SOURCE: ASSA ABLOY

February 13, 2009 02:43 ET

Record Year for ASSA ABLOY Despite Weak Market Development

STOCKHOLM, SWEDEN--(Marketwire - February 13, 2009) -


Fourth quarter

  * Sales increased by 9% to SEK 9,468 M (8,721), with -4% organic
    growth, 4% acquired growth and exchange-rate effects of 9%.
  * Operating income (EBIT) increased by 2% to SEK 1,469 M* (1,440),
    representing a margin of 15.5%* (16.5).
  * Net income amounted to SEK 92 M** (859).
  * Earnings per share increased by 7% and amounted to SEK 2.45*
    (2.30).
  * There were considerable savings from restructuring and efficiency
    measures during the quarter that will continue to give positive
    effects.
  * Operating cash flow rose by 10% to a record level of SEK 1,916 M
    (1,740).


Full year

  * Sales increased by 4% to SEK 34,918 M (33,550), with 0% organic
    growth, 4% acquired growth and exchange-rate effects of 0%.
  * Operating income (EBIT) increased by 1% to SEK 5,526 M* (5,458),
    representing a margin of 15.8%* (16.3).
  * Net income amounted to SEK 2,438 M** (3,368).
  * Earnings per share increased by 2% and amounted to SEK 9.21*
    (9.02).
  * Operating cash flow was unchanged, amounting to SEK 4,769 M
    (4,808).
  * Major investments in product development were made during the
    year and will contribute positively to sales.
  * The full cost of the new restructuring program, totaling SEK
    1,180 M, was expensed during the third and fourth quarters. All
    projects are now underway, while the program initiated in 2006
    will be completed in 2009.
  * The board of directors proposes a dividend of SEK 3.60 per share
    (3.60).


*  Excluding restructuring and non-recurring costs in 2008
   amounting to SEK 1,010 M for the quarter and SEK 1,257 M for
   the year.
** Excluding restructuring and non-recurring costs, net income
   for the quarter is SEK 918 M and for the year SEK 3,451 M.


SALES AND INCOME

                        Fourth quarter      Full year

                        2007  2008   Change 2007   2008    Change
Sales, SEK M            8,721 9,468  +9%    33,550 34,918  +4%
  of which,
  Organic growth                     -4%                   +0%
  Acquisitions                       +4%                   +4%
  Exchange-rate effects       +810   +9%           +16     +0%
Operating income
(EBIT), SEK M           1,440 1,469* +2%    5,458  5,526*  +1%
Operating margin
(EBIT), %               16.5  15.5*         16.3   15.8*
Income before tax,
SEK M                   1,168 1,286* +10%   4,609  4,756*  +3%
Net income, SEK M       859   92**    -     3,368  2,438** -
Operating cash flow,
SEK M                   1,740 1,916  +10%   4,808  4,769   -1%
Earnings per share
(EPS), SEK              2.30  2.45*  +7%    9.02   9.21*   +2%


*  Excluding restructuring and non-recurring costs in 2008
   amounting to SEK 1,010 M for the quarter and SEK 1,257 M
   for the year.
** Excluding restructuring and non-recurring costs, net income
   for the quarter is SEK 918 M and for the year SEK 3,451 M.

COMMENTS BY THE PRESIDENT AND CEO

"It is pleasing to report that ASSA ABLOY recorded its highest-ever sales and income in 2008, at the same time as investments in product development and market presence continued at a high level. Ongoing restructuring programs and other measures achieved valuable savings which counteracted the year's steadily weakening market. Acquisition activity maintained a continued high tempo, with 18 acquisitions completed.

However, everything indicates that 2009 will be a challenging year, since the financial crisis has had a strongly negative effect on investments in construction. Positive is that investments in product development are producing a good boost to sales, but are not expected to be sufficient to avoid a negative organic growth in 2009. Our focus will therefore be placed largely on cost control, profit margins and cash flow, while through our global and unique market presence we are active and ready to respond rapidly to opportunities on the market," says Johan Molin, President and CEO.

FOURTH QUARTER

The Group's sales totaled SEK 9,468 M (8,721), representing growth of 9% compared with 2007. In local currencies the increase amounted to 0% (11), of which organic growth for comparable units was -4% (6) while acquired units accounted for 4% (5) of the increase. Exchange-rate effects had a positive impact of SEK 810 M (i.e. 9%) on sales.

Operating income before depreciation, EBITDA, excluding restructuring and non-recurring costs, amounted to SEK 1,703 M (1,670), a rise of 2% compared with 2007. The EBITDA margin was 18.0% (19.1). The Group's operating income, EBIT, excluding restructuring and non-recurring costs, amounted to SEK 1,469 M (1,440), a rise of 2%, after positive currency effects of SEK 155 M. The operating margin was 15.5% (16.5).

Net financial items amounted to SEK 184 M (271), which corresponds to an average interest rate of just over 5%. The Group's income before tax amounted to SEK 276 M (1,168). Adjusted for non-recurring and restructuring costs, income before tax was SEK 1,286 M, representing a rise of 3%. After translation of subsidiaries' income statements, exchange-rate effects had a positive impact of SEK 115 M on the Group's income before tax. The profit margin was 2.9% (13.4) and adjusted for restructuring and non-recurring costs, 13.6%. The Group's tax charge totaled SEK 184 M (309). The effective tax rate for the quarter was affected by the fact that deferred tax has not been considered on some restructuring items. The underlying tax rate was 27%. Earnings per share amounted to SEK 0.29 (2.30). Adjusted for restructuring and non-recurring costs, earnings per share were SEK 2.45.

FULL YEAR

Sales for 2008 totaled SEK 34,918 M (33,550), which represents an increase of 4% compared with 2007. Organic growth was 0% (7). Acquired units contributed 4% (5). Exchange-rate effects affected sales positively by SEK 16 M.

Operating income before depreciation, EBITDA, amounted to SEK 6,447 M (6,366), excluding restructuring and non-recurring costs. The corresponding margin was 18.5% (19.0). The Group's operating income, EBIT, amounted to SEK 5,526 M (5,458), excluding restructuring and non-recurring costs, an increase of 1%. The corresponding operating margin (EBIT) was 15.8% (16.3).

Earnings per share increased by 2% to SEK 9.21 (9.02), excluding restructuring and non-recurring costs. Operating cash flow amounted to SEK 4,769 M (4,808).

RESTRUCTURING MEASURES

Payments related to the two restructuring programs amounted to SEK 152 M during the quarter, making the total for the full year SEK 485 M. The restructuring program initiated in 2006 has been a great success and will be completed in 2009. The annual rate of savings is close to the target level of SEK 600 M, which will be achieved during 2009. More than 2,000 employees have left the Group as a result of the changes in the production structure.

The restructuring program initiated during the second half of 2008 was fully underway by year-end. The program comprises some 40 projects, is expected to cost SEK 1,180 M and affects 1,800 employees. The payback time is 2-3 years. The entire cost has been expensed in the third and fourth quarters.

COMMENTS BY DIVISION

EMEA

Sales in EMEA division during the quarter totaled SEK 3,629 M (3,519), with organic growth of -9%. The weakening on all West European markets continued. Only Germany showed an increase in sales; otherwise growth was negative. The weakening also continued on the growth markets in Africa and Eastern Europe. Acquired growth amounted to 6%. Operating income excluding restructuring and non-recurring costs amounted to SEK 562 M (602), which represents an operating margin (EBIT) of 15.5% (17.1). Return on capital employed excluding restructuring and non-recurring costs amounted to 17.5% (22.4). The return was diluted by lower income and a number of acquisitions during the year. Operating cash flow before interest paid totaled SEK 938 M (829).

AMERICAS

Growth in Americas division weakened during the quarter but remained strong in the commercial segment, where the positive trend for the Security Doors business unit continued. The sales trend in the residential segment was negative. Total sales amounted to SEK 2,889 M (2,383), with 1% organic growth. Acquired growth amounted to 3%. The operating margin improved and amounted to 19.9% (19.3), excluding restructuring costs. Return on capital employed excluding restructuring costs amounted to 23.1% (21.6). Operating cash flow before interest paid totaled SEK 707 M (717).

ASIA PACIFIC

Organic growth in Asia Pacific division turned negative in the fourth quarter. All business units in Australia and New Zealand, which represent half the division, showed negative growth. Weakening was also evident on the Chinese market. On the other Asian markets apart from China growth was weakly positive. The division's sales totaled SEK 881 M (895), with -8% organic growth. Acquired growth amounted to 6%. Operating income excluding restructuring costs totaled SEK 92 M (115), which represents an operating margin (EBIT) of 10.4% (12.8). The quarter's return on capital employed excluding restructuring costs amounted to 13.8% (19.6). Operating cash flow before interest paid totaled SEK 194 M (90).

GLOBAL TECHNOLOGIES

Global Technologies division reported negative organic growth for the quarter. The weakened market situation affected all business units. At ITG the program to phase out unprofitable segments continued while some customer projects were postponed. Total sales in the fourth quarter were SEK 1,315 M (1,328), with organic growth of -8%. Acquired growth amounted to -3%. The division's operating income excluding restructuring costs amounted to SEK 203 M (219), giving an operating margin (EBIT) of 15.4% (16.5). Return on capital employed excluding restructuring costs amounted to 13.8% (16.9). Operating cash flow before interest paid totaled SEK 275 M (293).

ENTRANCE SYSTEMS

Entrance Systems division reported sales of SEK 952 M (823) in the fourth quarter, representing organic growth of 3%, the same figure as for the corresponding quarter last year. Acquired growth amounted to 6%. Demand from the retailing sector weakened but was counteracted by some expansion of demand from the hospital and healthcare sector and a positive trend on the service side. Operating income excluding restructuring costs amounted to SEK 150 M (130), giving an operating margin (EBIT) of 15.8% (15.7). Return on capital employed excluding restructuring costs amounted to 18.1% (16.3). Operating cash flow before interest paid totaled SEK 104 M (177).

ACQUISITIONS

The major acquisition completed and consolidated during the fourth quarter was that of Copiax in Sweden. Information abut Copiax has been published on several occasions, most recently in the Interim Report for the third quarter of 2008. Adding smaller acquisitions, a total of 20 companies have been consolidated during the year of which two concerned the final acquisition of the minority shares in iRevo, which is already being consolidated in the Group since 2007 (see below). The combined acquisition price for the 20 companies amounts to SEK 2,013 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to about SEK 1,460 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs.

During the fall Asia Pacific division made a public offer for the outstanding 49% of shares in the South Korean company iRevo. More than 90% of the total number of outstanding shares are now owned by ASSA ABLOY and the Korean stock exchange has approved the company's request for delisting. The first 51% of iRevo was acquired by ASSA ABLOY 2007 and the company has been consolidated in the Group since 1 October 2007.

The previously announced acquisition of the Chinese company Shenfei has now been approved by the authorities.

The competition authority in Germany has rejected the company's application concerning the acquisition of the German company SimonsVoss. ASSA ABLOY has lodged a formal appeal and is currently considering the next step in the process.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY's units all over the world are working purposefully to reduce the emission of greenhouse gases. This applies to units on both mature and new markets and to both existing and newly acquired companies. ASSA ABLOY's largest production unit in North America, Sargent Manufacturing, has made an investment in a combined-heat-and-power plant. By using the plant both to generate power and for heating, efficiency has been raised from 40% to 90%, which has significantly reduced energy consumption and the emission of greenhouse gases. Furthermore the investment has a financial payback time of only two years.

The 2008 Sustainability Report, reporting on the Group's 20-point program and giving other information about sustainable development, will be published at the time of the Annual General Meeting in April 2009.

OTHER EVENTS

The operating costs for 2008 for EMEA division include a non-recurring item of SEK 77 M relating to the provision of supplementary lock protection in the Swedish operation.

PARENT COMPANY

'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 1,775 M (1,641) for the full year. Income before tax amounted to SEK 1,590 M (2,351). Investments in tangible and intangible assets totaled SEK 0 M (496). Liquidity is good and the equity ratio was 39.8% (47.1).

DIVIDEND AND ANNUAL GENERAL MEETING

The Board of Directors proposes a dividend of SEK 3.60 (3.60) per share for the 2008 financial year. The Annual General Meeting will be held on 23 April 2009.

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 67-71 of the 2007 Annual Report. New or revised IFRS effective after 31 December 2007 have had no material effect on the consolidated income statements or balance sheets. The Group's Interim Reports are prepared in accordance with IAS 34. The Parent company applies RFR 2.1.

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 refer to the 2007 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.

* The long-term outlook is unchanged while the outlook for 2009 is new. No outlook for 2009 has previously been published.


Stockholm, 13 February 2009

Johan Molin

President and CEO


The Year-End Report has not been reviewed by the Company's Auditor.


Financial information

The Interim Report for the first quarter will be published on 22 April 2009. The Annual General Meeting will be held at Moderna Museet (the Museum of Modern Art) in Stockholm on 23 April.

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 10.00 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 08.30 on 13 February.


Please click on the link below to open the full pdf version of the press release: http://hugin.info/1014/R/1290242/290909.pdf


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