* The sales trend was positive and in comparable currencies sales
rose by 7% in the third quarter.
* Growth in Western Europe and Australia remained weak, but was
good in North America and on Asian, African and South American
markets.
* Sales totaled SEK 8,722 M (8,274), with 1% organic growth, 6%
acquired growth and exchange-rate effects of -2%.
* Operating income (EBIT) excluding restructuring costs amounted to
SEK 1,435 M (1,404), representing a margin of 16.5% (17.0).
* Net income amounted to SEK 709 M (884).
* Earnings per share amounted to SEK 2.38 (2.36) excluding
restructuring costs.
* The quarter's costs attributable to the new restructuring program
amounted to
SEK 247 M.
* The acquisitions of Valli&Valli, Gardesa, Rockwood and Cheil were
consolidated during the quarter. ASSA ABLOY has signed agreements
for the acquisitions of ShenFei. The acquisition of Copiax was
approved. ASSA ABLOY has made a public offer for the remainder of
the minority shares in the Korean company iRevo.
SALES AND INCOME
Third quarter January to September
2007 2008 Change 2007 2008 Change
Sales, SEK M 8,274 8,722 +5% 24,830 25,451 +3%
of which,
Organic growth +1% +2%
Acquisitions +6% +4%
Exchange-rate effects -133 -2% -794 -3%
Operating income (EBIT),
SEK M 1,404 1,435* +2% 4,018 4,056* +1%
Operating margin (EBIT), % 17.0 16.5* 16.2 15.9*
Income before tax, SEK M 1,211 1,227* +1% 3,440 3,470* +1%
Net income, SEK M 884 709 -20% 2,509 2,346 -6%
Operating cash flow, SEK M 1,306 1,189* -9% 3,068 2,852* -7%
Earnings per share (EPS),
SEK 2.36 2.38* +1% 6.72 6.76* +1%
* Excluding restructuring costs in 2008 totaling SEK 247 M for both
the quarter and the first nine months.
COMMENTS BY THE PRESIDENT AND CEO"Despite a continued slowdown on all mature markets, ASSA ABLOY
showed good growth during the quarter. Development on the North
American market was good while Europe, Australia and New Zealand
continued to weaken. On emerging markets the positive trend
continued, but at a lower level than before. The restructuring
program from 2006 is entering its final phase and has been a great
success. At the same time, work on the new program is underway and
several projects were launched during the third quarter," said Johan
Molin, President and CEO.
THIRD QUARTER
The Group's sales totaled SEK 8,722 M (8,274), representing growth of
5% compared with 2007. In local currencies the increase amounted to
7% (11), of which organic growth for comparable units was 1% (7)
while acquired units accounted for 6% (4) of the increase.
Exchange-rate effects had a negative impact of SEK 133 M (i.e. 2%) on
sales.
Operating income excluding restructuring costs and before
depreciation, EBITDA, amounted to SEK 1,669 M (1,625), a rise of 3%
compared with 2007. The EBITDA margin was 19.1% (19.6). The Group's
operating income, EBIT, excluding restructuring costs amounted to
SEK 1,435 M (1,404), a rise of 2%, after negative currency effects of
SEK 27 M. The operating margin excluding restructuring costs was
16.5% (17.0).
Net financial items amounted to SEK 207 M (193), which corresponds to
an average interest rate of just over 5%. The Group's income before
tax and excluding restructuring costs amounted to SEK 1,227 M
(1,211), which represents a rise of 1% on the previous year. After
translation of subsidiaries' income statements, exchange-rate effects
had a negative impact of SEK 21 M on the Group's income before tax.
The profit margin excluding restructuring costs was 14.1% (14.6). The
Group's tax charge totaled SEK 271 M (327), which represents an
effective tax rate of 28% for the quarter. The underlying tax rate is
still 27% and the reason for the increase is that some restructuring
costs have been reported without claims for deferred tax. Earnings
per share excluding restructuring costs amounted to SEK 2.38 (2.36),
which represents a rise of 1%.
THE PERIOD JANUARY TO SEPTEMBER
Sales for the first nine months of 2008 totaled SEK 25,451 M
(24,830), which represents
an increase of 3% compared with 2007. Organic growth was 2% (7).
Acquired units contributed 4% (5). Exchange-rate effects affected
sales negatively by SEK 794 M, i.e. 3%, compared with the first nine
months of 2007.
Operating income before depreciation, EBITDA, amounted to SEK 4,744 M
(4,697) excluding restructuring costs for the period. The
corresponding margin was 18.6% (18.9). The Group's operating income,
EBIT, excluding restructuring costs amounted to SEK 4,056 M (4,018),
representing a small increase after negative exchange-rate effects of
SEK 151 M. The corresponding operating margin (EBIT) was 15.9%
(16.2).
Earnings per share for the period increased to SEK 6.76 (6.72),
excluding restructuring costs. Operating cash flow amounted to SEK
2,852 M (3,068).
RESTRUCTURING MEASURES
Payments related to the restructuring program amounted to SEK 83 M
during the quarter, bringing the total for the first nine months of
the year to SEK 291 M. Savings during the quarter resulting from
measures carried out amount to SEK 40 M compared with the same period
last year. The quarterly rate of savings from the start of the
program now amounts to SEK 125 M.
So far 1,934 out of the total of a little over 2,000 employees
affected by the restructuring program have left the Group. The whole
program is expected to have reached completion by the end of the year
and the savings effects will be materialized progressively during
2009.
The review of production structures in high-cost countries announced
last quarter is now underway. The review covers those units that have
not yet been converted from full production to assembly. About thirty
projects will be carried out. The total cost is estimated to be SEK
800 M, with a payback time in line with the current restructuring
plan of around two to three years. The entire cost of the program is
expected to be expensed against income in 2008.
A proportion of the projects were announced and put in hand during
the third quarter. The total cost during the quarter amounted to SEK
247 M.
COMMENTS BY DIVISION
EMEA
Sales in EMEA division during the quarter totaled SEK 3,308 M
(3,144), with organic growth of -2%. The weakening on most West
European markets continued. The emerging markets in Africa and
exports to the Middle East, Asia and South America grew strongly.
Acquired growth amounted to 6%. Operating income excluding
restructuring costs amounted to SEK 552 M (543), which represents an
operating margin (EBIT) of 16.7% (17.3). Return on capital employed
excluding restructuring costs amounted to 19.6% (20.0). Operating
cash flow before interest paid totaled SEK 543 M (559).
AMERICAS
Growth in the commercial segment in Americas division during the
quarter was strong, with the Security Doors business unit showing
especially good progress. The sales trend in the residential segment
was negative for the fourth successive quarter. Total sales amounted
to SEK 2,737 M (2,621), with 6% organic growth. Acquired growth
amounted to 3%. The operating margin improved further from an already
good level and amounted to 20.6% (20.3) excluding restructuring
costs. Return on capital employed excluding restructuring costs
amounted to 26.7% (24.0). Operating cash flow before interest paid
totaled SEK 593 M (595).
ASIA PACIFIC
Sales in Asia Pacific division weakened during the third quarter, but
with substantial regional differences. In China growth was positive
despite the interruption for the Olympic Games. Korea also showed
strong sales improvement, while there was a weak negative trend in
Australia and New Zealand. The division's sales totaled SEK 892 M
(696), with 2% organic growth. Acquired growth amounted to 29%.
Operating income excluding restructuring costs totaled SEK 107 M
(93), which represents an operating margin (EBIT) of 12.0% (13.4).
The quarter's return on capital employed excluding restructuring
costs amounted to 16.4% (17.6). Operating cash flow before interest
paid totaled SEK 141 M (100).
GLOBAL TECHNOLOGIES
Global Technologies division reported continued growth overall, but
with variations between the business units. HID and Hospitality had
strong growth, whereas ITG had a negative sales trend as the program
to phase out unprofitable segments continued and delays arose on some
customer projects. Total sales in the third quarter were SEK 1,254 M
(1,254), of which organic growth accounted for 3%. Acquired growth
amounted to 0% as a net figure between acquisitions (+2%) and
disposals (-2%). Operating income excluding restructuring costs for
the division amounted to SEK 208 M (203), giving an operating margin
(EBIT) of 16.6% (16.2). The operating margin continued to improve for
HID, remained stable for Hospitality and decreased for ITG. Return on
capital employed excluding restructuring costs amounted to 15.7%
(15.8). Operating cash flow before interest paid totaled SEK 173 M
(221).
ENTRANCE SYSTEMS
Entrance Systems division reported sales of SEK 766 M (747) in the
third quarter, representing organic growth of 1%. Acquired growth
amounted to 3%. Sales of new installations on the mature markets of
Europe, North America, Australia and New Zealand were weak because
demand from the retail sector diminished. Sales in China were
affected negatively by the Olympic Games. On the service side,
however, several major contracts were received, mostly in the USA.
Operating income excluding restructuring costs amounted to SEK 110 M
(109), giving an operating margin (EBIT) of 14.3% (14.6). Operating
income was positively effected by price increases made, but
diminished by a growing price pressure on larger orders. Return on
capital employed excluding restructuring costs amounted to 13.5%
(13.7). Operating cash flow before interest paid totaled SEK 61 M
(41).
ACQUISITIONS
The major acquisitions completed and consolidated during the third
quarter were those of Cheil in Korea and Valli&Valli and Gardesa,
both in Italy. Information about Cheil was published on 30 July,
information about Valli&Valli was published on 18 January and 7 July,
and information about Gardesa was published on 9 June. Adding smaller
acquisitions, a total of eleven acquisitions were consolidated during
the first nine months of the year.
The combined acquisition price for these eleven acquisitions amounts
to SEK 1,255 M and preliminary acquisition analyses indicate that
goodwill and other intangible assets with indefinite useful life
amount to about SEK 835 M. The acquisition price is adjusted for
acquired net debt and estimated earn-outs.
On 15 October Asia Pacific division made a public offer for the
outstanding 49% of shares in the Korean company iRevo. The first 51%
were acquired by ASSA ABLOY in September 2007 and the company has
been consolidated into the Group since 1 October 2007.
On 17 October it was announced that Asia Pacific division has signed
a contract for the acquisition of the Chinese company ShenFei.
ShenFei is a leading manufacturer of door closers with 1,100
employees and annual sales of SEK 180 M. The acquisition requires the
approval of the appropriate authorities and is expected to be
completed in the fourth quarter of the year.
EMEA division's acquisition of Copiax has now been approved by the
Swedish authorities and will be completed during the fourth quarter.
The competition authority in Germany is continuing to consider the
acquisition of SimonsVoss by Global Technologies division.
During the quarter the company Bar Code Systems in Australia, which
belonged to the HID business unit of Global Technologies division,
was sold off.
SUSTAINABLE DEVELOPMENT
In China ASSA ABLOY Wangli has been certified according to ISO
14001:2004 for its security doors, fire resistant doors and
anti-theft locks businesses. ASSA ABLOY Wangli is the first Chinese
company manufacturing security doors that has been certified as such.
This is an important step in our efforts for a sustainable
development for the Group in China, which is one of the most
important growth markets in the world. More information about this
and other information about sustainable development and the Group's
sustainability program can be found at www.assaabloy.com.
PARENT COMPANY
Other operating income for the Parent company ASSA ABLOY AB totaled
SEK 1,231 M (888) for the first nine months. Income before tax
amounted to SEK 1,361 M (2,037). Investments in tangible and
intangible assets totaled SEK 0 M (2). Liquidity is good and the
equity ratio was 47.1% (49.6).
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, 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.
For 2008 the organic growth is expected to be positive, but can be
lower than 3% depending on the development if the business cycle.
*) The Outlook is unchanged from the latest published in the Interim
Report dated 30 July 2008.
Stockholm October 22, 2008
Johan Molin
REVIEW
This report has not been reviewed by the company's auditors.
FINANCIAL INFORMATION
The Year-End Report and Quarterly Report for the fourth quarter will
be published on 13 February 2009.
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 10.30 today at
Salénhuset, Norrlandsgatan 15, 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 22 October.
The full report with tables can be downloaded via the PDF link.
Good progress for ASSA ABLOY with continued growth
| Source: ASSA ABLOY AB
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