Conference for Q4 2021. For the first part of this call, all participants will be in listening only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present Peter Nilsson, CEO, and Fredrik Nilsson, CFO. Speakers, please begin.
Thank you. Peter speaking here, and as already mentioned, I will be supported on this call by Fredrik Nilsson. Our CFO will guide you through the financial figures. Before Fredrik is doing this, we will run through some overall comments and also some general comments for each of our three business areas. While doing this, of course, as usual, we will use as kind of extra information the slides which is displayed on our homepage. I'm starting with that. First page, Trelleborg interim report for Q4 2021, and then quickly moving to page 2, the agenda. Once again, as usual, starting with highlights, comments on business areas, financial then by Fredrik, and then a summary and some outlook for the running quarter, and then finishing off with the Q&A session as usual.
Turning to page 3, heading strong finish to a record year. I mean, this is best ever quarter four for us in terms of sales and in terms of EBIT and also overall for the full year, record sales, record margin and record EBIT, and also very strong cash flow. For us this is a very good year and also finishing off in a good way. For Q4 isolated sales ending up, 15% ahead of last year as EUR 8.8 billion. Organic sales very strong, continue to be very strong at 14%, and we're also adding another 1% on acquisitions, so total increase of 15. EBIT up by 12%, ending up as slightly north of SEK 1.2 billion, and then equals to margin 13.8%.
As I already comment, highest fourth quarter sales and EBIT to date for us. Items affecting comparability at SEK 160 million in the quarter, and that is ongoing restructuring projects, ongoing improvements of the structure which is being charged in this way. Cash flow a little bit shy of SEK 1 billion, impacted of course. Fredrik will comment more on that, but of course, as we have this strong increase of sales, working capital is up, but we feel that everything is well under control, and I mean, it's nothing really to be worried about. It's a strong cash flow, strong cash conversion, but of course, once again, impacted by the strong sales increase throughout the year.
Dividend is proposed at SEK 5.50, which is kind of 10% up compared to a year ago, to be confirmed at the AGM here in April. Note that we've done two smaller acquisitions in the quarter, VB Seals in North America, which is then supporting our geographical position and somewhat also widening our offering in this small service-oriented concept that we have within Sealing Solutions and putting priority on. Very strategically, although small as well, Alpha Engineered Composites, a small add-on to a good business that we already have within Industrial Solutions in North America. Two good acquisitions, although on the smaller side, but once again bringing in benefits in multiple dimensions. This is overall comments, and then turning to page 4 on the geographical sales development.
Strong overall, as already commented at 14, where North America is bringing in a lot, very strong organic sales in North America, 24% up compared to a kind of solid minus year ago. Nevertheless, we see North America is strong. South America also very strong, but of course with smaller sales, smaller share of sales in total, but nevertheless very strong. Europe also very solid at 10%, while Asia and other markets slightly slower, but nevertheless at a very healthy 8%. Strong development in all geographical areas throughout the world. Turning to page 5, agenda again, business areas. Quickly turning to page 6 for comments on the individual business areas, starting with Industrial Solutions.
Solid organic sales in the quarter, 9% up, sales stable in Europe, and strong increases here in North America and Asia. We note especially the market with this related construction, aerospace, and also trains is, let's say, bringing in good benefit for us. Behind the strong sales increase of organic sales growth of 7%, we still have, let's say, shrinking of our automotive sales, although small in the business areas, but of course impacting the overall.
We also note that EBIT and margin decreased even though we kind of managed to increase sales, and that is due to the fact that the comp compared to a year ago was quite challenging since we a year ago, which we then commented on then and also have commented since what was extraordinarily strong and the best quarter by far ever for Sealing Solutions a year ago. The comps are very challenging due to the fact that a year ago, we had some very good project sales in the quarter, which then created good margin drop through and good profit.
By looking at the individual quarter without kind of really comparing with a year ago, 12.7% at EBIT, which is a strong quarter in the way and we are overall positive on Industrial Solutions going in, moving forward with the strong order books and with, let's say, clear focus on continuing climbing the value ladder as we have been, let's say, telling the story before. Leaving then Industrial Solutions, turning to page 7, Trelleborg Sealing Solutions, very strong organic sales at 14%, where we know the general industry, and of course aerospace as well is growing substantially and basically in all geographies is benefiting.
Of course, also here, where automotive is slightly bigger, then of course, also behind these very strong sales figures, we have although a negative development actually coming from automotive, although not very major, but nevertheless, it's impacting us and pushing us in a negative direction if you look only at that. Healthcare and medical, solid growth. I mean, of course, not on the levels of that we have on the full business area, but this has been stable and it's a very solid high single-digit growth in the quarter. Although we still note that there is still what we call elective surgeries is still a little bit slow.
We have a few, let's say, some exposure into that area, and we know that in this area is still not really speeding up yet. EBITDA margin drop-through is good on this level, and we are able to increase the EBIT margin by 2 percentage points, and profit is up by almost 30%. Very strong drop-through and strong development, of course, good drop-through from the higher volumes and also generally a very good cost control throughout the business area. Good development also here. We have a very solid order book going forward, and we feel confident on the next few quarters. Turning to page 8. Heading strong demand for all tire categories. We're actually moving very strong in all areas.
Organic sales is, let's say, 25%, but of course, some of that being pricing as well. Nevertheless, the volumes is also moving very good in all areas, basically, both ag tires, material handling, construction tires, and basic in all regions. It's a very, very solid development. We continue to put priority on OE customers for long-term benefits by being, let's say, having the OE fitting, we will get a higher aftermarket share in the future. That's of course, some little bit short-term pain, but long-term gain. This is of course, something that we continue with this strategy, and we continue to believe that this is the right way of doing it.
Also in the quarter, I mean, with this high volume, you could expect a higher drop-through, but there's still this delay, the price impact from price increases is being implemented, and we still believe that it's going to move to a substantially higher margin here in the next few quarters. We are still impacted in the quarter by high raw materials, freight, and energy prices, which are kicking in also in Q4. With this is something which is pushing another round of price increases, and this is what's kind of impacting the EBIT and the margin as well, of course. We once again feel certain that this will be adjusted already from first of January, new price increases is kicking in and we will continue to adjust. It's.
I mean, it's never easy to increase pricing, but with this kind of demand situation we see at the moment, we feel confident that that's gonna be happening and we are still kind of confident on this kind of guidance that we did on the capital market side, that we're gonna get to around 15% here, let's say, in the next few quarters. This is kind of the comments on the business areas. Then agenda, page 9, financials, and leaving then to Fredrik on page 10 to guide us through this.
Thank you, Peter. Let's then move to page 10 and look at the sales development. Organic sales in the quarter amounted to 14% with good organic growth in all three business areas. If we compare to 2019, we have an organic growth of 13% in the quarter. If we look at the total reported net sales, it was 15% in the quarter, and we have 1% positive impact from acquisitions during the quarter. Looking at year- to- date, the organic growth was 16%. If we then move to page 11 and showing historical organic growth, the fourth quarter was another quarter with strong organic growth in historical context, as you can see in the chart. Moving on to page 12, showing the quarterly sales on a rolling 12-month basis.
The SEK 33.8 billion in sales for the full year was a record high for continuing operations. Moving on to page 13, looking at the EBIT, we have a record high EBIT for our fourth quarter. It increased by 12% to SEK 1.211 billion. As Peter mentioned, it's particularly driven by the profit growth in Sealing Solutions and Wheel Systems. In the result, there was also small FX impact from translation of foreign subsidiaries of only SEK 3 million in the quarter, so negligible in the larger scale. EBIT margin decreased from 14.2% to 13.8%. Industrial Solutions had a very strong quarter due to some large project business in 2020. Wheel Systems, as Peter mentioned, continued to be impacted by high raw material prices and increased costs for freight and energy.
Going to page 14, looking at EBIT and EBIT margin. For the full year, EBIT excluding items affecting comparability increased by 26% to SEK 5.151 billion. Trelleborg was for the first time above SEK 5 billion in EBIT for a full year, and the EBIT margin of 15.2% also at the record level. Moving to page 15, profit and loss statement. Some further details. We have items affecting comparability for -SEK 160 million in the quarter, and it was entirely related to the restructuring cost. Financial net declined from SEK 68 million- SEK 43 million in the quarter, and the lower financial expenses are mainly due to the lower debt level, so we are in fact paying lower interest costs. Tax rate for the quarter was slightly higher, 27%.
This quarter, the fourth, was impacted by some transfer pricing adjustments to be in line with OECD transfer pricing guidelines for the full year. I would like to highlight that our early guidance of underlying tax rate of 25% still stands for the full year. Moving to page 16, earnings per share up 10% to SEK 3.9 excluding items affecting comparability in the quarter. For the full year, EPS improved by 34% to SEK 13.95 . Moving to page 17, cash flow. Operating cash flow in the quarter amounted to SEK 989 million versus SEK 1.714 billion last year. We have a good positive contribution from increased EBITDA. As you can see in the chart, we have a less positive impact from working capital.
I would like to highlight that the 2020 cash flow from working capital was exceptionally strong, and we still have a positive cash flow in the fourth quarter 2021 from working capital, despite we have tied up more in inventory due to the strong business momentum we have. As Peter also mentioned, we have a higher CapEx level in 2021 versus 2020. Moving on to page 18, cash flow conversion, 84% on the last 12 months, and it just reflects the higher business activities, which require some additional working capital. Moving on to page 19, gearing and leverage development. The net debt equity ratio continued to improve and is now down to 25%. If we look at net debt divided by the EBITDA, we have a solid improvement from 1.7 down to 1.2.
If we then turn to page 20, a little quick recap of the updated financial targets from our Capital Markets Day in December. We kept our sales growth ambition of 5%-8%, but I would like to highlight that there is a clear ambition to accelerate the organic growth in this target for the coming years. EBIT margin, we raised that from 15%-16%, and we also have return on capital employed as a new target, and we have the ambition here to at least reach the 14%. I would also like to stress that the new target should be seen as a midterm target. Moving on to page 21. I will finish up this section by some financial guidelines for 2022. CapEx of SEK 1.4, the same level as we have seen now in 2021.
Restructuring cost of around SEK 300 million. As I said earlier, an underlying tax rate of around 25%. We expect amortization of intangible assets of around SEK 375 million. By that, I would like to hand back the microphone to Peter.
Great, Fredrik. Thanks. Agenda slide again, page 22. Quickly turning over to page 23. Recap, strong finish to record year. Fredrik has highlighted, I commented both for, let's say, highest sales, highest profit, and highest margin for us, and also with a very solid cash flow throughout the year. Looking individually at, as I say, more focused on Q4, same on acquisitions, EBIT up by 12%, margin 30.8%, slightly lower than a year ago, impacted primarily by this extraordinary Q4 a year ago in Industrial Solutions, which is pushing this margin down somewhat. Although highest quarter sales and higher absolute EBIT ever for a Q4 for us.
Cash flow is strong, almost SEK 1 billion, but as we already commented, higher business activity is consuming some working capital and also, of course, this higher business activity is also pushing up CapEx a little bit. Nevertheless, we feel very strong cash conversion and strong cash control in all areas. Proposal is to increase the dividend to SEK 5.50. Also, commenting on two smaller acquisitions executed in the quarter. Also some other, Fredrik already highlighted that, but nevertheless, we decided to include some main messages from the Capital Markets Day, which was held here beginning of December. Main message here, where there are plenty of slides, if you want to go back, they're on our webpage. I mean, we see that Trelleborg, the platform we have is stronger than ever.
We have a strong balance sheet, we have good businesses all over, and we know what we want to do. We have been working the last two years on exit of some of these business development units, and that has now been executed, even though we have not closed kind of the final deal here related to Printing Solutions, but it's signed, and we think that's a matter of time. If you look at that, and also as we presented on the Capital Markets Day, the kind of underlying growth rate and also EBIT margin actually improves while, when this is fully executed, we also highlighted some segments which we would be more focusing on, which we then internally call speedboats.
That is where we're gonna allocate more resources and make sure that we get going in those areas. We also said that we are focusing with the strong balance sheet and with the, let's say, strong cash flow going forward, we also see that we will increase M&A. I mean, we have been commenting before on valuations and that it may be a first signs of a shift here now in this running quarter or the last quarter where we see that it's more processes being started. I think also there is a more value to be created by making M&A and maybe not overpaying for everything. That is an area where we see some more opportunities showing. We also maintain that we have, let's say, slightly different strategies. I mean, we call it bespoke strategies.
Each of the Business Areas have their own strategy, they have their own priority. We have a very clear game plan for each of our Business Areas. Also in the Capital Markets Day, we announced this, that we're gonna hold then an extraordinary general meeting. What was held by the end of last year, we now have kind of authorization to initiate the share buyback program, where we also have been, of course, I mean, as you understand from this authorization, we have been in a kind of a closed period since we are end of the year, and this is gonna now kick off, and we're gonna start that shortly. So that is the comments on that. Then finishing up before the Q&A, some outlooks.
We are commenting on the outlook for the running quarter to be on par with a very strong fourth quarter. We are entering into 2022 with the best order books ever. Very solid order books basically in all areas. Of course, we still have this little bit depressed sales, I don't say demand, but the depressed sales coming in from automotive areas, but we do expect that to improve also here. We don't know, little bit beyond our control, of course, but we do see that, it's gonna improve. It's not gonna get worse. Maybe on this as well, just to comment on the outlook, just to clarify that also that on Wheel Systems, which has been little bit delayed on the price increases, we remain confident that we're gonna.
These price increases kicking in here from Q1 and some also coming into Q2, that's gonna go and be well executed, and we're gonna get the benefits from that as we move forward here. Then, of course, we still have to highlight there's still pandemic going on. I mean, even though this seems easing kicking in in a few areas, but it's still very high sick leaves in certain of our factories, and we still have kind of lack of people in certain areas and who knows it's gonna develop. We still have to keep this kind of comment since this is once again outside of our control. We feel confident that we will manage in a good way, but nevertheless, there is a risk that something will impact us short- term.
That, I guess, is the official presentation, if I may say, moving to the end and then quickly over to Q&A and opening it up for questions. Please go ahead.
Thank you. If you do have a question for the speakers please press star one on your telephone keypad. If you wish to withdraw your question you may do so by pressing star two to cancel. There will be a brief pause while questions are being registered. Our first question comes from Klas Bergelind with Citi. Please go ahead.
Thank you. Hi. Hi, Peter and Fredrik. Klas at Citi. For the first question I had is on other operating income and expenses. It came in a pretty big positive versus what we've seen in the past. I guess that this is the Czech operation that is still at the group level not been discontinued. If you could clarify, Fredrik, if it's not a capital gain or something else in there, because it appears as if the price cost development was perhaps a bit more challenged than first meets the eye. I don't think people had that big positive in the forecast in the P&L. I'll start there. Thank you.
Thank you, Klas. I will say it's three main components. It's the Fora money that several Swedish or all Swedish companies has received during the fourth quarter. That's one part of it. It's the excess return of some pension money that has been paid back to Swedish enterprises during the fourth quarter.
There is some operational effects that was negative in the fourth quarter 2020 that is now turning a little bit positive in 2021. There is also some sales of fixed assets, and that's the smallest amount.
Okay. I'm trying to understand then, you know, when I look at the division.
Also, Klas, just to mention, it's not part of the adjusted EBIT. It's reported outside the adjusted EBIT.
Okay. When I'm looking at P&L, it looks like it's part of the adjusted EBIT, but maybe I got that wrong then. Okay, there is nothing in terms of that. Because most of the Czech operation is in discontinued, but is there anything at group level still that is contributing positively to that line? Or is that completely outside?
Not sure I understand. The only thing we have left on the asset held for sale is the printing blankets.
All right. Okay. No, I was just wondering. I got a lot of questions on this. Okay. My second one is on Wheel Systems and the margin. You still say you're confident that the margin will improve here. At the CMD, I think you said, Peter, that it can take off in Wheel Systems and actually quite soon. Energy cost is a new cost headwind to the margin and could come through with a lag. Would you say that this is the biggest risk to the margin into the first quarter? Because expectations now for Wheel Systems is for the margin to jump from 10%-15% into the first quarter. Yeah, would be interested to hear your thoughts.
That is, let's say, roughly our plan as well. We remain there. I mean, the uncertainty here, I mean, has been a little bit energy prices. I mean, that has been the extra add-on. We once again, Klas, we feel we're well under control. I think we were quite open that we're gonna remain with this challenge also in Q4, and we do expect it to turn the corner here in Q1. That is really our view on it still. There's no change on that.
Okay. My very final one is also on Wheel Systems, sorry. So you had quite a big step up in growth. I had 14% and already had quite a big price increase in the number. You came in at 25. That seems like it's underlying demand improving quarter-on-quarter. It wasn't only pricing that drove that delta, right? It seems like it's a big volume effect. I just want to understand that.
Yeah, there is a substantial volume effect and a substantial price. We don't really want to give the share, but I mean that there is, let's say, two-digit on both.
Okay. Thank you.
Our next question comes from Hampus Engellau with Handelsbanken. Please go ahead.
Thank you. Two questions from me. I'm sorry to come back on Wheels, but when you have raised prices, is this prices just compensating the cost increase? Or is there some inbuilt margin expansion here, given your comments on the profitability going forward? The 50% target within a few quarters, it would be interesting if you could maybe discuss a bit on how much of that is demand trending up now, pricing, as was mentioned earlier, and also cost measures executed by you guys. That is maybe too many questions in my first question. I'm sorry for that. The last question is an easy peasy one. That's just if you have any further comments on this rumored buying interest on Wheel Systems. I'll stop there, Peter.
I mean, of course it's a mix of everything. On demand is very good in Wheel. I mean, we are struggling to cope with the demand as our competitors. Demand is very high from OE. Demand is high also from the aftermarket. But there is, of course, like we have commented before, since we have, let's say, give or take 50%, let's say, OE exposure. The OE is kind of with an automatic price formula, and that is kicking in with a kind of step-by-step on a 6- to 9-month delay. We all know that price increases for kind of 50% of the sales is kicking in by a formula. That is something which is very certain.
On the aftermarket, of course, I mean, we have in this high demand, we have partly overcompensated for the price increases since the demand is very high. That is kind of something which is benefiting on top of the kind of these automatic price increases. Of course, there is always some efficiency measures kicking in. I mean, the major thing here in getting the margin is simply to adjust the pricing to the underlying cost situation. We once again, I mean, of course, the proof is in the pudding, and then we looking forward to prove what we're saying here in Q1. With regards to this rumor that was kind of in the media and that we had to comment on, there's not much more to say.
I mean, it's true that there was some interest, and we are, let's say, keeping these conversations going. If there is anything to comment, we will get back and comment on that. I'm sorry I cannot say any more about this than we already stated in the press release here, during Christmas.
Fair and square. Just to follow up then on Wheels on the margin then. Am I reading you right that you are still kind of suffering a bit from having too much OE business compared to aftermarket, even though that you generally are underexposed to aftermarket? Can you see that kind of normalizing to your normal levels within 2022, or how should we think about that?
We still see a very strong demand from OE, at least here in the first six months, and then we have to see at the end of the year how that will turn. That is, I mean, that is something that we are. Let's say by decision really deciding to suffer a little bit on the margin, due to the fact that we firmly believe that the refitting will benefit us going forward. I mean, we will be able to reallocate if we wanted to, but then of course we will be disappointed and we will kind of allow others to have their refitting. We don't expect that mix really to improve here in the next few months.
The improvement in margin will solely come from adjusting for a higher cost base and not really from any improved mix benefits.
Thank you.
Our next question comes from Erik Golrang with SEB. Please go ahead.
Thank you. I have three questions. The first one, of course, on Wheel Systems and prices. To get a sense of the challenge here to get pricing through, how much do you have to raise prices from where we are to cover 2021 and expected 2022 cost headwinds? You know, based on your experience, how confident are you that you will actually be able to realize that? That's the first question. The second one, if you could perhaps have a sense to what extent, I mean, you talk about good orders, high order books. Are you concerned at all that there's sort of double ordering in the order book with customers eager to get delivery, so they place a bit of extra orders?
If so, is there a particular sort of area where you see risks of demand being unrealistically high? Then the third question on sealing, and if you could say something just about the magnitude of the organic sales decline for the auto parts in sealing. Thank you.
On the TWS pricing, we can say that is kind of more or less the pricing is agreed formulas, and we talk about hundreds of millions SEK on pricing increases. I don't really want to comment on that. I mean, we are confident. We are very confident that these price increases will kick in because the majority of it is actually coming from an agreed formula with OE. That is something which is going to kick in.
Once again, just to remind you on why this is the case is usually when they sell new tractors or sell new harvesters, I mean, they usually sell them several months ahead, and they want to have a firm pricing also on the tires there. That is happening on the pricing when the cost on the tires is going up, or the cost is going down, it's still going to happen. This is kind of an agreed formula, same as you have in the car OE industry and the truck OE industry. That is the way the industry is. That is why we feel very confident that these prices is going to kick in. Of course, if you do the calculation, we talk about, yeah, total for price increases year-on-year.
I mean, you talk, let's say, ahead of SEK 500 million in total. These price increases is basically already agreed. The risk you might say is more in the aftermarket that is more exposed to the kind of general market terms. There also we feel at the moment, of course, it can change. I mean, for the foreseeable future, we foresee the demand is good, and we see also that the price increases there is firm. That is where it might change if the demand is changing or the raw material pricing is changing. That is where the exposure is. The exposure is really not in the OE. The OE is where we're lacking price increases year- on- year.
We feel very confident that that's going to be compensated. I mean, the risk here, of course, what's happening with underlying raw materials, underlying costs, if that's continuing up, then we will continue to be in delay. But if you see the raw material, energy pricing starting to go down, then of course, we will be in a positive territory instead. That is the uncertainty. I mean, this is not nothing really strange. I mean, if you look into other tire companies which are exposed into other tire segments, you will see the same development. This is the industry, and that is something where we need to accept and work with. With order book, I mean, it's a fair question you have, what is the strength of the order book.
We see a very strong order book, but I mean, not necessarily the strength in the order book is not necessarily for the next six months strength. I mean, it is true that the length of the order book is growing. Of course, that creates a higher uncertainty whether the order book is going to stay solid or whether it's going by. As we see it today, it's growing in basically all dimensions. I mean, if we talk about tens of percentage points higher order book than sales in a way. The growth in order book continue to outgrow the sales, and that is where it's getting stronger and stronger.
Of course, we feel very confident that at least for the first six months of this year, it's going to be very solid. I mean, also beyond that, we have never had more orders kind of 6+ months ahead than we have at the moment. Whether that remain, I mean, we have to wait and see. I mean, we can only note that the order book is very strong in, yeah, basically all dimensions. Also where maybe the change a little bit, if I just, let's say, comment a little bit more about the change in the order book, where you see a very strong order book is little bit on this, call it late cyclical, where we see less a more big construction related like harvesters, tunnels.
These kind of areas has also been very, very strong here in the last six months. That is also where the order book shouldn't say it's been weak, but that is also where we've seen a strong growth in those areas, which is by definition a bit longer order book, but not necessarily uncertain. That is some further comments on the order book. I mean, when you got to sealing and automotive, I mean, now a major share of the sealing exposure to automotive is off the market, which has not been that heavily impacted as they are we. We don't talk about, let's say tens of percentage there. We talk about, let's say, single-digit shrinkage of automotive for us. That I think we're. I want to say.
I don't know, Erik, if you want to do any follow-ups on that.
No, that's perfectly fine. Thank you so much.
Sure.
Our next question comes from Agnieszka Vilela with Nordea. Please go ahead.
Thank you. I have three questions, and I will ask them one by one. Starting with the comment on the other operating income and expenses. Fredrik, I didn't really catch what you said about that. It was not included in the adjusted EBIT that you reported. I thought that the only non-recurring items that you adjusted the EBIT for were the SEK 160 million restructuring costs. If we could start with that.
I think there has been some misunderstanding. It's part of. You are absolutely right. You have the restructure SEK 160 and then other operating income is part of the normal EBIT. Then of course, the other income and cost is split between the business area.
It's basically supporting the business area in a way you can say?
Yeah, absolutely.
What should we expect going forward for this line? I mean, it could be quite volatile, but do you expect positive figures for other operating income?
No, I mean, the pension payback was a one-off item that we got here in the fourth quarter, so I don't expect that to be recurring. The sales of the fixed asset, which was the smaller amount, is also a one-off item. Then of course, FX, it can go up and down. I mean, it was negative in Q4 2020, and then it was positive here in Q4 2021. I mean, that can go up and down a little bit between the quarters.
Great. Thank you. Very clear. My second question is on the share buybacks. Obviously, you have the mandate now. My question is really, when do you plan to start it? Will it be opportunistic when buying back your shares? I mean, will you use any kind of valuation model for your shares? Will it be a kind of deciding factor for buying back?
I mean, we will comment on that. I mean, we've been in a kind of a close period, you know, as you understand. I mean, because we cannot really act. Even though we had a mandate, we couldn't act here in January. Now since we're releasing the report, we will start to work with that. In a few weeks, we will comment more about this. We don't really want to comment more on it at the moment. We will get back with more information when this is starting.
Thank you, Peter. My last question is on the cost headwinds. Obviously, we have now the buckets of both raw materials, energy prices and labor costs, and the two latter ones accelerated during Q4. Could you give us a glimpse of what's happening with raw material prices for you? Also remind us if you're buying on spot or on contract. Given where you are when it comes to purchasing, do you see a large headwind on raw material costs in 2022 compared to 2021?
Yeah. First, I mean, just a general comment. We are not concerned about this. We have good pricing power, and I think we have shown that we are able to compensate. We have in most of the businesses. Outside of Wheel Systems, we are in most areas single source, and we have a good relation with our customers. We are appreciated by the customers, and if we do fair price adjustments, they are generally accepted. We don't feel any concern about this. Of course, we cannot act ahead of kind of unknown incidents. I mean, of course, we had this. To be honest, we were caught a little bit by surprise on this very, let's say, sharp rise in raw materials here in Q4.
We are in delay for some of that compensation. That is valid, I mean, to smaller dimensions for Industrial Solutions, smaller dimension for Sealing. The majority of that is impacting also Wheel Systems. We are implementing new price increases. They are kicking in here from first of January. We do expect, let's say, price headwinds, but price-to-cost of raw materials to remain on a higher level in 2022 compared to 2021, but we have already adjusted for it. Then the setup in Wheel Systems, unfortunately, there is, let's say, a few months delay in getting that compensation. What I said many times in this call, we feel confident that this is gonna happen, although with kind of a three-month delay on this compensation.
I mean, we're talking about raw materials. I think the underlying raw material pricing is relatively flat from Q4 going into Q1. There are certain raw materials that also have an impact from this higher energy prices, and that is some energy surcharges that need to be addressed. I mean, it's a far lower dimension than what we've seen throughout 2021. We don't see a cost inflation in raw materials, but in a much lesser extent than we saw throughout 2021. I mean, that is manageable. Then of course, correctly stated by you, we do expect like everybody else also a salary inflation. I mean, we're not really concerned about that as well. I mean, we're managing in a good way and we feel confident.
I think you can see that also in our overall margin once again on Sealing Solutions and Industrial Solutions, that we have been managing these very sharp increases throughout 2021, and once again with delay in Wheel Systems. We feel it's well under control. There is cost inflation, yes, but we feel confident that we're going to be able to compensate for that.
Great. Thank you.
Our next question comes from Douglas Lindahl with DNB. Please go ahead.
Hello, Peter and Fredrik. I had a question on restructuring. I think you guided for SEK 400 million in 2021. It came in below that, while you're now guiding for SEK 300 million in 2022. Is there some spillover effect from 2021 into 2022? Or what's the reason for the sort of lower than expected restructuring costs in 2021?
I mean, you ask it to Fredrik can comment later, but this is of course an assumption that we do. I mean, part of this restructuring is coming from acquisitions, and we integrate acquisitions, and we have been able to do less acquisitions in 2021 than we kind of assumed that we're targeting, and that is kind of impacting that we have a lower restructuring. That of course also overflow into 2022, that it will be slightly lower than this previous guidance of SEK 400 million, which is partly an adjustment to a little bit lower acquisitions also in 2021. I think that is. It's still on the same ballpark. I mean, all this lesser restructuring is a good payback, and we don't see that as we are not stopping it on the way.
We are still addressing it, but it's partly impacted by acquisitions. I don't know, Fredrik, if you want to add anything else.
No, I mean, it's a project that we have approved and decided going back in 2020, 2021, and expect to approve here in 2022. All moving according to plan. That's also, as we mentioned at the Capital Markets Day, we said that it will be less than 1% of our sales. The SEK 300 million we are now commenting upon fits very well into that range.
If we are able to do some clever acquisitions, then of course that will most likely go up. Then we will, of course, re-guide. At the moment, the best estimate we can do is it's going to end up SEK 300 million.
Okay. Thank you.
As a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question comes from Robert Davies with Morgan Stanley. Please go ahead.
Yes. Morning. Thanks for taking my questions. My first question was just jumping back into Industrial Solutions. I know you mentioned the tough comparable margin from the projects for Q 20. Could you just quantify the benefit there? Because obviously through the first three quarters of this year, you've seen a reasonable kind of margin improvement on sort of positive top-line growth. Just wondered if you could kind of quantify how big the sort of, I guess, the one-off effects we can kind of figure out what the underlying operating leverage was in that business in the fourth quarter. Thank you.
Yeah, we feel that 12.7% is actually a good. I mean, we had 12% as a target, so there is still some drop-through on that one. I mean, we're talking about a few percentage points benefit compared to a year ago. We still feel that the well-managed leverage is good, volumes is kicking in. We feel confident that business is well managed, and then we are kind of slowly pushing the margin up. We committed on Capital Markets Day that we're going to go for more value, climbing the value ladder as we defined it then. I mean, that is still the overall ambition for this business area. It's difficult to give you exactly guidance on that, but we still feel it's well managed.
Drop-through is there. We are focusing a lot on what's called contribution margin. We feel that that is kind of definitely moving in the right area. We had a one-off positive a year ago, and that, of course, making the explanation in this quarter somewhat more difficult. Nevertheless, I mean, we don't want to send any negative signals rather the positive signals that we are doing it in a good way.
That's great. Thank you. I had two more questions. One was just around.
Robert, maybe only to give you one story just to highlight. If you look at Q4 in 2019, we were at 11.2%. Just to give you, let's say that 11.2%, and now we're at 12.7%. Of course, compared to that at a running rate in Q4 2019, if you use that as a benchmark, of course, it's a substantial uptick.
Yeah. No, I see. Okay. Thank you. Then my two other questions, one was on the comment you'd made, I think from the Sealing Solutions business around the components, the shortages holding back auto. Can you give us some sort of sense of the magnitude of that impact? And is that still an issue now? Is it sort of minor, major? Can you sort of quantify that impact and where we are in that year- to- date? Three, thank you.
As I said, I mean, let's say a meaningful part of our exposure in Sealing Solutions Automotive is aftermarket. That has not been really impacted by this at all. We do know. I don't want to give you a figure, but we talk about low, let's say, single-digit percentage shrinkage in the quarter on the total automotive exposure, where maybe the OE is a bit higher and then the aftermarket exposure is less. I think aftermarket, I don't have the figure exactly in front of me, but I mean, the aftermarket exposure in Sealing Solutions Automotive was growing on a low single-digit percentage. But overall, we are not concerned about that.
I mean, we don't expect it. We expect it to be slightly better here in Q1 than Q2, but we still expect some headwinds from these shortages, which is impacting that industry.
Okay, thank you. My last one was just on.
I guess the portfolio, you mentioned, I think earlier in the call that the remaining assets left for sale were just the printing blanket business. Is there anything kind of looking back now over the last two years that you think could be a further candidate to sort of move into a business and development or sort of, you know, ultimately sell? Or are you pretty happy with everything that, you know, you originally kind of put in that pot of the three different divisions? You're happy with all the bits that are there or is there anything else still that you think about getting rid of?
No. I mean, we are happy with what we have. It's always, I mean, we are moving forward. If somebody coming in and offering something on something, we will always look at it. There is nothing really up for sale. There is nothing that we're actively selling. Say, if somebody knocking on the door, we will of course always look at it. I mean, that is our job.
Sure.
If somebody steps in and offering something, we have to look at it. Once again, it's not really anything which we are not happy with, and there's nothing that we believe that we cannot develop in a good way. We are confident on the full portfolio, and we're confident that we're gonna, let's say, be able to develop everything that we have at the moment.
Okay. Great. All right. Thank you for answering my questions. That was everything. Thank you.
Our next question from Karl Bokvist with ABG Sundal Collier. Please go ahead.
Yes, thank you and hello. My first two questions are just the first one on Sealing, if you've experienced any form of a tougher environment in raising prices in case, you know, cost inflation has hit Sealing in a higher way than you perhaps imagined a quarter ago? Then just on the kind of seasonality-wise, there's usually a working capital release. Now we have a very strong market environment. Just wanted to double-check in case there's anything else behind the inventory build up apart from just preparing for continued high demand.
On raising prices, TSS or Sealing Solutions, once again, we have said it many times, we feel that we are in most cases single source. If you are fair with the customers, they do accept price increases so that we don't feel that we are. Then of course in some areas we were a few million EUR maybe behind on price increases. But I mean, in the total scheme of things, it's nothing. But that is hitting us always a little bit, unexpected strong hikes on energy prices. It's always an ongoing discussions, but we feel that we are very well compensated, and we have no problems being compensated for, let's say, potential inflation hitting Sealing Solutions.
No concern and nothing really impacting the margin in a way in the quarter or even go forward relating to the inflation. On the working capital, I mean, I think Fredrik we can say that the percentages. Yeah, please.
Yeah, the percentage looks good. I mean, if you look from an inventory point of view, I mean, the inventory level was exceptionally low 2020. Then of course with the higher business activities, we have built up a little bit inventory to securing a good supply to the customer with a little longer lead time. There is nothing else in the inventory call.
We feel that it's good KPIs and not really.
Yeah. Days looks.
Days looks good.
Looks good and rather stable. Nothing strange in the inventory as we know.
Understood. Apologies because I didn't really fully hear your answer to that question. The positive SEK 107 in other OpEx, I think the kind of core eliminations in the group EBIT reconciliation from divisions is still at SEK -80, similar to last quarter. Then we have the plus SEK 107 in Q4 compared to SEK -5 in Q3. You know, the first one, again, what was it related to, and what kind of impact did that number have on a divisional level since the kind of core eliminations are unchanged quarter-over-quarter?
I don't have the split between the BAs. We have, as I said, it's three elements that you have in other operating income. It's the sale of fixed assets, it's the FX impact, the operating FX impact was negative in Q4 2020. Now it's positive, so of course that create a delta. You have the pension payback from Fora, which was a one-off payback linked to excess return.
All right. Understood. That pension part, was that the majority of it? Sorry for getting-
No, it was one fourth of it.
All right.
The majority was linked to this FX.
majority is the FX case, which is difficult to.
Yeah, that will be plus in one quarter, negative in the next quarter and so forth.
Okay. My final one was just a follow-up on the buyback comment. Just what kind of details do you have left to sort out before you can initiate it? Will it be kind of delegated to kind of just being a systematic program where you do not have kind of the mandate to decide the volume and days where you buy? It's just entirely at the third party, so to say.
Most likely it has to go through a third party because considering our daily volumes and considering the setup and all these kind of lockup periods and all of that, it's gonna be challenging otherwise to get this executed. I mean, that is the system, and that is where we're still debating because we need to pay some banks to do it and we need to agree on the fee, and we need to agree on the setup around it. It's more some mechanics still being discussed, and then we'll run. Very likely or only option in a way is to have this, what we call a safe harbor, safe harbor, let's say, arrangement to get that done. It will be similar, most likely, that you have seen other companies doing it.
All right. Understood. There's nothing like exemption from insider information or anything like that, you know, might become a concern.
We're going to get away from that. By having these safe harbor set up, we're going to get away from that.
Understood. Thank you.
At this time, there are no further questions. I will hand back to the speakers for a final remark.
Great. Thanks for your interest. I mean, we are leaving 2021 in a very good way. I mean, we are leaving it with the strongest quarter Q4 for us. There's still some price compensations or cost compensations to be done in Wheel Systems. And once again, I mean, several questions about that. We are confident that's going to kick in. It's more or less an automatic price adjustment. So that will kick in. And I mean, we still go in with that in mind. And on top of that, record high order books, good confidence in, let's say, managing future potential inflationary pressure and a strong balance sheet. Of course, we're moving into a very exciting 2022 for Trelleborg.
We feel that we have all the deck of cards ourselves, and we need to decide how to play it. We feel that we are going to be able to play this card of deck, the deck of cards in a very good way. We go in with 2022 with confidence and leave behind us a very nice 2022. That was maybe my final comment for this call. I mean, as usual, Christofer is around, I'm around, and Fredrik is around. If there's any follow-up questions, do not hesitate to make contact if you feel that you need further clarifications or if you have any kind of other questions that you want us to address. Thanks again, and do take care and stay safe.