Now I will hand the conference over to CEO Peter Nilsson and CFO Fredrik Nilsson. Please go ahead.
Thank you. Peter Nilsson speaking. Also joining me here on the call is Fredrik Nilsson, our Group CFO. Eventually also Christofer Sjögren, our Head of Investor Relations. Welcome all of you to this presentation of the Q2 report for Trelleborg of 2025. As usual we're going to start up with presentation and then finishing up with the Q&A session. As usual we're going to use a slide deck which is on our webpage to guide us through this call. I trust all of you have that in front of you and if not you can also follow it here on the call. Using that slide deck and then turning to page two in that one, the agenda slide, where we're starting up as usual as well with the highlights and then some individual comments on the business areas.
Fredrik then will guide us through the financials and then I'll sum it up myself again with the summary and also some comments on the outlook for the running quarter. As I said before, finishing up with the Q&A. Turning to page three, headline of the highlights. Improved margin in a tentative market. I will elaborate a little bit more of course on this tentative market is actually behind. This is generally a very good development in quarter with one exception and that is automotive. We're going to comment on later on sales in the quarter at SEK 8.5 billion, a decrease in Swedish krona by 2% and behind that we are going sales development minus 1, M&A adding 6% and then we have currency which is bringing us down another 7 which is ending up with this 8.5.
EBIT-A at the 1,587, fairly close to last year corresponding to margin 18.7%, almost the record margin for Trelleborg. We have one quarter before 18.7%. Good margin development, although it is a little bit slim. Organic development in the quarter. Organic sales development in the quarter. We have a substantial negative effects, not unexpected, of a little bit north of SEK 100 million in the quarter. As usual we continue to improve the structure and we're investing in improved efficiency overall SEK 80 million in the quarter, slightly lower than a year ago. Cash flow at exactly SEK 1 billion and also slightly south of last year. It's actually good performance also in terms of cash flow where we had good management to working capital and then also continued fairly high CapEx level.
It's also an impact of a much higher running at the end of the quarter than compared to beginning of the quarter. I get back in comments on that a bit later. We are also happy to continue to execute acquisitions, smaller acquisitions but nevertheless very nice. Add on National Gummi in Sweden, SIKO in Germany, Czech Republic, and then Aero-Plastics in North America. Good spread among our business units, all of them adding and strengthening our overall position. Also, let's say here post the ending of quarter two, also acquired a smaller company in Singapore called Master Seal, which is then adding some capabilities which we don't have in that region and that's strengthening our position especially towards the energy sector, oil and gas sector, an area where we are, let's say, improving our presence not only here.
It's also for those of you following that, remember also the CRC acquisition in Alabama and U.S., which is basically another strengthening on this as a niche segment within Sealing. Also here, actually earlier today, you also notice that we continue to run our share buyback program as before. Overall a good quarter. Moving on to page four, organic sales development biography, and I'm into starting here with the totality. We see minus one and actually all of the negative is by far explained by a substantial downturn in our automotive sales where we have, let's say, double digit negative organic sales, which we a little bit struggle to fully understand. What we read in, which is the substantial inventory reduction and some hesitation especially in the aftermarket. If we look at the total organic sales and we exclude automotive impact, we are actually firmly positive in organic sales.
In all, also as you say, organic sales development, they started up fairly poor for us in April and then with a strong development in May and June. The run rate going into Q2.3 is actually substantially better than we saw going into the quarter. We also see basically improvements in more or less all segments but automotive again. We do read that this automotive downturn, it cannot continue to have this as a double digit negative organic sales. We don't really expect that to continue, but we notice a high uncertainty in that segment and the people are, as we read it, they are, let's say, cutting inventory heavily and we have been in the quarter quite dramatically actually under delivered in relation to actual car manufacturing and that is something of course we're watching carefully.
That is kind of a few, let's say, developed comments on the overall organic growth. We look at the regions, Asia continuing strong for us, most markets in Asia actually developing favorably, and we are satisfied with development. We look forward also to continue good development in this part of the world. Europe a little bit hesitated. Both Europe and North and South America are more impacted by this automotive downturn. As we see in both of these areas, actually the underlying PMI and underlying, let's say, underlying demand is actually improving. Once again, we have a dramatic downturn, especially in Europe and North America, related to automotive. That is kind of the overall comment, actually.
In a way, we can say that the quarter has actually been a better quarter than the figures show when we look at the full quarter with the strengthening of the business throughout the quarter. Turning to page five, business areas, and then quickly turning over to page six and more focused comments on industrial solutions. Industrial solutions developed well, organic sales positive, less automotive here. We have also M&A adding strong performance, especially in marine solutions. LNG projects continue good, and then water infrastructure is also continuing to develop nicely. Basically, development as before, certain construction segments for us continue to be challenging, especially both residential. Actually, non-residential is still continuing a little. We saw some signs of improvement in quarter one this year, but it's actually turned a little bit more sour again here in Q2.
We do feel that we are hitting the bottom here, and we hope that it will be going up from this level. It's not continuing down at least overall if you look on the overall development. Nevertheless, it's still challenging, and there is not any kind of certainty that it will improve already in the next quarter. Sales to aerospace developing nicely, both in industrial, and get back to that and comment on Sealing Solutions as well. We continue to slide upwards here on the margin. Managed throughout the business areas, good cost control, good margin control, good kind of mix control, and also benefiting from continued investments in what we call structural improvements. We continue to structurally improve the cost base in order to become more profitable as well as more competitive.
We also here continue to add small acquisitions of National Gummi in Sweden, which is kind of strengthening us within kind of specialty range of extruded seals, and SIKO, which is then adding some complementary technology mainly related to silicon rubber. In this aspect, I mean there is also different kinds of silicon. We get back to that. As you know, we've been investing in medical, which is then called liquid silicon, and SIKO is basically more focusing on hard silicon. Slight different segment is also linked to extrusions. It's local look to extrusion sealing, but also some supplementary what we call hard silicon molding, which is then adding capabilities which we did not really have at this level in our portfolio before. Overall, good development, good solid stable development industry solutions, good order intake overall as well.
If you look at turning to the next page, page seven, which is then addressing medical solutions, is also generally a good development. We have some softening in North America market, but we do read that as a kind of a temporary, temporary downturn, and that is pushing organic sales negative. Overall order intake is good, and M&A continue for another quarter to add. This is basically Baron kicking in, which is showing the year- on- year improvement, and we are also noting good development in Europe where we are substantially smaller in North America. This globalization of this business is strengthening us in Europe, and we see benefits here, good order intake, and we say North American is a little bit volatile. Overall development still good, and as I said, order intake is good.
In this quarter we had a little bit more negative purchasing from some of the key customers, which we do not expect to continue. We are also, for those of you following us, we've been focusing on this life science segment, which is basically biopharma focused. We continue to see a substantially smaller part than the kind of medtech part of your medical solutions, but nevertheless very good development, and we're growing in those areas where we would like to grow. EBITDA margin up, of course, mainly the acquisition integration of Baron will continue to run in a good way, and we also continue to invest in this. We have Malta production facility inaugurated targeting on this what you call life science segment inaugurated in the quarter, which is strengthening our presence in this area in Europe.
We also, outside not commented on the slide, continue this strategically important kind of investment in Costa Rica where we now keep that fully in line and we're looking forward to inaugurate that by the end of the year. Overall, good development although a little bit slower on sales in North America. Turning to page seven, S ealing solutions organic sales -4% as already commented, fully explained by the downturn in automotive while more or less all the other segments actually developing favorably. We also see with satisfaction that this segment where we've been struggling a little bit, if you say construction related segment or hydraulic seals segment, is actually improving as well. We have good order intake in that area but of course not fully, fully let's say impacting the sales in this quarter.
M&A, you're also adding here, we have added a few acquisitions last 12 months and we have a 3% up there. As I said, overall the sales industrial segments overall unchanged with strong Asia and slightly lower volumes in Europe and North America. Overall, the industrial segments actually developing favorably in the quarter with a very soft start and stronger May and June and also with a better order intake than we have seen before. Automotive expected dramatically down and primarily growing to aftermarket as well, which is impacting and we read that as I said we substantially under deliver in relation to the cost manufacturer and we also, as you comment on our sales series, the majority, vast majority of the sales is actually not linked to any specific car brands or specific car models. We are generally supplying all over.
That is why we feel very confident that this, let's say, low sales in the quarter is mainly due to inventory reductions and uncertainty where kind of the car makers are a little bit uncertain exactly what to believe and how the tariffs will impact the cross continent supply, which is then bringing down the inventory from us of course and also their focus on inventory increasing. That is something we're watching but once again something we feel will improve going forward. Aerospace continue good. We have high ambitions, continued high ambitions, domain end customers Airbus and Boeing and we don't see any downturn in that, which is then further supported by this growth in the more defense related aerospace segments. Although the defense in terms of volume is very small in comparison to the commercial aerospace segments.
EBITDA margin slightly lower than a year ago, impacted by lower production but also by these recent acquisitions, which is in a cellular lower margin, which we then of course are going to correct, but nevertheless impacting us in this quarter. Good acquisition of Aero-Plastics, which is then especially strengthening us in interior seals and interior, let's say, components in aerospace and opening up a new kind of segment within aerospace for us, together with earlier acquisitions of Magee and the German acquisition we did for more window sealing for aircrafts a year or so ago. That is an area where we now feel that we're developing leading positions, which we're going to benefit from as the market develops.
As I already commented, we acquired this Master Seal targeting on, let's say, more short cycle or short delivery time seals and more kind of server related seal market, especially targeting the energy sector but also some other segments benefiting from short deliveries, which is then also opening up kind of a new segment for us within Sealing Solutions where we also believe that we're going to be able to continue to deliver overall satisfaction with Sealing Solutions. A fairly, I should say, sour organic sales. Once again solely explained by the dramatic, yeah, rather dramatic downturn we have seen in the quarter in the automotive supply. Turning to page nine, a few comments on sustainability. We continue to improve in terms of absolute carbon dioxide emissions, continued focus on that, but we are approaching a level where it is more challenging to improve.
Of course, we have continued improvement plans, we have already delivered on our long term objectives here, and we are reviewing, and you will see before end of the year that we're going to release new targets for this area. Once again, we are going down to fairly low levels of impact. Next page, page 10, is the same here. Looking at share of renewable and fossil free electricity, keeping it on the same level as last year. Also here we are approaching a level where it doesn't really make sense to improve anymore, and that's of course also being targeted. We still have some ways to improve, but as we are starting at 91%, there is not that much more actually to do on this, but we keep it under control.
We are continuing to be, as I said, a sustainability leader in our industry, and of course as part of that we will continue to improve, although the steps going forward will be slightly less than you have seen the last few years. Turning to page 11, financials is the next agenda point, and then I'll leave that to Fredrik to guide us through on page 12 and forward.
Thank you, Peter. Starting with sales development on page 12, reported net sales declined by 2% in the quarter from SEK 8,711 million to SEK 8,551 million. As Peter mentioned earlier, it is mainly driven by negative translation effects impacting sales negatively by 7%. M&A added 6% in the quarter. We have organic sales decreased by 1% with organic growth in Industrial Solutions, where the other two business areas, Medical Solutions and Sealing Solutions, showed a decline. Moving on to page 13 showing the historical sales growth, the second quarter was somewhat behind our sales growth target, but 5% sales growth at constant FX in the quarter. Moving on to page 14 showing the rolling 12 months for continuing operations, we have sales of SEK 34.6 billion in the quarter on a rolling 12 months basis.
Moving on to page 15, looking into the EBIT-A, which as Peter mentioned, decreased slightly, but we saw improved margin. We have an EBIT-A of SEK 1,587 million in the quarter. Have in mind that we have negative translation effects of SEK 104 million this quarter compared to the corresponding period last year. Industrial Solutions was up 1% despite negative translation effects in the quarter, and Medical Solutions showed strong profit growth due to the acquisition and integration of the Baron Group. As Peter also mentioned, the Sealing Solutions decreased, and that was mainly due to the negative translation effects and the lower sales. Module-wise, this was the second best quarter at 18.6% compared to 18.4% last year, and that was supported by good pricing and continued operational improvements.
Looking at page 16, the more long-term trend, you can see on the rolling 12 months basis EBITDA amounted to SEK 6,254 million with a margin of 18.1%. There has been an EBITDA growth of 4% during the last 12 months. Moving on to page 17, the profit and loss statement, looking into some more details, we have items affecting comparability for the quarter of SEK -80 million, which was entirely related to restructuring cost for adjusting our cost base. Financial net increased from -63 to -125 . It is important to have in mind that last year, part of the quarter, we were sitting with a net cash position, which was generating an interest income of SEK 59 million. This year, we have a higher net debt, so that has also resulted in an increased interest expense.
In the second quarter, tax rate for items excluding items of effect incomparability amounted to 25%, which was in line with our underlying tax rate. Moving to page 18. Earnings per share excluding items affecting comparability amounted to SEK 4.31, which was a decrease of 4%. That is mainly due to the higher financial net that I just explained and the negative translation effects that has also impacted the net result for the group, including items affecting comparability. Earnings per share reached SEK 4.03. Moving on to page 19, the cash flow, the operating cash flow for the quarter amounted to exactly SEK 1 billion. Here you can see that we have a little bit of a negative outflow from working capital. As Peter said, we saw an uptick in sales during the second half of the quarter, which has impacted then our accounts receivables.
Otherwise, you can see that it's only smaller movements between the two quarters. Moving on, page 20, cash conversion still running at a high and good cash conversion of 87% on a rolling 12 months basis compared to 88%. Moving on to page 21, the gearing and the leverage development. We ended the quarter with a net debt of SEK 8,937 million. We have done share buyback of SEK 577 million during the second quarter. Looking at the debt equity ratio, we are at 24% and the net debt in relation to EBITDA was 1.2, so that was slightly higher than year end, but we have also paid out the dividend in this quarter. In other words, our balance sheet remains strong. Moving on to page 22, return on capital employed. Its amount ended up at 11.6% compared to 12.7% last year.
The main reason here is that the capital added from the acquisition made over the last 12 months. Page 23, looking at some of the guidance for the full year, CapEx unchanged SEK 1,650,000,000. Restructuring cost increased from 300 to 500 and the increase is entirely related to accelerated activities to optimize our cost base. Amortization of intangibles unchanged 650 and underlying tax rate also unchanged at 25%. By that, I would like to hand back the microphone to Peter.
Thank you. Page 24 summary and outlook is the next bullet point, the next action point, item point on the agenda. Turning to page 25 and get back to where we started. Improve margin in the tentative market. As I or Fredrik myself elaborate a few times, we actually see this as a quarter very much in the right direction. We are see more or less all our markets developing favorably. We see also an improvement in PMI. One exception is actually automotive where we see a dramatic downturn in the quarter. A little bit surprising to be honest. When we went into the quarter we didn't fully expect that. We see let's say very short buying from our customers and we see some hesitation in the aftermarket and we see also some hesitation on some of the AOEs.
Overall we see this, we're reading this as we are substantially delivering below the production rates and we are for sure not losing market share. I mean our products in the vast majority of them is kind of let's say generic supply that goes into all automotive manufacturers. It's not really related to individual AOEs. We believe in a bounce back there but nevertheless let's say a double digit negative organic growth in our automotive business in the quarter and that is pushing down the overall organic sales into negative territory. With this lower volumes we feel we manage that in a good way. Very good cost control, good margin control, good control of the cash in the quarter. Solid cash flow.
Freddy said all this deviation basically coming from higher sales end of the quarter than beginning of the quarter and also no increase at all on bad receivables or anything. This is simply a working capital issue which will get back. Continued acquisitions, smaller bolt-on acquisition, feel confident integrating them. We know what we're going to do with them and we of course know why we buy them and we feel confident that that's going to continue to speed up the focus on developing better and stronger Trelleborg. Also some post Q2 ending actions here just to highlight with Master Seal in Singapore and also continuation board decision to continue with a buyback on the current levels. Turning to page 26, a few comments on the outlook. We do expect the outlook demand to be somewhat higher in the running quarter compared to the current quarter.
There is of course continued this geopolitical situation with the tariffs and everything, but we do feel confident that we're going to see a better, better in terms of, of organic growth, a better Q3 than we saw Q2 for Trelleborg. We also feel confident that we will continue to be able to manage our cost base and our, let's say, mix in a very good way to continue to develop a solid, solid performance also going forward. That is kind of the way we look at it. Turning to page next again upon Q& A and then quickly turning to page 28 and opening up for the Q & A. Please go ahead, those of you who want to address some questions.
Welcome to the Trelleborg Q2 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing 5 on their telephone keypad. Now I will hand the conference over to CEO Peter Nilsson and CFO Fredrik Nilsson. Please go ahead.
Please. I mean, we know we should actually add Q&As here.
Next question comes from Agnieszka Vilela from Nordea . Please go ahead.
Can you hear us, Agnieszka? We cannot hear you.
Agnieszka Vilela, your line is now unmuted. Please go ahead.
Thank you. I have three questions. The first one is on your announcement about the buybacks. We do not. I can hear you.
I can hear you. Can you hear us?
Can you hear me?
Yes, now we can.
Could you repeat the first question, Agnieszka?
No, we cannot hear. Sorry.
Can you hear me now?
Yes, yes, hello. Yes, yes, we hear you now.
Can you hear me?
Yes,
yes, I can hear you. Yes. Oh, perfect. Thank you. On the news about the buybacks, we do notice that you basically have the—can you hear me? Okay. On the buybacks, you reduced the pace of the buybacks by half, basically. Can you tell us what are the main drivers behind that? Do you want to change the balance between the buybacks and the dividends, or should we expect a higher acquisition pace?
I think we continue. We are halving it compared to last year, but it's the same pace as we had the last quarter, so it's not really. We see the leverage is slightly up. We want to have room for acquisitions. We believe we are at 1.2 now in the quarter, and that is kind of some cautiousness. By still continuing, we run rate of SEK 2 billion, which is still 3, 3, 4% of our market cap. That is the level that we believe is correct. There is no specific other reason for it. We believe this is the right level for time being at least. Also, as you noted, I mean.
The next question comes from Vivek Midha from Citi . Please go ahead.
Thank you very much, everyone. Good afternoon. Can you hear me well?
Yes, we hear you. Excellent.
Excellent. Thank you very much for taking my questions. I have two if I may. The first is just a quick clarification around what you're thinking for the guidance. Should we interpret when you say somewhat higher that could mean potentially something like low single digits organic growth for Q3? Given that you saw that improving trend over the course of the quarter, was that something you were already seeing in June all in including the automotive business? Thank you.
That is correct. I mean we're talking, let's say, solid organic, positive organic growth. I mean that means that maybe not five, but at least it's low single digit as you say. That is what we see at the moment. We are not really seeing an improvement in order intake in automotive. What we do expect, in quarter conversion, is going to go up. That is our expectation. We do expect automotive to continue to be in a negative territory, but we do expect it not to be at all as high as we saw in Q2. At the same time, we continue, or we believe also, that other core industrial segments will improve on the back of good order intake in Q2. Overall, it's kind of mixed. Still, we feel a bit cautious, to be honest.
The uncertainty is there, and we do expect some continued hiccups in terms of some communication happening in the quarter. We feel, on the back of it, we don't believe automotive can continue on this level. Once again, on the back of a solid order book in the other industrial segments and continued good development in LNG, in semiconductors, and in aerospace, overall we feel confident with this guidance.
Thank you. My second question is on the TSS margin. It sounds like you saw an unexpected drop off in automotive demand, but you still managed to keep the TSS margin stable sequentially. Could you mind elaborating on how you managed to do that? Should we think of this as a mix effect given lower margins in automotive, or was there something where you thought you could do an even better margin and you came in lower because of the automotive drop off? Thank you.
There's a slight positive mix effect, but that is kind of not the beneficial here. The beneficial is that we continue to improve. We are integrating acquisitions. We are driving kind of better efficiency coming from the integration of the acquisitions. Coming a lot from operational improvement, continued good kind of mix and price management. There is a lot in that toolbox which is pushing us in the right direction. We don't get the volume. Is it correct that you say that we are losing volume? That is why we feel, say more and more confident. If you now see a better industrial core, industrial demand, fluid power, pneumatic, and we don't see this kind of dramatic downturn in automotive, we are starting to be more positive that we're going to see, let's say, Sealing Solutions moving in the right direction. It's good execution overall.
We feel, once again, we feel actually it's a quarter moving Sealing Solutions, right direction. As I said with this kind of negative surprise coming from the automotive demand.
Thank you very much.
The next question comes from Erik Golrang from SEB. Please go ahead.
Thank you. Three questions. First one on Medical Solutions, I guess organically you're on about the same level as you were two years ago. No sign of all of those structural drivers you've been talking about. What's missing and what needs to change for medical to start showing some positive growth here.
Yeah, I mean there's a lot of signs. We see overall we're getting, let's say, the inflow of new inquiries is coming. It's a fairly long startup on new projects and we are a little bit exposed to the volatility of the customers here. We do feel firmly that we're moving in the right direction. We're getting the inflow we did expect, as you say, maybe slightly better organic growth. We do see activity levels up, quoting level is up, and overall demand is up. We are getting benefits from being kind of the most global, most global kind of liquid silicon supplier. We are getting more and more global contracts. We firmly believe overall it's moving in the right direction. There are bigger batches being bought.
I mean, if I remember correctly, we were plus 5% organically in Q1 and now it's minus three, and maybe we have to see it over a few more quarters. They're not buying weekly. Some of these customers are buying more, more kind of sporadic if I may say. There is a little bit of push, overall good order intake in the quarter, and we feel that we're overall moving in the right direction. I don't know to have the, let's say, the overall trend as you're referring to, Erik. I think we will get to, I don't know, Christofer, if you have a better view on the longer term trends on this one.
Yes, when we had the Capital Markets Day back in 2023, we said that this area was growing somewhere between 5% and 10% and we still stand by that. What has happened, Erik, as you know, all the similar kind of companies we are facing in the market, and you know the names yourselves, but they have been experiencing negative organic numbers for the past two years and that is all due to the stock reduction. We have actually outperformed all the others basically. As you recall, we had a 5% organic growth in Q1. Now it's down 3%. It's very volatile currently. We feel, looking at the order intake, which doesn't necessarily translate into much better in Q3, but a little bit further ahead we have quite good order intake now for this business area.
We are very confident that we will reach this 5% to 10% growth in the coming years.
We are still very happy with this development and we're still happy for development. We recognize the volatility, we recognize that we would like it to be more stable and hopefully the aim is of course to get there by growing it and by being a little bit more spread out on different customers and different geographies. The proof is in the padding. We recognize that. We are once again, as Christofer Sjögren said and I'm saying, we are confident that we are moving in the right direction.
Thank you. Second question on Sealing Solutions and the margin trend there, unless I'm mistaking it's been coming down now more or less every quarter for a couple of years. I guess, I mean there's volume behind that and there's some acquisition diluting it. At what point do you feel you need to do something structurally on the cost side to stabilize the margin in Sealing?
We have a stable, I mean we are the same margin now, I mean compared to a few years ago. We have made some sizable acquisitions integrating with substantially lower margins. Overall, we feel generally okay. We were running it north of 20, we want to get closer to 25 than 20 and that, as we said for many, many quarters now, we will need some, let's say, solid organic growth in order to get to make that happen. We feel now for the first time in, yeah, in some years but in several quarters at least, we see now that underlying, let's say, sentiment is improving and we hopefully will then see that kind of translation into rather better volumes. We feel confident that we are, are kind of going to get a very good leverage. We are working. Contribution margin is up, gross profit is up.
We keep the cost under control. I mean you said we have not been doing, we have been doing a lot of things. We are closing factories, we are moving manufacturing. Of course, I mean in order to keep this margin about 20. It's actually also, I mean, of course difficult but easy to, in comparison with our competitors, actually a fairly good development. We feel also that we have this very much under control and once again we, we need some volumes in order to get this leverage, let's say, this improved drop through by the bigger volumes. I mean we, we feel also here that is moving in the right direction and we're keeping it stable, good cash.
So.
It is actually still a very, very good performing business area.
Thank you. The final question, I want to come back to, I think it was the first question on buybacks and your priorities going forward. I was cut out there from the answer. So $2 billion in run rate, is that now? I mean, when you first started and said $4 billion and that was the level that was going to hold until you said it's too big. Is that sort of the new normal where we think it should be on an annual basis ahead?
That is what we run at the moment. That is where we have it at the moment.
I think also fair to say, Erik, that we have already bought back almost 16% of all shares since we started the share buyback program.
Yes.
I think, I don't know the figure here, but it's SEK 20 billion. SEK 20, SEK 22 billion or something like that, give or take share buybacks.
It's 15.9 to be very correct, that we have bought number of shares from the start.
Yes, we feel it's less important for us to keep it going and keep it running. Now we feel it's just more. We still continue, as you say, $2 billion run rate, and then, I mean, we are still having room then to continue to make acquisitions and to be able to invest and to bring it better. We feel this is a long term effort. Of course, whether it's $2 billion or $4 billion, that's a difference. Nevertheless, I think the importance for us is that we continue to do buybacks and we continue to do that with the long term view in focus.
Okay, thank you. That's it.
Thank you.
Agnieszka Vilela, please push number five on your telephone to come back to queue again. The next question comes from Hampus Engellau from Handelsbanken. Please go ahead.
Thank you very much. Can you hear me?
Yes.
Excellent. I mean, two questions on my side, just a clarification on the more positive outlook. Would it be possible for you to add some more flavor on what parts has become better sequentially? Maybe end markets and also geographies. On the auto side, have you come to a point where you're starting to do some capacity adjustments, headcount, etc. there or are you seeing some proofs of improvement?
I mean, we basically see improvements in all geographies and in all segments except automotive. To simplify, then of course you have some negatives in terms of some specific order intake for rail, specific order intake for oil hoses or stuff. Overall, we see the sentiment is improving more or less everywhere. We do not see really firmly in the construction, residential construction or commercial construction, but that's kind of a small segment of ours. On the other side, we don't see a deterioration at least anymore there. Overall, the simple question and the honest question is that we see improvement in all geographies and we see improvements in all segments except automotive. Automotive has been strange and we are of course adjusting short term by, let's say, phasing out and adjusting the, I should say, the capacity in various ways.
We are not at the moment addressing it structurally, if you say by looking at factory closures or looking at some structural changes. We are adjusting this with short term in order to manage this dramatic downturn that we've seen here in the last few months actually. We do not see this being possible that you continue to do north of 10% negative organic growth or organic sales when, let's say, car manufacturing is continuing with, I don't know exactly the latest data, but a flattish or slight negative. We do see this as, we firmly believe that this is kind of inventory reductions and that it cannot continue to reduce inventory with this kind of pace.
With that said, we see that the order intake in automotive is very short, very short and we don't really have customers ordering, let's say, for the next 6, 9, 12 months that we had historically. The order book, although substantially smaller, is also substantially shorter. That is why the uncertainty is of course still around. Overall, looking at it, our estimation is that it cannot continue on the current kind of negative development.
Fair enough, thank you.
The next question comes from Timothy Lee from Barclays . Please go ahead.
Hi, thanks for taking my question. My first question is about pricing. Can you please comment a little bit about any price actions that you have made after the tariffs, and do you see other competitors doing any pricing activities?
Generally we'd be happy. I mean, as you know Trelleborg, in the vast majority of our sales we are single sourced for that specific applications and we are generally also a very small part of the total cost for the manufacturer. With that in mind, we have adjusted basically fully for the tariffs impact. There are a few very simple, very single, very small exceptions where it cannot be done due to contractual or project related sales. Overall we feel that we have not absorbed any tariffs ourselves. We have also benefited a little bit from this since we have a more regional setup and we have regional manufacturing. We have actually been benefiting in a few areas on that where our competitor has been impacted by the tariffs. Overall we do not see any tariff impact on the pricing. Overall, I would say pricing environment is still relatively good.
I mean the customers are cautious and they don't really invest a lot in switching suppliers and getting new approvals. Inflation is also generally on a fairly low level in terms of raw material, salary inflation, and stuff is getting more stable. Overall we have kind of improved what we say, our gross profit and our contribution margin. Pricing is kind of not really an issue for us, to be honest. Timothy.
Right, understood, very helpful. My second question is about your margin target. I think in the first two quarters we were around 18% plus that kind of adjusted EBITDA margin. I think if you are going to reach your 20% target it means we need a very substantial improvement in terms of margin in the next couple of quarters. How do you feel this margin target to be a realistic one by the end of this year?
No, no, this is very much in range, and I mean we feel that getting a little bit, we don't need dramatically higher volumes, but a little bit some more higher volumes, especially in the core segments of TSS, that then we will get there. I mean we also want to, as I say, we're talking about the run rate for the margin, it's not the full year margin for 2025, and we still feel it's within range. It will require that the kind of core industrial markets improve here in the second part of the year, but we still feel that's possible. If it happens, then we very much feel that the margin target is within range. I mean we talk about a few percentage points up here in the right segments, and then we're going to get there.
Of course, we have our kind of estimates and the way we calculate, and we have not been, we are not giving up yet. Once again, it will require that we get the organic sales into positive territory again.
I understood. Thank you very much.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Yeah, thanks to all of you for listening in and of course we are available for follow-up questions. Both myself and Fredrik and especially Christofer. If you have any lesser remaining questions or any new questions pop up, then please make contact and we will be happy to support you in any way we can. With that, let's have a nice continuation of the European summer and enjoy and speak and meet you soon. Take care. Thank you.