Investmentidea: Trelleborg AB
Trelleborg buys US-based Carolina Seal and wants to enter fast-growing markets
Sweden's Trelleborg AB is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. The innovative engineered solutions accelerate performance for customers in a sustainable way.
Trelleborg Sealing Solutions signed an agreement to acquire the privately owned U.S.-based Carolina Seal Inc. The business specializes in the distribution of polymer seals such as O-Rings, hydraulic seals and particularly products for the transport of chemicals.
Carolina Seal Inc. reported annual sales of 5.65 million US-Dollar for 2016. According to Trelleborg, the acquisition is part of the company's strategy to strengthen its positions in attractive market segments.
The opportunity to enter fast-growing markets
"The acquisition is a good fit and gives us the opportunity to enter the fast-growing chemical transportation sub-segment", said Claus Barsoe, president of the Trelleborg sealing solutions business area.
The US-business, he added, "is well-known to us and we are impressed with their engineering knowledge and the service they provide to customers." The transaction is expected to be completed within the first quarter of 2017.
Trelleborg wants to settle down in 2017
After two years of following an aggressive acquisition strategy, Trelleborg AB is looking forward to settle down in 2017: consolidating around its new market, positioning and exploiting its most advanced manufacturing and product technologies.
"We will continue to scout for strategically attractive acquisitions, however the number and magnitude of acquisitions made in 2016 will not be the new normal," Mr. Nilsson said. "Our main focus will always be organic growth."
Focus on substantial growth potential of digital technology when markets recover
For instance, Trelleborg will be "investing heavily" to leverage the substantial growth potential of digital technology when markets recover, Mr. Nilsson said. This includes smart technologies, such as devices with built-in sensors and tracking systems.
As an example, Mr. Nilsson cited the soon-to-launch Variable Inflation Pressure technology, which Trelleborg has developed in partnership with tractor manufacturer AGCO Fendt. The autonomous wheel can self-adjust the pressure of a combine harvester's tires according to its load during the operation, optimize the tire-footprint and reduce soil compaction.
Trelleborg wants to establish as global leader within agricultural tires
The rationale behind the 1.25 billion US-Dollar CGS/Mitas acquisition in May 2016 is to establish Trelleborg as "global leader within agricultural tires", Mr. Nilsson explained. This will include expanding the product range and reaching into new markets in addition to product innovations. However the future development remains to be seen.
Currently, Trelleborg AB stocks quote at around SEK 186.00 and have a twelve-month target price of SEK 192.10 (Bloomberg). The trailing P/E-ratio of the last twelve months is 22.74. At Bloomberg, 4 analysts recommend to buy the stock, 8 to hold and 1 to sell.
Investors can leverage their Trelleborg trades with Vontobel Bull & Bear Certificates.
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