* Sales in the first quarter increased by 8% to SEK 8,227 M
(7,653), with 8% organic growth,
6% acquired growth and exchange-rate effects of -6%.
* Operating income (EBIT) increased by 16% to SEK 1,289 M (1,110).
* Net income increased by 14% to SEK 803 M (704).
* Earnings per share increased by 15% to SEK 2.16 (1.88).
SALES AND INCOME
First quarter Full year
2007 2006 Change 2006 2005 Change
Sales, SEK M 8,227 7,653 +8% 31,137 27,802 +12%
of which,
Organic growth +8% +9%
Acquisitions +6% +3%
Exchange-rate effects -461 -6% -109 0%
Operating income (EBIT),
SEK M 1,289 1,110 +16% 4,771* 4,078 +17%
Operating margin (EBIT),
% 15.7 14.5 15.3* 14.7
Income before tax, SEK M 1,101 965 +14% 4,100* 3,556 +15%
Net income, SEK M 803 704 +14% 1,756 2,613 -33%
Operating cash flow, SEK
M 805 587 +37% 3,528 3,702 -5%
Earnings per share (EPS),
SEK 2.16 1.88 +15% 7.99* 6.97 +15%
*Excluding restructuring costs totaling SEK 1,474 M (full year)
COMMENTS BY THE PRESIDENT AND CEO, JOHAN MOLIN"The year got off to an excellent start with continued strong organic
growth driven by good demand especially for Global Technologies'
fast-growing products and in Europe. Acquired growth rose as a result
of several relatively small but value-creating acquisitions. It is
gratifying to report that we grew organically and through
acquisitions by 14% in the quarter at the same time as our
restructuring program progressed according to plan."
FIRST QUARTER
The Group's sales in the first quarter totaled SEK 8,227 M (7,653),
an increase of 8% on the previous year. Organic growth was 8% (12).
Newly acquired companies, principally Fargo, Adams Rite and Pemko,
contributed 6% (2) to sales. Translation of foreign subsidiaries'
sales
to Swedish kronor had a negative effect of SEK 461 M due to changes
in exchange rates.
Operating income before depreciation, EBITDA, amounted to SEK 1,518 M
(1,332). The corresponding margin was 18.5% (17.4). The Group's
operating income, EBIT, amounted to SEK 1,289 M (1,110), an increase
of 16%, after negative currency effects of SEK 74 M. Income was
boosted by increased sales volumes and by savings from the
restructuring program. The operating margin (EBIT) improved strongly
to 15.7% (14.5) despite some dilution from acquired units and
continued rises in material costs. The quarter's income before tax
amounted to SEK 1,101 M (965) after negative currency effects of
SEK 70 M due to translation of foreign subsidiaries. The Group's tax
charge totaled SEK 298 M (261), corresponding to an effective tax
rate of 27% on reported income before tax. Earnings per share for the
first quarter amounted to SEK 2.16 (1.88), which represents an
increase of 15%.
Operating cash flow for the quarter amounted to SEK 805 M -
equivalent to 73% (61) of income before tax - compared with SEK 587 M
last year. Working capital rose by SEK 469 M during the quarter.
RESTRUCTURING MEASURES
The comprehensive restructuring program initiated in April 2006 is
proceeding according to plan. The program includes some 50 individual
restructuring measures. The roles of a large number of production
units will be changed to focus mainly on final assembly, and some
units will be closed. The cost of the program is assessed at SEK
1,274 M and it is expected to generate cost savings of about SEK 600
M a year once the whole program is completed in 2009. The full cost
of the program was expensed in 2006.
Payments related to the restructuring program amounted to SEK 44 M
during the quarter. Savings resulting from measures carried out are
assessed at SEK 45 M for the quarter. So far about 600 out of the
total of 2,000 employees affected by the restructuring program have
left the Group.
COMMENTS BY DIVISION
EMEA
Sales for the first quarter in the EMEA division (Europe, Middle East
and Africa) totaled SEK 3,444 M (3,205), with 9% organic growth.
Acquired growth contributed 1%. Operating income amounted to SEK 593
M (479), which represents an operating margin (EBIT) of 17.2% (15.0).
Return on capital employed amounted to 22.7% (18.3). Operating cash
flow before interest paid totaled
SEK 376 M (294).
Sales growth remained strong in the first quarter. The Nordic region,
the UK, Spain and new markets in eastern Europe and Africa are
generating the best organic growth. The operating margin advanced
well during the quarter as a result of rising sales volumes and
savings from the restructuring program. Increased profitability led
to a strong improvement in return on capital employed. Cash flow was
seasonally weak during the quarter.
AMERICAS
Sales for the first quarter in the Americas division totaled SEK
2,607 M (2,519) with 6% organic growth. Acquired growth contributed
10%. Operating income amounted to SEK 496 M (470), which represents
an operating margin (EBIT) of 19.0% (18.7). Return on capital
employed amounted to 22.3% (21.1). Operating cash flow before
interest paid totaled SEK 449 M (280).
Americas' sales trend remained strong in the first quarter except for
the Door Group and the Residential Group which both reported lower
rates of growth. The American businesses in the commercial segment,
headed by the Architectural Hardware Group and the Electromechanical
Group, reported continuing strong growth during the quarter. The
acquired unit Pemko is developing according to plan but is producing
some dilution of the operating margin. The operating margin for
comparable units advanced well during the quarter as a result of the
growth in sales volumes.
ASIA PACIFIC
Sales for the first quarter in the Asia Pacific division totaled SEK
539 M (534) with 6% organic growth. Acquired growth contributed 3%.
Operating income amounted to SEK 41 M (35), representing an operating
margin (EBIT) of 7.7% (6.6). Return on capital employed amounted to
8.0% (7.1). Operating cash flow before interest paid totaled SEK 45 M
(6).
Sales in China are developing well and the sales trend in Australia
improved. The acquisition of Pyropanel is proceeding according to
plan. The operating margin improved relative to previous quarters as
a result of price increases made. Further price increases are being
made in April.
GLOBAL TECHNOLOGIES
The Global Technologies division reported sales of SEK 1,167 M (950)
in the first quarter, with organic growth of 13%. Acquired growth
contributed 16%. Operating income amounted to SEK 163 M (134), giving
an operating margin (EBIT) of 14.0% (14.1). Return on capital
employed amounted to 12.8% (17.8). Operating cash flow before
interest paid amounted to SEK 25 M (5).
Global Technologies reports continued strong organic growth in all
three of its businesses. Demand for the division's products is good
on all major markets. The operating margin is being temporarily
impaired by market investments and planned changes in acquired units,
primarily Fargo.
ENTRANCE SYSTEMS
The Entrance Systems division reported sales of SEK 668 M (617) in
the first quarter, representing organic growth of 7%. Acquired growth
contributed 3%. Operating income amounted to SEK 86 M (77), giving an
operating margin (EBIT) of 12.8% (12.5). Return on capital employed
amounted to 11.0% (9.8). Operating cash flow before interest paid
amounted to SEK 177 M (123).
Demand continues to be good on all major markets. Growth during the
quarter was strongest
in North America. Acquired units are strengthening the service
organization in the USA and Canada. Profitability was boosted by
increased sales volumes and prices during the quarter. Cash flow was
seasonally strong.
ACQUISITIONS
The acquisition of Pyropanel, a leading company in fireproof doors in
Australia, took place at
the end of January. Its sales in 2006 amounted to AUD 19 M, with a
good EBIT margin. The company has about 75 employees. The acquisition
is expected to contribute to earnings per share from the time of
acquisition. The company is consolidated in the Asia Pacific division
from 1 February.
The acquisition of Pemko, a leading manufacturer of door components
in the USA, took place
at the beginning of January. Its sales in 2006 amounted to USD 55 M,
with a good EBIT margin. The company has about 330 employees. The
acquisition is expected to contribute to earnings per share from the
time of acquisition. The company is consolidated in the Americas
division from 1 January.
In March Entrance Systems division acquired the service companies La
Force Associates in south-western USA and Portronik in Canada. The
companies distribute, install and carry out servicing of automatic
doors and have combined annual sales of around SEK 100 M. Servicing
and installation are strategically prioritized business areas for
Entrance Systems' growth. The acquisitions are expected to contribute
to earnings per share from the times of acquisition.
The combined acquisition price for the acquisitions made during the
quarter is about
SEK 500 M. This price is adjusted for acquired interest-bearing
assets including estimated earn-outs. Preliminary acquisition
analyses indicate that goodwill and other intangible assets with
indefinite useful life amount to about SEK 300 M.
Global Technologies division completed the acquisition of Integrated
Engineering in the Netherlands at the start of April. The company
develops and sells advanced access-card readers based on RFID
technology. The company, which had sales of about SEK 35 M in 2006,
has achieved high growth and has 14 employees.
EMEA division has signed a contract for the acquisition of the
Israeli company Alba. The company manufactures and sells mechanical
lock products for the local market. The company had sales of about
SEK 70 M in 2006 and has about 65 employees. The acquisition is
conditional on the approval of the Israeli competition authority. The
transaction is expected to be able to be completed during the spring.
OTHER EVENTS
Joe Grillo has regrettably decided to leave his position as Head of
Global Technologies division. Joe has during his six years in the
Group been instrumental in the development of the division and we
thank him for his contribution and wish him success in his future
career. Johan Molin, President and CEO, will take over the
responsibility for Global Technologies during a transition period
until a permanent successor has been appointed.
ASSA ABLOY's Board of Directors has decided to recommend to the
Annual General Meeting a new incentive program directed at 28,000 of
the Group's employees in 17 countries. The program is to be issued at
market price, with an estimated dilution effect amounting to about 1%
of the share capital. The proposed duration is five years. The
program has been discussed with the largest shareholders.
In March ASSA ABLOY published its first-ever report about its work on
sustainable development. This covers the environment, business
ethics, health & safety and working conditions. The report can be
found on the company's website.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled
SEK 176 M (-9) for the quarter. Income before tax amounted to SEK 789
M (-48). Investments in tangible and intangible assets totaled SEK 1
M (4). Liquidity is good and the equity ratio was 47.6% (44.3).
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 58-62 of the 2006 Annual
Report. New or revised IFRS effective after 31 December 2006 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 'Interim Financial Reporting' under the guidelines given in RR
31 issued by the Swedish Financial Accounting Standards Council. The
Parent company applies RR 32:05.
OUTLOOK
Organic sales growth is expected to continue at a good rate. The
operating margin (EBIT) and operating cash flow are expected to
develop well.
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.
Stockholm, 25 April 2007
Johan Molin
President and CEO
This Interim Report has not been reviewed by the Company's Auditor.
Financial information
The Annual General Meeting will be held on 26 April at the Modern
Museum (Moderna Museet) in Stockholm.
The Interim Report for the second quarter will be published on 9
August 2007.
The Interim Report for the third quarter will be published on 8
November 2007.
The Report for the fourth quarter will be published in February 2008.
Further information can be obtained from
Johan Molin, President and CEO, Tel: +46 8 506 485 42
Tomas Eliasson, Executive Vice President and CFO, tel: +46 8 506 485
72
ASSA ABLOY is holding an analysts' meeting at 14.00 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.
The full report with tables can be downloaded from the following
link:
ASSA ABLOY - off to an excellent start
| Source: ASSA ABLOY AB
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