, was affected by the activities ofthe mass media and the markets.

Through its environmental staffand corporate communicationsdepartment, Trelleborg has followedthe course of events and the cleanupwork. Trelleborg takes the view thatthe accident was significant andcould also have had devastating long-term consequences, but that Bolidenadopted a structured approach tomatters relating to the provision ofinformation to various interestedparties, cooperation with authoritiesand practical restoration work.

A wide-ranging study

Attention focused on a number ofenvironmental issues at the plant lo-cated in the community of Trelleborgin southern Sweden. A wide-rangingstudy of the environmental conse-quences of emissions from production(curing fumes, malodorous substancesand solvents) was submitted to theenvironmental authorities for theirdecision in connection with a permit-related issue.

Other events of interest within theGroup include the fire at TrelleborgAutomotive’s plant in Kalmar, Swe-den, which resulted in considerabledamage to buildings but only limitedenvironmental consequences causedby emissions of smoke and contami-nated water from fire-suppressionoperations. A fire also occurred at oneof the plants in Värnamo. The fire

destroyed a smokestack, resulting inlow-level emissions of curing fumesfrom production for a brief period.

New Environment Act

At a number of plants worldwide,work is under way to update orextend permits granted in accordancewith environmental legislation. Simi-lar activities were prioritized in Swedenwith a view to ensuring that applica-tions submitted prior to year-end1998 are handled in accordance withcurrent environmental legislation.

There are fears on the part of bothindustry and the authorities that theintroduction of Sweden’s new Envi-ronment Act could cause delays inthe formal handling of variouspermit-related issues during a transi-tional period.

Important aspectsA number of environmental issuesare of particular importance for theTrelleborg Group. In the Industrial

Group review

sector these include, for example,atmospheric emissions, soil contami-nation, handling of chemicals, wasteproducts, the environmental charac-teristics of products and hazards inthe work environment.

While interest within the Distri-bution sector focuses mainly ontransportation, customers andconsumers are increasingly drawingattention to issues relating to theenvironmental impact of packagingsand products. The environmentwithin and outside the major distri-bution and warehouse facilities alsocame under scrutiny in the course ofenvironmental reviews.

Detailed environmental data isshown in the Group EnvironmentalReport, which will be publishedduring the second half of 1999.

Soil-related issues

During recent years, soil and ground-water contamination has been discov-ered at a number of the Group’s

An extensive environmental study has been carried out among the Group unitslocated in Trelleborg.


Environmentalaffairs

plants. Cleanup work was concludedat the plants in Ridderkerk and Ede(the Netherlands) during the year.

Analyses and decontaminationwork are in progress at a number offacilities, for example in Trelleborg(Sweden), Hoogezand (the Nether-lands), Sandusky and Dawson (USA).

Soil-related issues were a majorfeature of interest in all new plantsacquired during 1998 and carefulexaminations have been conducted.

Emissions to air

Emissions to air occur primarilythrough solvents, vulcanizing gases,dust, carbon dioxide, nitrogen oxidesand odorous substances.

However, solvent emissions at manyof the Group’s plants have beensignificantly reduced through theinstallation of treatment plants andchanged processing methods.

At the plant in Trelleborg, solventemissions have been reduced byaround 400 tons annually during aten-year period to total about 40 tonsper year in 1998.

Emissions from the Bröderna Ed-strand plants have also been reduced,from 60 to 5 tons per year.

The use of chlorine-containingsolvents within the Group has alsobeen reduced.

Carbon dioxide emissions aremainly caused by the incineration offossil fuels in the Group’s powerplants and by the transport of rawmaterials, finished products andindividuals.

The gases released by the vulcan-ization processes contain a wide rangeof low-concentration substances.The composition and effect of suchsubstances on human beings and theenvironment has been studied.

Chemical-related issues

The production of rubber and otherpolymers necessitates the use of alarge number of chemicals. During

the production process, certain of thechemicals can have a harmful impacton both human beings and theenvironment.

The risks posed by the finishedproducts are considered very limited.By either completely eliminatingcertain chemicals, or using onlylimited amounts of themin closed systems, therisk to the workenvironment andsurrounding areais reduced.

Examples ofsubstances whoseuse within theGroup has beensignificantly reducedinclude highly aromatic(HA) oils, lead and leadcompounds, cadmium compounds,chlorine-containing solvents, zinccompounds and certain antioxidantsand accelerators.

However, a number of chemicalproducts with undesirable environ-mental properties, such as chlorinatedparaffins, phthalates and TMTDaccelerators, remain in use. Despiteintensive work in this area, no replace-ment products are currently available.

Work environmentTrelleborg takes extensive measuresto ensure that workplaces are as safeas possible. This is an importantmanagement task aimed at runningan efficient operation and safeguard-ing employees. A good and safe workenvironment is among the prerequi-sites for ensuring that employees feelsecure and are thus able to beactively committed to their work.

The accident rate at many of theGroup’s plants is generally very low,or normal, compared with the sectoras a whole.

During 1998, however, Sweden’sLabor Inspectorate noted a highincidence of work-related injuries in

The Group’s mostcommon goals are to:

• introduce ISO 14001

• reduce waste volumes

• reduce energy and waterconsumption

• reduce the number of work-related injuries

• reduce emissions to theatmosphere

certain departments at the Group’sTrelleborg unit.

Clearly defined areas of responsi-bility constitute another importantcomponent in efforts to secure agood and safe work environment.Through the ISO 14001 environ-

mental management system,which is gradually being

introduced through-out the Trelleborg

Group, all em-ployees will begiven an opportu-nity to think andact in an environ-mentally responsi-

ble manner, andfollow routines that

are designed to preventaccidents.

Training is another importantaspect of our work in the environ-mental area. Efforts in this area willbe intensified during 1999.

Environmental objectivesIn view of the Trelleborg Group’sdivergent operating areas, there is nopoint in establishing overall environ-mental objectives in addition to theundertakings contained in the Envi-ronmental Policy. However, bothshort-term and long-term environ-mental objectives are formulated atindividual plants within the frame-work of the environmental manage-ment system.


The overall goal of the TrelleborgGroup’s operations is to create thecompetitiveness needed to maintaina satisfactory level of profitabilitythrough an efficiently functioning,highly productive organization andhigh-quality products and services.Only by meeting these criteria canTrelleborg further develop its opera-tions for the lasting benefit of itsemployees, customers, suppliers andshareholders.

To achieve this goal, it is impor-tant to strive to develop the workingorganization. Such efforts to be basedon the specific conditions andrequirements that apply within theGroup’s various business segmentsand to be achieved within theframework of the corporate Humanresources policy, the aim of which isto improve Trelleborg’s competitive-ness through motivated personnel.

Leadership andSkills development

All managers in the Group must beable to implement changes anddevelop their personnel. Leadershipwill by characterized by considera-tion for personnel.

Responsibility and authority will beextended as far out into the organiza-tion as possible in order to ensure thatthe skills and commitment of eachemployee can be fully utilized.

Based on our corporate objectives,the most important responsibility forall managers is to formulate andcommunicate clear and easily under-stood goals for their individualoperations, while also monitoringprogress and supplying feedback.Management by objectives instead ofdetailed control and instructions willbe the motivating force behind theorganization.

This will be achieved throughannual performance appraisal andplanning discussions and regularfollow-up routines.

The Trelleborg Group’s expansionrequires a flexible and skilled organi-zation. Different working methods,higher levels of technology, expandedjob roles, organizational changes andother factors necessitate an intensiveprocess of change.

An important prerequisite for main-taining a favorable rate of growth andcompetitiveness in this situation is torecruit personnel with the appropriateprofessional skills and experience.

The Trelleborg Group strives tocombine a high level of professional

Industrial sector programsWithin Trelleborg’s industrial opera-tions, an international management-training program, the STORMExecutive Program, has been inprogress since spring 1995. The dualaim of the program, which consistsof three week-long seminars focusingon inter-cultural leadership, personaldevelopment and general businessskills alternating with project work,is to mold the managers of todayinto the leaders of tomorrow, and tocreate networks and common values

Group review

Human resources policyTrelleborg’s Human resources policyis based on trust and confidencebetween personnel and management.All employees must be aware of theobjectives established for their ownoperations and understand the corre-lation between these objectives andthe results achieved. The fundamentalfactors underlying the Group’sHuman resources policy are reflectedin a clearly defined and simpleorganization. Short decision-makingchannels make it possible to expandwork content and encourage indi-vidual responsibility for the achieve-ment of results.

Dynamics andcommunication

Differences – variation and contrast –create dynamics. The objective of theTrelleborg Group is to increase diver-sity among its employees in order tobetter utilize skills, regardless of sex,ethnic origin, religion, age or otherfactors.

The Trelleborg Group also strivesto attain an open and flexible envi-ronment, in which work is conductedin new forms and the line organiza-tion is supplemented by project workand various types of networks.

Professionalism and delegation of responsibilitybring fair rewards

expertise and far-reaching policy ofdelegation of responsibility andauthority with an equitable andattractive salary system.

A number of different trainingprograms, courses and seminars areconducted within the variousTrelleborg companies. This ongoingprocess to hone the skills of theGroup’s employees is essential if theGroup is to continue to competesuccessfully in its markets. The goalfor the Group as a whole is toprovide its workforce with trainingcorresponding to three days per yearfor each employee.

Latin America 3 %

Sweden 37 %

Other Nordic countries 17 %

Other European countries 25 %

North America13 %

Asia & Australia 5 %

Average number of employees, 1998

The average number of employees totals13,895 (13,525). At the year-end theGroup had 13,740 (13,443) employees. Ofthis figure, 5,174 (4,818) were employeedin Sweden and 8,566 (8,625) abroad.


in a fast-growing organization.During 1998, a fourth series was

arranged, with 20 participants. Sinceits inception, a total of 80 Groupemployees from 11 countries havetaken part in the STORM ExecutiveProgram.

In order to integrate new operationswith the Group’s existing operations, acomprehensive training program, “theNewcomer,” was started during 1998.

A “Young Managers Program” wasalso started during the year to iden-tify tomorrow’s managers and assurethat management needs will befulfilled during a strong expansionphase. Another objective is to ensurethat skilled employees are retainedand that career opportunities arecreated within the Group.

Participants in this program areyoung managers (maximum age 35),who are just commencing theircareers.

Commercialbusiness schools

Trelleborg’s Distribution sector alsoconducts an ambitious programdesigned specifically to improveemployee skills and achieve balancein the age structure.

Bröderna Edstrand has organizeda broadly based training program forits employees since the end of the1980s. Led by the president, mem-bers of management participate inthe courses and form a natural linkto the objectives and resourceswithin the company. In 1998, 155employees were involved in someform of training at the BE School.

The Ahlsell School is followingthe plans and objectives of the BESchool. During the four years inwhich the school has been active,some 1,570 personnel have beentrained in sales and quality controlwork. A special training program isalso provided for Ahlsell manage-ment personnel.

Humanresources

Trelleborg European Council

The Trelleborg European Council (TEC) was established in1996 to initiate a direct dialog between Trelleborg’s Euro-pean companies and the Group’s Executive Management.

Twenty-one representatives from seven European coun-tries in which the Group has production plants participatein the TEC.

The purpose of the TEC is to encourage all TrelleborgGroup personnel to become involved with and assumeresponsibility for continuous improvement work.

Incentive programDuring the autumn, employees inthe Trelleborg Group’s Swedish unitswere invited to purchase convertibledebentures in Trelleborg AB.

Senior executives in Sweden wereoffered the choice of subscribing forconvertibles or warrants, while seniormanagers in Group companies out-side Sweden were offered the sameopportunity subject to national lawsand local administrative conditions.

The convertible debentures offer

was oversubscribedby about 40 percent.In terms of warrants,44 percent of the totalnumber offered wassubscribed.

1998 1997

Average number of employees 13,895 13,525of which women, % 24 23

men, % 76 77Salaries and remuneration, SEK M 3,093 2,948

Operations in Sweden:Average number of employees 5,100 6,013

of which women, % 25 25men, % 75 75

Salaries and remuneration, SEK M 1,255 1,498Of which Parent Company:

Average number of employees 54 52of which women, % 46 40

men, % 54 60Salaries and remuneration, SEK M 36 32

Foreign operations:Number of countries 33 29Average number of employees 8,795 7,512

of which women, % 23 21men, % 77 79

Salaries and remuneration, SEK M 1,838 1,450


Group review

Presentation of theIndustrial sector

Major events, 1998• Formation of Trelleborg

Wheel Systems S.p.A., ajoint venture with Italy’sPirelli.

• Efficient coordination ofproduction on Sri Lanka.

• Development of newtechnology.

The futureTrelleborg Wheel Systems willcontinue to focus on profitableniche areas for special tiresand will strive to attain a lead-ing position in such markets.

Net sales, SEK M: 2,168

Share of Group sales,%: 8.7

No. of employees onDecember 31: 2,181



The rapidly growing businessarea Trelleborg Automotivebrings together the Group’sdevelopment, production andmarketing of products andservices to the world’s auto-motive industry. The productrange mainly consists of anti-vibration systems, acousticinsulation materials, enginehose and laminated products.

Strength factors

• Global R&D.

• Quality-certified production.

• Customer order-controlledproduction for Europe andNorth America.

Major events, 1998

• Office opened in Frankfurt,hub of European automotiveindustry.

• More units certified accord-ing to ISO 9000, ISO 14000and QS9000.

• Investment in new R&Dcenters.

The future

Continued investment in tech-nological competence andconsolidation of productionoperations. Annual organicgrowth goal of 10 percentestablished.




With a global market share ofmore than 20 percent, Trelle-borg Wheel Systems is theworld’s leading manufacturerof solid tires. In addition to itsproducts and other services,the focus is currently onincreasing the service offeredto both distributors andcustomers by delivering com-plete wheel systems.

Strength factors

• Global manufacturer, witha broad range of tires forforestry and agriculturalmachines, trucks and othermaterials-handling vehicles.

• Continued development ofTWIN concept, low-pres-sure tires with significantenvironmental benefits.

• Supplier of complete wheelsystems, tires mounted onwheel rims.



Sector President: Hans Porat

SEK M

0

500

1,000

1,500

2,000

1,486 1,822 1,674 1,800 1,899 1,954 1,899 1,938 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

5,0725,673

6,2716,782

7,195 7,3277,552 7,690

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Quarter, SEK M Rolling 12-months, SEK M

SEK M

0

50

100

150

200

90 134 111 111 128 157 146 127 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

308360

406446

448 507542 558

0

150

300

450

600


Major events, 1998

• Extensive productionrelocation and personnelreduction implemented.

• New couplings work shopestablished in Mettman.

• Acquisition of Expandite.

The futureGrowth in the industrial rub-ber segment normally followsgeneral economic growthtrends. Extensive efficiency-enhancement programs havebeen initiated within severalbusiness area units.




After having the Nordic regionas its main market, TrelleborgBuilding Systems has rapidlyestablished itself as Europe’sleading producer of sealingprofiles for industrial andconsumer applications. Thebusiness area is also a leadingsupplier of bitumen based seal-ing products and of granulesfor the cable industries.

Strength factors

• European market leaderin niche segments.

• Strong design andproduct development.

• Pan-Europeanestablishment.

Major events, 1998

• Acquisition of Germany’sleading producer of ex-truded sealing strips, ETM.

• Acquisition of Trebolit,Swedish producer ofwaterproofing materials.

• Acquisition of two distribu-tors of waterproofingmaterials, Finland’s Joule andGermany’s DBV.

The futureThe business area’s stronglyestablished presence in itsmain markets is creating goodopportunities for continuedfavorable growth.



No. of employees onDecember 31: 986

Net sales, Industrial sector Operating profit, Industrial sector

Trelleborg Enginereed Systems

Trelleborg Engineered Systemsdevelops, manufactures, marketsand distributes a range ofindustrial rubber products,such as industrial hose, rubbersheeting and expansion jointsand other industrial supplyproducts to customersthroughout the world.The business area also includesTrelleborg Protective Products,which develops, manufacturesand markets products designedto protect people working inhazardous environments.

Strength factors

• Leading global supplier ofindustrial rubber.

• Market leader in industrialhose systems in Europe andNorth America.

• Substantial product develop-ment resources.


Group review

Presentation of theDistribution sector

Bröderna Edstrand

Bröderna Edstrand is a leadingand completely independentdistributor of steel products.The business area focuses onproviding a high level of serv-ice through its fast, scheduled-traffic delivery system, a broadin-depth product range andthe resources to engage inpretreatment and the refiningof the products into assembly-ready components forcustomers.

Strength factors

• Reliability, good supplier andcustomer relations, know-how and systems to satisfythe steel, aluminum andservice requirements ofcustomers in the engineeringand building sectors.

• Extensive network of regionalwarehouses, scheduled-traffic delivery systems, salesoffices and local retailers inthe Nordic and Baltic areas.

• Well-established relationswith Europe’s leading steelmills.

Major events, 1998

• During 1998, BrödernaEdstrand started companies,warehousing and salesoffices in Poland and Latviaand a representational officein Lithuania.

• Cooperation establishedwith Starckjohann Steel.

• New computer systemintroduced.

The future

Demand for additionallyrefined materials is expectedto increase.




Ahlsell

Ahlsell offers its Nordic andBaltic region customers in theinstallation, industrial, munici-pal and retail sectors a func-tionally correct range of heat-ing and plumbing, electrical,refrigeration and tool supplies.

Strength factors

• Combination of finelymeshed network of centrallylocated professional marts,a central warehouse andefficient use of IT assurecustomers of fast andreliable deliveries.

• High-quality range fromprominent suppliers.

• Leading player in the Swed-ish heating and plumbing,electrical and refrigerationsupplies markets.

Major events, 1998

• Integration of SkoogsElektriska operations.

• Operations established inNorway.

• Acquisition of Swedish heat-ing and plumbing wholesaler,Värmekällan, and Norwegianelectrical supplies whole-saler, Elektro-Energi.

The future

The European wholesaling seg-ment is becoming increasinglyinternational. This is clearlyillustrated by the ongoingrestructuring of the heatingand plumbing supplies market.Ahlsell intends to take anactive part in this process.





Sector President: Fredrik Arp

Starckjohann

SEK M

0

1,000

2,000

3,000

4,000

1,754 2,042 2,050 2,533 3,370 3,741 3,777 3,904 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

7,238 7,392

7,6858,379

9,985

11,694

13,72114,792

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


SEK M

0

50

100

150

200

49 91 104 115 77 145 172 134 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

270

296332

359387

441

509 528

0

150

300

450

600


Starckjohann is a Finnish trad-ing group with operations or-ganized in four product areas:building materials, commercialsteel, heating and plumbingsupplies and automobile sales.

Strength factors

• Service centers for pretreat-ment of materials in accord-ance with customer require-ments.

• Own chain of outlets forsale of heating and plumbingsupplies.

• Extensive network ofbuilding materials outlets.

Major events, 1998

• Streamlining continued.Laakeripalvelu, a ball-bearingand transmission systemswholesaler, was divested.

Net sales, Distribution sector Operating profit, Distribution sector

Reynolds

Reynolds is the leading pro-ducer-independent distributorof non-ferrous products toprimarily the French, Britishand German markets.

Strength factors• Service centers for pretreat-

ment of materials to meetcustomer specifications.

• Producer-independentdistributor.

• Wide range within definedproduct groups.

Major events, 1998• Acquisition of French metals

wholesaler, Testas.

• Focus on maintaining specificproduct types in stock, forexample various fittings forrefrigeration equipment.

• Increased focus on furtherprocessing to add value tomaterials.

The future

Continued focus on supplyingvalue-added materials tocustomer specifications andon supplementing range withnew products.




• The Starkki buildings materi-als chain opened anotherstore in the Helsinki area.

The futureStarckjohann’s operations willbe integrated increasingly withthe Trelleborg Group’s otherdistribution operations. Thisis exemplified by the steelcenter for the pretreatmentof steel sheet currently underconstruction in Lahti. Produc-tion from this center will beintegrated with BrödernaEdstrand’s operations. Coop-eration within the purchasingarea will also be expanded.




22



Trelleborg Automotive supplies leadingglobal truck producers.

High growth; majortechnology investments

Focus on technological skillsTrelleborg Automotive functions as ahigh-tech cooperation partner tocompanies in the global automotiveindustry. The business area develops,manufactures and markets polymer-based products for antivibration,sound-insulation and vehicle compo-nent applications in cars, heavyvehicles and trains.

To improve the service offered tothe various customer segments in1998, the business area invested inand focused on the technical centersbuilt up in Europe and NorthAmerica and substantially strength-ened its key customer/customersupport organization.

Business trendThe business area’s earnings contin-ued to develop favorably. Operatingprofit rose from SEK 178 M in 1997to SEK 222 M in 1998.

Organic growth for comparableunits totaled about 50 percent in1998 and was primarily attributableto the business area’s investments inadditional technology and improvedcustomer service.

The full effect of the acquisition ofthe American company, Yale SouthHaven Inc, and the Brazilian company,Projectos e Aplicações de Vibrotécnicae Vedação Ltda, were felt during 1998.

A fire in the business area’s plant inKalmar and a labor dispute atGeneral Motors in the US had anadverse effect on earnings.

AcquisitionsTrelleborg Automotive acquired 25percent of the shares in the Swedishengineering consulting firm, Inge-mansson Automotive AB.

Through this acquisition, TrelleborgAutomotive gains access to uniquespearhead competence within theacoustic insulation and antivibrationareas with special efforts on noicevibration and harshness (NVH).

MarketThe principal market areas within theautomotive sector are the Americas,Asia, Europe and emerging markets,such as China and India.

Vehicle production is still stable ata high level within the business area’sUS, German and Scandinavianmarkets. The economic crisis had asubstantial effect on vehicle sales inAsia and Brazil during the year, butonly a marginal effect on TrelleborgAutomotive’s operations.

CustomersThe business area’s customer baseincludes some of the world’s largestvehicle manufacturers, such asGeneral Motors, Daimler-Chrysler,

Business Area President: George Caplea

Key figures / Trelleborg Automotive

1998 1997


Share of Group sales, % 8.9 8.2

Operating profit, SEK M 222 178

Operating margin, % 9.4 9.2

Average capital employed in operations, SEK M 1,325 1,046

Return on capital employed in operations, % 16.7 16.9

Investments in fixed assets, SEK M 149 110

Number of employees, December 31 2,186 2,025

Production in USA, Mexico, Brazil, Germany, Spain,Sweden, Norway, Great Britain and China.

The structural changes within theautomotive industry are continuing.This means that vehicle manufactur-ers are outsourcing certain areas ofproduction and research and devel-opment to subcontractors and arealso trying to reduce the number ofsuppliers and global platform projects.As a result, purchasing is conductedthroughout the world.

Within a few years, the structureof the antivibration systems, sealingsystems and hose systems segmentswill be such that five to seven com-panies will cover 75 percent of themarket.

In turn, suppliers will be seekingcooperation and partnership agree-ments in order

to offer systems solutions that willmeet automotive manufacturers’annual cost-savings demands of 1–5percent.



Ford, Volkswagen, Audi, Skoda,Volvo and Scania, as well as trainmanufacturers, brake systems pro-ducers and engineering companies.

CompetitorsThe business area’s main competitorsare BTR, Freudenberg, Cooper Tire& Rubber Co, Hutchinsson andConti-Tech.

OrganizationDuring the year, the business areawas reorganized with the aim ofstreamlining operations to focusprimarily on the automotive industry.

As of January 1, 1999, TrelleborgAutomotive consists of three businessunits, formerly divisions:

• Automotive Americas, which de-velops, manufactures and marketsproducts designed to resolve struc-tural noise and vibration problemsand provide greater comfort andincreased safety in vehicles.

• Automotive Europe, which devel-ops, manufactures and markets abroad range of antivibration com-ponents, molded products, profilesand hoses.

• Laminates, which is a leader in thedevelopment of existing and newmaterials and methods designed to

eliminate braking and structuralnoise in vehicles. This businessunit also manufactures specialproducts, such as rubber flooring,road tape and Fillite filling material.

The business area’s head office islocated in South Haven, Michigan.

ProductionDuring the year, the business areanoted a favorable level of work onhand, with a high utilization rate atits plants.

Currently, the number of plants inSweden are being decreased.

Trelleborg Automotive will con-tinue to focus on delivery precision,quality systems, constant improve-ments and cost reductions, with theobjective of minimizing the numberof faults per item to zero parts permillion.

During the year the business area’splants in Kalmar, Horda and Sjöbo(Sweden), Neumünster (Germany),Burgos (Spain) and Mjöndalen(Norway) were certified in accord-ance with QS 9000.

BUSINESS CONCEPT

Trelleborg Automotiveshall be one of the leadingglobal automotive suppli-ers within at least twoof the following threesegments: AntivibrationSystems, Sealing systemsand Hose systems.

SEK M

0

10

20

30

40

50

60

20 54 43 61 58 57 47 61 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

0

40

80

120

160

200

240

218

64

105

222 222215

134

178


SEK M


0

100

200

300

400

500

600

319 474 432 483 565 538 530 586 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

9421,218

1,465

1,708

1,9542,018

2,219

0

400

800

1,200

1,600

2,000

2,400

2,116

Net sales Operating profit

Detail of engine mount.

24



The units in the United States andMexico were certified earlier.

The unit in Mjöndalen receivedISO 14000 environmental certifica-tion during the year and certificationwork will gradually be implementedwithin the business area’s other units.

New productsDuring autumn 1998, the businessarea signed new contracts in the USfor products for 1999 modelsworth a total of approxi-mately SEK 200 M.These included suchproducts as linksassemblies forChrysler’s WT plat-form, lateral links forChrysler’s PL platform and tensionstruts.

In the Scandinavian market, eightproduction lines were installed dur-ing the year and new employees were

hired for the production of crankcaseventilation equipment for Volvopassenger cars.

In Germany, production was startedup of front-strut assembly productsfor the Volkswagen T5 and the bush-ings for the Mercedes Smart Car.

New sales center were opened inFrankfurt – the hub of the Europeanvehicle development market. A sales

office was also openedin Melbourne, Australia.

Research and devel-opment has beenassigned high prioritywithin the business area.Through its focus onproduct developmentand global production,

the business area strengthens its posi-tion as a supplier of solutions, ratherthan of merely components.

To meet the demands of the auto-motive industry, Trelleborg Automo-

Europe 51%The Americas

41%

Asia &Australia2%

Other 6%

Net sales by geographic market

tive is one of the principals behind anew research and developmentcenter in Trelleborg, in which morethan SEK 120 M will be invested.

In addition, a sum correspondingto SEK 15 M is being invested in adevelopment center in South Havenin USA.

The R&D center in Kalmar,Sweden, which was destroyed by fire

The business area develops, manufactures and markets polymer-based products, such as sound insulation materials,antivibration systems and other automotive components for heavy trucks.

Today, Trelleborg Automotive has salesin more than 50 countries.

Strut module.



More R&D centers in Europe and North America

in June 1998, was reopened on Janu-ary 18, 1999.

FutureThe business area will continue tofocus on technological skills and theconsolidation of its plants.

Its goal is to achieve an annualorganic growth of 10 percent and toparticipate actively in the currentrestructuring of the sector.

product development facilities, inGermany (Frankfurt), USA (Detroit)and Sweden (Trelleborg). Research anddevelopment work has been concen-trated in the business area’s technicalcenters in Sweden (Trelleborg andKalmar) and USA (South Haven),with production situated close tocustomer manufacturing facilities.

FrankfurtThe sales office in Frankfurt was openedin 1998. Customer account managersand engineers from Trelleborg’s opera-tions in the US and Europe are nowworking in the Frankfurt office todevelop products and system solutionsfor both European and Americancustomers.

Cooperation between TrelleborgAutomotive and customers has resultedin a system to insulate crankcase venti-lation for Volvo and a wheel suspen-sion module for Chrysler.

“The most important advantage ofthe Frankfurt office is that we are nowpositioned in the European automotiveindustry’s development center,” saysStaffan Bern, Marketing manager of

Trelleborg Automotive Europe.“Personnel from all units of Trelle-

borg Automotive are now concen-trated in Frankfurt, which will enableus to coordinate operations andshorten lead-times.”

Automotive manufacturing compa-nies comprise a group with extremelyhigh demands on delivery times andquality. Suppliers of the future willhave to meet the industry’s stringentdemands, maintain a global marketpresence, participate actively in re-search and development work andmake the transition from componentsmanufacturers to systems suppliers.

European giantGermany is a gigantic market in thepolymer and automotive industries.It is Europe’s largest manufacturer ofpolymer-based products, and Germanautomotive manufacturers accountfor more than 30 percent of all pas-senger cars produced in Europe.

S

The research and development center in Kalmar was reopened on January 18,1999 following the fire in June 1998.

Structural change in the world’s auto-motive industry continued in 1998,with major mergers such as Daimler/Chrysler, Paccar/DAF and, early in1999, Ford/Volvo. Increased consoli-dation and more intensive coopera-tion is expected to continue in 1999.

The trend is placing strongerdemands on suppliers. To meet newmarket conditions, Trelleborg Auto-motive has introduced a new struc-ture and strengthened cooperationbetween units in Europe and NorthAmerica.

Fewer manufacturersAnalysts who monitor the world’sautomotive market believe the rate ofmergers will continue, projecting thattoday’s 18 major manufacturers willbe reduced to 6–8 by the year 2010.

“We have to adapt to this trend,”says Terje Steingrimsen, Business unitmanager of Trelleborg AutomotiveEurope. “We must monitor custom-ers more closely and be prepared fornew structures and strong expansion.”

One approach is to establish salescenters in closer proximity to customer

26



World’s largest producerof solid tires

World agriculture was affected by anumber of factors during the year; inparticular grain, soybeans, sugar,maize and hog production declined,while the lowest price levels recordedduring the past 10–20 years weredown by around 20–30 percentcompared with the preceding year.

In addition, demand for farm andforest machinery de-

creased as a resultof the economiccrises in Asiaand the formerSoviet Union.

Taken as awhole, thesefactors led to areduced demandfor wheel prod-

ucts among ma-chine manufacturers.

Despite the toughconditions, the business area’s earn-ings were significantly better thanduring 1997.

Largest in solid tiresTrelleborg Wheel Systems is theworld’s largest producer of solid tires,with a global market share of morethan 20 percent.

As a result of its majority holdingin Trelleborg Wheel System S.p.A.and the continuing development of

products within its various nicheareas, Trelleborg’s market share is alsoincreasing in such segments as otherindustrial tires and farm and forestrymachine tires.

Through the business area’s rimproducers in Hadsten (Denmark)and Sävsjö (Sweden), its variousbusiness units can provide increasedservice by supplying complete wheelsto meet specific customer specifica-tions directly to the location wherethe wheels are needed.

Business trendNet sales rose from SEK 1,988 M in1997 to SEK 2,168 M in 1998. Earn-ings during the year totaled SEK 127M (97).

During the second half of 1998,demand from the leading manufac-turers of farm machinery declined.

Sales of solid tires to customers inthe materials-handling industryremained favorable throughout theyear.

The integration of acquired com-pany, Vorwerk, was completed andall production was relocated fromWuppertal, Germany, to Sri Lanka.

AcquisitionsDuring the autumn, Trelleborg WheelSystems entered into a joint venture

with Italian tire and cable producerPirelli.

The cooperation agreement relatesto Pirelli’s production and sale ofagricultural tires at its unit in Tivoli,just outside Rome and sales offices inmajor European markets.

Trelleborg owns 60 percent of thenewly established joint venture,Trelleborg Wheel Systems S.p.A.,and Pirelli the remaining 40 percent.

MarketTrelleborg Wheel Systems aim is tosecure a market leadership positionwith its tires and wheel systemssolutions in a number of selectedniche segments. In addition to focus-ing on products, the business area isalso striving to increase the serviceoffered to distributors and customers.

During the year, demand fromleading manufacturers of forklifttrucks remained good. In contrast,demand from leading manufacturersof farm machines declined.

CustomersAmong the business area’s customers,there is a broad spectrum of specialvehicle producers. Notable farmmachine customers include Claas,New Holland, Kverneland, JohnDeere and others.

Business Area President: Anders Pettersson

Key figures / Trelleborg Wheel Systems

1998 1997









Production in Belgium, Denmark, the Netherlands,Great Britain, Sri Lanka, Sweden, Spain and USA.



Customers within the forest machines,trucks, materials handling vehicles,harbor and civil aviation authoritiesand equipment suppliers areasinclude Nacco, Toyota, Still/Linde,Delta Airlines, the Port of SingaporeAuthority and airports in Frankfurtand Düsseldorf.

CompetitorsThe business area’s competitorsinclude such major tire producers asMichelin, Goodyear and Kléber, etc.,as well as Solideal, Alliance (Israel),Watts (Great Britain) and rim pro-ducer Titan (USA).

In certain segments, competitionincludes low-price manufacturersfrom Eastern Europe and Asia.

OrganizationThe business area consists of fourbusiness units, formerly divisions:• Forest & Farm Tires develops,

manufactures and markets a widerange of tires and rims for forestand farm machinery.

• Industrial Tires develops, manu-factures and markets solid tiresfor forklift trucks and othermaterials-handling equipment.

• Agricultural Radial Tires devel-ops, manufactures and marketsradial tires for farm tractors.

BUSINESS CONCEPT

Trelleborg Wheel Systemsshall develop, manufactureand market completewheel systems for forestand agricultural machinesand for trucks and othermaterials-handling equip-ment.

• Technical Materials. This businessunit develops and produces poly-mer compounds and products forareas of application in which strictdemands are placed on the techni-cal and chemical resistance proper-ties of the products.

Business area management is locatedin Trelleborg but two unit managersare based outside Sweden.

ProductionWork to integrate the business area’smanufacturing units is continuing.

The programs to certify the manu-facturing units in accordance withISO 9001 and ISO 14000 are alsocontinuing.

During 1998, the plants in Sävsjöand Trelleborg (Sweden) and inBelgium were certified. During 1999,the Hadsten plant in Denmark willalso receive certification.

New productsDuring recent years, Trelleborg hasfocused on establishing itself as aleader in the development of tires tomeet exacting customer require-ments in a number of well-definedsectors.

Low-pressure cross-ply tire tech-nology has been made popular byTrelleborg’s TWIN tire concept.Vehicles fitted with low ground-pressure tires cause significantly less

SEK M

0

100

200

300

400

500

600

474 509 481 524 572 550 534 512 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

1,694 1,7071,783

1,9882,086 2,187

2,1802,168

0

400

800

1,200

1,600

2,000

2,400


SEK M

0

10

20

30

40

50

24 29 22 22 40 32 34 21 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

0

30

60

90

120

150

116

79 7584

113

128 127

97



28



damage to soil and young cropscompared with traditional tires.

The TWIN concept hasbeen developed andadapted for a numberof applications includ-ing use as an industrialtire and meeting suchspecial demands aswear resistance.The business area willcontinue its develop-ment of the TWINconcept for new areas ofapplication, including variousgarden machines.

Pirelli’s radial tiresThe joint venture with Pirelliprovides Trelleborg Wheel Systemswith access to radial tire technology,which complements the businessarea’s current position as one of theleading players in low-pressurecross-ply tire technology.

Today, the radial tire is used on

virtually all trucks and passenger cars.But the technology is also being used

to an increasing extentfor tires for vehiclesused within thefarming and for-estry sectors. One of thereasons for this isthe growing needfor more cost-efficient operationswithin these sec-

tors, which is result-ing in the machines

having to drive greater distances onhard road surfaces between farmlandassignments. This places greaterdemands on the tire’s wear resistance,which in combination with drivercomfort and higher speeds meansthat market demand for tires pro-duced with radial technology willincrease in future.

The Industrial Tires business unithas increased its product develop-

Other 2%Asia & Australia 3%

Latin America 2%

NorthAmerica 22%

Other Europeancountries 47%

Other Nordiccountries 18%

Sweden 6%


ment activities and during the yearpresented a number of new systemsin which Trelleborg wheels play aprominent part. One example relatesto the special wheels produced for aleading European manufacturer ofelevators in a system designed to

The joint venture with Pirelli strength-ens Trelleborg Wheel Systems in thekey European market for agriculturalmachine tires.

The Forest & Farm Tires business unit develops, manufactures and markets abroad range of complete wheel systems for forest and farm machines.


T


Tires from Tivoli

Trelleborg and Pirelli initiated a pro-gram of cooperation in 1998 focusedon farm machinery tires. In thespring, Trelleborg Wheel Systemsreached an agreement with Pirelli’sagricultural tire division wherebyTrelleborg will distribute Pirelli tiresin Sweden.

“Within the next five years, ourobjective is to become a leader in oursegments: farm and forest and indus-trial tires,” says Anders Pettersson,President of the business area.

Strong trademarkPirelli is one of the strongest namesamong global tire producers. Withother leading companies such asGoodyear, Michelin, Bridgestone andYokohama, Pirelli competes in theglobally structured market for passen-ger car tires.

Farm machinery tires account forabout 4 percent of Pirelli’s total sales.According to the company, Pirelli’saverage share in European markets is17 percent. In Sweden, the corre-sponding market share in 1997 wasonly 5 percent. The company hopesto increase its Swedish market sharethrough cooperation with Trelleborg.

The agreement is highly importantfor Trelleborg’s strategic businesspurposes. In addition to access to theItalian company’s broad portfolio,both in terms of products and dimen-sions, Trelleborg will also derive ben-efits from Pirelli’s strong brand name.

Tires from Tivoli“Sales increased sharply during 1998in our domestic markets in NorthAmerica, Europe and Scandinavia,”says Anders Pettersson.

Cooperation was intensified inNovember when Trelleborg and Pirelliestablished Trelleborg Wheel SystemsS.p.A., a joint venture company thatincludes Pirelli’s former Agri Tyresbusiness unit, with production inTivoli and sales offices in all majorEuropean markets.

Trelleborg owns 60 percent of thenew company, and Pirelli Tyres ownsthe remaining 40 percent.

Complete product range“Pirelli’s radial tires for farm machinerysupplement Trelleborg’s own broadportfolio,“ says Anders Pettersson.“Production and sales will be inte-grated.”

“We are now able to offer a com-plete product range to leading tractormanufacturing companies such asNew Holland, John Deere, Fendt,Case and SAME,” he continues.

Asia 21 %

North- andSouthamerica41 %

Africa and other 8 %

Europe 30 %

Global market for agriculturalmachines by region.

accommodate elevators in confinedand inaccessible areas.

Technical Materials develops andproduces various polymer compoundsfor products used in environmentswhere major demands are made onthe products’ reliability. For example,materials for battery containers, pipeseals and silicon-rubber teats arecurrently being tested.

The focus on complete systems iscontinuing. The various require-ments of the different customersmean that the business unit concen-trates on such properties as heat andchemical resistance, in combinationwith environmental compatibility.

Trelleborg Wheel Systems is con-tributing substantial resources to thenew Technical Center in Trelleborg,which will be completed during 1999.

FutureTrelleborg Wheel Systems continuesto focus on profitable niches forspecial tires and strives for a marketleadership position in these segments.

Through the establishment ofTrelleborg Wheel Systems S.p.A.,Trelleborg can offer a complete rangeof wheels while continuing to de-velop the TWIN and TM concepts,as well as completely new products,based on this Trelleborg-Pirelli jointventure.

Some uncertainty exists, however,in terms of economic developmentsin Asia, the former Soviet Union andSouth America, particularly theeconomic trend in Brazil.

30



Leading global supplier of industrialrubber products

To a large extent, demand for indus-trial rubber products follows the trendof industrial production in eachcountry. A general decline was noted,however, towards the end of 1998,particularly within more project-related areas, such as offshore, the oilindustry and infrastructure.

Global partnerTrelleborg Engineered Systems devel-ops, designs, manufactures and

distributesa range ofindustrialrubberproducts,such asindustrialhose, rub-

ber sheeting and expansion jointsand other industrial supplies.Machine rolls used in the paper andpulp industry are also coated withsophisticated composite materialsfrom this business area.

Trelleborg Engineered Systems alsosupplies special products to infra-structure projects, such as expansionjoints, special hoses for dredgingoperations and oil industry applica-tions. It also supplies fire- and corro-sion-proof linings to the world’soffshore industry, and protectiveclothing and other products to fire,

rescue and defense services for assur-ing personal safety in hazardousenvironments.

Business trendsNet sales amounted to SEK 2,571 M,up from SEK 2,529 M in 1997.

Operating profit improved toSEK 119 M (106), up by 12 percent.

All of the business units reportedimproved earnings, with the excep-tion of Canada, which continued toshow unsatisfactory profitability.Trelleborg Technical Laminates andTrelleborg Protective Productsshowed positive earnings trends.

Demand for most of the businessarea’s products was favorable duringthe first six months of 1998 butdeclined towards the end of the year.

Extensive production relocationand personnel cuts were implementedwithin Trelleborg Industrial Hoseand Trelleborg Technical Laminatesduring the year. The production ofrubber sheeting in France was termi-nated and operations were trans-ferred in their entirety to the Trelle-borg Ibercaucho unit in Spain.Extensive personnel cuts were alsoimplemented in France.

Operations in SRG Bevco, whichwas acquired in January 1998, werefully integrated with Goodall USA’soperations during the year.

Towards the end of 1998, a couplingscenter serving the German marketwas opened in Mettmann, outsideDüsseldforf. Complete hose systemsare delivered from the center toprimarily the chemical industry.

The business area’s Spanish opera-tion broadened its range of productswith the addition of expandingbridge joints marketed under theExpandite name.

MarketThe first half of 1998 was character-ized by strong demand, but thisdeclined during the second half.The overcapacity of industrial rubberproducts (industrial hose, rubbersheeting/rubber mats, etc.) is trouble-some and is accompanied, inevitably,by price competition.

Demand from within the businessarea’s important pulp, mining and oilindustry segments deteriorated andremains particularly weak in Canada.To date, the downturns in Asia andSouth America have only had amarginal effect on the business area.Demand from offshore and infra-structure customers was good during1998, but the project portfoliodecreased towards the end of the year.

The market for protective prod-ucts developed favorably during1998, particularly in North America.During the year, a substantial tent

Business Area President: Georg Brunstam

Key figures / Trelleborg Engineered Systems

1998 1997









Production in France, Canada, Mexico, the Netherlands,Norway, Spain, Great Britain, Sweden and USA.Distribution organization for industrial supply products in North America.

Food/diary hoses.



BUSINESS CONCEPT

• Trelleborg Engineered Systems shall engage inthe cost-effective development, manufacturing,marketing and distribution of industrial rubberproducts, such as industrial hose systems,rubber sheeting and expansion joints andother industrial supplies to customersthroughout the world.

• The business area shall also develop, manufac-ture and market polymer-based niche productswith a high degree of engineering content toleading customers within the offshore, infra-structure and pulp & paper industries.

• Trelleborg Protective Products shall develop,manufacture and market protective productsdesigned to protect people in hazardousenvironments.

SEK M

0

100

200

300

400

500

600

700

619 681 581 648 681 672 588 630 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

2,2412,462

2,635 2,529 2,591 2,582 2,589 2,571

0

400

800

1,200

1,600

2,000

2,400

2,800


SEK M

0

10

20

30

40

50

33 45 13 15 31 36 27 25 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

116106

105109

0,0

25,0

50,0

75,0

100,0

125,0

79

111

96

119



order was delivered to the RoyalAustralian Air Force.

CustomersThe business area has customersthroughout the world, with the em-phasis on Western Europe and NorthAmerica. Sales to Asia are limitedand the direct effect of the Asiancrisis is therefore negligible.

Customers are mainly foundwithin the manufacturing industriesand among suppliers to such indus-tries. Major sectors include theoffshore, defense, paper and pulpindustries.

Three fourths of the TrelleborgProtective Products’ range of chemi-cal-resistant clothing, diving suitsand tents are sold to customerswithin the fire, rescue and defenseservices, all of which have highquality and safety demands.

CompetitorsTrelleborg is the European marketleader in rubber sheeting and rubbermats and its share of the Central andNorth American markets is increasing.

Trelleborg also holds a marketleadership position in the industrialhose segment in both Europe andNorth America.

The market is characterized byovercapacity and is in need of

restructuring. The restructuringprocess has been commenced butprogress is slow. Trelleborg intendsto take an active part in the process,however.

The largest competitors are IVG,ITR and Alfagomma (Italy),Semperit (Austria), Dunlop (GreatBritain), Hutchinson (France),Goodyear (USA) and Continentaland Phoenix (Germany).

In the advanced engineered andprotective products segments, themain competitors include Vredestein(the Netherlands), Dräger(Germany) and Scapa (Austria).

OrganizationTrelleborg Engineered Systems con-sists of a large number of companiesand product areas organized in sixbusiness units (formerly divisions).

• Trelleborg Industrial Hose devel-ops, manufactures, markets anddistributes a wide range of indus-trial hose, couplings and otherindustrial supply products.

32



• Trelleborg Protective Productsdevelops, manufactures andmarkets personal protective equip-ment, such as chemical- and fire-resistant clothing and diving suitsfor professional users, plus tentsand special products for medicalcare applications.

• Trelleborg Technical Laminatesdevelops, manufactures and mar-kets laminated polymer products,both bulk and niche products.

• Goodall is North America’s lead-ing distributor of industrial hoseand other industrial supplyproducts.

• Trelleborg Infrastructure Productsdevelops, manufactures andmarkets industrial rubber productsfor various infrastructure projects,for example harbors, roads andbridges.

• Trelleborg Engineered Productsdevelops, manufactures and mar-kets a range of products, all with asubstantial high-tech content, foruse in the offshore, electronics,and paper and pulp industries.

All of the business units are responsi-ble for the development, manufac-turing, marketing and sale of theirown products in a decentralizedorganization.

Business area management is basedin Trelleborg, Sweden, four businessunit managements are based outsideSweden.

ProductionProduction volumes remained stableduring the year. Rubber sheetingproduction in France was terminatedand relocated to Spain, where exten-sive production increases and invest-ments were made.

A comprehensive investment pro-gram was implemented within thebusiness area units in the Nether-

lands, Trelleborg Velp and TrelleborgBakker, to increase capacity andreduce the manufacturing cost ofinfrastructure products.

Investments are also under waywithin Trelleborg Industrial Hose,with the aim of reducing costs.

Investments were made in theMexican units to meet increasingdemand.

During the year, industrial rolloperations relocated from Örebro toTrelleborg.

An inventory-reduction projectwas successfully implemented in thebusiness area’s North Americanoperations, which resulted in lowerinventory costs.

All of the manufacturing unitswithin the business area have beenthird-party certified in accordancewith ISO 9001 or 9002. Work toobtain ISO 14000 environmentalcertification is in progress andTrelleborg Viking in Mjöndalen inNorway has already received third-party ISO 14001 certification.

New productsDuring the year, a large number ofnew products were introduced in themarket, including new, improvedindustrial hose for the food andmaterials-handling industries.

The business area also launchednew composite coatings for thesupercalendering rolls used in the

TrellTent’s operating tents are not only easy to keep clean and sterile, but are alsolight and easy to pack and carry. Patients can be given advanced medical carewithin less than one hour.

Asia & Australia 1%Other 1%

Latin America 1%

NorthAmerica 33%

Other Europeancountries 41%

Other Nordiccountries 11%

Sweden 12%


Net sales of Trelleborg EngineeredSystems totaled SEK 2,571 M in 1998.



Qualified partner

production of paper. One example ofsuch a coating is Jalon Yellow. Thismaterial is used on so-called soft andsupercalenders, which are the rollsthat give the paper a glossy surface.The new material cuts customerinvestment costs by a half, since theinstallation process has been greatlysimplified.

Extensive resources were investedin product development and duringthe year new products were launchedin the offshore and other segments.Other new products included bridgeelements and a new teflon-basedindustrial hose system for the NorthAmerican market.

The futureThe market in 1999 is characterized

by uncertainty,particularly interms of project-related products.Growth in theindustrial rubbersegment normallyfollows generaleconomic growthtrends. Extensive effi-ciency-enhance-ment programshave been initiatedwithin severalbusiness area unitsto meet the weakertrend of demand.

Main brands:Trelleborg (hose and rubbersheeting), Goodall (hose systems),Ibercaucho (rubber sheeting),Kléber (hose), Scirroco II (hose),Teguflex (couplings),Trellchem (protective clothing),Trelltech (roll coatings),TrellTent (inflatable tents),Tretight (door insulation products),Viking (diving suits) andExpandite (expanding bridge joints).

Protective clothing anddiving suits

Trelleborg Engineered Systems manu-factures personal protection equipmentunder the Trellchem (protective suits)and Viking (diving suits) brand names.

Professional divers use VikingHeavy Duty suits from Trelleborg ineveryday underwater work in thestraits of Öresund, where the ÖresundLink is being built between Swedenand Denmark. The divers removesand, stones, seaweed and musselsfrom the ocean floor to facilitate thebridge construction project.

“The Viking suits maintain veryhigh quality and are easy to repair,which is extremely important whendiving in these waters,” says KennethAndersson, project manager at SundMarine Works.

Structural integrityThe Öresund Link consists of bridgesand tunnels. The tunnel section willbe 3.5 km long, comprising 55,000-ton heavy concrete elements joined 20meters below the surface of the water.

Supported by satellite navigation,20 concrete elements are placed in asubmerged trench between the Danishmainland and the man-made island ofPepparholm.

Special rubber seals from Trelleborgand 5,000 tons of pressure create thestructural integrity required for thewatertight seams between the tunnel’sdifferent sections.

Tunnel seals for use in thenew Öresund tunnel link-ing Sweden and Denmarkare produced in Ridder-kerk, in the Netherlands.

FFive months of studies, blueprints,tests and overtime finally yieldedresults. Trelleborg EngineeredSystems and the customer, ABBAtom, joined forces to solve theproblem of renovating nuclear powerplants with a solution that providesspeed and cost-efficiency.

The “flow-stopper” solution ismost simply described as two rubberballoons that are placed in the waterpipe connecting the reactor tank tothe primary circulation system.When the rubber ballons are filledwith water, they swell and securelyseal off the flow, allowing renovationof the important pipes to begin.

An acid-based solution is used todissolve the radioactive oxide layerthat forms in the pipes and thisnaturally places very stringentdemands on the material used to pro-duce the flow-stoppers, which haveto withstand high pressure and acid.In this case aramid fibers and EPDMrubber were used.

“When we asked Trelleborg todevelop a flow-stopper, we did notfully understand the magnitude oftechnical problems involved in thedevelopment of such a product,” saysNils Eriksson, project manager atABB Atom.

The “flow-stoppers” are an exam-ple of how the business area’s high-technology expertise can be used incooperation with customers todevelop completely new productsand applications.

34



Europe’s largest supplier ofsealing strips

Business Area President: Peter Suter

There was a limited increase in de-mand in the building sector in 1998,but the trend varied. The businessarea’s largest customer segment forsealing profiles, namely system pro-ducers of windows and facade systemsin PVC and aluminum, themselvesexperienced a weak demand. In Ger-many and Great Britain, the marketdeclined by nearly 10 percent, whilethe consumer market for profilesdeveloped favorably, with the excep-tion of the important Russian market.

The market for waterproofingmaterials showed a stable trend, witha slight improvement in demand forrubber sheeting.

Business developmentNet sales rose by 27 percent to SEK

1,178 M (928) during 1998. Thesealing profiles for the Nordicbuilding market and gran-ules for the cable industryshowed strong growth.In Eastern Europe, thepositive sales trendcontinued, with theexception of Russia,where the turbulentsituation led to a temporary totalstoppage within the consumer sector.

The acquisition of ETM andTrebolit made a substantial contribu-tion to the increase in sales. Operat-

ing profit improved by 21 percent toSEK 135 M (112), primarily as a resultof the improvement in earnings withinsealing profiles.

In May 1998 the business areaacquired Elastomer-Technik-Mosbach(ETM), the leading producer ofextruded rubber sealing profiles inGermany and a company with world-class technological know-how. As aresult of this acquisition, Trelleborgis by far Europe’s leading supplier ofextruded sealing profiles to manufac-turers of windows and doors andother building-related companies.ETM in turn has a 30 percent hold-ing in Elastomer Compounding

s.r.o., a Czechproducer of

special com-pounds for the

extruded rubberprofiles industry.

In August,Trebolit was acquired,a Swedish producer

of waterproof-ing materialsfor the roof-ing and con-

struction industries. The acquisitionsignificantly expanded TrelleborgBuilding Systems’ range of bitumen-based waterproofing products.This is enabling the business area to

increase its export focus, particularlywithin bridge membranes, a segmentoffering major growth potential.

During the year, two distributorswere also acquired within the water-proofing area: Dach Baustoff Vertrieb(DBV), which distributes rubbermembranes to the German buildingindustry, and Joule Oy, one ofFinland’s leading distributors ofwaterproofing products, which alsoproduces and processes a range ofdifferent bitumen-based products.

The acquisitions of Trebolit, DBVand Joule reflect the business area’scontinued focus on waterproofingmaterials and expansion outsideSweden.

MarketWeak demand was noted in Euro-pean markets during the year. InCentral Europe, however, Poland,Hungary and the Czech Republicwere exceptions in showing favorablegrowth.

The earlier positive trend inRussia came to a complete halt asa result of the chaotic economicconditions encounteredduring 1998. The crisisin Russia has also had

Key figures /Trelleborg Building Systems

1998 1997

Net sales, SEK M 1,178 928



Operating margin, % 11.4 12,1

Average capital employed in operations, SEK M 611 446



Number of employees, December 31 986 872

Production in Sweden, Great Britain, Germany,the Czech Republic, Finland and Russia.

Different types of profilesfor insulating windows.

Mataki Självtäck is an easily laid,roofing material, with self-adheringseam lengths, for the DIY market.



BUSINESS CONCEPT

Trelleborg BuildingSystems shall be a leadingsupplier of rubber- andbitumen-based sealingproducts to the building-related industry, withfocus on well-definedniche segments.

an adverse effect on other markets,such as Finland.

The markets in both Norway andGreat Britain were depressed byexcessively high interest levels during1998. Germany, which is Europe’slargest building market, showed onlyweak development.

After having the Nordic region asits main market for many years,Trelleborg Building Systems’ newfocus and the acquisitions now madehave given the business area a strongposition as a preferred partner forEuropean building companies.

CustomersThe business area’s customers aremainly found in the European build-ing-related industry. In addition,Industrial Profiles maintains impor-tant customers in other segments ofthe manufacturing industry, forexample the white goods sector.

Many of the business area’s custom-ers have manufacturing operations inseveral countries. There has been adistinct increase in the trend towardsreducing the number of suppliersand shortening lead times in recentyears.

Against this background, Trelle-borg has assumed a strong positionas a pan-European cooperationpartner.

CompetitorsEach division focuses on a clearlydefined niche and holds a leadingposition within its prioritized marketsegments.

The majority of competitors oper-ate locally in their respective regionalmarkets, the exceptions being theGerman company Phoenix, theAustrian company Semperit and theBritish company Schlegel in themarket for sealing profiles, andIcopal in the market for waterproof-ing products.

OrganizationTrelleborg Building Systems operatesthrough five business units, formerlydivisions.

Net sales Operating profitSEK M

0

50

100

150

200

250

300

350

184 238 248 258 218 293 350 317 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

740804

962 1,0171,119

1,178

0

400

800

1,200

928872


SEK M

0

10

20

30

40

50

60

10 30 40 32 11 39 54 31 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

87 95105

112 113122

136 135

0

30

60

90

120

150

180


• Industrial Profilesand Consumer Profiles.The business units develop andmanufacture sealing strips for thebuilding-related industry andother specialist segments and self-adhesive sealing strips for the DIYmarket.

• Rubber Membranes and Roofing.Both business units manufacturesand market rubber sheeting forwaterproofing roofs, landfills andwater storage facilities. Bitumen-based sealing systems for roofs,bridge membranes and othermoisture-resistant applications aremanufactured and marketed underthe brand names Mataki andTrebolit.

36



• Materials. This business unitdevelops and manufactures com-pounds for the cable industries.

Business area management is locatedin Trelleborg, Sweden.

ProductionOver the years, Trelleborg ETM hasdeveloped a highly technologicalproduction technique, which willnow be gradually introduced to thebusiness area’s other units.

The aim is to create a number ofhighly specialized and competitiveproduction units focusing on theEuropean building industry.

New productsProduct development is as importantto the customer as the product.Every year, Trelleborg BuildingSystems, in cooperation with itscustomers, develops around 700 newprofiles using unique materials andwith special characteristics.

During 1998, a dry-glazing system– Trendline – was launched for theContinental wood-framed windowsmarket. Automatic applicationequipment, known as the RubberCat, has now been added to thissystem.

The business area has also developeda new single-step welding techniquefor EPDM seals in PVC windows.

Matakilite is a new, lighter mate-rial belonging to the Mataki brand.By strengthening and modifying thepolymers in Matakalite, it has beenpossible to reduce the weight of eachroll from 50 kg to 30 kg. Mataklitehas several environmental advantagessuch as easier recycling and lesstransportation because of the loweramount of slate used.

During the year, a new splicingsystem was developed for rubber

membranes produced by the businessarea. The system, which is based on aheat-sealing concept using a TPEmaterial, for which a patent is pend-ing, will be launched under thebrand names Elastoseal andSuperseal.

Sealing strips from Trelleborg Building Systems secure windows against draughts.Window profiles of various types are produced in Värnamo, among other locations.

Other Europeancountries 56 %

Other Nordiccountries 11 %

Sweden 31 %

Other 2%


Using Mataki Test™, any leakages in waterproofingmaterials can be detected immediately.

The business area has strengthened itsposition in Europe.

Uno Tech is a light waterproofingmaterial for large areas of roofing.


T


Two new distributorsTrelleborg Building Systems took afurther step into the German marketin 1998, through the acquisition of theGerman distributor, Dach BaustoffVertrieb (DBV), The acquisition ofDBV, which distributes rubber mem-branes to the German building indus-try, strengthens Trelleborg BuildingSystems’ organization in the Germanmarket.

During the same month, the busi-ness area acquired Joule Oy, one ofthe leading distributors of waterproof-ing products to the Finnish roofingcontractors market. The company alsoproduces and processes a range of dif-ferent bitumen-based products at itsplant close to Helsinki.

“The acquisitions of Joule, DBVand Trebolit can be regarded as a con-tinuation of our focus on the water-proofing products market,” says Suter.

Leadership profile

Internet tradingDuring the current year, TrelleborgBuilding Systems will begin an Elec-tronic Data Interchange (EDI) projectin cooperation with a large section ofthe Swedish building materials trade.The building materials trade organiza-tions have agreed on a standard forEDI trading via the Internet.

EDI will give the business areamore effective information exchangewith as many as 100 building materi-als dealers.

F

years, ETM has held a 30 per-cent interest in ESC ElastomerCompounding s.r.o., a Czechproducer of compounds for usein the profiles industry.

Expanding inwaterproofing materials

In August, a Swedish roofingmaterials company, Trebolit, wasacquired. The company’s productionoperations are located in Trelleborgand will be integrated with the busi-ness area’s other roofing materials pro-ducers in southern Sweden.

Trebolit’s products maintain a veryhigh standard, as shown by its selectionas supplier for the major bridge mem-branes order for the current ÖresundBridge project. In simple terms, thisproduct consists of a form of water-proofing material that is laid just belowthe road surface to prevent water fromseeping down into the concrete.

“The acquisition of Trebolit makes amajor contribution to our productrange,” says Peter Suter. “It strengthensour base for an even greater focus onexports, while simultaneously enablingus to further develop Trebolit’s bridgemembrane seals, a product area inwhich we see major potential forgrowth.”

Since it will be easier for the dealersto access current prices and placeorders, it will be possible to reducedelivery times by one day and accord-ing to demand.

The futureThe European building market isexpected to stabilize during 1999.

Poland, the Czech Republic,Slovakia and Hungary will developpositively and enjoy favorable ratesof growth. In the Nordic region,

Sweden and Finland are expected togrow, while growth in Norway andDenmark will stagnate.

The business area’s strong presencein these major markets creates favor-able conditions for continued positivegrowth.

Most important trademarksMataki (waterproofing), Trebolit(waterproofing materials), Värnamo(sealing profiles for the DIY market)and Superseal (EPDM waterproofing).

The acquisition of the German com-pany Elastomer-Technik-Mosbach(ETM), means that today TrelleborgBuilding Systems is Europe’s leadingsupplier of extruded sealing profiles tomanufacturers of windows and doorsand other building-related companies.

“We now have over 25 percent ofthe German market, which is the larg-est building materials market in Eu-rope,” comments Business Area Presi-dent, Peter Suter.

World-class technologyEMT was established in 1986 and istoday the German market leader inextruded rubber sealing profiles. Thetotal market for sealing profiles inGermany is worth SEK 1,200 M.

Much of the production equipmentis based on the company’s own ideas,particularly in the areas of qualitycontrol, flexibility and fast toolchanges. They also significantly reducethe amount of discards and waste.

Trelleborg ETM’s substantial tech-nological know-how will gradually beintroduced within the business area’sother profile units.

In addition, Trellborg ETM hasalso contributed to Trelleborg Build-ing Systems’ goal of establishing op-erations in Eastern Europe. For some

38



Sole full-range supplier in electrical, HVACand refrigeration markets

The wholesale sector has been inter-nationalized and restructured duringrecent years.

The Nordic wholesale market forelectrical and heating & plumbingproducts is virtually fully structured.Following the wave of large acquisi-tions in the wholesale sector duringrecent years, there are now fiveforeign distributors and one Swedishdistributor in the Swedish electrical,heating & plumbing supplies market.

Restructuring in the rest of Europehas not progressed as far, but theNordic region’s three leading players,Otta, Rexel and Hagemeyer, continueto strengthen their positions in theelectrical market.

Developing thewholesaler role

Ahlsell is striving to develop the whole-saler’s traditional role as a full-rangestockist of supplies into that of adistributor by assuming a moreactive role in the sales chain betweensupplier and customer.

Continuous efforts to develop rou-tines and services that offer increasedvalues to customers are a key element.During 1998, several new productswere launched to support this devel-opment. Examples include the Ahl-konto (clearing account for loyalcustomers), EDI, invoicing services,

catalogues available on CD-ROMand Internet-based ordering routines.

Business developmentAhlsell’s net sales increased by 29 per-cent in 1998, due mainly to theacquisition of Skoogs Elektriska.Newly acquired companies accoun-ted for SEK 53 M of the SEK 94 M im-provement in earnings.

The integration of Skoogs Elek-triska is completed effectively, andsynergy effects from the mergergenerated substantial contributionsto Ahlsell’s earnings. Duplicate busi-ness operations have been eliminatedthrough integration, and Ahlsell’slogistical model and administrative Of the market’s three main segments,

Heating & Plumbing, Industry andInstallation, the latter showed thestrongest business development in1998 following a marginal increasein construction activity.

Ahlsell has continued to expand itsoperations in Scandinavia. In January,the company strengthened its focuson the Do-It-Yourself (DIY) marketthrough the acquisition of VVS-Trading A/S in Denmark.

Värmekällan, a Swedish heating andplumbing company, was acquired inDecember 1997 and, in June 1998,Ahlsell acquired Elektro-Energi A/S,a Norwegian electrical supplycompany with operations in theimportant Oslo region.

Market investmentsAhlsell strengthened its marketcoverage in 1998 through the estab-lishment of two new branch officesin Poland (Warsaw and ) andthree in Sweden (Gislaved, Uddevallaand Helsingborg).

Investments in the Data & Teleproduct area were continued bystrengthening resources and launch-ing a new image under the nameAhlsell Network Systems.

Business Area President: Bo Hedenström

Key figures / Ahlsell

1998 1997





Average capital employed in operations, SEK M 1,361 820




Storage and Sale in Sweden, Denmark, Norway,Finland, Poland and Russia.

systems have been introduced succes-sively in Skoogs’ branch offices.

Heating & plumbing operations inSweden also showed a substantialincrease in earnings attributable tofavorable sales growth, improved costefficiency and a determined pricingstrategy that generated improvedmargins. The overall Swedish marketfor heating and plumbing suppliesincreased by about 8 percent duringthe year, matching the volume levelreached in 1996.


Ahlsell

BUSINESS CONCEPT

Ahlsell shall be thepartner of choice toelectrical, HVAC andcommercial refrigerationconsultants by assuringconvenience, product-availability and timedefinite delivery.


Internet salesAhlsell customers are able to visitprofessional marts and collect theproducts they need. Customers canalso use the Internet to review theproduct range and make purchases.

Ahlsell’s main catalogue, whichlists approximately 120,000 items,has since 1997 been available to allcustomers via Ahlsell’s web site onthe Internet.Through this site,customers can obtain informationabout Ahlsell and various servicessuch as Ahlkonto, Ahlkonto withcustomer-to-customer financingand a variety of invoicing services.

Customers can also order printedcatalogues or CD-ROM versions and download the calculation programs

from the web site.During 1999, Ahlsell also plans to

introduce its new Ahlsell Sekundservice, a digital professional mart.

Ahlsell’s traditional professionalmarts offer product informationfrom different suppliers. The virtualprofessional mart, instead, provideslinks to the home pages and websitesof suppliers. Links can be establisheddirectly from articles in Ahlsell’scatalogue to supplier websites.

EDIAhlsell’s focus on EDI (ElectronicData Interchange) has now progressedfrom the planning state to reality. The

system has been fully functional andavailable to customers since August1998.

With the help of EDI, customerscan place orders directly via their ownsystem. Today, Ahlsell provides order-ing, order and delivery confirmationand invoicing services via EDI.

CustomersAhlsell’s main customers are contrac-tors, industry, municipalities andelectricity boards as well as propertymanagers.

CompetitorsAhlsell is one of the leading whole-salers in the Swedish market for heat-

0

400

800

1,200

1,600

772 925 1,028 1,412 1,207 1,291 1,330 1,514 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

3,375 3,461 3,6594,137

4,5724,938 5,240

5,342

0

1,500

3,000

4,500

6,000


SEK M

0

20

40

60

80

100

11 40 43 72 37 67 60 96 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

145 146 153166

219

260

0

60

120

180

240

300

236


192

Ahlsell’s professional marts offer goodservice and product know-how.

40



The Swedish electrical marketdistributed by player

Other 4 %

Hagemeyer/Asea Skandia29 %

Ahlsell 28 %

Nordisk Solar 6 %

Otra/StorEl14 %

Rexell/Selga19 %

Onninen 10 %

Ahlsell 38 %

Dahl 40 %

Other 12 %

Onninen 11 %

AKA 21 %

Ahlsell 20 %

Kylma 29 %

Other 19 %

The Swedish plumbing & heatingsupplies market distributed by player

The Nordic refrigeration marketdistributed by player

ing & plumbing and electrical sup-plies and a Nordic market leader forrefrigeration supplies; see the diagrambelow.

OrganizationAhlsell’s operations are organized indivisions for heating & plumbing,

electrical, refrigeration, DIY andindustrial supplies.

Most sales are booked throughmore than 90 so-called professionalmarts in about 70 locations in theNordic countries, Russia and Poland.

The business area’s head office issituated in Häggvik, near Stockholm.

Customers make their own choice in an Ahlsell professional mart.

Quality and the environmentIn the beginning of 1998, Ahlsell’sLogistics Center and distributionoperations were quality certified inaccordance with ISO standard 9002.The business area’s refrigerationoperations are also quality certifiedin accordance with ISO 9001.

In total, the Swedish electrical marketis estimated to be worth SEK 6.6 billion.

In total, the Swedish plumbing & heat-ing market is estimated to be worthSEK 6.2 billion.

In total, the Nordic refrigerationmarket is estimated to be worthSEK 1.4 billion.


Ahlsell

Fusion whitout friction

Thanks to the highly efficient conveyorsystem, Ahlsell personnel in the Logis-tics Center can quickly pick out theproducts ordered.

parts of the organization wereestablished during the next threeweeks following a review of require-ments in various locations todetermine which units should beretained. Ahlsell retained most of itsprofessional marts.

IT support importantA major project was undertaken tomerge two different product catalogsand separate customer lists compris-ing approximately 25,000 productsand 15,000 customers, respectively,all of them carrying differentdiscount rates.

Ahlsell and Skoogs were quick torecognize the importance of invest-ments in IT support and, as a result,the work proceeded very smoothly.Skoog’s entire product range wasavailable in Ahlsell’s computers bymid-September.

More customers andnew names

The merger increased the total numberof customers, and the new Ahlsell Elhas become a stronger player todayfor customers and suppliers.

“For our suppliers, it is naturallymore attractive to work with amarket leader,” says Bo Sobéus. “Andfor our customers, it was importantthat no negative effects were causedby efforts to implement the merger.”

Skoogs has contributed severallarge customers within the industrialand power sectors. For these custom-ers, the merger has meant a period ofsome adjustment.

Although products and deliverytimes are the same, some routineshave been changed, some new peopleare handling their contacts and a newname has been introduced: Ahlsell.

T

The futureThe wholesale sector hasbeen internationalized andrestructured during recentyears. Additional structuralchanges are expected withinAhlsell’s market area, andAhlsell will play an active rolein the process of change.

Market development in1999 is expected to correspondlargely with growth in 1998.

The acquisition of Skoogs Elektriskawas finalized in August 1997, imme-diately doubling Ahlsell’s share of theSwedish electrical wholesale market.Hagemeyer of the Netherlands is themarket’s only larger player.

At year-end 1998, slightly morethan 16 months later, efforts tointegrate the acquired operationswere proceeding according to plan,and full integration is expected to becompleted during the first half of1999. The two wholesale companies,which supplemented each other wellon paper, have proved to be even bet-ter partners in reality.

Complement each otherAhlsell El, with sales focused on smalland medium-sized electrical installa-tion companies through its strongnetwork of professional marts, is sup-plemented by Skoog’s large customersconcentrated within industrial, elec-trical and energy supply companies.

“We decided to introduce a newstructure quickly, and informed allour employees of the change,” saysBo Sobéus, President of Ahlsell El.

In connection with the merger,Ahlsell El was reorganized. Its opera-tions were divided into seven regionsin the first week after the acquisitionof Skoogs Elektriska, and remaining

42



products from many of Europe’s lead-ing steel mills.

The business area’s role has beenstrengthened during recent years byan increase in steel imports from 57percent to 76 percent. A large part ofthe increase has gone via BrödernaEdstrand.

Several important steps in thebusiness area’s strategy to expand inthe Baltic region were implementedduring 1998. The region is beingdeveloped into an integrated market,with engineering and constructioncompanies operating throughout allareas, a transition that requiresincreased elements of coordinatedassistance. Through the coordinationof their steel distribution operations,Bröderna Edstrand and StarckjohannSteel, can offer high service standardsto customers that have elected to movetheir operations and to new customerswith similarly high demands.

CustomersThe structure of Bröderna Edstrand’scustomers changed in the early1990s. In pace with declining invest-ments in Swedish construction, theimportance of Sweden’s manufactur-ing sector grew stronger.

In addition to the Swedish engineer-ing industry, spearheaded by exportcompanies, other large customergroups include the building sectorand retailers.

Key figures / Bröderna Edstrand

1998 1997









Storage and Sale in Sweden, Denmark, Poland,Latvia and Lithuania.

Largest independent supplier inBaltic Sea area

customers. Other forces of change arethe potential for zero-inventory pro-duction and computer-to-computertransfers of material specificationsand payment.

Another important factor in theprocess of change now taking place is“the Europe project,” which is focusedon common product standards, a com-mon currency and elimination of cus-toms, whereby traditionally delineatednational markets are being coordinatedin larger regional markets. Countriessurrounding the Baltic Sea will be oneof the new regional markets.

Business trendProfit declined in 1998 to SEK 85 M(98) due mainly to nonrecurringcosts for new computer systems and

other development in-vestments. Swedish marketdemand for the businessarea’s products improved

in 1997, and most of 1998 was char-acterized by strong and stable demand.

Volumes declined during thefourth quarter, however, as a resultof lower order bookings from exportindustries.

Success factorsAs a producer-independent distribu-tor, Bröderna Edstrand offers

Business Area President: Rolf Forssell

Consumption of steel and aluminumin the Swedish engineering and con-struction industries increased sharplyduring the period March 1997–March1998. Subsequently, demand leveledoff at a continued high level. Althoughmost players in both markets stillhave strong order backlogs, uncer-tainties have increased concerningvolume growth in 1999.

Despite lower prices from Euro-pean steel manufacturers, the weakerSwedish krona has neutralized lowersteel prices in Sweden.

Strong forces of changeThe market pattern for distributorssuch as Bröderna Edstrand is under-going rapid change. Sweden’smechanical engineering and construc-tion industries are relo-cating large parts ofheavy productionoperations to Polandand the Baltic states.Parallels can be drawn to similarmoves abroad by Swedish textilecompanies during the 1970s.

The number of market players willbe fewer. Major factors include thedevelopment of information technolo-gies that will strengthen the trendtoward continuity and business part-nerships between materials manufac-turing companies, distributors and


Stena Stål 5 %

Heléns 13 %

Bröderna Edstrand 23 %Tibnor

49 %

Other10 %

SEK M

0

100

200

300

400

500

600

700

515 574 502 555 612 611 524 581 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

2,066 2,059 2,0772,243 2,280 2,302 2,328

0

400

800

1,200

1,600

2,000

2,400

2,800

2,146


SEK M

0

10

20

30

40

23 30 29 16 26 21 22 16 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

67

88

100 98 10192

85 85

0

30

60

90

120


Bröderna Edstrand


CompetitorsThe Swedish market for productgroups offered by Bröderna Edstrandis also cultivated by competingdistributors that are directly linked tosteel manufacturers, such as Tibnor/SSAB and Heléns/Rautaruukki.

OrganizationOperations in Sweden are dividedinto five regions with warehouses andsales offices in Malmö, Jönköping,Gothenburg, Stockholm/Norrköpingand Sundsvall, as well as a reinforce-ment plant in Jularbo.

Bröderna Edstrand opened a salesoffice in Denmark (Copenhagen) in1997 and, in the autumn of 1998,the business area established compa-nies, warehouse facilities and salesoffices in Poland (Gdynia) and Latvia(Riga), in addition to a branch officein Lithuania (Kaunas).

BE International manages salesoperations in markets outside theBaltic region. Operations werestarted in November 1998, and thenew company exports BrödernaEdstrand’s entire product portfolio.

The business area’s managementand joint functions are based inMalmö.

Special steel 6 %

Pipes 9 %

Aluminum12 %

Stainless steel 19 %

Commercialsteel 54 %

The Swedish wholesale market for steeland aluminum, distributed by player

Net sales by product group

BE plays an important part as an independ-ent import alternative among a number oflarge steelmill-linked wholesalers.

BE’s largest product group, commercialsteel, consists of a number of products:hot- and cold rolled sheeting as well asbeams, bar, profiles etc.

Quality and the environmentBröderna Edstrand has been qualitycertified in accordance with ISO9002 for several years. Comprehen-sive efforts are now being made togain environmental certification inaccordance with ISO 14001.

FutureSwedish consumption of steel andaluminum will decline. However,construction and engineeringcompanies are placing growingdemands on increased quantitiesof pre-treated input goods.

BUSINESS CONCEPT

As an independent supplier,Bröderna Edstrand shallpurchase, stock and distributesteel, tubes, stainless steeland aluminum, primarily forcustomers in the Swedishmarket. As a result of its flex-ible, locally oriented organiza-tion, Bröderna Edstrand’scustomers shall be offeredhigh availability, service andquality, in addition to acustomer-adapted range ofproducts.

44



Reynolds’ largest customer segment isthe building and engineering industryin France, Great Britain and Germany.Other important segments include theinfrastructure (construction of roads,railways and airports) and the installa-tion sector (copper pipes for the refrig-eration segment, among others).

Reynolds is also a key supplier ofsemi-finished goods for the electron-ics sector.

Business trendSales rose by 9 percent, from SEK 966M to SEK 1,054 M. Operating profitfor the Reynolds group declined bySEK 7 M to SEK 9 M due to lowermetal prices andreduced demandfrom theGerman market.

Volumes rose by 10 percent,primarily as a result of the acquisitionof Testas and an improved marketsituation in France and Great Britain.

In July, Testas was acquired, aFrench metals wholesaler with thesame operating focus as ReynoldsIntermétaux. The acquisition meansthat Reynolds can offer a broaderrange of products to a larger geo-graphic area, thereby creating im-portant economies of scale in thepurchasing area.

At the date of its acquisition, Testashad sales of approximately SEK 135 M,

with 35 employees at its central ware-house in Créteil, east of Paris, and thebranch unit in Nantes.

Economic activity in France,Reynolds’ most important individualmarket, remained stable at a satisfac-tory level during the first three quar-ters of 1998. In October, however, thefirst signs were noted that demandwas being affected by the Asian crisis.

The German building market re-mained weak throughout 1998. Theslight recovery at the beginning ofthe year was unable to be sustained,which had an adverse effect onReynolds’ roofing products opera-tions in this market.

Despite weaker demandin Great Britain duringthe second half of theyear, Reynolds’ British

company, Reyton, increased its salesand captured market share when thenew service center contributed newproducts and improved margins.

During the year, metal prices con-tinued to decline to the lowest level for12 years. The downturn resulted insubstantial downward adjustments tothe value of inventory and narrowermargins.

Success factorsReynolds has long experience ofworking in a highly competitive mar-ket and has acquired a well-devel-

oped network of suppliers and cus-tomers.

In common with the other whole-salers in the Trelleborg Group’sDistribution sector, Reynolds focuseson resolving customer problemseffectively by developing moresophisticated products and furtherprocessing to add value, whichmeans that the products are betteradapted in form and format to meet-ing customer needs.

Not only does the acquisition ofTestas strengthens Reynolds’ role inFrance, but it also complements thenew service center opened in 1997 inCheltenham, Great Britain.

Certification work in accordancewith ISO 9000 is continuing.During 1998, two plants receivedcertification.

OrganizationReynolds’ operations are well knownunder different names in the compa-ny’s various markets:• France: Reynolds European,

Intermétaux and Testas

• Great Britain: Reyton Metals

• Germany: Metallhalbzeug-Handeland Edelstahl-und Metallhalbzeug-Vertrieb

The business area’s head office islocated near Paris, France.

Business Area President: Gérard Lièvre

Adding value generateswider margins

Key figures / Reynolds

1998 1997

Net sales, SEK M 1,054 966








Stocking and distribution in France, Great Britain and Germany.


Reynolds

CustomersReynolds has a broad spectrum ofcustomers, the majority of whom areactive within the manufacturing andbuilding industries in France, GreatBritain and Germany.

Industrial customers includeengineering companies, which usesemi-finished metal products in theirproduction of goods for furtherprocessing or for direct delivery toend-users.

Road, rail and airport constructionand other infrastructure projectsconstitute another importantReynold’s customer group. This iscomplemented by the installationsector, which includes customers inthe refrigeration, heating, plumbingand roofing industries.

CompetitorsReynolds, like Bröderna Edstrand inSweden, is an independent whole-saler of products from Europeanmanufacturers which often maintaintheir own distribution channels aswell. The main competitors arefound among the producing mills’own wholesalers.

FutureReynolds will continue to focus onmeeting customer demands forvalue-added products through further

Net sales Operating profitSEK M

0

50

100

150

200

250

300

215 267 242 242 275 250 271 258 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

825907

9661,026 1,009 1,038 1,054

0

200

400

600

800

1,000

1,200

870


SEK M

–6

– 4

–2

0

2

4

6

8

3 5 8 0 4 3 8-6

1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

710

1516 17

15 15

9

0

4

8

12

16


Germany 12 %

GreatBritain 22 %France

66 %

processing and the range will also besupplemented by new products.

In future, customer demand forvalue-added products will be supp-lemented by demands for a broaderoverall product range. Reynolds’preparations for this include theaddition of an in-stock range offittings for refrigeration equipment.

In addition, an increasing numberof customers today require that theirwholesalers assume responsibility formaintaining customer-specific inven-tories in their warehouses.

Demand for “Just-in-Time” deliv-eries has been growing for someyears. For the wholesale sector, thismeans that the trend is towards agreater number of local warehousefacilities, thereby reducing thedistance to customers.

Markets in France and Great Britaincontinued to grow during 1998.


BUSINESS CONCEPT

Reynolds is a leadingproducer-independentdistributor of non-ferrousproducts, primarily to theFrench, Great Britain andGerman markets.

It is estimated that the current trendsin Reynolds’ markets in France, GreatBritain and Germany will continueduring 1999.

46



Cross-bordercooperation

Business Area President: Taisto Riski

Key figures / Starckjohann

1998 1997


Share of Group sales, % 24.2 —


Operating margin, % 3.0 —

Average capital employed in operations, SEK M 2,026 —

Return on capital employed in operations, % 9.0 —

Investments in fixed assets, SEK M 141 —


Storage and Sale in Finland, Estonia and Russia.

Trelleborg’s holdings, December 31 85.2 53.7

Starckjohann Oyj reported strongerdemand for all business segments in1998. Building production in Finlandrose by 11 percent, sales of buildingaccessories were up about 7 percentand higher investments in propertiesgenerated an increase of 11 percentin sales of heating and plumbingsupplies and other building materials.

Production in the metal industryrose by 15 percent, which increaseddemand for steel and other metals.Sales of steel inventories in Finlandincreased by 8 percent.

Stronger demand was also notedfor passenger cars in 1998. Approxi-mately125,751new carswere soldin Finland during the year, anincrease of 20.3 percent comparedwith 1997.

Trelleborg acquired a majorityholding in Starckjohann Oyj, apublicly listed Finnish company,in November 1997. The Group’sownership interest has since beenincreased to 85.2 percent throughtwo redemption offers and othertransactions.

Starckjohann was consolidated inTrelleborg’s income statement onJanuary 1, 1998.

Business trendNet sales by the Starckjohann Groupin 1998 amounted to SEK 6,068 M(5,297), an increase of 15 percent.All divisions reported higher net sales.

Operating profit amounted to SEK

182 M. Earnings were affected byexpansion of the Starkki chain ofsales outlets, low metal prices andfinancial problems in Russia.

Operating profit included otherincome from operations, such asgains from property sales and the saleof shares, which totaled SEK 39.5 M.

Work to streamline Starckjohann’soperations continued in 1998 with

the sale ofLaakeri-palvelu, awholesale

company, and Böge Larsen Projects,an exporting firm.

MarketAll divisions noted favorable marketdevelopment.

Sales by Starckjohann Steel, a steeldistributor, increased and demandfor pretreated materials continued torise. Profit was affected by lowermetal prices, however.

Construction of a new steel servicecenter in Lahti for pre-treatment of

steel sheet was started during theyear. According to present plans, theservice center will be completedtoward year-end 1999.

Suomen Teräspalvelu Oy wasacquired in March 1998. The acqui-sition has expanded the division’srange of pre-treated services.

Despite intensive competition inthe heating and plumbing market,Suomen LVI-Tukku increased itsmarket shares.

The building materials chain,Starkki, increased its market share in1998. The company’s expansionstrategy was continued; toward year-end, a new discount sales store wasopened in Helsinki and, in thebeginning of 1999, expansion of theTampere sales outlet was completed.Starkki was Finland’s fastest-growingbuilding materials chain in 1998.

Starckjohann Auto sells several ofFinland’s most popular cars, withOpel as its main model. The numberof car models and sales outlets hasbeen reduced to increase profitability.

OrganizationThe Starckjohann Group consists offour divisions:

• Starckjohann Steel is a wholesalerof commercial and specialty steels,aluminum and other metals.

Starckjohann is included in Trelleborg’s net sales as from January 1, 1998.


Starckjohann


SEK M

0

500

1,000

1,500

2,000

1,276 1,589 1,652 1,551 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

1,276

6,068


0

2,000

4,000

6,000

8,000

4,517

2,865

Starckjohannis included in

Trelleborg’s net sales as from

January 1, 1998

BUSINESS CONCEPT

Starckjohann shall bea leading independentdistributor within anumber of well-definedsectors.

SEK M

0

20

40

60

80

100

11 59 84 28 1- 11- 111- lV- 1- 11- 111- lV-1997 1997 1997 1997 1998 1998 1998 1998

11

70

154

182


0

40

80

120

160

200

Starckjohannis included in

Trelleborg’s net sales as from

January 1, 1998

• Suomen LVI-Tukku is Starck-johann’s heating and plumbingmaterials wholesaler, with anetwork of collect stores.

• Starkki is a nationwide buildingmaterials chain with 15 salesoutlets in Finland. The companycooperates with Rautanet, a chainof independent hardware stores.

• Starckjohann Auto is responsiblefor the Group’s automotive sales,representing several manufacturersspearheaded by Opel, Finland’smost popular passenger car in1998.

Starckjohann’s other operationsconsist of two smaller companies,Aninkaisten Tapetti ja Väri Oy and Oulun Pultti Oy, which conduct

niche activities in wholesale trading.

Market investments

Investments by Starckjohann in1998 amounted to SEK 141 M andfocused primarily on expansion ofthe Starkki chain and upgrades of thebusiness area’s IT-system.

Starkki’s expansion is concentratedin Finland’s growth areas. Thecompany’s present chain of 15 salesoutlets has entered a program ofpurchasing and marketing coopera-tion with Rautanet, a chain of

independent hardware stores.Starckjohann Steel handles a broad

range of commercial and specialtysteel, aluminum and other metals.The acquisition of Suomen Teräs-palvelu has significantly increasedthe division’s flash-cutting capacity.

Concentration on pre-treatedmetals is continuing through theconstruction of a new steel servicecenter for steel sheet in Lahti.Starckjohann Steel has steel servicecenters in five Finnish communitiesand 10 sales units in different partsof the country. A subsidiary inEstonia serves the Baltic states.

Starckjohann LVI-Tukku has a networkof customer-collection outlets.

48



Starckjohann Auto 12 %

Suomen LVI-Tukku 18 %

Starckjohann Steel 22 %

Starkki 46 %

Other 2 %

Net sales for Suomen LVI-Tukku rose18.2% in 1998, compared with thepreceding year.

Net sales by division

Suomen LVI-Tukku, the businessarea’s heating and plumbing materialswholesaler, strengthened its marketposition.

CustomersFinland’s building and engineeringindustries account for most sales in-voiced by Starckjohann. The Finnishbuilding sector, with particularemphasis on housing production,showed continued favorable develop-ment in 1998. The rate of increasewas marginally weaker than growthin the preceding year, however.

The range of building productssold through Starkki’s chain of salesoutlets is directed at both private andcorporate customers.

Customers in metals and mechani-cal engineering industries are movinga higher percentage of their pre-production operations to pre-treat-ment centers operated by steel whole-salers, creating greater demand forservices offered by StarckjohannSteel.

CompetitorsAll of Starckjohann’s divisions havestrong positions in their respectivemarkets. Starckjohann Steel isFinland’s second largest steel whole-saler after Asva Oy and KeskometalliOy, which merged in 1998.

Suomen LVI-Tukku holds a strongposition in the Finnish market forheating and plumbing materials. Itsmain competitors are Onninen Oyand LVI- Dahl Oy.

Starkki is Finland’s second largesthardware and building materialssupplier after Kesko Oyj and K-Rauta.

The competitive force of Starck-johann Auto is dependent on the

success of the car models representedby the division.

Quality and the environmentQuality is a key factor in the successof Starckjohann’s business activities.Starckjohann Steel’s focus on qualityhas made the company an importantelement in the network of steel andother metals suppliers to Finland’s

There is an increasing demand for pre-production services, such as customizedsteel cutting, at Starckjohann Steel.


Starckjohann

Cooperation inBaltic region

T

metal and mechanical engineeringindustry. The company is quality cer-tified in accordance with ISO 9002.

A comprehensive training programfor 800 of the business area’s employ-ees was started toward year-end 1998.The program comprises trainingrelated to the new IT-system intro-duced at year-end and several projectsto develop quality work in all divisions.

exchange between Bröderna Edstrand’slarge regional warehouse in Norr-köping and Starckjohann Steel’s ware-houses in Turku and Lahti, is nowimplemented several times a week.

Coordinated productionProduction operations of the two com-panies are also being coordinated toreduce delivery times during periodsof peak order bookings.

The regional warehouse in Norr-köping was expanded recently. Thefacility’s 35,000 sq.m. includes a largenew flame cutter for use on steel prod-ucts. Some production from Starck-

Customers in a LVI-Tukku store canobtain expert advice.

johann in Finland can be transferredto Norrköping during peak produc-tion periods.

The plant in Norrköping will besupplemented by a new steel sheetcenter now under construction inLahti, which will also supply productsfor Bröderna Edstrand’s customers inSweden.

Plans are also being made tocoordinate the product and supplierstrategies of Ahlsell and SuomenLVI-Tukku, which will yield signi-ficant purchasing synergies.

The futureStarckjohann’s favorable businessgrowth is expected to be sustainedin 1999. Growth in the buildingand metal industries will continue,although at a slower rate than growthin 1997 and 1998. A question sur-rounds trends for metal prices.

The acquisition of Starckjohannprovided a strong foothold for Trelle-borg’s distribution operations inFinland. Starckjohann’s steel andheating & plumbing divisions supple-ment the operations of BrödernaEdstrand and Ahlsell.

Coordinated product rangeLate in the autumn of 1998, coopera-tion between the units began to assumeclearly defined forms. StarckjohannSteel and Bröderna Edstrand eachhave extensive ranges of commercialsteel, stainless steel and aluminumproducts.

Through coordination of inventorycontrols, both companies can increasetheir service standards and reducecapital tied up in large inventories.Access to each other’s products is thekey element, and the “steel train,” an


Boliden

Boliden Ltd

President: Anders Bülow

Listed in Toronto and Montreal,Canada.

Stock Exchange symbol: BOL

Trelleborg’s holding as at December31, 1998: 43% (45) of both sharecapital and voting rights.

Boliden’s principal operations consistof the extraction, processing and saleof minerals and metals, particularlythe base metals zinc, copper and lead,and precious metals such as gold andsilver. The company also producesand sells copper tubes and brassproducts.

Low metal prices

With the exception of silver, theprices of Boliden’s principal metalshave declined since the middle of1997. Measured in real terms, theprice of copper fell during 1998 tonote its lowest level since the 1930s.

To a large extent, the low pricelevels derive from the Asian crisis andthe economic problems in Russia,which are affecting the price picturein the majority of raw materialssectors. Despite this market scenario,LME zinc inventories are at the high-est level noted since 1992.

Boliden has initiated a technical andfinancial evaluation of all operationswith the aim of increasing efficiency,

minimizing investmentsand calculating theeffects of implementing atemporary or permanenthalt in certain operations.

Earnings in 1998

Boliden showed an oper-ating loss for the year ofUSD 68.7 M (profit: 111.7),of which USD 42.5 M wasaccounted for byprovisions for the damaccident in Aznalcóllarin Spain.

The lower metal pricesmainly affected theMining business area,

which showed an operating loss ofUSD 42.4 M, excluding the provisionfor the accident in Spain.

Smelting operations generated aprofit of USD 25.6 M which, adjustedfor the effect on earnings of plannedmaintenance stoppages at the Rönn-skär and Norzink plants, was in linewith 1997 earnings.

The Copper business area reportedan improvement in operating profit toUSD 12.2 M in 1998. This was mainlydue to strong demand from the Euro-pean building sector during the year.

Los Frailes

Operations at Boliden Apirsas’ LosFrailes mine were halted in connec-tion with the dam accident on April25, 1998, when substantial amounts ofore dressing sand and water ran outfrom the tailings pond. The accidentwas caused by a slide in the clay layerbeneath the re-taining wall ofthe tailings pond.

During the sum-mer, and autumn,Boliden and thelocal authoritiesjointly conductedan extensivecleanup project,which was com-pleted as plannedduring theautumn.

Boliden’s mining production

1998* 1997

Zinc, ton 178,778 129,761

Copper, tons 143,516 86,041

Lead. tons 102,535 99,320

Gold, ounces 173,125 164,445

Silver, ounces 8,248,000 8,084,000

Metal content of concentrates from Boliden’s mines,including the share in Saudi Arabian company, SCPM.

* Includes Westmin Resources.

Operating loss: USD 68.7 M(profit: 117.7)

Number of employees:6,300 (6,300)

Presentation of associated companies

Boliden conducts mining and concentrating/refining operations inSweden, Canada, Chile, Spain and Saudi Arabia.Underground mining is conducted at several of the facilities.

In November, Boliden applied for per-mission to restart mining operations.The application includes permissionto utilize the mined-out Aznalcóllarmine for the deposition of wasteproducts.

Permission to restart operations isexpected during the first quarter of1999.

Lomas Bayas

Operations at the Lomas Bayas minein Chile were started up at the endof the year. Capacity utilization todate is about 70%, due to high chlo-ride and nitrate levels. These prob-lems are now partly resolved and willbe completely eliminated before theend of 1999.

Rönnskär

Rebuilding work was started in 1998to raise annual production capacity atthe smelter in Rönnskär to 240,000tons of copper. The work is expectedto be concluded during the secondhalf of year 2000.

Stockholm listing

The Boliden Board has decided toalso list the Boliden share on theStockholm Stock Exchange.


Sorb Industri

BPA

BPA AB (publ),

President: Johan Karlström

Exchange listed in Stockholm,Sweden

Trelleborg’s holdings as ofDecember 31, 1998: 29% of sharecapital and of voting rights (29).

BPA is the leading installation companyin Scandinavia, with operations inapproximately 100 communities. It isthe only company in Sweden able tooffer installations in heating and plumb-ing as well as the electrical and ventila-tion sectors. The company also con-ducts expansive activities focused onthe property and industrial sectors.

Business development in BPA is influ-enced by certain clearly definedindustrial and social trends. Buildinginstallation contracts commissionedby property owners and tenants arebecoming more complex and comprisea growing part of total costs in a typicalconstruction project. A comprehensiverange of installation skills and expertiseis required to solve the technicalchallenges of today’s sophisticatedinstallation market demands.

Net sales: SEK 6,382 M (6,086)

Number of employees:6,319 (6,300)

Sorb Industri AB,President: Per Lidström

Trelleborg’s holdings as ofDecember 31,1998:95% of share capital (95) and80% of voting rights (90).

Sorb Industri AB was established inthe late 1980s by Boliden/Trelleborg.Its original business concept was –and is – to develop competitive com-panies into an industrial group basedin the Norrland region of Sweden.In view of the Group’s expansion,however, most future acquisitionswill probably be made in geographicalregions closer to large markets.

Sorb Industri’s operations areorganized in three business areas:Niche Products, Components andsystems and Timber Processing.

All companies included in the NicheProducts business area market prod-ucts related to safe and healthy workenvironment. Brokk develops, manu-factures and markets remote-control-led demolition robots available indifferent sizes and equipped with a

variety of equipment alternatives forapplications in difficult and risk-filledenvironments.

Components and systems comprisesLövånger Elektronik and Texor, whichwork primarily with electronic solu-tions for customers in the IT sectorand mechanical solutions for custom-ers in the food processing andpharmaceutical industries.

The Timber Processing business area,which consists of Wallmark Såg andSvenska Träbroar, markets sawn tim-ber and processed timber products.

Sorb Industri noted generally favor-able business development during1998. The business areas Niche Prod-ucts and Components and systemsreported improved operating profit,while Timber Processing was affectedby falling prices for sawn timberproducts. Investments focused onincreased production capacity.

Sorb Industri companies reportednet sales of SEK 579 M (534), with 472(408) employees. Sales by comparableunits increased by slightly more than13 percent. Profit after financial itemsamounted to SEK 37 M (39).

Net sales: SEK 579 M (534)

Number of empoyees: 472 (408)

Brokk, a Sorb Industri company, producesremote-controlled demolition robots foruse in difficult and hazardous environments.

Greater interest in environmental andhealth considerations is also leading togrowing demands on the indoor envi-ronments we create. Other areas char-acterized as particularly rapid-growthsectors for installation services includeIT and personal safety installations.

General trends in earnings, operationsand markets show that BPA’s strategy iscorrect. The company’s positioning as apure installation company has confirmedthat rapid growth and stability can beachieved in an industrial sector charac-terized by sharp decline and crisisthroughout most of the 1990s.

Financial reporting


Board of Directors’ report

The Trelleborg Group is organized in eight business areaswith the emphasis on products and services within theIndustrial and Distribution sectors.

The 1998 financial year was characterized by expansionthrough acquisitions, but also through the establishmentof new operations and organic growth.

During spring and early summer 1999, the Board andexecutive management will provide information aboutfuture plans and intentions and will present ideas onpotential development opportunities.

Research and developmentDuring the year, the investment in a Technical Centerin Trelleborg, which was approved in 1997, proceededaccording to plan. To improve the services provided tothe Group’s various customer segments, investments arebeing made in and resources strengthened at the techni-cal centers established in Europe and North America.New products and product categories are being devel-oped within all of the business areas, in many cases inclose cooperation with customers.

Profit for the yearGroup profit after financial income and expense amountedto SEK 616 M (2,550). Net profit for the year totaledSEK 492 M.

The Group’s net debt increased by SEK 2,419 M andamounted to SEK 3,287 M at year-end. Of the increase,newly acquired units accounted for SEK 1,297 M andnet investments and changes in working capital forSEK 627 M.

On December 31, 1998, the Group had liquid fundsof SEK 855 M.

Employee incentive programDuring autumn 1998, all employees in the TrelleborgGroup’s Swedish units were invited to purchase convert-ible debentures in Trelleborg AB. Senior executives inSweden could choose between subscribing for converti-bles or warrants. Senior executives in Group companiesoutside Sweden were offered warrants if national lawsand administrative conditions so allowed.

Boliden to be spun offAs a decisive step in the Trelleborg Group’s concentrationof operations to its core business within the Industrialand Distribution sectors, the Trelleborg AB Board hasdecided to propose that the Annual General Meeting vote

on April 22, 1999 to spin off Trelleborg AB’s holding ofcommon stock in Boliden to Trelleborg’s shareholders.Trelleborg has undertaken to retain its holding of prefer-ence shares in Boliden until further notice.

Board and management changesAt the Trelleborg Annual General Meeting on April 24,1998, the Board thanked retiring member Sven Boreliusfor his ten years of service on the Board.

Ove Larsson and Lennart Nordström joined the Boardas new employee representatives, succeeding Arne Nilssonand Kerry Johansson. Yngve Söderberg and KerryJohansson were named deputy employee representatives,succeeding Stig-Erik Nyström and Lennart Nordström.

In January 1999, Trelleborg’s President and CEO KjellNilsson resigned his position. Fredrik Arp was appointednew President and Chief Executive Officer.

Work of the BoardThe Trelleborg AB Board of Directors consists of eightpersons elected by the Annual General Meeting and threemembers and three deputies elected by the employees astheir representatives. President and Chief ExecutiveOfficer Kjell Nilsson was a member of the TrelleborgBoard during 1998. He resigned from the Board inJanuary 1999.

Among the members elected by the Annual GeneralMeeting are persons with links to Trelleborg’s largestowner, the Dunker Foundation, as well as persons withno affiliations to the main owners. Other corporateexecutives take part in the Board’s meetings, either tomake presentations, or in an administrative function.Trelleborg AB’s General Counsel is also Board Secretary.

During the 1998 financial year, the Board assembledfor 4 (4) planned meetings and 1 (0) extra meeting.

The work of the Board follows an agenda, dedicatedto meeting the Board’s information requirements andformulated in accordance with the special proceduresestablished by the Board in regard to the division ofduties between the Board and Company President.

A Compensation Committee has been establishedwithin the company under the direction of the BoardChairman to address matters regarding salaries andconditions of employment for the President and toestablish guidelines for executives immediately sub-ordinate to the President.

During the period up to the 1999 Annual GeneralMeeting, this committee consists of Board ChairmanRune Andersson and Deputy Chairman Lennart Nilsson.

Trelleborg Group

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The Group’s unappropriated earnings,including profits from 1998, totaledSEK 6,050 M. SEK 0 M is required forappropriation to restricted reserves.

The Parent Company’s unapprop-riated earnings comprise retainedearnings from the previous year ofSEK 1,666,258 K, together with netincome for the year of SEK 4,428,747 K,a total of SEK 6,095,005 K.

The Board of Directors and thePresident propose that shareholders be

Proposed disposition ofunappropriated earnings

paid a cash dividend of SEK 2.00 (3.50)per share and share type, a total ofSEK 234,683 K, plus Trelleborg’s holdingof shares in Boliden – in proportion totheir holding of common stock inTrelleborg AB.

The Parent Company’s book valueof the common stock will be confirmedat the time of the Annual GeneralMeeting.

It is proposed that the remainingamount be carried forward.

Financial reporting


Consolidatedincome statement

SEK M Note 1998 1997

Invoiced sales 2 25,041 20,825

Cost of sales –20,164 –16,405

Gross income 4,877 4,420

Sales expenses –3,216 –2,422

Administrative expenses –887 –926

Research and development expenses –65 –134

Items affecting comparability 3 17 1,309

Other operating income 293 186

Other operating expenses –100 –143

Shares in results of associated companies 4 –183 319

Operating income 1, 5 736 2,609

Financial income and expenses 6 –120 –59

Earnings after financial items 616 2,550

Tax on the year’s earnings 7 –81 –510

Minority interest in the year’s earnings –43 –2

Net income 492 2,038

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SEK M 1994 1995 1996 1997 1998

Sweden 8,096 9,614 9,022 8,558 8,912

Other Nordic countries 1,415 1,463 1,375 1,153 7,084

Other European countries 6,725 7,609 7,840 7,095 5,957

North America 2,252 2,097 1,889 3,355 2,620

Latin America – – – – 209

Other markets 647 521 448 664 259

Total 19,135 21,304 20,574 20,825 25,041

Net sales by geograhic market

0

5,000

10,000

15,000

20,000

25,000

30,000

21,304 20,574 20,825 25,04119,135

1994Year 1995 1996 1997 1998

Net sales, SEK MOperating margin, %

0

1

2

3

4

5

6

3.6

5.7

3.84.7

3.7

SEK M %

0

400

800

1,200

1,600

2,000

1,810 877 1,300 7191,221

1994Year 1995 1996 1997 1998Operating income, excluding itemsaffecting comparability, SEK MReturn on operating capital employed, %

0

4

8

12

16

20

9.8

16.3

9.5

12.6

5.7

SEK M %

SwedenOther Nordic countriesOther European countries

North America

Latin America

Other markets

SEK M

1994Year 1995 1996 1997 19980

5,000

10,000

15,000

20,000

25,000

Net salesThe Group’s net sales in 1998 totaled SEK

25,041 M, compared with SEK 20,825 M in1997. Excluding Boliden, net sales in1997 amounted to SEK 16,622 M, whichreflects an increase of 51 percent in netsales by the Group’s Industrial sector andDistribution sector operations in 1998.

All Industrial sector business areasreported higher net sales in 1998. Net salesfor the sector totaled SEK 7,690 M (6,782),an increase of 13 percent. Most of theincrease was attributable to recentlyacquired companies.

Net sales by the Distribution sector roseto SEK 14,792 M (8,379), of which SEK

6,068 M was attributable to sales invoicedby the acquired operations of Starck-johann. Most of the increase in Ahlsell’snet sales was attributable to the acquisi-tion of Skoogs Elektriska.

Markets outside Sweden accounted for65 percent (59) of the Group’s total netsales.

Operating profitGroup operating profit totaled SEK 736 M(2,609). Operating profit for 1998 in-cluded participations in the pretax resultof Boliden Ltd, amounting to a loss ofSEK 244 M (profit: 589), and a capital gainof SEK 17 M from the divestment of Inter-trade and Chemtrade.

Operating profit for 1997 included acapital gain from the divestment of 55percent of the shares in Boliden totalingSEK 1,309 M.

The Group’s industrial and distributionoperations reported operating profit ofSEK 980 M, compared with SEK 711 M in1997, an improvement of 38 percent.

The operating profit of industrialoperations improved from SEK 446 M in1997 to SEK 558 M in 1998, an increase of25 percent.

All business areas reported improvedearnings in 1998, compared with thepreceding year. Trelleborg Automotivereported operating profit of SEK 222 M(178), an increase of 25 percent. Theearnings of Trelleborg Wheel Systems roseby 31 percent to SEK 127 M (97). Theoperating profit of Trelleborg EngineeredSystems amounted to SEK 119 M (106), anincrease of 12 percent. Trelleborg BuildingSystems reported earnings of SEK 135 M(112), an increase of 21 percent.

The operating profit of distributionoperations amounted to SEK 528 M (359).Results of the Starckjohann business areaare included in earnings for 1998 and, forcomparative purposes, results of thedivested Intertrade och Chemtrade opera-tions are included in figures for 1997.Excluding these changes, Distributionsector earnings improved by 26 percent

Ahlsell reported operating profit ofSEK 260 M (166), an increase of SEK 94 M.Recently acquired companies accountedfor SEK 53 M. Bröderna Edstrand reportedoperating profit of SEK 85 M (98).Earnings by Reynolds amounted to SEK 9 M(16). Starckjohann’s operating profittotaled SEK 182 M.

Other consolidated items yielded adeficit of SEK 123 M (deficit: 94).

In addition to Group-wide expenses,this item included Sorb Industri, Chap-man, participation in the result of theassociated company BPA, etc.

The net of financial income andexpenses resulted in an expense of SEK 120 M(expense: 59).

Profit after financial income andexpenses amounted to SEK 616 M (2,550).Excluding the effects of Boliden onGroup earnings, corresponding profitamounted to SEK 860 M (652), an im-provement of 32 percent.

Tax charges for the year totaled SEK 81 M(510), including taxes paid in an amountof SEK 39 M.

Net profit for the year totaled SEK 492 M(2,038), corresponding to SEK 4.20 pershare. Excluding Boliden, net profit wasSEK 742 M, or SEK 6.35 per share.

Comments on the consolidatedincome statement

Net sales and operating margin

Operating profit and return on capital


Financial reporting


December 31, SEK M Note 1998 1997

Assets

Fixed assets:

Intangible assets 8, 9 2,483 1,719

Tangible assets 10, 11 4,718 3,868

Financial fixed assets 12–16 4,167 4,174

Total fixed assets 11,368 9,761

Current assets:

Inventories 17 4,042 3,595

Current receivables 18, 19 4,233 4,252

Short-term investments 20 36 2,589

Cash and bank 819 984

Total current assets 9,130 11,420

Total assets 20,498 21,181

Shareholders’ equity, provisions and liabilities

Shareholders’ equity

Restricted equity: 21

Capital stock 2,934 2,934

Restricted reserves 1,991 2,001

Total restricted equity 4,925 4,935

Non-restricted equity: 22

Non-restricted reserves 5,558 4,078

Net income 492 2,038

Total non-restricted equity 6,050 6,116

Total shareholders’ equity 10,975 11,051

Minority interest 156 342

Provisions:

Provision for pensions and similar 23 568 768

Provision for deferred tax 24 34 105

Other provisions 25 448 409

Total provisions 1,050 1,282

Long-term liabilities:

Interest-bearing long-term liabilities 26–29 3,731 4,021

Other long-term liabilities 27 63

Total long-term liabilities 3,758 4,084

Current liabilities:

Interest-bearing current liabilities 30 319 272

Other current liabilities 31, 32 4,240 4,150

Total current liabilities 4,559 4,422

Total shareholders’ equity, provisions and liabilities 20,498 21,181

Contingent liabilities 33 249 329

Pledged assets 33 2,019 2,059

Consolidatedbalance sheet

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0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

1.3

0.6 0.5 0.4 0.4

%

Debt ratio

1994Year 1995 1996 1997 1998

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

12,4

496,

470

8,42

29,

059

9,89

49,

430

11,9

1911

,051

14,7

6210

,975

Capital employedShareholders’ equity

SEK M

1994Year 1995 1996 1997 1998

Shareholders’equity, SEK MBalance sheet total, SEK MEquity/assets ratio, %

0

5,000

10,000

15,000

20,000

25,000

30,000SEK M %

1994Year 1995 1996 1997 1998051015202530354045505560

6,47

0

9,05

9

9,43

0

11,0

51

10,9

75

19,9

87

19,4

64

19,0

29

21

,181

20

,498

32.4

46.649.6

53.8 54.3

AssetsIntangible fixed assets at year-end 1998amounted to SEK 2,483 M (1,719), mostof which was attributable to goodwillarising from acquisitions in the Group’sIndustrial and Distribution sectors.

Tangible assets amounted to SEK 4,718 M(3,868). Tangible assets in Group unitsacquired during the year amounted toSEK 764 M.

Gross investments during the yearamounted to SEK 806 M, with Industrialsector operations accounting for SEK 399 Mand Distribution operations for SEK 255 M.The sharp increase in investments inDistribution sector operations, comparedwith 1997, was attributable to investmentsin Starckjohann.

Gross investments exceeded deprecia-tion for the year by SEK 185 M.

Financial assets amounted to SEK 4,167 M(4,174). The book value of the holding inBoliden Ltd was SEK 2,289 M. The Group’s29.3 percent interest in BPA was bookedat SEK 354 M.

As at December 31, 1998, the marketvalue of the holdings in Boliden and BPAwas SEK 917 M and SEK 371 M, respectively.

Inventories at year-end amounted toSEK 4,042 M, an increase of SEK 447 Mcompared with a year earlier. Acquiredunits accounted for most of the increase,but a marginal increase was also noted ininventories of comparable units.

Short-term investments amounted toSEK 36 M (2,589). The figure for 1997included promissory notes totalingSEK 2,413 M for divested shares in BolidenLtd. The notes matured for payment onJune 18, 1998, whereby 1,119,445 shareswere returned to the Trelleborg Group onAugust 19.

Shareholders’ equity and liabilities

Shareholders’ equity at year-end 1998amounted to SEK 10,975 M (11,051).During the year, SEK 587 M was distrib-uted to shareholders. Shareholders’ equityper share totaled SEK 93.55.

Adjusted for the proposed spin-off ofthe Group’s current holding in Boliden,shareholders’ equity per share amountedto SEK 74.05.

Liabilities to minority interests decreasedduring the year to SEK 156 M. The changewas attributable to the Trelleborg Group’sincreased ownership interest in Starck-johann, which rose from 53.7 percent to85.2 percent.

Provisions at year-end amounted toSEK 1,050 M. A reversal of PRI pensionliabilities amounted to SEK 234 M.

Provisions for restructuring costsamounted to SEK 448 M. This includedprovisions made in connection withcompany acquisitions.

The Group’s interest-bearing liabilitiesand provisions totaled SEK 4,618 M,a decrease of SEK 443 M compared with ayear earlier. Long-term liabilities totalingSEK 3,731 M include liabilities of SEK 451 Mwith maturity periods of five years ormore.

The Group’s total assets at year-end1998 amounted to SEK 20,498 M. Theequity/assets ratio was 54.3 percent (53.8).

Adjusted for the proposed spin-off ofthe Group’s current shareholding inBoliden, total assets amounted toSEK 18,209 M and the equity/assets ratiowas 48.6 percent.

Comments on the consolidatedbalance sheet

Debt ratio

Capital structure

Equity/assets ratio andshareholders’ equity

Financial reporting


Consolidated statement of changes in financial position

SEK M 1998 1997

Earnings before tax 616 2,550

Paid tax –39 –92

Reversed:

Depreciation 621 686

Shares in results of associated companies less dividend received 193 –313

Total funds provided internally 1,391 2,831

Investments:

Gross in machinery and plant 806 963

Divestments of machinery and plant –52 –64

Divestments of participations inassociated companies and other shares 37 –10

Total investments, net 791 889

Change in working capital:

Inventories 358 12

Operating receivables 43 592

Operating liabilities 94 –550

Total change in working capital 495 54

Other items:

Long-term non-interest-bearing receivables and liabilities 348 807

Translation differences 325 127

Change in minority interest 229 –330

Total other items 902 604

Total funds utilized 2,188 1,547

Acquisitions –1,297 –4,153

Divestments 247 2,889

Total acquisitions/divestments –1,050 –1,264

Dividend –587 –424

Capital contribution 15 —

Change in financial fixed assets/liabilities –2,419 –404

Specification of change in financial assets/liabilities:

Change in long-term investments –144 –27

Change in liquid funds –2,718 –46

Change in interest-bearing long-term liabilities and provisions 490 –118

Change in interest-bearing current liabilities –47 –213

–2,419 –404

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Excluding existing plants in acquired companies

0

200

400

600

800

1,000

1,200

1,129 1,134 963 806650

SEK M

1994Year 1995 1996 1997 1998

SEK M

Year–8,000

–6,000

–4,000

–2,000

0

2,000637

–464 –868

–3,287

-5,979

1994 1995 1996 1997 1998

OtherChange in operating capitalDividendsGross investmentAcquisitions

Dividends fromassociated companiesSales of Intermarket

Earnings before depreciation

SEK M

InflowOutflow0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

The net of consolidated financial assets and liabilities amountedto an expense totaling SEK 3,287 M (expense: 868), representingan increase of SEK 2,419 M in the Group’s net debt.

Operations during the year generated a cash flow of SEK 292 M.Gross investments amounted to SEK 806 M.

Companies acquired during the year increased the Group’snet debt by a total of SEK 1,297 M, with Industrial sector opera-tions accounting for SEK 669 M of the increase and Distributionoperations for SEK 302 M. In addition, the Group re-acquiredproperties from a former sale/leaseback transaction.

The cash surplus from operations, defined as operating profitafter the reversal of depreciation, amounted to SEK 1,540 M.

Working capital increased by SEK 495 M, mainly as a result ofa slight increase in inventories.

Liquid fundsAt year-end 1998, Group liquid funds amounted to SEK 855 Mand included SEK 36 M (2,589) in short-term investments andSEK 819 M (984) in cash and bank deposits.

Short-term investments in 1997 included promissory notestotaling SEK 2,413 M related to divested shares in Boliden Ltd.The notes matured for payment on June 18, 1998. Payments inan amount of approximately SEK 47 M were not made, whereby1,119,445 shares in Boliden Ltd were returned to the TrelleborgGroup.

Long-term investmentsLong-term investments amounted to SEK 476 M, of whichSEK 443 M represents collateral for fulfilling commitments inaccordance with lease contracts related to plant sale/leasebacktransactions.

LiabilitiesAt year-end 1998, the Group reversed its pension liability toPRI in an amount of SEK 234 M. After reversal, the year’spension liability totaled SEK 568 M (768).

Group liabilities to credit institutions declined by SEK 535 Mto SEK 3,386 M at year-end. Of the total amount, SEK 115 M isdue for payment in 1999. During the year, Trelleborg AB issuedconvertible debentures to employees with an subscription priceof SEK 74.00. In total, the loan liability amounted to SEK 246 M.

Comments on the statement of changes infinancial position

Financial assets and liabilities

SEK M 1998 1997

Long-term investments 476 620

Short-term investments 36 2,589

Cash and bank deposits 819 984

To be deducted:

Interest-bearing provisions –568 –768

Interest-bearing long-term liabilities –3,731 –4,021

Interest-bearing short-term liabilities –319 –272

Net liabilities –3,287 –868

Investments

Financial net assets/liabilities

Change in net liability

Financial reporting


Income statement

SEK M Note 1998 1997

Sales expenses –26 —

Administration expenses 34, 35 –167 –139

Items affecting comparability 36 — –71

Other operating income 68 62

Other operating expenses –16 –6

Operating income –141 –154

Financial income and expenses 37 4,118 770

Earnings after financial items 3,977 616

Appropriations 38 452 277

Earnings before tax 4,429 893

Net income 4,429 893

Statement of changes in financial position

SEK M 1998 1997

Earnings before tax 4,429 893

Reversed:

Dividend –587 –424

Depreciation 5 4

Foreign exchange reserves –68 68

Share preminum reserve 15 —

Total funds provided internally 3,794 541

Investments:

Gross in machinery and plants 18 14

Net aquisition/sale of machinery and fixed assets — –7

Net aquisition/sale of shares 2,336 230

Total investments, net 2,354 237

Change in working capital:

Inventories 4 –1

Operating receivables 1,760 3,090

Operating liabilities –27 290

Total change in working capital 1,737 3,379

Total funds utilized 4,091 3,616

Change in financial fixed assets/liabilities –297 –3,075

Specification of change in financial fixed assets/liabilities:

Change in long-term investments 1,215 166

Change in liquid funds –415 –829

Change in interest-bearing long-term liabilities and provisions –1,147 –6,180

Change in interest-bearing current liabilities 50 3,768

–297 –3,075

Income statement Parent Companyand Statement of changesin financial position

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Balance Sheet, December 31, SEK M Note 1998 1997

Assets

Fixed assets:

Tangible assets 39, 40 62 49

Financial fixed assets 41, 42 12,085 8,534

Total fixed assets 12,147 8,583

Current assets:

Inventories 43 5 1

Current receivables 44, 45 6,548 4,788

Short-term investments 46 4 293

Cash and bank 189 315

Total current assets 6,746 5,397


Shareholders’ equity, provisions and liabilities

Shareholders’ equity

Restricted equity: 47

Capital stock 2,934 2,934

Share premium reserve 15 —

Restricted reserves 1,304 1,304

Total restricted equity 4,253 4,238

Non-restricted equity: 48

Profit brought forward 1,666 1,360

Net income 4,429 893

Total non-restricted equity 6,095 2,253

Total shareholders’ equity 10,348 6,491

Foreign exchange reserve 0 68

Provisions:

Provisions for pensions and similar 49 132 208

Other provisions 50 28 14

Total provisions 160 222

Long-term liabilities:

Interest-bearing long-term liabilities 51–53 7,709 6,500

Other long-term liabilities 11 —

Total long-term liabilities 7,720 6,500

Current liabilities:

Interest-bearing current liabilities 54 384 434

Other current liabilities 55, 56 281 265

Total current liabilities 665 699


Contingent liabilities 57 607 837

Pledged assets 57 673 613

Balance sheet,Parent Company

Financial reporting


To provide a true and fair picture of the Group’s position and earnings capacity ahead in time, theformal income statement and balance sheet for 1998 have been supplemented with income state-ments and balance sheets for remaining operations, that are based upon the situation that wouldexist if the current holding in Boliden is spun off to shareholders in May 1999, as proposed.

Pro forma,remaining operations

Income statement

SEK M 1998 1998Pro forma,

remaining operations

Net sales 25,041 25,041

Cost of sales –20,164 –20,164

Gross income 4,877 4,877

Selling, administrative and R&D expenses –4,168 –4,168Items affecting comparability 17 17Other operating income and expenses 193 193Result from participations in associated companies 61 –183

Operating income 980 736

Financial income and expenses –120 –120

Profit after financial items 860 616

Taxes –75 –81Minority interest in this year’s earnings –43 –43

Net income 742 492

Balance sheet

December 31, SEK M 1998 1998Pro forma,

remaining operations

Assets

Intangible fixed assets 2,483 2,483

Tangible fixed assets 4,718 4,718

Financial fixed assets 1,878 4,167

Inventories 4,042 4,042

Receivables 4,233 4,233

Liquid funds 855 855


Shareholders’ equity 8,686 10,975

Minority shares 156 156

Provisions 1,050 1,050

Long-term liabilities 3,758 3,758

Short-term liabilities 4,559 4,559


* Pro forma, remaining operations

Key figures

SEK M 1998* 1998

Return on shareholders’ equity, after full tax, % 7.5 4.5

Equity/assets ratio, % 48.6 54.3

Shareholders’ equity per share, SEK 74.05 93.55

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Accounting and

Trelleborg Group’s AccountsThe Trelleborg Group’s Accounts includethe Parent Company and all subsidiariesand associated companies. Subsidiariesrefer to companies in which Trelleborgowns more than 50 percent of the votingrights in the company. Associated compa-nies refers to companies in which Trelle-borg has long-term holdings which areequivalent to no less than 20 percent andno more than 50 percent of the votingrights.

The Consolidated Accounts have beenprepared in accordance with recommenda-tions by the Swedish Financial AccountingStandards Council which are essentiallyin accordance with IASC’s rules forconsolidated accounting.

Acquisition accounting has been applied.Companies acquired during the year havebeen included in the Consolidated IncomeStatement at values which were in line withvalues after the acquisition. Companieswhich were sold during the year have beenincluded in the consolidated result up tothe date of the sale.

Translation offoreign subsidiaries

The Trelleborg Group applies the so-calleddaily rate method for translating incomestatements and balance sheets of foreignsubsidiaries. This means that all items inthe income statement are translated at anaverage rate, whereas all assets and liabili-ties in the subsidiaries are translated at thebalance sheet date rate.

The translation differences which ariseare partly due to the effect of the differencebetween average income statement ratesand rates prevailing on the balance sheetdate, and partly to the fact that net invest-ments are translated at a different rate atthe end of the year than at the beginningof the year.

The translation differences are not trans-ferred to the Income Statement but areposted directly to shareholders’ equity.

Associated companiesHoldings in associated companies are reportedin accordance with the equity method. In theConsolidated Income Statement, profitparticipation in associated companies is shownas consolidated earnings before taxes andminority interest adjusted for write-offs on,or dissolutions of, any acquired overvalues orundervalues, respectively. The Group’s shareof the associated companies’ tax cost isincluded in the Group’s tax cost. Minorityinterest in profit/loss of associated companiesis shown in the Group’s minority interest.

Consolidated book value of the holding inassociated companies corresponds to theGroup’s share in the shareholders’ equity ofthe associated companies and any residualvalues of overvalues and undervalues whichhave arisen in the acquisition calculation.

Group contributionsContributions received and made arereported as appropriations.

TaxesLegislation in Sweden and certain other coun-tries provides companies with an opportunityto defer tax payments through appropriationsto non-taxed reserves.

The Consolidated Income Statement andBalance Sheet are shown exclusive of non-taxed reserves. In the Consolidated Accounts,the non-taxed reserves are divided intodeferred tax and shareholders’ equity. Thedeferred tax liability is entered at the actualtax rate in the country of domicile of therespective Group company. In the event of achange in the tax rate, the change in the taxliability is reported in the year’s results.

The Group also reports deferred tax onother differences between book and taxvalues on assets and liabilities. Deferred taxassets are reported only to the extent they arelikely to be utilized within the foreseeablefuture.

When calculating deferred tax, the actualnominal tax rate in the respective country hasbeen applied.

Valuation principles

Financial reporting


Minority interestMinority interest in subsidiaries and associ-ated companies, respectively, is reported asa share of earnings after tax in the Consoli-dated Income Statement.

Receivables and liabilitiesin foreign currency

Receivables and liabilities in foreigncurrencies are translated at balance sheetdate rates. Unrealized exchange gains onlong-term receivables and liabilities areappropriated to a foreign exchange reserve.

In the event of hedging using forwardcontracts, the current rate is applied on thedate the hedge is made in the valuation ofan underlying claim or liability. Wherehedging refers to estimated future commer-cial flows and a receivable or liability hasnot yet arisen, the valuation of thesecontracts has not affected the accounts.

The difference between the forward rateand the current rate at the time the contractis entered into is capitalized over the term ofthe contract. Income recognition of hedgingthrough forward contracts is made on thematurity of the underlying transaction, oralternatively, upon liquidation.

Other forward contracts are valuedaccording to the same principles as receiv-ables and liabilities in foreign currency.Advances from customers or to suppliershave not been revalued, but are shown atthe rate applicable when the advance wasreceived or given.

The Parent Company has taken loans, orforward contracts, in foreign currencies tooffset the main portion of net investmentsin foreign subsidiaries. The size of hedgingvaries from a maximum of the full value,including tax effects, down to the level atwhich the Group’s equity/assets ratio iskept intact even with fluctuations inexchange rates. Loans and contracts arevalued at the investment rate in the ParentCompany. In the Consolidated Balancesheet, these have been valued at the balancesheet date rate, in which exchange differ-

ences have been directly posted to share-holders’ equity to the extent they correspondto a translation difference posted thereduring the year for each subsidiary.

Exchange differences relating to currentbusiness operations have been credited/debited to operating income, whereasexchange differences of a financial naturehave been reported under financial incomeand expenses.

Inventories and receivablesInventories are shown at the lowest of acqui-sition value in accordance with the first in/first out principle (FIFO) and actual value.Adequate depreciation for obsolescence hasbeen made. Receivables are reported at theamounts which are expected to be realized.

Research and developmentThe majority of the costs for R&D is chargedimmediately to operating costs as they arise.

GoodwillGoodwill is written-off over economic life.Goodwill, which arises in connection withacquisitions of long-term strategic value,is written-off over a maximum period of20 years.

Tangible fixed assetsFixed assets are shown at their historicacquisition values less accumulated depre-ciation according to plan. Depreciationaccording to plan is based on historicacquisition costs of fixed assets.

Depreciation rates are calculated on theestimated economic life. For machineryand equipment, depreciation rates ofbetween 5 and 33 percent are applied, andfor buildings between 1.5 and 6 percent.For leasing assets, the annuity model is ap-plied, with depreciation to their estimatedvalue at the end of the contract period.

The Group’s leasing agreements relate toleases pertaining to operations.

Accounting andValuation principles

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Note 1Employees and costs

Average number of employees1998 1997

Number NumberWomen Men Total Women Men Total

Sweden 1,280 3,820 5,100 1,298 3,146 4,444Other Nordic countries 585 1,736 2,321 92 394 486Other European countries 786 2,664 3,450 801 2,514 3,315North America 473 1,388 1,861 507 1,479 1,986Other markets 158 1,005 1,163 78 767 845

Total consolidatedunits 3,282 10,613 13,895 2,776 8,300 11,076Companies which areno longer consolidated — — — 285 2,164 2,449

Total 3,282 10,613 13,895 3,061 10,464 13,525

During 1998, a remuneration of SEK 200 K (200) was paid to theChairman who is not employed in the Group. The other sevenBoard Members elected by the AGM, who are not employees in theGroup, received a remuneration totaling SEK 700 K (800), with 100 Kdistributed to each.

The President and CEO received a salary, bonus payment and pen-sion benefits as well as other remuneration totalling SEK 6,058 K

(6,113). Of this, SEK 2,546 K (2,286) represents pension benefits andSEK 787 K (1,089) bonus payment based on return on shareholders’equity.

In accordance with an agreement entered into, the President isentitled to retire at the age of 60 and his employment agreementhas a term of notice on the side of the Company of 36 months. Forsome other senior executives there are agreements regarding amutual right to early retirement at the age of 60 or 62. If such isthe case, compensation of 65 or 70 percent of the ordinary salaryis paid until the age of 65 when normal retirement pension is paid.For these persons in the Company Management, extended periodsof notice on the side of the Company are also applied, usually 18 or24 months.

Since the end of the 1998 financial year, but before the publicationof this annual report, a change of President has occurred. In thisconnection, SEK 20 M was reserved for severance payments inaccordance with the above conditions. The new President and ChiefExecutive Officer’s salary, estimated bonus, pension premiums andother remuneration for 1999 will total approximately SEK 5,540 K.Of the President’s total remuneration, pension benefits account forSEK 740 M and estimated bonus for SEK 800 M. Under the terms of anagreement, the President is entitled to retire as from the age of 60.Under the terms of his employment agreement, the President isentitled to receive a 24-month period of notice from the company.

A “Compensation Committee” chaired by the Chairman of theBoard of Directors deals with issues relating to salary and terms ofemployment for the President and draws up guidelines for personsat the level immediately below him.

the Consolidated AccountsNotes to

Wages, salaries, other remunerations and payroll overheads␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1998␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1997␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣Board and Other Total Board and Other TotalPresident* employees wages Presidentemployees wages

SEK M incl.bonus incl.bonus

Sweden 24 1,231 1,255 31 1,075 1,106Other Nordic countries 16 511 527 5 120 125Other European countries 25 776 801 19 673 692North America 2 470 472 5 398 403Other markets 9 29 38 2 17 19

Total consolidatedunits — — — 62 2,283 2,345Companies which areno longer consolidated — — — 8 595 603

Total 76 3,017 3,093 70 2,878 2,948

* Including former vice President.

␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1998␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1997␣ ␣ ␣ ␣ ␣ ␣Payroll Of which, Payroll Of which,

SEK M overheads pension cost overheads pension cost

Consolidatedunits 1,081 161 906 109Companies which areno longer consolidated — — 202 —

Note 2Net sales

By geographic market:SEK M 1998 1997Sweden 8,912 7,488Other Nordic countries 7,084 762Other European countries 5,957 4,817North America 2,620 3,169Other markets 468 568

Total consolidated units 25,041 16,804Companies which areno longer consolidated — 4,021Total 25,041 20,825

Net sales1) and operating profit by business area:

␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1998␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣ 1997␣ ␣ ␣ ␣ ␣ ␣ ␣ ␣

Sales Operating Sales OperatingSEK M income incomeTrelleborg Automotive 2,219 222 1,708 178

Trelleborg Wheel Systems 2,168 127 1,988 97Trelleborg Engineered Systems 2,571 119 2,529 106

Trelleborg Building Systems 1,178 135 928 112

Other –446 –45 –371 –47

Industrial sector 7,690 558 6,782 446Ahlsell 5,342 260 4,137 166

Bröderna Edstrand 2,328 85 2,146 98

Reynolds 1,054 9 966 16Starckjohann 6,068 182 — —

Intermarket (1997) — — 1,130 85

Other — –8 — – 6

Distribution sector 14,792 528 8,379 359Boliden2) — –244 4,203 589Other 2,651 –123 1,792 –94

Elimination –92 — –331 —

Items affecting comparability — 17 — 1,309

Total 25,041 736 20,825 2,609Group’s industrial anddistribution operations 25,041 980 16,622 711

1) Total sales. Elimination of internal sales within individual sectors is reported under item headed“Other”.2) As of July 1, 1997, Boliden is reported as an associated company

Financial reporting


Note 9 Intangible fixed assets

1998 Capitalized Concessions, Rental rights Goodwill Advances relating Totalexpenditure patents and and similar to intangible intangible

SEK M for R&D work licenses rights fixed assets fixed assets

Accumulated acquisition values:

On January 1 427 51 21 1,883 3 2,385

Acqusitions 2 — — 774 — 776

Investments 4 2 4 1 — 11

Divestments and scrappings –10 — — –24 — –34

Reclassifications — –5 5 — — 0

The year’s translation differences 39 4 3 115 — 161

Closing accumulated acquisition values 462 52 33 2,749 3 3,299Accumulated depreciation according to plan:

On January 1 –408 –25 –4 –229 — –666

Acqusitions — — — — — —

Divestments and scrappings 9 — — 15 — 24

The year’s depreciation according to plan –10 –5 –2 –111 — –128

Reclassifications — 5 –5 — — 0

The year’s translation differences –38 –1 –1 –6 — –46

Closing accumulated depreciation –447 –26 –12 –331 — –816

Residual valueaccording to plan on December 31 15 26 21 2,418 3 2,483

Note 8Intangible fixed assets

SEK M 1998 1997Capitalized expenditure for research and developmentwork and similar work 15 19Concessions, patents, licenses, brand-namesand similar rights 26 26Rental rights and similar rights 21 17Goodwill 2,418 1,654Advances relating to intangible fixed assets 3 3

Total 2,483 1,719

Note 6Financial income and expensesSEK M 1998 1997Result of other securities and receivables which are fixed assets:Interest 33 16Exchange rate differences 3 16Dividend and other financial income 9 10

Total 45 42Other interest income and similar income statement items:Interest 52 233Exchange rate differences 236 137Dividend and other financial income 1 4

Total 289 374Interest expenses and similar income statement items:Interest –271 –355Exchange rate differences –183 –120

Total –454 –475

Total financial income and expenses –120 –59

Note 7Tax on the year’s earnings

SEK M 1998 1997The year’s tax expense:Paid tax –39 –92Deferred tax expense –14 –166Tax on paticipations in associated companies –28 –84Deferred tax expense relating to itemsaffecting comparability — –168

Total –81 –510The tax authorities have queried previous year’s assessments of tax for the Parent Company and a number ofSwedish subsidiaries. Provisions have been made in respect of those cases which have been deemed to carry arisk of increased taxation.

Note 3Items affecting comparability

SEK M 1998 1997Capital gain on sale of Intertrade och Chemtrade 17 —Capital gain on sale of 55.1 percent of the sharesin Boliden Ltd — 1,468

Provisions for restructuring within the group — –159

Total 17 1,309

Note 4Shares in results of associated companies

Earnings after Net earnings Dividendfinancial items received

SEK M 1998 1997 1998 1997 1998 1997Boliden Ltd –244 262 –250 203 — —

Other associatedcompanies 61 57 39 32 10 6

Total –183 319 –211 235 10 6

Note 5Depreciation according to plan of intangible and tangiblefixed assets

SEK M 1998 1997Capitalized expenditure for research and developmentand similar work 10 1

Concessions, patents, licenses, and brand-names 5 5Rental rights and similar rights 2 1

Goodwill 111 67

Real estate 86 78Machinery and other technical plant 287 415

Equipment, tools, installations 120 85

Development under ground (1997: Jan–Jun) — 34

Total 621 686


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Note 10Tangible assets

SEK M 1998 1997Real estate 2,378 1,728

Machinery and other technical fixed assets 1,765 1,591Equipment, tools and installations 383 441

New construction in progress and advances relating to tangible assets 192 108

Total 4,718 3,868


Note 11 Tangible assets1998 Real estate Machinery and Equipment, New construction Total

other technical tools and in progress and tangiblefixed assets installations advances relating fixed

to tangible assetsSEK M fixed assets


On January 1 2,244 3,896 1,103 111 7,354

Acqusitions 690 121 25 — 836

Investments 117 378 128 172 795

Divestments and scrappings –222 –108 –348 –20 –698

Reclassifications 41 –141 171 –71 0

The year’s translation differences 177 125 46 3 351

Closing accumulated acquisition values 3,047 4,271 1,125 195 8,638

Accumulated depreciation according to plan:

On January 1 –552 –2,301 –662 –2 –3,517

Acqusitions –43 –19 –9 — –71

Divestments and scrappings 32 72 202 — 306

The year’s depreciation according to plan –86 –287 –120 — –493

Reclassifications — 115 –115 — 0

The year’s translation differences –82 –76 –38 — –196

Closing accumulated depreciation –731 –2,496 –742 –2 –3,971

Accumulated write-ups:

On January 1 53 1 — — 54

Acqusitions 3 — — — 3

The year’s write-ups — 1 — — 1

The year’s translation differences 9 — — — 9

Closing accumulated write-ups 65 2 — — 67

Accumulated write-downs:

On January 1 –17 –5 — –1 –23

Divestments and scrappings 17 — — — 17

The year’s write-downs –3 –7 — — –10

Closing accumulated write-downs –3 –12 — –1 –16

Planned residual value on December 31 2,378 1,765 383 192 4,718

The total tax assessment value for the Group’s Swedish real estate amounts to SEK 528 M (208), of which for buildings SEK 448 M (166). Companies included in theGroup rent real estate from renting companies. During 1998, rental charges amounted to SEK 46 M (76). The remaining rental period is 19 years on average.Most of the leased properties were repurchased during the year.

Note 12Financial fixed assets

SEK M 1998 1997Participations in associated companies 2,758 2,902Other shares 81 53

Other long-term securities holdings 476 620

Other long-term receivables 37 38Deferred tax liability 815 561

Total 4,167 4,174Long-term investments amounting to SEK 433 M form security for, among other things, fulfillment of obligationsin accordance with lease contracts in connection with sale/lease-back transactions relating to fixed assets,and for loan agreements entered into. The market value of the investments exceeds the book value.

Financial reporting


Note 13The Trelleborg Group’s holding of shares and participations in Group Companies*

Company Registration No Domicile/country Number Ownership,% Book value, SEK K

Chemtrade Holding AG Switzerland 100 100 3

AB Tegea 556030-7398 Trelleborg, Sweden 200,000 100 23

Tenabben AB 556118-4986 Trelleborg, Sweden 250 100 0

Oy Trelleborg Ab Finland 4,000 100 0

Trelleborg Automotive Group AB 556475-6087 Trelleborg, Sweden 1,000 100 0

Trelleborg Building Systems Group AB 556323-2585 Trelleborg, Sweden 1,000 100 0

Trelleborg Canada BV The Netherlands 41 100 709Bröderna Edstrand AB 556106-2174 Malmö, Sweden 20,000 100Trelleborg Wheel Systems Belgium NV Belgium 733,000 100Trelleborg GmbH Germany 150,000 100Elastomer-Technik-Mosbach GmbH Co KG Germany 100

Trelleborg Corporation USA 2,592 100 144Metech International, Inc USA 1,000 100Goodall Rubber Company USA 718,935 100Goodall Rubber Co of Canada Ltd Canada 100Trelleborg Wheel Systems Americas, Inc USA 1,000 100Trelleborg YSH, Inc USA 100,000 100

Trelleborg Engineered Systems Group AB 556055-7711 Trelleborg, Sweden 1,250 100 0

Trelleborg Fabrieken BV The Netherlands 80,000 100 0

Trelleborg Fond AB 556153-9817 Trelleborg, Sweden 10,000 100 1

Trelleborg Holding AB 556212-8255 Stockholm, Sweden 1,000 100 2,077Skoogs Elektriska AB 556073-7115 Malmö, Sweden 600,000 100SHS Efach grosshandel GmbH Germany 100Sorb Industri AB 556272-5282 Skellefteå, Sweden 512,660 95Starckjohann Oyj Finland 110,219,545 85Trelleborg Building Systems AB 556026-2148 Trelleborg, Sweden 12,000 100

Trelleborg Holding Danmark A/S Denmark 50,000 100 62

Trelleborg Holding France SA France 1 424,290 100 119Reynolds European SAs France 249,994 100Trelleborg Industrie SA France 1,025,000 100

Trelleborg Holding Italia S.p.a. Italy 200,000 100 0

Trelleborg Holding Norge A/S Norway 10,000 100 0

Trelleborg Holdings (UK) Ltd Great Britain 20,000,000 100 114Chapman Industries plc Great Britain 23,910,084 100Reyton Metals Ltd Great Britain 400,000 100Trelleborg Industries UK Ltd Great Britain 7,423,312 100

Trelleborg Industri AB 556129-7267 Trelleborg, Sweden 725,000 100 197

Trelleborg Industrie S.p.a. Italy 200,000 100 1

Trelleborg Insurance Ltd Bermuda 50,000 100 118

Trelleborg Kort AB 556119-8820 Trelleborg, Sweden 25,000 100 3

Trelleborg Protective Products AB 556010-7145 Trelleborg, Sweden 100,000 100 15

Trelleborg Wheel Systems Group AB 556041-6975 Trelleborg, Sweden 20,000 100 11

Trellswitch Intressenter AB 556052-1485 Trelleborg, Sweden 4,500,000 100 591Trelleborg Horda AB 556053-5832 Värnamo, Sweden 10,000 100

Trelltech AB 556012-9206 Trelleborg, Sweden 800,000 100 2,533Ahlsell AB 556054-9759 Sollentuna, Sweden 28,000 100

Total Parent Company 6,721

* The table shows directly and indirectly owned companies with combined sales in excess of SEK 250 M.A complete list of companies is attached to the Annual Report filed with the Swedish Patent and Registration Office, PRV.


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Note 15Other shares

1998, SEK M Other sharesAccumulated acquisition values:

On January 1 62

Acquisitions 48

Sales –22

The year’s translation differences 2

Accumulated closing acquisition values 90

Accumulated write-downs:

On January 1 –9

Closing accumulated write-downs –9

Book value on December 31 81

Note 14Shares and participations in associatedcompanies

1998, SEK M Participation in associatedcompanies


On January 1 2,712

Acquisitions 6

Reclassification 1

The year’s translation differences 60

Closing accumulated values 2,779

Proportion of non-distributed equity:

On January 1 190

Reclassification —

The year’s shares in results –211

Closing, non-distributed proportions of equity –21

Book value on December 31 2,758

Company Registration Domicile Propor- Propor- No. of Book Marketnumber tion of tion of shares/ value, value,

equity, % votes, % participations SEK M SEK M

Directly-owned:

BPA AB 556056-7298 Stockholm 29.33 29.55 19,178,952 354 371

Indirectly-owned:

Boliden Ltd Toronto 42.9 45,859,444 2,289 917

Dawson Manufacturing Co 45 189,090 71

Shanghai Ibercaucho Rubber Co 50 32 28

Other 16

Total 2,758

Note 18Current receivables

SEK M 1998 1997Accounts receivable – trade 3,030 3,026Bills receivable 127 129

Operating receivables 34 28

Prepaid tax 87 117Other current receivables 245 322

Prepaid expenses and accrued income 710 630

Total 4,233 4,252

Note 17Inventories

SEK M 1998 1997Raw materials and supplies 1,025 585

Work in progress 122 403Finished products and goods for resale 2,886 2,600

Construction work in progress 3 2

Advances to suppliers 6 5

Total 4,042 3,595

Note 16Deferred prepaid tax

Deferred prepaid tax has been recorded in connection with provisions and write-downs in acquisition balances.In addition, prepaid tax has been recorded with reference to unutilized losses carried forward to the extentthey are likely to be utilized within the foreseeable future.


Company Number of Book value Book value,shares/participations local currency, SEK M SEK M

PEAB AB 3,116,295 4.5 % 45 53

Other Swedish companies 2

Swedish companies 47

Total foreign companies 34

Total 81

Financial reporting


Note 21Restricted equity

SEK M 1998Opening balance on January 1, 1998 4,935Allocation to share premium reserve* 15Allocation to restricted reserves 0The year’s proportion of equity in associated companies –211Transfer between restricted and non-restricted equity 910The year’s translation difference –724

Closing balance on December 31,1998 4,925

* Allocation to share premium reserve; revaluation of convertible promissory note to market interest rate.

On December 31, 1998, the capital stock of Trelleborg AB amounted to SEK 2,933,538,100,distributed on 117,341,524 shares, each with a nominal value of SEK 25.00.

Class of share Number of shares Percent Number of votes Percent

Series A 12,000 000 10.23 120,000,000 53.25Series B 105,341,524 89.77 105,341,524 46.75

Total 117,341,524 100.00 225,341,524 100.00

Note 25Other provisions

SEK M 1998 1997Provisions for restructuring measures 345 346Other provisions 103 63

Total 448 409

Note 24Provisions for deferred tax

Provisions for deferred tax refers to deferred tax portion in untaxed reserves, deferred tax liability which hasbeen recorded with reference to surplus values in acquisition balances as well as deferred tax liabilities whichhave arisen as a result of accrual differences.

Note 23Provision for pensions, etc

SEK M 1998 1997Provisions for PRI-pensions 443 645Provisions for other pensions 125 123

Total 568 768

Note 22Non-restricted equity

SEK M 1998Opening balance on January 1, 1998 6,116Allocation to restricted reserves 0Dividend –587Transfer, proportion of equity in associated companies 211Transfer between restricted and non-restricted equity –910Net income for the year 492The year’s translation difference 728

Closing balance on December 31,1998 6,050

Note 19Prepaid expenses and accrued income

SEK M 1998 1997Interest 237 218

Rentals 37 55Other 436 357

Total 710 630

Note 20Short-term investments

SEK M 1998 1997Certificates of claim for sold Boliden shares — 2,413Investments in securities 36 176

Total 36 2,589


Note 26Interest-bearing long-term liabilities

SEK M 1998 1997Bond loans 1 1Liabilities to credit facilities 3,271 3,751Bank overdraft facilities 135 83Convertible debenture 246 —Other interest-bearing liabilities 78 186

Total 3,731 4,021

Note 27Liabilities to credit institutions

SEK M 1998 1997Maturity date 1–5 years from balance sheet date 3,085 519Maturity later than 5 years from balance sheet date 186 3,232

Total 3,271 3,751

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Note 30Interest-bearing current liabilities

SEK M 1998 1997Liabilities to credit institutions 115 170Other interest-bearing liabilities 204 102

Total 319 272

Note 29Other long-term liabilities

SEK M 1998 1997Maturity date 1–5 years from balance sheet date 59 186Maturity later than 5 years from balance sheet date 19 0

Total 78 186

Note 28Bank overdraft facilities

SEK M 1998 1997Granted credit limit 241 470Of which utilized 135 83Unutilized portion 106 387

Note 31Other current liabilities

SEK M 1998 1997Advances from customers 17 39Accounts payable-trade 2,414 2,352Bills payable 60 70Operating liability to associated companies 2 2Tax liability 86 65Other non-interest-bearing liabilities 561 477Accrued expenses and prepaid income 1,100 1,145

Total 4,240 4,150

Note 32Accrued expenses and prepaid income

SEK M 1998 1997Interest 290 248Rentals 2 71Wages and salaries 227 232Payroll overheads 137 107Other 444 487

Total 1,100 1,145

Note 33Contingent liabilities and pledged assets

SEK M 1998 1997Contingent liabilities:Discounted bills 1 —Pension commitments 45 88Guarantees and other contingent liabilities 203 241

Total 249 329

Pledged assets: 1998 1997

Liabilities Other Accounts Other Totalto credit interest-bearing payable

SEK M institutions liabilities – tradeReal estate mortgages 316 — 7 12 335 468Chattel mortgages 1,135 — — — 1,135 1,108Long-term investments 443 — — — 443 383Short-term investments — — 1 — 1 1Retention of title in machinery 19 — — — 19 17Shares 83 3 — — 86 75Other — — — — — 7

Total 1,996 3 8 12 2,019 2,059


Financial reporting


Note 35Depreciation according to plan of tangible fixed assets

SEK M 1998 1997Real estate –1 –2

Equipment, tools and installations –4 –2

Total –5 –4

Note 38Appropriations

SEK M 1998 1997Group contributions, received 431 351

Group contributions, provided –47 –6Appropriation to foreign exchange reserve 68 –68

Total 452 277

Note 37Financial income and expenses

SEK M 1998 1997Result from participations in Group companies:

Dividend 643 1,268

Result on sales 3,430 –224

Total 4,073 1,044Result from participations in associated companies:

Dividend 10 6

Total 10 6

Result from other securities and receivables which are fixed assets:

Interest income, Group companies 217 117

Interest income, other 36 27

Exchange rate differences 3 14

Dividend and other financial income 5 10

Total 261 168Other financial income and similar profit items:

Interest income, Group companies 308 141

Interest income, other –24 34

Exchange rate differences –21 –297

Dividend and other financial income 1 0

Total 264 –122Interest expenses and similar profit items:

Interest expenses, Group companies –180 –139

Interest expenses, other –150 –67

Exchange rate differences –160 –120

Total –490 –326

Total financial income and expenses 4,118 770

Note 36Items affecting comparability

SEK M 1998 1997Capital losses: – Sale of real estate — –71

Total — –71

Note 39Tangible fixed assets

SEK M 1998 1997Real estate 41 33

Equipment, tools and installations 21 14

New construction in progress and advances relating totangible assets 0 2

Total 62 49

Notes tothe Accounts of the Parent Company

Wages, salaries, other remunerations and payroll overheads

1998 1997Board and Other Total Payroll Of which, Board and Other Total Payroll Of which,President* employees wages and overheads pension President employees wages and overheads pension

SEK M salaries cost salaries cost

Sweden 8 28 36 22 10 7 25 32 15 5

* Including former vice President

Note 34Employees and costs

Average number of employees1998 1997

Number NumberWomen Men Total Women Men Total

Sweden 25 29 54 21 31 52

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Note 40 Tangible assets

1998 Real estate Equipment, New construction Totaltools and in progress and tangibleinstallations advances relating to fixed

SEK M tangible fixed assets assets


On January 1 42 22 2 66

New acquisitions 7 11 — 18

Acquisitions by subsidiaries — — — —

Divestments and scrappings — –1 — –1

Reclassifications 2 — –2 0

Advances paid during the year — — — —

Closing accumulated acquisition values 51 32 0 83

Accumulated depreciation according to plan:

On January 1 –9 –8 — –17

Acquisitions by subsidiaries — — — —

Divestments and scrappings — 1 — 1

Reclassifications — — — —

The year’s depreciation according to plan –1 –4 — –5

Closing accumulated depreciation –10 –11 — –21

Planned residual value on December 31 41 21 0 62

Tax assessment values, buildings 15

Tax assessment values, land 2

Note 45Prepaid expenses and accrued income

SEK M 1998 1997Interest 234 210Rentals 1 0

Other 6 13

Total 241 223

Note 46Short-term investments

SEK M 1998 1997Listed shares 1 2

Promissory note receivables 3 100

Other — 191

Total 4 293

Note 41Financial fixed assets

SEK M 1998 1997Participation in Group companies (Note 13 and Note 42) 6,721 4,372

Receivables from Group Companies 4,437 3,279

Participation in associated companies (Note 14) 301 298Participation in other companies (Note 15) 1 17

Other long-term securities holdings 625 568

Total 12,085 8,534

Other long-term securities holdings:Other long-term securities holdings consist of interest-bearing securities and receivables, intended for long-termholding. Of these, SEK 443 M form security for, among other things, fulfillment of commitments in accordance withrental agreements in connection with sale/lease-back transactions relating to fixed assets, and for loan agreementsentered into. The market value on the investments exceeds book values.

Note 43Inventories

SEK M 1998 1997Finished products and goods for resale 5 1

Note 42Participations in Group companies

SEK M 1998Opening balance on January 1, 1998 4,372

Additional:New acquisition 163

Increase in capital 2,868

Deductible:Divested shares –682

Closing balance on December 31, 1998 6,721

See also Note 13.

Note 44Current receivables

SEK M 1998 1997Non-financial receivables:Accounts receivable – trade 1 0

Operating receivables, Group companies 10 7Operating receivables, associated companies 0 0

Prepaid tax 5 5

Other current receivables 11 25Prepaid expenses and accrued income 241 223

Total 268 260Financial receivables:Financial receivables, Group companies 6,280 4,528

Total current receivables 6,548 4,788


Financial reporting


Note 47Restricted equity


Share premium reserve* 15


* Allocation to share premium reserve; revaluation of convertible promissory note to market interest rate.

On December 31, 1998, the capital stock of Trelleborg AB amounted to SEK 2,933,538,100,distributed on 117,341,524 shares, each with a nominal value of SEK 25.00.

Class of share Number of shares Percent Number of votes Percent

Series A 12,000 000 10.23 120,000,000 53.25Series B 105,341,524 89.77 105,341,524 46.75

Total 117,341,524 100.00 225,341,524 100.00

Note 57Contingent liabilities and pledged assets

SEK M 1998 1997Contingent liabilities:Pension commitments 4 4Guarantees and other contingent liabilities 603 833

Total 607 837

Of which, for subsidiaries 530 719

Pledged assets:Liabilities to

SEK M credit institutionsChattel mortgages 230 230

Long-term investments 443 383

Total 673 613

Note 56Accrued expenses and prepaid income

SEK M 1998 1997Interest 251 232

Wages and salaries 10 9Payroll overheads 4 4

Other 4 7

Total 269 252

Note 55Other current liabilities

SEK M 1998 1997Accounts payable – trade 10 8

Operating liabilities, Group companies 1 4

Operating liabilities, associated companies 0 0Other non-interest-bearing liabilities 1 1

Accrued expenses and prepaid income 269 252

Total 281 265

Note 54Interest-bearing current liabilities

SEK M 1998 1997Other interest-bearing liabilities, Group companies 384 434

Note 53Bank overdraft facilities

SEK M 1998 1997Granted credit limit 100 216

Of which utilized 16 11Unutilized portion 84 205

Note 52Liabilities to credit institutions

SEK M 1998 1997Maturity date 1–5 years from balance sheet date 2,529 —

Maturity date later than 5 years from balance sheet date — 2,930

Note 51Long-term interest-bearing liabilities

SEK M 1998 1997Liabilities to credit institutions 2,529 2,930

Bank overdraft facilities 16 11

Convertible debenture 246 —Other interest-bearing liabilities 4,918 3,559

Total 7,709 6,500

Note 50Other provisions

SEK M 1998 1997Provisions for environmental commitments 8 14Provision for severance payments 20 —

Total 28 14

Note 49Provisions for pensions, etc

SEK M 1998 1997Provisions for PRI-pensions 121 196Provisions for other pensions 11 12

Total 132 208

Note 48Non-restricted equity


Dividend –587

Net income fot the year 4,429



Fina

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To the Annual General Meeting of Trelleborg AB:We have audited the Annual Report, the consolidated financialstatements, the accounting records and the administration of theBoard of Directors and the President of Trelleborg AB for theyear 1998. These accounting records and the administration ofthe Company are the responsibility of the Board of Directorsand the President. Our responsibility is to express an opinion ofthe Annual Report, the consolidated financial statements andthe administration on the basis of our audit.

Our audit was carried out in accordance with generally-accepted auditing standards. This means that we have plannedand performed the audit to reasonably assure ourselves that theAnnual Report and the consolidated financial statements are freeof any material errors. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes an assessment of theaccounting principles used and their application by the Board ofDirectors and the President, as well as an evaluation of the over-all presentation of information in the Annual Report and theconsolidated financial statements. We have examined significantdecisions, measures taken and the circumstances of the Com-pany in order to determine the possible liability of any memberof the Board or the President for damages to the Company orwhether they have in some way acted in violation of the SwedishCompanies Act, the Annual Accounts Act, or the companiesarticles of association. We believe that our audit has provided uswith a reasonable basis for our opinion as set forth below.

In our opinion, the Annual Report and the consolidated finan-cial statements have been prepared in accordance with theAnnual Accounts Act, and therefore we recommend:

– that the income statements and the balance sheets of theParent Company and the Group be adopted, and

– that the earnings of the Parent Company be dealt with inaccordance with the proposal in the Board of Directors’ Report.

In our opinion, the members of the Board of Directors andthe President have not committed any act or been guilty of anynegligence, which could give rise to any liability to the Company.We therefore recommend:

– that the Members of the Board of Directors and thePresident be discharged from liability for the financial year.

Trelleborg, March 8, 1999.

Auditors’ Report forTrelleborg AB

Reg. No. 556006-3421

Trelleborg in March 1999

Rune Andersson Lennart Nilsson Hans Cavalli-BjörkmanChairman of the Board

Sven Olving Erik Penser Didrik Normark

Berthold Lindqvist Rolf Kjellman Kim Davidsson

Lennart Nordström Ove Larsson Fredrik ArpPresident and CEO

Reidar Peters Thomas ThielAuthorized Public Accountant Authorized Public AccountantArthur Andersen AB KPMG Bohlins AB


Board of DirectorsElected by Annual General Meeting

Rune AnderssonChairman of the Board.Chairman of ABElectrolux and SvedalaIndustri AB. Boardmember of Henry ochGerda Dunker’s Founda-tion and Donation FundNo. 2.Holdings: 407,500shares (in associatedcompany).Age 54. Elected 1983.

Lennart NilssonDeputy Chairman.Chairman of Celsius AB,the Association ofSwedish EngineeringIndustries and LundUniversity. Deputychairman of Cardo AB.Board Member of ABIndustrivärden, GorthonLines AB, CrafoordskaStiftelsen, Henry ochGerda Dunker’s Founda-tion and DonationFund No. 2 and othercompanies.Holdings: 0 shares.Age 58. Elected 1985.

HansCavalli-BjörkmanBoard Member.Former President ofSkandinaviska EnskildaBanken. Chairman ofSalus Ansvar HoldingAB and other compa-nies. Board Member ofHöganäs AB, Platzerfastigheter AB andother companies.Holdings: 702 shares.Age 70. Elected 1970.

Sven OlvingBoard Member.Former Chancellor ofChalmers Instituteof Technology. Chairmanof Chalmers industri-teknik and CIT EnergyManagement AB.Holdings: 0 shares.Age 70. Elected 1988.

Erik PenserBoard Member.Chairman of ErikPenser FondkommissionAB and Yggdrasil AB.Board Member of Ideon,Cortecs plc and othercompanies.Holdings: 0 shares.Age 56. Elected 1988.

Didrik NormarkBoard Member.President and CEO ofElektrokoppargruppen.Chairman of Dahrén-tråd and EKS Isodraht.Board Member ofHenry och GerdaDunker’s Foundationand Donation FundNo. 2.Holdings: 1,000 shares.Age 62. Elected 1994.

Berthold LindqvistBoard Member.Chairman of ABMunters, BoardMember of Gambro AB,Pharmacia & Upjohn,Inc, PLM AB andSecuritas AB.Holdings: 1,000 shares.Age 60. Elected 1996.

Rolf KjellmanBoard Member.Executive Member ofHenry och GerdaDunker’s Foundationand Donation FundNo. 2. President ofHenry DunkersFörvaltnings AB.Holdings: 500 shares.Age 59. Elected 1997.


Kim DavidssonEmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(LO).Holdings: 122 sharesand 1,500 convertibles.Age 52. Elected 1994.

Lennart NordströmEmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(PTK).Holdings: 600 sharesand 3,500 convertibles.Age 62. Elected 1990.

Ove LarssonEmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(PTK).Holdings: 3,700 sharesand 2,100 convertibles.Age 62. Elected 1998.

Kerry JohanssonDeputy EmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(LO).Holdings: 0 shares and0 convertibles.Age 49. Elected 1997.

Anja GustafssonDeputy EmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(PTK).Holdings: 1,200 sharesand 3,500 convertibles.Age 54. Elected 1997.

Yngve SöderbergDeputy EmployeeRepresentative.Elected by the Unionsof the Trelleborg Group(LO).Holdings: 0 shares and0 convertibles.Age 54. Elected 1998.

AuditorsReidar PetersAuditor.Authorized PublicAccountant, ArthurAndersen AB.Deputy Auditor 1970,Auditor since 1977.Holdings: 0 shares.Age 59.

Thomas ThielAuditor.Authorized PublicAccountant, KPMGBohlins AB.Deputy Auditor 1983,Auditor since 1985.Holdings: 0 shares.Age 51.

Hans PihlDeputy Auditor.Authorized PublicAccountant, ArthurAndersen AB.Deputy Auditor since1984.Holdings: 0 shares.Age 47.

Alf SvenssonDeputy Auditor.Authorized PublicAccountant, KPMGBohlins AB.Deputy Auditor since1988.Holdings: 0 shares.Age 49.

Board of DirectorsAppointed by employees


Group management

Notes: The call options referred to were issued by theDunker funds and foundation (Förvaltnings AB H.D.)in April 1994 and entitle holders to purchase a corre-sponding number of B shares at a share price ofSEK 125:00 during the period March 15 to April 15, 1999.

The convertibles referred to relate to a convertibledebenture loan issued in accordance with Chapter 5of the Swedish Companies Act (1975:1385), whichgives holders the right to convert their debenturesinto a corresponding number of new B shares inTrelleborg AB at a price of SEK 74:00 during the periodFebruary 21, 2003 to April 15, 2004.

The warrants referred to provide holders with theright to subscribe for a corresponding number of newB shares in Trelleborg AB at a price of SEK 74:00 duringthe period February 21, 2003 to April 15, 2004.

Lars WallenbergSenior Vice President,General Counsel andCorporate Secretary.Holdings: 96 shares and 15,000call options, 7,600 warrants and19,400 convertibles.Age 47. Employed 1981.

Leif ÖbergSenior Vice President,Corporate Communicationsand Investor Relations.Holdings: 21,000 shares, 10,000call options, 7,600 warrants and19,400 convertibles.Age 52. Employed 1978.

Sören AnderssonSenior Vice President,Human ResourcesHoldings: 0 shares and10,100 convertibles.Age 43. Employed 1998.

Lars Olof NilssonSenior Vice President,Group TreasuryHoldings: 1,800 shares and27,000 warrants.Age 36. Employed 1988.

Gertrud AnderssonSenior Vice President, Finance.Holdings: 13,638 shares,7,600 warrants and 19,400convertibles.Age 54. Employed 1963.

Hans PoratExecutive Vice President,Chief Operational Officerand President of Trelleborg’sIndustrial sector.Holdings: 2,000 shares(in spouse’s name), 7,600 war-rants and 19,400 convertibles.Age 43. Employed 1997.

Bo HedenströmPresident of Ahlsell,Holdings: 0 shares, 7,600warrants and 19,400convertibles.Age 45. Employed 1998.

Fredrik ArpPresident, Chief ExecutiveOfficer and President ofTrelleborg’s DistributionSector.Holdings: 51,549 shares.Age 45. Employed 1999.(Previously employed1985–1996).

Claes JörwallSenior Vice President,Taxes and Group Structure.Holdings: 473 shares.(in own and family members’name), 7,600 warrants and19,400 convertibles.Age 45. Employed 1988.


Five year-review

Trelleborg Group (SEK M unless otherwise stated) 1998 1997 1996 1995 1994

Net sales and earnings:Net sales 25,041 20,825 20,574 21,304 19,135Items affecting comparability 17 1,309 — 1,966 213Operating profit(including shares in results of associated companies) 736 2,609 877 3,776 1,434Profit after financial items 616 2,550 1,018 3,512 904Taxes –81 –510 –16 –639 –238Minority shares –43 –2 1 –10 –14

Net income for the year 492 2,038 1,003 2,863 652

Capital structure:Intangible fixed assets 11,368 9,761 8,109 9,076 11,931Tangible fixed assets 9,130 11,420 10,920 10,388 8,056

Total assets 20 498 21,181 19,029 19,464 19,987

Shareholders’ equity 10,975 11,051 9,430 9,059 6,470Minority shares 156 342 12 3 3Provisions 1,050 1,282 1,842 1,107 1,125Long-term liabilities 3,758 4,084 3,714 4,241 6,512Current liabilities 4,559 4,422 4,031 5,054 5,877

Total shareholders’ equity, provisions and liabilities 20,498 21,181 19,029 19,464 19,987

Key figures:Equity/assets ratio, % 54.3 53.8 49.6 46.6 32.4Debt ratio, times 0.4 0.4 0.5 0.6 1.3Capital turnover rate, times 1.6 1.4 1.4 1.5 1.2Operating margin, excluding items affecting comparability, % 3.7 4.7 3.8 5.7 3.6Return, excluding items affecting comparability,on capital employed in operations, % 5.7 12.6 9.5 16.3 9.8Profit margin, % 2.4 6.0 4.9 7.3 3.6Return on total capital employed, % 5.5 25.5 9.6 36.2 11.2Return on shareholders’ equity, after full tax, % 4.5 19.9 10.9 36.2 10.5Earnings per share, SEK 4.20 17.40 8.60 24.40 5.60Ditto, excluding items affecting comparability, SEK 4.05 7.65 8.60 10.20 2.75Earnings per share, after full tax and after full conversion, SEK 4.20 — — — —Shareholders’ equity per share, SEK 93.55 94.20 80.40 77.20 55.20

Other information:Average number of employees 13,895 13,525 13,086 12,421 12,351 – of whom, abroad 8,795 7,512 5,605 5,530 5,055Investments in plants (excluding existing plants in acquired companies) 806 963 1,134 1,129 650Financial net assets/liabilities –3,287 –868 –464 +637 –5,979

FINANCIAL DEFINITIONS

Return on operating capital: Operating capital before financial items,including minority interests, divided by average total assets (calculated onclosing balance each month), less interest-bearing investments and non-interest-bearing operating liabilities.

Capital turnover rate: Net sales in relation to average capitalemployed in operations.

Operating margin: Operating profit before financial items and sharesin the profit/loss of associated companies in relation to net sales.

Earnings after full tax per share, SEK: Earnings after financial incomeand expenses, less full tax (adjusted for tax-free dividends), in relation toaverage number of shares outstanding before and after items affectingcomparability.

Return on capital employed in operations: Operating profit beforefinancial items, including minority interests shares, divided by averagetotal assets (based on each closing balance), minus interest-bearinginvestments and non-interest-bearing operating liabilities.

Return on shareholders’ equity after full tax: Profit/loss for theyear in relation to average shareholders’ equity.

Debt/equity ratio: Current and long-term liabilities in relation toshareholders’ equity, plus minority interests.

Equity/assets ratio: Shareholders’ equity plus minority interests inrelation to total assets.

Profit margin: Earnings after net financial income and expenses,excluding items affecting comparability, in relation to net sales.


Trelleborg’s Series B shares have been traded on the Stock-holm Stock Exchange since 1964.

The capital stock of Trelleborg AB amounts to SEK

2,933,538,100, represented by 117,341,524 shares with anominal value of SEK 25:00 each. On May 30, 1997, the Com-pany’s former Series C and Series D shares were converted intoSeries B and Series A shares, respectively, in accordance with adecision by the AGM.

Following the conversion, there are only two classes ofshares: 12,000,000 Series A shares and 105,341,524 Series Bshares. All of the Series A shares carry ten votes and Series Bshares one vote each. All the Series A shares are owned by theDunker Funds and foundations.

Share price and tradingThe bid rate of Trelleborg series B shares declined by 34 per-cent (+10) in 1998, while the “Veckans Affärer” Total Indexrose by 10 percent (25) and the 16-most traded shares indexincreased by 18 percent (26). Over a five-year period, 1994–1998, the price of Trelleborg series B shares declined by anaverage of 4 percent annually, whereas VA’s Total Index roseby an average of 19 percent annually and the 16 most-tradedshares index increased by 20 percent annually.

During 1998, approximately 114 million Trelleborg shareswere traded on the Stockholm Stock Exchange, comparedwith about 150 million in the previous year, correspondingto 97 percent (128) of the total number of shares in thecompany, at a value of SEK 10,839 M (17,823). In turn, thisconstituted 0.7 percent (1.2) of all shares on the stock mar-ket’s A-List and 0.6 percent (1,5) of total stock market trading.

In 1998, Trelleborg was the 26th most-traded share in

terms of value and 28th most-traded share on the StockholmStock Exchange. Average daily trading amounted to approxi-mately 454,065 shares (600,600) or SEK 43 M (72). Purchasesand sales by foreign investors resulted in a net export ofTrelleborg shares of SEK 10 M during the period January–November 1998, compared with a net import of SEK 113 Mduring the corresponding period of 1997.

Of the total number of shares, non-Swedish shareholdersaccounted for 26.8 per cent (20.3) at year-end 1998. The per-centage of institutional ownership, including Dunker interests,was 42.0 percent (46.6) in Sweden and 26.2 percent (19.7)abroad, representing a combined total of 68.2 percent (66.3).

The information is based on the official share register andnominee list as per December 31, 1998.

The value of units in the Company-related savings plan,Trelleborg Allemansfond, declined by 26.5 percent (+11)during 1998.

Beta valueThe beta value is a measurement of risk that shows a share’sprice sensitivity compared with the stock market as a wholeover a five-year period. According to the Stockholm StockExchange’s measurement based on a rolling 48-monthperiod, the beta value of Trelleborg’s Series B share amountedto 1.35 (1.22). This means that during 1998, the price of theTrelleborg share fluctuated 35 percent more than the totalnumber of shares on the Stockholm Stock Exchange, meas-ured in a value-weighted index.

The characteristic line was 0.55 (0.47) which means that55 percent of the price trend for Trelleborg shares is explainedby the general stock market trend.

Share capital andownership

Prices paid on theStockholm Stock Exchange

Trelleborg B Low, SEK High, SEK

1994 76.00 126.00

1995 69.00 121.50

1996 70.00 96.50

1997 89.00 142.00

1998 57.00 124.50

The average market price of the share during1998 was SEK 92.68 (120.32).

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

30

60

90

120

150

180

210

240SEK M Volume

1994 1995 1996 1997 1998 1999

Price trend of Trelleborg Series B shares onthe Stockholm Stock Exchange 1994–1998

The “Affärsvärldens” GeneralIndex at the end of the month

Series B share

Number of shares traded ineach month ’000, inclpost-reported transactions


The largest shareholders in Trelleborg ABNumber Percent of Percent

Owner of shares share capital of votes

Dunker funds and Foundation 12,186,000 10.39 53.34MSF- and FVF-Mutual Funds (USA) 6,470,400 5.51 2.87Fourth AP-fund (SWE) 5,769,204 4.92 2.56S-E Banken’s unit trusts, etc (SWE) 5,649,716 4.81 2.51Boston Safe Deposit (USA) 5,330,603 4.54 2.37Försäkrings AB SPP Ömsesidigt (SWE) 5,051,590 4.31 2.24Folksam Liv, etc (SWE) 4,067,060 3.47 1.80Principal Mutual LifeInsurance Company (USA) 3,969,000 3.38 1.76Skandia Försäkr. and unit trusts (SWE) 3,067,981 2.61 1.36Odin Fondene (NOR) 2,454,200 2.09 1.09Other 69,444 shareholders 63,325,770 53.97 28.10

Total 117,341,524 100.00 100.00

Distribution of shares, December 31, 1998At the 1998/1999 turn of year, the number of shareholdersamounted to 69,454 (74,325) of whom 44,553 (47,708)were directly registered and 24,901 (26,617) nominee-regis-tered.

Number of Percent of Change, percentHolding shareholders total shares from Dec 31, 1997

1–1,000 62,842 13.29 –0.881,001–5,000 5,495 10.65 –0.335,001–50,000 977 11.00 –0.3150,001– 140 65.06 +1.52

Total 69,454 100.00

Average number of shares after full conversion:1998 1997 1996 1995 1994

117,341,524 117,341,524 117,341,524 117,341,524 117,341,524

Class of share No of shares Percent No of votes Percent

Series A 12,000 000 10.23 120,000,000 53.25Series B 105,341,524 89.77 105,341,524 46.75

Total 117,341,524 100.00 225,341,524 100.00

Data per Series B share 1998 1997 1996 1995 1994

Earnings after full tax, SEK 4.20 17.40 8.60 24.40 5.60Ditto, exclusive items affecting comparability, SEK 4.05 7.65 8.60 10.20 2.75Earnings after full tax and full conversion, SEK 4.20 — — — —Shareholders’ equity per share, SEK 93.55 94.20 80.40 77.20 55.20Dividend, SEK 2.001) 3.502) 3.00 3.003) 1.00Yield, % 3 3.5 3.3 7.14) 0.9

Market price, December 31, SEK 66.00 100.00 90.50 70.50 108.50P/E ratio 16 135) 11 75) 19

1) According to the Board of Director’s proposal, excluding the spin off to shareholders of Trelleborg’s holding of Boliden shares.Market value on February 9, 1999, SEK 4.80 per Trelleborg share.

2) Excluding special dividend of SEK 1.503) Excluding special dividend SEK 2.004) Including special dividend SEK 2.005) Excluding items affecting comparability

Decision on new stock issueAt the Annual General Meeting on April 24, 1998, the Boardof Directors was granted continued authority up to the nextAGM to make a decision regarding a new stock issue with pre-emption from the shareholders’ preferential rights. An issue ofthis type will be directed at the international capital marketand total no more than 10 percent of all shares outstanding on

the issue date, and will be subject to the same market termsthat are generally applied to similar issues.

Dividend policyAs stated in the past, the Board of Directors is of the opinionthat long-term dividends should correspond to about onethird of profit for the year.


Growth in capital stockImmediately before its introduction on the Stockholm StockExchange in 1964 Trelleborg had a capital stock of SEK 63 M.In 1966, a directed non-cash issue for SEK 2.6 M was made onthe acquisition of Ulvex AB. As a result of new stock issue in1969 (2:5) at a price of SEK 100) and 1976 (1:3 at SEK 110)the capital stock was increased by SEK 26.2 M and SEK 30.6 M.In 1978, a directed non-cash issue for SEK 3.2M was made onthe acquisition of Tekniska Gummifabriken Jakobsberg AB.Thereafter, stock issues have been made as shown in thefollowing table.

Increase in TotalYear Issues capital stock, SEK capital, SEK

1982 Directed new issue at SEK 125.00to Aritmos and others 42,000,000 167,611,200

1984 Stock dividend 1:4, split 4:11) 41,902,800 209,514 000

1986 Directed new issue at SEK 95.00to Sävsjö Fälgar AB 6,875,000 216,389,000

1986 Directed new issue at SEK 95.00to acquire Boliden shares 95,150,000 311,539,000

1987 Stock dividend 1:1 311,539,000 623,078,000

1987 Conversion ofsubordinated debentures 15,587,125 638,665,125

1988 New issue 1:5 of Series C andSeries D shares (bonus shares)2) 127,733,025 766,398,150

1988 Directed new issue to acquireBoliden shares and convertibles 39,559,750 805,957,900

1988 Conversion ofsubordinated debentures 934,150 806,892,050

1989 Directed new issue to acquireBoliden convertibles 7,787,700 814,679,750

1989 Conversion ofsubordinated debentures 60,100 814,739,850

1989 Stock dividend 1:1 814,739,850 1,629,479,700

1989 Conversion ofsubordinated debentures 17,075 1,629,496,775



1992 New issue 1:5 at SEK 70.00 325,948,675 1,955,692,075

1993 New issue 1:2, at SEK 30.00 977,846,025 2,933,538,100

1) 5 new shares, each with a nominal value of SEK 25.00 were received for every oldshare with a nominal value of SEK 100.00, of which 1 (one) through stock dividendand 4 through split.

2) At SEK 200.00 (restricted shares) and SEK 260.00 (unrestricted shares), respectively.

Convertibles programThe Parent Company issued a convertible debenture loan inNovember 1998, which was offered to all employees withinTrelleborg’s companies in Sweden. The SEK 261 M loan carriesinterest at a fixed rate based on the 12-month STIBOR*minus 0.6 percent. For the first interest-rate period, whichextends to February 20, 1999, the interest rate is linked to 90days STIBOR minus 0.6 percent. Conversion to shares maytake place during the period February 21, 2003 throughApril 15, 2004 at a conversion price of SEK 74.00. If thennual General Meeting approves the Board’s proposal thatthe Boliden holding be spun off to shareholders, this willprobably result in the conversion price being reduced.

A capital discount of SEK 15 M, which has been calculatedbased on the difference between the company’s convertibleloan interest rate and the market interest rate has been cred-ited to restricted equity, the share premium reserve, in boththe Parent Company and the Group. The discount is expensedas interest during the loan period.

If the entire debenture loan is converted into shares at aprice of SEK 74.00 per share, the total number of shares willincrease by 3,528,700.

Warrants programDuring the year, the Parent Company also offered a warrantsprogram to senior executives in Sweden and abroad. Thewarrants entitle holders to purchase one share for each warrantat a price of SEK 74.00 during the period February 21, 2003through April 15, 2004. If the Annual General Meetingapproves the Board’s proposal that the Boliden holding bespun off to shareholders, this will probably result in the pricebeing reduced.

If all of the warrants are exercised, the total number ofshares will increase by 1,674,200.

The dilution effect resulting from full conversion and fullexercise of the warrants will amount to about 2.8 percent ofthe votes and 5.1 percent of the share capital in Trelleborg AB.

* STIBOR (Stockholm Inter Bank Offered Rate).

Share capitaland ownership


Shareholderinformation

CalendarAnnual General Meeting April 22President’s address to the AGM April 22Interim Report January–March April 22Interim Report January–June August 17Interim Report January–September November 10Preliminary Year-end Report 1999 February 2000Annual Report 1999 March 2000

Trelleborg Shareholder informationTrelleborg AB regularly publishes information in Swedish andEnglish about the Group’s development. The Annual Reportand the Group’s in-house magazine, T-TIME, are distributedto all shareholders who have notified the Company that theywish to receive this information.

Trelleborg also offers services to shareholders by telephone.Via a special telephone number: +46 8 678 21 00 or e-mail:[email protected], anyone interested will be provided withanswers to questions, be able to order magazines, brochures,etc., or contact specialists in a specific area, etc.

On the Trelleborg Group’s web site on the Internet,information can be found which is specially directed to share-holders such as: current financial information, AnnualReports from 1976 onwards, the latest news releases, stockmarket prices and the in-house magazine, T-TIME. Presenta-tions of the Group’s eight business areas are also found here.

In addition, anyone who is interested can request a CD-ROM disk with Trelleborg AB’s Annual Reports for the years1976–1996 (in English).

Reports, Annual Reports, T-TIME, etc, are available uponrequest, from Trelleborg AB, Corporate Communications,P.O. Box 153, SE-231 22 Trelleborg, Sweden.Phone: +46 410 670 00. Fax: +46 410 427 63.E-mail:[email protected]

Change of addressChanges of address relating to physical persons who areregistered as residents in Sweden are made automatically withthe Swedish Securities Register Center, VPC. Special notifi-cation regarding change of address needs not be made to theshareholders’ account-holdings institution (AI) or TrelleborgAB. The standard notification of change of address made atany Swedish post office branch will suffice.

Please note that shareholders who have chosen not to haveautomatic address updating must give notification of theirnew address themselves to AI. Shareholders whose shares arenominee-registered should notify their nominee as soon aspossible of any changes in their name, address or accountnumber. A special form for notification is available from thebanks.

Other shareholders must give notification of addresschanges and changes of account numbers to the SwedishSecurities Center, VPC AB, P.O. Box 7822, SE-103 97Stockholm, Sweden. Phone: +46 8 402 90 00.In corresponding with VPC, the shareholder number(personal ID number or organization number) should bestated.


Notification of attendance at the AGM should be made to:Trelleborg AB, Legal Department, P.O.Box 153, SE-231 22Trelleborg, Sweden. E-mail: [email protected],fax: +46 410 439 72 or by phone: +46 410 670 31, 670 25670 32 (direct line) or +46 410 670 00 (switchboard).

When making notification, please provide name, personalidentity number and number of shares held.

DividendThe Board of Directors and the President propose that share-holders be paid a cash dividend of SEK 2.00 (3.50) per shareand share type, a total of SEK 234,683 K plus Trelleborg’sholding of common shares in Boliden – in proportion totheir holdings in Trelleborg AB.

The Parent Company’s book value of the common stockwill be confirmed at the time of the Annual General Meeting.

Tuesday, April 27, 1999, is proposed as the record day. Ifthe AGM approves the proposal, the dividend will be remit-ted by VPC on or about Tuesday, May 4, 1999.

Owing to the technical procedures required to effect thedividend payment, the record day and the dividend paymentdate may be changed to later dates.

General Meeting

Annual General MeetingThe Annual General Meeting of Trelleborg AB (publ) will beheld on Thursday April 22, 1999, at 3pm in Söderslätts-hallen in Trelleborg, Sweden.

Annual General Meeting programVisitors to the AGM are invited to participate in the follow-ing programs:

12:30 Registration and light refreshments.2:15 Meeting hall opens.3:00 Start of AGM.

Notification of attendanceShareholders who wish to attend the Annual General Meet-ing must be entered in the share register maintained by theSwedish Securities Register Center (VärdepapperscentralenVPC AB) by Monday, April 12, and notify the Company oftheir intention to attend the AGM no later than Monday,April 19, 1999 at 3 pm.

Shareholders whose shares are nominee-registered mustthus have their shares temporarily re-registered in their ownnames on that date. Such registration should be requested ofthe nominee a few days in advance.

Annual


Trelleborg Group

in the Americas

III




Europe 87%

LATIN AMERICA 1%

Asia & Australia 1%

Other 1%NORTH AMERICA 10%

The Group’s net sales by geographicmarket


Trelleborg Group in the Nordic and

the Baltic states and Poland

IV

North America 10%

OtherEuropeancountries 22%

Asia & Australia1%

Latin America 1% Other 1%

The NORDIC and the BALTIC STATES and POLAND 65%

The Group’s net sales by geographicmarket

Group Center





• Ahlsell

• Bröderna Edstrand

• Starckjohann


BUSINESS AREASTrelleborg Automotive400 Aylworth Avenue

US-South Haven, MI 49090

Phone: +1 616 637 2116

Fax: +1 616 637 8315

Internet:www.trelleborg.com/automotive

E-mail: [email protected]

Trelleborg Wheel SystemsSE-231 81 Trelleborg, Sweden

Street address: Henry Dunkers gata 1

Phone: +46 410 510 00

Fax: +46 410 100 81

Internet:www.trelleborg.com/wheel_systems


Trelleborg Engineered SystemsSE-231 81 Trelleborg, Sweden


Phone: +46 410 510 00

Fax: +46 410 71 15 21Internet:www.trelleborg.com/engineered_systems

E-mail:[email protected]

Trelleborg Building SystemsSE-231 81 Trelleborg, Sweden


Phone: +46 410 510 00

Fax: +46 410 189 81Internet:www.trelleborg.com/building_systems


Ahlsell ABSE-191 88 Sollentuna, Sweden

Street address: Bagarbyvägen 61

Phone: +46 8 623 71 00

Fax: +46 8-92 02 61

Internet: www.ahlsell.se


Bröderna Edstrand ABP.O. Box 225

SE-201 22 Malmö, Sweden

Street address: Spadegatan 1

Phone: +46 40 38 40 00

Fax: +46 40 38 41 63

Internet: www.edstrand.se


Reynolds S.A.sImmeuble Lumière,

17 rue des Deux Gares

F-92565 Rueil Malmaison

France

Phone: +33 1 47145 555

Fax: +33 1 47145 515

Internet: www.reynolds-european.fr


Starckjohann OyjP.O. Box 54

FIN-15101 Lahti, Finland

Street address: Helsingintie 50

Phone: +358 3 811 911

Fax: +358 3 811 9555Internet: www.starckjohann.fi


GROUP CENTERTrelleborg AB (publ)P.O. Box 153

SE-231 22 Trelleborg, Sweden


Phone: +46 410 670 00

Fax: +46 410 427 63

Internet: www.trelleborg.com


Trelleborg Treasury

P.O. Box 7365

SE-103 90 Stockholm, Sweden

Street address: Norrlandsgatan 20, 3 tr

Phone: +46 8 440 35 00

Fax: +46 8 440 35 48

Internet: www.trelleborg.com


ASSOCIATED COMPANIESBoliden LimitedBCE Place

P.O. Box 848

181 Bay Street,

Toronto, Ontario M5J 2T3

Canada

Street address:

Bay Wellington Tower, Suite 1500

Phone: +1 416 364 2727

Fax: +1 416 364 5484

Internet: www.boliden.ca


Sorb Industri ABTrädgårdsgatan 8

SE-931 31 Skellefteå, Sweden

Phone: 0910-174 00

Fax: 0910-70 19 00

Internet: www.sorb.se


BPA AB (publ)P.O. Box 885

SE-161 24 Bromma, Sweden

Street address:

Karlsbodavägen 20A

Phone: +46 8 799 85 00

Fax: +46 8 799 85 16

Internet: www.bpa.se


Group addresses

VA n n u a l R e p o r t Tr e l l e b o r g 1 9 9 8

Environ-ment

Safety

Comfort

Trelle

borg A

B A

nnual R

eport 1998

Trelleborg AB (publ), P.O. Box 153, SE-231 22 Trelleborg, SwedenPhone: +46 410 670 00 • Fax: +46 410 427 63

E-mail: [email protected]: www.trelleborg.com

Trelleborg is aglobal industrial and distribution group.

With a focus on comfort,safety and the environment, we make the job

easier and more convenientfor our customers and


The Trelleborg Group has a turnover of 25 billion and13,800 employees in 35 countries.

The Trelleborg Group is organized in eight business areas:Trelleborg Automotive, Trelleborg Wheel Systems,

Trelleborg Engineered Systems, Trelleborg Buildings Systems,Ahlsell, Bröderna Edstrand, Reynolds and Starckjohann.

The Trelleborg shares have been traded onthe Stockholm Stock Exchange since 1964.

Annual Report 1998

annual report trelleborg -98 - ku leuven · 2 annual report trelleborg 1998 w growth a year of...

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