Fourth quarter
* Sales increased by 9% to SEK 9,468 M (8,721), with -4% organic
growth, 4% acquired growth and exchange-rate effects of 9%.
* Operating income (EBIT) increased by 2% to SEK 1,469 M* (1,440),
representing a margin of 15.5%* (16.5).
* Net income amounted to SEK 92 M** (859).
* Earnings per share increased by 7% and amounted to SEK 2.45*
(2.30).
* There were considerable savings from restructuring and efficiency
measures during the quarter that will continue to give positive
effects.
* Operating cash flow rose by 10% to a record level of SEK 1,916 M
(1,740).
Full year
* Sales increased by 4% to SEK 34,918 M (33,550), with 0% organic
growth, 4% acquired growth and exchange-rate effects of 0%.
* Operating income (EBIT) increased by 1% to SEK 5,526 M* (5,458),
representing a margin of 15.8%* (16.3).
* Net income amounted to SEK 2,438 M** (3,368).
* Earnings per share increased by 2% and amounted to SEK 9.21*
(9.02).
* Operating cash flow was unchanged, amounting to SEK 4,769 M
(4,808).
* Major investments in product development were made during the
year and will contribute positively to sales.
* The full cost of the new restructuring program, totaling SEK
1,180 M, was expensed during the third and fourth quarters. All
projects are now underway, while the program initiated in 2006
will be completed in 2009.
* The board of directors proposes a dividend of SEK 3.60 per share
(3.60).
* Excluding restructuring and non-recurring costs in 2008 amounting
to SEK 1,010 M for the quarter and
SEK 1,257 M for the year.
** Excluding restructuring and non-recurring costs, net income for
the quarter is SEK 918 M and for the year
SEK 3,451 M.
SALES AND INCOME
Fourth quarter Full year
2007 2008 Change 2007 2008 Change
Sales, SEK M 8,721 9,468 +9% 33,550 34,918 +4%
of which,
Organic growth -4% +0%
Acquisitions +4% +4%
Exchange-rate effects +810 +9% +16 +0%
Operating income
(EBIT), SEK M 1,440 1,469* +2% 5,458 5,526* +1%
Operating margin
(EBIT), % 16.5 15.5* 16.3 15.8*
Income before tax,
SEK M 1,168 1,286* +10% 4,609 4,756* +3%
Net income, SEK M 859 92** - 3,368 2,438** -
Operating cash flow,
SEK M 1,740 1,916 +10% 4,808 4,769 -1%
Earnings per share
(EPS), SEK 2.30 2.45* +7% 9.02 9.21* +2%
* Excluding restructuring and non-recurring costs in 2008 amounting
to SEK 1,010 M
for the quarter and SEK 1,257 M for the year.
** Excluding restructuring and non-recurring costs, net income for
the quarter is
SEK 918 M and for the year SEK 3,451 M.
COMMENTS BY THE PRESIDENT AND CEO"It is pleasing to report that ASSA ABLOY recorded its highest-ever
sales and income in 2008, at the same time as investments in product
development and market presence continued at a high level. Ongoing
restructuring programs and other measures achieved valuable savings
which counteracted the year's steadily weakening market. Acquisition
activity maintained a continued high tempo, with 18 acquisitions
completed.
However, everything indicates that 2009 will be a challenging year,
since the financial crisis has had a strongly negative effect on
investments in construction. Positive is that investments in product
development are producing a good boost to sales, but are not expected
to be sufficient to avoid a negative organic growth in 2009. Our
focus will therefore be placed largely on cost control, profit
margins and cash flow, while through our global and unique market
presence we are active and ready to respond rapidly to opportunities
on the market," says Johan Molin, President and CEO.
FOURTH QUARTER
The Group's sales totaled SEK 9,468 M (8,721), representing growth of
9% compared with 2007. In local currencies the increase amounted to
0% (11), of which organic growth for comparable units was -4% (6)
while acquired units accounted for 4% (5) of the increase.
Exchange-rate effects had a positive impact of SEK 810 M (i.e. 9%) on
sales.
Operating income before depreciation, EBITDA, excluding restructuring
and non-recurring costs, amounted to SEK 1,703 M (1,670), a rise of
2% compared with 2007. The EBITDA margin was 18.0% (19.1). The
Group's operating income, EBIT, excluding restructuring and
non-recurring costs, amounted to SEK 1,469 M (1,440), a rise of 2%,
after positive currency effects of SEK 155 M. The operating margin
was 15.5% (16.5).
Net financial items amounted to SEK 184 M (271), which corresponds to
an average interest rate of just over 5%. The Group's income before
tax amounted to SEK 276 M (1,168). Adjusted for non-recurring and
restructuring costs, income before tax was SEK 1,286 M, representing
a rise of 3%. After translation of subsidiaries' income statements,
exchange-rate effects had a positive impact of SEK 115 M on the
Group's income before tax. The profit margin was 2.9% (13.4) and
adjusted for restructuring and non-recurring costs, 13.6%. The
Group's tax charge totaled SEK 184 M (309). The effective tax rate
for the quarter was affected by the fact that deferred tax has not
been considered on some restructuring items. The underlying tax rate
was 27%. Earnings per share amounted to SEK 0.29 (2.30). Adjusted for
restructuring and non-recurring costs, earnings per share were SEK
2.45.
FULL YEAR
Sales for 2008 totaled SEK 34,918 M (33,550), which represents an
increase of 4% compared with 2007. Organic growth was 0% (7).
Acquired units contributed 4% (5). Exchange-rate effects affected
sales positively by SEK 16 M.
Operating income before depreciation, EBITDA, amounted to SEK 6,447 M
(6,366), excluding restructuring and non-recurring costs. The
corresponding margin was 18.5% (19.0). The Group's operating income,
EBIT, amounted to SEK 5,526 M (5,458), excluding restructuring and
non-recurring costs, an increase of 1%. The corresponding operating
margin (EBIT) was 15.8% (16.3).
Earnings per share increased by 2% to SEK 9.21 (9.02), excluding
restructuring and non-recurring costs. Operating cash flow amounted
to SEK 4,769 M (4,808).
RESTRUCTURING MEASURES
Payments related to the two restructuring programs amounted to SEK
152 M during the quarter, making the total for the full year SEK 485
M. The restructuring program initiated in 2006 has been a great
success and will be completed in 2009. The annual rate of savings is
close to the target level of SEK 600 M, which will be achieved during
2009. More than 2,000 employees have left the Group as a result of
the changes in the production structure.
The restructuring program initiated during the second half of 2008
was fully underway by year-end. The program comprises some 40
projects, is expected to cost SEK 1,180 M and affects 1,800
employees. The payback time is 2-3 years. The entire cost has been
expensed in the third and fourth quarters.
COMMENTS BY DIVISION
EMEA
Sales in EMEA division during the quarter totaled SEK 3,629 M
(3,519), with organic growth of -9%. The weakening on all West
European markets continued. Only Germany showed an increase in sales;
otherwise growth was negative. The weakening also continued on the
growth markets in Africa and Eastern Europe. Acquired growth amounted
to 6%. Operating income excluding restructuring and non-recurring
costs amounted to SEK 562 M (602), which represents an operating
margin (EBIT) of 15.5% (17.1). Return on capital employed excluding
restructuring and non-recurring costs amounted to 17.5% (22.4). The
return was diluted by lower income and a number of acquisitions
during the year. Operating cash flow before interest paid totaled SEK
938 M (829).
AMERICAS
Growth in Americas division weakened during the quarter but remained
strong in the commercial segment, where the positive trend for the
Security Doors business unit continued. The sales trend in the
residential segment was negative. Total sales amounted to SEK 2,889 M
(2,383), with 1% organic growth. Acquired growth amounted to 3%. The
operating margin improved and amounted to 19.9% (19.3), excluding
restructuring costs. Return on capital employed excluding
restructuring costs amounted to 23.1% (21.6). Operating cash flow
before interest paid totaled SEK 707 M (717).
ASIA PACIFIC
Organic growth in Asia Pacific division turned negative in the fourth
quarter. All business units in Australia and New Zealand, which
represent half the division, showed negative growth. Weakening was
also evident on the Chinese market. On the other Asian markets apart
from China growth was weakly positive. The division's sales totaled
SEK 881 M (895), with -8% organic growth. Acquired growth amounted to
6%. Operating income excluding restructuring costs totaled SEK 92 M
(115), which represents an operating margin (EBIT) of 10.4% (12.8).
The quarter's return on capital employed excluding restructuring
costs amounted to 13.8% (19.6). Operating cash flow before interest
paid totaled SEK 194 M (90).
GLOBAL TECHNOLOGIES
Global Technologies division reported negative organic growth for the
quarter. The weakened market situation affected all business units.
At ITG the program to phase out unprofitable segments continued while
some customer projects were postponed. Total sales in the fourth
quarter were SEK 1,315 M (1,328), with organic growth of -8%.
Acquired growth amounted to -3%. The division's operating income
excluding restructuring costs amounted to SEK 203 M (219), giving an
operating margin (EBIT) of 15.4% (16.5). Return on capital employed
excluding restructuring costs amounted to 13.8% (16.9). Operating
cash flow before interest paid totaled SEK 275 M (293).
ENTRANCE SYSTEMS
Entrance Systems division reported sales of SEK 952 M (823) in the
fourth quarter, representing organic growth of 3%, the same figure as
for the corresponding quarter last year. Acquired growth amounted to
6%. Demand from the retailing sector weakened but was counteracted by
some expansion of demand from the hospital and healthcare sector and
a positive trend on the service side. Operating income excluding
restructuring costs amounted to SEK 150 M (130), giving an operating
margin (EBIT) of 15.8% (15.7). Return on capital employed excluding
restructuring costs amounted to 18.1% (16.3). Operating cash flow
before interest paid totaled SEK 104 M (177).
ACQUISITIONS
The major acquisition completed and consolidated during the fourth
quarter was that of Copiax in Sweden. Information abut Copiax has
been published on several occasions, most recently in the Interim
Report for the third quarter of 2008. Adding smaller acquisitions, a
total of 20 companies have been consolidated during the year of which
two concerned the final acquisition of the minority shares in iRevo,
which is already being consolidated in the Group since 2007 (see
below). The combined acquisition price for the 20 companies amounts
to SEK 2,013 M, and preliminary acquisition analyses indicate that
goodwill and other intangible assets with indefinite useful life
amount to about SEK 1,460 M. The acquisition price is adjusted for
acquired net debt and estimated earn-outs.
During the fall Asia Pacific division made a public offer for the
outstanding 49% of shares in the South Korean company iRevo. More
than 90% of the total number of outstanding shares are now owned by
ASSA ABLOY and the Korean stock exchange has approved the company's
request for delisting. The first 51% of iRevo was acquired by ASSA
ABLOY 2007 and the company has been consolidated in the Group since 1
October 2007.
The previously announced acquisition of the Chinese company Shenfei
has now been approved by the authorities.
The competition authority in Germany has rejected the company's
application concerning the acquisition of the German company
SimonsVoss. ASSA ABLOY has lodged a formal appeal and is currently
considering the next step in the process.
SUSTAINABLE DEVELOPMENT
ASSA ABLOY's units all over the world are working purposefully to
reduce the emission of greenhouse gases. This applies to units on
both mature and new markets and to both existing and newly acquired
companies. ASSA ABLOY's largest production unit in North America,
Sargent Manufacturing, has made an investment in a
combined-heat-and-power plant. By using the plant both to generate
power and for heating, efficiency has been raised from 40% to 90%,
which has significantly reduced energy consumption and the emission
of greenhouse gases. Furthermore the investment has a financial
payback time of only two years.
The 2008 Sustainability Report, reporting on the Group's 20-point
program and giving other information about sustainable development,
will be published at the time of the Annual General Meeting in April
2009.
OTHER EVENTS
The operating costs for 2008 for EMEA division include a
non-recurring item of SEK 77 M relating to the provision of
supplementary lock protection in the Swedish operation.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB
totaled SEK 1,775 M (1,641) for the full year. Income before tax
amounted to SEK 1,590 M (2,351). Investments in tangible and
intangible assets totaled SEK 0 M (496). Liquidity is good and the
equity ratio was 39.8% (47.1).
DIVIDEND AND ANNUAL GENERAL MEETING
The Board of Directors proposes a dividend of SEK 3.60 (3.60) per
share for the 2008 financial year. The Annual General Meeting will be
held on 23 April 2009.
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 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 for the year
2009 will be a challenging year since the financial crisis has had a
strongly negative effect on investments in construction, and negative
organic growth for the year is therefore expected for ASSA ABLOY.
* The long-term outlook is unchanged while the outlook for 2009 is
new. No outlook for 2009 has previously been published.
Stockholm, 13 February 2009
Johan Molin
President and CEO
The Year-End Report has not been reviewed by the Company's Auditor.
Financial information
The Interim Report for the first quarter will be published on 22
April 2009. The Annual General Meeting will be held at Moderna Museet
(the Museum of Modern Art) in Stockholm on 23 April.
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 10.00 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.
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 13 February.
Record year for ASSA ABLOY despite weak market development
| Source: ASSA ABLOY AB
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