ASSA ABLOY

July 27, 2012 02:18 ET

Strong growth and earnings for ASSA ABLOY

STOCKHOLM, SWEDEN--(Marketwire - Jul 27, 2012) -


  * Sales increased by 14%, including 3% organic growth, and totaled SEK
    11,997 M (10,502).
  * Improved growth in North America and continued strong growth in Global
    Technologies.
  * Stable but weak development in Europe, while the emerging markets
    showed improved performance.
  * Acquisitions done of Helton, Guoqiang and Sanhe, whose combined annual
    sales of SEK 1,140 M represent 2.7% growth. At the same time a sales
    process was initiated to sell the jointly owned company Wangli with
    annual sales of SEK 600 M.
  * Operating income (EBIT) increased by 17% and amounted to SEK 1,885 M
    (1,615). The operating margin was 15.7% (15.4).
  * Net income amounted to SEK 1,295 M (1,156).
  * Earnings per share rose by 15% to SEK 3.51 (3.05).
  * Cash flow remained good and amounted to SEK 1,435 M (1,311).

SALES AND INCOME
                                Second quarter      First half-year
                           -------------------------------------------
                              2011    2012 Change   2011   2012 Change
----------------------------------------------------------------------
 Sales, SEK M               10,502  11,997   +14% 19,201 22,835   +19%

   of which,

   Organic growth                             +3%                  +3%

   Acquisitions                               +6%                 +12%

   Exchange-rate effects              +504    +5%          +653    +4%

 Operating income (EBIT),
 SEK M                       1,615   1,885   +17%  2,992  3,540   +18%

 Operating margin (EBIT), %   15.4    15.7          15.6   15.5

 Income before tax, SEK M    1,460   1,677   +15%  2,675  3,158   +18%

 Net income, SEK M           1,156   1,295   +12%  2,099  2,435   +16%

 Operating cash flow, SEK M  1,311   1,435    +9%  1,758  1,918    +9%

 Earnings per share (EPS),
 SEK                          3.05    3.51   +15%   5.57   6.61   +19%

COMMENTS BY THE PRESIDENT AND CEO

"I am very pleased that ASSA ABLOY's good performance continued during the second quarter of the year, with growth of a full 14% and a strong improvement in earnings," says Johan Molin, President and CEO. "It was particularly pleasing that sales in Americas improved and that the good growth at Global Technologies continued. Our investments in Emerging Markets are also giving results, in the form of good organic growth of a full 9% in the region. However in Europe the situation weakened further, with sales at an unchanged level.

"Research and Development activity remained very high and many new products were launched during the period. Sales of new products are going exceptionally well and accounted for a full 22% of the quarter's total sales. Examples of exciting new products include a new high-technology printer for the e-government sector, security doors for the social housing sector in China, and a completely new series of advanced automatic door openers from Besam.

"Earnings improved by a good 17%, with the newly acquired companies making especially strong advances during the quarter. The successful efficiency and restructuring measures also continued to make good contributions to the profit margin.

"Activities on the acquisition front continued at full speed and resulted in the acquisitions of Helton, Gouqiang and Sanhe - three acquisitions that add 2.7% to our sales. Helton is particularly interesting since it is a first step for Entrance Systems into the North American market for sectional doors. Our expansion on the strategically important Chinese market continued through the acquisitions of Gouqiang and Sanhe. They complement in a very good way our geographical presence in China.

"The world economy is forecast to remain weak for the rest of the year. On the mature markets stable economic development with unchanged weak growth is expected, while economic growth on the new markets is expected to be less strong than last year."

SECOND QUARTER

The Group's sales totaled SEK 11,997 M (10,502), an increase of 14% compared with the second quarter of 2011. Organic growth for comparable units was 3% (5). Acquired units contributed 6% (20). Exchange-rate effects had a positive impact of SEK 504 M on sales, that is 5% (-13).

Operating income before depreciation, EBITDA, amounted to SEK 2,157 M (1,863). The corresponding EBITDA margin was 18.0% (17.7). The Group's operating income, EBIT, amounted to SEK 1,885 M (1,615), an increase of 17%. The operating margin was 15.7% (15.4).

Net financial items amounted to SEK -208 M (-156). The Group's income before tax amounted to SEK 1,677 M (1,460), an improvement of 15% compared with the previous year. Exchange-rate effects had a positive impact of SEK 70 M on the Group's income before tax. The profit margin was 14.0% (13.9). The estimated underlying effective tax rate on an annual basis amounted to 23%. Earnings per share amounted to SEK 3.51 (3.05), an increase of 15%.

FIRST HALF-YEAR

Sales for the first half of 2012 totaled SEK 22,835 M (19,201), representing an increase of 19%. Organic growth was 3% (5). Acquired units contributed 12% (14). Exchange-rate effects had a positive impact of SEK 653 M on sales, that is 4% (- 11), compared with the first half of 2011.

Operating income before depreciation, EBITDA, for the half-year amounted to SEK 4,085 M (3,493). The corresponding margin was 17.9% (18.2). The Group's operating income, EBIT, amounted to SEK 3,540 M (2,992), which was an increase of 18%. The corresponding EBIT operating margin was 15.5% (15.6).

Earnings per share for the first half-year increased to SEK 6.61 (5.57), a rise of 19%. Operating cash flow for the half-year totaled SEK 1,918 M (1,758).

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 86 M in the quarter.

The restructuring programs proceeded according to plan and led to a reduction in personnel of 93 people during the quarter and 6,336 people since the projects began. A further 1,199 people will leave by the end of 2014.

At the end of the quarter provisions of SEK 1,449 M remained in the balance sheet for carrying out the programs.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,379 M (3,253), with organic growth of 0% (-3). The market situation remained weak during the quarter. Growth was strong in Africa, good growth in Scandinavia, Finland, the UK, eastern Europe and Israel. Germany, Spain and the rest of central Europe achieved stable sales, while France, Benelux and Italy reported negative growth during the quarter. Acquired growth amounted to 4%. The operating margin was affected by -0.3 of a percentage point by dilution from acquisitions. Operating income totaled SEK 533 M (510), which represents an operating margin (EBIT) of 15.8% (15.7). Return on capital employed amounted to 20.6% (20.6). Operating cash flow before interest paid totaled SEK 430 M (429).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,548 M (2,177), with organic growth of 5% (2). The sales trends for Mechanical Locks and Security Doors were stable, while the sales trend for High-Security and Electromechanical Products and on the private residential market were strong. Canada, Mexico and South America showed good growth in the quarter. Acquired growth was 1%. Operating income totaled SEK 540 M (456) and the operating margin was 21.2% (20.9). Return on capital employed amounted to 24.1% (23.6). Operating cash flow before interest paid totaled SEK 500 M (482).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 1,892 M (1,630), with organic growth of 5% (12). Growth was good in Korea and South-East Asia. China continued to show low growth due to lower new-building activity, while the sales trend in Australia remained negative. Acquired growth amounted to 1%. Operating income totaled SEK 271 M (232), representing an operating margin (EBIT) of 14.3% (14.3). The quarter's return on capital employed amounted to 20.8% (22.4). Operating cash flow before interest paid totaled SEK 373 M (199).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,701 M (1,416), with organic growth amounting to 11% (17). HID had strong growth in access control, secure issuing of smart cards and identification technology. Government ID had negative growth. Hospitality showed strong growth with good profitability on all markets. Acquired growth amounted to 1%. The division's operating income amounted to SEK 289 M (224), giving an operating margin (EBIT) of 17.0% (15.9). Return on capital employed amounted to 17.5% (15.0). Operating cash flow before interest paid totaled SEK 273 M (270).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 2,725 M (2,235), with organic growth amounting to -1% (5). Growth was weak for Besam, Crawford and Flexiforce in spite of a continuing positive sales trend in the service sector. The sales trends for Ditec and the private residential market were negative, affected by the weak economic trend in southern Europe. Acquired growth amounted to 21%. Operating income totaled SEK 354 M (281), giving an operating margin of 13.0% (12.6). Return on capital employed amounted to 10.8% (10.6). Operating cash flow before interest paid totaled SEK 293 M (166).

ACQUISITIONS AND DIVESTMENTS

During the quarter Traka in the UK, Frameworks in the USA, Helton in Canada and Guoqiang (Golking) in China were consolidated. The combined acquisition price for the eight companies acquired this year amounts to SEK 3,880 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 3,268 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 887 M.

On 2 May it was announced that ASSA ABLOY had signed a contract to acquire the Chinese company Sanhe Metal, a leading manufacturer of fire and security doors. The company has 260 employees and its sales in 2012 are expected to total SEK 130 M.

The decision was taken during the quarter to initiate selling of the jointly owned Chinese company Wangli. Since June the business has been reclassified under 'Assets held for sale' in accordance with IFRS 5. Sales during the quarter was reduced by SEK 76 M as a result of the reclassification. Wangli's annual sales is SEK 600 M.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY is developing and launching a new generation of energy-efficient and sustainable products for access control. One product in this field, Sargent's Passport 1000 P1 Power over Ethernet lock product, won a 'Green Solutions Award' in the new-products category at the Security Industry Association's 2012 exhibition. The lock employs IP technology and uses the existing local data network for both power supply and communication. Energy consumption both in use and on standby has been significantly reduced compared with traditional access control products.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 898 M (877) for the half-year. Income before tax amounted to SEK 966 M (592), an increase due primarily to higher dividends from subsidiaries compared with last year. Investments in tangible and intangible assets totaled SEK 9 M (2). Liquidity is good and the equity ratio was 48.2% (36.2). The equity ratio has risen mainly because of amortization of interest-bearing loans and conversion of debenture loans.

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 88-93 of the 2011 Annual Report. Since 2011 ASSA ABLOY has been 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.

The agreed revision of IAS 19 Employee Benefits applies from 1 January 2013 with retroactive effect during 2012. In this recalculation of comparative information for 2012, unrecognized expenses relating to service provided in previous years and unrecognized actuarial losses are accounted for as an adjustment of opening equity taking into account tax effects. The unrecognized balance sheet items totaled SEK 1,092 M as at 31 December 2011.

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 2011 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 24 April 2012:

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 2012



      Lars Renström           Carl Douglas      Birgitta Klasén

        Chairman              Vice Chairman           Board member





      Eva Lindqvist            Johan Molin        Sven-Christer Nilsson

      Board member          President and CEO         Board member





      Jan Svensson           Ulrik Svensson         Seppo Liimatainen

      Board member            Board member       Employee representative





      Mats Persson

 Employee representative


REVIEW REPORT

Introduction

We have reviewed this Report for the period 1 January to 30 June 2012 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.

Scope of Review

We have 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.

Conclusion

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 2012
PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Auditor in charge

FINANCIAL INFORMATION

The Quarterly Report for the third quarter will be published on 29 October 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 at
                              www.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 27 July.

Q2 2012: http://hugin.info/1014/R/1629985/522225.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#1629985]

Contact Information


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

    Carolina Dybeck Happe
    Chief Financial Officer
    Tel: +46 8 506 485 72