* Sales for the third quarter increased by 7% to SEK 8,274 M (7,736),
with 7% organic growth, 4% acquired growth and exchange-rate
effects of -3%.
* Operating income (EBIT) for the quarter increased by 14% to SEK
1,404 M (1,235*), which is the best yet achieved by the Group and
represents a margin of 17.0% (16.0*).
* Net income for the quarter amounted to SEK 884 M (366)**.
* Earnings per share for the quarter increased by 17% to SEK 2.36
(2.02*).
* Operating cash flow improved further, rising by 42% to SEK 1,306 M
(919).
* The acquisitions of Baodean and iRevo were completed.
SALES AND INCOME
Third quarter January to September
2007 2006 Change 2007 2006 Change
Sales, SEK M 8,274 7,736 +7% 24,830 23,078 +8%
of which,
Organic growth +7% +7%
Acquisitions +4% +5%
Exchange-rate effects -248 -3% -943 -4%
Operating income (EBIT),
SEK M 1,404 1,235* +14% 4,018 3,496* +15%
Operating margin (EBIT), % 17.0 16.0* 16.2 15.2*
Income before tax, SEK M 1,211 1,054* +15% 3,440 3,014* +14%
Net income, SEK M 884 366** +142% 2,509 1,367** +84%
Operating cash flow, SEK M 1,306 919 +42% 3,068 2,339 +31%
Earnings per share (EPS),
SEK 2.36 2.02* +17% 6.72 5.85* +15%
*Excluding 2006 restructuring costs totaling SEK 437 M for the
quarter and SEK 957 M for the first nine months.
** Excluding restructuring costs the 2006 net income is SEK 759 M for
the quarter and SEK 2,194 M for the first nine months.
COMMENTS BY THE PRESIDENT AND CEO"During the third quarter growth continued at a good pace throughout
the Group. It was particularly pleasing that growth in Asia Pacific
more than doubled and that all divisions delivered substantial
improvements in earnings. The Group's cash flow was stable and strong
and the restructuring program continued to proceed according to
plan," said Johan Molin, President and CEO.
THIRD QUARTER
The Group's sales totaled SEK 8,274 M (7,736), an increase of 7%
compared with 2006. In local currencies the increase amounted to 11%
(13), of which organic growth for comparable units contributed 7% (8)
while acquired units accounted for 4% (5) of the increase in volume.
Exchange-rate effects had a negative impact of SEK 248 M - i.e. 3%
-on sales.
Operating income before depreciation, EBITDA, amounted to SEK 1,625 M
(1,464), an increase of 11% compared with 2006. The EBITDA margin was
19.6% (18.9). The Group's operating income, EBIT, amounted to
SEK 1,404 M (1,235), an increase of 14%, after negative currency
effects of SEK 48 M. The operating margin (EBIT) was 17.0% (16.0).
Net financial items amounted to SEK 193 M (181), which corresponds to
an average interest rate of just over 5%. The Group's income before
tax amounted to SEK 1,211 M (1,054), which represents an increase of
15% on the previous year. After translation of subsidiaries' income
statements, exchange-rate effects had a negative impact of SEK 42 M
on the Group's income before tax. The profit margin was 14.6% (13.6).
The Group's tax charge totaled SEK 327 M (251), corresponding to an
effective tax rate of 27% for the quarter. Earnings per share
amounted to SEK 2.36 (2.02), which represents an increase of 17%.
The Group's operating cash flow amounted to SEK 1,306 M (919),
equivalent to 108% (87) of income before tax. Working capital fell by
SEK 53 M during the quarter.
THE PERIOD JANUARY TO SEPTEMBER
Sales for the first nine months of 2007 totaled SEK 24,830 M
(23,078), which represents an increase of 8% compared with 2006.
Organic growth was 7% (9). Acquired companies contributed 5% (3).
Exchange-rate effects affected sales negatively by SEK 943 M, i.e.
4%, compared with the equivalent period in 2006.
Operating income before depreciation, EBITDA, for the period amounted
to SEK 4,697 M (4,174). The corresponding margin was 18.9% (18.1).
The Group's operating income, EBIT, amounted to SEK 4,018 M (3,496)
an increase of 15%, after negative exchange-rate effects of SEK 166
M. The corresponding operating margin (EBIT) was 16.2% (15.2).
Earnings per share for the period increased by 15% to SEK 6.72
(5.85). Operating cash flow for the period amounted to SEK 3,068 M
(2,339).
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 90 M
during the quarter and SEK 215 M in the first nine months. Savings
during the quarter resulting from measures carried out are assessed
at SEK 60 M compared with the same period last year. The quarterly
rate of savings from the start of the program now amounts to SEK 85
M. So far 1,035 out of the total of 2,000 employees affected by the
restructuring program have left the Group.
COMMENTS BY DIVISION
EMEA
Sales growth in EMEA division remained good during the third quarter,
with no major regional variations. Sales totaled SEK 3,144 M (2,914),
with 6% organic growth. Acquired growth amounted to 1%. Operating
income developed very positively and amounted to SEK 543 M (469),
which represents an operating margin (EBIT) of 17.3% (16.1). Return
on capital employed also improved and amounted to 20.0% (17.9).
Operating cash flow before interest paid totaled SEK 559 M (537) and
was well in line with operating income.
AMERICAS
The sales trend in Americas division remained good in the commercial
segment during the quarter, and sales for the third quarter totaled
SEK 2,621 M (2,632), with 5% organic growth. Progress was weaker in
the sections dependent on the residential market. Acquired growth
amounted to 4%. Operating income continued to improve and amounted to
SEK 533 M (523), which represents an operating margin (EBIT) of 20.3%
(19.8). Return on capital employed amounted to 24.0% (23.2).
Operating cash flow before interest paid was strong and totaled SEK
595 M (498).
ASIA PACIFIC
Sales in Asia Pacific division grew strongly in all markets in the
region and totaled SEK 696 M (611), with 10% organic growth. The
acquisition of Pyropanel is proceeding according to plan and work to
integrate Baodean and iRevo, which will be consolidated from the
fourth quarter, has begun. Acquired growth amounted to 5%. Operating
income improved strongly relative to previous quarters as a result of
price increases made to compensate for rising raw-material costs,
together with a healthy growth in volume, and amounted to SEK 93 M
(63), representing an operating margin (EBIT) of 13.4% (10.3). Return
on capital employed amounted to 17.6% (12.7). Operating cash flow
before interest paid totaled SEK 100 M (-7), a significant
improvement on the previous year.
GLOBAL TECHNOLOGIES
Global Technologies division reported continued strong growth with
sales of SEK 1,254 M (1,107) in the third quarter, of which organic
growth accounted for 11%. The integration of Integrated Engineering
and Aontec proceeded according to plan and acquired growth amounted
to 7%. Operating income amounted to SEK 203 M (168), giving an
operating margin (EBIT) of 16.2% (15.1). Return on capital employed
amounted to 15.8% (16.1). Operating cash flow before interest paid
amounted to SEK 221 M (108).
ENTRANCE SYSTEMS
Entrance Systems division reported sales of SEK 747 M (674) in the
third quarter, representing organic growth of 7%. The service side
showed especially strong growth while the USA had rather lower
overall growth. The division's newly established operations in Asia
are showing very good growth. Acquired growth amounted to 4%.
Profitability was boosted by increased sales volumes and prices
during the quarter, and operating income amounted to SEK 109 M (87),
giving an operating margin (EBIT) of 14.6% (12.9). Return on capital
employed amounted to 13.7% (11.3). Operating cash flow before
interest paid amounted to SEK 41 M (23).
ACQUISITIONS
The acquired companies Esety, Aontec and Alba were consolidated
during the third quarter. The total acquisition price for the
companies consolidated during the first nine months amounts to
SEK 1,060 M and preliminary acquisition analyses indicate that
goodwill and other intangible assets with indefinite useful life
amount to SEK 750 M. The acquisition price is adjusted for acquired
interest-bearing liabilities including estimated earn-outs.
Asia Pacific division's acquisitions of the Chinese company Baodean
and the Korean company iRevo were completed once all necessary
permissions had been received, and both companies will be
consolidated from 1 October.
OTHER EVENTS
During the quarter ASSA ABLOY has decided on a 20-point program of
sustainable development which is to be carried through during the
years 2007 to 2010. Matters covered by the program include the
phasing-out of some chemicals used in production; energy consumption;
workplace conditions; and other social and ethical issues governed by
the company's Code of Conduct. The stated goals also require the work
of sustainable development to be integrated into the company's
existing processes. The results of the program will be reported in
the annual report on sustainable development in the Group which in
the future will be published at about the same time as the Group's
Annual Report. Current information about sustainable development is
published on the Group's website.
PARENT COMPANY
Other operating income for the Parent company ASSA ABLOY AB totaled
SEK 888 M (574) for the nine months. Income before tax amounted to
SEK 2,037 M (480). The improved income is chiefly due to
non-recurring costs which burdened last year's figures. Investments
in tangible and intangible assets totaled SEK 2 M (15). Liquidity is
good and the equity ratio was 49.6% (44.2).
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.
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 2006 Annual Report. No significant risks
other than the risks described there are judged to have occurred.
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.
This Interim Report has not been reviewed by the Company's Auditor.
Financial information
The Report for the fourth quarter will be published on 13 February
2008.
For more information, please contact:
Johan Molin, President and CEO, tel no: +46 8 506 485 42
Tomas Eliasson, CFO and Executive Vice President, tel no: +46 8 506
485 72
ASSA ABLOY is holding an analysts' meeting at 12.00 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 information contained herein are subject to the disclosure
requirements of ASSA ABLOY AB under the Swedish Securities Exchange
and Clearing Operations Act and/or the Swedish Financial Instruments
Trading Act. This information has been publicly communicated November
8 at 08.00 CET.
The full report with tables can be downloaded from the following
link:
Strong progress for ASSA ABLOY - continued growth and improved profits in all divisions
| Source: ASSA ABLOY AB
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