TRELLEBORG, Sweden — Trelleborg A.B. President and CEO Peter Nilsson has defended his company's $1.25 billion purchase of CGS Holding A.S., parent of tire manufacturer Mitas, saying the agricultural tire sector "will eventually turn."
In an in-house interview published on the company's website, Mr. Nilsson was asked whether the timing of the Czech group's acquisition was right, and if it increased Trelleborg's exposure to weak agriculture sector.
"We always maintain a long-term perspective," Mr. Nilsson said in response.
The company, he added, must be sure that it can handle a future rise in demand as the market would eventually turn around.
For example, the Trelleborg boss said machinery sales in the agricultural market were down about 25 percent from the industry's peak.
"We now see how cereal production is continuing to rise, without sales of tractors and other machinery increasing, but rather decreasing.
"So, we do not know when it will turn around, but we must be prepared when it does."
Mr. Nilsson went on to say that the acquisition was "special," because of its size and the way different parts of CGS fit into different business areas at Trelleborg.
Besides the Mitas tire assets, the CGS acquisition included operations that enhanced Trelleborg's market positions in coated systems, sealing solutions and industrial solutions.
According to Mr. Nilsson's assessments, the two companies' synergies up until 2020 will amount to about $44 million.
"These are mainly cost synergies, but also a great deal of sales synergies," he said.
The estimate, he concluded, could be conservative and was based on how the market looks today.