ASSA ABLOY

July 27, 2011 02:16 ET

Solid progress for ASSA ABLOY

STOCKHOLM, SWEDEN--(Marketwire - Jul 27, 2011) -


  * Sales totaled SEK 10,502 M (9,356), representing an increase of 12%,
    made up of 5% organic growth, 20% acquired growth and currency effects
    of -13%.
  * Strong growth in Asia and South America.
  * Slow but stable development on the mature markets.
  * Operating income (EBIT) increased by 7% and amounted to SEK 1,615 M
    (1,515).
  * The operating margin amounted to 15.4% (16.2) including dilution from
    acquisitions and currency with 1.1%.
  * Sale of Lorentzen & Wettre to ABB means that the Cardo transaction will
    be complete.
  * Reduced tax rate to 22% (24).
  * Net income amounted to SEK 1,156 M (1,031).
  * Earnings per share rose by 12% to SEK 3.07 (2.74).

SALES AND INCOME

                                 Second quarter      First half-year
                              -----------------------------------------
                                2010   2011 Change   2010   2011 Change
-----------------------------------------------------------------------
Sales, SEK M                   9,356 10,502   +12% 17,701 19,201    +8%

  of which,

  Organic growth                               +5%                  +5%

  Acquisitions                                +20%                 +14%

  Currency effects                     -956   -13%        -1,623   -11%

Operating income (EBIT), SEK M 1,515  1,615    +7%  2,810  2,992    +6%

Operating margin (EBIT), %      16.2   15.4          15.9   15.6

Income before tax, SEK M       1,363  1,460    +7%  2,521  2,675    +6%

Net income, SEK M              1,031  1,156   +12%  1,910  2,099   +10%

Operating cash flow, SEK M     1,440  1,311    -9%  2,310  1,758   -24%

Earnings per share (EPS), SEK   2.74   3.07   +12%   5.10   5.60   +10%


COMMENTS BY THE PRESIDENT AND CEO

"In the second quarter of the year sales grew by an exciting 25% in local currencies, made up of 5% organic growth and 20% acquired growth," says Johan Molin, President and CEO. Asia and South America showed strong growth, while development in the mature markets was slow but stable. It was pleasing that our electromechanical products did extremely well and continued to grow in all divisions and on all markets, with HID in particular reporting great successes and achieving 19% organic growth during the quarter.

"Operating income improved by 7% in spite of strong negative currency effects. The operating margin was affected positively by the volume growth and the efficiency and restructuring programs at the same time as it was diluted by acquisitions and currency.

"It is very pleasing that the Cardo deal is now concluding with the signing with ABB Ltd for the sale of Lorentzen & Wettre. This means that the parts of Cardo that do not fit ASSA ABLOY long term will get industrial owners that gives them better opportunities for continued development and growth. The integration of Crawford is progressing rapidly and is looking extremely promising.

"During the quarter Portafeu, France's leading manufacturer of fire doors, was acquired and its integration into EMEA division is in good progress. Portafeu broadens our offer in one of our most important European markets. I want to take this opportunity to welcome Portafeu's highly skilled staff into the Group.

"The business cycle on the mature markets is expected to be slow but stable due to cuts in public spending at the same time as the development on the emerging markets is expected to continue to be positive."


SECOND QUARTER

The Group's sales totaled SEK 10,502 M (9,356), an increase of 12% compared with 2010. Organic growth for comparable units was 5% (2). Acquired units contributed 20% (8). Currency effects had a negative impact of SEK 956 M on sales, that is -13% (-5).

Operating income before depreciation, EBITDA, excluding restructuring costs, amounted to SEK 1,863 M (1,780). The corresponding EBITDA margin was 17.7% (19.0). The Group's operating income, EBIT, amounted to SEK 1,615 M (1,515), an increase of 7%. The operating margin was 15.4% (16.2).

Net financial items amounted to SEK -156 M (-152). The Group's income before tax amounted to SEK 1,460 M (1,363), an improvement of 7% compared with the previous year. Currency effects had a negative impact of SEK 153 M on the Group's income before tax. The profit margin was 13.9% (14.6). The estimated effective tax rate amounted to 22%, giving a tax charge of SEK 321 M (333). Earnings per share amounted to SEK 3.07 (2.74), an increase of 12%.

FIRST HALF-YEAR

Sales for the first half of 2011 totaled SEK 19,201 M (17,701), representing an increase of 8%. Organic growth was 5% (-1). Acquired units contributed 14% (6). Currency effects affected sales negatively by SEK 1,623 M, that is -11% (- 5), compared with the first half of 2010.

Operating income before depreciation, EBITDA, excluding restructuring costs, amounted to SEK 3,493 M (3,316) for the half-year. The corresponding margin was 18.2% (18.7). The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK 2,992 M (2,810), an increase of 6%. The corresponding operating margin (EBIT) was 15.6% (15.9).

Earnings per share for the first half-year rose to SEK 5.60 (5.10) an increase of 10%. Operating cash flow for the half-year amounted to SEK 1,758 M (2,310).

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 67 M in the quarter.

The restructuring programs continued according to plan and have led to a reduction in personnel of 89 people during the quarter and 5,572 people since the projects began. A further 816 people will leave by the end of 2012.

At the end of the quarter, a provision of SEK 809 M was set aside in the balance sheet for carrying out the remaining parts of the programs.


COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,253 M (3,311), with organic growth of -3% (3). The market trend remained weak during the second quarter and only Germany, Scandinavia, Eastern Europe and Israel showed growth. Acquired growth amounted to 8%. Operating income totaled SEK 510 M (525), which represents an operating margin (EBIT) of 15.7% (15.9). Return on capital employed amounted to 20.6% (19.9). Operating cash flow before interest paid totaled SEK 429 M (613).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,177 M (2,503), with organic growth of 2% (-4). The sales trend during the quarter was positive and all business units except Mexico showed growth, with especially good performance from Electromechanics, Residential and South America. Acquired growth amounted to 1%. Operating income totaled SEK 456 M (493) and the operating margin was 20.9% (19.7). Return on capital employed amounted to 23.6% (21.6). Operating cash flow before interest paid totaled SEK 482 M (586).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 1,630 M (1,566), with organic growth of 12% (18). Growth was strong throughout Asia, and especially for security doors in China. Australia and New Zealand recorded a negative sales trend affected by the natural disasters in the region and a reduction in stimulation measures in Australia. Acquired growth amounted to 2%. Operating income totaled SEK 232 M (222), representing an operating margin (EBIT) of 14.3% (14.2). The quarter's return on capital employed amounted to 22.4% (20.3). Operating cash flow before interest paid totaled SEK 199 M (57).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,416 M (1,240), with organic growth amounting to 17% (5). HID showed strong growth again in the second quarter, but with an increasing proportion of project orders with lower margins. Hospitality recorded strong growth driven by the recovery on the renovation market and rising sales of RFID locks and energy-efficiency products. Acquired growth amounted to 14%. The division's operating income amounted to SEK 224 M (208), giving an operating margin (EBIT) of 15.9% (16.8). The operating margin was diluted by 1.1% from the acquisitions of LaserCard and ActivIdentity. Return on capital employed amounted to 15.0% (14.5). Operating cash flow before interest paid totaled SEK 270 M (204).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 2,235 M (1,012), with organic growth amounting to 5% (-2). Growth was good for all units including the newly acquired Crawford (formerly Cardo) and FlexiForce. Profitability also showed a positive trend for all units and the integration of Crawford and FlexiForce proceeded at a satisfactory pace. Acquired growth amounted to 135%. Operating income totaled SEK 281 M (145), giving an operating margin of 12.6% (14.3). The operating margin was diluted by 2.4% mainly from the acquisition of Crawford (Cardo). Return on capital employed amounted to 10.6% (13.6). Operating cash flow before interest paid totaled SEK 166 M (106).

ACQUISITIONS

During the quarter FlexiForce in the Netherlands, Swesafe in Sweden, Portafeu in France and one minor acquisition were consolidated. The combined acquisition price for the eight companies acquired during the first half-year, excluding disposal groups, amounted to SEK 6,429 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 5,778 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 290 M.

The acquisition analysis for Cardo Entrance Solutions is presented on Page 18. The parts of Cardo that are to be divested - that is, Cardo Flow Solutions and Lorentzen & Wettre - have been classified as 'disposal groups held for sale' in accordance with IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations'. The disposal groups have been valued at fair value at the time of acquisition with a deduction for costs to sell.

On 4 July it was announced that ASSA ABLOY had signed a contract with the Swedish/ Swiss company ABB Ltd for the sale of Lorentzen & Wettre, part of the former Cardo Group. The sale price is SEK 750 M on a liability-free basis. The sale is expected to be completed during the second half of 2011.

SUSTAINABLE DEVELOPMENT

The Security Doors business unit of ASSA ABLOY Americas has received both GREENGUARD Indoor Air Quality Certification and GREENGUARD Children & Schools Certification for its four brands Ceco, Curries, Graham and Maiman.

The GREENGUARD Environmental Institute certifies products and materials that give off the lowest possible levels of particles and chemical vapors during their lifetimes, with the aim of recommending healthier products and materials for indoor environments.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 877 M (911) for the half-year. Income before tax amounted to SEK 592 M (1,188), a reduction due primarily to reduced dividends from subsidiaries. Investments in tangible and intangible assets totaled SEK 2 M (1). Liquidity is good and the equity ratio was 36.2% (50.4). The equity ratio has fallen because of borrowing for the acquisition of Cardo.

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.

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 April 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.

The Board of Directors and the President and CEO declare that this half- year report gives an accurate picture of the Parent company's and the Group's operations, position and income and describes significant risks and uncertainty factors faced by the Parent company and the companies making up the Group.

                            Stockholm, 27 July 2011

    Gustaf Douglas        Carl Douglas        Birgitta Klasén

       Chairman           Board member         Board member



     Eva Lindqvist         Johan Molin     Sven-Christer Nilsson

     Board member       President and CEO      Board member



     Lars Renström       Ulrik Svensson      Seppo Liimatainen

     Board member         Board member    Employee representative



     Mats Persson

Employee representative






REVIEW REPORT

We have reviewed this Report for the period 1 January to 30 June 2011 for ASSA ABLOY AB (publ). The Board of Directors and the CEO are responsible for the preparation and presentation of this Interim Report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this Interim Report based on our review.

We conducted our review in accordance with the Swedish Standard on Review Engagements SÖG 2410, 'Review of Interim Report Performed by the Independent Auditor of the Entity'. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Interim Report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent company.

Stockholm, 27 July 2011
PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant
Auditor in charge

FINANCIAL INFORMATION

The Quarterly Report for the third quarter will be published on 28 October 2011.



           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 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 08.00 on 27 July.

Q2 2011: http://hugin.info/1014/R/1533681/467257.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#1533681]

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