Annual Report 1996 - bib.kuleuven.be · 2 Comments by the President External interest in the...

Annual Report1996

1996 Highlights ____________________________ 1

Comments by the President ___________________ 2

Group structure ___________________________ 4

Group review_____________________________ 5

Sales and earnings by Business Sector, etc: Key figures ______________ 5

Financial operations________________________ 7

Metal market, metal prices ___________________ 9

Business Sector Mines & Metals - Boliden _______________________________ 12

Business Sector Rubber Products - Trelleborg Industri _______________________ 20

Business Sector Distribution - Trelltrade______________________________ 26

Other companies __________________________ 32

Environment - an area under continuous development ___________________ 34

Financial reporting_________________________ 39

Report of the Board of Directors______________ 39

Recommended distribution of profit___________ 39

Consolidated Profit and Loss Accounts and comments __________________________ 40

Consolidated Balance Sheets and comments __________________________ 42

Consolidated Source and Application of Funds Statements and comments __________ 44

Parent Company Profit and Loss Accounts and Application of Funds Statements__________ 46

Parent Company Balance Sheets _____________ 47

Accounting and Valuation Principles __________ 48

Notes _________________________________ 50

Auditors’ Report ___________________________ 57

Share capital and ownership _________________ 58

Board of Directors and Auditors _______________ 60

Group Management ________________________ 62

Five-year review, definitions __________________ 63

Annual General Meeting, services to shareholders ___ 64

Contents

1

1996 Highlights

The financial year was characterised by a split economic scenario.The European economy weakened, whereas the USA showed a more positive picture.

In Sweden, the growth rate was checked by a stronger SEK.

◆Demand for base metals remained positive.

The average price for copper weakened compared with the previous year.

◆A rapid expansion took place in Business Sector Rubber Products through acquisition of companies

and operations with a total turnover of approximately SEK 1.6 billion.

◆SEK 1,134M was invested in fixed assets. In addition, net assets of SEK 1,259M were acquired

in connection with acquisitions of companies, etc.

◆Earnings after financial income and expenses amounted to SEK 1,018M.Earnings after taxes were SEK 1,003M, equivalent to SEK 8.60 per share.

◆At the year-end, financial assets less liabilities amounted to SEK -464M.

The equity ratio increased by 3 percentage points to 49.6 per cent.

◆In order to obtain more advantageous and more long-term borrowing

and to increase the readiness for aggressive investments, a new syndicated loan was raised for USD 1 billion (approximately SEK 6.8 billion).

◆It is proposed that the dividend be unchanged at SEK 3 per A and B share

and at SEK 10 per C and D share.

Group (SEK M unless otherwise stated) 1996 1995

Invoiced sales 20,574 21,304

Earnings after financial income and expenses 1,018 3,512Net earnings 1,003 2,863Return, per cent:

on shareholders’ equity after full tax 10.9 36.9on operating capital, excluding restructuring items 9.1 15.5

Equity ratio, per cent 49.6 46.6

Earnings, SEK per share after full tax 8.60 24.40Ditto, excluding restructuring items 8.60 10.20

Shareholders’ equity, SEK per share 80.40 77.20

Financial net assets less liabilities at year-end -464 +637

Investment in fixed assets 1,134 1,129

Average number of employees 13,086 12,421

Dividend, SEK per A and B share*) 3 3Ditto, SEK per C and D share*) 10 10

Share price 31 December, B shares, SEK 90.50 70.50Ditto, C shares 96.50 84.00

*) For 1996, in accordance with the recommendations of the Board of Directors and the President. The figures for 1995 exclude an exceptional dividend for this year of SEK 2 per share for all classes of share.For a more detailed summary of the financial development and other key figures as well as definitions, see page 63.

”

2

Comments by the President

External interest in the Trelleborg Groupremained very strong during 1996. Thisstimulating interest in the Group’s opera-tions was further accentuated soon afterthe 1996/97 turn of year when the sub-sidiary, Boliden, became the focus of atten-tion.

mining operations. The expansion will pri-marily be concentrated on an internation-alisation through establishment of opera-tions in, among other places, North andSouth America. It also includes plans foran extension of Rönnskärsverken and theexploration of a number of deposits inSweden. Through the listing, Boliden willbe given considerably widened opportuni-ties to finance its investments.

Toronto is the financial centre of themining world and the location for a largenumber of international mining compa-nies which is the reason why the introduc-tion will be made in that city. With thisstep, it will also be easier for Boliden torecruit personnel to be located in the coun-tries in which expansion is to take place.

Details about the introduction will beprovided in the offering document whichwill be distributed during Spring 1997.

CONTINUED CONCENTRATION

The listing of Boliden is a manifest exam-ple of the determined restructuring workwhich we have for a long time been carry-ing out within the Trelleborg Group andwhich has extensively characterised theoperations of the past year. We took sever-al important steps on our chosen pathtowards a concentration of the Group’score sectors, with continued expansion andinternationalisation as the guiding star.

One such step was the long-termfinancing agreement which was signedduring the Autumn when the TrelleborgGroup raised a syndicated loan for USD 1billion. A total of 22 Swedish and foreignbanks participated in the loan syndicate.The response of the banks to this creditfacility also shows a strong interest in thedevelopment which is presently underwayin the Group.

EXPANDING RUBBER OPERATIONS

During 1996, Trelleborg Industri, whollyin line with its expansion and internation-alisation strategy, acquired a number ofrubber companies both inside and outsideSweden.

At the beginning of the year, the Frenchcompany, CMPP, which manufacturesindustrial hose and rubber sheeting, wasacquired. CMPP, which now carries thename Trelleborg Industrie SA, has aturnover of approximately SEK 600M and750 employees. The acquisition alsoincluded the company’s sales organisation

A company undergoing strongdevelopment and change

In connection with the Meeting of theBoard of Directors of Trelleborg on 12February, it was announced that Trelle-borg intends to list Boliden in Toronto,Canada. It is expected that it will be possi-ble to do this as early as in June 1997. Inconnection with the listing, Trelleborgintends to sell approximately half its share-holding in the listed company which willprobably be named Boliden Ltd.

Boliden’s strategic plan includes rapidand vigorous expansion, particularly in its

3

in Spain, Italy, Germany, Switzerland andthe Netherlands.

The Spanish company, Ibercaucho, isanother large company which was incorpo-rated into Trelleborg during 1996. Iber-caucho is interesting at several levels, notleast because the company has a presencein Latin America and China - two parts ofthe world in which Trelleborg hasembarked on an exciting expansion.

Trelleborg Industri also strengthened itsposition in North America by acquiringtwo Canadian distribution companies -Snowden Rubber and Anderson CP Rub-ber.

Major acquisitions on the rubber sidealso include the Swedish company, Horda,with operations in several locations in thesouthern part of Sweden.

INTENSIFIED EXPLORATION

An important cornerstone of Boliden’soperations is exploration - ore-prospecting.The intensified investments in explorationin the Skellefte field again resulted in sev-eral interesting finds in 1996. At the begin-ning of the year, a large gold mineralisationwas discovered in Åkulla Östra. Beneathwhat is now the Renstöm mine, a largebase metal deposit was found later in theyear which is judged to have a very largepotential.

Exploration is also underway in otherparts of the world, for example in SaudiArabia, Spain and on the Kola Peninsula.The licence to prospect for ore on the KolaPeninsula forms part of the agreementwhich Boliden entered into with theauthorities in Murmansk during the year.

In the past year, Boliden has also estab-lished an office in Tucson, USA, in orderto look closer at the opportunities forexploration and mining investigations, pri-marily in South America, from that loca-tion.

Boliden’s international investment inexploration has been strengthened still fur-ther during the beginning of 1997. In Jan-uary, Boliden and the Adolf Lundin com-pany, South Atlantic Resources (SCQ),decided to form a joint (50/50) company,the operations of which will concentrateon intensive exploration in the BalticShield region, i.e. Sweden, Norway, Fin-land and North-West Russia. The inten-

tion is to introduce the company, NorthAtlantic Natural Resources AB (NAN), onthe O list of the Stockholm Stock Ex-change during Spring.

MINING START AND INCREASEDSMELTER CAPACITY AS PER PLAN

At Boliden Apirsa in Spain, the Aznalcóllarmine was closed as planned during theAutumn. At the same time, mining startedin the adjacent Los Frailes mine, which incommon with Aznalcóllar is a complex oredeposit with zinc, lead and silver contents.

On the part of Rönnskärsverken, thepast year, among other things, involvedextensive work on completing an applica-tion to the National Franchise Board forEnvironment Protection for a licence forincreased copper production. The applica-tion was submitted in October and con-cerns capacity extension from currently140,000 tonnes to 300,000 tonnes. Anextension is a very interesting investmentfrom several aspects.

NEW MARKETS FOR THE DISTRIBUTION COMPANIES

The distribution companies continue todevelop favourably and defended - andeven strengthened - their market positionsduring the year. Ahlsell made a couple ofsupplementary acquisitions and hasincreasingly started to show an interest inthe countries around the Baltic. Opera-tions, for example, were established bothin St Petersburg and Warsaw.

Otherwise, the past year showed a splitscenario for the distribution companies.Price falls in steel and other metals hit bothBröderna Edstrand and Reynolds. Pricesalso decreased for the companies in the sul-phur and sulphuric acid sector. Volumes,however, remained satisfactory.

More detailed descriptions of the opera-tions and the individual companies can befound later in this Annual Report. I do,however trust that in just a few words Ihave been able to convey the picture of acompany undergoing strong developmentand change to everyone interested in theTrelleborg Group.

RESULT 1996

For details of the 1996 result, I would alsolike to refer the reader to reports later in

the text. I would, however, like to com-ment that a profit of SEK one billion mustbe considered quite reasonable under thecircumstances which prevailed during theyear, among other things, with regard tometal prices. As everyone knows, the cop-per price fell significantly at the beginningof the year when the speculation bubbleconcerning copper burst.

IMPORTANT DEVELOPMENT PHASE

To predict the trend for the financial yearwhich has just begun is very difficult. Allsigns point to an upward economic trendbut it still looks as if only a few have actu-ally seen it. Regardless of fluctuations inthe economy, the Trelleborg Group is inthe midst of an important developmentphase which in any case will lead to signif-icant changes and in which the keyword isgrowth.

For Sweden and Swedish industry,politically-motivated threats do howeverremain for which I and many others feelthe utmost concern for the developmentwithin the energy area.

The energy issue concerns not only afew companies or people: it concerns us all.A clear majority of Swedes, about twothirds, want to continue to deploy nuclearpower stations as long as they are safe. Theelectricity-intensive industry knows thatan early phasing out of nuclear power willin the long term hit employment withinthe successful Swedish base industries.

THANK YOU FOR YOUR OUTSTANDING

CONTRIBUTIONS

Finally, to all employees, shareholders andother interested parties: Thank you foryour outstanding contributions and high-ly-stimulating interest during 1996. I bidyou very welcome to a new exciting finan-cial year.

Kjell Nilsson

4

Group structure

Mines & MetalsBolidenPresident: Anders Bülow

Swedish and international miningoperations, production of copper,zinc, lead, silver and gold as well as sulphur products, metal processing, metal recovery andtechnology sales.

See also page 12, etc.

Rubber Products Trelleborg Industri

President: Sven-Gunnar Schough (from 1 March 1997: Hans Porat)

Wide range of products made of rubber and other polymer materials,primarily for industrial use.


Distribution Trelltrade

President: Björn Ogard

Wholesale trading with heatingand plumbing supplies, electrical,refrigeration and tool products, steeland aluminium, etc.


The Group is organised in three main Business Sectors, which all have strongly decentralised profit responsibility.

The Business Sectors are in turn divided into Business Areas, Divisions or similar.The operating organisation does not always coincide with the legal organisation.

Sales by Business Sector 1996

Mines & Metals

Rubber Products

Distribution

Other

Distribution

Other

Capital employed by Business Sector 1996

Mines & Metals

Rubber Products

5

Group review

SALES AND OPERATING RESULT BY BUSINESS SECTOR

Ditto incl interestInvoiced sales Operating result after in associated

(Group external), SEK M depreciation, SEK M companies1996 1995 ± % 1996 1995 ± Mkr 1996 1995

Mines & Metals 7,893 8,675 –9 362 703 –341 441 1,2251)

Rubber Products 4,685 4,421 +6 296 311 –15 296 312Distribution 7,267 8,085 –10 297 536 –239 297 536Other 2) 729 123 – –180 –339 +159 –157 –263

20,574 21,304 –3 775 1,211 –436 877 1,810Restructuring items — 1,966 –1,966 –– 1,966

Total 20,574 21,304 –3 775 3,177 –2,402 877 3,776Financial net 141 –264

Earnings before tax 1,018 3,512Tax –16 –639Minority interest 1 –10

Net earnings 1,003 2,863

1) Including interest in result of Falconbridge Ltd.2) Comprises Groupwide costs. In addition, the following companies are included: Trelleborg NV–SA, Chapman and Velox.

CASH FLOW REPORT

Cash flow excluding Acquisi- TotalSEK M acquisitions and sales tions/sales Dividend cash flow

Mines & Metals 265 265Rubber Products 329 –911 –582Distribution 481 –69 412Other *) –259 –279 –658 –1,196

Total 816 –1,259 –658 –1,101

*) Comprises Groupwide costs, Trelleborg NV-SA, Chapman and Velox as well as financial transactions, restructuring items, taxes, etc.

KEY FIGURES

Average Return oncapital employed Operating margin, % capital employed, %

1996 1995 1996 1995 1996 1995

Mines & Metals 3,904 4,333 4.6 8.0 9.3 16.2Rubber Products 2,223 1,886 6.3 7.0 13.3 16.7Distribution 1,448 1,514 4.0 6.5 20.5 35.4Other 985 83 — — — —

Total Group, excluding restructuring items 8,560 7,816 3.8 5.7 9.1 15.5Ditto, including restructuring items 8,560 7,816 3.8 14.9 9.1 40.6

Return on capital employed is calculated on operating result after depreciation, including minority interest, divided by average balance sheet total (calculated on balancecarried forward each month) less shares, interest-bearing investments and non-interest-bearing operating liabilities.

6

SPLIT ECONOMIC SCENARIO

The economic scenario was split during1996. Within the EU area, industrial pro-duction continued to fall, primarily duringthe beginning of the year. For the USA, thepicture was more positive with rising pro-duction from the second quarter.

In Sweden, the growth rate moderatedas a consequence of the weaker Europeantrend and an increasingly strong SEK. Therate of inflation continued to fall withincreasingly low interest rates as a result.

Demand for base metals remained satis-factory during the year and stock levelsreduced still further. The average price forcopper weakened compared with the pre-vious year.

STRUCTURAL CHANGES

In Business Sector Rubber Products, astrong expansion took place via acquisi-tion. The combined turnover for acquiredcompanies and operations amounted toapproximately SEK 1.6 billion, equivalentto around one-third of the previous year’sturnover for the Business Sector. Throughthe acquisitions, its capital employed inoperations increased by approximatelySEK 1 billion.

SALES

In 1996, Group invoiced sales decreasedfrom SEK 21,304M to SEK 20,574M.Adjusted for structural changes, sales fellby approximately 6 per cent. Exchange ratefluctuations influenced turnover negative-ly.

RESULTS

Group earnings after depreciationamounted to SEK 775M (3,177). Of thedecline in earnings, SEK 2,402M, lowerrestructuring items accounted for SEK1,966M, mainly attributable to the 1995sale of the shares in Falconbridge Ltd.

Earnings after financial income andexpenses amounted to SEK 1,018M(3,512). Corresponding earnings exclud-ing restructuring items constituted SEK1,018M (1,546). As a consequence of theaforementioned sale of shares, average netindebtedness reduced substantially com-pared with 1995. This resulted in animprovement of financial income andexpenses by SEK 405M from SEK -264Mto SEK +141M, and that interest in resultsof associated companies decreased by SEK497M from SEK 599M to SEK 102M.

Earnings after minority interest and tax-es amounted to SEK 1,003M (2,863),which is equivalent to SEK 8.60 (24.40)per share. Earnings exclusive of restructur-ing items constituted SEK 1,003M

(1,195), equivalent to SEK 8.60 (10.20)per share.

See also comments under the section“Financial reporting”, page 39, etc as wellas the report by the respective BusinessSector, page 12, etc.

FINANCIAL POSITION

The Group’s cash flow excluding dividendamounted to SEK -443M. This includesacquisitions totalling SEK 1,259M.

After a dividend to the shareholders ofSEK 658M, of which a special dividend ofSEK 235M, the change in financial assetsless liabilities amounted to SEK -1,101Mwhich resulted in a net liability at the year-end of SEK 464M.

The equity ratio increased by 3 percent-age points to 49.6 per cent.

DIVIDEND

The Board of Directors and the Presidentrecommend that the dividend to the share-holders be unchanged at SEK 3 (3) per Aand B share, and at SEK 10 (10) per C andD share.

DIVIDEND POLICY

As previously stated, it is the opinion of theBoard of Directors that the dividendshould be equivalent to approximatelyone-third of the annual profit in the longterm.

1992 1993 1994 1995 1996-20

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25

Earnings, SEK per share

After full taxDitto, excluding restructuring items

-100

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100

200

300

400

500

-2000

-1500

-1000

-500

500

1000

1500

2000

1st qtr -94 2nd qtr -94 3rd qtr -94 4th qtr -94 1st qtr -95 2nd qtr -95 3rd qtr -95 4th qtr -95 1st qtr -96 2nd qtr -96 3rd qtr -96 4th qtr -96

0

Earnings after financial income and expenses, excluding restructuring items, SEK M

Isolated by quarter, left scale

Rolling 4 quarters, right scale

7

Financial operations

The Group is subject to various risks in theform of fluctuating metal prices, exchangerates and interest rates as well as financingrisks and credit risks. In order to reduce theexposure, the Board of Directors has estab-lished guidelines for the Group’s handlingof these risks for which the Group’s centraltreasury function has the main responsibil-ity.

The financial operations are centralisedas a result of which large-scale benefits andspecialist know-how can be utilised.

ORGANISATION

The financial operations are carried out byTrelleborg Finance BV (TFI) in Brussels -the Group’s internal bank - and by Trelle-borg AB Finans (TAF) and Boliden MetalTrading AB (BMT) in Stockholm whichrespectively handle currency, interest rateand metal exposures.

The internal bank is responsible for thebulk of the Group’s deposits and loans andserves as a bank vis-à-vis the Group com-panies. Other tasks comprise netting ofintra-Group payments and currency hedg-ing as well as consultancy services in thearea of capital rationalisation.

The handling of metal, currency andinterest risks are co-ordinated. As a result,the combined knowledge concerning thevarious financial markets can be betterutilised in the work aimed at minimisingthe risks.

FOREIGN EXCHANGE AND METAL PRICE EXPOSURE

Transaction exposureThe largest income exposure in changes inexchange rates arises in the mining opera-tions. The most important currency in thisrespect is the USD and its relation to thefunctional currency for each respectiveproduction location due to the fact thatmetal prices are quoted in USD. The totaltransaction exposure for the Group isapproximately SEK 5 billion, of which the

exposure to the USD accounts for approx-imately SEK 3.4 billion. Metal prices arestrongly cyclical and fluctuate considerablywith, among other things, the world econ-omy. In accordance with the Group’s for-eign exchange and metal price policy,hedging may take place up to a maximumvolume equivalent to two years’ flows(excluding income related to the preciousmetals, gold and silver), distributed over aperiod of up to three years. For estimatedincome flows relating to gold and silver,hedging may be made up to five years.

The foreign exchange and metal pricehedging varies with regard to markettrends. At the turn of the year, the hedgingof USD vis-à-vis SEK and ESP, respective-ly, was equivalent to more than half ayear’s exposure. Hedging of the gold pro-duction was equivalent to approximatelyone year’s exposure and lead productionslightly more. In addition, a small part ofthe silver production was hedged. Hedgingof USD as well as gold, lead and silver wasmade at levels which exceed the rate/priceon 31 December 1996.

Exposure to other currencies, totallingapproximately SEK 1.6 billion on anannual basis, has been hedged at between25 and 50 per cent of one year’s forecastexposure. Taken together, this hedging hasbeen made on a par with the rates at 31December 1996.

Hedging is made by application of bothforward contracts and options.

1998 1999 2000 2001 2002 20030

500

1000

1500

2000

2500

3000

Committed credit facilities and maturity structure at 31 December 1996, SEK M

Total of medium-term and long-term credit facilities = approximately SEK 8.5 billion

Patrik Lunning of Trelleborg Finans in Stockholm is one of the staff responsible for the Group’s foreign exchange, interest and metal trading.

8

Translation exposureThe foreign exchange exposure which aris-es through investments in foreign netassets are hedged. The size of the hedgingvaries from a maximum of the full value ofthe investment including tax effect downto the level at which the Group’s equityratio is kept intact on currency fluctua-tions. Exchange rate differences whicharise on these hedgings are eliminated inthe Group against exchange rate differ-ences on these net assets (so-called transla-tion differences).

The book value of the TrelleborgGroup’s net assets abroad amounted toapproximately SEK 1,700M on 31December 1996 (2,200).

INTEREST RATE RISK

During the year, the Group’s net assets ofSEK 637M changed into a net liability ofSEK 464M. Interest-bearing assets aver-aged approximately SEK 6 billion until 31July and thereafter to approximately SEK 4billion. The decrease is mainly due to thefact that the second instalment for the1995 sale of shares in Falconbridge wasused to amortise interest-bearing liabilities.On 30 June, these amounted to more thanSEK 6.5 billion and thereafter fell toapproximately SEK 4 billion.

Interest-bearing assets extensively ran atfixed interest, whereas the majority of bor-rowing was characterised by short tenorsand gradually falling interest levels.

In accordance with current policy,interest rates on borrowing and investment

in liquid funds may be fixed for a maxi-mum of 24 months. At the turn of theyear, the average tenor on borrowing wasapproximately one month taking intoaccount the fact that more than half of theremaining gross liability was repaid whenthe third instalment for the Falconbridgeshares was received on 31 January 1997.

The average tenor for liquid fundsexcluding the Falconbridge payment wasslightly more than 12 months at the turnof the year.

TRADING ON COMMERCIAL TERMS

In addition to hedging of metal prices, cur-rencies and interest rates, some trading iscarried out on business terms, primarily incurrencies and metals, with the aim ofmaintaining some flow of information, totest various strategies for hedging and tocreate a better result through higher aver-age metal prices and lower financing costs.

FINANCIAL INSTRUMENTS

Forward contracts, options and swapagreements which are combined in variousstrategies with the objective of obtainingan optimum outcome are used to hedgethe various risks to which the Group issubjected.

FINANCING

With the objective of acquiring less expen-sive and more long-term financing as wellas increasing the preparedness for aggres-sive investments, a new syndicated credittotalling USD 1 billion was raised at thebeginning of October, equivalent to morethan SEK 6.8 billion, with a tenor of 7years. The total volume of granted medi-um-term and long-term (>12 months)credit facilities amount to approximatelySEK 8.5 billion.

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 199620

40

60

80

100

120

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160

4

5

6

7

8

9

10

Metal Index (=Boliden’s total weighted production of Cu, Zn, Pb, Au and Ag in January 1996)

USD Index

USD/SEK

Average USD Index = 93 January 1996 = 100

Average USD/SEK = 6.66

USD Index USD /SEK

Representatives of the 22 banks which took partwhen Trelleborg raised a syndicated loan for USD 1 billion visited Boliden Apirsa in Spain inconnection with the signing of the loan agreement.

9

Metal market, metal prices

Metal prices London Metal Exchange (LME) 1996 1995 1994 1993 1992

Copper USD/tonne 2,290 2,937 2,313 1,912 2,283Zinc USD/tonne 1,025 1,031 998 961 1,240Lead USD/tonne 774 631 549 406 542Gold USD/oz 388 384 384 360 344Silver USD/oz 5.20 5.20 5.29 4.31 3.95

Rate USD/SEK 6.69 7.12 7.70 7.78 5.81

Prices refer to average price (cash prices).

CONFIDENCE FOR 1997

With continued positive growth in theworld economy, good demand for basemetals and a strong USD trend towardsthe end of 1996, there is every reason forconfidence ahead of the coming year.

The beginning of 1996 was charac-terised by an upturn in the economy in theOECD which stimulated industrial pro-duction. The countries outside the OECDshowed a continued very favourable trend.This trend is expected to continue during1997.

The overshadowing event in 1996 wasthe extensive speculation scandal in cop-per. On 6 June, the LME opened with acopper price (3-month price) of USD2,378 per tonne. During the day, the price

fell substantially to USD 1,880 at the low-est. During the afternoon, a strong recov-ery took place and the exchange closed atUSD 2,190.

This was the beginning of the exposureof the speculation tangle of the century.The company, Sumitomo in Japan,announced that its chief trader, YasuoHamanaka, had caused the company spec-ulation losses of USD 2.4 billion. Duringthe Autumn, this led to an exaggeratedprice fall. The price again turned uptowards the end of the year with the sup-port of record-low world stocks of copper.Supply and demand are now graduallyexpected to come to control the develop-ment to an increasing extent.

SENSITIVITY ANALYSIS

The mining operations are characterisedby fluctuations in metal prices. TheGroup’s sensitivity to changes in metalprices is shown in the chart below which isbased on planned production levels in1997 and the rates: USD/SEK 7 andUSD/ESP 135, respectively. Changes inproduction levels as well as in metals andcurrencies can, however, affect the calcu-lated effects on the result.

A gold ingot weighs 400 troy ounzes, approximately 12.5 kilos, and was worth SEK 1,014,362.50 at the 1996/97 turn of year.

Effect on result of +/– 10% price change, SEK M

All metals +/–10% = +/– 346 SEK M in result

Silver

Gold

Lead

Zinc

Copper

0 20 40 60 80 100 120

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500

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1992 1993 1994 1995 1996

LeadUSD/tonne

COPPER

Speculation tangle reduced the price: recovery towards the end of the year

After price levels in excess of USD 2,800per tonne during May, the speculation tan-gle in Sumitomo caused a massive price fallat the beginning of June. Falling LMEstock levels led to a strengthening of theprice at the end of the year.

The long period with a high copperprice had the effect that extensive invest-ments in new production were decided.Delays and other interruptions for bothmines and smelters, however, meant thatthe feared surplus did not materialise andthe supply of copper was again very shortat the end of the year.

During the past year, LME stocksdecreased by 175,000 tonnes to criticallylow levels for the consumers. This had theeffect that the volume of materials availablefor immediate delivery was very limited.This situation contributed strongly to therapid price fluctuations on the market.

Exports from the “Eastern bloc” areestimated at approximately 700,000tonnes in 1996. There is considerableuncertainty with regard to imports intoChina but they are estimated to haveamounted to approximately 250,000tonnes. This resulted in net exports fromEast to West of 450-500,000 tonnes whichwas a significant reduction compared withthe previous year.

Consumption in the Western worldincreased by approximately 3.5 per cent,mainly because of very high demand, pri-marily in the USA. Mining productionincreased significantly by approximately 6per cent and gave the smelters an opportu-nity to increase their capacity utilisation.Production of refined copper increased bymore than 6 per cent. Despite the very sub-stantial production increase, total copperstocks fell during the year to levels equiva-lent to approximately three weeks’ con-sumption. A strongly contributing factorwas the reduced exports from the “Easternbloc” which were at historically very lowlevels and provided a support for the price.

ZINCLight at the end of the tunnel in 1997?

The zinc price fluctuated within a very nar-row range during 1996. The explanationlies in the fact that for a long time the pricehas already been at such a low level thatthere is no further room for a fall. Theongoing market shortage, however, raisesthe possibility of price increases.

During the year, LME stocks fell byapproximately 150,000 tonnes despite aweak consumer trend.

Exports from the “Eastern bloc” areestimated to have increased to more than500,000 tonnes during the year. Chinaincreased its imports of zinc concentrateand as a result was able to raise its exports

of metal. Russia and Kazakhstan are esti-mated to have increased their exports onlymarginally.

During the year, consumption showedapproximately zero growth which is sur-prising taking into account the steady eco-nomic growth in the USA. The main rea-son was stock-building of value-addedproducts during 1995 which should havebeen consumed in 1996. Mining produc-tion increased significantly by approxi-mately 4.5 per cent. The smelters, howev-er, were not able to take advantage of theincreased supply of concentrates so theincrease in zinc production ended up ataround 1 per cent. Total stocks fell steadi-ly during the year to a level equivalent to7.5 weeks’ consumption compared withmore than 10 weeks’ at the beginning ofthe year.

LEADSatisfactory price level in 1996

The year started with a strongly risingprice, and a year-high was reached inMarch. In May, a new lower price peakwas reached. During the last five monthsof the year, the price was in a downwardtrend which was unexpected as the totalstock level was very low. The seasonallylow-consumption period during the Sum-mer started a slow increase in LME stocks.As the market’s expectations of a renewedfall in stock following the holiday periods

1992 1993 1994 1995 19961000

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3500USD/tonne

Copper

1992 1993 1994 1995 1996600

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Zinc

11

during the Summer did not materialise,the price weakened to a level of approxi-mately USD 700 per tonne.

During the year, LME stocks decreasedby approximately 16,000 tonnes.

Net exports from the East increased andare estimated to have amounted to approx-imately 250,000 tonnes. The main reasonfor the increase was probably the high leadprice levels during the year. That providedChina and the Republics in the formerSoviet Union with an opportunity for largeexport income. With increasing domesticconsumption, however, the increase wasonly a passing phenomenon.

During the year, consumption in-creased by more than 1.5 per cent. Miningproduction rose by approximately 9 percent but structural changes and productioninterruptions at the producers limited theincrease in production of refined lead tojust over 2 per cent. During the year, totalstocks remained largely unchanged andfluctuated around approximately 4.5weeks’ consumption.

GOLDGlittering start, weak ending

Following an attempt to establish a pricelevel in excess of USD 400 per ounce at thebeginning of the year, the gold priceshowed a weak trend during the remainderof the year.

A strongly contributing factor to thiswas concern ahead of the formation of theEMU (European Monetary Union). Thejoint central bank plans to have a signifi-cantly smaller gold reserve than the com-bined reserves of the individual membercountries. That could possibly lead to asale by the central banks concerned. Thereis also concern that a gold sale will be usedto facilitate a compliance with the EU’sconvergence criteria.

Also the International Monetary Fund(IMF) is considering selling out parts of itsgold reserve in order to reduce the onus forsome of the most debt-burdened countriesin the world. The sale is planned to takeplace over a long period and the effect onthe market is therefore expected to be verylimited.

Mining production of gold fell in both1994 and 1995. For 1996, mining produc-tion is estimated to have increased byapproximately 3 per cent to more than1,900 tonnes of gold. Production in SouthAfrica continued to decrease, whereas sub-stantial increases were noted in LatinAmerica, Asia and Australia.

SILVERPrimarily influenced by the gold price trend

The price of silver is extensively influencedby the gold price trend.

Mining production increased slightlyduring 1996, whereas exports from the“Eastern bloc” and sales by central banksdecreased. The volume of available silvertherefore fell by approximately 2 per cent.Consumption showed only a marginalincrease.

The market was characterised by a sig-nificant shortage over several years. 1996also showed a shortage - of just under3,000 tonnes. The substantial stocks of sil-ver, however, prevented a shortage fromarising.

1992� 1993 1994 1995 1996300

325

350

375

400

425

450USD/oz

Gold

1992 1993 1994 1995 19963,00

3,50

4,00

4,50

5,00

5,50

6,00

6,50

7,00USD/oz

Silver

1992 1993 1994 1995 1996

USD/SEK

Rate

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

12

interrupted by exceptionally large precipi-tation, the worst for more than 100 years.

In the Aitik mine, an area with signifi-cantly lower copper content than the long-term average, was mined during 1996 andthis resulted in lower copper production in

spite of significantly increased total oreproduction. In December, mining startedof a richer part of the ore and, in 1997, thecopper content is estimated to exceedAitik’s average content.

The weak economy in Europe led tofalling demand for copper semi-manufac-tures.

A large number of cost rationalisationprojects were initiated in several Bolidenunits, partly through stricter focusing oncore operations.

ENCOURAGING RESULTS

In spite of these events, the year wasenhanced by good news.

Highlights were the very positive explo-ration results in the Skellefte field. Both thegold deposit in Åkulla Östra and the deepseated mineralisation beneath the Ren-ström mine, with significantly higherindicative ore-values than so far in this area,will create criteria for continued positivedevelopment of the operations in theSkellefte field and provide encouragementfor continued exploration investments.

BolidenBUSINESS SECTOR MINES & METALS – BOLIDEN

”Gold and zinc discoveries, copperprice-fall and torrential rain

The expansion of the Los Frailes minein Spain on the whole is following theactual timetable. In December, concentra-tion of ore from Los Frailes started and fullproduction in both the mine and theexpanded concentrator will be attainedduring Autumn 1997.

In October, an application was submit-ted for a licence to increase the annual pro-duction of copper in the Rönnskär smelterto more than 200,000 tonnes. A decisivefactor is clear, long-term and competitiveterms for the energy supply. On conditionthat the continued work does not bringabout any unforeseen negative surprisesand that realistic environmental and ener-gy conditions can be secured, it should bepossible to make an expansion decisionaround the 1997/98 turn of year.

Boliden’s new organisation has nowbeen implemented. An important part hasbeen to create improved prerequisites forinternational expansion. Business develop-ment and exploration work have also beengiven a more prominent position.

Boliden’s exploration activities are cur-rently concentrated on existing operationsin Sweden, Spain and Saudi Arabia. But in1996 we also became engaged in explo-ration projects on the Kola Peninsula andin Burkina Faso.

Business development investments wereconcentrated on evaluation of new explo-ration and mining projects in Latin Amer-ica, West Africa and the CIS, and theambition is that in these areas Boliden willbecome involved in new projects of highquality within the near future.

POSITIVE EXPECTATIONS

For 1997, we anticipate a positive price-trend for zinc which is a base metal forBoliden, and that market conditions forthe copper semi-manufacture operationswill improve through a generally strongereconomic trend in Europe.

On the copper market, the risk of sur-plus remains and the price-trend will there-fore probably remain weak. However, itlooks as though the forecasts of the mostnegative pessimists will not come true.

Within Boliden, mined copper produc-tion is increasing significantly because ofhigher copper contents in Aitik. In addi-tion, production in Rönnskär is expectedto increase following fine-tuning of thenew investments which were carried outduring 1995. During the latter part of1997, a new precious metals mill will

PRESIDENT: ANDERS BÜLOW

1996 offered a succession of events whichwere positive, such as the gold and zinc dis-coveries in the Skellefte field which attract-ed a great deal of attention. From an oper-ating viewpoint, however, the year causedproblems, primarily through lower metalprices and temporary lower metal con-tents.

The copper price fell substantially. Thetriggering factor was the Sumitomo scan-dal. The underlying fundamental factorswere however significant productionincreases which are expected to lead to asurplus of copper over the next few years.However, new production units aroundthe world had major start-up problems andthe supply of scrap decreased, partly as aconsequence of lower prices. The effect wasthat copper stocks continued to fall andthere was some recovery in the copperprice towards the end of the year.

During the first few months of the year,operations at the Aznalcóllar mine were

stages within the existing operations, andthe objective of becoming involved in newcontracts mainly in the mining sector,1997 looks like being a very interestingand exciting year.

Anders Bülow

13

become operational in Rönnskär which hashigher capacity and more rational opera-tions.

In January, an agreement was madebetween Boliden AB and the AdolfLundin-controlled South Atlantic Re-sources to form a joint exploration compa-

ny which will operate in Scandinavia andWestern Russia. The intention is to intro-duce the new company on the O-list of theStockholm Stock Exchange in connectionwith a share issue to the general public dur-ing Spring 1997.

With a number of projects in various

BUSINESS SECTOR MINES & METALS – BOLIDEN

Business Area: Includes: Operations:

MINESPresident: Gunnar Axheim

Six mining areas (three under-ground and three open-pitmines): Garpenberg, Boliden, Laisvall and Aitik in Sweden,Saudi Precious Metals Ltd (50%) in Saudi Arabia and Boliden Apirsa in Spain.

Mining and concentration ofnon-ferrous ores in Sweden and abroad.

SMELTERSPresident: Anders Vikdahl

Three smelters in Scandinavia: the Rönnskär copper smelterin Skelleftehamn, the Boliden Bergsöe secondary leadsmelter in Landskrona and the Norzink (50%) zinc smelterin Norway.

Production of copper, lead,zinc, silver and gold metals aswell as sulphur products.

COPPER PRODUCTS &METAL RECOVERYPresident: Thomas Cederborg

Three divisions: Copper Tubing, Brass and Recovery withproduction units in Sweden, Great Britain, the Netherlands,Belgium and the USA.

Production of copper-basedsemi-manufuctured goodswith recovery of scrap as acommon feature as well asresponsibility for supply ofscrap to the Group’s smelters.

TECHNOLOGY SALESPresident: Staffan Jähkel

Boliden Contech with representative offices in Sweden, Ger-many, China and Russia as well as agents in several othercountries.

Marketing and sale of technology developed withinBoliden.

BUSINESS DEVELOPMENT &EXPLORATIONPresident: Bengt Löfkvist

Boliden’s exploration and technical staff functions. Exploration and technologydevelopment as well as workon active search for new pro-jects, especially in SouthAmerica, the CIS and WestAfrica.

OBJECTIVES AND STRATEGIES

Boliden’s business concept is in a globalenvironment to be a reliable and cost-effi-cient supplier of high-quality metal prod-ucts.

Our objectives are• to be one of the technologically and envi-

ronmentally-leading international min-ing and metal companies in our priori-tised metals: zinc, copper and gold

• to attain satisfactory and sustained prof-itability (at least 15 per cent return oncapital employed) over one businesscycle.

Our strategies are• to maintain and develop our ore reserves

in existing mining areas• to increase our total ore reserve through

exploration and acquisition internation-ally and, in so doing, utilise and developfurther our vast expertise in explorationand mining

• to balance mining capacity and smeltercapacity in the long term.

Our visions and evaluations include• cost-awareness in all areas aimed at

improving competitiveness still further• target-oriented leadership combined

with continuous development of allemployees at all levels

• continuously striving for good economyin the use of energy and raw materials

• that all operations should be charac-terised by care for the environment,health and safety.

Boliden is a technically-advanced companyinvolved in exploration, mining, metallur-gy and environmental adaptation. Bolidenalso possesses vast expertise in explorationand mining operations outside Sweden.Together with strong cost-awarenessthroughout the organisation, this providesBoliden with excellent criteria for being aworld-class mining company.

14

fall in both prices and production for thebrass division - all contributed primarily.

InvestmentsTotal investments for the Business Sector(excluding associated companies) amount-ed to SEK 773M (790).

Investments in Business Area Minesamounted to SEK 617M. The largestinvestment was attributable to the expan-sion of the Los Frailes mine in which oreproduction started during the Autumn. Ofthe total investment of approximately SEK600M, SEK 390M was spent during theyear. The expansion will continue duringthe first half of 1997 and the mine isexpected to attain full production capacity,approximately 4 million tonnes ofprocessed ore, in Autumn 1997.

The expansion of the Petiknäs minecontinued according to plan - an invest-


OPERATIONS IN 1996Market

An account of the market for our mostimportant metals is given in a separate sec-tion beginning on page 9.

SalesInvoiced sales fell by 9 per cent to SEK7,893M (8,675). In volume, however, saleswere higher than in the previous year. Low-er invoicing is attributable to lower pricesin SEK, primarily for copper.

Of invoiced sales, 73 per cent (70) weremade outside Sweden.

EarningsOperating earnings fell by 49 per cent toSEK 362M (703).

To the fall in earnings, a generally lowerlevel of metal prices, primarily copper,temporarily lower ore content as well as a

Key figures 1996 1995

Invoiced sales, SEK M 7,893 8,675

Operating earnings after depreciation, SEK M 362 703

Ditto, including interest inassociated companies 441 1,225 1)

Operating margin, % 4.6 8.0Average capital employed,

SEK M 3,904 4,333Ditto, including interest in

associated companies 4,269 6,951 1)

Return on capital employed, % 9.3 16.2Ditto, including interest in

associated companies 10.3 17.6 1)

Operational cash flow, SEK M 216 175

Investments in fixed assets, SEK M 773 790

Number of employees at 31 December 4,943 5,404

1) Including interest in result of Falconbridge Ltd.

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

-4.0

-2.0

0

2.0

4.0

6.0

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Invoiced sales, SEK MOperating margin, %

Sales and operating margin

-400

-300

-200

-100

0

100

200

300

400

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-10.0

-8.0

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8.0

10.0

12.0

14.0

16.0

18.0

20.0

1992 1993 1994 1995 1996

Earnings after depreciation, SEK MReturn on capital employed, %

Earnings and profitability

At the smelter in Rönnskär, approximately 900 people are employed. In 1996, 126,000 tonnes of copper was produced, Rönnskär’s most important product.

15

Mining production Refined metal 1)

Metal production 1996 1995 1996 1995

Copper, tonnes 000 65.7 77.7 126.4 111.1Lead, tonnes 000 97.3 100.0 42.2 42.2Zinc, tonnes 000 142.5 158.6 67.52) 65.42)

Silver, tonnes 241.8 249.9 300.9 261.1Gold, kilos 4,686 5,582 10,075 8,162

1) Of which, approximately 50 per cent own concentrates2) 50% of Norzink’s production

Ore reserves at 1 January 1996Proven and Metal contents

probable ore Gold Silver Copper Zinc LeadArea tonnes 000 gram/tonne gram/tonne per cent per cent per cent

The Skellefte field 9,200 2.2 86 1 5 0.7Laisvall 9,900 9 0.5 5Garpenberg 5,700 0.1 137 0.1 4.8 2.4Aitik 182,000 0.2 4 0.38Apirsa/Los Frailes 49,500 60 0.3 3.8 2.2

ment totalling SEK 140M - in which thePetiknäs mine will be extended to the 800metre level and a 2.5 kilometre drift estab-lished between Petiknäs and the Renströmmine to enable hauling of Petiknäs ore inthe existing shaft in Renström.

During 1996, a decision was made toextend the Garpenberg Norra mine to the900 metre level for approximately SEK18M. An investment in the Gruvsjö shaftof the Garpenberg mine (approximatelySEK 50M) was completed at the beginningof 1997.

Total investments in Business AreaSmelters amounted to SEK 104M.

The two largest ongoing investmentsare an expansion of Rönnskär’s preciousmetals mill at a total cost of approximatelySEK 80M, which will provide for a nearly100 per cent production increase, as well asa new gas treatment plant for Rönnskär’skaldo mill (approximately SEK 45M)which will make it possible to process morescrap, and which improves the environ-ment.

MARKET POSITION

According to the latest world statisticsregarding producers in the mine andsmelter industries, Boliden is well posi-tioned on the world market with regard to

the base metals: zinc, copper and lead. As amine producer, Boliden is currently theseventh largest zinc producer. With regardto refined copper, Boliden is placed twen-ty-ninth in the statistics.

With Boliden’s plans for increased zincproduction, partly through the expansionof the Los Frailes mine in Spain, and theincreased copper production, which isbeing investigated on behalf of Rönn-skärsverken, Boliden will move up to fifthplace in the world ranking for zinc and tofifteenth place for copper.

The Copper Tubing Division as well asthe Brass Division, which have both con-centrated on high-quality special nicheproducts within their respective productarea, are both among the leading producersin Europe.

Within the Recovery Division, BolidenMetech and Arv Andersson, are the leaderson their respective markets. Arv Anderssonis one of the largest metal recovery compa-nies in Sweden with 9 warehouses from theStockholm region to Gällivare. BolidenMetech is one of the largest recovery com-panies of precious metals in electronicscrap in the USA.


Measured and indicated resources at 1 January 1996Metal contents

Gold Silver Copper Zinc LeadArea Tonnes 000 gram/tonne gram/tonne per cent per cent per cent

The Skellefte field 1,600 3.5 40 1.3 2.4 0.2Laisvall 1,100 0.1 4.9Garpenberg 3,300 127 2.9 1.2Aitik 700,000 0.2 3 0.33Apirsa/Los Frailes 30,000 60 0.3 3.6 2.2

The open-pit mine in Aitik is Europe’s largest copper mine.

16

alisation in the Boliden area was alsoannounced. This is located beneath theexisting mine in Renström, below the1,100 metre level with bore holes intersect-ing mineralisation down to around 1,500metres but is not limited depthwise andsidewise. Drilling tests show zinc contentssignificantly above the Boliden average of 5per cent. In addition, the mineralisationcontains high contents of gold and silver.In the gold mine in Åkerberg, a changeoverwas made during the year from open-pit tounderground mining. The area containsmany interesting exploration projectswhich with increasing efforts will beworked during 1997.

Laisvall is Europe’s largest lead mineand in it is also extracted zinc and silver.During the year, a new production recordof 1.8 million tonnes was attained. Anextensive action programme was imple-mented which, among other things, meansthat loading and transport are now sub-contracted. An application to the NationalFranchise Board for Environment Protec-tion for an additional production increaseto 2.2 million tonnes per annum will besubmitted during 1997.

Garpenberg in Dalecarlia consists oftwo mines in which the biggest productsare zinc and silver. Copper, lead and goldare also extracted. A new form of shiftwork, which provides for increased pro-duction, was introduced in both mines. Atthe beginning of 1997, the Gruvsjö shaftof the Garpenberg mine was inaugurated -an investment of approximately SEK 50M.During 1997, the 900 metre level will alsobe reached in Garpenberg Norra and amine investigation will start in Dammsjön.

Saudi Company for Precious Metals Ltd(SCPM), which mines gold in the Sukhay-barat mine in Saudi Arabia, is owned inequal parts by Boliden and the Saudi Gov-ernment company, Petromin. In the mine,approximately 700 kilometres north-eastof Jeddah, 700,000 tonnes of ore perannum is extracted as an open-pit opera-tion. The gold is produced as dore (95 percent gold), which is sold on the market.Both the production and the financialresults continued to develop favourablyduring the year thanks to competitive costconditions and a gradually higher ore con-tent during the year. The total productionfrom leaching plant and heap-leachingamounted to 2,687 kilos (2,826). Invoicedsales amounted to SEK 215M (249). InSukhaybarat, investigations point to addi-

OPERATIONS BY BUSINESS AREA 1996

Mines■ Production records in Aitik

and Laisvall■ Two new deposits in the Skellefte field

during the year■ Expansion of Los Frailes as planned

The Business Area currently consists of sixmining areas - Aitik, Boliden, Garpenbergand Laisvall in Sweden, Boliden Apirsa inSpain and Saudi Company for PreciousMetals (SCPM) in Saudi Arabia. The basemetals mined are zinc, copper, lead, goldand silver. All mining areas have their ownconcentrators.

The Business Area reports a fall in earn-ings over the previous year. The decline ismainly explained by temporarily lowercontents, primarily in the Aitik mine.Increased production compared with theprevious year could not fully compensatefor other negative factors.

Aitik, the open-pit mine outside Gälli-vare, is one of Europe’s largest coppermines. In addition to copper, gold and sil-ver are also extracted. Aitik is by far Boli-den’s largest individual gold mine and italso accounts for half of the copper con-centrate which supplies the smelter inRönnskär. During the year, Aitik againattained a production record, 18 milliontonnes compared with 17 million tonnespreviously. An area with significantly lowercopper content than the long-term aver-age, however, provided lower copper pro-duction in spite of the significantlyincreased ore production. In December,extraction began of a richer part of the oreand, in 1997, the copper content is expect-ed to exceed Aitik’s average content. Dur-ing 1997, work on developing the ore baseand improve gold yield will be intensified.

The Boliden area comprises six mines inthe northern part of Västerbotten - the so-called Skelleftefield - named Långdal,Petiknäs, Renström, Kankberg, Kristine-berg and Åkerberg. In this area, miningoperations began in 1925 when the Boli-den mine was opened with the gold-richestore ever found in Europe. The area’sbiggest products are zinc, gold and silver.During Spring, the discovery wasannounced of the Åkulla gold mineralisa-tion which is considered to have a verygood potential, both with regard to con-tents and volume. During the year, the dis-covery of a very interesting base ore miner-


Sweden

Other Nordic countries

Other European countries

USA, Canada

Other markets

Sales by market 1996

Sales by Business Area 1996

Mines

Smelters

Copper Products &

Metal Recovery

Technology sales

17

tional ore deposits which may extend thelife of the mine by 2-3 years. In July, anapplication for a licence to mine the iden-tified gold mineralisation, Bulgah, 70 kilo-metres from Sukhaybarat, was submitted.

During the first few months of the year,operations at the zinc mine Aznalcóllar inSpain outside Seville was interrupted byexceptional precipitation, the worst for100 years. The mine was closed for 8 weeksas a result of the rain and considerableefforts were made to prevent flooding inAznalcóllar’s tailing pond. The costs for thestoppage could only be partly covered byprocessing of stocked materials. Duringthe latter part of the year, the Aznalcóllarmine was finally exhausted and will now befilled with waste rock from the adjacentLos Frailes zinc mine. The expansion ofLos Frailes continued successfully duringthe year. The first ore contact was made asearly as March and, in September, it waspossible to start ore production on a largerscale. Los Frailes will be in full productionduring Autumn 1997. Ore production willincrease with the expansion of Los Frailes,from 2.3 million tonnes per annum to, in afirst phase, 4 million tonnes per annum. Arationalisation programme which involvesexpansion and modernisation of the con-centrator is in progress.

Smelters■ High lead prices favoured earnings in

Boliden Bergsöe■ Expansion of the precious metals mill

in Rönnskär started■ Application submitted for expansion

of Rönnskär’s copper production■ Norzink started vigorous rationalisa-

tion programme

The Business Area consists of three smelterunits, the Rönnskär copper smelter inSkelleftehamn, the Boliden Bergsöe sec-ondary lead smelter in Landskrona and theNorwegian Norzink A/S zinc smelter(owned in equal parts by Boliden and theRTZ Group). The Business Area reportsearnings on a par with 1995. Lower copperprices and higher costs because of increasedenergy taxes were compensated by largerproduction volumes as a result of capacityincreases implemented during 1995.

Rönnskärsverken is Boliden’s smelter forthe production of copper, lead, gold, silverand zinc oxide. Rönnskär is also a large pro-ducer of sulphur dioxide and sulphuricacid. Other products are selenium and

crude nickel sulphate. Production is basedon concentrates from own mines as well asbought concentrates and an increasing pro-portion of electronic scrap. During 1996,the precious metals mill was refurbished forincreased production. A decision was alsomade regarding production-increasingmeasures in the kaldo mill which willimprove the possibility to process morescrap, and improve the environment. Anapplication for a new environmentallicence for Rönnskär was submitted inorder to make possible the “Rönnskär+200” programme, the objective of whichis to increase copper production from thecurrent permitted 140,000 tonnes perannum to more than 200,000 tonnes perannum. In order to meet this, major refur-bishment and extention of Rönnskär isrequired, including a completely newsmelter unit. The cost of “Rönnskär +200”is estimated at approximately SEK 1.5 bil-lion. During the year, a decision was madeto invest in a pilot project for “Rönnskär+200” which will start during 1997.

The Norzink zinc smelter in Odda onthe west coast of Norway is owned equallyby Boliden AB and Rio Tinto MineralsDevelopment Ltd. The main products arezinc, zinc alloys, cadmium, sulphuric acid


and aluminium flouride. The raw materialcomes in the form of concentrates andclinker, of which approximetely 50 percent is from Boliden’s mines. More than 85per cent of the products are exported,mainly to Sweden, Denmark, Germanyand Great Britain. In 1996, invoiced salesamounted to SEK 1,184M (1,196). Earn-ings improved over 1995 thanks to bothhigher prices and increased volumes forNorzink’s aluminium flouride production.Zinc production increased by 4 per centduring the year. A weak zinc price andhigher electricity prices were compensatedby a 17 per cent cut in personnel and resul-tant reduced payroll expenses. The objec-tive of the restructuring work, which wasinitiated in 1996, is cost-savings of approx-imately NOK 50M on an annual basis.

Every year, the Boliden Bergsöe sec-ondary lead smelter in Landskrona recov-ers more than 3 million car batteries fromSweden, Denmark, Norway and Finland.In Sweden, the recovery ratio is well inexcess of 95 per cent. The main productsare lead and tin alloys. The plant in Lands-krona is one of the very largest, and froman environmental viewpoint, cleanest sec-ondary lead mills in Europe. In 1996, Boli-den Bergsöe produced yet another satisfac-

Boliden’s mines in Garpenberg produce mainly zinc and silver.

18

tory annual result thanks to favourable leadand tin prices and high utilisation of pro-duction capacity. During the year, a plantwas started up in the Norwegian city ofBergen for sorting building and industrialwaste which constitutes an importantresource source for various forms of recov-ery. The plant in Bergen marks Boliden’sambitions with regard to recovery withinnew sectors. During the year, a decisionwas made to increase the capacity of thesmelter in Landskrona from currentlyapproximately 40,000 tonnes to more than45,000 tonnes per annum. An investmentin new flue gas boilers and modification ofsecondary combustion chambers will meanincreased energy recovery of 2-3MW. Boli-den Bergsöe also sells surplus heating tothe Landskrona Municipality district heat-ing system.

Copper Products & Recovery■ Lower prices and reduced demand for

products in the Brass Division result-ed in reduced earnings

The Business Area consists of three Divi-sions. The Brass Division with BolidenGusum in Sweden, LDM in the Nether-lands and MKM in Great Britain producedapproximately 81,000 tonnes of brassproducts during the year. The Copper Tub-ing Division manufactured around 35,000tonnes of copper tubing. The bulk of theproduction is carried out at the BolidenCuivre & Zinc unit in Belgium. TheRecovery Division consists of AB ArvAndersson with nine scrapyards in North-ern Sweden and Boliden Metech withthree strategically-located units in theUSA. The common denominator of theoperations is collection and processing ofscrap raw materials. The recovery conceptis important for Boliden both from anenvironmental perspective and from a sup-ply viewpoint.

The Business Area reports a fall in earn-ings compared with the previous year. Thedecline is mainly explained by the fall inthe earnings of the Brass Division as aresult of lower prices and reduced demandfor products than in 1995. In terms ofearnings, the Copper Tubing Division ison a par with the previous year. Lowerprices were compensated by increased pro-duction which, taken together, generatedearnings on a par with 1995.

For the five producing units within the

Brass and Copper Tubing Divisions, recentyears have been characterised by effectivi-sation and cost reduction in production. Inorder to continue this trend, work meth-ods in accordance with the Japanese Kaizenphilosophy with a focus on continuousimprovements were implemented in paral-lel. Together with certifications in accor-dance with the ISO 9000 programme, theDivisions are therefore now well equippedto strengthen still further their positionson the European market.

For the expansion of Rönnskärsverken’scopper production, which is being investi-gated, the requirement for scrap is promi-nent. Through AB Arv Andersson, Bolidenhas a resource for the collection and hand-ling of scrap. During the year, the positionon the Nordic market was strengthenedthrough two acquisitions and also throughexpansion of the reception area to theBerent region in North-West Russia. Alarge number of shipments of metal duringthe year show that this area is very interest-ing for the future. Through the BusinessArea, Rönnskär is also supplied with largevolumes of electronic scrap from the USA.

Technology sales ■ Important project-starts in India,

Kazakhstan and Germany■ New representative office in China

Boliden Contech markets and sells tech-nology developed within Boliden for effi-cient industrial processes in the mining,metallurgy and sulphuric acid areas. Thetechnology is sold in the form of licencesand consulting services and also throughdeliveries of equipment and turn-keyplants. Main products are the kaldo tech-nology, Se-filters, wet electrostatic precipi-tators, roasting technology and flue gascleaning. Boliden Contech operates allover the world and has offices in Sweden,Germany, Russia, China and Tanzania aswell as representatives in a large number ofother countries. Boliden Contech’s earn-ings for the year were on a par with 1995.Important events during the year were theproject-start for delivery of a copper mill toIndia, refurbishmement of an electric fur-nace in Kazakhstan, two orders for deliveryof wet electrostatic precipitators and seleni-um filters to Germany, and the second


Trial drillings are in progress in Åkulla Östra where a large gold mineralisation has been discovered.

19

SIDA assignment - a training project inBolivia - in less than a year. At the year-end1995/96, a representative office wasopened in China. The Chinese market hasshowed significant interest in BolidenContech’s products and a number ofimportant contacts were made. During1997, it is expected that it will be possibleto maintain the strong sales trend againstthe background of the very considerableinvestment needs which exist on themajority of Boliden Contech’s main mar-kets.

ExplorationDuring the year, Boliden was granted aconcession for gold exploration within a500 square kilometre area within the“Green Stone Belt” which stretches fromGuinea and the Ivory Coast in the westand Ghana in the south through BurkinaFaso to Mali and Senegal in the north andNiger in the north-east. Ghana, for exam-ple, has produced gold since the 19th cen-tury and is the centre for the giganticmines of the Ashanti gold company. Dur-ing Autumn 1996, an exploration officewas established in the capital, Oua-gadougou, to lead the exploration in thenew Bouboulou concession area. Diamonddrillings will start in Spring 1997.

In Saudi Arabia, SCPM’s activities wereessentially concentrated on continuedresearch into the Sukhaybarat and Bulghahdeposits. Drilling, trench digging and sup-plementary samplings were made to con-firm indicated volumes and gold contents.The work will continue during the firsthalf of 1997. Results so far indicate poten-tial for extending the existing open-pitmine in Sukhaybarat.

In Spain, significant work has beendevoted to reconnoitring in the “PyriteBelt”. In 1997, a large portion of theresources will be concentrated on the LosFrailes ore’s extension depthward whereearlier drillings and geophysical measur-ings indicate increasing copper contents.During 1996, applications were also madefor exploration licences in new areas in thecentral “Pyrite Belt”. Work there isplanned to start during the second half of1997.

In the Berent region in North-WestRussia, a project is being carried out in col-laboration with a government institution -Central Kola Expedition - aimed at puttingtogether information regarding a number

of gold and copper projects in the centralpart of the Kola Peninsula. Diamonddrillings are expected to start within priori-tised areas during the first half of 1997.

In Sweden, work in the second half ofthe year in the Renström mine concentrat-ed on evaluating possible systems forexploration of the “Renström 1,500”deposit. Geological investigations showthat the mineralisation is open in side anddepth which indicates further potential inthe area. In order to obtain further know-ledge about the mineralisation, furtherdrillings are planned from an exploratorydrift at the 800 metre level, adjacent to anewly-constructed underground haulagesystem between the Renström mine andthe Petiknäs mine.

In March 1996, a decision was maderegarding continued exploration work inthe Åkulla Östra gold deposit. During theyear, 8,000 metres of diamond boreholeswere drilled. In the ongoing explorationprogramme, further drillings remain to bedone as well as ensuing concentration trialsahead of a decision regarding a mininginvestigation.The results of the year’s workare in line with the initial estimates of atleast 8 tonnes of gold.

Apart from in Åkulla Östra, continuedwork within the framework of the goldprogramme in the Skellefte field was car-ried out with high intensity. Extensivemoraine geochemical samples were takenand previously-filed samples were re-analysed with a concentration on gold. Theresults were positive and several anomalieswere noted. The objects will be processedfurther with drillings during 1997.

In Garpenberg, investigation work wasin progress in both mines. Geophysicalmeasurings in boreholes depthwards in theGarpenberg mine indicate further poten-tial for additional zinc ore. In GarpenbergNorra, interesting geophysical anomalieswere measured in the northward extensionof the ore. The results will be followed upwith drilling programmes during 1997.

During the past year’s drillings in theKristineberg mine, a previously-unidenti-fied copper/gold horizon was found in aparallel zone to the east of the principalore. The metal contents justify the imme-diate start of a large investigation pro-gramme aimed at ascertaining geometryand metal contents.

Technology & DevelopmentThree interesting technology projects dur-ing the year were the development in theareas large-scale cut and fill mining, bacte-rial leaching as well as automation andprocess control.

Tests with large-scale cut and fill miningwere carried out in the Petiknäs mine dur-ing 1996. The trials were very positive. Themethod which, fully-implemented, willprovide for a productivity increase in themining of more than 20 per cent, isplanned to come into operation inPetiknäs and in Garpenberg Norra during1997.

Research into extraction of base metalsthrough bacterial leaching, so-called bio-leaching, has been in progress over the past10 years. The technology is interestingmainly because it provides increased effi-ciency and reduced costs. During 1996,tests were carried out on a large number ofores and concentrates, both in order toincrease precious metal yields and toreduce pollution contents. The results wereencouraging and activities will be increasedduring 1997. Together with other Euro-pean companies and research institutions,Boliden is carrying out a bioleaching pro-ject within the EU research programme,Brit-EURam. The project will run forthree years and the results will form thebasis for a decision regarding the buildingof a bioleaching process on a large scale.

Increased automation of productionequipment processes has a considerablepotential for improving the utilisation ofplants, stabilising processes and for reduc-ing costs. New advanced control systemsfor the concentration processes have beendeveloped and are being implementedwhile, at the same time, refined censors arebeing developed which are expected toimprove the control systems still further.


20

BUSINESS SECTOR RUBBER PRODUCTS – TRELLEBORG INDUSTRI

Trelleborg Industri

”Strong international expansion initiated

ACTING PRESIDENT: SVEN-GUNNAR SCHOUGH

The 1996 financial year was characterisedby primarily three factors:

1. The strong international expansionwhich was initiated with the aim ofstrengthening the Business Sector’s posi-tions in a number of selected areas throughstrategic acquisitions. During the year,

companies were acquired with a totalturnover of SEK 1.6 billion.

2. The continued weak demand in largeparts of Western Europe, which had theeffect that sales for comparable units fell by8 per cent over the previous year.

3. The strengthened price of the kronaduring the year which contributed to a fallin earnings by approximately SEK 25Mcompared with the previous year. Costs forrestructuring, partly as a consequence ofacquisitions made, also contributed to theearnings decline.

STRENGTHENED MARKET POSITIONS

The by-far predominant issue during theyear, however, was the fact that through anumber of strategic acquisitions, we suc-ceeded in strengthening our market posi-tions in a number of important areas.

Following the purchase in April of theFrench company, CMPP, from the Miche-lin Group, we are now the market leader inindustrial hose in Europe.

In North America, the subsidiary,Goodall, strengthened its market positionas one of the leading distributors of indus-trial hose and other industrial suppliesthrough its acquisition of two Canadiandistribution companies with 17 salesoffices in Canada.

The acquisition of the Swedish HordaGroup, among other things, brought abouta supplementation of Trelleborg’s productrange aimed at the automotive industrywithin the framework of Trelleborg Auto-motive as well as a strengthening of theEuropean market position in the buildingprofiles sector.

Through the acquisition of the Spanishrubber company, Ibercaucho, which hasproduction in Spain and Mexico, and from1997 also in China, we strengthened ourposition as the clearly leading manufactur-er of rubber sheeting in Europe.

Among other events during the finan-cial year can be mentioned the fact that theexpansion of the international marketingorganisation continued according to plan.During the year, new regional offices wereopened in Thailand, Japan and Hungary.The manning of the representative officein Russia was significantly strengthened.

In parallel with the expansion of theoperations, work also continued on con-centrating and effectivising manufacturingat existing plants.

EVENTFUL YEAR – FULL EFFECT IN 1997?

On the whole, it can be said that 1996 wasa very eventful year. Implementation andintegration of already-made acquisitions, alarge number of ongoing discussions aboutfurther acquisitions, and collaboration aswell as continued expansion of the interna-tional marketing organisation was bothtime- and cost-consuming.

During the second half of 1997, someimprovement in demand is expected, espe-cially in Europe. At the same time, we willby then be able to reap some of the fruits ofthe efforts which have previously been putinto, among other things, initiating thestrong expansion which will continue dur-ing 1997.

Sven-Gunnar Schough

■ Acquisition of companies witha turnover of SEK 1.6 billion

■ Continued weak demand inWestern Europe

■ Strong SEK reduced earningsin 1996

President from 1 March 1997: Hans Porat

21


ORGANISATIONThe Business Sector comprises the Group’srubber operations originating from themanufacturing of rubber products whichstarted in Trelleborg in 1897.

The operations are carried out throughthe wholly-owned subsidiary, TrelleborgIndustri AB, which in turn consists ofsome 40 Swedish and foreign subsidiaries

organised in four product-oriented Busi-ness Areas comprising a great number ofdivisions and product areas.

Business Area: Includes: Operations:

TYRES & PROTECTIVE PRODUCTSPresident: Sven-Gunnar Schough

Development, manufacture and sale of a broad range of tyresand rims for delivery of complete wheels for, among otherthings, forestry and agricultural vehicles, contracting machinery,industrial fork-lifts and other goods-handling vehicles. Protec-tive and diving suits as well as other products such as tents anddock-gate insulation based on rubber-coated cloth. Milk linersand battery containers.

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

HOSE & ENGINEEREDPRODUCTSPresident: Sven-Gunnar Schough

Development, manufacture and sale of a broad range of indus-trial hose as well as distribution of hose and other industrialsupplies. Rubber and polyurethane roll-coverings for the paperand pulp industry as well as other industries. Special productsfor infrastructure projects, expansion joints, special hose for,among other things, dredging work as well as fire protective andanti-corrosion linings for, among other things, the off-shoreindustry.

Production in Sweden, Norway, the Netherlands,France and Canada. Distribution organisation for industrial supply productsin North America.

AUTOMOTIVE &COMPOSITESPresident: Mikael Jonson

Development, manufacture and sale of antivibration and auto-motive components for trains, heavy vehicles and cars. Antivi-bration mountings for machinery and buildings, moulded prod-ucts for, among other things, the white goods industry, technicalrolls for note dispensers, printers, telefax machines, etc. Com-posite materials for sound-absorbing, calendered materials,sheeting, rubber mats and flooring as well as road-marking tape.

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

BUILDING PRODUCTSPresident: Peter Suter

Development, manufacture and sale of extruded profiles for thesealing of doors and windows, rubber sheeting for roofs andlandfills as well as damp- and water-repellent asphalt-based lay-ers for roofs and building constructions. Rubber granulate forthe cable industry and retreading material.

Production in Sweden, GreatBritain and Belgium.


• Our business concept is to develop, man-ufacture and market function-orientedproducts and product systems based onour know-how in polymer technology.

• Our vision is, through our products, tocontribute to improved comfort, safetyand environment.

• Our objectives are– to be a leading international “multi-domestic” company in a number of well-defined product areas

– to grow by 15 per cent per annum onaverage (excluding major strategic acqui-sitions) with the aim of creating necessarybenefits of scale within R&D, manufac-turing and marketing– to attain at least 15 per cent return oncapital employed and 8 per cent net mar-gin over one business cycle– to improve through continuous evalu-ation of raw materials and productionmethods both interior and exterior envi-ronment.

• Our strategies are– to combine the company’s own productdevelopment and organic growth withacquisitions through active participationin structural changes– to increase the presence on rapidly-growing markets outside Europe andNorth America– to improve quality and efficiency con-tinuously in order to meet new demandsfrom our customers– to utilise modern Information Technol-ogy with the objective of improving cus-tomer service and communication.

22


OPERATIONS IN 1996

MarketDemand for industrial products on theWest European market, on which the Busi-ness Sector has approximately 75 per centof its sales, was slightly weaker than in theprevious year with squeezed prices as aconsequence. In North America, demandremained satisfactory during most of theyear. The expansion of the Business Sec-tor’s international marketing organisationcontinued according to plan.

Raw material prices fell during the yearbut stabilised at a historically fairly highlevel. The SEK, which strengthened gradu-ally during most of the year, meant someweakening of the international competi-tiveness for most products made in Swe-den.



Operating result afterdepreciation, SEK M 296 311


SEK M 2,223 1,886Return on capital employed, % 13.3 16.7

Operational cash flow, SEK M -582 70



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Earnings and profitabilitySales

Invoiced sales increased by 6 per cent toSEK 4,685M (4,421). Of the salesincrease, units acquired during the yearaccounted for SEK 609M. For comparableunits, invoiced sales decreased by 8 percent. Of invoiced sales, 77 per cent (76)were made outside Sweden.

ResultsOperating earnings fell by 5 per cent toSEK 296M (311). The contribution toearnings from units acquired during theyear amounted to SEK 27M. For compara-ble units, earnings declined by 15 per centto SEK 269M.

To the fall in earnings contributed pri-marily the weak market trend in Europewhich mainly hit forestry and agriculturaltyres as well as industrial hose. Exchangerate differences as a consequence of the on-average stronger SEK had a negative effecton earnings of approximately SEK 25M.

During Spring 1996, Trelleborg Industri acquired the French company, CMPP, which manufactures food hose, among other things.

23


Acquisitions and divestmentsDuring the financial year, operations witha combined annual turnover of approxi-mately SEK 1.6 billion and 1,500 employ-ees were acquired. Among major acquisi-tions during the year can be mentioned:

April: The French industrial rubbercompany, CMPP, with a turnover of SEK600M and 750 employees at a plant inClermont Ferrand in France and at salesoffices in Germany, Belgium, the Nether-lands, Switzerland, Spain and Italy. Mainproducts: industrial hose and rubber sheet-ing. Vendor: the Michelin Group.

September: Horda AB, the previously-listed Swedish rubber company, with aturnover of SEK 360M and 350 employeesat five plants in Småland and at sales officesin Finland and Norway. Main products:automotive components, building profilesand other extruded profiles, rubber com-posites and rubber granulate for, amongothers, the cable industry, and retreadingmaterials.

October: 85 per cent of the shares and anoption to acquire during 1997 the remain-ing 15 per cent in the privately-ownedSpanish rubber company, Ibercaucho, witha turnover of SEK 300M and some 370employees at three plants in Spain, oneplant in Mexico and a sales office inVenezuela. Main products: rubber sheet-ing, fenders and expansion joints.

November: The Canadian distributioncompanies, Anderson CP-Rubber andSnowden Rubber with a turnover of SEK250M and 200 employees at 17 salesoffices in Canada. Main products: distrib-ution of industrial supplies (industrial andhydraulic hose, couplings, conveyor belt-ing, etc). Vendor: StarCan Corporation.

Among own operations established dur-ing the year can be mentioned new region-al offices in Thailand, Japan and Hungaryas well as a strengthening of the marketorganisation in the former Soviet Union,partly by establishing sales offices in StPetersburg, Kiev and Minsk.

During the year, the operations inMataki Takfönster in Sollebrunn and KAStans AB, which was included in theacquisiton of Horda, were sold. The lattertransaction also included Trelleborg Build-ing Products’ operations for jointing ofprofiles in Österbymo.

The plant for manufacturing batterycontainers in Spondon, Great Britain, wasshut down. Parts of the production weremoved to the Business Sector’s plant inHoogezand, the Netherlands. The plant inKarlskrona for manufacturing extrudedprofiles was closed. Operations were con-centrated on the Business Sector’s plants inVärnamo.

At the end of the year, a decision wasalso made to move the operations at theBusiness Sector’s plant in Wasbek, Ger-many during 1997. Production of antivi-bration components for the automotiveindustry was concentrated on the adjacentplant in Neumünster, whereas manufactur-ing of heavy-duty building profiles will bemoved to the Business Sector’s plants inSweden, the Netherlands and GreatBritain. Manufacturing of milk liners wasconcentrated on the plant in Trelleborgalready in 1996. A decision regarding thelocation of the production of brake com-ponents (membranes) will be made at thebeginning of 1997.

InvestmentsDuring the year, investments in fixed assets(excluding acquisition of companies)amounted to SEK 278M.

PersonnelDuring the year, the number of employeesincreased by 35 per cent to 6,329 at theyear-end. The majority of the increase wasattributable to acquisitions made duringthe year. Within comparable units, thenumber of employees fell by 2 per cent to4,425. The average number of employeesduring the year, calculated as full-timeworkers, amounted to 6,010 (4,636), ofwhich 2,295 (1,981) work in Sweden.

In order to meet future demands onmodern leadership, technological expertiseand high preparedness for change in arapidly expanding operation, the work onproficiency development continued withinthe internal leadership programme,STORM Executive Programme. An inter-national training programme (TrelleborgRubber University) was launched duringthe year with the objective of also achiev-ing a broader technological proficiencydevelopment in all parts of the BusinessSector.

Large low-pressure tractor tyres provide advantagesfor environment-friendly farming.

24

THE WORLD’S RUBBER INDUSTRY

ExternalThe world’s rubber industry is estimated toturnover in the region of SEK 1,000 bil-lion. Of that, tyres of various types are esti-mated to account for approximately 50 percent. Of the remaining 50 per cent, halfgoes to the automotive industry in theform of a large number of different com-ponents and half to other industries. Ofthis, approximately 80 per cent is used forproduction of various types of industrialrubber products (hose, profiles, vibrationinsulators, moulded products, rubbersheeting, rubber mats, conveyor belting,etc) and the remaining approximately 20per cent for consumer products (boots,shoes, balls, gloves, babies’ dummies, con-doms, etc).

MarketIn most areas, rubber is used for, amongother things, sealing, dampening, and wearprotection. Consumption of rubber prod-ucts is estimated to amount to approxi-mately 12 million tonnes per annum. Seenhistorically, rubber consumption hasgrown in step with GDP in various parts ofthe world. The reason is that with higherliving standards demands also followdemands on the functions offered by theunique sealing and dampening propertiesof rubber, i.e. comfort, safety andimproved environment.

Of the world consumption of rubberproducts, approximately half is based onnatural rubber and half on synthetic rub-ber. Natural rubber is extracted from therubber tree, Hevea Brasiliensis, whichtoday is mainly grown on plantations inSouth-East Asia (including Indonesia,Malaysia, Thailand and Sri Lanka). Syn-thetic rubber is extracted from oil. In theproduction of rubber products, a largenumber of other component raw materialsare also used including fillers such as car-bon black, various types of chemicals, soft-eners, antioxidants, reinforcement materi-als, etc.

CompetitorsThe world’s largest rubber companies arethe large global manufacturers of tyres forcars, trucks and buses. The three largesttyre companies are Bridgestone/Firestonein Japan, Michelin in France andGoodyear in America, all with an annualturnover in excess of SEK 60 billion. Oth-er large tyre companies are Continental in

Germany, which owns among othersGislaved in Sweden, Sumitomo/Dunlopand Yokohama in Japan and Pirelli in Italy.Together, these seven companies accountfor approximately 75 per cent of total tyresales in the world. 120 small or medium-sized manufacturers, account for theremaining 25 per cent, of which niche pro-ducers such as Trelleborg is one.

In several of its niches and market areas,Trelleborg has significant market shares. Inthe area of solid industrial tyres for fork-lifttrucks and other materials-handling equip-ment, which accounts for approximately60 per cent of Trelleborg’s tyre sales, forexample, Trelleborg is the world leaderthrough its subsidiaries, TrelleborgMonarch and Trelleborg Bergougnan. Inits other main area, forestry and agricultur-al tyres, Trelleborg also has a strong posi-tion on its main markets, Scandinavia andWestern Europe. An expansion has startedin North and Latin America. Competitorsin this area are several of the large tyremanufacturers as well as other niche com-panies such as Nokian, Vredestein andAlliance.

If the tyre industry is now fairly wellstructured, then the industrial rubber sec-tor in the world in many respects remainsstrongly fragmented with a large numberof players. As a comparison with the tyreindustry, it can be mentioned that the sev-en largest rubber companies (Bridgestonein Japan, BTR in Great Britain, Freuden-berg in Germany, Hutchinson in France,Gates and Goodyear in the USA and Con-tinental in Germany) together account foronly approximately 15 per cent of totalsales of industrial rubber and that the 25largest, of which Trelleborg is one, togetheraccount for only approximately 30 percent. In addition to these large companies,there is a very large number of small andmedium-sized players with which Trelle-borg also competes to a various extentdepending on product and market area.

In the automotive components area,however, some restructuring has takenplace in recent years. The automotive com-panies have significantly reduced the num-ber of suppliers while, at the same time,their demands for development capacityand global presence have increased.Through the creation of Trelleborg Auto-motive, Trelleborg marks its intention tobe one of the leading players in this area.

Sweden

Other Nordic countries


USA, Canada

Other markets




Tyres & Protective Products

Hose & Engineered Products

Automotive & Composites

Building Products

25

OPERATIONS BY BUSINESS AREA 1996

Tyres & Protective Products■ Falling demand in Europe■ Slight fall in operating earnings

During the second half of 1996, operationsin the Business Area was characterised by asignificant decline in demand for in partic-ular forestry and agricultural tyres inEurope. This, however, was extensively sea-sonal and as early as January, demand againincreased. A more general recovery is how-ever not anticipated until later in 1997.

Demand for industrial tyres on theNorth American market also weakenedtowards the end of 1996.

Sales of protective products were slight-ly down on the previous year.

For the Business Area as a whole, oper-ating earnings fell slightly compared withthe very good earnings of the previous year,primarily as a result of currency effects.

Hose & Engineered Products■ Strong expansion and strengthened

market coverage■ Improved earnings, thanks to acquisi-

tions

During most of 1996, operations in theBusiness Area were characterised by thework of integrating operations within theformer Business Area Hose & Supply withthe French rubber company, CMPP, whichwas acquired in April. A new productionand market structure was implemented,which is expected to have full effect in1997.

Demand for industrial hose in WesternEurope remained weak.

The North American operations con-tinued to develop positively. The marketposition in Canada was strengthened sig-nificantly towards the end of the year fol-lowing the acquisition of the operations ofthe distribution companies, Anderson CP-Rubber and Snowden Rubber which willbe integrated with the subsidiary, Goodall.

Demand for roll-coverings to the Scan-dinavian paper and pulp industry as well asproducts for infrastructure and offshorewas on a par with the previous year.

The Business Area’s operating earningsimproved slightly, mainly as a result ofearnings contributions from the operationsacquired during the year. The earningsimprovements were, however, counteract-ed by losses in the Engineered ProductsDivision’s production of heavy-duty build-

ing profiles in Germany. A restructuring ofthat operation has been initiated.

Automotive & Composites■ Positive trend■ Improved earnings

The Business Area enjoyed a continuedpositive trend during the year. Both salesand operating earnings for comparableunits increased over the previous year,mainly thanks to a strong earningsimprovement in the automotive compo-nents area.

During the year, the automotive-orient-ed product range was strengthenedthrough the acquisition of the HordaGroup whose automotive-related opera-tions were integrated into Trelleborg Auto-motive within the Business Area. Furtherexpansion within the automotive sector isanticipated during 1997. As a phase inthis, the Business Area changed its name atthe turn of the year from Antivibration &Composites to Automotive & Composites.

During the year, the positions in thecomposite area were also strengthenedthrough the acquisition of Ibercaucho andCMPP which made Trelleborg the clearlyleading manufacturer of rubber sheetingon the European market.

Building Products■ Weak start but strong finish

After a weak start, mainly as a result of adifficult Winter, demand improved steadi-ly during the year. Both sales and operatingearnings for comparable units were on apar with the previous year despite a contin-ued weak building trend. The incorpora-tion of Horda’s building- and materials-related operations meant a significantcontribution to earnings.

The investment in increased exportscontinued to develop favourably and isexpected to be able to accelerate still fur-ther as a result of the acquisition of Hordaand marketing investments made in,among others, Eastern Europe.

Substantial investments in machinerywere effected during the year at the pro-duction plant in Värnamo to which theproduction of extruded profiles, which waspreviously carried out in Karlskrona, wasalso moved during the year.

Trelleborg Rubore manufactures brake-shims, which provide for silent and efficient brakes,and which are here being tested in a rig to control their quality.


26

BUSINESS SECTOR DISTRIBUTION – TRELLTRADE

Trelltrade

”Tough at the beginning butimprovement duringthe Autumn

PRESIDENT: BJÖRN OGARD

■ Price fall and decliningdemand in first half of the year

■ Stabilisation and improvementduring the Autumn

■ Satisfactory return despite weakbusiness trend

Price fall and declining demand were thecommon denominator for the Trelltradecompanies during the first half of 1996.Thereafter, a stabilisation took place andduring the Autumn several of the compa-nies registered improved volumes andprices only to be faced by a weaker marketduring the Winter months.

GENERALLY FALLING DEMAND

Demand generally fell slightly during1996. In spite of that, Ahlsell - thanks toaggressive market investments - was able toincrease its sales. For Bröderna Edstrand,volume declined by more than 10 per cent.The stockbuilding, which took place in allparts during 1995 was in 1996 replaced bya similar reduction in stock. Although steelconsumption remained satisfactory in Swe-den, these variations in stock hit volumeshard. Reynolds experienced a very weakand steadily declining French market, asatisfactory British market and a Germanmarket which, due to Winter weather anda poor building trend, offered some verybad Winter and Spring months in order tobegin to recover thereafter.

The Intermarket Group registered satis-factory volume development, especially onthe European market on which sales, fol-lowing a weak start, increased significantlytowards the end of the year. In the USA,there was a strike in the sulphuric acidplant for a large part of the year. In spite ofthat, production was running but volumeswere slightly down. Fillite in Great Britianenjoyed satisfactory demand throughoutthe year.

WEAKENED RESULT BUTIMPROVEMENT IN 1997

The earnings of the Business Sector weak-ened compared with 1995. Seen againstthe weak business trend, primarily on thebuilding side, profitability was howeversatisfactory overall. On a comparison, itshould be noted that 1995 was charac-terised by unusually high demand andfavourable prices which meant all-timehighs in earnings for several of the compa-nies. 1996 was more of a standard year.Thanks to the extra costs - mainly in theform of stock losses - which have now beentaken, 1997 should be a better year than1996.

Ahlsell strengthened its position on themarket in 1996. Costs for the marketinginvestment which was initiated duringAutumn 1995, however, weakened 1996earnings. A strengthened sales organisationand the establishment of new professionalmarts as well as improved cost efficiencyand stock turnover rate create prerequisitesfor a more positive trend in 1997.

Bröderna Edstrand suffered large stocklosses and low volumes. Towards the end ofthe year, international supply and demand,however, reached a balance and the price

SUBSTANTIAL PRICE FALLS

Hardest hit by the price fall was BrödernaEdstrand which had not experienced any-thing like it for a few decades. Steel pricesfell by approximately 20 per cent, stainlessand aluminium by 40 per cent. Thisstrongly affected the year’s earnings. ForReynolds, the fall in the price of copperhad the same effect. Price changes in exist-ing stock alone affected these two compa-nies negatively by a total of approximatelySEK 100M compared with 1995.

For Boliden Chemtrade and BolidenIntertrade, prices for sulphur and sulphuricacid fell to historically low levels. Duringthe Autumn, however, a stabilisation tookplace and prices improved slightly.

During the year, Ahlsell experiencedpractically no price increases at all, eitherin heating and plumbing supplies or on theelectrical side.

27

trend turned up. During 1997, prices areexpected to be steadily adjusted upwards.This will however be counteracted by thefact that the Swedish engineering industryis already working at high capacity utilisa-tion, that infrastructural investments arefalling, with the exception of a small num-ber of big projects, and that the buildingmarket is improving only very slowly.Edstrand’s cost scenario continued toimprove and capital efficiency increasedsignificantly, not least on the stock side.

Following its cost adaptation in Franceand a restructuring of its German opera-tions, Reynolds will generate significantlyhigher earnings in 1997. The British mar-ket, which has grown the fastest in recentyears, is expected to remain strong and isexpected to be able to generate even higherearnings following the expansion that hastaken place with a strengthening of thesales side and a new efficient service centre.

Boliden Intermarket’s prospects for1997 are good. Prices of sulphur and sul-

phuric acid improved during Autumn1996 as did demand. 1997 has started well.The ongoing rationalisation programme inthe sulphuric acid plant will make a fullimpact during 1997 and the extra costs,which were caused by the strike, will grad-ually cease. Through minor investments inits plant, Fillite has increased its produc-tion capacity.

Björn Ogard

ORGANISATION

Business area: Includes: Operations:

AHLSELL ABPresident: Bengt Olsson

Ahlsell AB with subsidiaries Ahlsell Oy Ref Ab, Ahlsell Kulde A/S, Skaneks A/S, Flex Scandinavia AB, Gelia Industri AB, JW Andersson Maskin AB.

Wholesale trading with heat-ing and plumbing supplies,electrical, refrigeration andtool products.

BRÖDERNAEDSTRANDPresident: Rolf Forssell

Bröderna Edstrand AB Wholesale trading with com-mercial, reinforcing and spe-cial steel, industrial pipes,stainless steel and aluminium.

REYNOLDS EUROPEAN SAPresident: Gérard Lièvre

Reynolds European SA with subsidiaries Intermetaux SA, Reyton Metals Ltd, Metallhalbzeughandel GmbH, EMV- Edelstahl GmbH.

Wholesale trading with wire,rod, sheeting, pipes and pro-files, etc, made of copper,brass, aluminium, special steeland other metals.

BOLIDEN INTERMARKETPresident: Björn Ogard

Boliden Intermarket AB with subsidiaries Fillite Ltd, Boliden Chemtrade AG, Boliden Intertrade Inc.

Trading with sulphur prod-ucts. Production and sale ofcenospheres.


AhlsellAhlsell’s strength on the Swedish market isproximity to its customers. This is attainedthrough the professional marts, which areestablished all over the country, in whichcustomers are able to satisfy their need forheating and plumbing supplies, electricalproducts, etc. The combination of theseprofessional marts and the central ware-house in Hallsberg creates rapid and effi-cient distribution. In order to make thispossible, a highly-advanced IT system hasbeen developed which links the operationstogether and which is also able to commu-nicate with suppliers and customers. A fur-

ther strength of Ahlsell is the very broadand extensive product range in heating andplumbing supplies as well as in electricaland refrigeration products.

For Ahlsell, the expansion opportunitiesin the Nordic countries and around theBaltic are interesting against the back-ground of the internationalisation which istaking place in wholesale trading withheating, plumbing supplies and maybe pri-marily within electrical products.

Bröderna EdstrandBröderna Edstrand’s strength on theSwedish market is that the company is anationwide wholesaler of steel with stocks

and systems which allow for 24-hour ser-vice. Scheduled truck delivery systems, abroad and extensive range of stocked prod-ucts as well as means for pretreatmentamount to a high service level to its cus-tomers. For many years, BrödernaEdstrand has enjoyed well-established rela-tions with most of the European steel millsand is the import alternative on theSwedish market.

For Bröderna Edstrand it is vital to con-tinue to develop the high level of service tocustomers and to be able to offer variousforms of pretreatment and added value inorder to facilitate materials supplies forcustomers.


28



Operating earnings after depreciation, SEK M 297 536


SEK M 1,448 1,514Return on capital employed, % 20.5 35.4

Operational cash flow, SEK M 412 380



0

1000

2000

3000

4000

5000

6000

7000

8000

9000

-2.0

-1.0

0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1992 1993 1994 1995 1996



1992 1993 1994 1995 1996-200

-100

0

100

200

300

400

500

600

-15.0

-10.0

-5.0

0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0




ReynoldsReynolds is - primarily in France and GreatBritain - known as one of the major suppli-er-independent distributors of metals inthe area of non-ferrous products and inboth these countries has established servicecentres in order to be better able to satisfycustomer requirements.

Reynolds intends to continue to focusits operations on these two main marketsand there to strengthen its positions stillfurther.

Boliden IntertradeBoliden Intertrade has its own plant in theUSA for production of sulphuric acid andat the same time carries out trading withsome US and Canadian smelters. Thecompany has built up a well-functioningdistribution network by rail and, with itslocation in south-east USA, is in closeproximity not least to the large and veryimportant fertiliser industry in Floridawhere 70 per cent of the US market islocated.

Boliden Intertrade strives to strengthenstill further its good position on the Amer-ican market, the demands of which it hasgood possibilities to satisfy through its

double role as producer and as retailer onbehalf of others.

Boliden ChemtradeVirtually throughout the world, BolidenChemtrade has very well-established con-tact networks with both suppliers (smeltersand refineries) and customers as well as alogistically well-functioning systems withtankers, trailers and a large terminal inRotterdam for interim storage of sulphuricacid.

For Boliden Intertrade and Chemtradeit is vital to continue to develop logisticsbetween suppliers and customers. It is alsoimportant to continue to build up long-term business relations in Europe andSouth America and in the future also inAsia.

FilliteFillite is leading the development of newapplications for its main product, cenos-pheres, a filler material which is especiallysuitable for plastics.

For Fillite, it is essential to continue thisdevelopment in order to maintain its posi-tion as the world’s leading supplier ofcenospheres.

Bröderna Edstrand’s trucks distribute, among other things, steel products to workshops and construction sites.

29


OPERATIONS IN 1996

AhlsellAhlsell is a wholesale company in productareas heating and plumbing supplies, waterand sewerage supplies, electrical, refrigera-tion and tools. In Sweden, it has some 70professional marts with close proximity toits customers who primarily consist of con-tractors, municipalities and industry. Froma central warehouse in Hallsberg, the flowof the approximately 50,000 stock items iscontrolled via a highly-efficient computerautomation system.

An unusually cold Winter in 1995/96contributed to very low building activity atthe beginning of the year. The expectationsof volume growth that existed on the mar-ket were not realised. Substantial falls inraw material prices and a strengthened cur-rency led, for the first time in many years,to falling average prices. Despite that,invoiced sales increased by 7 per cent fromSEK 3,159M to SEK 3,396M, thanks tothe market investments which were madeduring the year.

Over the past five-year period, whole-sale trading has been internationalised. InSweden and the Nordic countries, electri-

cal wholesale is dominated by multination-al companies. In Europe, wholesale ofheating and plumbing supplies has becomeincreasingly large-scale and covers severalmarkets. In the Nordic countries, the DahlGroup dominates. In the refrigeration sec-tor, Ahlsell and its competitors work on aNordic basis. It is therefore natural that theAhlsell Group sees the Nordic area andBaltic countries as its domestic market.

Ahlsell’s establishment in St Petersburgis developing according to plan. Collabora-tion agreements were signed in the Balticstates. A new company in Poland openedits first unit in Warsaw in January 1997.During the year, Gelia Industri AB wasacquired, a company which is involvedwith a consumer-packaged electrical mate-rials programme directed at the retail stage.At the beginning of 1997, PeFo A/S wasacquired with similar orientation in Nor-way. In addition, the refrigeration whole-sale company, Hillco Norge A/S wasacquired. As a result, Ahlsell’s market shareof wholesale refrigeration in Norway willreach a level comparable with that in theother Nordic countries. Because of the dis-tance from the central warehouse in Halls-

Ahlsell’s package solutions mean that the products are in the right place at the right time.

AhlsellBröderna Edstrand

Inter- market

Reynolds


Sweden

Other Nordic

countries


USA, Canada

Other markets


30


berg, it was previously not possible to carryout distribution of heating and plumbingproducts within 24 hours. In order to pro-vide customers with the desired service,Tornab AB, with outlets in Luleå, Piteå,Skelleftå and Umeå was acquired from 1January 1997.

Bröderna EdstrandBröderna Edstrand is an independent,nationwide full-range wholesaler of steeland aluminium. In addition to the engi-neering and building industries, munici-palities and retailers are major customergroups.

In Sweden, supply of steel dropped by14 per cent during 1996 but BrödernaEdstrand’s market share neverthelessremained largely unchanged. However,because of price and volume falls invoicedsales fell by 20 per cent from SEK 2,712Mto SEK 2,176M.

Following two years of strong interna-tional volume growth, 1996 was charac-terised by general stock reductions andsubstantial price cuts in BrödernaEdstrand’s entire product area. The com-bined supply of steel of the EU countriesdecreased by 10 per cent during the year.Although steel manufacturers within theEU reduced their total production by 5 percent, prices fell significantly during theyear, for stainless cold-rolled sheeting andaluminium by more than 40 per cent.

During 1996, Bröderna Edstrandtrimmed and increased operations at thenew service centre for special steel andpipes in Jönköping and rationalised theunits for pre-fabrication of reinforcing steel(ILF) in Jularbo and Malmö.

A great deal of work was put in optimis-ing the stock capital. The objective was toincrease the turnover rate with a main-tained high level of service. Inventory ofthe product range, target figures for prod-ucts as well as a review of local stock loca-tions are examples of measures which weretaken.

Work continued on quality-assuringoperations in accordance with third-partycertification in 1995. Quarterly sum-maries, follow-up and analyses provide forincreased information and improved cus-tomer service. During the year, effortsaimed at meeting the increased require-ments on environment-friendly operationswere also intensified. This part will becomean even more important competitivemeans in the future.

ReynoldsReynolds is an independent distributor ofsemi-manufactures in the area of non-fer-rous products with operations in France,Great Britain and Germany. The ReynoldsGroup provides a broad product outputand offers advanced service to customerswithin practically all industrial sectors.

Translated into SEK, invoiced sales fellby 25 per cent, from SEK 1,119M to SEK842M. Demand on the French market wasweak throughout the year from both theengineering and building industries. Thecopper price fall led to tough competitionas all parties tried to reduce their stockswith lower prices as a consequence.

Earnings fell significantly in the Rey-nolds Group and profitability was weak.

In order to compensate for the new low-er turnover level, a savings programme wasstarted in France which will gradually pro-duce effects during 1997. In 1996, theBritish market was by far the best. Salesincreased by nearly 30 per cent. Continuedinvestment is being carried out, and at theturn of the year a new warehouse and ser-vice centre were inaugurated.

Boliden IntermarketBoliden Intermarket consists of three oper-ating units: Boliden Chemtrade (BCT) inZug, Switzerland, Boliden Intertrade(BIT) in Atlanta, USA, and Fillite in Run-corn, Great Britain. BCT’s and BIT’s pre-dominant operations are production andtrading with sulphur and sulphuric acid.Fillite manufactures and markets ceno-spheres.

Invoiced sales of the IntermarketGroup, translated into SEK, fell by 13 percent from SEK 1,105M to SEK 960M. ForBCT and BIT, the market at the beginningof the year was characterised by imbalancewith significantly larger supply thandemand. Supply of sulphur from refineriesand of sulphuric acid from smeltersincreased while, at the same time, con-sumption - mainly from the fertiliserindustry - remained unchanged which ledto a substantially lower price level.

BCT strengthened its positions inEurope and increased its volumes primari-ly in Brazil, Chile, Mexico and SouthAfrica. The Autumn months were highlysatisfactory and the volume of sulphuricacid increased by approximateley 25 percent over the previous year.

BIT enjoyed success on the market withsales of sulphuric acid of its own produc-

The Swedish heating & plumbing supplies market 1996

Ahlsell

Dahl

Skoogs

Lunda- grossisten

OnninenOther

The Swedish electrical market 1996

Asea- Skandia

Selga/ RexellAhlsell

Skoogs

Storel/Otra

Nordisk Solar

31

tion as well as sulphuric acid deliveredfrom the smelters. Prices were lower butnevertheless made possible a fairly satisfac-tory result. The plant in Copper Hill, Ten-nessee, was hit by a strike for most of theyear. It was however possible to keep pro-duction going at an unchanged scale albeitat higher costs.

In western USA where BIT operatestwo pelleting plants, in which liquid sul-phur from refineries is converted to fixedsulphur pellets, the price of offshore sul-phur was largely halved which led to signif-icantly lower prices for the sulphur whichwas sold in solid form.

Fillite enjoyed a very successful year in1996. Production capacity was fullyutilised and demand was high. Salesincreased by 20 per cent and operatingearnings by even more. Some major orders

were delivered to British Steel which, witha new technology, uses cenospheres as insu-lation material in oil pipelines.

COMPETITORSAhlsell

Ahlsell’s market share on the Swedish heat-ing and plumbing supplies market isapproximately 35 per cent. The main com-petitors are Dahl, which also has around35 per cent, and Skoogs, 15 per cent.

On the Swedish electrical market, Asea-Skandia and Selga/Rexell lead with marketshares of 30 and 20 per cent, respectively.Ahlsell, Skoogs and Storel/Otra haveapproximately 15 per cent each.

Bröderna EdstrandBröderna Edstrand’s market share is 24 percent. Its main competitors are Tibnor

which is estimated to have a market shareof approximately 50 per cent and Helénswith around 11 per cent.

ReynoldsReynolds’ main competitors are the salesorganisations of the producing mills.

BCT/BITBCT/BIT’s main competitor in interna-tional trading with sulphuric acid isInteracid which is owned by the Japanesecompany, Sumitomo.

FilliteFillite is estimated to account for 30 percent of the world market for cenospheres.

In Sweden, Ahlsell has established some 70 professional marts in close proximity to its customers who primarily consist of contractors, municipalities and industry.


32

SORBINVEST ABPresident: Per Lidström

Sorbinvest, which is located in Skellefteå,was created at the end of the 1980s withthe objective of developing competitivecompanies in Västerbotten. The back-ground was the need to meet personnelreductions when mines and smelters wereeffectivised. The company was formed onthe initiative of Boliden/Trelleborg but theoriginal owners also included the Govern-ment, a number of banks and SkellefteåMunicipality. In 1996, Trelleborg in-creased its ownership to 90 per cent ofvotes and 95 per cent of capital. Theremaining shares are owned by SkellefteåMunicipality and Sparbanken Sverige.

Sorbinvest carries out operations withinthe areas mechanics, timber and electro.The focus is within the engineering indus-try. The business concept is – throughactive ownership and development work -to create a strong long-term industrialgroup with its base in Norrland.

Most subsidiaries operate within well-defined niches. Holmhed Systems AB, forexample, manufactures remote-controlledrobots for demolition work in crampedand health-hazardous environments. Cus-tomers are found in the building industryas well as the cement and steel industriesand recently also in the nuclear powerindustry. The export share amounts toapproximately 85 per cent. Fumex AB pro-duces spot extractors which are now foundnot only in industry but also at dentistsand in schools and hairdressing salons.Other engineering companies are exten-sively subcontractors to other industries.Products range from handling equipmentand special machinery for the forest indus-try as well as pressure vessels, heat exchang-ers and systems for the process industry toprocessed components and complete prod-ucts for the food and pharmaceuticalindustries.

Nearly a quarter of Sorbinvest’sturnover comes from Wallmarks Såg AB.Wallmarks delivers not only sawn timberbut nearly half of the production isprocessed into glulam, pre-painted woodpanels for building facades, finger-jointedtimber and impregnated products. During1996, Svenska Träbroar AB was acquired.This company is attempting to create a

market for road bridges of wood as a com-petitive alternative to conventional bridgesof iron and concrete.

Lövånger Elektronik AB, which wasestablished to manufacture the Carlssonloudspeakers that were well known in the1970s, is now a contract supplier to theSwedish electronics industry and, at thesame time, has developed its own products,including battery-chargers.

Following previously-implemented in-vestment programmes, 1996 was a year ofconsolidation. Work aimed at improvingthe Sorbinvest Group’s structure contin-ued. Investments in product and marketdevelopment constituted prioritised areas.

Group turnover amounted to SEK592M (584) and the number of employeesto 539 (525). Earnings after financial itemswere SEK 28M (40). Return on capitalemployed amounted to 19 per cent (27 percent).

Other companies

Invoicing and new order bookingsremained satisfactory during the year,whereas exchange rate fluctuations andincreased competition led to reduced earn-ings. Business Area Timber was hit espe-cially hard by exchange rate fluctuationsand falling demand, a trend which wasnoted already at the beginning of the year.Return on capital fell significantly over theprevious year but remains at a satisfactorylevel compared with other similar opera-tions.

Prospects look favourable. Especiallywithin Business Area Timber, which is nor-mally at the forefront of a boom, bothdemand and prices are now improving.Should this trend continue, other sectorswill also improve gradually.

Remote-controlled demolition robots from Holmhed Systems, a subsidiary of Sorbinvest, are superior in cramped spaces and health-hazardous environments.

33

BPA AB (PUBL)Associated company

President: Johan Karlström

BPA is Sweden’s leading contracting com-pany with operations in the heating andplumbing supplies, electrical, and ventila-tion sectors. In these sectors, BPA developsnew concepts with co-ordinated completecontracts and is able to offer complete con-tracts to customers with strict demands onfunctional solutions. The company is rep-resented all over Sweden by nearly 200units in some 90 locations. BPA operateson the Scandinavian market and carriesout operations via wholly-owned sub-sidiaries in both Sweden and Denmark.

In 1994, Ventilationsunion AB with itssubsidiaries was acquired from TrelleborgAB through a non-cash issue. During1996, an additional number of small elec-trical and heating and plumbing suppliescompanies were acquired in Sweden. As aresult, BPA strengthened still further itsleading position on a number of local mar-kets.

BPA also develops new service andmaintenance packages for the property sec-tor and industry which are placing increas-ing demands on technological expertiseand endurance. As this is not always avail-able in their own organisation, customerslook for a competent supplier with strongresources who will be able to take-over theresponsibility on out-sourcing. During1996, BPA took-over service and mainte-nance organisations from property compa-nies which together manage more than100,000 apartments.

BPA’s concentration of its operationscontinued to provide positive effects. Themarket developed favourably and BPA hasa strong business base in repair, refurbish-ment and service. The BPA Group now hasa turnover of SEK 5 billion and 6,000employees.

At the turn of the year, the TrelleborgGroup’s ownership in BPA amounted to28.77 per cent of capital and 29.35 percent of votes.

BPA is Sweden’s leading contracting company within heating and plumbing supplies, electrical and ventilation.

34

Between them, the Trelleborg Group’sthree main Business Sectors - Metals, Rub-ber and Distribution - have very differentprerequisites with regard to the environ-mental work. In order to guarantee thatthe work is nevertheless carried out on thebasis of the same high principles, a Group-wide environmental policy was adopted in1995.

LOW EMISSION AND DISCHARGE LEVELS

Work aimed at limiting harm to the envi-ronment from various production plantshas steadily continued over the pastdecades. This has also resulted in the fact

that emissions into air and water are now atlevels which are not judged to representany risk to the health of those livingaround the plants or harm to the sur-rounding environment.

DECOMMISSIONING TECHNOLOGY

Issues other than process emissions havecome into focus in recent years. On thepart of the mining industry, substantialresources have - in collaboration with sci-entists and environmental authorities -been invested in developing technology fordecommissioning tailing ponds and wasterock deposits after mine closure. Boliden’s

Environment - an area under continuous development

OVERALL ENVIRONMENTAL POLICY

1All operations are to be charac-terised by care for environment,health and safety.

2Group companies are to offer the market products and serviceswhich meet strict demands on functionality and environmental adaptation.

3Sound energy and raw materialseconomy will be strived for.

4Protection of the environmentwill be based on the commit-ment from employees at all levelsand on clearly-communicateddemands made on suppliers andcontractors.

5Environmental protection will be designed in accordancewith what is environmentallyjustified, technologically possibleand financially reasonable.

6The environmental work will be examined and developed ona continuous basis.

7The operations are to be carriedout in a spirit of openness vis-à-vis the world around us.

An environmental policy will be produced for each local operation and based on theseoverall guidelines.

Boliden, as one of the first mining companies in the world, successfully remediated a tailings pond through flooding. The

35

expertise and experience in this areaattracts significant international interest.

TRELLEBORG IN THECYCLICAL SOCIETY

Key principles in recent environmentalwork and environmental debate have been“eco-cycle adaptation” and the “sustain-able” society. This has meant that thedebate has extensively come to deal withresource consumption and recovery. Trelle-borg’s operations have all the necessaryqualities to form an important cog in the“sustainable” society of the future. Themetal sector manufactures products whichtheoretically are 100 per cent recoverable.

Lead production at Boliden Bergsöe, forexample, is already based on recovery oflead batteries and 25 per cent of the rawmaterials to Rönnskär’s copper productionconsists of cinder, scrap metal and ashes. Inthe Rubber Sector, tyre manufacturing isbased on natural rubber, a renewable rawmaterial.

TRELLEBORG INTERNATIONALLY

Trelleborg’s activities outside Sweden areincreasing steadily. In the environmentalarea, the criteria may be significantly dif-ferent with regard to, for example, legisla-tion, company culture and external condi-tions. The Group’s environmental policy,

however, applies world-wide and the envi-ronmental work is carried out with thesame orientation and ambition regardlessof whether the operations are in Sweden,Southern Europe, the USA or Saudi Ara-bia.

ENVIRONMENTALMANAGEMENT SYSTEMS

For a number of years, a well-functioningenvironmental management system hasexisted within the Group. Because of dif-ferent conditions, the design of it differsbetween the various Business Sectors. Ineach sector, however, there is a special envi-ronment officer who is a member of thecompany management. An importantcomponent in the environmental manage-ment system is the Group’s environmentalpolicy. During the year, work has been inprogress on drawing up local environmen-tal policies. Another important part of thework is regular internal environmentalaudits within the heavy duty operations.

CERTIFICATION

Today, there is the opportunity for gainingan official quality stamp on an environ-mental management system through certi-fication in accordance with ISO 14000and/or EMAS registration. Some unitswithin the Group are well on the way intheir work to certifying their operations.Their experience will form the basis formaking decisions about the way in whichthis work should be pursued in the Group.

TRELLEBORG INDUSTRI “Green” rubber products

Of the products manufactured and mar-keted by Trelleborg Industri, products withan “environmental profile” form a growingproportion. As examples can be mentionedspecial tractor tyres which lead to reducedearth compaction and various types of rub-ber sheeting which, among other things,are used for sealing landfills and waterreservoirs.

Environmental ManagementSeveral Divisions have decided to intro-duce an environmental management sys-tem in accordance with ISO 14001. Dur-ing 1996, an extensive training programmewas carried out with regard to environ-ment, health and safety aimed at raisingproficiency of the executives responsible.

Stekenjokk pond was attended to in 1992, and metal discharges from the pond have fallen to a very low level.

36

In Business Area Building Products,separate environmental groups have beenformed to take an overall grip on the envi-ronmental area.

Agenda 21In Trelleborg, the Company has involveditself in the industrial group of the localAgenda 21 work. The link between theenvironmental work in company andmunicipality is important for both parties.A common view on environment, health,safety and recycling concepts can, forexample, lead to more efficient systems forenergy supply and transportation. Envi-ronmental know-how in industry can bevery beneficial to other sectors in society,and the collaboration leads to mutuallyincreased knowledge and understanding.

An extensive campaign was carried outaimed at changing the travel habits ofemployees to and from work.

The Company contributed financiallyto the planting of trees in one of themunicipality’s green areas. The project is acollaboration with the local schools called“Tree of Knowledge”.

The Company is also participating in ajoint environmental audit which will becarried out for the first time during 1997.

SolventsContinued investment aimed at reducingthe use of solvents is underway in severalunits. In Truck & Train Components inSjöbo it is planned to replace the current tri-degreasing with alkali degreasing in a closedsystem. The use of other solvents is alsoexpected to be reduced through a changedmethod which involves reduced overspray.

In the units in Trelleborg, mapping isunderway of all emission points for sol-vents. The mapping will form the basis foran action programme aimed at minimisingsolvent emissions consisting of a change tomore environmentally-adapted products,process changes, etc.

Emissions and dischargesDuring the year, no violations of termswere noted. An investigation relating tothe result of action implemented aimed atreducing emissions of solvents, vulcanisa-tion fumes and dust will be submitted tothe National Franchise Board for Environ-ment Protection during 1997. The resultsof tests carried out so far on the newly-installed treatment plants in Trelleborg andVärnamo have been positive.

WasteBy introducing routines for sorting pro-duction waste at the source, it has beenpossible to reduce the volume of wastewhich is sent for landfilling by more than60 per cent during the period 1990-1996,and it has therefore been possible to cut theannual cost of waste-handling by SEK 2M.

BOLIDEN

The indestructible metalsMetals have the property that in most areasof use they are not consumed but are possi-ble to recover. Subject to the existence ofsystems for recovery, this means that themetal which is extracted in the mine is aresource which it will extensively be possi-ble to use and re-use for centuries to come.

Emissions and dischargesIn spite of an already low discharge level,the trend of reduced discharges continued- with some exceptions - during 1996. Tosome extent, this can be explained by newinvestments in cleaning equipment, butreductions can also be noted for operationsin which production has increased and nonew installations have been made. Thepositive development can instead be attrib-uted to the increasing proficiency andcommitment of individual staff members.In particular, it is a matter of reactingquickly and correctly to various types ofanomaly/interruption of operations.

At the Laisvall mine, problems contin-ued with the water treatment plant whichwas installed last year. Attempts to tune theoperation of the plant are in progress.However, discharges have on the wholebeen within the limit for established guid-ing values.

With regard to discharges of copperfrom Aitik, record low discharges intowater, 1.6 kilos, were registered for 1996.

At Rönnskärsverken, a decision wasmade to build a new gas-cleaning plant inthe lead kaldo mill. The installation will bemade in order to be able to increase theprocessing capacity but will also result inreduced discharges.

Waste and residual productsAt all plants, routines have been intro-duced for sorting at the source of non-industry specific waste, for example pack-aging, demolition material, scrap and tyres.At Rönnskärsverken, a large proportion ofthe residual products which arise arerestored to the process. Work is underway

Zn, tonnesCu, tonnes

Pb, tonnesOre production, M tonnes

Discharges of metal to water from Swedish mines

1992 1993 1994 1995 19960

2

4

6

8

10

12

14

16

18

18

18,5

19

19,5

20

20,5

21

21,5

22

SO2, tonnesCathode copper, T tonnes

Production and emissions of sulphur dioxide at the Rönnskär smelter

1992 1993 1994 1995 19960

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

0

20

40

60

80

100

120

140▼

Limit

Decommissioning of tailing ponds

Area Status

Gillervattnet,Boliden In operation Plan existsKristineberg Closed 1991 Measures

underwayLaver Closed 1946 VegetatedLaisvall In operation Plan existsStekenjokk Closed 1988 AccomplishedAitik In operation Plan existsRyllshyttemagasinet,Garpenberg In operation Plan existsEnåsen Closed 1991 AccomplishedSaxberget Closed 1988 AccomplishedKalvbäcken Closed 1963Vassbo Closed 1982 Accomplished

37

aimed at finding a market for also thoseresidual products which today must be sentto landfill sites. Trials with reprocessing ofdust separated from the zinc line are cur-rently in progress in Great Britain.

EnergyDuring the period 1985-1996, consump-tion of energy contributed externally toRönnskärsverken reduced from 1,300GWh to approximately 1,000 GWh perannum while, at the same time, copperproduction nearly doubled. The majorityof the decrease is due to the fact that it hasbeen possible to replace oil for heat pro-

duction by making use of waste heat.Rönnskär also delivers 19,000 MWh dis-trict heating which is equivalent to theheating requirement for approximately1,000 households.

DecommissioningAmong future environmental activitieswithin the mining industry, decommis-sioning of closed mines stands out as themost important as well as most expensivearea.

Boliden has invested, and will continueto invest, large resources on development ofdecommissioning technology and imple-

mentation of measures. Significant parts ofthis work are carried out in collaborationwith environment protection authoritiesand consultants/scientists. In 1996, Boli-den has participated in drawing up aresearch programme which has been given agrant of SEK 40M by MISTRA (the Foun-dation for Strategic EnvironmentalResearch). Boliden will also play an activerole in the planned research programme.

As shown in the table, all tailing pondswhich have been taken out of operationsince 1969 have been remediated anddecommisioning plans prepared for theponds which are still in operation.

In the severe climate in Laisvall, Boliden has successfully vegetated three tailing ponds where natural growth is in the process of being established.

38

The know-how and experience whichhas been built up within the company hasmeant that technology and methods havebeen developed steadily. The aim anddirection is to attain at least the same envi-ronmental protection at a lower cost. As aresult, it has been possible to reduce theestimated cost for the remaining activitiesby more than 50 per cent.

Licence issuesDuring the year, an application for permis-sion to double copper production atRönnskärsverken was submitted to theNational Franchise Board for EnvironmentProtection. A decision is expected inAutumn 1997. According to the plans, itshould be possible to implement the pro-duction increase without any increase inmetal emissions. It is considered that it willbe possible to limit the increase in sulphurdioxide emissions to approximately 30 percent compared with 1996 discharges ofslightly more than 3,000 tonnes. Thismeans that even after a build-up it will bepossible to keep discharges at a level whichis below the current limit of 5,000 tonnesSO2 per annum. During 1996, severalmines also submitted applications forincreased production.

Environment-technology know-howBoliden Contech markets technologyknow-how and equipment for the miningand smelter industries. The main marketsare the CIS and Asia.

Through modern processes and newprocess equipment applied to run-downplants, a significant reduction of emissionsof sulphur dioxide and metals is attained asa rule.

Flue gas cleaning is another importantarea. Sales of cleaning plants as well as fil-ters for separation of mercury, and wetelectro-static precipitators increased duringthe year. Plants were delivered to, amongothers, France, Germany and Italy.

In addition, Contech markets processesfor the recovery of metal scrap and otherwaste products. A topical example is theconstruction of a scrap-based copper millin India.

DISTRIBUTION

The third main branch of the Group’soperations is the wholesale and distribu-tion companies, Ahlsell and BrödernaEdstrand. Environmental issues withinthese operations differ radically from thoseof the heavy manufacturing industries.

Anyone requiring more detailedinformation regarding discharges,waste-handling, etc, is referred to theenvironment report that every localoperation obliged to hold a licencesubmits annually to the supervisoryauthority.

A plant constructed by Boliden Contech for flue-gas cleaning with the wet electro-static precipitator, EDITUBE,has been installed at the French company, Tredi, among others.

Recovery systemsImportant issues include the building upof systems for collection and recovery offluorescent tubes and plastic pipes in col-laboration with other actors.

Reduced solvent emissionsAnother example is Bröderna Edstrand’srust-protection coating of certain prod-ucts. During 1995-96, all coating plantswere provided with treatment plants whichled to a reduction in solvent emissions ofmore than 95 per cent.

39

The international economic scenario wasvery much split during the year. Primarilythe USA, but also Great Britain reportedsatisfactory growth, whereas the otherEuropean economies developed signifi-cantly more weakly.

Demand for base metals remained satis-factory and stock levels fell still further.The average price for copper, however,weakened compared with the previousyear.

Business Sector Rubber Productsexpanded strongly through acquisition. Intotal, companies and operations with anannual turnover of approximately SEK 1.6billion were acquired, equivalent to aroundone-third of the turnover of the BusinessSector in the previous year.

The year’s earnings after financialincome and expenses amounted to SEK1,018M which was significantly lowerthan in the previous year, SEK 3,512M,which however included large positiveexceptional items of SEK 1,966M.

Excluding these restructuring items,earnings after financial income andexpenses were 34 per cent lower than in theprevious year. Through realised tax deduc-tions, earnings after tax, however, wereonly 16 per cent lower than in 1995.

The fall in operating earnings excludingrestructuring items, SEK 775M comparedwith SEK 1,211M in the previous year, isdue to lower earnings levels in BusinessSectors Mines & Metals and Distribution.

Net liabilities increased by SEK1,101M, primarily as a result of acquisi-tions carried out.

Liquid assets amounted to SEK3,619M, of which SEK 2,442M refers tothe final instalment for the sold shares inFalconbridge which was received on 31January 1997.

PERSONNEL

During 1996, the average number ofemployees in the Group, calculated as full-time employees, increased by 665 to13,086. Calculated as number of individu-als, the Group had 14,464 employees atthe year-end, of whom 8,264 were in Swe-den and 6,200 abroad.

An agreement entered into betweenTrelleborg AB and the trade union organi-sations at the Group’s European companiesregarding the formation of a EuropeanWorks Council within the TrelleborgGroup came into force on 22 September1996. In accordance with EU directives,the Works Council is to promote informa-tion and consultation with the Group’s

employees on a European level. In 1996,23 employee representatives were includedon the Works Council of whom nine werefrom Swedish companies and two eachfrom companies in Norway, Denmark, theNetherlands, Belgium, Germany, GreatBritain and Spain.

During 1996, a remuneration of SEK200T (165) was paid to the Chairman whois not employed in the Group. The othereight Board Members elected by the AGM,who are not employees in the Group,received a remuneration totalling SEK800T (660) distributed on SEK 100Teach. The President and CEO received asalary and bonus payment as well as otherremunerations and benefits totalling SEK3,938T (4,045). Of this, SEK 417T (860)represents bonus payment based on returnon average risk capital. In accordance withan agreement entered into, the President isentitled to retire at the age of 60 and in hisemployment agreement has a term ofnotice on the side of the Company of 36months.

For some other senior executives, thereare agreements about a mutual right to callfor early retirement from the age of 60 or62. If that is the case, compensation of 65or 70 per cent of the ordinary salary is paiduntil the age of 65 when normal pension ispaid in accordance with an ITP plan. Forsome persons in the Company Manage-ment who are not covered by the Employ-ment Protection Act, extended periods ofnotice on the side of the Company are alsoapplied, usually 6 or 12 months. In a fewcases, the term of notice is 18 or 24months. For these persons, there are cus-

tomary pension commitments within theframework of a general pension plan.

BOARD OF DIRECTORS

On 6 May 1996, the Annual GeneralMeeting elected Berthold Lindqvist, Presi-dent of Gambro AB, Board Member. Hesucceeds Göran Linders who died on 13November 1995. After the AGM, theTrades Union Group Council announced achange among the Employee Representa-tives to the effect that Kim Davidsson hadbeen appointed Employee Representativeand Örjan Carlsson had replaced him asDeputy Employee Representative.

RECOMMENDED DISTRIBUTION OF PROFIT

Including the 1996 profit, the Group’sunappropriated earnings amount to SEK4,161M. No appropriation is required torestricted reserves.

The Parent Company’s unappropriatedearnings comprise retained earnings fromthe previous year, SEK 479,664T, togetherwith net earnings for the year, SEK1,304,808T, or a total of SEK 1,784,472T.

The Board of Directors and the Presi-dent recommend a dividend to sharehold-ers of SEK 3 (3) per A and B share andSEK 10 (10) per C and D share, or a totalof SEK 423,555T, and that the remainder,SEK 1,360,917T, be carried forward.

It should be noted that C and D sharesare not guaranteed any dividend but havepreferential rights to 1996 inclusive aheadof A and B shares to a dividend of SEK 10,if a dividend is paid.

Average number of employees 1996 1995

Parent Company 54 51Other Swedish companies 7,427 6,840

Total Swedish companies 7,481 6,891

Companies abroad 5,605 5,530

Total Trelleborg Group 13,086 12,421

Of whom,women 2,340 2,376men 10,746 10,045

The average number of employees has been calculated as full-time employees in accordance with the recommendations of theSwedish Accounting Standards Board.

Salaries and remunerations Group Parent CompanySEK M 1996 1995 1996 1995

Boards and Presidents 53 48 7 6Other employees 2,804 2,741 23 21

Total 2,857 2,789 30 27

As required by law, the complete specification is kept at the Parent Company’s head office (see also Notes 23 and 39).

Social costs 1,018 998 14 13

FINANCIAL REPORTING

Report of the board of directors(Group and Parent Company)

40

Consolidated Profit and Loss Accounts

SEK M Note 1996 1995

Operating income 1 20,786 24,792

Operating expenses 1 -19,236 -20,841

Operating earnings before depreciation 1,550 3,951

Planned depreciation 2 -775 -774

Operating earnings after depreciation 775 3,177

Financial income and expenses

Net interest 3 131 -300

Exchange rate differences 24 51

Other financial items 4 -14 -15

Associated companies

Interest in results of associated companies 5 102 599

Earnings after financial income and expenses 1,018 3,512

Taxes 6 -16 -639

Minority interest in earnings 7 1 -10

Net earnings for the year 1,003 2,863

FINANCIAL REPORTING

41

COMMENTS ON THE CONSOLIDATED PROFIT

AND LOSS ACCOUNTS

Operating incomeConsolidated operating income amountedto SEK 20,786M (24,792), a decrease of16 per cent, mainly due to the sale of theshares in Falconbridge and Munksjö aswell as SEK 730M in lower invoicing.

Invoiced sales totalled SEK 20,574M(21,304), a decrease of 3 per cent.

For Business Sector Mines & Metals,sales fell by 9 per cent, partly as a result oflower volumes and prices of copper andcopper-based semi-manufactures as well asproduction losses at the Aznalcóllar minein Spain.

For Business Sector Rubber Products,sales increased by 6 per cent. For compara-ble units invoicing decreased by 8 per cent,of which 5 per cent because of currencyfluctuations and the remainder primarilyas a result of lower volumes.

For the units in Business Sector Distrib-ution, invoicing fell by 10 per cent, pri-marily due to lower prices and volumes inBröderna Edstrand as well as the effect ofthe strengthening of the SEK on the salesof the units abroad.

Of total sales, 57 per cent (55) referredto markets outside Sweden. Exports fromSweden amounted to SEK 3,917M(3,204).

EarningsOperating earnings after depreciationamounted to SEK 775M (3,177). 1996earnings were charged with winding-upcosts of SEK 43M. 1995 earnings includedrestructuring items at SEK 1,966M, main-ly attributable to the sale of the shares inFalconbridge.

Operating earnings after depreciation,excluding restructuring items, amountedto SEK 775M (1,211).

Business Sector Mines & Metals report-ed operating earnings of SEK 362M (703).The fall in earnings was partly due to low-er copper prices, lower metal contents andproduction losses in Spain. Hedging of pri-marily precious metals partly balanced theeffects of falls in metal prices. The effects ofchanged exchange rates were fully balancedby hedgings.

Business Sector Rubber Productsattained earnings of SEK 296M (311). Thefall is partly due to negative effects of thestrengthening of the SEK and continuedweak demand in Western Europe.

Business Sector Distribution’s operatingearnings fell to SEK 297M (536). The sig-nificant fall is primarily attributable tolarge price changes in stocks as well asreduced sales volume, primarily in Bröder-na Edstrand.

Other consolidated items include clos-ing-down costs of SEK 43M but improvedsubstantially in spite of that, primarilythanks to lower rental costs.

Financial net increased by SEK 405Mto SEK 141M (-264). Net interest incomerose by SEK 431M as a result of theimproved net indebtedness following thesale of the Falconbridge and Munksjöshares. Interest-bearing assets extensivelyran at fixed interest rates, whereas themajority of the borrowing was charac-terised by short tenors and steadily fallinginterest rate levels.

Interest in results of associated compa-nies amounted to SEK 102M (599). The1995 figure includes Falconbridge andMunksjö at SEK 524M.

Consolidated earnings after financialincome and expenses amounted to SEK1,018M (3,512). The corresponding resultexcluding restructuring items was SEK1,018M (1,546).

The year’s tax expense amounted toSEK 16M (639), a decrease of SEK 623M,mainly attributable to associated compa-nies and realised tax deductions in the Par-ent Company.

Net earnings for the year were SEK1,003M (2,863) including restructuringitems and SEK 1,003M (1,195) excludingsuch items.

FINANCIAL REPORTING

0

5000

10000

15000

20000

25000

-4.0

-3.0

-2.0

-1.0

0

1.0

2.0

3.0

4.0

5.0

6.0

1992 1993 1994 1995 1996



-800

-600

-400

-200

0

200

400

600

800

1000

1200

1400

-12.0

-9.0

-6.0

-3.0

0

3.0

6.0

9.0

12.0

15.0

18.0

21.0

1992 1993 1994 1995 1996

Earnings after depreciation excluding restructuring items, SEK MReturn on operating capital employed, %


0

5

10

15

20

25

1992 1993 1994 1995 1996

SwedenOther Nordic countriesOther European countries

USA, CanadaOther markets

Invoiced sales, SEK M

42

Consolidated Balance Sheets

31 December, SEK M Note 1996 1995

AssetsCurrent assetsLiquid assets 8 3,619 3,337Receivables 9 4,175 3,931Stock 3,126 3,120

Total current assets 10,920 10,388Fixed assetsShares and participations in non-Group companies 10 753 701Long-term investments 11 647 2,688Other long-term receivables 66 107Deferred tax asset 329 249Intangible assets 12 523 218Machinery, real estate and other fixed assets 13 5,791 5,113

Total fixed assets 8,109 9,076

Total assets 19,029 19,464

Liabilities and shareholders’ equityCurrent liabilities 14Current non-interest-bearing liabilities 15 4,666 4,794Current interest-bearing liabilities 16 59 260

Total current liabilities 4,725 5,054Long-term liabilities 14Bond and debenture loans 17 —- 6Other long-term borrowing 18 3,597 4,107Provision for pensions 19 1,074 1,015Deferred tax liability 74 92Other long-term non-interest-bearing liabilities 117 128

Total long-term liabilities 4,862 5,348Minority interest 12 3Shareholders’ equity Restricted equity 20Share capital 2,934 2,934Restricted reserves 2,335 2,010

Total restricted equity 5,269 4,944Non-restricted equity 21Non-restricted reserves 3,158 1,252Earnings for the year 1,003 2,863

Total non-restricted equity 4,161 4,115Total shareholders’ equity 9,430 9,059

Total liabilities and shareholders’ equity 19,029 19,464

Assets pledged 22 1,330 725

Contingent liabilities 22 261 310

FINANCIAL REPORTING

43

COMMENTS ONTHE CONSOLIDATED

BALANCE SHEET

AssetsAt the year-end, consolidated liquid assetsamounted to SEK 3,619M. The figureincludes a receivable of SEK 2,442M relat-ing to the final instalment for the soldshares in Falconbridge. In accordance withthe agreement, payment was received on31 January 1997.

Long-term investments amounted toSEK 647M at the turn of the year. Thedecrease compared with the previous yearis due to the fact that the final instalmenton the Falconbridge payment is reported asa current asset in 1996.

Gross investments in fixed assets,excluding fixed assets in acquired compa-nies, amounted to SEK 1,134M. Theinvestments are distributed by SEK 773Mon Business Sector Mines & Metals, SEK278M on Business Sector Rubber Prod-ucts, SEK 51M on Business Sector Distri-bution and SEK 32M on other units. Inaddition, assets of approximately SEK1,250M were acquired in connection withacquisitions, primarily within BusinessSector Rubber Products.

Despite investments and acquisitions,the Group’s total assets fell by SEK 435Mto SEK 19,029M. This is due to the factthat the first instalment for the Falcon-bridge shares, which was received on 31July 1996, was used for amortisation ofloans.

At the turn of the year, consolidatedcapital employed amounted to SEK9,906M compared with SEK 8,425M inthe previous year.

LiabilitiesIn October 1996, a new syndicated loanwas raised for USD 1 billion (on the borr-owing date, more than SEK 6.8 billion)with a tenor of 7 years. Total granted medi-um-term and long-term credit promisesamounted to approximately SEK 8.5 bil-lion on 30 December.

The 1997 bond loan, which was takenover from Boliden in 1988, was repaid inadvance during 1996.

Of the Group’s other long-term borrow-ing of SEK 3,597M, SEK 2,393M wasamortised in connection with the receiptof the final instalment for the Falconbridgeshares on 31 January 1997.

Shareholders’ equity, equity ratioDuring the year, shareholders’ equityincreased by SEK 371M to SEK 9,430M.Of this, SEK 26M consisted of positivetranslation differences which had arisen ontranslation of assets and liabilities of for-eign subsidiaries.

The equity ratio improved by 3 percent-age points to 49.6 per cent.

FINANCIAL REPORTING

15

20

25

30

35

40

45

50

1992 1993 1994 1995 1996

Equity ratio

Equity ratio, %

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1992 1993 1994 1995 1996

Capital employedShareholders’ equity

Capital structure, SEK M

1992 1993 1994 1995 19960

5000

10000

15000

20000

25000

30000

0

5

10

15

20

25

30

35

40

45

50

Shareholders’ equity, SEK MBalance sheet total, SEK MEquity ratio, %

Equity ratio and shareholders’ equity

44

Consolidated Source and Application of Funds Statements

SEK M 1996 1995

Earnings before taxes 1,018 3,512Taxes paid –57 –113Reversed:

Depreciation 775 774Write-down —– 629Interest in results of associated companies less dividend received –53 –402

Total funds provided internally 1,683 4,400

Investments:In machinery and equipment, gross 1,134 1,129Sales of machinery and equipment –187 207Sales of interests in associated companies and other shares –62 62

Total investments, net 885 1,398

Change in working capital:Stock –377 313Operating receivables –254 264Operating liabilities 650 159

Total change in working capital 19 736

Other items:Long-term non-interest-bearing receivables and liabilities –4 72Translation differences –23 –310Change in blocked accounts 0 0Change in minority interest –10 0

Total other items –37 –238

Total funds utilised 867 1,896

Acquisitions –1,259 0Sales —– 4,321

Total acquisitions/sales –1,259 4,321

Dividend –658 –209Change in net financial assets/liabilities –1,101 +6,616

Specification of change in financial net assets/liabilities:Change in liquid assets +282 +1,755Change in long-term investments –2,041 +1,888Change in interest-bearing current liabilities +201 +665Change in interest-bearing long-term liabilities +457 +2,308

–1,101 +6,616

FINANCIAL REPORTING

45

COMMENTS ON THE SOURCEAND APPLICATION OF FUNDS

STATEMENTS

The net of consolidated financial assetsand liabilities deteriorated by SEK 1,101Mduring the financial year. Of this, acquisi-tions, primarily within Business SectorRubber Products, accounted for SEK1,259M and dividend to the shareholdersfor SEK 658M. Operations made a finan-cial contribution of SEK 816M.

Gross investments in machinery andfixed assets amounted to SEK 1,134M,most of which was attributable to BusinessSector Mines & Metals.

The working capital in existing unitsdecreased during the year, whereas thenewly-acquired units contributed to a totalincrease in working capital of SEK 378M.

Liquid fundsAt the turn of the year, the Group’s liquidfunds amounted to SEK 3,619M (3,337).The amount includes a receivable of SEK2,442M for the sold shares in Falconbridgewhich was paid on 31 January 1997.

Long-term investmentsLong-term investments amounted to SEK647M, of which SEK 615M constitutescollateral for meeting commitments inaccordance with a rental agreement in con-nection with sale/lease-back transactionsrelating to fixed assets.

IndebtednessDuring the year, the Group’s net indebted-ness increased by SEK 1,101M. In connec-tion with the receipt of the first instalmentfor the Falconbridge shares on 31 July1996, SEK 2,805M was amortised whichhad the effect that consolidated currentand long-term liabilities reduced by SEK658M during the year.

FINANCIAL REPORTING

0

200

400

600

800

1000

1200

1400

1992 1993 1994 1995 1996

Investments, SEK M

Excluding fixed assets in companies acquired

OtherResult Gross changes Dividend Total oper-

after Deprec- invest- Acquis- in capital from assoc. ationalSEK M depreciation iation ments itions employed companies cash flow

Mines & Metals 362 446 -773 181 49 265Rubber Products 296 183 -278 -911 128 -582Distribution 297 77 -51 -69 158 412Other -180 69 -32 -279 124 -298

Operational cash flow 775 775 -1,134 -1,259 591 49 -203

Dividend to shareholders -658

Other*) -240

Change in financial assets less liabilities -1,101

CASH FLOW REPORT

*) Comprises financial transactions, restructuring items, taxes, etc.

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

1992 1993 1994 1995 1996

Financial net assets/liabilities, SEK M

Outflow Inflow0

300

600

900

1200

1500

1800

2100

2400

2700

3000

3300

3600

OtherDividend

Earnings before depreciation

Gross investments

Change in working capitalDividend from associated companies

Change in net indebtedness, SEK M

Acquisitions

46

PROFIT AND LOSS ACCOUNTS, SEK M Note 1996 1995

Operating income 25 580 913Operating expenses 25 –478 –358

Operating earnings before depreciation 102 555Planned depreciation 26 –4 –3

Operating earnings after depreciation 98 552Financial income and expenses Net interest 27 210 –155Exchange rate differences 13 142Other financial items 28 419 132

Earnings after financial income and expenses 740 671Group contributions/Shareholder contribution 565 126

Earnings before appropriations and taxes 1,305 797Appropriations —– —–

Earnings before taxes 1,305 797Taxes —– —–

Net earnings for the year 1,305 797

SOURCE AND APPLICATION OF FUNDS STATEMENTS, SEK M 1996 1995

Earnings before appropriations and taxes 1,305 797Taxes paid —– —–Reversed:

Dividend –658 –209Depreciation 4 3

Total funds provided internally 651 591

Investments:In machinery and equipment, gross 4 2Acquisitions/sales of machinery and equipment, net —– –1Acquisitions/sales of shares, net –186 –3,599

Total investments, net –182 –3,598

Change in working capital:Stock —– –1Operating receivables 379 247Operating liabilities –295 181

Total change in working capital 84 427

Total funds utilised –98 –3,171

Change in financial net assets/liabilities +749 +3,762

Specification of change in financial net assets/liabilities: Change in liquid assets and short-term investments –69 +618Change in long-term investments +955 +1,281Change in interest-bearing current liabilities –1,731 –253Change in interest-bearing long-term liabilities +1,594 +2,116

+749 +3,762

Parent Company Profit and Loss Accountsand Application of Funds Statement

FINANCIAL REPORTING

47

Parent Company Balance Sheets

BALANCE SHEETS 31 December, SEK M Note 1996 1995

AssetsCurrent assetsLiquid assets 1,437 1,506Receivable from subsidiaries 1,328 880Receivables 29 370 440Stock 2 2

Total current assets 3,137 2,828Fixed assetsShares and participations in subsidiaries 30 4,145 4,411Shares and participations in non-Group companies 31 312 232Receivable from subsidiaries 3,066 1,179Long-term investments 32 615 1,547Machinery, real estate and other fixed assets 33 46 47

Total fixed assets 8,184 7,416

Total assets 11,321 10,244

Liabilities and shareholders’ equity Current liabilities Accounts payable to subsidiaries 4,202 2,413Current non-interest-bearing liabilities 34 571 272Current interest-bearing liabilities —- 62

Total current liabilities 4,773 2,747Long-term liabilitiesTo subsidiaries 314 1,787Bond and debenture loans —- 6Other long-term borrowing 2 116Provision for pensions 35 210 211Other long-term non-interest-bearing liabilities —- 1

Total long-term liabilities 526 2,121Shareholders’ equity Restricted equity 36Share capital 2,934 2,934Legal reserve 1,304 1,304

Total restricted equity 4,238 4,238Non-restricted equity 37Retained earnings 479 341Earnings for the year 1,305 797

Total non-restricted equity 1,784 1,138Total shareholders’ equity 6,022 5,376

Total liabilities and shareholders’ equity 11,321 10,244

Assets pledged 38 845 603

Contingent liabilities 38 4,512 5,080

FINANCIAL REPORTING

48

Accounting and Valuation Principles

CONSOLIDATED ACCOUNTS

The Accounts for the Trelleborg Groupcomprise the Parent Company and allcompanies in which Trelleborg AB directlyor indirectly owns more than 50 per centof the voting rights.

The Consolidated Accounts have beenprepared in accordance with generallyaccepted accounting standards and inaccordance with the Swedish FinancialAccounting Standards Council’s recom-mendations which in substance corre-spond with IASC’s regulations for consoli-dated accounting.

The Accounts have been preparedaccording to the purchase accountingmethod. Companies acquired during theyear are included in the Group’s Profit andLoss Account at values representing theperiod after acquisition. Companies soldduring the year have been included in theGroup’s earnings up to and including thedate of sale.

TRANSLATION OF FOREIGN SUBSIDIARIES

The Trelleborg Group applies the so-calleddaily rate method for translating balancesheets and profit and loss accounts of for-eign subsidiaries. The effect is that all assetsand liabilities of the subsidiaries are trans-lated at the rate prevailing on balance sheetdate, whereas all items of the profit andloss accounts are translated at an averagerate. The translation differences whicharise are the effect of the differencebetween average rates and rates prevailingon balance sheet date of the profit and lossaccounts as well as the fact that net invest-ments are translated at a different rate atthe year-end than at the beginning of theyear. The translation differences are notshown via the Profit and Loss Accounts butare directly posted to shareholders’ equity.

ASSOCIATED COMPANIES

Shareholdings in associated companies, inwhich the Group owns at least 20 per centand a maximum of 50 per cent of the vot-ing rights, are reported in accordance withthe equity method. In accordance with theequity method, the Group book value ofthe shares in the associated companies isequivalent to the Group’s interest in theshareholders’ equity of the associated com-pany as well as possible residual values onovervalues and undervalues which havearisen on the acquisition calculation. In theConsolidated Profit and Loss Account isreported as the result participation theGroup’s share in the interest in the resultsof the associated companies after financialincome and expenses adjusted for possiblewrite-offs on, or dissolutions of, acquiredovervalues and undervalues, respectively.The Group’s share of the associated com-panies’ net taxes is included in the Group’stax expenses, and minority interest in theresults of associated companies is includedin the Group’s minority interest.

TAXES

Swedish and certain other countries’ legis-lation provides companies with an oppor-tunity to postpone tax payments throughappropriations to untaxed reserves. TheConsolidated Profit and Loss Account andBalance Sheet are reported exclusive ofuntaxed reserves. In the ConsolidatedAccounts, the untaxed reserves are dividedinto deferred tax and shareholders’ equity.The deferred tax is entered at the actual taxrate in the country of domicile of therespective Group company. On a change inthe tax rate, the change in the tax liability isreported in the year’s result.

Deferred tax on other differencesbetween book values and fiscal values ofassets and liabilities is also reported in theyear’s Accounts. Deferred tax assets arecapitalised only to the extent by whichthey are likely to be utilised within theforeseeable future. When calculatingdeferred tax, the nominal tax rate in therespective country has been applied. Theyear’s tax expense is reported on the line“Taxes” in the Profit and Loss Account andis specified in Note 6.

FINANCIAL REPORTING

49

MINORITY INTEREST

Minority interest in subsidiaries and asso-ciated companies, respectively, is reportedas interest in the result after tax in the Con-solidated Accounts. The minority’s interestin the result after financial income andexpenses as well as tax is stated in Note 7.

RECEIVABLES AND LIABILITIES INFOREIGN CURRENCIES

Receivables and liabilities in foreign cur-rencies are translated at rates prevailing onbalance sheet date. Unrealised exchangegains on long-term receivables and liabili-ties are appropriated to a foreign exchangereserve. On hedging via forward contracts,the current rate is applied on the date thehedging is made in the valuation of anunderlying claim or liability. Where aclaim or liability has not yet arisen, the val-uation of the forward contracts has notinfluenced the Accounts. The differencebetween the forward rate and the currentrate at the time the contract is entered intois capitalised over the tenor of the contract.Income/revenue recognition of hedging vialoan or forward contract is made on thematurity of the underlying transaction,alternatively on closure. Other forwardcontracts are valued according to the sameprinciples as receivables and liabilities inforeign currency. Advances from customersor to suppliers have not been revalued butare shown at the rate applicable when theadvance was received or given. The ParentCompany has borrowed foreign currenciesto balance against the main portion of netinvestments in foreign subsidiaries. Thesize of the hedging varies from a maximumof the full value of the investment includ-ing tax effect down to the level at whichthe Group’s equity ratio is kept intact onfluctuations in exchange rates. The loansand contracts, respectively, are valued atthe investment rate in the Parent Compa-ny. In the Consolidated Balance Sheet,these loans have been valued at the rateapplicable on balance sheet date at whichexchange rate differences have been direct-ly posted to shareholders’ equity to theextent they correspond to a translation dif-ference posted there during the year in

respect of each subsidiary company.Exchange differences relating to the cur-rent business operations have been credit-ed/debited to operating profit, whereasexchange differences of a financial natureare shown under financial income andexpenses.

FORWARD CONTRACTSIN METALS

The main part of forward contracts on themetal exchange concerns sales contractswhich are entered into in order to ensurethe price for own production during a cer-tain period of time. The results of suchsales contracts are not shown in the Groupuntil the period in which the physical pro-duction and delivery take place. Whencontracts are repurchased for the sameterm, profit/loss-accounting is made at thetime of repurchase. In addition, there issome trading on business terms in whichpositions taken are not directly related tothe Group’s own production. These posi-tions are market-valued whereby unre-alised profits are carried forward and unre-alised losses taken up as expense.

CONTRACT WORK IN PROGRESS

Contract work in progress is valued asdirect accrued expenses as well as an appro-priate portion of indirect expenses for not-yet completed plants. Recognition inrevenue is made in step with the degree ofcompletion. Where applicable, provision ismade for anticipated loss.

STOCK AND RECEIVABLES

Stock is shown at the lower of acquisitioncost in accordance with the first in/first outprinciple (FIFO) and actual value. Ade-quate depreciation for obsolescence hasbeen made. Receivables are reported at theamounts which are expected to be realised.

PROSPECTING, RESEARCH ANDDEVELOPMENT

The majority of costs for prospecting aswell as research and development arecharged to operating costs as incurred. Ininstances where the financial potential hasbeen determined for extraction of a miningdeposit, the expenses are entered as costsuntil the time of extraction. Expenses forprojects after the stated date are carried for-ward and depreciated over the economiclife of the assets.

FIXED ASSETS AND DEPRECIATION

Fixed assets are shown at their historicacquisition values less accumulatedplanned depreciation. Costs for under-ground preparations referring to installa-tions for regular mining, expected to beused for more than one year, are capi-talised. Planned depreciation is based onhistoric values of the fixed assets.

The depreciation rates are calculated ontheir estimated economic life. These are 5-33 per cent in respect of machinery andequipment and 1.5-6 per cent in respect ofbuildings. The annuity model is applied toleasing assets. This has the effect that theyare depreciated to their estimated value atthe end of the contract period. Goodwillvalues are written off by 10 per cent.

FINANCIAL REPORTING

50

NOTE 1OPERATING INCOME

Invoiced sales by market (SEK M) 1996 1995

Sweden 9,022 9,614Other Nordic countries 1,375 1,463Other European countries 7,840 7,609USA and Canada 1,889 2,097Other markets 448 521

Total invoiced sales 20,574 21,304Other operating income 212 353Restructuring items —- 3,135

Total operating income 20,786 24,792

Exports from Sweden amounted to SEK 3,917M (3,204).

RESTRUCTURING ITEMS

SEK M 1996 1995

Capital gain (included in operating income) —- 3,135Capital loss/cost (included in operating expenses) —- -1,169

Total —- 1,966

Specification:Sale of shares —- 3,102Provisions and write-downs regarding real estate —- -566Write-down on fixed assets and other —- -570

Total —- 1,966

NOTE 2DEPRECIATION

SEK M 1996 1995

Patent and similar rights 5 4Goodwill 39 48Machinery and equipment 554 540Underground preparations 72 80Buildings 102 98Land improvements 3 3Construction in progress and projects 0 1

Total planned depreciation 775 774

NOTE 3NET INTEREST

SEK M 1996 1995

Interest income 729 348Interest expenses -539 -587Interest on pension liabilities -59 -61

Net interest 131 -300

NOTE 4OTHER FINANCIAL ITEMS

SEK M 1996 1995

Dividends on other shares 0 2Earnings on sale of shares 1 11Earnings on sale of interest-bearing securities 8 10Loss on sale of interest-bearing securities -2 -5Revaluation of shares and securities 5 -4Other financial items -26 -29

Total -14 -15

NOTE 5INTEREST IN RESULTS OF ASSOCIATED COMPANIES

The Group has received dividends from associated companies dur-ing 1996 of SEK 49M (197), which in the Group has reduced thebook value of the shares in the associated companies by the sameamount.

SEK M 1996 1995

Result after financial income and expenses 102 599Taxes -16 -229Minority interest in result —- -9

Net earnings for the year 86 361

Interest in Earnings afterassociated financial items Net earningscompanies, SEK M 1996 1995 1996 1995

Associated companies within Business Sector Mines & Metals 79 63 64 62Falconbridge and Munksjö —- 525 —- 295Other 23 11 22 4

Total 102 599 86 361

NOTE 6TAXES

The tax authorities have queried previous years’ assessments of taxfor the Parent Company and a number of Swedish subsidiaries.Provisions have been made in respect of those cases which havebeen deemed to carry a certain risk of increased taxation.

In addition, the tax authorities have queried a former Swedishsubsidiary’s accounting of sold shares. On the sale of the company,the tax case in question, which refers to the tax years 1987-1993,was guaranteed. During 1996, the 1987 year of assessment wasdecided by the Administrative Court of Appeal in favour of theCompany. Thereafter, the tax authorities announced that theyintend to withdraw their claim in the County AdministrativeCourt with regard to the remaining years which have been sub-mitted for a ruling in the County Administrative Court. Againstthat background and following consultation with external taxexperts, the risk of increased tax assessments has been deemed tobe small. Therefore, no provision has been made for additional tax.The estimated tax cost in respect of the claims made by the taxauthorities amounts to SEK 331M.

Distribution of taxes, SEK M 1996 1995

Taxes paid:Group companies -57 -113Associated companies -13 -156

Deferred taxes: Group companies 58 -297Associated companies -4 -73

Total -16 -639

Notes to the Consolidated Accounts

FINANCIAL REPORTING

51

NOTE 7MINORITY INTEREST

Minority interest in result, SEK M 1996 1995

Earnings after financial income and expenses 1 –2Taxes 0 1Minority interest in result of associated companies —– –9

Net earnings 1 –10

NOTE 8LIQUID ASSETS

SEK M 1996 1995

Cash 667 529Short–term investments 2,952 2,808

Total 3,619 3,337

Short-term investments in shares and interest-bearing securities (inrespect of interest-bearing securities including coupon rate) areshown at the lower of acquisition cost and market value on balancesheet date. Interest-bearing securities, which are intended to beheld until their date of redemption, are shown as long-term invest-ments. The item short-term investments includes a claim for SEK2,442M relating to the sale of Falconbridge shares for which pay-ment was received on 31 January 1997.

NOTE 9RECEIVABLES

SEK M 1996 1995

Bills receivable 112 61Accounts receivable 2,578 2,552Prepaid costs and accrued income 814 942Advances to suppliers 22 12Tax recoverable 40 42VAT recoverable 128 76Other current receivables 481 246

Total 4,175 3,931

NOTE 10SHARES AND PARTICIPATIONS IN

NON-GROUP COMPANIES

A complete statutory specification has been appended to the copyof the Annual Report forwarded to the Swedish Patent and Regis-tration Office. A copy of this specification may be obtained onrequest from the Company’s head office in Trelleborg.

Nominal BookShare per No. of value value

31 December 1996 cent 1) shares SEK T SEK T

Swedish companiesBPA AB 29 18,814,952 150,520 295,797BPA AB, call options 8,564,948 13,587Elastofol AB 50 1,000 100 122MHT Takentreprenad i

Jönköping AB 25 500 50 509MHT Notab AB 33 500 50 393MHT Takentreprenad i Syd AB 25 500 50 1,028MHT Takentreprenad i Sydost AB 26 510 51 32Returbatt AB 33 200 20 20Stiftelsen Mineralindustrins Teknikutveckling —– 1,500 1,500Tätskiktsgarantier i Norden AB 25 50 50 50Tätskiktsgarantier i Sverige, AB 21 150 150 64Other companies 3,196

Total Swedish companies 316,298

Companies abroadDBV Dach-Baustoff Vertrieb

GmbH, Germany 25 —– DEM 75 236Nordim AS, Denmark 25 5,000 DKK 500 462NorLense AS, Norway 30 300 NOK 300 0Norzink AS, Norway 2) 50 750,000 NOK 75,000 321,371QuimiBol AG, Switzerland 50 1,000 CHF 1,000 824Saudi Company for Precious Metals Ltd 2) 50 51,500 SAR 51,500 84,941Scanchem Chartering AG,

Switzerland 50 50 CHF 500 453Other companies 28,437

Total companies abroad 436,724

Total 753,022

1) Highest percentage of share capital or voting rights.2) Associated companies shown in the Group in accordance with the equity method. The market value on 31 December 1996 of the listed shares in BPA was SEK 376M.

NOTE 11LONG-TERM INVESTMENTS

Of this, SEK 615M (373) consists of interest-bearing securitiesand receivables intended for holding long term. All of these formcollateral for, among other things, fulfilment of commitments inaccordance with rental agreements in connection with sale/lease-back transactions relating to plants. The book value of the invest-ments does not exceed their market value.

FINANCIAL REPORTING

52

NOTE 12INTANGIBLE ASSETS

SEK M 1996 1995

Patents and similar rightsAcquisition costs 99 72Accumulated depreciation/write-down –26 –21

Value as per Balance Sheet 73 51

GoodwillAcquisition costs 562 231Accumulated depreciation/write-down –112 –64


NOTE 13MACHINERY, REAL ESTATE AND

OTHER FIXED ASSETS

The total taxable value of the Group’s properties in Swedenamounted to SEK 1,342M (1,337), of which for buildings SEK1,104M (1,168).

A number of Group companies rent buildings from rentingcompanies. A total rental, excluding rent for properties which arere-let, of SEK 110M (286), was paid in 1996. The average remain-ing rental period is 16 years.

SEK M 1996 1995

Machinery and equipmentAcquisition costs 8,972 8,134Accumulated depreciation/write-down –5,935 –5,333

Value as per Balance Sheet 3,037 2,801

Underground preparationsAcquisition costs 1,228 897Accumulated depreciation/write-down –306 –228


BuildingsAcquisition costs 1,806 1,585Accumulated depreciation/write-down –774 –625

Value as per Balance Sheet 1,032 960

Land and land improvementsAcquisition costs 471 429Accumulated depreciation/write-down –14 –9


Construction in progressAcquisition costs 345 265Accumulated depreciation/write-down –2 –2


NOTE 14FINANCIAL ASSETS/LIABILITIES, NET

1997 amortisation of long-term liabilities, SEK 4M (3), is shownunder short-term liabilities. The Group’s long-term loan agree-ments include customary covenants.

SEK M 1996 1995

Liquid assets 3,619 3,337Long-term investments 647 2,688Less:Current interest-bearing liabilities –59 –260Long-term interest-bearing liabilities –4,671 –5,128

Financial assets/liabilities, net –464 637

NOTE 15CURRENT NON-INTEREST-BEARING LIABILITIES

SEK M 1996 1995

Bills payable 101 104Accounts payable to suppliers 2,162 2,101Accrued taxes 75 100Accrued costs and prepaid income 1,786 2,017Advances from customers 90 7Accrued VAT 64 114Other current liabilities 388 351

Total 4,666 4,794

NOTE 16CURRENT INTEREST-BEARING LIABILITIES

SEK M 1996 1995

Next year’s amortisation of long-term liabilities 4 3Other current interest-bearing liabilities 55 257

Total 59 260

NOTE 17BOND AND DEBENTURE LOANS

Original Remaining Interestamount SEK M year-end SEK M rate % Term

Bond loan 1997*) 150 —– 10.5 1982-97

Total —–

* )Transferred from Boliden AB on 31 December 1988 and repaid in advance at 31 December 1996.

NOTE 18OTHER LONG-TERM BORROWING

SEK M 1996 1995

Bank overdraft facilities 51 61Other long-term interest-bearing liabilities 3,546 4,046

Total 3,597 4,107

FINANCIAL REPORTING

53

NOTE 19PROVISION FOR PENSIONS

SEK M 1996 1995

PRI/FPG pensions 943 925Other commitments 131 90

Total 1,074 1,015

NOTE 20RESTRICTED EQUITY

SEK M

Balance brought forward 1 January 1996 4,944Transfer to restricted reserves 41Changes in restricted and non-restricted equity 115Translation difference 169

Balance carried forward 31 December 1996 5,269

On 31 December 1996, the share capital of Trelleborg ABamounted to SEK 2,933,538,100 distributed on 117,341,524shares, each with a nominal value of SEK 25.

Class of shares Number of shares Per cent Number of votes Per cent

A 10,678,400 9.10 106,784,000 47.39B 96,444,482 82.19 96,444,482 42.80C 8,897,042 7.58 8,897,042 3.95D 1,321,600 1.13 13,216,000 5.86

Total 117,341,524 100.00 225,341,524 100.00

NOTE 21NON-RESTRICTED EQUITY

SEK M

Balance brought forward 1 January 1996 4,115Transfer to restricted reserves –41Dividend –658Changes in restricted and non-restricted equity –115Earnings for the year 1,003Translation difference –143


NOTE 22CONTINGENT LIABILITIES AND ASSETS PLEDGED

SEK M 1996 1995

Contingent liabilitiesDiscounted bills 1 56Pension commitments 129 117Guarantees and other contingent liabilities 131 137

Total 261 310

Assets pledgedProperty mortgages 125 23Leasehold site mortgages 495 293Long-term investments 615 373Title retained in machinery and equipment 37 36Shares 58 —–

Total 1,330 725

NOTE 23AVERAGE NUMBER OF EMPLOYEES;

SALARIES AND OTHER REMUNERATION


SEK M 1996 1995

Operations in Sweden Number of municipalities 82 74Average number of employees 7,481 6,891Salaries and other remuneration 1,714 1,522Operations abroadNumber of countries 26 19Average number of employees 5,605 5,530Salaries and other remuneration 1,143 1,267

Total average number of employees 13,086 12,421

Of these, women 2,340 2,376men 10,746 10,045

Total salaries and other remuneration 2,857 2,789

NOTE 24ADJUSTED KEY FIGURES, ETC

In accordance with the Swedish Financial Accounting StandardsCouncil’s recommendation relating to acquisition of subsidiariesthrough issue of own shares as well as taking into account deferredtax on surplus values in connection with acquisition, some key fig-ures, etc, have been revised. The adjustments refer to valuation ofown shares and the calculation of deferred tax.

SEK M 1996 1995

Depreciation of goodwill –90 –99Earnings after financial income and expenses 978 3,472Goodwill 450 218Net earnings 974 2,834Shareholders’ equity 9,430 9,110Balance sheet total 19,041 19,492Equity ratio % 1) 49.6 46.7Return on shareholders’ equity after full tax % 8) 10.5 36.1Earnings after full tax, SEK per share 9) 8.30 24.20Ditto, excluding restructuring items 8.30 9.95Shareholders’ equity, SEK per share 80.40 77.65

For definitions, see page 63.

FINANCIAL REPORTING

54

Notes to the Accounts of the Parent Company

NOTE 25RESTRUCTURING ITEMS

The Parent Company’s operating income includes exceptionalprofits of SEK 530M (717), of which capital gains SEK 526M(686). Operating expenses include exceptional costs of SEK 332M(7), of which capital losses SEK 13M (0).

NOTE 26DEPRECIATION

SEK M 1996 1995

Machinery and equipment 2 1Buildings 2 2

Total planned depreciation 4 3

NOTE 27NET INTEREST

SEK M 1996 1995

Interest income 544 227Interest expenses –321 –369Interest on pension liabilities –13 –13

Net interest 210 –155

NOTE 28OTHER FINANCIAL ITEMS

SEK M 1996 1995

Dividends on shares in subsidiaries 407 81Dividends on other shares —– 50Earnings on sale of shares 1 —–Earnings on sale of interest-bearing securities 8 10Loss on sale of shares –1 —–Loss on sale of interest-bearing securities –1 –5Revaluation of shares and securities 5 –3Other financial items —– –1

Total 419 132

NOTE 29OTHER CURRENT RECEIVABLES

SEK M 1996 1995

Accounts receivable —– 1Prepaid costs and accrued income 357 429VAT recoverable 1 1Tax recoverable 5 5Other current receivables 7 4

Total 370 440

NOTE 30SHARES AND PARTICIPATIONS IN SUBSIDIARIES

The change during the year in book value of the shares owned bythe Parent Company in subsidiaries is shown below (SEK M):

Balance brought forward 1 January 1996 4,411Plus:

New acquisitions 1,956Shareholders’ contribution 392

Less:Shares sold, liquidation –2,614


In order to reflect better the true value of subsidiary companies inconnection with restructuring, their book values have been redis-tributed by write-ups and write-downs.

Nominal Book No. of value value

31 December 1996 shares SEK T SEK T

Shares in Swedish subsidiaries Ahlsell AB 28,000 2,800 211,793Ahlsell Control Instruments AB 100,000 10,000 12,020Boliden International Mining AB 1,000 100 1,791,860Bröderna Edstrand AB 20,000 2,000 190,015AB Tegea 200,000 20,000 23,382Trelleborg Fond AB 2,500 250 250Trelleborg Industri AB 725,000 72,500 196,701Trelleborg Kort AB 25,000 2,500 2,943Trellswitch Intressenter AB 4,500,000 450,000 512,807

Total Swedish subsidiaries 2,941,771

Shares in subsidiaries abroad Chemtrade Holding AG, Switzerland 100 CHF 100 2,586Oy Trelleborg Ab, Finland 4,000 FIM 4,000 0Trelleborg Canada BV, Netherlands 40 NLG 40 709,306Trelleborg Corporation, USA 2,590 USD 25,900 144,396Trelleborg Fabrieken BV, Netherlands 80,000 NLG 10,000 0Trelleborg Holding Danmark AS, Denmark 50,000 DKK 25,000 61,831Trelleborg Holding France SA, France 1,424,290 FRF 142,429 118,888Trelleborg Holdings (UK) Ltd, Great Britain 23,691,267 GBP 23,691 166,143Trelleborg Italiana Spa, Italy 20,000 ITL 200,000 0

Total subsidiaries abroad 1,203,150

Total shares and participations in subsidiaries 4,144,921

FINANCIAL REPORTING

55

NOTE 31SHARES AND PARTICIPATIONS IN

NON-GROUP COMPANIES


Nominal BookShare per No. of value value

31 December 1996 cent 1) shares SEK T SEK T

BPA AB, shares and call options 29 18,814,952 150,520 291,4572)

Other companies 20,576

Total 312,033

1) Highest percentage of share capital or voting rights. 2) Book value includes paid premium of SEK 13,587T for 8,564,948 subscription options

BPA B unrestricted (each subscription option entitles the holder to subscribe for one share ata price of SEK 14.40 during the period 2 January 1997 – 15 December 2000).

NOTE 32LONG-TERM INVESTMENTS

Of this, SEK 615M (373) consists of interest-bearing securitiesand receivables intended for holding long term. All of these formcollateral for, among other things, fulfilment of commitments inaccordance with rental agreements in connection with sale/lease-back transactions relating to plants and for loan agreements. Themarket value of the investments exceeds their book value.

NOTE 33FIXED ASSETS

The Parent Company rents buildings from renting companies. Atotal rental of SEK 1M (13), was paid in 1996. The averageremaining rental period is 19 years.

SEK M 1996 1995

Machinery and equipmentAcquisition costs 11 8Accumulated depreciation/write-down –5 –4


BuildingsAcquisition costs 65 65Accumulated depreciation/write-down –30 –27


Taxable value 14 25Land and land improvementsAcquisition costs 5 5


Taxable value 2 2

NOTE 34OTHER CURRENT NON-INTEREST-BEARING

LIABILITIES

SEK M 1996 1995

Accounts payable 8 7Accrued costs and prepaid income 532 265Other current liabilities 31 —–

Total 571 272

NOTE 35PROVISION FOR PENSIONS

SEK M 1996 1995

PRI/FPG pensions 197 194Other commitments 13 17

Total 210 211

NOTE 36RESTRICTED EQUITY

SEK M

Balance brought forward 1 January 1996 4,238Balance carried forward 31 December 1996 4,238

NOTE 37NON-RESTRICTED EQUITY

SEK M

Balance brought forward 1 January 1996 1,137Dividend –658Earnings for the year 1,305


FINANCIAL REPORTING

56

NOTE 38CONTINGENT LIABILITIES AND ASSETS PLEDGED

SEK M 1996 1995

Contingent liabilitiesPension commitments 4 4Guarantees and other contingent liabilities 4,508 5,076

Total 4,512 5,080Of which, for subsidiaries 4,453 4,977Assets pledgedProperty mortgages 230 230Long-term investments 615 373

Total 845 603

NOTE 39AVERAGE NUMBER OF EMPLOYEES;

SALARIES AND OTHER REMUNERATION


Operations in Sweden 1996 1995

Number of municipalities 3 3Average number of employees 54 51Of these, women 21 21

men 33 30Salaries and other remuneration, SEK M 30 27

Trelleborg, February 1997

Rune AnderssonChairman of the Board

Bertil Bertilsson Hans Cavalli-Björkman

Lennart Nilsson Sven Olving

Erik Penser Sven Borelius

Didrik Normark Berthold Lindqvist

Arne Nilsson Stig-Erik Nyström

Kim Davidsson

Kjell NilssonPresident

The Auditors’ Report was submitted on 12 February 1997

Reidar Peters Thomas Thiel

FINANCIAL REPORTING

57

Auditors’ ReportCompany No. 556006-3421

We have examined the Annual Report, the Consolidated Financial Statements, the accounting records and the adminis-

tration by the Board of Directors and the President for the 1996 financial year. The examination was carried out in accor-

dance with generally accepted auditing standards.

PARENT COMPANY

The Annual Report has been prepared in accordance with theSwedish Companies Act.

We recommendthat the Profit and Loss Account and the Balance Sheet be

adopted,that the earnings be distributed in accordance with the proposal

in the Report of the Board of Directors andthat the Board of Directors and the President be discharged

from liability for the 1996 financial year.

GROUP

The Consolidated Financial Statements have been prepared inaccordance with the Swedish Companies Act.

We recommend that the Consolidated Profit and Loss Account and Consolidated

Balance Sheet be adopted.

Trelleborg, 12 February 1997

Reidar Peters Thomas ThielAuthorised Public Accountant Authorised Public AccountantArthur Andersen AB KPMG Bohlins AB

58

Share capital and ownership

The share capital of Trelleborg AB amounts to SEK2,933,538,100, represented by 117,341,524 shares, each with anominal value of SEK 25. A and D shares carry ten votes each, Band C shares one vote each. C and D shares have preferential rightto a dividend of SEK 10 per share to 1996 inclusive. As soon aspossible after the record day on 30 April 1997, the C and D shareswill be converted into B and A shares, respectively, in accordancewith the present Articles of Association. No special action need betaken by the shareholder: the registration will automatically bedealt with by VPC.

On 6 May 1996, the Annual General Meeting authorised theBoard of Directors for the term until the next AGM to decide ona new share issue with pre-emption of shareholders’ right of pref-erence. Such a share issue is intended to be directed at the interna-tional capital market and amounts to a maximum of 10 per cent ofthe outstanding shares on the date of issue and be made on suchmarket terms as are generally applied to similar issues.

Class of shares Number of shares Per cent Number of votes Per cent

A 10,678,400 9.10 106,784,000 47.39B 96,444,482 82.19 96,444,482 42.80C 8,897,042 7.58 8,897,042 3.95D 1,321,600 1.13 13,216,000 5.86

Total 117,341,524 100.00 225,341,524 100.00

DEVELOPMENT OF SHARE CAPITAL

Immediately before its introduction on the Stockholm StockExchange in 1964, Trelleborg had a share capital of SEK 63M. In1966, a directed non-cash issue for SEK 2.6M was made on theacquisition of Ulvex AB. As a result of new share issues in 1969(2:5 at a price of SEK 100) and in 1976 (1:3 at SEK 110), theshare capital was increased by SEK 26.2M and SEK 30.6M,respectively. In 1978, a directed non-cash issue for SEK 3.2M wasmade on the acquisition of Tekniska Gummifabriken JakobsbergAB. Thereafter, share issues have been made as shown in the table.

Increase of TotalYear Issues made share capital share capital

1982 Directed new issue to Aritmos,and others, at SEK 125 42,000,000 167,611,200

1984 Bonus issue 1:4, split 4:1 1) 41,902,800 209,514,0001986 Directed new issue at SEK 95 to acquire

Sävsjö Fälgar AB 6,875,000 216,389,0001986 Directed new issue at SEK 200 to

acquire Boliden shares 95,150,000 311,539,0001987 Bonus issue 1:1 311,539,000 623,078,0001987 Conversion of debentures 15,587,125 638,665,1251988 New issue 1:5 of C and D shares

(“bonus” shares) 2) 127,733,025 766,398,1501988 Directed new issue to acquire

Boliden shares and convertibles 39,559,750 805,957,9001988 Conversion of debentures 934,150 806,892,0501989 Directed new issue to acquire

Boliden convertibles 7,787,700 814,679,7501989 Conversion of debentures 60,100 814,739,8501989 Bonus issue 1:1 814,739,850 1,629,479,7001989 Conversion of debentures 17,075 1,629,496,7751990 Conversion of debentures 188,550 1,629,685,3251991 Conversion of debentures 58,075 1,629,743,4001992 New issue 1:5 at SEK 70 325,948,675 1,955,692,0751993 New issue 1:2 at SEK 30 977,846,025 2,933,538,100

1) Five new shares, each with a nominal value of SEK 25 were given for every old share with anominal value of SEK 100. Of these, one new share was in respect of the bonus issue andfour new shares the result of the split.

2) At SEK 200 (restricted shares) and SEK 260 (unrestricted shares), respectively.

TRELLEBORG SHARES DURING 1996

During the year, the price of Trelleborg B shares rose by 28 percent (-35 per cent), whereas the “Veckans Affärer” index of the 16most-traded companies rose by 38 per cent (+17 per cent) and theGeneral Index by likewise 38 per cent (+18 per cent). Viewed overa five-year period, 1992–1996, Trelleborg B shares rose by 3 percent per annum on average whereas the index of the 16 most-trad-ed companies rose by 23 per cent and the General Index by 21 percent.

During 1996, approximately 119 million Trelleborg shares weretraded on the Stockholm Stock Exchange against 183 million inthe previous year, equivalent to 101 per cent (156 per cent) of thetotal number of shares in the Company, at a value of SEK10,164M (17,089). This in turn was equivalent to 1.2 per cent(2.7 per cent) of total stockmarket turnover. In 1996, Trelleborgwas the twenty-third and in 1995 the tenth most-traded share onthe Stockholm Stock Exchange. The average daily turnoveramounted to around 474,200 shares (728,700) or SEK 40M (68).Purchases and sales by foreign investors resulted in a net export ofTrelleborg shares of SEK 187M compared with net imports ofSEK 1,486M in the previous year.

The value of units in the company-related savings scheme,Trelleborg Allemansfond, rose by 32 per cent during 1996 (-32 percent).

TRELLEBORG SHARE PRICES 1992–1996

Refers to restricted B shares up to 7 July 1992, thereafter unre-stricted B shares.

SHARE PRICES, STOCKHOLM STOCK EXCHANGE

Trelleborg B Low High

1992 39.50 111.401993 35.10 86.001994 76.00 126.001995 69.00 121.501996 70.00 96.50

Calculated on maximum and minimum buying price, adjusted for issues and split and themost-traded class of share (i.e. B restricted up to 7 July 1992, thereafter B unrestricted).

30

60

90

120

150

180

210 240

1992 1994 1995 1996

10000 20000 30000

1993

(c) Six Findata

Share price at the end of each monthThe “Affärsvärlden” General Index at the end of the monthNumber of shares traded in each month (000, incl post-reported transactions)

59

TRELLEBORG’S 10 LARGEST SHAREHOLDERS (31 DECEMBER 1996)

The information is based, among other things, on VPC’s officialregister of shareholders and nominees at 30 December 1996.

Of the total number of shares, non-Swedish shareholdersaccounted for 23.6 per cent at the 1996/1997 turn of year (17.8).The proportion of institutional ownership was 40 per cent (51) inSweden and 23 per cent (17) abroad or totally 63 per cent (68).

Number of Per cent of Per centOwner shares share capital of votes

Dunker funds and foundation 1) 12,196,000 10.39 53.34Chase Manhattan Bank (US, CA, GB, LU) 9,536,818 8.13 4.23Försäkrings AB SPP Ömsesidigt 5,237,926 4.46 2.32S-E-Banken’s Unit Trusts, etc 4,929,000 4.20 2.19State Street Bank (US) 4,894,635 4.17 2.174th AP Fund 3,965,004 3.38 1.76Folksam Liv, etc 3,596,060 3.06 1.60Handelsbanken’s Unit Trusts, etc 3,444,765 2.94 1.53Skandia Försäkringar and Unit Trusts 3,144,731 2.68 1.40Trygg-Hansa Försäkringar and Unit Trusts 2,380,000 2.03 1.06Other approximately 72,700 shareholders 64,016,585 54.56 28.40

Total 117,341,524 100.00 100.00

1) Of which 10,678,400 A shares and 1,321,600 D shares, which represent all the shares ofthese classes of share.

DISTRIBUTION OF SHAREHOLDINGS (30 DECEMBER 1996)

At the end of the year, there were 72,709 shareholders (77,190) ofwhich 49,430 (50,518) were directly-registered and 23,279(26,672) nominee-registered.

Number of Per cent of Change, per cent,Holding shareholders total shares from 30 Dec 1995

1– 1,000 65,802 13.80 -1.141,001– 5,000 5,816 10.96 -2.615,001–50,000 947 10.84 -3.20

50,001– 144 64.40 +6.95

Total 72,709 100.00

DATA PER SHARE

(Adjusted for issues) 1996 1995 1994 1993 1992

Result, SEK per share after full conversion and full tax 8.60 24.40 5.60 -13.50 -17.30Ditto, excluding restructuring items 8.60 10.20 2.75 -16.40 -15.20Dividend per B share, SEK 3.00 3.001) 1.00 —- —-Share price at 31 December,B shares, SEK 90.50 70.50 108.50 79.50 46.50Ditto C shares 96.50 84.00 117.00 84.00 53.50Shareholders’ equity, SEK 80.40 77.20 55.20 50.80 78.90Yield, per cent 3.3 7.12) 0.9 0 0Price/Earnings ratio 11 73) 19 neg neg

1) Excluding an exceptional dividend of SEK 2.2) Including an exceptional dividend of SEK 2.3) Excluding restructuring items.

Average number of shares after full conversion:

1996 1995 1994 1993 1992

117,341,524 117,341,524 117,341,524 84,746,657 71,708,710

60

Board of Directors and AuditorsBOARD OF DIRECTORS

Rune AnderssonChairman. Born 1944. Elected 1983. Chair-man: Getinge Industrier, SSAB and SvedalaIndustri. Board Member: Henry & Gerda Dun-ker’s Foundation and Donation Fund Number2, Sandvik and Skandinaviska Enskilda Banken.Holding: 407,500 shares (in associated compa-ny).

Bertil BertilssonDeputy Chairman. Born 1926. Elected 1976.Chairman: Henry & Gerda Dunker’s Founda-tion and Donation Fund Number 2, HenryDunker’s Förvaltnings AB, Förvaltnings AB HDand AB Hevea. Holding: 16,680 shares (in ownand spouse’s name).

Hans Cavalli-BjörkmanBorn 1928. Elected 1970. Former President ofSkandinaviska Enskilda Banken. Chairman:Lindab, Skoogs, Sydsvenska Handelskammarenand other companies. Board Member: ElandersKommunikation, Höganäs, Platzer Bygg, Gud-me Raaschou Bankaktieselskab, PreussenElektraScandinavia and Salus Holding. Holding: 702shares.

Lennart NilssonBorn 1941. Elected 1985. President and CEOof Cardo. Chairman: Celsius and the Associa-tion of Swedish Engineering Industries. BoardMember: Cardo, Crafoordska Stiftelsen, Henry& Gerda Dunker’s Foundation and DonationFund Number 2, Lund University and othercompanies. Holding: Nil.

Sven OlvingBorn 1928. Elected 1988. Former Vice Chancel-lor of Chalmers Institute of Technology. Chair-man: Chalmers Industriteknik. Board Member:Bofors, Celsius Industrier, Electrolux, LM Erics-son and other companies. Holding: Nil.

Didrik NormarkBorn 1936. Elected 1994. President of ABElektrokoppar. Chairman: Dahréntråd. BoardMember: Bjurhagen, Henry & Gerda Dunker’sFoundation and Donation Fund Number 2,London Metal Exchange Ltd. Holding: 1,000shares.

Erik PenserBorn 1942. Elected 1988. Chairman: Erik Pen-ser Fondkommission and Yggdrasil. BoardMember: Atlantica, Ideon, Sandrew Film,Svenska Cellulosa AB SCA and other compani-es. Holding: Nil.

Sven BoreliusBorn 1928. Elected 1988. Former President andCEO of Euroc. Chairman: LKAB. Board Mem-ber: Cardo, Scancem (former Euroc), Fabege,Getinge Industrier, Scribona, Svedala Industri,Sanitec Ltd Oy, Finland and other companies.Holding: 4,000 shares.

Kjell NilssonBorn 1948. Elected 1990. President and CEOof Trelleborg AB. Chairman: PEAB and Sorbin-vest. Deputy Chairman: the Association of Swe-dish Chemical Industries. Board Member:Munksjö, Postgirot Bank and the Federation ofSwedish Industries. Holding: 100,000 calloptions (in associated companies).

61

Lilian RingsandBorn 1942. Elected 1989. Employee Represen-tative (Federation of Salaried Employees inIndustry and Service). Elected by the unions ofthe Trelleborg Group. Holding: 134 shares.

Örjan CarlssonBorn 1950. Elected 1994. Employee Represen-tative (The Swedish Metal Workers’ Union).Elected by the unions of the Trelleborg Group.Holding: 95 shares.

Lennart NordströmBorn 1936. Elected 1990. Employee Represen-tative (Federation of Salaried Employees inIndustry and Commerce). Elected by the unionsof the Trelleborg Group. Holding: 588 shares.

Reidar PetersBorn 1939. Authorised Public Accountant, Art-hur Andersen AB, Malmö. Appointed DeputyAuditor 1970. Auditor 1977.

Thomas ThielBorn 1947. Authorised Public Accountant,KPMG Bohlins AB, Stockholm. AppointedDeputy Auditor 1983. Auditor 1985.

Hans PihlBorn 1951. Authorised Public Accountant, Art-hur Andersen AB, Malmö. Appointed 1984.

Alf SvenssonBorn 1949. Authorised Public Accountant,KPMG Bohlins AB, Malmö. Appointed 1988.

DEPUTY DIRECTORS

AUDITORS DEPUTY AUDITORS

Stig–Erik NyströmBorn 1946. Elected 1993. Employee Represen-tative (The Swedish Miners’ Union). Elected bythe unions of the Trelleborg Group. Holding:62 shares.

Kim DavidssonBorn 1947. Elected 1994. Employee Represen-tative (Swedish Trade Union Confederation).Elected by the unions of the Trelleborg Group.Holding: 122 shares.

Berthold LindqvistBorn 1938. Elected 1996. President of GambroAB. Board Member: Gambro, Pharmacia &Upjohn, PLM and Securitas. Holding: 1,000shares.

Arne NilssonBorn 1933. Elected 1981. Employee Represen-tative (Federation of Salaried Employees inIndustry and Service). Elected by the unions ofthe Trelleborg Group. Chairman of the SIFbranch at Trelleborg Industri. Holding: 2,948shares (in own and spouse’s name).

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Kjell NilssonBorn 1948. Employed 1985. President andCEO. Holding: 100,000 call options (in associ-ated companies).

Anders BülowBorn 1953. Employed 1981. Executive Vice Pre-sident. President: Business Sector Mines &Metals and Boliden AB. Holding: 10,000 calloptions.

Björn OgardBorn 1946. Employed 1996. Executive Vice Pre-sident. President: Business Sector Distributionand Trelltrade AB. Holding: 1,300 (in own andfamily’s name).

Hans PoratBorn 1955. Employed 1997. Executive Vice Pre-sident. President: Business Sector Rubber Pro-ducts and Trelleborg Industri AB. Holding:1,000 (in spouse’s name) .

Gertrud AnderssonBorn 1944. Employed 1963. Group Controller.Holding: 13,255 shares.

Claes JörwallBorn 1953. Employed 1988. Taxes and Groupstructures. Holding: 273 shares.

Lars Olof NilssonBorn 1962. Employed 1988. Treasury. Holding:599 shares.

Hans NybergBorn 1942. Employed 1987. Senior Vice Presi-dent - Internal Audit. Holding: 9,923 shares,2,000 call options (in own and family’s name).

Lars WallenbergBorn 1951. Employed 1981. Senior Vice Presi-dent - Group Counsel & Company Secretary.Holding: 15,000 call options.

Leif ÖbergBorn 1946. Employed 1978. Senior Vice Presi-dent - Information Services, Personnel andInformation Technology. Holding: 21,000 shares, 10,000 call options.

Group Management

Note: The stated call options, issued by Dunker Funds and Foundation (Förvaltnings AB HD) in April 1994, entitle the holder to buy the corresponding number of B shares during the period 15 March - 15 April 1999 at a price of SEK 125.

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Group highlights

Group, SEK M 1996 1995 1994 1993 1992

Income and resultInvoiced sales 20,574 21,304 19,135 21,617 23,125Result after depreciation,

including restructuring items 775 3,177 906 -326 -186Ditto, excluding restructuring items 775 1,211 693 -675 24Result after financial income and expenses 1,018 3,512 904 -1,516 -1,564Taxes -16 -639 -238 +390 +309Minority interest 1 -10 -14 -16 +16

Net result for the year 1,003 2,863 652 -1,142 -1,239

Capital structureCurrent assets 10,920 10,388 8,056 8,604 9,514Blocked accounts with the Riksbank 0 0 0 5 7Fixed assets 8,109 9,076 11,931 12,874 16,210

Total assets 19,029 19,464 19,987 21,483 25,731

Current liabilities 4,725 5,054 5,877 10,023 9,680Long–term liabilities 4,862 5,348 7,637 5,493 9,876Minority interest 12 3 3 3 4Shareholders’ equity 9,430 9,059 6,470 5,964 6,171

Balance sheet total 19,029 19,464 19,987 21,483 25,731

Key figuresEquity ratio 1) % 49.6 46.6 32.4 27.8 24.0Debt/Equity ratio, 2) times 0.5 0.6 1.3 1.8 2.2Capital turnover, 3) times 1.4 1.5 1.2 1.2 1.1Operating margin, 4) % 3.8 5.7 3.6 neg 0.1Profit margin, 5) % 4.9 7.3 3.6 neg negInterest cover, 6) times 2.7 6.4 2.0 neg negReturn on total capital employed, 7) % 9.6 36.2 11.2 neg negReturn on shareholders’ equity after full tax, 8) % 10.9 36.9 10.5 neg negResult, SEK per share after full tax 9) 8.60 24.40 5.60 -13.50 -17.30Ditto, excluding restructuring items 8.60 10.20 2.75 -16.40 -15.20

Other informationAverage number of employees 13,086 12,421 12,351 17,566 21,801of which, abroad 5,605 5,530 5,055 6,548 8,025

Investments (excluding fixed assets in companies acquired) 1,134 1,129 650 620 1,077

Financial net assets/liabilities -464 +637 -5,979 -7,212 -10,431

DEFINITIONS

1) Equity ratio Shareholders’ equity plus minority interest dividedby the balance sheet total.

2) Debt/equity ratioCurrent liabilities plus long–term liabilities divid-ed by shareholders’ equity plus minority interest.

3) Capital turnoverInvoiced sales divided by average capital employed.

4) Operating marginOperating result after planned depreciation exclud-ing restructuring items divided by invoiced sales.

5) Profit marginResult after net financial items excluding restruc-turing items divided by invoiced sales.

6) Interest coverResult after financial income and expenses plusinterest costs divided by interest costs.

7) Return on total capital employedResult after planned depreciation plus interest inresults of associated companies divided by averageshareholders’ equity plus minority interest andfinancial net assets/liabilities.

8) Return on shareholders’ equity after full taxNet result of the year divided by average sharehold-ers’ equity.

9) Result, SEK per share after full taxResult after financial income and expenses less fulltax (adjusted for tax-free dividends) divided byaverage outstanding number of shares, includingand excluding restructuring items, respectively.

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Annual General MeetingThe Annual General Meeting will be held on Friday 25 April 1997 at 3pm

in Trelleborg at “Trelleborgen” (located between Västra Vallgatan and Bryggaregatan). The AGM can be viewed on a large screen at Expolaris Kongresscentrum, Kanalgatan 73, Skellefteå.

The AGM will be broadcast live via a TV link and therefore the participants in Skellefteåwill also be able to put questions to the AGM panel in Trelleborg.

AGM PROGRAMME

Visitors to the AGM are also invited toparticipate in the following programme:

12.00 “Trelleborgen” opens with variousactivities.

13.00 The AGM premises open in Trelle-borg and Skellefteå.Buffet lunch.

14.15 Cabaret in Trelleborg, transmittedto Skellefteå via a TV link.

15.00 Start of AGM.

It should be noted that the C and Dshares are not guaranteed any dividend buthave preferential right to the 1996 finan-cial year inclusive ahead of A and B sharesto a dividend of SEK 10, if dividend ispaid. As soon as possible after the recordday on 30 April 1997, the C and D shareswill be converted into B and A shares,respectively, in accordance with the presentArticles of Association. No special actionneed be taken by the shareholder: the reg-istration will automatically be dealt withby VPC.

FINANCIAL INFORMATION ANDREPORTS

Trelleborg AB regularly publishes informa-tion about Group developments. A Prelim-inary Report on the 1996 accounts waspublished on 12 February 1997. TheAnnual Report will be published in themiddle of March. A report covering thefirst quarter of 1997 will be made in con-nection with the Annual General Meetingon 25 April. An Interim Report coveringthe first six months of 1997 will be pub-lished on Tuesday 19 August and a reportto September inclusive on Monday 3November 1997.

READER INFORMATION

Figures quoted in brackets in the AnnualReport refer to 1995 operations unless oth-erwise stated. SEK, Swedish kronor, areused throughout. SEK million is abbreviat-ed to SEK M and SEK thousand to SEK T.All amounts refer to SEK M unless other-wise stated. Million tonnes is abbreviatedM tonnes.

SERVICES TO SHAREHOLDERS

The Annual and Interim Reports will besent automatically to those shareholderswho have notified the Company thereofand to nominee-registered shareholderswho have registered this on their VPCaccount via their account-operating insti-tute. Such financial and other informationcan also be ordered direct from Trelleborg

AB, Information Department, Box 153,SE-231 22 Trelleborg, Sweden.

Trelleborg also offers services to share-holders by telephone. Via a special tele-phone number, Int +46 8 30 62 80, any-one interested will be provided withanswers to questions, be able to order mag-azines, brochures, etc, or be put in touchwith specialists in a specific area, etc. Any-one who wishes to know current metalprices, can telephone “Miss Metal” on Int+46 8 31 59 90, who will provide informa-tion on current prices in the quoted cur-rency and SEK for gold, silver, copper,lead, zinc and nickel. The report is updat-ed every weekday after 3pm.

Most of this information is also avail-able via Internet, address: www.trell-group.se. The Annual Report can also befound at the following address: www.bolagsfakta.se and is available on Bolags-Fakta’s CD-ROM disk, which can beordered free of charge by telephoning +468 661 21 30.

AUTHORITY FOR NEW SHAREISSUE

The Board of Directors intends to recom-mend to the Annual General Meeting thatthe Board is given continued authority tothe next AGM to pass a resolution regard-ing new issues with pre-emption from theshareholders’ right of preference. It isintended that one such issue will be direct-ed at the international capital market andamount to 10 per cent maximum of thetotal outstanding number of shares at thedate of issue, and be on market terms.

CHANGE OF ARTICLES OFASSOCIATION

The AGM will also deal with a proposal fora change of the Articles of Associationwhich, among other things, would involvedeletion of the present regulations regard-ing C and D shares, and that the regula-tions about right of preference on anincrease of the share capital be adapted tonew regulations in the Swedish CompaniesAct.

NOTIFICATION OF ATTENDANCE

Shareholders who wish to attend the AGMin Trelleborg or in Skellefteå must notifythe Company of their intention not laterthan 3 pm on Tuesday 22 April 1997,either by telephoning Int +46 410 670 31,670 47 (direct lines), 670 00 (switchboard)or by telefax Int +46 410 175 89 or in writ-ing to the Company Secretary, TrelleborgAB, Box 153, SE-231 22 Trelleborg, Swe-den. Notification can also be made viaBoliden by telephoning Int +46 910 77 4180, 77 33 70 (direct lines) or 77 40 00(switchboard).

To qualify for attendance, shareholdersmust be registered with the Swedish Secu-rities Register Centre (Värdepapperscen-tralen VPC AB) by Tuesday 15 April 1997.Shareholders whose shares are nominee-registered must thus have their shares tem-porarily registered in their own names(such registration should be requested ofthe nominee a few days in advance).

DIVIDEND

The Board of Directors and the Presidentrecommend a dividend for the 1996 finan-cial year of SEK 3 per A and B share and ofSEK 10 per C and D share. Wednesday 30April 1997 is proposed as the record dayfor the dividend. Should the AGM decidein accordance with the proposal, it isexpected that the dividend will be remittedby VPC on Friday 9 May 1997.

AddressesTRELLEBORG ABP.O. Box 153SE-231 22 Trelleborg Visitors’ address: Henry Dunkers gata 2 Tel +46 410 670 00Fax +46 410 427 63

BOLIDEN ABBOLIDEN CONTECH ABBOLIDEN INTERMARKET ABBOLIDEN INTERNATIONALMINING ABP.O. Box 21024SE-100 31 StockholmVisitors’ address: Norra Stationsgatan 75-77 Tel +46 8 610 15 00 Fax +46 8 31 55 45 (Boliden AB)+46 8 34 80 97 (Contech)+46 8 736 07 01 (Intermarket)+46 8 32 63 52 (International Mining)

BOLIDEN MINERAL AB SE-936 81 Boliden Visitors’ address: Kontorsvägen 1 Tel +46 910 77 40 00Fax +46 910 77 41 10

TRELLEBORG INDUSTRI AB SE-231 81 Trelleborg Visitors’ address: Henry Dunkers gata 1Tel +46 410 510 00Fax +46 410 121 19

AHLSELL AB SE-191 88 Sollentuna Visitors’ address: Bagarbyvägen 61 Tel +46 8 623 71 00Fax +46 8 92 02 61

BRÖDERNA EDSTRAND AB P.O. Box 225, SE-201 22 Malmö Visitors’ address: Spadegatan 1 Tel +46 40 38 40 00Fax +46 40 38 41 63

SORBINVEST AB (publ)Trädgårdsgatan 8, SE-931 31 SkellefteåTel +46 910 174 00Fax +46 910 70 19 00

Associated companiesBPA AB (publ)SE-117 82 StockholmVisitors’ address: Årstaängsvägen 11 ATel +46 8 709 38 00Fax +46 8 19 12 11

NORZINK A/S EitrheimN-5750 Odda, Norway Tel +47 53 64 91 00Fax +47 53 64 33 77

SAUDI COMPANY FORPRECIOUS METALS LTD P O Box 12948SA-21483 JeddahSaudi ArabiaTel +966 2 667 24 72Fax +966 2 660 25 61

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

Internet: www.trellgroup.se

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