Japanese group sees off-road tire business as a “future growth driver”

Trelleborg, Sweden – Trelleborg Group has agreed to divest its Trelleborg Wheel Systems (TWS) business to Yokohama Rubber Co. (YRC) for SEK22 billion (€2.1 billion) on a cash and debt free basis.

The transaction is set for completion “in the latter part of 2022” subject to regulatory approvals,  the companies announced in separate statements 25 April.

According to YRC, the acquisition will contribute to the expansion of its off-highway tires (OHT) business, which is sees as a “future growth driver.”

A target now for the Japanese group is to level up the current 2:1 ratio of consumer tires to commercial tires within its business, it explained.

This, said YRC, would help bring the sales composition of the group’s tire business more in line with the overall market and secure earnings growth.

The deal builds on YRC’s mid-2016 purchase of off-road tire maker Alliance Tire Group (ATG), which has since bolstered group sales by around 20%.

According to its statement, TWS will also help strengthen YRC’s commercial tire business in terms of product lineup, cost, service, and digital transformation.

In fiscal 2021, TWS sales totalled SEK10 billion, accounting for about 30% of Trelleborg AB’s consolidated revenue, noted YRC.

Over the past 10 years, it added, TWS’ had expanded turnover 2.6-fold and more than tripled earnings.

Of tires manufactured and sold by TWS, agricultural tires account for about 60%, industrial tires about 20%, with the remainder being tires for construction machinery and motorcycles.

TWS has 14 manufacturing plants in nine countries: seven in Europe (Italy, Latvia, Serbia, Slovenia, and three in the Czech Republic), two in the US, one in Brazil, and four in Asia (two in China and two in Sri Lanka).

About 70% of the company’s sales are in Europe.

In a separate statement, Trelleborg said the decision to divest TWS would improve its profitability and reduce cyclicality.

“Our ambition is to grow Trelleborg into the world’s foremost engineered polymer solutions company in our selected industries,” said Peter Nilsson, president and CEO of Trelleborg Group.

Those industries, he went on to say, include healthcare & medical, automation and aerospace, as well as in specialty industrial applications.

“Moreover, we see a great potential to expand into adjacent products and solutions that complement and strengthen our existing offering,” he added, noting that the divestment created “a more coherent portfolio.”

The divestment, said Nilsson, would also help the Swedish group to significantly improve its sustainability profile with a lower CO2 footprint.