Operator: We will hand the conference over to CEO, Peter Nilsson, and CFO, Fredrik Nilsson. Please go ahead.
Peter Nilsson: Thank you. And Peter Nilsson speaking. And as already stated, I'm joined here on our quarter 2 call for 2026 by Fredrik Nilsson, who is our Group CFO; and also in the room here and able to support us is also Christofer Sjögren, our Head of Investor Relations. So presentation of our Q2 for '26. As usual, using the presentation, which you can find on our web page. And then quickly turning us to this presentation, turning to Page 2, agenda slide. Normal setup for us in Trelleborg, starting with some general comments and highlights from the quarter, then also some comments on the business areas individually, our 3 business areas. And then also — then Fredrik will jump in and guide us through the financials more in detail and then finishing off with a summary from me and also some comments on the outlook for the running quarter and then finishing off with the Q&A session. So as usual, turning to Page 3. Heading for our report this time, strong growth and record high margin. Sales ended up a little bit north of SEK 9 billion, increase of 7%, and this is the highest sales we have had for a single quarter up to date. Organic sales, fairly strong for us at 8%. M&A, adding another 1 percentage point to sales and then currency headwind still of 2%. EBITA up at SEK 1,761 million which is then, let's say, yes, notably higher than last year, is also then corresponding to a margin of 19.2%, which is both in terms of absolute EBIT figure and also in terms of margin, the highest we have had for a single quarter so far. Still some negative currency translation effects on— [Technical difficulties — call briefly interrupted and restarted from beginning]
Peter Nilsson: Yes. So sorry for this, all of us, we were not aware that we were out of the call, and we just pick it up. So we do — we start off the full call. So welcome all of you to this Q2 presentation of Trelleborg in 2026. I'm Peter Nilsson speaking, CEO of Trelleborg, and joined here on the call is Fredrik Nilsson, our Group CFO; and also supporting us on the call is Christofer Sjögren, our Head of Investor Relations. As usual, when we present our quarterly results, we're going to use a slide deck, which has been on our web page for some time or for a few hours. So that is what I'm going to refer to throughout the call. And using that, turning then to Page #2, agenda. Page #2, please. So Page #2, agenda. We're talking about the highlights, and then commenting on the business areas and commenting on the financials, Fredrik going to guide us through the financial part of the slide deck and then finishing off with a summary and some comments on the outlook for the running quarter and then finishing off with the Q&A as usual. So then turning to Page #3. Heading for our report this time, strong growth and record high margin. Coming sales in the quarter, ending up a little bit north of SEK 9 billion, which is an increase of 7% compared to a year ago, which is also to be noted, the highest sales we have had to date for a single quarter in Trelleborg. Organic sales in the quarter ending up at a high 8%, M&A adding another 1% and then currency bringing us down with 2 percentage points. So that is the kind of the sales development. And if you look at the results, EBITA ending up at SEK 1,761 million, which is corresponding to a margin of 19.2%. And both of these — both EBITA and the margin is also the highest to date for a single quarter for Trelleborg. We have still some negative currency translation effects on the EBITA, which is bringing that down by SEK 24 million going down, but nevertheless negative. Earnings per share, increasing more than the EBITA, benefiting from improved financial net and actually increasing in the quarter by 18%, of course, also supported by the share buybacks, which I will comment on also a little bit later. Items affecting comparability linked to restructuring and linked to integration of M&A of some SEK 67 million. Cash flow, solid cash flow, good cash flow, a bit north of SEK 1.2 billion, which is up by some 20% compared to a year ago. Good management of working capital in a growing environment. And I mean, on a rolling 12 basis, we keep the operating cash flow — cash conversion above 90%. Share buybacks continue at the same pace as been commented before, a little bit south of SEK 500 million in the quarter. And also in the quarter, we announced an acquisition of a company called Gomet, an Italian company — Italian-based company, focusing on the aftermarket of niche automotive sealing products called boots, which is overall — our position within boots is strong globally, and this is kind of adding capabilities and adding a product range more focused on the aftermarket. So a very good supplementary acquisition to us, which we're going to benefit from in this niche application and this kind of what we call business unit within Trelleborg. Turning to Page 4. Commenting a little bit more in detail on the sales development in the quarter. We have, let's say, fairly solid organic growth in all main geographical markets. Europe growing by 6%, which is quite substantially higher than a year ago. Americas and Asia, both of them close to or even slightly higher than 10%. Good development in U.S. and Asia, we noted satisfaction as well. We are behind this 10% growth. We have good growth figures, both in India — in all main markets in Asia, India, China, Japan and Korea. Overall, summing up on 8% organic. So good organic sales development in the quarter, which is fairly equally split globally as well. Page 5. On the agenda slide, commenting on the business areas, quickly turning to Page 6 and commenting on Industrial Solutions, a solid organic growth, organic sales up by 4% and M&A adding another 1%. And behind this is still a little bit lower project deliveries in the quarter, which we have announced before, and we keep to that guidance that we — it was a little bit lower in the quarter, and we do expect that to pick up more here in the second part of this year. We also noted satisfaction that — Construction Industry sales is actually showing some improvements. It's been a fairly bad market for quite some time. And although running substantially below the peak a few years ago, we noted satisfaction that we see the first signs of an improvement. Also good performance within Aerospace within Industrial. We have an Aerospace exposure within Industrial Solutions, although the biggest aerospace exposure within Sealing Solutions, but we also noted satisfaction that I'll get back to that later. It's developing very nice in Sealing Solutions and developing also nice within Industrial Solutions. Overall, this kind of boils down to an improvement — a slight improvement, must say, in EBITA and margin, owing to higher sales volume and operating efficiency. And behind this figure is actually slightly better as we see it because also with this mix that we have mixed development within the quarter, we have had a slightly negative mix on the sales development here. So we are, let's say, happy with the development in Industrial Solutions in the quarter. Also here, of course, this acquisition of Gomet is kicking in when that being fully integrated, this Gomet acquisition, which I already commented on. Turning to Page 7. On Trelleborg Medical Solutions, stable organic growth. We are growing by 2%. Some mixed, let's say, sales development with a good development in Europe and North America, while Asia was temporarily somewhat lower. Life Science segment, a smaller part of Medical Solutions, but a focused area for us, continue to develop nicely and developing in a very robust way. Slight improvement, basically on par with last year for EBITA, benefiting from the slightly higher sales, but well managed and good development overall. And we have a slight downturn, and that is mainly a mix effect, but no big things here, stable performance and solid performance for Medical Solutions. Turning to Page 8 and commenting on Trelleborg Sealing Solutions. Yes, we say very strong sales growth and also, let's say, with a nice uptick also in the EBITA. Good development in most segments within Sealing Solutions, good development in Industrials generally with especially good performance in Europe and Asia. Automotive actually growing very nicely for us in the quarter. We are benefiting from our global presence and global balance within this segment and of course, also, as most of you are aware, good development in truck and buses and also a recovery in the aftermarket sales where we've been suffering a little bit in the last few quarters, but that bounced back in this quarter. So good development overall for us within automotive. Aerospace, developing very good growth on a good — on a global team, which is also creating good benefits for us in the quarter. So overall, a very good development in Sealing Solutions, which is then, let's say, delivering very good results. We were good — very good development EBITA and good margin development, good performance overall, also creating a solid foundation for at least for the rest of the year. Turning to Page 9. A few comments on the sustainability before entering into the financials, continue to bring down our CO2 emissions within the group, down by 19% year-on-year, solid development. Of course, as it gets lower, it gets more challenging to deliver it further. But nevertheless, it is a high priority also going forward, and we are going to continue to improve, but although maybe not with this we have seen in this quarter. Same — Page 10, same applies here. We have also another KPI on the next page, Page 10 is then also a share of electricity, which is also a good development here, where we see that we are more or less now up to 100% of all electricity used is coming from renewable or fossil-free electricity. So — but as we go close to 100%, then of course, we cannot go above 100%. So you should not expect too big improvements here. We're going to make sure that we keep it on this level and continue to deliver good results also in these aspects. Turning to Page 11, the agenda slide and financials. Turning over to Fredrik, who is then starting on Page 12.
Fredrik Nilsson: Thank you, Peter. Starting then on Page 12, looking at the sales development. We have reported 7% increased sales in the quarter from SEK 8.551 billion to SEK 9.161 billion, which is the highest sales for a quarter. If we look on the right side of the slide, you will see an organic sales growth of 8% in the quarter with growth in all 3 business areas. And then we have 2% negative from currency in the quarter and M&A added 1% growth in the quarter. Moving on to Page 13. Here you can see in the second quarter, we achieved 9% sales growth at constant FX, which is above, you can say, the sales growth target we have over a business cycle. And as you can see here on the chart, that it's quite some time ago since we were above that target. So it's nice to see that we are hitting that level. Moving on to Page 14. Looking at the quarterly sales for the rolling 12 months for continuing operations. You can see here on the rolling 12 that we reached SEK 34.7 billion in the quarter. Moving on to Page 15, zooming in on the EBITA and the EBITA margin. If we then start with EBITA, excluding items affecting comparability, we have a nice increase of 11% to SEK 1.761 billion. And in the quarter, as Peter mentioned, we have minus SEK 24 million in negative translation effects. If we're then looking on the margin side, you can see a nice increase from 18.6% to 19.2%, and this was the highest margin that we have had for a quarter. And the margin improvement was due, of course, to the good organic sales growth, but also continued operational improvements. Moving on to Page 16. Looking at the EBITA and the EBITA margin on rolling 12 months. You can see an EBITA of SEK 6.430 billion. And then we had a margin of 18.5% on a rolling 12-month basis. It's an increase of 3% of the EBITA over the last 12 months, but you need to have in mind that we have had a significant negative translation impact during the last 12 months. Moving on to some details in the profit and loss statement. Looking into the items affecting comparability, we have minus SEK 67 million in the quarter, and that was entirely relating to restructuring projects. Looking at the financial income and expenses, you can see that it was lowering from SEK 125 million negative to minus SEK 109 million, so a nice improvement. And the tax rate for the quarter at 25%, which is also in line with the earlier communicated guidelines. Moving on to Page 18, looking at the earnings per share. And if you're looking at the earnings per share, excluding items affecting comparability, a good improvement of SEK 4.31 up to SEK 5.07, which was an increase by 18%. And that was, of course, due to the higher EBITA, improved financial net and the share buybacks. And then if we include items affecting comparability, it was an improvement from SEK 4.03 to SEK 4.85. Moving on to next page, Page 19. Looking at the cash flow, an improvement of 22% in the quarter from SEK 1 billion to SEK 1.217 billion. And then you can see here that the CapEx level is coming down. So there is a nice improvement year-over-year from the net CapEx. And then you can see an increase on the working capital side. And that is, of course, partly related to that, you see the good organic sales growth. We are tying up a little bit more in accounts receivables. And we have also temporarily built up some strategic inventory of some important raw materials to secure that we can supply with a strong organic growth. Moving on to Page 20. Looking at the cash flow conversion, very good cash flow conversion continue. As you can see here, a year ago, we had 87%, and now we are ending the quarter with 96% cash conversion over the last 12 months. Moving on to Page 21, the gearing and the leverage development. We're ending the quarter with a net of SEK 10.031 billion, and that's an increase compared to prior quarter, but please have in mind that we paid out our dividend in late April. We have also done share buybacks of SEK 458 million in the quarter. So then zooming in on the ratios, you can see on the slide, net debt over equity, 27%, and net debt over EBITDA has gone up to SEK 1.3 billion. In other words, our balance sheet remains strong. Page 22, looking at the return on capital employed. You can see here a year ago, we're at 11.6%. Now we're at 12.6%. So you can see that the trend from the third quarter in 2025 continue. And the main reason here is the higher profitability that is improving our return on capital employed. Moving on to Page 23, financial guidelines for the full year. It's unchanged compared to what you saw end of first quarter. But looking into the details here, CapEx, SEK 1.450 billion. Restructuring costs, we expect that the year will end around SEK 375 million; amortization of intangible assets, SEK 650 million; and the underlying tax rate should stay at current level at 25%. By that, I would like to hand back the microphone to Peter.
Peter Nilsson: Thank you. So turning to Page 24, back to the agenda slide and going in for summary and some comments on the running — on the outlook for the running quarter. Turning to Page 25. Overall, we see an improved demand in a lot of our end markets and basically struggle to see areas where we see not an improvement. So it's looking good. And we see, once again, most of the areas moving in the right direction. We also have, let's say, wide good development. All business areas recorded solid organic growth. And we also see that sales in the quarter was also the highest to date for a single quarter for us. So good demand overall, both running quarter and also the way we look at the future. Improved earnings, we also get a reasonable good drop-through on this one, which is also — this higher sales is turning into the best EBITA and the best margin for a single quarter that we had to date. Cash flow following. We are managing — we feel we're managing the working capital in a good way in this growth environment, although, let's say, we are also, of course, cautious here. We have had some uncertainty related. I mean, I couldn't say that we have any problems yet. But at last, we don't know what's going to happen a little bit with some of the raw materials. We've been a little bit careful building some inventory to make sure we get both availability and also to safeguard a little bit of the pricing. So that has been impacting us, but good management of accounts receivable, good management of payables. And on top of that, as we have been guiding before also CapEx is going down, which is also benefiting. So good cash flow, good cash conversion, above 90% looking slightly lower in this quarter. We also continue to do the share buybacks of roughly SEK 500 million per quarter, slightly lower in this quarter, but the overall kind of guidance in relation to share buybacks is the same as before. Turning to Page 26 on the outlook for the running quarter, and we should be open here that it was a little bit struggle to get it right. We see an improved demand actually quarter-on-quarter, but also that we have, let's say, the comparative figures going into Q3 is a little bit more challenging. So you should read this that actually we see that the organic growth figure from 8% might not be 8% in the Q3. It will be a bump down on that, but we will still remain in a very positive territory. So we feel confident on the demand, and we have good order books going into the quarter. So happy to answer more questions about that. But I mean, this is the way we would like to send a message. Demand is solid, demand is good. Demand is actually sequentially improving. But as, let's say, if you're looking into Q3, we do expect the organic growth figures to be a tad down compared to what you saw in Q2. And then, of course, a normal add-on, we are living in a little bit uncertain territory at the moment in terms of geopolitical situation. Of course, things might change and things might be different, but that is — we cannot do anything about that, and we are ready to adjust. But nevertheless, we need to add this comment to highlight the uncertainty we see around us. Turning then to Page 27 and then Q&A. Quickly turning to Page 28, it is, I guess, and opening up for questions. Please go ahead.
Operator: The next question comes from Chit Sinha from JPMorgan.
Chitrita Sinha: I have 3, please. Maybe just firstly on Sealing Solutions and maybe just commenting on the margin from here. Clearly, a strong development organically year-on-year and a good drop-through. But perhaps if you could just shed a bit more light in terms of how we should think about the margin development as we head into a quarter with tougher comps.
Peter Nilsson: Starting with that one, I don't say tougher comps in that respect for TSS. We still believe we can improve from the running margin. We expect a good demand overall, and we're running with fairly high gross profits here. So if the volume continues as is, we are kind of positive also about the future. Of course, we don't talk about another 2 percentage points or whatever up, but we're running on a good level, and we expect it to remain at this level or even somewhat better for the second part of the year.
Chitrita Sinha: Very clear. And then my second question is just regarding your commentary on the product deliveries. So you pointed to a bit of a sequential increase in deliveries and obviously, you have communicated a bigger pickup in H2. Just wanted to clarify whether the deliveries in the quarter were in line with expectations? And then how are things developing on the demand side here?
Peter Nilsson: Are you referring now to Industrial Solutions? Is that the question related to — yes. So I mean that is a long order. But generally, that business that we referred to is very long orders, and we know that — we know the order book well in advance. So it's a very, let's say, low turn in the quarter, if I may say. So that is why we feel confident that these deliveries will be — is developed as expected and it's well in line with what we guided for and believed in. So we don't see any — you never know, there could be some, let's say, delays in certain areas, but we don't know that at all. So it's not really a problem about availability or lack of orders. It's more a matter that the customers did not ask for the products here in the first part of the year, and we see an increased project activity here in the second part of the year. So nothing really surprising or nothing kind of no challenges as we see it today.
Chitrita Sinha: I'm sorry, just on the demand side, the book-to-bill...
Peter Nilsson: The demand side is — I mean, if you look at the project business, the demand is still, let's say, flat positive. So we do — I mean, we are — I mean, on this project part of Industrial Solutions, the main exposure is not the only one, but if you should pick someone, it's LNG development and all of that. And that is kind of still — so overall, let's say, the activity level is high. And then, of course, it's always a little bumpy on this kind of big project business. It goes a little bit up and down, and there is always a phasing in the projects and all of that. But we are a solid order book. We have, if I may say for that business, an all-time high order book. And so that is more a matter of executing and making sure. So it looks good, and that's not only for the next quarter, that looks good for kind of the next year plus in that part. But it will be a little bit fluctuations in between quarters since this kind of sizable project deliveries.
Chitrita Sinha: And my final question is just on pricing. I just wanted to get a bit more color with regards to development in Q2 and then just what you're seeing at the moment as well.
Peter Nilsson: Pricing, of course, a lot of, let's say, suppliers are indicating, let's say, cost ups and there's also some freight costs going up. But I mean, we are confident in managing that in a good way. We are using kind of resourcing where that is beneficial for us. And we do, of course, also do some pricing. But we believe the acceptance for price increases. Well-motivated price increases is good in a way, so we don't see a challenge in adapting for this potentially higher raw material pricing. We should say that most of this raw material price increase has not really kicked in yet, but also neither has our price increases. So we feel — going forward, we don't feel any kind of — we don't see that as a risk for us going forward on this cost inflation in relation to price increases. But there, we need to stay close to it and see what happens and we adjust when we need it, and we feel confident that we will be able to adjust if needed.
Operator: The next question comes from Alex Jones from BofA.
Alexander Jones: If I can start on the outlook statement for Q3, you're talking about demand sort of an underlying basis being sequentially better. Are there particular regions or end markets where you're seeing that? Or is that sort of across the board? And then you're also talking about sort of putting that to one side, the comp impact on Q3 growth. Is there any way to think about the magnitude of that and therefore, the potential step down from the 8% this quarter?
Peter Nilsson: The demand is surprisingly good more or less all over. Of course, you have some automotive pockets, which is weak, if I say that. But overall, the global automotive is good. And also, as I said, truck and buses is good. We see the aftermarket automotive picking up. So there is, of course — but we don't really have this exposure — direct exposure to the weak areas of that. But overall, we see aerospace is good. Semiconductors continue to deliver very well. We have oil and gas, LNG delivering good. We see also some uptick in this, what we call industrial automating, robotics and stuff also where we see higher demand. I mean the area — construction industry, all the comments and although on a lower level, we see slight kind of lights in the tunnel here for both commercial and residential construction. And the big segment for us, which is hydraulic, pneumatics, which is then driven by off-highway and agriculture also where we — after some kind of a little bit challenging quarters, we see also an uptick in this. So I have to say, Alex, that we're looking fairly bright at the moment wherever you look. Medical Solutions is the one, but it's a little bumpy on I think project, I should say, the start of programs, and they are a little bit bumpy in the ordering. So that is what we have. And that is also maybe if I stay on that, the main — one of the main things here going in Q3. If you look at our Q3 figure last year, we had, I think, 13% or something organic growth in Medical Solutions. And we did comment already then that, that was kind of abnormally high. And that is where we had to bring with us here now going into this quarter where we have a comp with a fairly, let's say, high. So we talk about a couple of percentage points down from this 8%. So we still let's say, expect it to stay on a very solid number above our kind of long-term guidance of 4%. But then when it ends up, if I can be very direct, if it ends up 5%, 6% or 7%, I don't know. But we don't believe it's going to reach 8%, but we neither believe we don't see it's going to go below 4%. So that is kind of the ballpark figure to give some more clear guidance on that, as I understand, there were some confusion or some questions around it.
Alexander Jones: That's really helpful. And if I can just follow up one more on margins. You're talking the release about pricing and sort of cost efficiencies having covered extra costs due to the geopolitical situation. And I'm aware that you're particularly proactive as a business on both those pricing and efficiency points. Was there any benefit in the quarter that you're able to sort of mobilize the company to price and to be more efficient on cost ahead of some of those raw mat inflations hitting the business? Or is it more sort of a neutral effect on margins this quarter?
Peter Nilsson: I would say it was neutral to positive, but a very slim positive if that — I mean also when you have all of this kind of turbulent situation, I mean, change management gets a little bit easier, you can speed up a few actions, you can do the adjustments a little bit quicker, both in terms of pricing and kind of own cost actions. But I mean, overall, this is not kind of an explanation on the margin. It's not an explanation of growth. And we don't — I've got some questions also on prebuying. We don't see any sizable prebuying. We don't see really customers protecting themselves on prebuying. So we cannot — of course, we're watching it carefully, but we cannot really see that driving sales growth or driving the development in any meaningful way. Then of course, there could be individual cases. But I mean, if you look at the overall development, we cannot see that being kind of any kind of meaningful impact in any way.
Operator: The next question comes from Ope Otaniyi from GS.
Opeyemi Otaniyi: Two questions for me. Most of my initial questions have been answered already, but maybe just on medical, so low organic growth there. Could you just maybe talk through what's driving that? I think previously you talked about that being driven by Life Sciences, but sort of any idea what the run rate is maybe from when you speak to customers, especially in light of the fact that you've expanded capacity and that should be supporting organic growth?
Peter Nilsson: It's not — I know you're looking at the figures in detail, that we do as well. But I mean, this is really a small deviations here, and that's kind of a weekly delivery here and there where people, let's say, fill up their inventory or lowering their inventory. We don't see that as kind of linked to an activity level. And I think it's been a little bit — it is a little bit bumpy in medical, I must say. And we need to look at the rolling 12 more to get the guidance. It will be, let's say, bouncing a little bit in between the quarters. We still remain in a solid positive territory, and we don't see that changing going forward. Now of course, it gets tough comps in Q3 here as we had a plus — was 13% last year. So now — and that was kind of linked. So maybe we will get into a negative here in Q3. But I mean that is not going to kind of influence the rolling 12 figure that much. So I cannot really — I'm sorry that I cannot really give you any more guidance on it. We need to accept that this is the way it is, and we need to look more on the rolling 12 figure. We are not concerned. Sorry, we are not concerned. We see the development. We're keeping the customers. We're keeping the programs. We're growing in the programs, but the customers are ordering a little bit in — yes, they go a little bit up and down sometimes in the orders, which we honestly do not fully understand why.
Opeyemi Otaniyi: Great. And maybe just on Sealing Solutions, plus 12% organic growth is pretty strong, and I know the guide kind of reflects this in the go forward that you therefore have tough comparables. But could you just give us a sense of if that sort of — if there's any actual pull forward demand and particularly like what — effectively where the plus 12% came versus your initial expectations going into the quarter?
Peter Nilsson: I mean, let's say that the order book supported this going into the quarter. It was slightly — it was a kind of slight acceleration in the quarter, but not really meaningful. We had a very good order intake in Q1. We have a good order intake in Q2. So we feel confident also going into Q3. There's a few segments pushing. We have aerospace continue developing very nice. Semiconductors is a lot up as well for us, although a small part of totality, but it's growing rapidly within Sealing Solutions going — developing a nice way. If there's anything which is more, let's say, meaningful positive in the quarter is probably the development within this, what we call hydraulics pneumatics, which is off-highway, agriculture, where we see an improvement in the quarter. Otherwise, it's kind of the same, a little bit slight in automation, robotics, but these 2 areas, both kind of hydraulics, off-highway and automation has been a little bit negative development in the last quarter. We've been waiting for the uptick there, and now it's kind of — yes, we're seeing it, but it's not kind of dramatic changes. So we see Sealing Solutions is very wide in exposure. So it's kind of a very wide growth in a lot of segments and also in also a lot of geographies. So it's kind of a broad-based growth that we see in Sealing.
Opeyemi Otaniyi: Great. And maybe just one last one just on margins. Really strong in Sealing Solutions, but sort of flattish in Industrials and medical versus quite strong organic growth. Could you just help us understand sort of why the drop-through was maybe less than expected in those 2 segments despite decent organic growth?
Peter Nilsson: I commented that the Industrial Solutions is like, say, internal, you don't see it, but we guide you on that one. It's a slight negative mix that we have a little bit unbalanced growth in a few areas. We do expect it to be better in the second part of the year. But nevertheless, in the quarter, that is why you don't really get the drop-through that we should be getting. But that is the way it is sometimes. In medical, once again, it's a fairly small business. So it's individual orders, individual customers that is driving it. And we are kind of happy as long as it stays above 20%, and that is what we're aiming for, and that is what we do, and we were we were about 20% in this quarter. And then whether it's 20.2% or 20.4% or 20.5% is kind of very similar as we see it. So that — I don't know if that's enough or you...
Operator: The next question comes from Forbes Goldman from Pareto Securities.
Forbes Goldman: Just one follow-up on what you said there on the semiconductor exposure. Could you give us any sense of the current revenue run rate or share of group sales and give some color on how that is growing and perhaps margins as well would be very appreciated.
Peter Nilsson: It's a low single digit, let's say, compared to the overall group sales. But I mean, the growth rate is tens of percent in organic growth. And of course, we're also looking there to be fully transparent on that one looking also for acquisitions, and we're doing investments. We are building a new — we're expanding, for instance, our factory in China in order to support organic growth there. We have recently inaugurated a new facility for semiconductors also in Malta for Europe, and we're looking also for a setup in U.S. So we are investing into that, and we're looking for continued kind of tens of percent of organic growth for, let's say, kind of foreseeable future. So this is going to be a growing part of Trelleborg. Of course, we're focusing on organic growth, but also, hopefully, be able to support it also with some supplementary acquisitions. So it's a priority segment for us. It's not as big as we want it in Trelleborg today, but it will be a substantially bigger part of Trelleborg if you look for the next kind of 3, 5 years. So that is kind of the horizon where you're going to see this growing part of Trelleborg.
Forbes Goldman: Great. One more final one for me. On aerospace, the capacity investments you've been doing in Morocco, when do you see those ramping up? And how much capacity are you adding in total?
Peter Nilsson: I mean, on that one, we are not only adding Morocco is kind of a little specific to Airbus and Safran investment there to support them locally. So that is kind of more part of a global supply chain from them and being able to deliver products to them with the same kind of quality systems and same quality control. We are investing in a lot of sites to grow with aerospace activity. I don't really want to give a guidance there, but I mean, we're also talking here, let's say, 2-digit organic growth for the foreseeable future.
Operator: The next question comes from Vivek Midha from Citi.
Vivek Midha: I have 2 questions related, so I'll ask them together, just around the Sealing Solutions business. Firstly, on the margins, good incremental margins off the back of the very strong growth, taking to 22.5%, not far off the 23% level you've targeted in the past. Now that's 1 quarter and recognizing the TSS margins typically lower in the second half of the year. So I'm interested in the time line you now see for getting to that 23% level. Would you see that as feasible in 2027, for example? And then a related question, following up on your comments about the hydraulics segment, the fluid power business. I think my understanding is that you've generally outperformed the broader customer base. It'd be interesting to get an update on where you see yourselves now versus before that market went into a slowdown? How far away are we from any peaks? Or are we now above prior peaks? That would be very helpful.
Peter Nilsson: So starting with the hydraulics, I don't — I think we are quite some way away from the peak actually. We are not yet — I mean, agriculture — construction equipment improving, but agriculture, which is another big subsegment — say, construction equipment and mining is kind of on a good level. Mining on a top level, if I may say, but construction equipment is still growing and agriculture is still down. So I don't see that happening. And also when you look at these previous peak levels, there is also quite a lot of kind of aftermarket in that part as well. And we feel that the inventory levels there is still relatively low. So there is kind of a double up, which we do expect to continue for some time. So we are — difficult to give a guidance, but I don't feel that we are, let's say, not even close. I don't think we are close to the kind of peak on that one. That's going to take some time before we get that fully into the books. And then talking about the margin in Sealing Solutions, I mean, we have a good development. We do expect it to continue to improve, as you say, we are not kind of at the peak level here of 22.5%. But then whether to give guidance for individual quarters and stuff is difficult, but we do expect there is improvement possibilities. And of course, if you have 23% over a cycle, there should be a few quarters, which should be above 23% in order to get into that. As I say, there is some seasonality. There is some differences between quarters and between the businesses. So we are not seeing kind of the Sealing being 23%. We need to — if we get to, let's say, a stable long-term margin of 23%, we will have to have a few quarters, which is above 23%. So I don't know if you want to add something to that. But I think what I want to say about that one.
Operator: The next question comes from Agnieszka Vilela from Nordea.
Agnieszka Vilela: Maybe starting with your gross margin, it was record high now in the quarter, 38.5%. And we've seen that you've made very good progress on your kind of fixed cost base and you always address your production footprint. But looking at your OpEx cost, it has been quite sticky at 20% of sales. And my question really is if you're looking into it and especially maybe on the admin side, which is actually higher as a percentage of sales compared to other industrials.
Fredrik Nilsson: Yes. I mean if you're looking at the quarter, it was a little bit higher — it was higher year-over-year. But if you look sequentially from Q1 to Q2, it was more on the same level. But of course, that's also dependent on other activities that we are doing, for example, M&A projects and so forth. So that's a little bit ups and down, Agnieszka, from that point of view, if you're looking at the central costs.
Agnieszka Vilela: Yes. No, not really central costs, more like your OpEx, so more of the kind of administration costs that you present in your P&L?
Fredrik Nilsson: I mean we have a different setup also you can say with Sealing Solutions that we are running with a higher gross profit because we have that kind of more solution selling, which is adding more sales and admin costs. So I mean that is part of our business model and also creating more margin on the bottom line. So it's difficult to have a view when you benchmark, but of course, we can always improve, and that is what we are always doing, you see restructuring cost when we try to get out synergies when we're acquiring companies. So — but of course, it's different to compare other industrials with running with a different business model.
Agnieszka Vilela: No, maybe if you can add a comment, it would be appreciated.
Peter Nilsson: No, no. It's more a matter of push on that. And I mean, this is part of the way that we are able to get a better gross profit is, of course, we're adding more, especially sales costs. We know that we're having quite a lot of application engineering. We are generally bypassing distributor sales, and that means that we need to carry a higher fixed cost, but that — getting that back on a higher gross profit. So that is always the balance. If we cannot get the higher gross profit, then we have to lower the administration and the OpEx. But if we can get it up to higher, we think the overall net is better in this way. But of course, we're looking at it all the time, and we're looking for ways to improve it and looking to become more efficient without kind of — without bringing down the support to our customers along the way.
Agnieszka Vilela: Yes. Fair point. And then my last question is on capital allocation. If I look at your M&A activity last year, by this time point, you completed 4 acquisitions. I think this year, we're running at 2 now. So can you just maybe talk a bit about your pipeline? What do you see? And what do you expect — do you expect any deals to happen until the year-end?
Peter Nilsson: Pipeline in M&A is improving. There is a lot of activity at the moment. So we debated here before it will be any summer holiday or not for us because there's a lot of activity level. And then, of course, you never know in these acquisitions on whether you're actually able to make the deal at the end. I mean the valuations are, in some areas, quite challenging, and we are not kind of willing to overpay. Private equity is back in the market, very eager to make deals. We are, of course, here long term or forever, and we are a little bit more cautious in certain areas than we feel that they are. So we are losing some deals just to be transparent. But once again, the activity level is high, and we are confident that you're going to see us doing a number of M&As before year-end. I shouldn't say pipeline is bigger than ever, but it's on kind of a number of projects ongoing at the moment is on a very high level in historic comparisons. And then once again, with that said, you never know if a deal is done until it's actually done.
Operator: The next question comes from Hampus Engellau from Handelsbanken.
Hampus Engellau: Two questions from me. I'm sorry for coming back to your outlook, but normally, you guide with adjustments for seasonal valuations. Now you're bringing in as a reason for somewhat weaker demand, but also bringing in that you should probably have some more price contribution in Q3 for compensating for raw material and also that you see better project business. Could you maybe please add some more flavor on this outlook just for me to understand what part is weaker? Is there — as someone earlier asked about maybe some more business on prebuying in the quarter related to Sealing? Or how should I think about this? Sorry for...
Peter Nilsson: The guidance is actually, if you look sequentially, the business activity is up. But I mean, if I remember the figure is correct. We had a minus 1% in Q2 organic growth, and then we had a plus 3% plus 4% even in Q3 next year. So this is a 5 percentage points difference. And then if you're adding that to this 8%, then, of course, it gets a very tough comp. So if you take that 8% and then 5% and difference is 3%. So we actually see it's going to be better than 3%. So we actually see an increased activity quarter-on-quarter. That is the way we calculate, Hampus. Did you follow my...
Hampus Engellau: Fair enough.
Peter Nilsson: So that is the way we look at this. So just to clarify, we actually see an improvement quarterly — quarter-on-quarter, we've seen improvement activity, but tougher comps means that we will most likely not be able to deliver 8% in Q3. But it will be, as we see it today, very solid organic growth also in Q3. And then, of course, there is some positive, there is some negatives. You're mentioning some positive, maybe a little bit more pricing, maybe a little bit higher project activity. But then we know medical is not going to be — that's going to be negative because it's very, very tough comps in there. We have a high activity level in certain parts of Sealing Solutions, which is going to be challenging to actually bring more capacity on stream. So there is some negative, some positive, but it boils down, once again, there is a couple of percentage points down on organic growth compared to this quarter. But once again, it's a very solid — we expect a solid quarter also in Q3.
Hampus Engellau: Fair enough. Maybe the last one question on the auto, very positive take on the quarter for you guys. At the same time, when I look at the different parts, the OE business generally has been much tougher in Q2 than compared to Q1. So from your perspective, is it — I mean, truck is up by now, I know, but is it aftermarket that has stepped up further? Or what is driving your auto business being broad-based good in the quarter given how OE business has been?
Peter Nilsson: Say aftermarket is up, truck and buses is up. And then, of course, we have global exposure. So we still feel that the China — Asian market is developing nicely. North America also quite okay, more sour in Europe. But overall, I mean, most of our automotive exposure is linked to kind of global technology more than global platform. So we have a very wide exposure. And if it's growing in China and growing in North America, then I mean, we grow with that. And then, of course, we absorb some lowering activity in Europe sometimes. But overall, we feel that it's a global exposure, which is — fully global exposure, which is benefiting us in terms of, let's say, passenger car automotive. So that is the way...
Hampus Engellau: Are you gaining market share in China? Because I mean, the light vehicle production in China is down 8% in the quarter.
Peter Nilsson: Yes. I think we do that somewhat that we are in certain areas growing in that activity. So that is — but it is the way we can explain it — so we can only explain the aftermarket is up. But we see also our kind of sales to brake systems and this constant velocity joints and all of that, that is actually — it is improving in the quarter. There is some kind of probably market share gains. But overall, we feel the market is fairly high activity in most of the areas within automotive. That is the way we look at it.
Operator: The next question comes from Timothy Lee from Barclays.
Timothy Lee: Actually, my first question is a little bit follow-up on the question before on the automotive recovery and also related to the recovery on construction in TIS that you also mentioned in the slides. So this segment has been weak for a while, and then we are seeing some improvement. So how do you see the sustainability of the recovery based on what you discussed with your customers? How do you think these segments will continue to be kind of improving in the next couple of quarters?
Peter Nilsson: Yes. If you say the construction segment, I mean, I don't know if you're following there is Sweden, there is this company, Inwido, which is kind of the biggest window and door maker, which recorded a record high order intake actually it was yesterday or something, which is well in line. We see an uptick in that one. We see an uptick in the kind of house construction, especially residential construction. And that is — because that's the main exposure we have within TIS is actually ceiling profiles for windows and doors, and that is where we see an uptick from low levels, but nevertheless, an uptick on that one. Overall, construction — infrastructure construction, if you may say that, has been on a high level for some time. We have rail expansions. We have tunnels. We have harbors. So that part of the industry has not really been down, so that is kind of developing nicely. I think that automotive team, what you wanted more on that one? Or what do you want to ask about automotive development, if I got it right from you.
Timothy Lee: Yes. I mean, I was just wondering how sustainable for this kind of recovery will be based on what you discussed with your customers because these segments have been weak for a while, right?
Peter Nilsson: Yes. But I think automotive could potentially be, if I may say, that there was an uptick because we were boosted in the quarter by some aftermarket pickup. Truck and buses in that segment is kind of looking solid also going forward. But it could be that it was, let's say, overly positive linked to this aftermarket bounce back. But it's not a major part of Trelleborg anymore. And that is, let's say, a very small part of our exposure. But it could be that this kind of good development. I don't know, if Christofer wanted to add something as well.
Christofer Sjögren: Yes. Well, Tim, you know that last year in Q2, we fell quite significantly in the aftermarket on our brake shims due to the tariffs basically. And then the market has slowly come back in Q3, Q4, Q1 and now also in Q2. So we are basically back where we started in the aftermarket. So it's more a situation where we took a big hit last summer and now are back to normal.
Timothy Lee: Understood. Yes, that makes sense. And then a little bit follow-up on the organic growth expectation as well. So first of all, regarding the TIS, the delayed projects, which is going to deliver in the second half, do you have a sense of whether it will be more in the third quarter or in the fourth quarter, given that you're expecting the organic growth in the third quarter to be slightly lower quarter-on-quarter because of base, obviously, but does that imply that it is likely for the delayed project delivery will be more towards the fourth quarter?
Peter Nilsson: We don't want to split there. We say — I mean, sorry, that we need to say that we see an improvement on that one, but it's not really major — it's an important part, but it is not kind of explanatory part of TIS. It will improve, and it will be creating some positives, but not really any major difference to the overall figures. So that is — yes, I think the way I want to comment on that one.
Operator: The next question comes from Ope Otaniyi from GS.
Opeyemi Otaniyi: I do apologize. My question has already been answered, so I'll go back in line.
Peter Nilsson: Thank you. Thanks to all of you for listening in, and thanks again for your continued interest in Trelleborg. Happy to support you with further comments. Christofer, main contact point, and he's happy to take your calls and take your questions. And of course, Fredrik and myself, happy and eager to support as well if needed and if we can kind of be helpful. So don't hesitate to contact us. So thank you and speak to you soon, all of you. Thank you.