ContentsSummary of operations 2Interview with the Group Managing Director 3Report of the Board of Directors 6Financing, Liquidity, Solvency 7Personnel 8Research and Development 9Business Sector: Technical Rubber 10Business Sector: Trellex 12Business Sector: Industrial Supplies/Products 14Business Sector: Industrial Supplies/Trading 15Goodall Rubber Company 16Business Sector: Tyres 18Business Sector: Special Products 20Other information, Proposed Distribution of Profits 22Trelleborg Shares 24Source and Application of Funds Statements 26Profit and Loss Accounts 27Balance Sheets 28Notes to the Financial Statements 30Report of the Auditors 34Board of Directors, Auditors 35Group Management 37World Rubber Report 38Trelleborg in the World Market 4210-year Review 47Summary diagram 48

Annual General MeetingThe Annual General Meeting will be held in Trelleborg onThursday 29 May 1986 at 3 p.m.

Notification of attendanceShareholders who wish to attend the AGM must notify theCompany of their intention not later than 3 p.m. on Monday26 May, either by telephone (Int + 410)-51 419/51 103(direct lines) or 51 000 (switchboard), or in writing to Trelle-borg AB, Legal Department, S-231 81 Trelleborg. Sweden.

Qualifications for attendanceCompany practice conforms with the law on the simplifiedhandling of shares. To qualify for attendance, shareholdersmust be registered with the Swedish Securities RegisterCentre (Vardepapperscentralen VPC AB) by 16 May 1986.

Shareholders whose shares are managed by a bank orprivate stockbroker must arrange for their shares to beregistered in their own names with VPC by 16 May.

DividendThe Board of Directors and the Managing Director propose adividend of SEK 2.50 per share for the 1985 financial year.

Dividend qualifications Reader informationIn order to qualify for the dividend, 3 June 1986 has beenproposed as the date of record with VPC. As a result,dividends should be paid by VPC on 10 June 1986.

Change of address

Figures quoted in brackets in the Annual Report refer to 1984operations unless otherwise stated. SEK, Swedish Crownsare used throughout. SEK million are abbreviated SEK M andSEK thousand, SEK T. All amounts refer to SEK M unlessotherwise stated.

Shareholders who have changed their address must notifyVPC in writing at the following address - VPC, S-l 71 18Solna, Sweden,

Organisation

Financial information and reportsTrelieborg regularly publishes information on Group develop-ment. A preliminary report on the 1985 accounts was pub-lished on 28 February 1986. Final accounts were presentedon 21 March 1986.

The Group is organised in six Business Sectors (see detailedinformation on page 10 and the following). In addition, theAmerican subsidiary Goodall Rubber Company forms aseparate unit within the Group.

The organisation also includes the following corporate func-tions:

The Annual Report will be published at the beginning of May1986. An interim report covering the first 8 months of 1986will be published on 7 October 1986.

Annual and Interim Reports will be sent direct to those share-holders who have informed VPC that they wish to receive

l Administrationl Data/Computer Systems. Engineering/Plant Servicesl Finance. Information/PRl Internal Audit

l Laboratoryl Legal Servicesl Materials. Personnel. Purchasing

Corporate entities within the Group are listed from page 42,

Annual report of Trelleborg ABThe Board of Directors and the Managing Director arepleased to submit the Annual Report and Group Consol-idated Accounts for 1985.

Summary of operations(Group, SEK M unless otherwise stated)

1985 1984 1983

Invoiced sales 2,132 1,861 1,702of which abroad % 59 51 52

Profit:after financial income and expenses 167.2 107,4 45.9

before appropriations and taxes 164.2 107.1 47.0

Return %:on equity 23.3 15.7 11.0

on assets 13,7 12.4 8.6

on capital employed 18.6 16.8 11.8

Interest cover 2.9 2.3 1.7

Equity ratio % 33.4 34.2 32.9

Risk capital % 41.3 41.2 37.0

Investment in plant, gross +193 +132 +112

Investment in plant, net + 55 + 60 – 5

Average number of employees 4,584 4,466 4,680

Profit, SEK per share:after deduction of a 50% assumedstandard tax 10.00 6.40 2.75

after deduction of final tax 13.40 7.50 4.75

after full conversion and 50% tax 9.70 6.30 —

after full conversion and final tax 13.00 7.30 —

Visible equity, SEK per share 64.25 50.30 44.95

Ditto after full conversion 64.10 50.70 —

Adjusted equitv, SEK per share 64.25 50.30

Ditto after full conversion 64.10 50.70

44.95

Dividend, SEK per share 2 . 5 0 * ) 1.40 1.40

Share price 31 December (adjusted), SEK 121 50 52

2

*) proposed by the Board of Directors

For definitions of key figures see page 30–31.

Sales and return on capital employed per business sector

Invoiced sales Return on(external) SEK M capital employed

1985 1984 Change 1985 1984

Technical Rubber 552 507 + 9% >20% 18%

Trellex 462 295 + 57% >20% 18%

Industrial Supplies/Products 305 284 + 7% 11% 9%

Tyres 253 279 - 9% 10% 20%

Industrial Supplies/Trading 237 176 + 35% 15% 18%

Special Products 184 270 – 32% > 2 0 % >20%

Other 139 50 +178%

Total 2,132 1,861 + 15% 19% 17%

“A high growth rate is a precondition for Trelleborg’sdevelopment.Therefore, we have to buy companies.”Christer Gladh, CGI, Malmö, interviews Rune Andersson,Group Managing Director of Trelleborg.

What really lies behind the impressive improve-ments in profitability in the expansive TrelleborgGroup in recent years?Improvements in profitability depend on either a few veryradical measures or many small changes. We have madehundreds of changes which explain the increased return oncapital. The most important factor was the changed structureof our organisation and thus the realisation of our businessconcept, higher productivity, reduced fixed costs andimproved capital utilisation. Last year, we achieved a 19 percent return on capital employed. In 1983, it was 12 per cent.

To a large extent, Trelleborg operates in a com-mercially-mature industry which suffers inter-nationally from exceptional profitability prob-lems. In that situation, is expansion throughacquisition the only means of creating growth?Growth in the world’s rubber industry is expected to run at amaximum annual rate of only a few per cent for the remainderof this century. In recent years, we have experienced agrowth-rate of 6–7 per cent, including inflation, in our originalunits. That is not enough. If Trelleborg is to develop, we mustachieve higher growth and there is only one solution to thatproblem if you want to avoid a price war: you acquire com-panies.

Has Trelleborg made that possible after thechange in its organisation and the closely-defined business concepts?Yes. Trelleborg has immense breadth to its operations. Weare active in almost every world market as well as in most

industries. We have some 20,000 products. That, of course,is interesting from the point of view of trends, as it is onlyrarely that you experience a simultaneous depression in allindustries. If you design a grid with the various BusinessSectors forming one axis and the markets forming the other,you will find that the bulk of our total sales takes place insquares, each of which represents only a few thousandths ofour combined sales. The largest "square" represents theSwedish engineering industry which only accounts for10–15 per cent of total turnover.

I do not think there are many companies of a similar size withsuch a finely-meshed market network. That also made itnecessary for us to review our export strategy. It gave us anorganisation which is different from the traditional structure.

So the business concepts were designed to fitexactly the common denominators that existedaround the products and their markets?Yes, you could put it like that. We identified four differentgroups, Firstly, areas in which the product itself dominatesand product development and technology are important. Inthese areas we can apply pure “niche” thinking, look for newapplications and develop new products, Tyres and SpecialProducts belong to this category. We aim to be big in anumber of generally small product areas.

Secondly, areas in which our products form part of a diffe-rent end product, ie where we act as subcontractors.Development is carried out in close collaboration with ourcustomers. We act as a "sounding board" for large com-panies such as Volvo, Saab-Scania, Alfa-Laval and ASEA.Technical Rubber belongs to this category.

3

A third group comprises areas where distribution is just asimportant as the product itself. In this instance, we becometraders and wholesalers and provide extensive stockholdingand a well-developed distribution network throughout theworld. Here salesmen, buyers and logisticians are requiredfor the daily needs of industry. Industrial Supplies/Pro-ducts/Trading and Goodall belong to this area.

Finally, there are a number of products around which soft-ware is the must important factor. Here we play the part of anengineering company and act as international consultants.Engineering expertise, construction solutions and the role ofconsultant form the most important components. This is,perhaps, where Trelleborg shows its sharpest edge in theshape of our specialist consulting expertise aimed at miningcompanies throughout the world.

How can these business areas be combined inthe Group?The common denominator is materials and material develop-ment. In these I include our investment-intensive mixingplants located in many parts of the world. Central functionsinclude buying of raw materials, financing aspects and anumber of overlapping information and personnel aspects.But marketing and most of the technology aspects arestrongly decentralised.

What acquisition rate is Trelleborg anticipatingand where are the most interesting opportunitiesto be found?Based on our present level of profitability and our existingBalance Sheet, we can cope with such a strong increase inturnover that we can reach SEK 5,000 M by the end of 1988- ie an increase of 40-50 per cent per annum -withouthaving to raise new capital and still retain a 30 per centequity/assets ratio.

Taking into account the weak growth rate in our industry-today, our present units would probably only be able togenerate SEK 700-800 M of this possible turnover increase.A turnover of around SEK 2,000 M would be left for acquis-itions. Now, this growth rate is nut just for its own sake, butwe are aware of the scope that exists and we know how tohandle it.

But can the Trelleborg management cope withsuch a high tempo?The controlling factor is always people -the availability of anexpert workforce. Of that we are fully aware and we mustview our recruitment drive in that light. In recent years, wehave employed some 30 high-calibre staff. But you are quiteright, a constant supply of skilled people is required to enableus to implement our acquisition strategy. And we will notundertake any acquisition unless we know in advance how toapply leadership and management to the company once ithas ben acquired.

The Goodall Rubber Company was one of lastyear’s major acquisitions. How are you dealingwith this company today?We have deployed highly-trained staff from Trelleborg in three

of the four leading positions. In recent years, Goodall which isNorth America’s largest distributor of industrial supplies,showed annual losses of more than USD 3M. We alreadyanticipate making a profit this year. Work efforts are veryintense there at this moment: the work force is beingreduced, factories are being restructured, etc. When that iscomplete, we see Goodall as an excellent base from which tomake further inroads into the North American market.

Goodall is one of more than 100 distributioncompanies in the Group. Why are distributioncompanies so important to Trelleborg?It is a tremendous strength to have such well-establishedpositions throughout the world. We have large maincustomer groups in the engineering industry as well as inmining, quarrying, construction and steel. Strong marketingactivities and a presence locally are preconditions forreaching these industries efficiently. That is why we speci-fically talk of market shares in Rotterdam, Kalmar, Glasgowand Marseille, rather than market shares in different countriesgenerally. l

Some of our competitors also have about 100 retailers, butwe have our own network. And that is important. That waywe always have salesmen in the market selling our products.In addition, we get a much more valuable feed-back fur ourproduct development. Our salesmen constantly report backon market requirements. Many new products have beeninitiated that way.

But 65 per cent of Goodall’s sales consist ofbought products?Well, that illustrates yet another dimension, This is a casewhere the Group’s flexibility has increased through the sales-mix which Goodall possesses, Goodall carries a centralrange which will always be manufactured locally. It primarilycomprises special hose and expansion joints for the pet-rochemical industry and the US Government. But as Goodallbuys the remainder from virtually all over the world, it gives usscope to provide products from our European factories if thedollar is high or if we have excess capacity. We can introduceour own products when we find it profitable in the totalcontext.

Will Trelleborg then make most of its futureacquisitions in the field of distribution?The world market for industrial supplies is gigantic We prob-ably have only a few per cent of it and clearly many suitableacquisition targets exist. But there are also a number ofopportunities in Technical Rubber. We could establishourselves in more countries and merge operations to improveproduction and, above all, product development. TechnicalRubber and Industrial Supplies form a stable base foracquisitions, but it is our ambition to be stronger in all Busi-ness Sectors. In the case of Trellex, still further forwardintegration is an interesting prospect. It would, of course, alsobe possible to acquire operations with other products tobroaden the markets In the case of Trellex one could, furinstance, consider mining pumps and for Special Products,perhaps respiratory protection masks.

4

How can you explain the fall in profitability inthe tyres sector?For many years Tyres achieved its long-term profitabilitytarget, ie at least 20 per cent on capital employed. We lookon last year’s fall as an isolated incident. The severe Swedishwinter delayed spring farming and the farmers postponedtheir investment. Activities in the forest machinery industrywas substantially reduced. But we are not hiding the fact thatstructural changes are also necessary. Our project of merg-ing Trelleborg’s and Viskafors’ tyre operations, which is nowin progress, can serve as an example.

To what extent are you dependent oninternational currencies?This year, our international share will increase to approx-imately 70 per cent compared with 59 per cent in 1985.Slightly more than 30 per cent of our sales will be in Sweden,around 25 per cent in North America, 30-35 per cent inother European countries and the remainder in the rest of theworld, of which Australia is the largest individual market. Oursales in various currencies equate with the proportions of theSwedish currency basket. The effect is therefore that, as faras we are concerned, international currency dependencyposes no major problem. In fact, it balances rather evenly.

Prices for natural rubber have collapsed and theprice of oil price has fallen drastically. That mustbe a big advantage to you?It is true that most of the raw materials we use consist of oil inrefined form. But from that one should not draw the simpleconclusion that we shall benefit quickly. You see, in theproduction stage before ours, there is a considerable lack ofprofitability and, no doubt, the companies involved will takeadvantage of the price reduction and strengthentheir profitability. We also do not know if the oilprice will again recoil upwards. That, after all, isvery probable.

In the short term, reductions in oil prices have amore indirect effect as they favour our customers,almost all of whom are industrial companies. Thatcould result in increased demand and thus affect usfavourably. In the long term, it may result in morestable price development and strengthen the entirepolymer industry in its competition with othermaterials such as steel.

Natural rubber can mainly be found in a number ofstandard products. It accounts for approximately10 per cent of our product mix. Previously, naturalrubber was incorrectly priced and producers havenow been forced to follow the price of syntheticrubber. As far as we are concerned, the effectwill be marginal.

You paint a very positive picture.What, then, are the threats toTrelleborg?Our most important remaining problem,apart from Tyres, is the hose division ofIndustrial Supplies and Goodall. In the

case of industrial Supplies, the trend points in the right dir-ection. We have experienced a number of start-up problemsin our new West German factory but we are optimistic thatwe will come to terms with them. As I have just mentioned,we already see profit opportunities in Goodall this year.

The long-term threats are posed by our high labour intensityand the fact that more than half of our production is based inSweden. If labour cost developments in Sweden, year afteryear, are considerably ahead of the rest of Europe, that wouldbe an obvious threat. It also concerns the inroads in variousproduct areas made by countries with low labour costsalthough, to a considerable extent, we have learned to livewith them. We have discontinued many simple product linesand replaced them with advanced ones. However, the threatis obviously always there and we are always aware of it whenwe update our product range and specialise still further.

1985 saw your profits increase of 56 per cent andnow you forecast a further 30-40 per cent rise.Are you not being over-optimistic?Increased profits will, to a large extent, be the result ofcontinued work to improve efficiency. Structural changesrarely make an impact until one or two years after they havebeen implemented. We therefore expect the effects of theactions we took in 1984-85 to produce results now. Inaddition, there are our recent acquisitions which, in mostcases, were unprofitable at the time of acquisition. They arenow beginning to yield normal profits. Therefore, do notthink we are being over-optimistic. Perhaps this is the righttime to mention another target set by the Board of Directors.It concerns our dividend policy which, in the long term, aimsto provide a dividend equivalent to one third of the annualprofit per share after standard tax.

Report of the Board of DirectorsGroup ReviewIn 1985, Group invoiced sales amounted to SEK 2,132M(1984: 1,861). Of these, sales abroad accounted for SEK1,269M which is equivalent to 59 per cent of total sales (1984SEK 945M and 51 per cent, respectively). Exports fromSweden amounted to SEK 579M (56l).Distribution of salesabroad on different markets is shown in Note 1 on page 31.

Invoiced sales for comparable units increased by 7 per centin absolute terms, or slightly more than the rate of inflation.

At the Annual General Meeting on 30 May, Group profit for1985 before extraordinary items, appropriations and taxeswas forecast to increase by 30 per cent to approximatelySEK 140M. In the Interim Report which was published on 10October, the forecast was revised to approximately SEK160M, an increase of 50 per cent. The actual outcome wasSEK 167.2M (1984 107.4) which is equivalent to SEK 10.00per share after 50 per cent standard tax (6.40) and SEK13.40 after final tax (7.50).

Group profit before appropriations and taxes amounted toSEK 164.2M (107.1). After appropriations and provisions fortaxes, net profit for the year was SEK 69.4M (20.5).

Group accounting principles are explained in the Notes to theFinancial Statements on page 30.

180

160

140

120

100

80

60

40

20

0

-20

-40

-60

-80

Development of profit, 1981 - 1985

1981 1982 1983 1984 1985

Structural ChangesTrelleborg Atlas A/S which was acquired on 31 December,1984, increased Group turnover in 1985 by approximatelySEK 110M.

During 1985, the following companies and operations wereacquired: in the Netherlands, the distribution company Cleton& Meijer (on 1 January, annual turnover approximately SEK30M and 50 employees) and Bakker Rubberfabriek B.V. (on1 July, SEK 40M, 135 employees); in Great Britain, NationalPlastics’ battery container operations (on 1 October, SEK40M, 100 employees); in the United States, Goodall RubberCompany (on 1 November, SEK 550M, 650 employees); inSweden, 51 per cent of the shares in Transportbandsvulk iSkåne AB (on 1 December, SEK 8M, 10 employees) andSävsjö Fälgar AB’s operating assets and liabilities (on 30December, annual turnover approximately SEK 40M and 45employees).

In 1985, Trelleborg sold the Swedish companies Ing. TorstenUllman AB and Trinova AB (on 1 March, annual turnoverapproximately SEK 80M, 270 employees) and Varnamolsolerduk AB (on 1 May, SEK 50M, 50 employees).

The combined effect of these acquisitions and sales was anincrease in turnover of approximately SEK 40M during 1985.

Invoiced sales per Business Sector

Otherlndustrial SuppIies/ 6% Technical Rubber 26%

Trading 11%

Special Products9%

Tyres 12%Trellex 22%

lndustrial SuppIies/Products 14%

Invoiced sales per market

USA,Canada 9%

Othermarkets 6%

Sweden41%

Other Europeancountries 33%

Other Nordic countries 11%

6

Return, %At the same time, profit is estimated to have increased bySEK 4M.

Extraordinary Income and ExpensesExtraordinary expenses in 1985 mainly refer to the restructur- Return on equitying of production units. The transfer of production from Ham- (after tax)burg to the new factory in Wasbek/Neumünster was com-pleted during the year. The mixing department and a minorproduction unit of the Norwegian Atlas company were closeddown. The manufacture of tubes for industrial tyres at ABVärnamo Gummifabrik was discontinued.

Extraordinary income arose on the sale of operational units, Return on capital

Return on assets

mainly Värnamo lsolerduk AB.

Extraordinary income and expenses influenced the 1985 pro-

employed (before tax)

(before tax)

fit by SEK -3.0M, net.

Financing, Liquidity and Solvency

Considerably improved net interest income andincreased liquidityNet borrowing of the Group (interest-bearing liabilities exclud-ing PRI-liabilities less cash and interest-bearing investments)in 1985 increased by SEK 126.9M (1984 SEK -69.7M),mainly as a result of considerable acquisitions of companies.

Liquidity was strengthened still further. At the year-end, liquidassets amounted to SEK 561.4M, an increase of 317.0M

1981 1982 1983 1984 1985from the beginning of the year.

Invoiced sales, SEK M

Foreignsales

718 844

885

945

1269

403 429

494

561

579ExportsfromSweden

1981 1982 1983 1984 1985

6

Equity ratio, %

25.1

27.4

32.9

34.2

33.4

4

After 50% assumed

24

20

16

12

8

4

14Profit, SEK per share

12

After

10

final tax

8

1981 1982 1983 1984 1985

2

standard tax

1981 1982 1983 1984 1985

7

Net interest income improved considerably to SEK +2.1 Mcompared with SEK -28.9M in 1984 and SEK -52.3M in1983. The 1985 improvement is due not least to increasedforeign exchange transactions. The Group’s net receivablesabroad were secured in respect of currencies through short-term borrowing in the equivalent currencies, in many inst-ances at favourable interest rates. In addition, currencieswere borrowed in balancing baskets aimed at optimising totalinterest and currency arbitrage.

During the year, the Trelleborg Group’s equity/assets ratio(for definition see page 30) fell from 34.2 to 33.4 per cent.This is a temporary decrease due to the consolidation ofGoodall Rubber Company. In 1986, the equity/asets ratio isexpected to increase considerably - prospective acquisitionsnot included.

Slightly more capital tied up but continuedincrease in stock turnoverDuring 1985, capital tied up in stock and customer receiv-ables less accounts payable for comparable units increasedby a total of SEK 45.5M (1984 SEK - 15.2M). The ratio toinvoiced sales was slightly less favourable as a result ofreduced accounts payable as is shown in the following table:

1985 1984 1983 1982 1981

Stock % 21.8 22.8 26.5 28.6 29.0Accounts receivableincluding billsreceivable % 18.7 17.9 17.6 19.3 18.1Accounts payable andbills payable % 7.5 9.4 8.9 9.0 8.2

Total % 33.0 31.3 35.2 38.9 38.9

SEK M

1981 1982 1983 1984 1985

InvestmentsDuring 1985, a gross amount of SEK 193M (1984 SEK

Salaries

132M) was invested in fixed assets (including companies

and social

acquired during the year). Of this, SEK 99M represents fixed

costs,

assets of companies acquired during the year. The major part

5424 5169

4680 4466 4584

of the other investments were investments in improved effi-

568 579

602

624

650

ciency.

energy, rents, transportation etc)

SEK 21M, 1.0%

Boards and Managing

Profit retained in the company

Directors

8

SEK 127M, 6.0%

Other employees

SEK 650M, 30.3% SEK 1,275M 59.7%

Social costs*)

9.1 7.7 1.3 1.3446.3 428.5 238.9 235.9

455.4 436.2 240.2 237.2

144.0 151.7 107.8 104.0

Employees (salaries and social costs) Suppliers (raw Materials,

*) Refers to Sweden only

Distribution of sales income 1985 Average number of employees

PersonnelAs already mentioned in the initial review, the Group at theend of 1985 includes the operations which Trelleborgacquired during the year in the Dutch companies Cleton &Meijer and Bakker Rubberfabriek B.V., the British companySpondon Plastics Ltd, the American company Goodall Rub-ber Company and the Swedish companies Transport-bandsvulk i Skåne AB and Sävsjö Fälgar AB. At the turn ofthe year, these companies employed a total of 900 people.On the other hand, Ing. Torsten Ullman AB, Trinova AB andVärnamo Isolerduk AB employing a total of 320 people, weresold.In 1985, the number of employees in the Parent Companyincreased for the first time in many years, mainly due torecruitment at the Ystad factory and the continued expansionof the Swedish sales organisation.The recruitment of highly-trained staff which was initiated in1983-84 continued. A special trainee programme began.This employs younger well-educated staff who, throughworking on a number of projects both in Sweden and abroad,are given an excellent insight into the operations of thevarious Group units. At the same time, offers of early retire-

Depreciation (replacement

mt, etc, continue. The total effect is that the number of

of worn-out equipment)

personnel is gradually being adapted to the demands which

SEK 48M, 2.3%

n e put on a new, more highly technological Trelleborg.

Taxes SEK 16M, 0.7%

alaries and remunerations

Dividends to shareholders

SEK M Group Parent Company1985 1984 1985 1984

Average number of employees

1985 1984

Parent Company 2,507 2,494Other Swedish companies 852 1,117

Total Swedish companies 3,359 3,611

Of which collectively employed 2,263 2,433salaried staff 1,096 1,178

Manufacturing companies abroad 726 533Sales companies abroad 499 322

Total companies abroad 1,225 855

Total Trelleborg Group 4,584 4,466

Of these collectively employed 2,946 2,904salaried staff 1,638 1,562

The figures stated for the average number of employees havebeen calculated by reference to the number of annual work-ers on the recommendations of the National AccountancyBoard.

Research and DevelopmentAn annual amount, equivalent to around 4 per cent ofturnover, is invested in research and development in theGroup. The Business Sectors account for the main portionand concentrate mainly on technology and product develop-ment, whereas the central resources are concentrated onthe materials and applications aspect.

Great interest is shown in new technology for the reinforce-ment of rubber products by mixing-in short textile fibres.Materials have been developed for various types of hosebends, for instance for cooling systems in vehicles. The sub-sidiary Ulvex AB has acquired advanced, computer-control-led equipment for manufacturing such hose bends.

Full-scale prototypes of different products consisting ofpneumatic beams were produced, ie load-bearing inflatableconstructions. New system solutions were developed in col-laboration with the Swedish Ministry of Defence and areexpected to result in completely new products at the begin-ning of the 90s.

ASEA’s increased investment in railway engines and trams,puts demands on new materials and constructions whichoffer improved grip during heavy dynamic tension andreduced creep at high temperatures. The collaboration withASEA has also lead to development of new methods forestablishing the properties of different materials, which in turnresulted in development of so-called FEM (finite element)

. programmes for computer calculation of the performance ofrubber products.

Materials and constructions were produced which can standhigher temperatures than has previously been thought poss-ible, mainly in respect of hot water seals and joints.

A new type of polyurethane material with improved perform-ance and more reliable process properties was created andis now being tested on a pilot scale.

During 1985, the equipment for advanced development workat the central laboratory in Trelleborg was supplemented withregard to chemical analysis, microscopics, fatigue and ten-acity testing and prototype manufacturing of foils, coatedtextiles and products made of thermo-elastomer materials.During the year, a number of training programmes in rubbertechnology were held aimed at increasing the product andmaterial knowledge of Trelleborg’s customers. In addition, a280-page V-belt handbook was published, mainly aimed attechnicians and for use in training in machine and transmis-sion technology.

In related product areas, test methods and materials weredeveloped which give rubber/metal products increasedfatigue resistance and longer relaxation (power loss ondeformation),

9

Business Sector: Technical RubberManager: Bo ForsénInvoiced sales: SEK 552M (5O7)Of which abroad: 43% (42)Return on capital employed: >20% (18)Number of employees: 1,510(1,260)Main products: Advanced moulded products, combined rub-ber/metal products, sealing strips, battery containers.Competitors: There are a large number of competitors inmost product areas both in Sweden and abroad. the num-ber of manufacturers of rubber battery containers has con-siderably reduced during the last few years.

Improved profitability and expansion throughacquisitionDemand for the Business Sector’s products and servicesremained satisfactory in 1985. As volume was kept at asatisfactory level in most of the Business Sector’s units,productivity improved throughout. The long-term target of a20 per cent return on capital employed was achieved.

The removal of the production unit in Hamburg to new pre-mises in Wasbek/Neumünster gave rise to considerablestart-up problems. During the year, the initial strongly-reduced productivity which was the result of a new andinexperienced workforce, improved gradually. Profit,however, is still not satisfactory. The management wasstrengthened by specialists from the Parent Company andcontinued improvement is expected during 1986.

Sweden 57%Rest of Europe34%

Share of total lnvoiced salesGroup sales = 26% by market

Othermarkets9%

During 1985, two important acquisitions were made. Thesewere described in detail in the Interim Report in October(Koninklijke Bakker Rubberfabriek outside Rotterdam with135 employees and an annual turnover of more than SEK40M, specialising in fenders, lock-gate sealants and bearingpads for bridges, and Spondon Plastics Ltd in theGreat Britain with more than 100 employees and an annualturnover of around SEK 40M, manufacturers of hard rubberand polypropylene battery containers). Both acquisitions,which were made on 1 July and 30 September, respectively,were rapidly assimilated and resulted in satisfactory profit

10

contributions in the Business Sector.

Bakker Rubberfabriek supplies lock-gate sealants and otherspecial products for the giant Oosterschelde project which willsouth west Netherlands against storm floods and tidal

Business Sector: TrellexManager Thomas OldérInvoiced sales: SEK 462M (295)Gf which abroad: 84 % (84)Return on capital employed: >20% (18)Number of employees: 470 (265)Main products: Expertise in mineral processing with specialistproducts and systems for milling, screening, dressing, mat-erials handling and wear protection, organised in three div-isions: Grinding, Screening & Wear Protection and Belting.New products are port fenders and debarking drum linings.Competitors: Other rubber companies, many of which arelocally restricted. There is also competition on the materialsside between rubber and steel. Conveyor belts are subject toconsiderable international competition.

Substantial expansion in 1985During 1985, the economic situation in the mineral proces-sing industry remained depressed throughout the world. Theturnover of the Business Sector increased by almost 60 percent. The main portion is attributable to the acquisition on 31December 1984 of Atlas A/S Den Norske Remfabrik, nowrenamed Trelleborg Atlas A/S. The remaining volumeincrease was due partly to new products, and partly togrowth in the existing product range which was a result of anumber of marketing investments.

Rest of Europe58%

Sweden 16%

Other

Share of total Invoiced salesGroup sales = 22% by market

markets26%

The markets which - apart from the acquired companies expanded most strongly in 1985 were Scandinavia, NorthAmerica and Great Britain.

In Norway, Trellex holds a very strong market positionthrough the acquisition of Atlas. The integration of Trelleborgand Atlas has gone according to plan. The ensuing advan-tages have resulted in considerable profit improvement.

In all, Trellex reached and surpassed its long-term require-ment for a 20 per cent return on capital employed after only

12

six months.

As part of the Business Sector’s ambition of offering itsindustrial customers still better service, 51 per cent of theshares in the service company Transportbandsvulk i SkåneAB were acquired on 1 December 1985. On 1 February1986, a similar operation was acquired in Karlstad.

Continued volume growth and improved profitexpected in 1986No major changes in the economic situation are expected inthe near future. Despite this situation, Trellex expects con-tinued volume growth and improved profit in 1986. This willbe achieved through planned new acquisitions as well as afurther strengthening of the marketing organisation and newproducts.

The picture is taken at a crushing and sorting plant in Saudi Arabia to whichTrellex has supplied a number of key components: screening cloths, con-veyor belts, etc.

A Trellex-lined primary mill at Lebjedienskii GOK in the USSR, one of thelargest iron-ore mines in the world.

13

Business Sector: Industrial Supplies/ProductsManager: Kjell NilssonInvoiced sales: SEK 305M (284)Of which abroad: 89% (86)Return on capital employed: 11% (9)Number of employees: 440 (430)Main products: Special hoses for fuel, compressed air,

Rest of Europe

Sweden 11%

Other

chemicals, hydraulics, etc, vibration insulators, rubber

74%

markets

sheeting, rubber mats, V-belts. Manufacturing units aresituated in Sweden, West Germany and the Netherlands.Competitors: All products are subject to tough international Share of total Invoiced sales

15%

Competition, often from countries with considerably lower Group sales = 14% by market

labour costs than Sweden.

Slightly improved 1985 profitIn total, return on capital employed improved from 9 percent to more than 11 per cent, mainly as a result of reducedcapital investment. In order to reach the long-term target ofa 20 per cent return on capital, further considerable struct-ural changes are required.

Continued low profitability on industrial hoseTrelleborg IS one of Europe’s largest manufacturers ofindustrial hose with modern production plants in Sweden,West Germany and the Netherlands. Most of the product

range, however, comprises standard hose which, as aresult of considerable international excess capacity, IS sub-ject to extremely tough price competition, which in turnresults in low profitability in the production process

In order to achieve the Group’s profitability target in thisproduct sector, further marketing Investment IS requiredthrough forward Integration in order to secure marketshares. This will be done through acquisitions of new unitsas well as expanding existing sales companies.

Rationalisation of the product stage in order to strengthencompetitiveness continues. Reductions in the productrange are being implemented and development resourcesare aimed at new, advanced hose products.

The restructuring programme which has been in progressfor two or three years will be intensified in 1986. The fulleffect of the restructuring work is, however, not expected tobe felt for another couple of years.

Improvement in hydraulic hoseDuring the year, demand for hydraulic hose was high both inEurope and the United States. Nevertheless, profitability isnot yet satisfactory.

To improve profitability, the methods of selling connected hose will be further developed. Distribution willbe made more and more through own sales companiesand/or smaller dealers.

During 1986, a new product range of hydraulic hose, whichcan stand extremely low temperatures, will be launched.Further rationalisation of production will also be accom-

14

plished during 1986.

Satisfactory profitability for NovibraThe Novibra range of rubber/metal products for vibrationreduction and shock absorption shows continued satisfact-ory profitability and increase in volume. The export sharecontinues to Increase During 1986, efforts will be concen-trated on expanding the distribution network and wideningthe product range.

Rubber sheeting - a profitable bulk productTrelleborg IS one of Western Europe’s largest manufactur-ers of rubber sheeting and rubber mats. Rational product-ion and distribution have made satisfactory profitabilitypossible despite the products’ bulk profile.In order to retain profitability, Investments are made in anincreased number of products with greater technology con-tent such as rubber mats for public environment.

Business Sector: Industrial Supplies/

Sweden 80%TradingManager; Kjell NilssonInvoiced sales: SEK 237M (176)Of which abroad: 20% (7)Return on capital employed: 15% (18)Number of employees: 265 (220)Main products The business sector is a pure tradingorganisation with a nation- wide network of local industrialsupply depots carrying a complete range of hoses, V-belts,

Share of total

Invoiced sales

Other

rubber sheeting, etc and well-adapted to local demand. A Group sales = 11%

by market

markets

similar distribution sys tern is being developed in Norway,

20%

Great Britain, the Netherlands and France.Competitors: Independent local distributors generally withno Parent Company connection.

Continued expansionDuring 1985, the continued expansion of the tradingorganisation was burdened by start-up expenses whichresulted in a somewhat lower return on capital than in theprevious year.

The Trelleborg-Atlas organisation IS now well-established inthe Norwegian market as a distributor of Trelleborg pro-ducts The operations of the previously directly-ownedNorwegian sales company, Trelleborg Gummi A/S, wereIntegrated in Trelleborg-Atlas.

Transmission restructuredDuring 1985, a far-reaching concentration of the productrange was implemented. The greater part of the standard V-belts was removed. This resulted in greater efficiency.reduced capital tied up and improved profitability.

Good prospects for 1986In summary, 1985 was a comparatively good year for Busi-ness Sector Industrial Supplies/Products. The conditions for1986 are viewed as favourable with a continued healthydemand for all of the Business Sector’s various products.Resources Will primarily be concentrated on continuedexpansion of the distribution network through forwardintegration, on increased investments in production tech-niques in order to strengthen the competitiveness at theproduction stage and on still further capital rationalisation andefficiency.

New sales offices in SwedenDuring the year, a further three sales offices were estab-lished in Sweden - in Uppsala, Växjö and Skövde. TheTrelleborg range is supplemented by an increased numberof bought-in products of a supply character such as bootsand work-shoes. Despite the annual investment in newsales offices, profitability remains satisfactory. Theorganisation now has some 25 own depots throughoutSweden.

Future developmentDevelopment and experiences in 1984 and 1985 confirmthat forward market integration is the key to profitability bothin respect of Industrial Supplies/Products and Trading.Therefore, continued intensive investment in this isplanned.

15

Goodall Rubber CompanyManaging Director: Claes SvenssonInvoiced sales SEK 83M (1 November - 3 1 December1985)Return on capital employed: negativeNumber of employees: 540Main products: Goodall is own production (approximately

Purchased products

35 per cent of turnover) mainly consists of industrial hose foradvanced applications and expansion joints for petrochemi-cal industry. Via more than 40 own sales offices, extensivetrading takes place in products of a supply character (hosecouplings, rubber sheeting, V-belts, conveyor belts, protec-

Estimated share of total

Own products as sharetive equipment, etc).

Competitors: Goodall’s own production is subject to strongGroup sales 1986 = 15-20%

of total sales

in terna tional competition. All domes tic manufacturers areaffected by large imports from Europe and South East Asiaas a result of the strong position of the dollar. At thedistribution stage, there are a large number of independentlocal distributors most of whom, however, have a consider-ably more limited product range than Goodall.

North America’s largest distributor of industrialsuppliesGoodall has more than 40 own local sales offices in theUnited States, Canada and Mexico. This gives Trelleborgaccess to North America’s largest Independent distributionchain for industrial products of a supply character. Thecompetitors in the market mainly operate through Indepen-dent local distributors.

A downturn in the economy in the American oil industry,which traditionally IS one of Goodall’s most Important con-sumers, and increased competition from imported pro-ducts, favoured by the rise of the US dollar, had the effectthat from 1982, Goodall was forced to reduce its ownproduction considerably. The measures taken, however,proved Insufficient and in the years 1982-l 985, the com-pany showed a cumulative loss of around USD 13M.

Large improvement potentialTrelleborg’s acquisition of Goodall in November 1985 wasbased on a reconstruction and improvement programmewhich had been carefully studied in advance.

A further reduction and concentration of Goodall’s ownmanufacture is expected to free considerable capital andresult in considerable improvement in productivity. By utilis-ing Trelleborg’s materials and construction know-how,further savings will be made in production.

A new information system, to be introduced in 1986/87, willprovide important administrative benefits. During 1986, thenumber of employees is expected to reduce by around 100or more than 15 per cent. An Increase in the product rangeat the distribution stage IS expected to Improve the profit ofthe trading which IS already favourable.

Already profitable in 1986As a result of the measures implemented, running opera-tions are expected to show profit in 1986. Added to this willbe profit arising from the sale of fixed assets and equip-ment.

On condition that the US dollar does not weaken further,the portion of Trelleborg products manufactured in Europeis expected to increase rapidly in Goodall’s tradingorganisation.

17

Business Sector: TyresManager: Fredrik ArpInvoiced sales: SEK 253M (279)Of which abroad: 5 1% (43)Return on capital employed: 10% (20)Number of employees: 350 (400)Main products: Tyres, tubes and complete wheels for for-

Share of total

Sweden 49%

Rest of Europe

estry. agricultural and industrial vehicles. Special tyres for

Group sales = 12%

by market

50%

millitary applications as we// as tyres for garden equipment,

Invoiced sales

Otheretc and motorcycles.Competitors: Strong international competition in the stan- marketsdard product range.

Concentration on agriculture, forestry and

1%

industryThe concentration on special tyres for agricultural, forestryand industrial vehicles continues. The leading products ofthe Business Sector are low profile tyres of Trelleborg’s owrconstruction with a larger surface area and lower pressurethan conventional tyres, used mainly in the agricultural andforest industries They are marketed under the trade-nameTWIN and exported to most European countries.

During 1985, the sale of agricultural tyres in Scandinaviaw a s hit by a very late start in spring farming and a rainyautumn, which resulted in lower profit

In Central Europe, the market continued to grow in respectof both agricultural and industrial tyres. The demand for lowprofile tyres Increases steadily.

1986 ForecastThe market for agricultural and forestry tyres IS expected toremain weak but the prerequisites are more favourable inrespect of Industrial tyres and the special range of tyres forgreen areas such as sports grounds, golf courses andparks.

The reduced profitability in 1985 IS considered to be of atemporary nature Through increased efforts in existingmain markets and powerful activities aimed at increasinginternal efficiency, the sales volume IS expected to stabilisedand profitability considerably improve already in 1986

Fredrik Arp, formerly Division Manager wthin Tarket? AB the Swedish Match Group, became new Manager of the

18

Business Sector on 1 March 1986.

Acquisition of Sävsjö FälgarOn 30 December 1985, all operational assets and debts ofSavsjö Fälgar AB were acquired from Munksjö AB. Theacquisition was financed through a new issue of 275,000restricted B-shares directed at Munksjö and a cash ele-ment. Sävsjö Fälgar is Sweden’s largest manufacturer ofwheel rims for agricultural, forest and contract machinery.The company has 45 employees and an annual turnover ofabout SEK 40M For 15 years, Trelleborg and Sävsjö havebeen collaborating closely on TWIN products. Trelleborghas also been Sävsjo’s largest customer for many years.

The background to the acquisition IS the Increasing sale ofcomplete wheels and wheel systems. Complete wheelsaccount for 80 per cent of Trelleborg’s present sales ofTWIN tyres

Trelleborg will continue the Sävsjö company’s operationswith the name unchanged and with all its former employees

Collaboration with ViskaforsAt the turn of the month February/March 1986, Trelleborgbegan negotiations aimed at closer collaboration with Vis-kafors AB of the Hexagon Group. Viskafors has 480employees and in 1985 had a turnover of SEK 198M, ofwhich tyres accounted for nearly SEK 85M and industrialrubber products for the remainder of more than SEK 110M.

The aim is to establish a jointly-owned company with tyresforming the main product area. The aim is to bring togetherViskafors AB and the tyres division of the Trelleborg Groupin the new company. Such a merger is considered to be ofgreat benefit both respect of production and marketing.The new company is estimated to have a turnover of

19

between SEK 400M and SEK 500M.

Business Sector: Special ProductsManager: Rune AnderssonInvoiced sales: SEK 184M (270)Of which abroad: 20% (25)Return on capital employed: >20% (>20)

Share of total

Sweden 80%

Rest of Europe

Number of employees: 250 (6 15)Operations: During 1985, Trelleborg sold Ing. Tors ten UII-man A B in Moheda (on 1 March) and Varnamo lsolerduk AB

Group sales = 9%

Other

17%

(on 1 May) with a combined annual turnover of approx- marketsimately SEK 130M and 3 15 employees. At the year-end, the 3%Protective Products Division (Ystad) and Roll Covering/Lin-

Invoiced salesing Division (Trelleborg) remained in the Business Sector.

by market

Roll Covering and Lining DivisionManager: Tors ten KjellinInvoiced sales: SEK 47M (43)Of which abroad: 7% (12)Number of employees: 79 (75)Main products: Roll covering for the paper and pulp industryetc, corrosion and wear protection covering mainly for themining, chemical and nuclear industries.Competitors: Relatively few, partly due to advanced spec-ialisa tion and, in the case of rolls, high freigh t costs. Maincompetitors to be found in Norway, West Germany andAustria.1985 was characterised by a very satisfactory and evencapacity utilisation throughout the year. Capacity was betterexploited than previously. The success of the newly-

In spring 1986, it was decided to extend the roll-covering factory in Trelle- developed Clupak mat contributed to this. It offers con-borg to meet growing demand for Clupac mats. siderable quality and cost advantages in the manufacture of

sack paper and was well-recetved by the Swedish paper

20

mills during the year.

Protective Products DivisionManager: Sten BengtssonInvoiced sales: SEK 70M (72)Of which abroad: 32% (26)Number of employees: 189(153)Main products: Products for personal and environmentalprotection, such as masks, fire and chemical protectiveclothing, inflatable hospital and rescue tents, oil booms,dock-gate insulation,

Competitors: In the manufacturing stage, mainly Scandin-avian and European rubber manufacturers. In the distribu-tion stage there is also competition from companiesspecialising in protective and safety equipment.

During the year, the Division’s advanced chemicals protec-tion range, Trellchem®, which had already been suc-cessfully launched in Europe, was introduced in NorthAmerica. There too, it was favourably received and sales areexpected to more than double in 1986. Substantial orderswere also received from the United Arab Emirates and HongKong.

Pilot sales of the new hospital tent, TrellTent®, were madeto Norway, West Germany, Switzerland and Australia. Thedock gate insulation Tretight® continued to sell well in Scan-dinavia and France.

During the year, exports increased by 25 per cent andactivities were concentrated on further internationalisation inalready established markets. Among development projectsin progress products for protection against ABC warfarecan be mentioned, for instance a new protective mask anda so-called C-combat uniform.

During the year, an extension of around 1,200 squaremetres was built at the Ystad factory. The effects of difficul-ties in staff recruitment were delays in delivery schedules, Atthe turn of the year, the order-book amounted to more thanSEK 66M which included deliveries to the Swedish ArmedForces and the Swedish Civil Defence in 1986 and 1987.

21

Other InformationChanges to the Board of DirectorsAt the 1985 Annual General Meeting Åke Ståhlbrandtretired after serving Trelleborg for 42 years, more than 35 ofwhich as a Board Member. He was Managing Director ofTrelleborg AB 1949– 1976 and Chairman 1976–1985. BoSandell, who was elected Deputy Board Member in 1984,resigned due to changes in the ownership structure ofInvestment AB Skrinet.

Lennart Nilsson, Helsingborg and Gustaf Douglas of Ryd-boholm, Åkersberga were elected new Board Members.

At an inaugural Board Meeting following the Annual GeneralMeeting, Ernst Herslow, Malmö (Board Member since1965) was elected Chairman. He was succeeded as DeputyChairman by Bertil Bertilsson, Helsingborg (Board Membersince 1976),

New AuditorThomas Thiel, Authorised Public Accountant, Stockholm(Deputy Auditor since 1983) was appointed Auditor follow-ing the retirement of Sten Berglund, Sten Humble, Auth-orised Public Accountant, Lund was appointed DeputyAuditor.

Proposed Distribution of ProfitThe Group’s unappropriated profit, including its 1985 profit,amounts to SEK 135,571 T. Of this, SEK 225T is requiredfor appropriation to restricted reserves.

The Parent Company’s disposable profit includes a balanceof SEK 61,416T brought forward from the previous yearwhich, added to the net profit for the year, SEK 22,898Tmakes a total of SEK 84,314T.

The Board of Directors and the Managing Director recom-mend that a dividend of SEK 2.50 per share be paid toshareholders making a total of SEK 20,951 T, and that thebalance, SEK 63,363T be carried forward.

For many years, the level of dividend has considerablylagged behind the average for Swedish companies due tolow profitability during the latter part of the 70s and thebeginning of the 80s, and last year’s ban on increaseddividends. 10 years ago, ie in 1975, the dividend was SEK1.60 (adjusted for bonus issue and split). No dividends werepaid for the period 1977–79. In 1980–82, SEK 1.20 waspaid and in 1983–84 SEK 1.40. The dividend increase fromSEK 1.40 to SEK 2.50, which the Board of Directors nowrecommends, should partly be seen as compensation forthree years in the 70s when no dividends were paid and analmost stagnant dividend, so far, in the 80s. As stated in the1984 Annual Report, the Board of Directors are of theopinion that the dividend, in the long term, should corres-pond to approximately one third of the annual profit afterfinancial income and expenses and 50 per cent standardtax.

22

The Danish sales company, TrelIeborg Gummi A/S was voted Company ofthe Year in 1985 and awarded the newly-established Challenge Cup.The trophy is a silver polymer-molecule mounted on a piece of sea-preserved oak. The designer is Magnus G:son Liedholm of Skanör Swedenhere seen sculpting the molecule using a model from Lund

Trelleborg SharesDuring 1985, Trelleborg share orices developed very favour-ably An increase of 140 oer cent placed Trelleborg thirdamong the most successful Al and All listed companies.During the year, the “Affärsvärlden” general index increased

200by 25 per cent, Viewed over a five year period. 1981-85, 175Trelleborg shares nave increased by 860 per cent which 150

placed them fifth in the AI/AII lists.

The lowest price quoted for Trelleborg shares in 1985 was 125

SEK 51.50 (January) and the highest was SEK 130 (Decem- 100

ber). a difference of more than 150%

At the end of 1985, 362 employees participated in the share

75

savings scheme in the Trelleborg Savings Fund and the Trel-

50

leborg General Fund which are Company-linked. During theyear. the value of the funds’ shares increased by 147 and 98per cent, respectively.

At the turn of the year. the Company’s share capitalamounted to SEK 209,514.OOO. At the beginning of 1986, it

25

increased by SEK 6,875.OOO to SEK 216,389,OOO following a 1981 1982 1983 1984 1985 1986

new issue of 275,000 restricted B-shares directed at Munk-sjö AB being part-payment for the acquisition of the assets ofSävsjö Fälgar AB.

At the time of the Stock Exchange introduction in 1963, theCompany’s share capital was Increased by SEK 31,5M to63M by a new 1:1 issue at a price of SEK 140. Subsequently,the following issues were made:

1966 - SEK 2.6M - a directed non-cash issue in respect ofthe acquisition of Ulvex AB.1969 - SEK 26.2M - new issue 2:5 at a price of SEK 100.1976 - SEK 30.6M - new issue 1:3 at a price of SEK 110.1978 - SEK 3.2M - directed non-cash issue to acquireTekntska Gummifabriken Jakobsberg AB.1982 - SEK 42.0M - directed new issue at a price of SEK125.1984-SEK 41.9M - bonus issue1:4.

In 1984, there was also an issue of convertible debentures toemployees of the Swedish part of the Group totalling SEK20M. Conversion into restricted B-shares can be made from1 October 1987 to 31 December 1991. The conversion rateis SEK 60. The debenture loan runs for ten years at a fixedinterest rate of 10 per cent per annum.

At the time of the 1984 bonus issue, there was a 4:1 split.Five new shares, each with a nominal value of SEK 25 werereceived for every old share with a nominal value of SEK 100.Of these, one was in respect of the bonus issue and four theresult of the split. For retrospective comparisons, historicvalues shuld be divided by a factor of 5.

Trelleborg share prices 1981- 1985Continuos line = share prices at the end of each monthBroken line = The “Affarsvarlden general index at the end ofeach month Source Findata

Share prices, Stockholm Stock Exchange*

1981

Low High

9.90 15.80

1982 13.50 24.20

1983 23.20 58.20

1984 47.00 65.00

1985 51.50 130.00

*Calculated on maximum and minimum buying price eachmonth and adjusted for bonus issue and split in 1984.

Datapershare 1981- 1985,with adjustments for issues made

1985 1984 1983 1982 1981

Calculated profit SEK 10.00 6.40 2.75 1.85 0.90Ditto after full 9.70 6.30conversion 9 706.30 - - -Dividend SEK 2.50 1.40 1.40 1 20 1.20Share at end of year 121 50 52 23 14Adjusted shareholders’equity SEK 64.25 50.30 44.95 41.30 34.35Yield % 2.1 2.8 2.7 51 87

24

Price/Earnings ratio 12 8 19 12 15

Share data 10 largest Trelleborg shareholders (April 1986)Share capital 31-12-1985 SEK 209.5MNominal value SEK 25Number of shares 31-12-1985 8,380,560

of which A (10 votes) 1,652,000of which B (1 vote) 6,728,560of which restricted (1,471,120 A+4,815,376 B) 6,286,496of which unrestricted (180,880 A+1,913,184 B) 2,094,064

Number of shares after the new issue directed atMunksjö (275,000 shares) and after full conversion(330,000 shares) 8,988,560

of which A 1,652,000of which B 7,336,560of which restricted 6,894,496of which unrestricted 2,094,064

Number of shareholders 01-04-1986 5,176of which directly registered 3,816of which nominee registered 1,360

Profit per shareafter 50% assumed standard tax SEK 10.00after full tax 13.40after full conversion and 50% tax 9.70after full conversion and full tax 13.00

Adjusted shareholders’ equity per share 64.25Ditto after full conversion 64.10Visible shareholders’ equity per share 64.25Ditto after full conversion 64.10Dividend 1985 1.40Proposed dividend 1986 2.50

Distribution of shareholdings (April 1986)

Number of % of share % ofshares capital votes

Dunker Funds andFoundation 1,741,535 26.78 71.44AB Hevea 2,128,000 25.39 9.154th AP Fund 600,000 7.16 2.58AB Aritmos 500,000 5.97 2.15Almedahl-Dalsjöfors AB 250,006 2.98 1.08Investment AB Cardo 200,009 2.39 0.86Sydfonden 143,506 1.71 0.62Rune Andersson (inclassociated company) 140,500 1.68 0.60Carl BennetInvestment AB Öresund

131,000 1.56 0.56110,000 1.31 0.47

During 1985, Dunker Funds and Foundation exchanged127,500 B-shares for an identical number of A-shares withthe 4th National Swedish Pension Insurance Fund. By doingso they increased their share of votes from 66.5 to 71.4 percent. The shareholdings of Investment AB Skrinet/Herakleswere acquired by AB Hevea.

The Company had a predecessor in AB Velox which began opertation inMalmö in 1896. In the following that company moved to a new factoryin Trelleborg. In 1905, Velox was restructured and a new company estab-lished, Trelleborgs Gummifabriks AB, which changed its name to TrelleborgAB in 1977. shown here are a number of share documents, ranging from thefirst Velox certificate to the presen t standardised VPC certificate.

Holding

1 - 500501 - 5,0005,001 - 50,00050,001 -Swedish nominees

Number ofshareholders

3,542 5.17214 3.14

10 2.3317 72.8633 16.50

% of totalshares

Source and Application of Funds(SEK M)

Group

Funds provided internallyProfit beforeappropriations and taxesDepreciationTaxesDividendsOtherShanges in blocked accountsTranslation differences

1985

+164.2+ 47.9– 15.8– 11.7– 0.7 —+ 0.1– 10.8

StatementParent Company

1984 1981–85 1985 1984 1981–85

+107.1 +362.0 + 84.2 +67.4 +249.8+ 43.5 +264.0 + 21.4 +23.2 +144.7– 4.3 – 35.3 – 3.3 – 0.0 – 5.6– 11.7 – 48.5 – 11.7 –11.7 – 48.5

+ 0.7 — — – 0.1– 0.4 – 0.1 + 0.1 – 0.1 —

— – 10.8 — — —

Total funds provided internally +173.2 +134.2 +532.0 + 90.7 +78.8 +340.3

Funds utilised internallyOperating capital:Change in stock levels + 88.9 + 2.8 +169.5 + 3.4 – 19.8 + 31.9Change in operating receivables + 118.9 + 42.8 +220.0 + 36.2 + 51.5 +189.5Change in operating liabilities – 53.8 – 68.7 –238.3 + 8.7 – 31.7 – 122.1Investments:In fixed assets (net, incl acquisitions) +154.9 + 73.2 +355.9 + 56.6 + 4.3 +137.1In shares/patent rights + 38.1 + 4.2 + 42.5 + 132.2 + 28.1 +170.2

Total funds utilised internally +347.0 + 54.3 + 551.6 + 237.1 +32.4 +406.6

Total internally generated funds –173.8 + 79.9 – 19.6 –146.4 +46.4 – 66.3

Funds provided/utilised externallyIssue of new shares — — + 52.5 — — + 52.5Change in long-term liabilities +113.1 + 0.6 + 35.2 +116.3 –10.0 + 91.2Change in interest-bearingcurrent liabilities +374.7 – 47.0 +393.5 + 337.2 – 50.0 + 348.2Change in long-termreceivables – 7.2 – 8.6 – 7.8 – 30.9 +33.9 – 13.2Change in minority participations + 10.2 – 5.6 + 3.8 — — —

Total funds provided/utilised externally + 490.8 – 60.6 + 477.2 + 422.6 – 26.1 + 478.7

Change in liquid funds andshort-term investment + 317.0 + 19.3 + 457.6 + 276.2 +20.3 + 412.4

26

Profit and Loss Accounts(SEK M)

Group

1985

Parent Company

1985 1984

Operating income and expensesInvoiced sales (Note 1) 2,132.2 1,861.2 1,188.5 1,061.0

Other operating income + 21.7 + 9.6 + 20.7 + 15.3

Operating income 2,153.9 1,870.8 1,209,2 1,076.3

Cost of production,sales and administration – 1,940.9 – 1,691.0 –1,129.3 – 979.1

Operating profit before depreciation + 213,0 + 179.8 + 79,9 + 97.2

Planned depreciation (Note 2) — 47.9 - 43.5 - 21.4 – 23.2

Operating profit after depreciation + 165.1 + 136,3 + 58,5 + 74,0

Financial income and expensesDividends on shares in subsidiaries — — + 6.0 + 0.1

Dividends on other shares + 0,0 + 0.0 + 0.0 —

Interest income + 7 8 . 3 + 54.6 + 7 3 . 2 + 48.8

Interest expenses (Note 3) - 87.3 – 79.9 – 74.0 – 64.2

Currency gain/loss (Note 4) + 11.1 – 3,6 + 8.1 – 3.8

Profit after financial income and expenses +

Extraordinary items (Note 5)Extraordinary income +

Extraordinary expensesGroup contributions

1 6 7 . 2 +

1 3 . 0 +- 1 6 . 0 –

—

107,4 + 71,8

17,0 + 4.617,3 - 0.7

— + 8.5

+ 54.9

+ 24,6— 4.8— 7.3

Profit before appropriations and taxes + 164.2 + 107.1 + 84.2 + 67,4

AppropriationsChange in stock reserve - 24.9 – 41,0 – 28.0 – 30.7

Appropriation to reserve for losses — 10.9 - — —

Appropriation to renewal reserve — 3.9 - 3.3 -

Appropriation to/dissolution of investment reserve — 6.0 + 0.1 – 4.0 —

Transfer to special investment fund — — 4.6 — — 4.2

Transfer from special investment fund + 4.3 + 14.8 + 4.3 + 14,8

Difference between plannedand book depreciation – 31.7 – 50.0 – 27.0 – 30.6

Other appropriations — 5,2 + 0.2 — —

Profit before taxes + 85,9 + 26.6 + 26.2 + 16.7

Taxes (Note 6) — 15.8 – 4,3 – 3.3 —

Minority participations — 0.7 – 1.8 — —

Net profit for the year + 6 9 , 4 + 20.5 + 2 2 . 9 + 16,7

27

Balance Sheets as at 31 December(SEK M)

Group Parent Company

1985 1984 1985 1984

AssetsCurrent assetsCash and bank balanceShort-term investments (Note 7)Bills receivableCustomer receivablesReceivables from subsidiariesPrepaid costs and accrued incomeAdvances to suppliersOther receivablesStock (Note 8)

82.5478.9

6.6439.7

—

22.22.1

51.1543.0

51.0193.4

12.2339.8

—

21.51.8

27.5454.1

28.2471.3

1.5159.0140.4

14.11.6

20.1243.7

29.9193.4

0.8161.3114,7

16.70.76.3

240.3

Total current assets 1,626.1 1,101.3 1,079.9 764.1

Blocked account with the RiksbankSpecial investment fund 0.4 0.5 — 0.1

Fixed assetsShares and participations innon-Group companies (Note 9)Shares in subsidiaries (Note 9)Receivables from subsidiariesOther long-term receivables (Note 10)GoodwillDevelopment expenses brought forwardMachinery and equipment (Note 11)Buildings (Note 11)Land and land improvements (Note 11)Construction in progress

41.1——

19.24.11.2

381.886.511.74.6

3.0——

12.04.5 —3.1

297.440.6

4.99.7 —

36.9210.9

45.613.7

1.2174.7

14.32.3

2.1113.5

22.16.3—

3.1138.2

14.11.9—

Total fixed assets 550.2 375.2 499.6 301.3

Total assets 2,176.7 1,477.0 1,579.5 1,065.5

28

Group Parent Company

1985 1984 1985 1984

Liabilities and shareholders’ equityCurrent liabilities (Note 12)Bills payableAccounts payable to subsidiariesAccounts payable to suppliersAccrued costs and prepaid incomeAccrued taxesAdvances from customersOther current liabilities

14.0 38.8 2.4 3.4— — 76.1 58.8

196.2 175.0 77.5 98.3151.3 114.4 92.5 72.0

11.1 4.8 2.9 0.812.9 16.8 12.4 16.5

549.9 157.0 407.7 93.2

Total current liabilities 935.4 506.8 671.5 343.0

Lung.term liabilities (Note 12)To subsidiaries — — 5.1 8.3Overdraft facilities 92.7 89.3 3.1 —Bond and debenture loans (Note 13) 32.5 35.6 32.5 35.6Provision for pensions (Note 14) 212.1 199.7 164.2 152.9

Other long-term liabilities 237.6 137.2 188.3 80.1

Total long-term liabilities

Untaxed reserves (Note 15)Stock reserveReserve for lossesRenewal reserveAccumulated extra depreciationInvestment fundSpecial investment reserveOther untaxed reserves

574.9

82.410.93.9

146.96.00.45.2

461.8

57.5——

110.9—

4.7—

393.2

69.7—

3.3101.5

4.0——

276.9

41.7——

74.5—

4.3—

Total untaxed reserves 255.7 173.1 178.5 120.5

Minority participations 11.7 1.5 — —

Shareholders’ equityNon-disposable capital (Note 16)Share capital: 209.5 209.5 209.5 209.5

1,652,000 A-shares, par SEK 25, 10 votes each6,728,560 B-shares, par SEK 25, 1 vote eachStatutory reserves 53.9 50.2 42.4 42.4

Total non-disposable capital 263.4 259.7 251.9 251.9

Disposable capital (Note 17)Profit brought forward 66.2 53.6 61.5 56.5

Net profit for the year 69.4 20.5 22.9 16.7

Total disposable capital 135.6 74.1 84.4 73.2

Total shareholders’ equity 399.0 333.8 336.3 325.1

Total liabilities and shareholders’ equity 2,176.7 1,477.0 1,579.5 1,065.5

Contingent liabilities (Note 18) 32.8 115.4 227.2 236.1

Assets pledged (Note 18) 459.7 466.0 311.7 322.4

29

Notes to the financialstatementsAccounting principlesThe Accounts for the Trelleborg Group comprise the ParentCompany and all companies in which Trelleborg AB directlyor indirectly owns more than 50 per cent of the voting rights.

The Accounts have been prepared according to the purch-ase accounting method. This involves setting off sharehold-ers’ equity in acquired companies at the time of acquisitionagainst the book value of the shares. Companies acquiredduring the year are included in the Group’s Profit and LossAccount at values representing the period after the acqui-sition.

From 1985, the Trelleborg Group applies the so-called dailyrate method for translating Balance Sheets and Profit andLoss Accounts of foreign subsidiaries. The effect is that allassets and liabilities of the subsidiaries are translated at therate prevailing on balance sheet date, whereas all items of theprofit and loss accounts are translated at an average rate.The translation differences which arise are the effect of thedifference between average rates and rates prevailing onbalance sheet date of the profit and loss accounts as well asthe fact that net investments are translated at a different rateat the year-end than at the beginning of the year. The trans-lation differences are not shown via the profit and lossaccounts but are directly posted to shareholders’ equity,

Swedish Group companies’ receivables and liabilities in for-eign currencies are translated at rates prevailing on balancesheet date. Where the exchange rate is secured through aforward contract, the rate of the forward contract is used.The Parent Company has borrowed money in foreign curren-cies to balance against exchange differences referring to themain portion of net investments in foreign subsidiaries.Exchange rate differences arising from such loans have beendirectly posted within the Group to shareholders’ equity tothe extent they correspond to a translation difference postedthere during the year in respect of subsidiary companies,Exchange differences relating to the current business oper-ations have been credited/debited to operating profit,whereas exchange differences of a financial character areshown under financial income and expenses.

Receivables are reported in the amounts which are expectedto be realised.

Up to and including 1984, the Annual Reports of foreignsubsidiaries were translated according to the so-calledmonetary/non-monetary method (with stock at rates prevail-ing on balance sheet date). The reason for the change inmethod is that capital invested in the foreign companies isnow mainly found in companies which can be termed inde-pendent companies. Had the daily rate method been applied,the 1984 profit after financial income and expenses wouldhave been SEK 105.0M, ie SEK 2.4M less than by applyingthe monetary/non-monetary method. The difference is duepartly to increased depreciation and partly because trans-lation differences on application of the daily rate method areposted direct to shareholders’ equity. In addition, fixed assetsin 1984 would have been SEK 375.2M, ie SEK 14.8M morethan by applying the previous method. The difference is due

to the fact that the daily rates in most instances are higherthan the equivalent rates prevailing on dates of acquisitionwhich are the result of the large devaluations of the Swedishkrona in recent years.

Comparison between the daily rate method and the mon-etary/non-monetary method (MIM-method)

1985 1984 1984

daily daily rate rate MIM-

SEK M method method method

Profit and Loss AccountInvoiced salesOperating profit before depreciationPlanned depreciationInterest income and expensesProfit after financial income and expensesExtraordinary itemsProfit before appropriations and taxesProfit for the year

Balance SheetOperating assetsBlocked account with the RiksbankFixed assetsBalance sheet total

Current liabilitiesLong-term liabilitiesUntaxed reservesMinority participationsShareholders’ equityBalance sheet total

2,132.2 1,861.2 1,861.2213.0 179.8 179.847.9 45.2 43.5

+ 2.1 – 29.6 – 28.9167.2 105.0 107.4

– 3.0 – 1.8 – 0.3164.2 103.2 107.169.4 16.6 20.5

1,626.1 1,101.3 1,101.30.4 0.5 0.5

550.2 390.0 375.22,176.7 1,491.8 1,477.0

935.4 506.8 506.8574.9 461.8 461.8255.7 175.9 173.111.7 1.5 1.5

399.0 345.8 333.82,176.7 1,491.8 1,477.0

DefinitionsReturn on equity: Computed on the basis of profit after finan-cial income and expenses less taxes in full, ie taxes paid plusdeferred tax liabilities equivalent to 50 per cent of total alloc-ations, divided by average equity plus minority capital and 50per cent of untaxed reserves.

Return on total assets: Computed as operating profit afterplanned depreciation, plus interest and dividend income,divided by average balance sheet total.

Return on capital employed: Computed as operating profitafter planned depreciation plus interest and dividend income,divided by average balance sheet total less non interest-bearing operating liabilities.

Interest cover: Profit after financial income and expenses plusinterest costs, divided by interest costs.

Equity ratio, solvency: Shareholders’ equity plus minorityholdings plus 50 per cent of untaxed reserves expressed as apercentage of the balance sheet total less cash, bankbalances and short-term investments.

Risk capital: Shareholders’ equity plus minority participationsplus untaxed reserves expressed as a percentage of thebalance sheet total less cash, bank balances and short-terminvestments.

Investment in plant: The difference between gross and netvalues consists of assets in companies acquired and assetsdisposed of during the year.

Profit per share: Profit after financial income and expensesless estimated taxes (50 per cent assumed standard tax andfinal tax respectively), divided by the number of shares at theend of the year. Final tax has been calculated as actual taxplus a deferred tax equivalent to 50 per cent of all appropri-ations.

30

Visible equity: Shareholders’ equity plus minority capital anduntaxed reserves less assumed standard tax. Note 3 - Interest expenses

The cost of interest on PRI-pension liabilities in 1985amounted to SEK 21 .OM (20.5) of which SEK 17.6M (1 7.0)was charged against the Parent Company,

Adjusted equity: Visible equity plus hidden reserves, prop-erties and unquoted shares.

Note: The return ratios (return on capital employed andreturn on total capital) have been adjusted partlybecause Goodall Rubber Company has only beenincluded in the Group for two months in 1985, andpartly because the acquisition of the operations ofSävsjö Fälgar AB on 31 December 1985.

Note 4 – Currency gain/loss

Group (SEK M) 1985 1984Referring to loans +11.1 –4.3Referring to translation of balancesheets in foreign subsidiaries — +0.7

When computing ‘Equity ratio, solvency’ and ‘Riskcapital’, the balance sheet total has been reduced byliquid resources in order to offset the variations result-ing from foreign exchange transactions and foreignexchange exposure,

Total +11.1 –3.6

Note 5 – Extraordinary items

SEK M Group ParentCompany

Note 1 – Invoiced salesInvoiced sales for the Group were distributed as follows:

Extraordinary incomeCapital gains:

shares +2.0real estate +1.7other operating assets +12.3 +0.9

Other + 0.7 —Invoiced sales by market (SEK M) 1985 1984Sweden 862.9 916.4Other Nordic countries 241.4 181.7Other European countries 701.5 567.8USA and Canada 203.4 95.1Other markets 123.0 100.2

Total extraordinary income +13.0 +4.6

Extraordinary expensesCost of early retirementsand termination payments – 3.6 –2.5Restricting/discontinuationof operations –11.0 —Disposal of/write-downon fixed assets – 1.4 —Dissolution of previous reserves +1.8

Total 2,132.2 1,861.2

Exports from Sweden amounted to SEK 578.6M (560.7).

The Parent Company’s total invoiced sales amounted to SEK1,188.5M (1,061.0) of which SEK 321.7M (212,4) or 27 percent (20) refers to transactions with other companies in theGroup. Purchases by the Parent Company from subsidiariesin 1985 amounted to SEK 44M (23) which is equal to 8 percent (4) of total purchases.

Total extraordinary expenses –16.0 –0.7

Note 6 – TaxesOf the year’s tax costs, SEK 2.6M represents a tax on profit-sharing.

At the end of 1985, there were in the Group unutilised lossdeductions of approximately SEK 140M. In respect of theGroup’s Swedish operations, unutilised depreciation onstock and appropriations to loss reserves amounted to SEK77M.

Note 2 – DepreciationPlanned depreciation is based on historic values of the fixedassets. The depreciation rates are calculated on estimatedeconomic life. These are 6–33 per cent in respect of machin-ery and equipment and 2–6 per cent in respect of buildings.Goodwill values are written off by 10 per cent. Note 7 Short-term investments

Interest arbitrage dealings totalling SEK 55.3M (45.0) havebeen net accounted for in the balance sheet. Short-terminvestments include SEK 13.2M (refers to the Parent Com-pany) deposited in a blocked liquidity account with the Riks-bank (the funds will be repaid on 30 December 1986) and21,265 shares in Gunnebo AB at a nominal value of SEK0.5M and a book value of SEK 1.8M.

Depreciation (SEK M) Group Parent Company1985 1984 1985 1984

Planned depreciation:Machinery and equipment 44.1 41.5 20.6 22.5Buildings 2.5 0.8 0.3 0.2Write-up on buildings 0.2 0.2 0.2 0.2Development costsbrought forward 0.4 0.3 0.3 0.3Goodwill 0.7 0.7 — —

Note 8 – StockTotal planneddepreciation 47.9 43.5 21.4 23.2

Stock is shown at the lower of acquisition cost in accordancewith the so-called first in/first out principle and actual value.Adequate depreciation for obsolescence has been made.

Difference betweenplanned depreciationand book depreciation 31.7 50.0 27.0 30.6

Book depreciation 79.6 93.5 48.4 53.8SEK M Group Parent Company

In book depreciation for 1985 is included SEK 43M(14.8)which refers to depreciation against a special investmentreserve.

1985 1984 1985 1984Raw materials 77.2 66.2 34.0 34.6Work in progress 101.0 101.4 72.3 66.3Finished products 364.8 286.5 137.4 139.4

Total 543.0 454.1 243.7 240.3

31

Note 9 – Shares and participationsThe change in book value of the shares owned by the ParentCompany in subsidiaries is shown below (SEK M):

Value as at 1 January 1985 113.5Plus:

Shares in acquired subsidiaries + 58,4New issues in subsidiaries + 55,8

Less:Sale of shares in subsidiaries – 16.8

Value as at 31 December 1985 210.9

In order to better reflect the true value of subsidiary com-panies a redistribution of book values has been made in theform of total appreciation of SEK 20.0M and depreciation bythe same amount,

No. of Par Bookshares value value

SEK T SEK T

Shares in subsidiariesSwedenIndustrial companies

Atlas Gummi AB 1,000Eskilstuna Gummi AB 1,250Sigma AB 15,000Swedish Tyre-Tube AB (91 %) 18,200Transportbandsvulk i Skåne AB (51 %) 1,530Trelleborg i Örebro AB 4,000Trellfax AB (97%) 19,402Velox AB 1,000AB Värnamo Gummifabrik 160,000

100125

1,5001,820

153400

1,9401,000

16,000

119501

3,9721,3651,600

8801,120

—27,408

Shares owned indirectlyUlvex AB 150,000 7,500 —Tekniska GummifabrikenJakobsberg AB 2,000 200 —AB Teguflex 500 50 —Trelleborgdäck AB 1,000 100 —Trelleborg Pty Ltd, Australia 100,000 AUD 100 —

Other shares and participationsSweden

AB ConvectusAB LandskronafinansAB Malmfältens FinansNyckeln Holding ABSwedish Rainwear ABHB Svenska Dagbladet & CoTP-Data AB (50%)AB Trelleborgs FFTrelleborgs Stuveri ABTrellex Orebed AB (50%)

150,00028,81610,0008,250

10040

5002,500

1802,000

15,0002,8821,0001,650

10—50

25018

200

29,9501,2261,0003,383

10—50

50327

200

Other countriesTrelleborg BTR Pty Ltd,Australia (50%) 10,000 AUD 10 59Trelleborg JM Inc,Philippines (30%)Michel Baule, France

— PHP — 1041 FRF — —

Trelleborg Iran JS Co (50%) 40 IR 4,000 —Trelleborg SA de CV,Mexico (49%) 147 MXP 147 28Interspiro GmbH, WestGermany (40%) — DEM — 394

Total other shares and participations 36,934

In addition, subsidiaries’ own miscellaneous shares in outsidecompanies at a book value of SEK 4.2M (of which GoodallMexicana SA SEK 3.3 M).

Other companiesAB AkvarexRubber Trading ABAB TegeaTrelleborg International ABAB TrellflexTrelleborg i Gävle ABAB TrelleborgfinansTrelleborg Fond ABAB NovibraAB Saldo

50040,00012,000

500500500

1,0001,250

500500

504,0001,200

505050

100125

5050

503,5001,200

505050

1001255050

Note 10 – Other long-term receivablesThese include funds deposited in a blocked liquidity accountwith the Riksbank which will be repaid on 31 March 1988 bySEK 14.9M (6.8) referring to the Group and SEK 13.7 (6.3)referring to the Parent Company.

Note 11 – Fixed assetsOther countriesManufacturing companies

Bakker Rubberfabriek BV,the Netherlands 750 NLG 750 17,221Goodall Rubber Co, USA (73%) 464,624 USD 530 25,784Spondon Plastics Ltd, UK 500,000 GBP 500 3,385Trelleborg Atlas A/S,Norway (92%) 61,116 NOK 15,279 11,693Trelleborg BV, the Netherlands 14,500 NLG 14,500 53,973Trelleborg GummiwerkeGmbH, West Germany — DEM 7,000 19,873

Sales companiesTrelleborg Australia Pty LtdTrelleborg SA-NV, BelgiumTrelleborg Ltd, CanadaTrelleborg Rubber Ltd, CyprusTrelleborg Gummi A/S, DenmarkOy Trelleborg AB, FinlandTrelleborg SA, FranceCleton & Meijer, the NetherlandsTrelleborg Rubber(Nederland) BVTrelleborg Srl, ItalyTrelleborg Gummi AG,SwitzerlandTrelleborg SA, SpainTrelleborg Ltd, UKTrelleborg Inc, USATrelleborg Gummi GmbH, Austria

1,000 AUD 1 73,000 BEC5,000 CAD

10,000 CYP70 DDK

2,000 FIM90,000 FRF

600 NLG

3,0005010

1,500300

9,000600

200—

1442,000

4053,000

15,162

SEK M Group Parent Company1985 1984 1985 1984

Machinery and equipmentAcquisition costs 849.5 667.3 373.6 320.9Accumulated planneddepreciation –467.7 –369.9 –198.9 –182.7

Planned residual value 381.8 297.4 174.7 138.2Accumulated extra depreciation –146.4 –110.4 –101.5 – 74.5

Book value 235.4 187.0 73.2 63.7

Fire insurance value 1,300.0 1,493.0

BuildingsAcquisition costs 137.4 57.4 17.6 16.8Accumulated planneddepreciation – 51.4 – 17.6 – 3.8 – 3.4Unutilised accumulatedwrite-ups + 0.5 + 0.8 + 0.5 + 0.7

1,000 NLG6,000 ITL

1,000680

1,000796

Planned residual value 86.5 40.6 14.3 14.1Accumulated extra depreciation – 0.5 – 0.5 — —

50 CHF32,000 ESP

100,000 GBP100,100 USD

— ATS

5032,000

1001,0013,000

66—

10,0004,000

—

Book value 86.0 40.1 14.3 14.1

Taxable value 9.3 8.0Fire insurance value 562.0 487.0– of which rented buildings 520.0 487.0

Total shares in subsidiaries 210,899

32

Land and improvementsAcquisition cost 15.2 5.7 2.7 2.3Accumulated planneddepreciation – 3.9 – 1.3 – 0.8 – 0.8Unutilised accumulatedwrite-ups + 0.4 + 0.5 + 0.4 + 0.4

Planned residual value 11.7 4.9 2.3 1.9Accumulated extra depreciation — — — —

Note 15 – Untaxed reservesChanges in the value of the Group’s untaxed reserves areshown below:

SEK M Balance Dissolutions/ Trans. Balancebrought Approps. as lation carriedforward per P&L differ. forward

1/1/85 accounts ence 31/12/85Book value 11.7 4.9 2.3 1.9

Taxable value 1.9 148 Stock reserve 57.5 +24.9 — 82.4Reserve for losses — +10.9 — 10.9Accumulated extradepreciation 110.9 +31.7 +4.3 146.9General investment reserve — + 6.0 — 6.0Renewal reserve — + 3.9 — 3.9Special investmen reserve 4,7 – 4.3 — 0.4Other untaxed reserves 0.0 + 5,2 — 5.2

The total taxable value of the Group’s properties in Swedenamounted to SEK 21.4M.

A number of Group companies rent buildings from SPP. Atotal rental of SEK 39,3M was paid to SPP in 1985 of whichSEK 32.8M was charged to the Parent Company. The aver-age remaining rental period is slightly more than 12 years,

Total untaxedreserves 173.1 +78.3 +4.3 255,7

Note 12 – Group liabilities Note 16 – Non-disposable capitalSEK M Total Of which

interest. bearing SEK M Group ParentCompany

1985 1984 1985 1984 Value as at 1 January 1985 259.7 251,9Allocated to statutory reserves + 0.2 —Cornpanies sold - 0.2 —Translation difference + 3,7

Value as at 31 December 1985 263.4 251.9

Current liabilities 935.4 506.8 445.9 101.5Long-term liabilities 574.9 461.8 535.7 438.1

1,510.3 968.6 981.6 539.6

Less:Cash and bank balanceand short-term investment –561.4 –244.4 –561.4 –244.4 Note 17 – Disposable capitalTotal liabilities incl PRl-pension Iiabilities, net 948.9 724.2 420.2 295.2 SEK M Group Parent

Company1986 amortisation of long-term liabilities, SEK 29.7M (23.5)are shown under short-term liabilities. At the end of 1985,granted but unutilised credits amounted to approximatelySEK 250M.

Value as at 1 January 1985 74,1 73,2Less:

Dividends paid during 1985Dissolution of restricted

– 11,7 –11.7

equity in companies sold + 0,2 —Allocated to statutory reserves – 0,2

Plus:Net profit, 1985 + 69.4 +22.9Translation difference + 3.8 —

Note 13 - Bonds and debenture loans

Original Remaining Interest Term Amort.amount year-end rate 1986SEK M SEK M % SEK M

Value as at 31 December 1985 135.6 84.4

An insignificant portion of the Group’s disposable capital issubject to dividend tax, which is payable where dividends arereceived by the Parent Company.

Bond loan,1967 25 2.2 7 1967–87 —Bond loan, 1973 20 11.4 71/4 1973–93 1.1Convertibledebentures, 1984*) 20 20.0 10 1984–94 —

Note 18 – Contingent liabilities and*) Conversion into shares maybe exercised from 1 October 1987 up to andincluding 31 December 1991 at a conversion rate which is currently SEK60. assets pledged

Note 14 – Provision for pensions SEK M Group Parent Company

1985 1984 1985 1984SEK M Group Parent Company

1985 1984 1985 1984Contingent liabilitiesDiscounted bills 1.6 2.9 — —

Pension commitments 2.4 — — —Guarantees and othercontingent liabilities 28.8 112.5 227.2 236.1

PRI pensions 188.0 177.6 157.9 147.4Other pensions 24.1 22.1 6.3 5.5

Total 212.1 199.7 164.2 152.9 Total 32.8 115.4 227.2 236.1of which for subsidiaries — — 205.8 219.2

Assets pledgedProperty mortgages 42.3 16.6 2.1 1.7Leasehold site mortgages 2.6 2.6 0.7 0.7Corporate mortgages 342.5 366.8 245.0 245.0Bank accounts 17.3 12,6 8.9 10.0Short-term investments 55.0 65.0 55.0 65.0Title retained inmachinery and stock — 2.4

Total 459.7 466,0 311.7 322.4

33

The Auditors’ Report for this Annual Report and the consol-idated financial statements was submitted on 4 April 1986.

Reidar Peters Thomas Thiel

Note 19 – Average number ofemployees by municipality and bycountry

1985 Group ParentCompany

Auditors’ ReportIn SwedenAlvestaEskilstunaGotlandGothenburgHelsingborgMalmöSjöboStockholmSundsvallTrelleborgVärnamoYstadÖrebroMunicipalities withless than 20 employees

39 —23 —

136 —4228 —2197

15121

2,133358 —129132

42 The Annual Report and the Accounts for 1985 have beenprepared in accordance with the Swedish Companies Act.

We recommend that the Annual General Meeting21971321

2,133

1292

—

—

—

approve the Profit and Loss Accounts and BalanceSheets for the Parent Company and the Groupallocate earnings as proposed in the Board of Director’sReportdischarge the Board and the Managing Director from

49 49 liability for 1985.

Trelleborg 4 April 1986

Reidar Peters Thomas ThielAuthorised Publ. Acc. Authorised Publ. Acc.

Total, in Sweden 3,359 2,507

Outside SwedenDenmarkFranceThe NetherlandsNorwayGreat BritainUSAWest GermanyCountries with lessthan 20 employees

2671

——

382 —148159154231 —

——

54 —

Total, outside Sweden 1,225 —

Total 4,584 2,507

The average number of employees has been calculatedaccording to recommendations made by the NationalAccountancy Board.

Note 20 – Salaries and other remun-eration, excluding social costs

SEK M 1985 1984Parent CompanySwedish subsidiariesForeign subsidiaries:

DenmarkFranceThe NetherlandsNorwayGreat BritainUSAWest GermanyOther countries

240.2 237.283.2 104.8

3.8 3.99.1 10.5

36.1 21.623.3 5.010.0 8.013.0 8.428.1 29.0

8.6 7.8

Total 455.4 436.2

Trelleborg, March 1985

Ernst HerslowChairman of the Board

Bertil Bertilsson Hans Cavalli-BjörkmanJan Odhnoff Börje KarlssonIngvar Wenehed Göran LindersLennart Nilsson Gustaf DouglasArne Nilsson Karl-Axel Lindskog

Rune AnderssonManaging Director

34

Board of DirectorsErnst Herslow. Chairman.Born 1919. Elected 1965.Chairman: Gorthon Invest AB, Höganäs AB,lndustri AB Euroc and Investment AB Öresund.Board Member: Skandinaviska Enskilda BankenShareholding: Nil

Hans Cavalli-BjörkmanBorn 1928. Elected 1970Managing Director of Skandinaviska Enskilda Banken.Chairman: Landskrona Finans AB, Skoogs AB, ÅkermansVerkstads AB, Skånes Handelskammare and others.Board Member: Kanthal AB, Incentive AB, Saab-Scania ABand others.Shareholding: 10.

Born 1933 Elected 1982.

Sundblad and Karl-Axel Lindskog.

Managing Director of Rottne lndustri AB.

Odhnoff. At the back: Göran Linders, Gustaf Douglas, Arne Nilsson, Göran

Board Member: Scandust AB and Skandinaviska Enskilda

Third row: Yngve Söderberg, Jarl Grönberg, Lennart Nilsson and Jan

Banken, Växjö.ShareholdIng: 2,500

Bertil Bertilson. Deputy Chairman.Born 1926. Elected 1976.Managing Director of Gorthon Invest AB.Förvaltnings AB HD, Förvaltnings AB HGI andHenry Dunkers Förvaltnings AB.Chairman: Gorthons Rederi AB.Board Member: Henry and Gerda Dunker’s Foundation andDonation Fund No 2.Holding: Shares and convertible bonds equal to 2.100shares.

Jan OdhnoffBorn 1931. Elected 1977.Director General of the Swedish Centre for Working Life.Arbetslivscentrum.Holding: Convertible bonds equal to 400 shares.

Börje Karlsson Rune Andersson

Born 1944. Elected 1983.Managing Director of Trelleborg AB.Chairman: AB Convectus.Board Member: Gorthon Invest AB, lndustri AB Kuben andAB Verdexa.

Herslow. Second row: Ingvar Wenehed, Börje Karlsson and Bertil Bertilsson.

Holding: Shares (in own name and in associated company)

Front row, from left: Hans Cavelli-Björkman, Rune Andersson and Ernst

plus convertible bonds equal to 198,800 shares.

lngvar WenehedBorn 1930. Elected 1983.Managing Director of AB Aritmos.Chairman: Industri AB Kuben.Board Member: AB Bahco, Eldon AB, AB Sture Ljungdahl,Sandblom & Stohne AB and others.Shareholding: Nil.

Göran LindersBorn 1933. Elected 1982.Partner of the Mannheimer & Zetterlöf firm of solicitors,Malmö.Board Member: Brio AB, Gorthon Invest AB,Wilh. Sonesson AB, Th Strålfors AB and others.Holding: Convertible bonds equal to 2,000 shares.

Lennart NilssonBorn 1941. Elected 1985.Managing Director of Wilh Sonesson AB.Board Member: Henry and Gerda Dunker’s Foundation andDonation Fund No 2, AB IRO, Investment AB Nils Dacke, ABLeo and others.Shareholding: Nil.

Gustaf DouglasBorn 1938. Elected 1985.Active partner of Förvaltnings AB Wasatornet.Chairman: AB Hevea and Forsinvest AB.Deputy Chairman: Boliden AB.Board Member: Stora Kopparbergs Bergslags AB,Almedahl-Dalsjöfors AB, AB Piren and others.Shareholding: Nil.

Arne NilssonBorn 1933. Elected 1981.Employee Representative. Elected by the Trelleborg Groupmembers of SIF (Swedish Industrial Salaried Employees’Association). Chairman of the SIF branch at Trelleborg AB.Holding: Shares and convertible bonds equal to 2,025shares.

Karl-Axel LindskogBorn 1928. Elected 1979.Employee Representative. Elected by the Trelleborg Groupmembers of the Swedish Factory Workers’ Union.Chairman of the Union local branch at Trelleborg AB.Deputy Chairman of Trelleborg Municipal Council.Holding: Shares and convertible bonds equal to 1,000shares.

Deputy DirectorsGöran SundbladBorn 1921. Elected 1983.Managing Director of Almedahl-Dalsjöfors AB.Board Member: AB Aritmos, Nordiska Kompaniet,AB Nordviror, AB Thorsman & Co, Rederi AB Transatlanticand Svenska Handelsbanken.Holding: Convertible bonds equal to 24,000 shares.

Jarl GrönbergBorn 1931. Elected 1984.Employee Representative. Elected by the Trelleborg Groupmembers of SALF (Swedish Foremen’s and Supervisors’Union). Chairman of the SALF branch at Trelleborg AB.Shareholding: Nil.

Yngve SöderbergBorn 1944. Elected 1984.Employee Representative. Elected by the Trelleborg Groupmembers of the Swedish Factory Workers’ Union. Chairmanof the local Union branch at AB Värnamo Gummifabrik.Shareholding: Nil.

AuditorsReidar PetersBorn 1939. Authorised Public Accountant, Peters & CoRevisionsbyrå AB, Malmö. Appointed 1977.

Thomas ThielBorn 1947. Authorised Public Accountant, BohlinsRevisionsbyrå AB, Stockholm.Appointed Deputy Auditor 1983. Auditor 1985.

Deputy AuditorsHans PihlBorn 1951. Authorised Public Accountant, Peters & CoRevisionsbyrå AB, Malmö. Appointed 1984.

Sten HumbleBorn 1946. Authorised Public Accountant, BohlinsRevisionsbyrå AB, Lund. Appointed 1985.

36

Group ManagementRune AnderssonBorn 1944. Employed 1983. Group Managing Director.Manager, Business Sector: Special Products.Shareholding: Shares (in own name and in associated com-pany) plus convertible bonds equal to 198,800 shares.

Bo ForsénBorn 1948. Employed 1974. Deputy Managing Director.Manager, Business Sector: Technical Rubber.Holding: Shares and convertible bonds equal to 55,000shares.

Fredrik ArpBorn 1953. Employed 1985. Manager, Business Sector:Tyres.Shareholding: Convertible bonds equal to 8,333 shares.

Kjell NilssonBorn 1948. Employed 1985. Manager, Business Sector:Industrial Supplies.Holding: Shares and convertible bonds equal to 22,167shares.

Thomas OldérBorn 1947. Employed 1969. Manager, Business Sector:Trellex.Holding: Convertible bonds equal to 12,500 shares.

Åkerman is absent from the photograph).

Claes SvenssonBorn 1949. Employed 1970. Managing Director of Goodall

Andersson, Bo Jacobsson, Nils Levin, Fredrik Arp and Kjell Nilsson (Ivar

Rubber Company, USA.Holding: 2,000 shares.

Carl AspegrenBorn 1931. Employed 1958. Information & PR, Law.Holding: Shares and convertible bonds equal to 2,520shares.

Lars-Göran BarckBorn 1942. Employed 1984. Personnel.Holding: Shares and convertible bonds equal to 23,500shares.

lngemar HobrohBorn 1943. Employed 1969. Materials, Engineering/PlantServices.Holding: Shares (in own name and in associated organisa-tion) plus convertible bonds equal to 1,520 shares.

Bo JacobssonBorn 1951. Employed 1975. Administration.Holding: Convertible bonds equal to 2,500 shares.

Nils LevinBorn 1928. Employed 1954. Laboratory.Holding: Shares (in own and spouse’s name) plus convertiblebonds equal to 385 shares.

Ulf SvenssonBorn 1941. Employed 1965. Purchasing.Holding: Convertible bonds equal to 4,000 shares.

lvar ÅkermanBorn Employed 1984. Finance, taxes.

Seated from left: Claes Svensson, Thomas Oldér, Carl Aspegren and Lars-

Holding: Shares and convertible bonds equal to 1,900

Göran Barck. Standing: Ingemar Hobroh, Ulf Svensson, Bo Forsén, Rune

shares.

World Rubber ReportBy Robert Grace, Editor, European Rubber Journal.

LONDON - The structure of the world’s rubber productmanufacturing industry has changed dramatically in the pastyear or so. Some firms have succumbed to financial press-ures while others, keen to tap new market opportunities,have taken over their struggling neighbours or forged newtechnical and commercial alliances.

These changes have served to underscore the increasing“internationalisation” of the rubber industry, once consideredby so many to be a relatively provincial business. Andnowhere can this trend be seen more clearly than in theactions of Trelleborg AB which, after first reordering itselfinternally, has embarked enthusiastically on an expansionarycourse designed to give it a greater role in the global rubberindustry.

It is because of Trelleborg’s clearly stated intention to stepbeyond the borders of the progressive – yet insulated, andsomewhat isolated – Scandinavian rubber industry, that Ihave been invited by your company’s directors to outlinebriefly the fast and furious changes that are remoulding theface of the industry abroad. There is far too little space tomention all the significant companies and events, but thefollowing hopefully will provide a framework to help you toassess the implications of Trelleborg’s activities in the contextof the broader, international scene.

But first, to help put things in perspective, it is worth notingjust how vital the vehicle manufacturing industry is to theworld’s rubber business. The most recent estimates by theLondon-based International Rubber Study Group show thatabout 58 percent of all rubber consumed by non-CentrallyPlanned Economy countries in 1982 went into the productionof tyres. In addition, industry observers reckon that as muchas 20 percent of all non-tyre rubber products ends up invehicles. That means that little more than 20 percent of theworld’s rubber is used to produce non-automotive products!

With that information in hand, it is easy to see why so muchattention is paid to the tyre/automotive sectors.

The tyre industry’s consolidationcontinuesFor our purposes, key deals earlier this decade by two ofJapan’s "Big Three" tyre makers provide a useful startingpoint for this investigation of the rubber industry’s increasedinternationalisation. Bridgestone Corp. – the largest rubbercompany in Japan, and the sixth largest in the world, basedon its 1984 group sales of $3,375 M – made a monumentalleap West in early 1982 with its $52 M purchase of Firestone

38

Tire & Rubber Co.’s radial truck tyre factory in Nashville,

Tennessee. The deal made Bridgestone only the secondforeign tyre maker – after France’s Michelin – to manufactureits products on American soil. About 18 months later Japan’sthird-ranked tyre maker, Sumitomo Rubber Industries Ltd,burst into the European manufacturing arena with theacquisition of Dunlop Holdings’ loss-making car and trucktyre operations in England and West Germany. SRI eventuallytook over Dunlop’s bankrupt French tyre interests as well.

These moves proved to be only a prelude to the more wide-spread retrenchment that was to follow, on both sides of theAtlantic Ocean, in response to rising raw materials costs,large-scale overcapacity, shrinking profit margins and fiercecompetition from lower-priced competitors in Eastern Europeand Asia. Though almost all sectors of the rubber productindustry felt the squeeze, the most visible by far has been thetyre industry.

Giant restructuringAnalysts and industry observers long have been forecasting asevere shake-out of the global car and truck tyre business.Some even predict that by the end of this decade, more than75 percent of the world’s tyre-making capacity maybe in thehands of only half a dozen companies. Proponents of thistheory foresee short-lived independence for the tyre opera-tions of some smaller firms, such as Holland’s Vredestein NVand Switzerland’s Maloya AG. Thus far, the pundits are beingproved right. In just the past few years, the tyre industry’sstructural changes have been profound:

•

•

•

•

•

•

Pirelli SpA, acquired the brand name of Italy’s only otherdomestically-based tyre maker, the financially flounderingCeat SpA;

Michelin boosted its shareholding in France’s strugglingKléber-Colombes SA, to make it nearly a wholly ownedsubsidiary;

Sweden’s Gislaved AB acquired Norway’s Viking Dekk A/Sto complement its existing Gislaved Däck AB operations;

Last June, West Germany’ leading tyre maker, ContinentalGummi-Werke AG, purchased controlling interest in thetyre division of Austria’s Semperit AG;

The following month in the US, Dunlop Holdings distanceditself further from the tyre manufacturing mainstream byselling its North American unit, Dunlop Tire Corp., for morethan $200 M to a group of investors that included localmanagement and – significantly – Sumitomo RubberIndustries;

In late January of this year, B.F. Goodrich Co. and UniroyalInc. – two of America’s "Big Five" tyre makers, along withGoodyear, Firestone and GenCorp Inc.´s General Tire divi-sion – revealed that they intend to merge their tyre opera-tions into a 50/50 joint venture company called Uniroyal-Goodrich Tire Co. That marriage, in a single stroke, willcreate the second-largest tyre maker in the United States,after Goodyear;

• And most recently, and closest to home, is of courseTrelleborg’s own proposed joint venture with Sweden’sViskafors AB, primarily for the manufacture of specialitytyres such as those used on vehicles employed in agricul-ture, forestry, gardening and general industry,

Add to these major deals a host of cutbacks, closures andrecently signed technical licensing agreements (particularlybetween Western firms and parties in India, China and South-east Asia), and the global tyre industry assumes a profilevastly different from that which it sported at the turn of thisdecade.

Goodyear stiIl leadingDespite all the changes, one thing has remained constant:Goodyear Tire & Rubber Co.’s ranking, in turnover terms, asboth the world’s largest tyre manufacturer and its top rubbercompany overall. Based on sales of tyres alone in 1984 – themost recent year for which figures for all firms are available –Goodyear was clearly No. 1, with turnover of about $6,250 M;its closest competitor, Groupe Michelin, registered sales ofroughly $5,000 M. The other global tyre contenders laggedwell behind, with Firestone claiming third place ($2,640 M),Bridgestone fourth ($2,460 M) and Pirelli fifth ($1 ,470 M).

Michelin – tyres onlyEarly estimates of the 1985 rankings indicate the first fourpositions are likely to remain unchanged, although Michelin,the only major tyre maker that has not diversified into otherproduct areas, has proclaimed its intention to overtakeGoodyear, which reaped about 40 percent of its nearly$9,600 M group sales last year from non-tyre activities.However, the formation of the Uniroyal-Goodrich Tire Co.,due to be completed by this July, will give birth to a $2,000 Mtyre manufacturer; this new firm, despite operating almostexclusively in the North American market, will thus be bigenough to knock Pirelli out of its No. 5 position worldwide.Additionally, Sumitomo Rubber (with its European Dunloptyre interests) is likely to end up neck and neck with Pirelli in1985, each with tyre sales of roughly $1,500 M.

It is obvious that the long-expected shake-out of the world’styre business is in full swing, and one can be sure that furtherchanges and consolidations will occur in the coming months.Nevertheless, it is not only the tyre part of the rubber industrythat has grabbed the headlines in the past year or so.

A British Giant – BTR!Perhaps the industry’s most spectacular deal concluded inMarch 1985, with the London-based BTR plc successfullycompleting its hostile takeover of the UK’s Dunlop Holdingsplc. Shorn of its loss-making European tyre operations, andreeling under the strain of more than £500 M ($725 M) indebts, the once-mighty Dunlop found itself vulnerable to thepredatory instincts of one of Britain’s most profitable con-glomerates. After much public posturing by both sides, BTR

39

finally increased its offer to £101 M (plus the acquisition ofgroup’s hefty debts), and Dunlop’s shareholders consentedto the takeover, creating in the process one of the world’slargest rubber product manufacturing concerns.

Although founded in England’s Midlands in 1924 as a tyre-making subsidiary to America’s B.F. Goodrich Co., the then-British Tyre & Rubber Co. Ltd bailed out of the unprofitabletyre business 35 years later, shortened its name and beganto diversify. By the end of 1984, the acquisition-mindedgroup had swelled to 60,000 employees, was involved innearly everything from ladies tights to insurance, and postedannual sales of just under £3,500 M ($5,075 M). And that wasbefore it bought Dunlop!

Although already a major, non-tyre rubber processor beforethe Dunlop acquisition last spring, the firm catapulted itselfinto the worldwide rubber industry’s upper echelons withcompletion of that much-publicised deal. By adding Dunlop’s31,000 employees and 1984 sales of more than £1 ,500 M toits ever-expanding portfolio, the company may leap all theway to No. 2 in the world’s ranking of rubber companies in1985 possibly displacing Michelin from that spot. (It shouldbe noted, however, that, even after the Dunlop purchase,BTR’s rubber-related activities account for no more than 40percent of the group’s total turnover.)

The Dunlop brand name lives onAnd so the great, but once-threatened Dunlop brand namelives on – albeit in the hands of several different owners:Sumitomo makes Dunlop-brand car and truck tyres inEurope and Japan; the Melbourne-based Pacific Dunlop Ltd,previously a subsidiary of the UK group, now is entirely locallyowned, and controls the brand name in the Australasiaregion; Dunlop Tire Corp. has retained the famous name onits products in North America; and BTR now marketsworldwide an extensive range of Dunlop-brand sports, foot-wear, offshore, aerospace and industrial rubber goods.

Elsewhere in the world, the structural changes to some of therubber industry’s other major companies have been no lessprofound. Uniroyal Inc., the world’s seventh-largest rubbercompany in 1984, is a case in point.

In response to a hostile bid from American takeover specialistCarl Icahn, the firm orchestrated a leveraged buy-out byinvestors and management last summer, which kept lcahnout of the board room and transformed the $2,100 M tyres,chemical and engineered products concern into essentially aprivately held company.

The new UniroyalThe heavy debts associated with the buy-out, however, haveprompted a major restructuring by Uniroyal, only part ofwhich is represented by the tyre venture with B.F. Goodrich.In addition, the firm has declared its intention to sell itsmassive Uniroyal Chemical Co. subsidiary - as a single unit –by the middle of this year; in April, Uniroyal was still reviewingoffers by various, unnamed foreign and domestic bidders.

Separately, the company also has got out of the hose busi-ness – selling its automotive, hydraulic and industrial hoseoperations in June 1984 to Parker Hannifin Corp.; its fluid-transfer hose unit last summer to Dana Corp. (both purch-asers are US-based); and its 50 percent stake in Italy’s Uni-royal Manuli SpA in January to Manuli, its former partner inthe venture, Uniroyal also sold its US rubber conveyor beltinginterests last year to BBA Group plc, the British brake liningsand belting concern.

So, if all goes as planned, by July this year, Uniroyal Inc. willhave successfully transformed itself into a relatively debtfreeengineered and power transmission products company thatowns a half interest in a major tyre operation.

Bayer-subsidiary to PirelliIn Europe, meanwhile, the most significant deal in 1986 hasbeen Pirelli’s takeover on 1 January of Bayer AG’s loss-making Metzeler Kautschuk GmbH subsidiary. The DM 100M ($40 M) deal is expected to supplement and strengthenthe Italian giant’s diversified products operations, as MetzelerKautschuk manufactures a specialised range of rubber-to-metal bonded and technical rubber articles, as well as bicycleand motorcycle tyres and sports equipment. Metzeler, withover 6,500 employees working in six countries, has investedheavily in new production technology in recent years, andsaid last October that it expected its 1985 sales to rise bysome 14 percent to about DM 800 M ($300 M).

By all accounts, the past year or two have been extremelyactive ones; and have served to reshape the industry drama-tically. Accompanying these basic structural changes havebeen other, perhaps less noticeable, but no less significantdevelopments.

Foremost among these has been the emergence of the Paci-fic Rim, or Asia-Oceania, region of the world as a formidablerubber processing area. Although Japan and Australia havelong been major players in the world’s rubber productsmanufacturing business, they have become even more prom-inent lately. And the area in between those two islands, betterknown for its natural-rubber growing prowess, has sharplyincreased its own rubber consumption.

This latter statement is backed up by the most recent figuresreleased by the International Institute of Synthetic RubberProducers, These revealed that last year, for the first time, theAsia-Oceania region surpassed Western Europe as a rubberconsumer, and that by 1990 it also will overtake North Ameri-ca, in terms of tonnage used (by an estimated 3.19 M tonnesto North America’s 3.07 M tonnes).

A number of Western firms have spurred rubber productmanufacture in the Far East by shifting production of some oftheir Iabour-intensive, lower-technology products, such asfootwear, gloves, condoms and the like, to countries such asMalaysia, Taiwan and Thailand, where Iabour costs can be afraction of what they would be at home. In addition, Malaysia,the world’s biggest NR-producing country, is making a con-certed effort to build a strong rubber product manufacturingbase, as a means of adding value to one of its prime naturalresources.

40

Goodyear investing in the Far EastMeanwhile, recent actions by Goodyear, in particular, haveunderscored the importance Western firms attach to theregion. Already this year Goodyear has stated its intention toconstruct a $29 M technical centre near Tokyo (to supple-ment its existing laboratories in Luxembourg and Akron,Ohio), and has officially opened a $1 M natural rubber lab inSingapore. These moves follow closely on the heels of the USfirm’s agreement last year to establish a joint venture withJapan’s Toyo Giant Tyre Co. Ltd, for the manufacture ofGoodyear-brand earthmover tyres in that country, and of asimilar deal in Taiwan with Formosan Rubber Group Inc., forthe production of V-belts. Goodyear also held talks last yearaimed at starting tyre production in South Korea, although noagreement has yet been reached.

Goodyear, though the biggest and perhaps the best-known,is hardly alone among Western rubber companies in its ef-forts to tap the fast-growing Far Eastern market. Others areconcentrating their overseas efforts on cracking the vastpotential of the Chinese market.

The end result of all this activity really can be summed up inone, basic revelation: The rubber industry of the future will beglobal in scope, and dominated by those companies whichare outward-looking and progressive. This doesn’t mean thatsmall firms must grow into giants in order to compete profit-ably. It does mean, however, that, in addition to investing inthe available new technology, companies increasingly willneed to specialise in order to prosper, Computerisation andautomation will increase, staffing levels will decrease, andproduction of value-added, high-technology products will be-come the order of the day for most major rubber processors.The coming together of the rubber and plastics industries,spurred in large part by the development of more cross-overmaterials such as thermoplastic elastomers, will eventuallylead to the recognition of one, all-encompassing polymerindustry,

The future will be rough on some firms, rewarding to others.The fate of companies such as Trelleborg depends uponmanagement responsiveness now.

Ranking by worldwide sales

1984 1983

Millions of dollars Sales Profit Sales Profit

1 Goodyear, US2 Michelin, France3 Firestone, US4 Pirelli, Switzerland5 B.F. Goodrich, US6 Bridgestone, Japan7 GenCorp, US8 Uniroyal, US9 Dunlop Holdings, UK

10 Dunlop Olympic, Australia11 Continental, W. Germany12 Gates, US13 Yokohama, Japan14 Freudenberg, W. Germany15 Sumitomo, Japan

10,241 411 9,736 3065,076 –257 5,390 –2864,001 102 3,669 1113,498 72 3,730 N.A.3,438 61 3,192 183,375 65 3,208 772,722 7 2,517 652,122 77 1,936 672,113 –130 2,430 -2521,363 56 1,264 311,241 14 1,326 161,190 N.A. 1,100 N.A.1,180 4 1,089 – 11.043 N.A. 930 N.A. 978 7 945 – 2

A brief biography of Robert Grace.Born 20 May, 1957, in Cleveland, Ohio. Graduated in June1979 from Ohio University, Joined Crain CommunicationsInc. in its Akron, Ohio, office in March 1980, as AssistantEditor on Rubber& Plastics News. Transferred to London inOctober 1981, to serve both as Deputy Editor on Crain’snewly acquired monthly magazine, European Rubber Jour-nal, and as European Correspondent for RPN in Akron.Promoted to Editor of ERJ in May 1982. Grace also presentlyserves as Managing Editor of a new quarterly publication,Urethanes Technology, launched by Crain CommunicationsLtd, London, in March 1984.

Note: Figures are based on total company operations, notonly rubber products. These, however, are estimated tomake for at least 50 per cent of earnings.Reference: European Rubber Journal, February 1986.

41

Companies abroadTrelleborg Australia Pty Ltd29 Cowper street, ParramattaNSW 2150, AustraliaTel Int+61-2633 20 45Tlx lnt+71-74 220

Trelleborg BTR Pty LtdSydney:Box 117. Auburn NSW 2144.Australia265 Parramatta RoadTel lnt+61-2 647 28 22Tlx lnt+71-22 992Fax lnt+2 648 50 20Perth:Box 283, Kewdale WA 61055 Reggio Road. AustraliaTel lnt+61-9 458 30 79Tlx lnt+71-93 990

Trelleborg SA-NVBvd Auguste Reyers 207-2091040 Brussels, BelgiumTel lnt +32-2 735 81 97Tlx lnt+46-23313MD: Stefan Johansson

42

Trelleborg Ltd2600 John Street, MarkhamOntario L3R 3W3, CanadaTel lnt+ 1-416 475 5000Tlx lnt+21-069 66 719MD: Harry Mills

Trelleborg Rubber LtdP.O. Box 750. Lamaca, CyprusLion House, GeorghiouAradhpioti Street, Flat No. 4Tel lnt+357-41 28336Tlx lnt+605-3368Fax lnt+357-283 37MD: Thomas Ek

Värnamo Gummi ApSNiels Hemmingsens gade 9,DK-1153 Copenhagen, DenmarkTel lnt+45-1 11 4406MD: Gert Ehrhorn

Trelleborg Gummi A/SGunnar Clausens vej 26DK-8260 Viby J, DenmarkTel lnt+45-1 628 54 44

Trelleborg Gummi A/SPostboks 119, DK-3000Helsingör, DenmarkSundtoldvej 8Tel lnt+45-221 1011Tlx lnt+55-411 32MD: Bo C Persson

Oy Trelleborg AbDrumsövägen 54 B,00200 Helsinki 20, FinlandTel lnt+358-0692 65 00Tlx lnt+57-125 332MD: Paul Nikku

Oy Värnamo Gummi AbDrumsövägen 54 B,00200 Helsinki 20, FinlandTel lnt+358-0692 65 00Tlx lnt+57-125 332MD: Hannes Heimonen

Trelleborg SABP 57, F-936 02 Aulnay-Sous-Bois,France 50. Rue Henri BecquerelTel lnt+33-1 8662291Tix lnt+42-212328Fax lnt +33-1 48693321MD: Olof Dahlquist

Augers SADelivery address.133 Ave F RooseveltF-691 50 Decines. FranceTel lnt+33-7 880 27 77Tlx lnt+42-340 295Office:5 Rue E Pottier, BP 6081,F-696 04 VilleurbanneTel lnt+33-7 880 22 54Tlx lnt+42-340 295MD: Christian Giraud

Cofic SA6, Bvd des Chutes-LavieF-l 30 13 Marseille, FranceTel lnt+33-91 666892Tlx lnt+42-440 768MD: Martin Serpaggi

Sico SA2, Chemin Montlaisir,F-441 00 Nantes, FranceTel lnt+33-40 46 99 41MD: Jacques Launeu

Trelleborg BVPostbus 33. NL-9600 AAHoogerand, The NetherlandsFoxham 57Tel lnt+31-5980 159 11Tlx lnt+44-530 55MD: Stefan Johansson

Trelleborg Rubber (Nederland) BVPostbus 159. NL 96OO-ADVlaardingen, The NetherlandsTel lnt+31-1034 55 66Tlx lnt+44-21218MD. Peter Jongejans

Kon Bakker Rubberfabriek BVPostbus 7. NL-2980 AARidderkerk, The NetherlandsKerkweg 1 BTel lnt+31-1804 22 122Tlx lnt+44-202 17MD: Allan Markestein

Cleton & MeijerPostbus 54, NL 3130 ADVlaardingen The NetherlandsVan Beethovensingel 130- 132Tel lnt+31-1034 59 22Tlx lnt+44-23132MD: Peter Jongejans

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Spruit Transmissies BVDe Punt 10, NL-1721 BZBroek op Langedijk, The NetherlandsTel lnt+31-2260 65 00MD: Jan Spruit

Trelleborg Iran Co290 Sommayeh AvenueTehran 15996, IranTel Int+98-83 44 71-3Tlx lnt+88-212030, 222281

Trelleborg SrlVia Reiss Romuli 122/4,101 48 Torino, ItalyTel lnt+39-11 220 16 66Tlx lnt+43-224095MD: Kjell Larsson

Trelleborg SA de CVAv Homero 1425-1005Col Los Morales, Delegation Miguel Hidalgo11510 Mexico D. F., MexicoTel lnt+52-5395 45 15Tlx lnt+22-177 65 83

Trelleborg Atlas A/SPostboks 14, Leirdal,N-1008 Oslo 10, NorwayProf Birkelandsvei 36 DTel lnt+47-2 32 20 90Tlx lnt+56-719 83Fax lnt+47-2 16 12 94MD: Oddvar Bredde

Trelleborg Atlas A/SSiva, N-2200 Kongsvinger,NorwayTel int+47-66 154 55Fax lnt+47-66 192 93Loc Mgr: Arnfinn Ruud

Trelleborg Atlas A/SPostboks 1880,N-8010 Bodin/Bodö, NorwayTel lnt+47-81 232 82Loc Mgr: Reidar Rikardsen

Trelleborg Atlas A/SPostboks 2010, N-9405Kanebogen/Harstad, NorwayTel lnt+47-82 66 890Loc Mgr: Jarl Hugo Jensen

Trelleborg Atlas A/SÖvre Flatåsvej 2B, N-7080Heimdal/Trondheim, NorwayTel lnt+47-7 98 58 50Loc Mgr: Knut Menne

Trelleborg Atlas A/SLiamyrene 6, N-5090 Nyborg iÅsane/Bergen, NorwayTel lnt+47-5 12 32 00

Trelleborg Atlas A/SPostboks 262, N-4000Stavanger, NorwayTel lnt+47-452 05 40Loc Mgr: Inge Berge

Atlas International A/SPostboks 14, LeirdalN-1008 Oslo 10, NorwayTel lnt+47-232 2090Tlx lnt+56-71 983MD: Oddvar Bredde

Trelleborg Vest A/SPostboks 100, N-5363Ågotnes, NorwayTel lnt+47-533 47 82Tlx lnt+56-42216

Trelleborg Gummi AGPostfach 619, CH-4000Basel, SwitzerlandGartenstr. 120Tel lnt + 41-61 22 27 55Tlx lnt + 45-96 28 66Fax lnt+41-61 23 92 12MD: Kjell Larsson

Trelleborg SAGeneral Peron, 32 (22 G)28020 Madrid, SpainTel lnt+34-455 16 11Tlx lnt+52-42811MD: Rafael Jiménez-Caceres

A 1 Transmission LtdUnit B 2, Stag Industrial Estate,Endemere Rd, Coventry CV6 5PY,Great BritainTel lnt+44-203 66 73 73Tlx lnt+51-312 532MD: Thomas MankertLoc Mgr: P Snazell

Norsalta LtdAtlas House, Beecham Close,Aldridge, Walsall West Mid-lands WS9 8UZ, Great BritainTel lnt+44-922 55 334Tlx lnt+51-337 110MD: Derek Baker

Spondon Plastics Ltdc/o Courtaulds Acetate LtdPO Box 5, Spondonj

Derby DE2 7BP, Great BritainTel lnt+44-332 66 14 22Tlx lnt+51-37221MD: Clive Thawley

Trelleborg Ltd90 Somers Road, Rugby,Warwickshire CV22 7ED,Great BritainLoc Mgr: Knut HammerTel lnt+44-788 627 11

Värnamo Rubber Co (UK) Ltd23 Old Park Road, Hitchin,Herts.SG5 2JS,Great BritainTel lnt+44-462 565 78Tlx lnt+51-826 430Fax lnt+44-462 360 69MD: Lars Nordlander

Trelleborg Inc30700 Solon IndustrialParkway, Solon, Ohio44139, USATel Int+ 1-2162488600Tlx lnt+23-433 2046MD: Thomas Oldér

Goodall Rubber CoPO Box 8237, Trenton, NewJersey 08650, USA572 Whitehead RoadTel Int+ 1-609 587 4000Tlx lnt+23-23 84 3463Fax Int+1-6095870628MD: Claes Svensson

Trelleborg Gummiwerke GmbH2350 Neumünster 1,Postfach 2509, West GermanyIndustristr, Wasbek/NeumünsterTel lnt+49-4321 6060Tlx lnt+41-299 531MD: Wolfgang Ehrhardt

Atlas IndustriegummiDeutschland GmbHRudolf Diesel Str 34, D-5350Euskirchen, West GermanyTel lnt+49-2251 6944Tlx lnt+41-886 91 24MD: Winsrid Busczkiewicz

Trelleborg Gummi GmbHZeleborgasse 24, A-1120Wien, AustriaTel lnt+43-222 83 65 08Tlx lnt+47-31 868MD: Hans Brunner

Tlx lnt+51-311 144MD: Thomas Mankert

44

Swedish ManufacturingCompaniesTrelleborg AB231 81 TrelleborgNygatan 102Tel lnt+46-410-51 000Tlx lnt+54-32950Fax lnt+46-410-198 69MD: Rune Andersson

Trelleborg AB SjöbofabrikenBox 57,27500 SjöboSolgatan 2Tel lnt+46-416-120 80Tlx lnt+54-33722Loc Mgr: Bengt Andersson

Trelleborg AB YstadfabrikenBox 24, 271 00 YstadDragongatan 18Tel lnt+46-411-139 20Tlx lnt+54-33369Loc Mgr: Bertil Hellberg

Sigma ABStålgatan 2, 70358 ÖrebroTel lnt+46-19-10 47 00Tlx lnt+54-73468MD: Gunnar Söderberg

Ulvex ABEkbacksvägen 10,161 30 BrommaTel lnt+46-8-26 25 60Tlx lnt+54-19365MD: Bengt Lizell

Tekniska GummifabrikenJakobsberg ABMD: Bengt Lizell

Sales:Stålgatan 2, 703 58 ÖrebroTel lnt+46-19-10 47 00Tlx lnt+54-73468

Manufacture:Ronevägen 1, 620 12 HemseTel lnt+46-498-845 10Tlx lnt+54-4167Lingvide, 620 11 HavdhemTel lnt+46-498-811 11

AB Värnamo GummifabrikBox 1004, 331 01 VärnamoTel lnt+46-370-481 00Tlx lnt+54-70063Fax lnt+46-370-482 48MD: Lars Nordlander

Sävsjö FäIgar AB576 00 SävsjöTel lnt+46-382-116 95Tlx lnt+54-35288MD: Karl-Erik Nilsson

Swedish Tyre Tube ABBox 931,25109 HelsingborgTel lnt+46-42-12 61 00MD: Per-lngvar Jönsson

Swedish Sales CompaniesTransportbandsvulki Skåne AB (Trellex)Bryggerig 5, 267 00 BjuvTel lnt+46-42-829 00MD: Göran Sjöberg

Eskilstuna Gummi ABBox 1108, 631 80 EskilstunaNystrandsg 29Tel lnt+46-16-12 50 90Tlx lnt+54-46125MD: Folke Swensson

Trelleborg ABBox 5025, 791 05 FalunVallavägen 14Tel lnt+46-23-195 20Loc Mgr: Gunnar Larsson

Trelleborg ABBox 702, 801 28 GävleFemte Tvärg 2Tel lnt+46-26-10 00 45Loc Mgr: Johan Unneberg

Trelleborg ABBox 14069, 400 20 GothenburgEbbe Liberathsg 30Tel lnt+46-31-20 06 10Tlx lnt+54-28206Loc Mgr: Claes Sjölin

Trelleborg AB (Trellex)Box 14069, 400 20 GothenburgVarbergsg 2–4Tel lnt+46-31-20 00 80Fax lnt +46-31-40 83 64Loc Mgr: S-Å Thörnkrantz

Trelleborg ABHerkulesv 10, 552 40 JönköpingTel lnt+46-36-11 82 20Loc Mgr:

Trelleborg AB (Trellex)Granitv 8, 552 67 JönköpingTel lnt+46-36-16 92 30Tlx lnt+54-70012Loc Mgr: Oscar Dahlbäck

Trelleborg ABTorsåsgatan 36, 392 39 KalmarTel lnt+46-480-203 01Loc Mgr: Mikael Blent

Trelleborg ABSpärrgatan 6, 653 41 KarlstadTel lnt+46-54-15 67 20Loc Mgr: Tore Dahlman

Transportbandsvulk iKarlstad (Trellex)Kvällsvindsg 3652 21 KarlstadTel lnt+46-54-11 58 25Loc Mgr: Bengt Lundkvist

Trelleborg ABMidgårdsv 26, 951 52 LuleåTel lnt+46-920-132 50Loc Mgr: Lars Eriksson

Trelleborg ABVinkelgatan 3, 211 24 MalmöTel lnt+46-40-93 53 40Loc Mgr: Gert Lindal

Eskilstuna Gummi ABBox 21, 611 22 NyköpingHemgårdsvägen 6Tel lnt+46-155-681 00, 681 70Loc Mgr: Hans Öhman

Trelleborg ABBox 190, 931 22 SkellefteåNordlanderg 15Tel lnt+46-910-171 45Loc Mgr: Sven Norvall

Trelleborg ABGesällg 1, 541 50 SkövdeTel lnt+46-500-712 20Loc Mgr: Bengt Ekström

Trelleborg ABBox 11032, 161 11 BrommaKarlsbodavägen 13–15Tel lnt+46-8-98 01 00, 98 82 35Loc Mgr: Lennart Hedman

Trelleborg ABBox 6028, 850 06 SundsvallBultgatan 7Tel lnt+46-60-15 03 30Loc Mgr: Alf Larsson

Trelleborg AB (Tyres)Box 817, 851 23 SundsvallKontorsvägen 9Tel Int+46-60-12 34 40

Sundsvall HydraulikBox 3039, 850 03 SundsvallKontorsvägen 9Tel lnt+46-60-11 73 50,15 26 59Loc Mgr: Carl-Åke Dahl

45

Trelleborg ABBergaholmsv 1, 151 42 SödertäljeTel lnt+46-755-870 30Loc Mgr: Curt Brandström

Trelleborg ABBox 10033, 901 10 UmeåMätarvägen 5Tel lnt+46-90-14-21 25, 14 21 26Loc Mgr: Lars A Ericson

Trelleborg ABBjörkg 4, 753 28 UppsalaTel lnt+46-18-11 12 75Loc Mgr: Thomas Lundquist

Tore Roos MaskinBox 1010, 721 26 VästeråsArnbomsgatan 10Tel lnt+46-21-13 67 33,13 67 88Loc Mgr: Ulf Löfgren

Trelleborg ABViktor Rydbergsgatan 40,352 46 VäxjöTel lnt+46-470-177 10Loc Mgr: Ulf Lundin

Trelleborg i Örebro ABBox 320, 701 04 ÖrebroRadiatorvägen 7Tel lnt+46-19-11 91 95, 10 58 20 (Tyres)MD: Jan Berggren

Other companies inSwedenTrelleborg International AB23181 TrelleborgTel lnt+46-410-51 000MD: Sture Svennberg

Trellex Orebed AB23181 TrelleborgTel lnt+46-410-51 000MD: Bertil Mattsson

TP-Data AB23181 TrelleborgTel lnt+46-410-150 00MD: Ingemar Gerbro

Associated SwedishcompaniesAB ConvectusStora Södergatan 3,222 23 LundTel lnt+46-460-15 80 00Fax lnt+46-46 15 82 15MD: Bo Lundquist

Hollingworth MaskinBox 320, 701 04 ÖrebroRadiatorvägen 7Tel lnt+46-19-11 94 30Loc Mgr: Jan Berggren

46

Group highlights 1976– 1985(SEK M unless otherwise stated)

1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 0 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5From income statementsInvoiced sales

of which abroadOperating profit before depr

as % of invoiced salesPlanned depreciationFinancial income and expensesExtraordinary itemsProfit before allocationsand taxesProfit per share after 50%assumed standard taxFrom balance sheetsCurrent assetsFixed assetsCurrent liabilitiesLong-term liabilitiesUntaxed reservesShareholders’ equityBalance-sheet total

952% 44

38.64.1

39.9–26.8–15.3

98546

62.66.3

43.8– 3 2 1– 9.8

97054

21.72.2

42.5–35.5+66.1

1,03951

83.58,0

39.9–25.9– 3.5

1,33749

114.48.6

43,9–35.4– 4.0

1,44350

117.08.1

46,9–54.8+ 8.8

1,62052

152.99.4

50.2–71.3–11.8

1,702 1,861 2,13252 51 59

145.7 179.8 213.08.6 9.7 10.0

47.5 43.5 47.9–52.3 – 28,9 + 2,1+ 1.1 – 0.3– 3,0

–43.4 –23.1 + 9.8 +14.2 +31.1 +24.1 +19.6 +47.0 +107.1 +164.2

SEK Neg Neg Neg 1.05 2.10 0.90 1.85 2,75 6,40 10.00

547409226395131204956

657433271538

84197

1,090

626366243469

55225992

665367239505

56232

1,032

777386304540

74239

1,163

863413375570

87238

1,276

991423487536

89296

1,414

1,036 1,101 1,626333 375 550485 507 935461 462 575

93 173 256325 334 399

1,369 1,477 2,177

From statements of changesFunds provided internallyFunds utilised internallyFunds generated internally

–16.4 – 5.8 + 48,8 +49.2 + 69,5 +59,6 + 57,0 +108,0 +134.2 +173.2+12.1 +154.8 –101.8 +94.2 +124.5 +94.7 +131.7 – 76.2 + 54.3 +347,0+28,5 –160.6 +150.6 –45.0 – 55,0 –35,1 – 74,7 +184.2 + 79,9 –173.8

Funds provided/utilised externally +47,9 +164.5 – 85,3 +29.9 + 49.1 +59.8 + 94.6 –107.5 – 60.6 +490.8Change in liquid funds +19.4 + 3.9 + 65.3 –15.1 – 5,9 +24.7 + 19.9 + 76.7 + 19.3 +317.0

Key indicatorsReturn on equity % NegReturn on assets % 0,4Liquidity % 2.4Equity ratio % 29,9Interest coverage % NegOperating capital as % of turnover 41,0

Neg2.42.4

23.10,2

45.4

IVegNeg2,6

29.1Neg41.1

4.25.52.8

28.31.3

41,5

7,9 1.47,9 7.02,6 2,3

26.7 25.11.4 1.4

38.1 38,9

8.59.02,0

27.41,3

38.9

11.08.62.1

32.91,7

35.2

15.712,42.2

34.22,3

31,3

23.313.7

1.733.4

2.933.0

55.04,584

465106455

21195

42.92..50²)

47

Other informationInvestment in plant, netNumber of employees’)

Sales per employee SEK TFixed capital per employee SEK TSalaries

as % of turnoverSocial costs

as % of salariesDividend (Parent Co.) per share SEK

40.86,491

14661

29030

10335.5

6.–

64,86,072

16268

30131

12842.5

—

–20,24,968

19570

29330

12141,3

—

43.04,781

21770

29428

12442.2

—

59,45,301

25269

35827

15342.7

6.–

84.05,424

26674

39327

17544.5

6 . -

51.35,169

31378

41225

16740.5

6.–

–5.24,680

36469

42525

17741.6

7.–

59.74,466

41780

43623

18843.11.40

1) Previous to 1978, average no. employed;1978 and onward, average man-years.

2) Proposed.

Summary diagram

Industrial Supplies/

Other

Technical Rubber 26%

Sales per marketDuring 1985, sales abroad Increased from 51 to 59 per cent

Trading 11%

6%

Trellex 22%

of Group turnover. The Swedish domestic market’s share

Special Products

Industrial Supplies/

reduced from 49 to 41 per cent. Major changes will take

9%

Tyres 12%

Products 14%

place in 1986 as a result of a number of company acquis-itions. Sales abroad are expected to increase from 59 tonearer 70 per cent of total invoicing. Sweden’s share con-tinues to decrease to approximately 30 percent. The remainder of Europe is expected to equal that figure, while theUnited States and Canada Increase to approximately 25 percent

Sales per Business Sector

USA,

Other

Sweden

During 1985, Trellex’s share of Group turnover Increased

Canada 9%

markets 6%

41%

from 16 to 22 per cent, mainly due to the acquisition of Atlas

Other European

Other Nordic countries 11%

A/S Den Norske Remfabrik (now Trelleborg Atlas A/S). Spe-

countries 33%

cial Products decreased from 15 to 9 per cent after the saleof Ing. Torsten Ullman AB and Värnamo Isolerduk AB. Theturnover for November-December 1985 of Goodall RubberCompany is included in “Others”. Goodall’s share of Groupturnover is expected to increaseto 15-20 percent in 1986.

Sales per customer categoryThe engineering Industry’s share has gradually grown from

Salaries

5424

5169

4680

4466

4584

over 30 to close to 45 per cent of Group turnover. Compared

and social

568 579 602 624

650

to other companies, Trelleborg depends very little on the

costs,

1981 1982 1983 1984 1985

automotive industry Less than 5 per cent of Group turnover

SEK M

is in this sector. Supplies to the mining, steel, quarrying andconstruction lndustries account for approximately 30 percent of the Group’s total sales, while ‘Others’ (agriculture,forestry, Government and local authority, etc) account forapproximately 25 per cent.

48

Number of employees

Others (agriculture,

Engineering

The diagram reflects the average number of employees

forestry, Government

industry

according to the National Accountancy Board’s recom-

and local authority,

mendations. In companies acquired and sold during 1985,

etc)

the number of employees is shown relating to the date

Mining, steel,

from/to the acquisition/sale. At the turn of the year 1985/86,

quarrying and

there were approximately 900 employees in the newly-

construction

acquired companies. In the sold companies there were, at

industries

the time of sale, 300 employees.

24 Return, %

Return on equity

14

Profit, SEK per share

After

The return on shareholders’ equity increased by 7.6 percen-

12

final tax

tage points to 23.3 per cent during 1965. The relatively low

10

actual tax contributed to the high return. Return on capital

8

employed increased by 1.6 percentage points to 18.6 per

6

cent. The effect of the 1986 forecast is that the Group’s long-

4

After 50% assumed

term target of at least 20 percent return on capital employed

2

standard tax

can be exceeded.

1981 1982 1983 1984 1985

Assets, risk capital and liquid resources, SEK M

25.1 27.4

32.9

34.2

33.4

At the end of the year, risk capital in relation to total capital

1981 1982 1983 1984 1985

less liquid funds amounted to 41.2 percent, the same as inthe previous year. The balance sheet total increased by SEK700 M, primarily due to an increase in liquid funds and assetsof companies acquired during the year.

Profit per share

20 (after tax)

In 1965, profit per share after 50 per cent standard taxincreased by 56 per cent to SEK 10 and after full tax by 79

16

Return on capital

Return on assets

per cent to SEK 13.40. The actual tax remained low afterapropriations to untaxed reserves and utilisation of taxable

12

employed (before tax)

(before tax)

loss deductions.

8

Equity/assets ratio

4

During 1985, the Group’s equity/assets ratio reduced by 0.6

1981 1982 1983 1984 1985

percentage points to 33.4 per cent, a temporary decrease as

Assets 1276

1414 1370 1477

2177

a result of the acquisition of Goodall Rubber Company. The

Risk capital

331

391

423

508

666

Group’s present profitability level means that the equity/

Liquid 129

148

225 244 561

assets ratio will improve gradually, not including possible

resources

future acquisitions.