ASSA ABLOY

October 28, 2011 02:23 ET

ASSA ABLOY: Good performance on a weak market

STOCKHOLM, SWEDEN--(Marketwire - Oct 28, 2011) -


--  Sales increased by 14% and amounted to SEK 10,841 M (9,474). The
    increase was made up of 2% organic growth, 18% acquired growth and
    currency effects of -6%.
--  Continued strong growth in Asia.
--  Stable but slow sales on the mature markets and slowdown in South
    America.
--  A new restructuring program launched involving the closure of 17
    production units and a number of other rationalizations and changes.
--  Agreement signed for the acquisition of the American company Albany
    Door Systems, a leader in high-speed industrial doors.
--  Operating income (EBIT) increased by 7% and amounted to SEK 1,751 M
   (1,630). The operating margin was 16.2% (17.2).
--  Net income amounted to SEK 1,653 M (1,099) including a one-off income
    of SEK 424 M.
--  Earnings per share rose by 13% to SEK 3.30 (2.93), excluding a
    one-off income of SEK 424 M.

SALES AND INCOME
                                 Third quarter          Jan-Sep
                             -----------------------------------------
                               2010   2011 Change   2010   2011 Change
----------------------------------------------------------------------
Sales, SEK M                  9,474 10,841   +14% 27,175 30,042   +11%

  of which,

  Organic growth                              +2%                  +4%

  Acquisitions                               +18%                 +16%

  Exchange-rate effects        -216   -491    -6% -1,240 -2,113    -9%

Operating income, SEK M       1,630  1,751    +7%  4,440  4,743    +7%

Operating margin (EBIT), %     17,2   16,2          16,3   15,8

Income before tax, SEK M      1,440  1,582   +10%  3,961  4,256    +7%

Net income, SEK M             1,099  1,653   +50%  3,009  3,751   +25%

Operating cash flow, SEK M    1,890  1,528   -19%  4,200  3,286   -22%

Earnings per share, SEK *)     2,93   3,30   +13%   8,03   8,86   +10%

*) excluding one-off income of SEK 424 M in the third quarter and the
   period Jan-Sep of 2011.

COMMENTS BY THE PRESIDENT AND CEO

"Our strong growth continued during the quarter and reached a good 20% in local currencies," says Johan Molin, President and CEO. "However, organic growth continued to weaken and reached 2% due to a weakening business cycle. It was pleasing that Asia continued to show strong growth and that Europe and Africa showed some improvement at the same time as North America, South America and Australia continued to weaken.

"Operating income improved by 7% despite negative currency effects. The operating margin was affected positively by the volume growth and the efficiency and restructuring programs, but this was diluted by acquisitions and by the increased share of sales on emerging markets with lower margins.

"A new analysis of the remaining production structure has been initiated. Further potential for efficiency improvements has been identified. Improvements will be realized through continued rationalization of the Group's production structure and through increased synergies from the Cardo acquisition. The total net cost is expected to be SEK 900 M.

"Acquisition activities continued at a high pace through the acquisitions of the American company Albany Door Systems and the Korean company Angel Metal. Very exciting is the acquisition of Albany Door Systems, which brings to the Group a world-leading company within high-speed industrial doors. It is also gratifying that our leading position in Korea is further strengthened by Angel Metal. In the year so far the Group has added an impressive sales of SEK 7,800 M, representing 21% growth, through acquisitions.

"The business cycle on the mature markets remains weak but stable because of cuts in public funding, while the trend on the emerging markets is expected to remain positive, although at a lower level than before."

THIRD QUARTER

The Group's sales totaled SEK 10,841 M (9,474), an increase of 14% compared with 2010. Organic growth for comparable units was 2% (6). Acquired units contributed 18% (10). Exchange-rate effects had a negative impact of SEK 491 M on sales, that is -6% (-3).

Operating income before depreciation, EBITDA, amounted to SEK 2,002 M (1,875). The corresponding EBITDA margin was 18.5% (19.8). The Group's operating income, EBIT, amounted to SEK 1,751 M (1,630), an increase of 7%. The operating margin was 16.2% (17.2).

Net financial items amounted to SEK -169 M (-190). The Group's income before tax amounted to SEK 1,582 M (1,440), an improvement of 10% compared with the previous year. Exchange-rate effects had a negative impact of SEK 104 M on the Group's income before tax. The profit margin was 14.6% (15.2). The estimated effective tax rate amounted to 22%, corresponding to a tax charge of SEK 348 M (341). Earnings per share amounted to SEK 3.30 (2.93), an increase of 13%.

FIRST NINE MONTHS OF THE YEAR

Sales for the first nine months of 2011 totaled SEK 30,042 M (27,175), representing an increase of 11%. Organic growth was 4% (2). Acquired units contributed 16% (7). Exchange-rate effects affected sales negatively by SEK 2,113 M, that is -9% (-5), compared with the first nine months of 2010.

Operating income before depreciation, EBITDA, amounted to SEK 5,495 M (5,191). The corresponding margin was 18.3% (19.1). The Group's operating income, EBIT, amounted to SEK 4,743 M (4,440), an increase of 7%. The corresponding operating margin (EBIT) was 15.8% (16.3).

Earnings per share, excluding one-off income, rose to SEK 8.86 (8.03), an increase of 10%. Operating cash flow amounted to SEK 3,286 M (4,200).

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 75 M in the quarter.

The restructuring programs continued according to plan and have led to a reduction in personnel of 181 people during the quarter and 5,753 people since the projects began. A further 639 people will leave by the end of 2012.

At the end of the quarter provisions of SEK 688 M remained in the balance sheet for carrying out the remaining parts of the programs.

During the third quarter plans were announced for a new restructuring program that will start during the fourth quarter. Initial estimates show that a total of 17 production units and two administrative units will be shut down. The cost is estimated at SEK 1,330 M and the payback time is just over three years. Net of one off income during the third quarter related to the Cardo acquisition the total cost amounts to approximately 900 MSEK.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,155 M (3,065), with organic growth of 0% (1). The market trend remained weak but stable with growth in Scandinavia, Finland and Eastern Europe. Southern Europe continued to show negative growth. Acquired growth amounted to 5%. Operating income totaled SEK 535 M (520), which represents an operating margin (EBIT) of 17.0% (17.0). Return on capital employed amounted to 20.9% (20.8). Operating cash flow before interest paid totaled SEK 586 M (704).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,312 M (2,537), with organic growth of -1% (2). The sales trend during the quarter was negative but stable, with growth in electromechanics and on the residential market. At the same time sales on the institutional market and in South America declined to some extent. Acquired growth amounted to 1%. Operating income totaled SEK 466 M (515) and the operating margin was 20.1% (20.3). Return on capital employed amounted to 23.5% (24.1). Operating cash flow before interest paid totaled SEK 493 M (614).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 1,822 M (1,735), with organic growth of 7% (15). Growth was strong in Asia, and especially in units for digital door locks in Korea and for security doors in China. Australia and New Zealand continued to show a negative sales trend affected by the earthquakes in New Zealand and a reduction in stimulation measures in Australia. Acquired growth amounted to 2%. Operating income totaled SEK 275 M (271), representing an operating margin (EBIT) of 15.1% (15.6). The quarter's return on capital employed amounted to 25.0% (21.6). Operating cash flow before interest paid totaled SEK 232 M (300).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,524 M (1,365), with organic growth amounting to 5% (26). HID showed good growth in access control and strong growth in e-Government. Hospitality reported a positive trend on the renovation market with good growth for RFID locks and energy-efficiency products. Acquired growth amounted to 14%. The division's operating income amounted to SEK 248 M (247), giving an operating margin (EBIT) of 16.3% (18.1). The operating margin was affected by a dilution of 2.0% from the acquisitions of LaserCard and ActivIdentity. Return on capital employed amounted to 16.2% (18.1). Operating cash flow before interest paid totaled SEK 285 M (186).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 2,241 M (987), with organic growth amounting to 5% (-1). Growth was good on the mature markets and strong on the emerging markets such as Turkey and Asia. Profitability also showed a positive trend for all units, and the integration of Crawford and FlexiForce proceeded at a good pace. Acquired growth amounted to 130%. Operating income totaled SEK 308 M (152), giving an operating margin of 13.8% (15.4). The operating margin was affected by a dilution of 2.0%, mainly from the acquisition of Crawford (Cardo). Return on capital employed amounted to 10.7% (14.3). Operating cash flow before interest paid totaled SEK 225 M (165).

ACQUISITIONS

During the quarter Angel Metal in Korea and a number of minor acquisitions were consolidated. This means that a total of fourteen companies were consolidated during the first nine months of the year. The combined acquisition price for these fourteen companies, excluding disposal groups, amounted to SEK 6,809 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 5,986 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn- outs amounted to SEK 413 M.

During the quarter the sell of Cardo Flow Solutions and Lorentzen & Wettre - parts of the former Cardo Group - were completed. The sales prices on a cash and debt free basis were SEK 5,900 M and SEK 750 M respectively.

On 28 October it was announced that an agreement had been signed with the American entrance-automation company Albany Door Systems, global leader in high- speed doors. Albany Door Systems has worldwide geographical coverage, 700 employees and expected sales of USD 180 M (SEK 1,100 M) in 2011. Albany Door Systems will be consolidated into the group in the first quarter of 2012. Integration costs related to coordination of markets and products are estimated to SEK 150 M.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY has had its Trio-E hinged door certified according to the American UL Environment (Underwriters Laboratories) requirement UL IRS 102 - the first door manufacturer to achieve this. This requirement measures the health and environmental effects of the manufacture and use of doors. The Trio-E door is the first to be certified according to this sustainability requirement on the North American market.

PARENT COMPANY

'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 1,129 M (1,145) for the nine-month period. Income before tax amounted to SEK 880 M (1,344), a reduction due primarily to reduced dividends from subsidiaries. Investments in tangible and intangible assets totaled SEK 3 M (9). Liquidity is good and the equity ratio was 36.9% (51.4).

ACCOUNTING PRINCIPLES

ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. Significant accounting and valuation principles are detailed on pages 86-91 of the 2010 Annual Report. From 2011 ASSA ABLOY is implementing the International Financial Reporting Standard IFRS 5, 'Non- current Assets Held for Sale and Discontinued Operations'. Non-current assets are classified as assets held for sale when their carrying amount will be largely recovered in a sales transaction and a sale is viewed as being highly probable. They are reported at the lower of carrying amount and fair value less costs to sell if their carrying amount can be largely recovered in a sales transaction and not through continuing use and it is highly probable that a sale will occur.

This Interim Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Interim Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

TRANSACTIONS WITH RELATED PARTIES

No transactions that significantly affected the company's position and income have taken place between ASSA ABLOY and related parties.

RISKS AND UNCERTAINTY FACTORS

As an international Group with a wide geographic spread, ASSA ABLOY is exposed to a number of business and financial risks. The business risks can be divided into strategic, operational and legal risks. The financial risks are related to such factors as exchange rates, interest rates, liquidity, the giving of credit, raw materials and financial instruments. Risk management in ASSA ABLOY aims to identify, control and reduce risks. This work begins with an assessment of the probability of risks occurring and their potential effect on the Group. For a more detailed description of risks and risk management, see the 2010 Annual Report. No significant risks other than the risks described there are judged to have occurred.

AUDIT

This Report has not been reviewed by the Company's Auditors.

OUTLOOK*

Long-term outlook Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.


* Outlook published on 28 July 2011:

Long-term outlook

Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.


FINANCIAL INFORMATION

The Year-end Report and Quarterly Report for the fourth quarter will be published on 10 February 2012.

ASSA ABLOY is holding an analysts' meeting at 10.00 today at Operaterrassen in Stockholm. The analysts' meeting can also be followed on the Internet atwww.assaabloy.com. It is possible to submit questions by telephone on: +46 8 5052 0270, +44 207 509 5139 or +1 718 354 1226

This information is that which ASSA ABLOY is required to disclose under the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act.

The information is released for publication at 08.00 on 28 October.

Q3 2011:

http://hugin.info/1014/R/1559014/481947.pdf

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: ASSA ABLOY via Thomson Reuters ONE

[HUG#1559014]

Contact Information

  • FURTHER INFORMATION CAN BE OBTAINED FROM:
    Johan Molin
    President and CEO
    Tel: +46 8 506 485 42

    Tomas Eliasson
    Chief Financial Officer
    Tel: +46 8 506 485 72