SOURCE: ASSA ABLOY

April 22, 2009 06:11 ET

ASSA ABLOY: Record earnings despite severe market downturn

STOCKHOLM, SWEDEN--(Marketwire - April 22, 2009) -


* There was a severe downturn in new construction on all the world's major markets.

* All divisions were affected but Entrance Systems, HID and the growth markets remained relatively stable.

* Sales totaled SEK 8,881 M (8,203), an increase of 8%, with -12% organic growth, 4% acquired growth and exchange-rate effects of +16%.

* Major efficiency gains throughout the Group led to sustained margins and continued strong cash flow. The successful restructuring program is continuing.

* Operating income (EBIT) amounted to SEK 1,328 M (1,244), an increase of 7% excluding restructuring costs of SEK 109 M, representing a margin of 15.0% (15.2).

* Net income excluding restructuring costs amounted to SEK 827 M (772).

* Earnings per share excluding restructuring costs amounted to SEK 2.20 (2.08), an increase of 6%.


SALES AND INCOME

                                 Full year          First quarter
                             2007    2008 Change  2008   2009 Change
Sales, SEK M               33,550  34,918    +4% 8,203  8,881    +8%
  of which,
  Organic growth                             +0%                -12%
  Acquisitions                               +4%                 +4%
  Exchange-rate effects    -1,131     +16    +0%  -275 +1,460   +16%
Operating income (EBIT),
SEK M                       5,458  5,526*    +1% 1,244 1,328*    +7%
Operating margin (EBIT), %   16.3   15.8*         15.2  15.0*
Income before tax, SEK M    4,609  4,756*    +3% 1,055  1,124    +7%
Net income, SEK M           3,368 2,438**      -   772  718**      -
Operating cash flow, SEK M  4,808   4,769   - 1%   583    838   +44%
Earnings per share (EPS),
SEK                          9.02   9.21*    +2%  2.08  2.20*    +6%

* Excluding non-recurring and restructuring costs amounting to SEK 1,257 M for the full year 2008 and to SEK 109 M for the first quarter of 2009.

** Excluding non-recurring and restructuring costs, net income was SEK 3,451 M for the full year 2008 and SEK 827 M for the first quarter of 2009.

COMMENTS BY THE PRESIDENT AND CEO

"All markets showed a weakening trend during the first quarter. At the same time, ongoing restructuring measures and adjustments in production capacity meant that both income and cash flow continued to improve. Despite this good performance in the first quarter, the remainder of 2009 is expected to be extremely challenging, both in terms of sales and income, since the financial crisis has had severe negative effects on investments in new construction. Implementation of the plan to reduce the number of production units and adjust production capacity is continuing, which will guarantee the Group's long-term competitiveness. Investments in improved market coverage and new products, primarily in the fast-growing electromechanical segment, are continuing with undiminished vigor," said Johan Molin, President and CEO.

FIRST QUARTER

The Group's sales totaled SEK 8,881 M (8,203), representing growth of 8% compared with 2008. Organic growth for comparable units was -12% (0), while acquired units accounted for 4% (3) of the increase. Exchange-rate effects had a positive impact of SEK 1,460 M (i.e. 16%) on sales.

Operating income before depreciation, EBITDA, excluding restructuring costs, amounted to SEK 1,594 M (1,476), an increase of 8% compared with 2008. The EBITDA margin was 17.9% (18.0). The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK 1,328 M (1,244), an increase of 7%, after positive currency effects of SEK 225 M. The operating margin was 15.0% (15.2).

Net financial items amounted to SEK 205 M (189), which corresponds to an average net interest rate of just over 5%. The Group's income before tax amounted to SEK 1,015 M (1,055). Adjusted for restructuring costs, income before tax was SEK 1,124 M, representing an increase of 7%. Exchange-rate effects had a positive impact of SEK 140 M on the Group's income before tax. The profit margin was 11.4% (12.9). The Group's tax charge amounted to SEK 296 M (283). Earnings per share amounted to SEK 1.92 (2.08). Adjusted for restructuring costs, earnings per share were SEK 2.20, an increase of 6%.

RESTRUCTURING MEASURES

Payments related to the two restructuring programs amounted to SEK 144 M during the quarter.

The restructuring program initiated in 2006 has been a great success and will be completed during 2009. More than 2,300 employees have left the Group in connection with the implementation of the program. During the first quarter costs of SEK 109 M where taken for additional costs in two projects.

The restructuring program initiated during the second half of 2008 is fully underway and just over 1,000 people have so far left the Group. The program comprises some 40 projects, is expected to cost SEK 1,180 M and will affect a total of 1,800 employees. The payback time is 2-3 years.

COMMENTS BY DIVISION

EMEA

Sales in EMEA division during the quarter totaled SEK 3,473 M (3,473), with organic growth of -15%. The weakening on all markets except Africa continued. Acquired growth amounted to 5%. Operating income excluding restructuring costs amounted to SEK 496 M (567), which represents an operating margin (EBIT) of 14.3% (16.3). The effects of the restructuring programs and other efficiency measures compensated for many of the effects of the negative growth in volume. Return on capital employed excluding restructuring costs amounted to 15.2% (21.0). The return was impacted chiefly by the lower income. Operating cash flow before interest paid totaled SEK 339 M (241).

AMERICAS

Organic growth in Americas division turned negative during the quarter. All units apart from Canada and Brazil were affected by the slowing of the economy that has now extended to the non-residential segment. The sales trend in the residential segment remained negative. Total sales amounted to SEK 2,744 M (2,422), with -15% organic growth. Acquired growth amounted to 3%. By means of restructuring and capacity changes, the operating margin was maintained at a very strong level and amounted to 19.2% (19.3). Return on capital employed amounted to 20.2% (22.0). Operating cash flow before interest paid totaled SEK 487 M (227).

ASIA PACIFIC

Organic growth in Asia Pacific division was negative in the first quarter. The business units in Australia and New Zealand showed negative growth. On the Chinese market too, weakening was seen on the lock side, while security doors showed growth. On the Asian markets apart from China growth was positive. The division's sales totaled SEK 759 M (692), with -6% organic growth. Acquired growth amounted to 6%. Operating income totaled SEK 54 M (54), which represents an operating margin (EBIT) of 7.1% (7.8). The quarter's return on capital employed amounted to 7.4% (8.4). Operating cash flow before interest paid totaled SEK 34 M (85).

GLOBAL TECHNOLOGIES

Global Technologies division reported negative organic growth for the quarter. The weakened market situation made itself felt at all business units except HID/Fargo which remained relatively stable. Total sales in the first quarter were SEK 1,279 M (1,158), with organic growth of -8%. Acquired growth amounted to 0%. The division's operating income amounted to SEK 199 M (160), giving an operating margin (EBIT) of 15.6% (13.8). Return on capital employed amounted to 12.5% (13.2). Operating cash flow before interest paid totaled SEK 90 M (41).

ENTRANCE SYSTEMS

Entrance Systems division reported sales of SEK 822 M (697) in the first quarter, representing organic growth of -2% (3). Acquired growth amounted to 5%. Demand from the retailing sector weakened but was counteracted to some extent by demand from the hospital and healthcare sector and a positive trend on the service side. Operating income amounted to SEK 128 M (89), giving an operating margin (EBIT) of 15.5% (12.7). Return on capital employed amounted to 14.8% (11.0). Operating cash flow before interest paid totaled SEK 241 M (173).

ACQUISITIONS

Four minor acquisitions were consolidated during the first quarter. The combined acquisition price for these acquisitions amounts to SEK 191 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to about SEK 70 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY's third Sustainability Report was published in April. The Report contains a review of targets and outcomes in the Group's 20-point program and a description of how sustainability operations are run. Major advances regarding energy consumption, carbon dioxide emissions and the use of chemicals in production were reported during the year.

There is also a description of how ASSA ABLOY communicates with the outside world on sustainability issues and how reporting was made at the C level of the GRI. The Report can be found on the Group's website, www.assaabloy.com.

PARENT COMPANY

'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 80 M (480) for the first quarter. Income before tax amounted to SEK -69 M (381). Investments in tangible and intangible assets totaled SEK 1 M (0). Liquidity is good and the equity ratio was 43.9% (47.8).

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 56-60 of the 2008 Annual Report. New or revised IFRS effective after 31 December 2008 have had no material effect on the consolidated income statement or balance sheet. The Group's Interim Reports are prepared in accordance with IAS 34. The Parent company applies RFR 2.2.

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 pages 41-43 of the 2008 Annual Report. No significant risks other than the risks described there are judged to have occurred.

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 for the year

2009 will be a challenging year since the financial crisis has had a strongly negative effect on investments in construction, and negative organic growth for the year is therefore expected for ASSA ABLOY.

Easter is expected to have a negative impact on sales and earnings in the second quarter.

*) The Outlooks published on 13 February 2009 were:

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 for the year

2009 will be a challenging year since the financial crisis has had a strongly negative effect on investments in construction, and negative organic growth for the year is therefore expected for ASSA ABLOY.

Stockholm, 22 April 2009

Johan Molin
President and CEO

The Interim Report has not been reviewed by the Company's Auditor.

Financial information

The Interim Report for the second quarter will be published on 29 July 2009.

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


      ASSA ABLOY is holding an analysts' meeting at 13.00 today
               at Klarabergsviadukten 90 in Stockholm.
    The analysts' meeting can also be followed on the Internet at
                         www.assaabloy.com.
         It is possible to submit questions by telephone on:
        +46 8 5052 0270, +44 208 817 9301 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 12.00 on 22 April.

Q1 2009: http://hugin.info/1014/R/1307220/300775.pdf

This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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