Higher Raw-Material Prices Having Increased Impact on Trelleborg

"The turbulent price trend for raw materials in the form ofsharply increased prices has been compounded during the second quarterand resulted in greater cost pressure. This is mainly affectingTrelleborg Automotive. Increased raw-material prices affect usfollowing a certain time lag and, because we work under contracts ofvarious durations, the length of such lags and the impact of ourvarious raw materials also vary.

"We're continuing to focus on several actions to offset theincreased costs, such as hedging the raw-material clauses in ouragreements with suppliers, efficiency measures at all levels,including a continuous review of our production structure, andadjusting the prices we charge customers," says Peter Nilsson. "Theprice trend is volatile and difficult to estimate and the magnitude ofthe price increases also varies among the various raw-material gradesthat we purchase. Moreover, based on the current raw-material prices,extensive hedging with futures contracts is not attractive. Althoughthis is having an adverse effect on our margins in the short term, ourcontinued favorable positions in four of five business areas enableus, with a certain time lag, to offset the higher raw materialprices."

In total, Trelleborg purchases natural rubber and aluminum forbetween SEK 1,000 M and SEK 1,500 M on an annual basis.

Peter Nilsson also comments on the continued efficiency problemsbeing faced by Trelleborg Automotive's Fluid & Acoustic Solutionsarea. "While we are continuing to focus on solving these problems, wehave encountered a delay that will probably last for another quarter,meaning throughout the third quarter of 2006. However, the problemsare solely related to Fluid & Acoustic Solutions and, if they aredisregarded, Trelleborg Automotive is performing well in line with itsearnings for the year-earlier period.

"As a result of the increased raw-material prices, the problemsaffecting Fluid & Acoustic Solutions and the impact of there havingbeen fewer working days during the quarter compared with theyear-earlier period, our total assessment of the second quarter of2006 is that we will not match the earnings* we reported in thecorresponding quarter of 2005, although earnings for the first half of2006 will be in line with or slightly exceed the result reported forthe first half of 2005" says Peter Nilsson.

Outlook according to the interim report for the first quarter of2006:

"The outlook for the first half of 2006 remains unchanged, withmarket growth in the Group's seven principal markets expected to be inline with the second half of 2005. A high level of demand for naturalrubber and continued high oil prices affecting the pricing scenariofor certain polymer raw materials is expected to result in continuedcost pressure during the second quarter of 2006."

* Operating profit from continuing operations excludingnon-recurring items.

Trelleborg is a global industrial group whose leading positionsare based on advanced polymer technology and in-depth applicationsknow-how. We develop high-performance solutions that seal, damp andprotect in demanding industrial environments. The Trelleborg Group hasannual sales of approximately SEK 24 billion, with about 22,000employees in 40 countries. Trelleborg consists of five business areas:Trelleborg Automotive, Trelleborg Wheel Systems, Trelleborg EngineeredSystems, Trelleborg Building Systems and Trelleborg Sealing Solutions.The Trelleborg share has been quoted on the A list of the StockholmStock Exchange since 1964. www.trelleborg.com

This information was brought to you by Waymakerhttp://www.waymaker.net