Back Fold TRELLEBORG AB 2017 ANNUAL REPORT 2017 Annual Report WITH ASSURED Sustainability Report WWW.TRELLEBORG.COM WE SEAL, DAMP AND PROTECT CRITICAL APPLICATIONS IN DEMANDING ENVIRONMENTS Back Fold Fold CONTENTS 2–25 Interview with President and CEO Peter Nilsson ....................... 3 The Trelleborg Share .............................................................. 7 The Group and Targets and outcomes ......................................................... 10 business areas Growth and better earnings .................................................. 12 Trelleborg Coated Systems ................................................... 14 Trelleborg Industrial Solutions .............................................. 16 Trelleborg Offshore & Construction ....................................... 18 Trelleborg Sealing Solutions ................................................. 20 Trelleborg Wheel Systems .................................................... 22 Rubena Savatech ................................................................ 24 The Group in brief................................................................ 25 26–45 The unique properties of polymers ........................................ 27 Value generation at Trelleborg .............................................. 28 Strategy for leading Strategy supported by four cornerstones ............................... 30 positions Blue DimensionTM – Solutions for better sustainability ............ 34 UN Sustainable Development Goals ...................................... 36 Digitalization – Focusing on making it easy for customers ....... 38 Drivers for market presence ................................................. 40 Foreword by the President and CEO ...................................... 47 46–63 Stakeholder engagement ..................................................... 48 Compliance with laws and codes .......................................... 51 Sustainability – Abroad Safe and effi cient use of resources ...................................... 54 social responsibility Diversity provides opportunities ............................................ 58 Broad-based community involvement .................................... 60 Governance of Trelleborg’s sustainability activities ................. 62 GRI G4 Index overview – Core ............................................... 63 Risks and risk management ................................................. 65 64–83 Foreword by the Chairman of the Board ................................. 71 Corporate governance .......................................................... 72 Corporate governance Board of Directors ............................................................... 80 provides stable framework Group Management ............................................................. 82 Comments on the consolidated income statements .............. 85 84–133 Consolidated income statements ........................................ 86 Comments on the consolidated balance sheets ..................... 89 Financial information: Consolidated balance sheets ............................................... 90 Net profi t for the year Comments on the consolidated cash-fl ow statements ........... 92 Consolidated cash-fl ow statements ...................................... 93 Notes – Group .................................................................... 94 Parent Company income and cash-fl ow statements ............. 122 Parent Company balance sheets ........................................ 123 Notes – Parent Company .................................................... 124 Proposed treatment of unappropriated earnings .................. 127 Financial defi nitions and glossary ....................................... 128 Ten-year overview .............................................................. 129 Audit report ...................................................................... 130 Assurance report – Sustainability Report ............................. 134 Shareholder information .................................................... 135 Addresses ........................................................................ 137 Audited Board of Directors’ Report, pages 7–25 and 47–133. Reviewed Sustainability Report, pages 10–11, 47–63 and 134. Fold Fold TRELLEBORG AND 2017 IN BRIEF FOUNDED IN 1905 HEAD OFFICE IN TRELLEBORG NUMBER OF COUNTRIES WITH OPERATIONS 50 LISTED ON NASDAQ STOCKHOLM, LARGE CAP 1964 NUMBER OF EMPLOYEES 23,152 SALES IN 2017 (SEK M) 31,581 Share of the Trelleborg Group’s sales General Capital-intensive industry industry 34% 55% Oil & gas 5% Transportation equipment 19% Light vehicles Agriculture 18% 11% Infrastructure construction 8% Aerospace 5% KEY EVENTS IN 2017 January 23, 2017 Acquires U.S. seal distributor in chemical transportation March 17, 2017 Jean-Paul Mindermann appointed February 2, 2017 Finalizes Business Area President April 27, 2017 Press acquisition of seal distributor of Trelleborg Industrial release from 2017 Annual in chemical transportation Solutions General Meeting 2017 Q2 Q3 February 1, 2017 Fourth March 7, 2017 Paolo April 27, 2017 Interim report quarter and year-end Pompei appointed Business January–March 2017 report 2016 Area President of Trelleborg Wheel Systems January 31, 2017 Nomination March 31, 2017 June 23, 2017 Acquires Committee proposes change Divests compounding U.S. manufacturer of to number of Board members operation in the advanced components Czech Republic in composites January 25, 2017 Nomination Committee proposes re-election of Board GRI: G4-5, G4-6, G4-7, G4-8, G4-9, G4-10, G4-13 Fold Fold Back Trelleborg is a world leader in engineered polymer Seal solutions. We seal, damp and protect critical To seal is to fi ll a gap when joining two static or moving (dynamic) surfaces, applications in demanding environments. thereby separating different media from Our innovative solutions accelerate performance each other. for customers in a sustainable way. Protect Damp To protect is to help the environment, To damp is to absorb energy, thereby people, infrastructure and other assets reducing vibration and noise. to manage the impact from natural and man-made forces. Business areas’ share of Key fi gures, continuing operations, SEK M 2017 2016 consolidated sales, % Net sales 31,581 27,145 Rubena Trelleborg Coated Organic sales, % 4 –5 Savatech 6% Systems 8% EBITA, excluding items affecting comparability 4,385 3,700 Trelleborg Industrial EBITA margin, % 13.9 13.6 Solutions 18% Trelleborg Wheel EBIT, excluding items affecting comparability 4,091 3,496 Systems 28% EBIT margin, % 13.0 12.9 Trelleborg Offshore Items affecting comparability –69 –391 & Construction 9% EBIT 4,022 3,105 Trelleborg Sealing Operating cash fl ow 3,688 3,460 Solutions 31% Cash conversion ratio, % 90 99 Return on shareholders’ equity, % 1) 11.0 10.1 Earnings per share, SEK 1) 10.60 8.18 Dividend, SEK 2) 4.50 4.25 1) Including items affecting comparability. 2) As proposed by the Board. August 31, 2017 Peter Hahn November 28, 2017 Consolidates appointed Business Area and adapts operations in oil & gas President of Trelleborg Sealing Solutions July 20, 2017 October 27, 2017 Interim November 28, 2017 Fredrik Meuller Interim report report July–September 2017 steps down as Business Area April–June 2017 President of Group Q4 August 17, 2017 Decides to November 2, 2017 Acquires invest in new production facility German service company in for sealing solutions in Denmark tires for material handling and construction vehicles September 15, 2017 Nomination December 13, 2017 Finalizes Committee ahead of the 2018 the acquisition of manufac- Annual General Meeting appointed turer of advanced composites and new Chairman proposed components All of Trelleborg’s corporate press releases and news regarding products and solutions are available at www.trelleborg.com. Hevea Brasiliensis is the Latin name for the rubber tree from which the sap is collected to produce rubber. The leaves on the cover are from the rubber tree. Fold Back TRELLEBORG AS AN INVESTMENT TRELLEBORG AS AN INVESTMENT Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications in demanding environments. The Group has demonstrated stable profi tability and a favorable earnings performance in recent years, despite challenging market conditions in certain market segments. Trelleborg is focusing on being a partner that is easy to do business with and is intensifying its utilization of new technologies, not least connected to digital solutions. Trelleborg is working continuously to create value for all its stakeholders. Global trends support business focus Trelleborg operates in selected market segments where the Group has the potential to achieve favorable profi tability and leading positions. Global trends such as urbanization, population growth and increased transportation benefi t Trelleborg’s choice of segments and support the focus on products and solutions for enhanced sustainability. Strong position and value creation built on applications expertise and business acumen Trelleborg’s strong positions with engineered products and solutions is the result of in-depth applications expertise that refl ects the needs of customers and is critical to their applications. The Group is characterized by far-reaching delegation of responsibilities and powers and encourages rapid decisions. Continuous optimization of portfolio and processes Trelleborg’s continuous efforts to improve its geographic balance, optimize its portfolio,