* Sales totaled SEK 10,502 M (9,356), representing an increase of 12%, made up
of 5% organic growth, 20% acquired growth and currency effects of -13%.
* Strong growth in Asia and South America.
* Slow but stable development on the mature markets.
* Operating income (EBIT) increased by 7% and amounted to SEK 1,615 M (1,515).
* The operating margin amounted to 15.4% (16.2) including dilution from
acquisitions and currency with 1.1%.
* Sale of Lorentzen & Wettre to ABB means that the Cardo transaction will be
complete.
* Reduced tax rate to 22% (24).
* Net income amounted to SEK 1,156 M (1,031).
* Earnings per share rose by 12% to SEK 3.07 (2.74).
SALES AND INCOME
Second quarter First half-year
-----------------------------------------
2010 2011 Change 2010 2011 Change
-----------------------------------------------------------------------
Sales, SEK M 9,356 10,502 +12% 17,701 19,201 +8%
of which,
Organic growth +5% +5%
Acquisitions +20% +14%
Currency effects -956 -13% -1,623 -11%
Operating income (EBIT), SEK M 1,515 1,615 +7% 2,810 2,992 +6%
Operating margin (EBIT), % 16.2 15.4 15.9 15.6
Income before tax, SEK M 1,363 1,460 +7% 2,521 2,675 +6%
Net income, SEK M 1,031 1,156 +12% 1,910 2,099 +10%
Operating cash flow, SEK M 1,440 1,311 -9% 2,310 1,758 -24%
Earnings per share (EPS), SEK 2.74 3.07 +12% 5.10 5.60 +10%
COMMENTS BY THE PRESIDENT AND CEO
"In the second quarter of the year sales grew by an exciting 25% in local
currencies, made up of 5% organic growth and 20% acquired growth," says Johan
Molin, President and CEO. Asia and South America showed strong growth, while
development in the mature markets was slow but stable. It was pleasing that our
electromechanical products did extremely well and continued to grow in all
divisions and on all markets, with HID in particular reporting great successes
and achieving 19% organic growth during the quarter.
"Operating income improved by 7% in spite of strong negative currency effects.
The operating margin was affected positively by the volume growth and the
efficiency and restructuring programs at the same time as it was diluted by
acquisitions and currency.
"It is very pleasing that the Cardo deal is now concluding with the signing with
ABB Ltd for the sale of Lorentzen & Wettre. This means that the parts of Cardo
that do not fit ASSA ABLOY long term will get industrial owners that gives them
better opportunities for continued development and growth. The integration of
Crawford is progressing rapidly and is looking extremely promising.
"During the quarter Portafeu, France's leading manufacturer of fire doors, was
acquired and its integration into EMEA division is in good progress. Portafeu
broadens our offer in one of our most important European markets. I want to take
this opportunity to welcome Portafeu's highly skilled staff into the Group.
"The business cycle on the mature markets is expected to be slow but stable due
to cuts in public spending at the same time as the development on the emerging
markets is expected to continue to be positive."
SECOND QUARTER
The Group's sales totaled SEK 10,502 M (9,356), an increase of 12% compared with
2010. Organic growth for comparable units was 5% (2). Acquired units contributed
20% (8). Currency effects had a negative impact of SEK 956 M on sales, that is
-13% (-5).
Operating income before depreciation, EBITDA, excluding restructuring costs,
amounted to SEK 1,863 M (1,780). The corresponding EBITDA margin was 17.7%
(19.0). The Group's operating income, EBIT, amounted to SEK 1,615 M (1,515), an
increase of 7%. The operating margin was 15.4% (16.2).
Net financial items amounted to SEK -156 M (-152). The Group's income before tax
amounted to SEK 1,460 M (1,363), an improvement of 7% compared with the previous
year. Currency effects had a negative impact of SEK 153 M on the Group's income
before tax. The profit margin was 13.9% (14.6). The estimated effective tax rate
amounted to 22%, giving a tax charge of SEK 321 M (333). Earnings per share
amounted to SEK 3.07 (2.74), an increase of 12%.
FIRST HALF-YEAR
Sales for the first half of 2011 totaled SEK 19,201 M (17,701), representing an
increase of 8%. Organic growth was 5% (-1). Acquired units contributed 14% (6).
Currency effects affected sales negatively by SEK 1,623 M, that is -11% (-5),
compared with the first half of 2010.
Operating income before depreciation, EBITDA, excluding restructuring costs,
amounted to SEK 3,493 M (3,316) for the half-year. The corresponding margin was
18.2% (18.7). The Group's operating income, EBIT, excluding restructuring costs,
amounted to SEK 2,992 M (2,810), an increase of 6%. The corresponding operating
margin (EBIT) was 15.6% (15.9).
Earnings per share for the first half-year rose to SEK 5.60 (5.10) an increase
of 10%. Operating cash flow for the half-year amounted to SEK 1,758 M (2,310).
RESTRUCTURING MEASURES
Payments related to all restructuring programs amounted to SEK 67 M in the
quarter.
The restructuring programs continued according to plan and have led to a
reduction in personnel of 89 people during the quarter and 5,572 people since
the projects began.
A further 816 people will leave by the end of 2012.
At the end of the quarter, a provision of SEK 809 M was set aside in the balance
sheet for carrying out the remaining parts of the programs.
COMMENTS BY DIVISION
EMEA
Sales for the quarter in EMEA division totaled SEK 3,253 M (3,311), with organic
growth of -3% (3). The market trend remained weak during the second quarter and
only Germany, Scandinavia, Eastern Europe and Israel showed growth. Acquired
growth amounted to 8%. Operating income totaled SEK 510 M (525), which
represents an operating margin (EBIT) of 15.7% (15.9). Return on capital
employed amounted to 20.6% (19.9). Operating cash flow before interest paid
totaled SEK 429 M (613).
AMERICAS
Sales for the quarter in Americas division totaled SEK 2,177 M (2,503), with
organic growth of 2% (-4). The sales trend during the quarter was positive and
all business units except Mexico showed growth, with especially good performance
from Electromechanics, Residential and South America. Acquired growth amounted
to 1%. Operating income totaled SEK 456 M (493) and the operating margin was
20.9% (19.7). Return on capital employed amounted to 23.6% (21.6). Operating
cash flow before interest paid totaled SEK 482 M (586).
ASIA PACIFIC
Sales for the quarter in Asia Pacific division totaled SEK 1,630 M (1,566), with
organic growth of 12% (18). Growth was strong throughout Asia, and especially
for security doors in China. Australia and New Zealand recorded a negative sales
trend affected by the natural disasters in the region and a reduction in
stimulation measures in Australia. Acquired growth amounted to 2%. Operating
income totaled SEK 232 M (222), representing an operating margin (EBIT) of
14.3% (14.2). The quarter's return on capital employed amounted to 22.4% (20.3).
Operating cash flow before interest paid totaled SEK 199 M (57).
GLOBAL TECHNOLOGIES
Sales for the quarter in Global Technologies division totaled SEK 1,416 M
(1,240), with organic growth amounting to 17% (5). HID showed strong growth
again in the second quarter, but with an increasing proportion of project orders
with lower margins. Hospitality recorded strong growth driven by the recovery on
the renovation market and rising sales of RFID locks and energy-efficiency
products. Acquired growth amounted to 14%. The division's operating income
amounted to SEK 224 M (208), giving an operating margin (EBIT) of 15.9% (16.8).
The operating margin was diluted by 1.1% from the acquisitions of LaserCard and
ActivIdentity. Return on capital employed amounted to 15.0% (14.5). Operating
cash flow before interest paid totaled SEK 270 M (204).
ENTRANCE SYSTEMS
Sales for the quarter in Entrance Systems division totaled SEK 2,235 M (1,012),
with organic growth amounting to 5% (-2). Growth was good for all units
including the newly acquired Crawford (formerly Cardo) and FlexiForce.
Profitability also showed a positive trend for all units and the integration of
Crawford and FlexiForce proceeded at a satisfactory pace. Acquired growth
amounted to 135%. Operating income totaled SEK 281 M (145), giving an operating
margin of 12.6% (14.3). The operating margin was diluted by 2.4% mainly from the
acquisition of Crawford (Cardo). Return on capital employed amounted to 10.6%
(13.6). Operating cash flow before interest paid totaled SEK 166 M (106).
ACQUISITIONS
During the quarter FlexiForce in the Netherlands, Swesafe in Sweden, Portafeu in
France and one minor acquisition were consolidated. The combined acquisition
price for the eight companies acquired during the first half-year, excluding
disposal groups, amounted to SEK 6,429 M, and preliminary acquisition analyses
indicate that goodwill and other intangible assets with indefinite useful life
amount to SEK 5,778 M. The acquisition price is adjusted for acquired net debt
and estimated earn-outs. Estimated earn-outs amount to SEK 290 M.
The acquisition analysis for Cardo Entrance Solutions is presented on Page 18.
The parts of Cardo that are to be divested - that is, Cardo Flow Solutions and
Lorentzen & Wettre - have been classified as 'disposal groups held for sale' in
accordance with IFRS 5, 'Non-current Assets Held for Sale and Discontinued
Operations'. The disposal groups have been valued at fair value at the time of
acquisition with a deduction for costs to sell.
On 4 July it was announced that ASSA ABLOY had signed a contract with the
Swedish/ Swiss company ABB Ltd for the sale of Lorentzen & Wettre, part of the
former Cardo Group. The sale price is SEK 750 M on a liability-free basis. The
sale is expected to be completed during the second half of 2011.
SUSTAINABLE DEVELOPMENT
The Security Doors business unit of ASSA ABLOY Americas has received both
GREENGUARD Indoor Air Quality Certification and GREENGUARD Children & Schools
Certification for its four brands Ceco, Curries, Graham and Maiman.
The GREENGUARD Environmental Institute certifies products and materials that
give off the lowest possible levels of particles and chemical vapors during
their lifetimes, with the aim of recommending healthier products and materials
for indoor environments.
PARENT COMPANY
Other operating income for the Parent company ASSA ABLOY AB totaled SEK 877 M
(911) for the half-year. Income before tax amounted to SEK 592 M (1,188), a
reduction due primarily to reduced dividends from subsidiaries. Investments in
tangible and intangible assets totaled SEK 2 M (1). Liquidity is good and the
equity ratio was 36.2% (50.4). The equity ratio has fallen because of borrowing
for the acquisition of Cardo.
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 86-91 of the 2010 Annual Report. From 2011 ASSA ABLOY is
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.
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 2010 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 28 April 2011:
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 2011
Gustaf Douglas Carl Douglas Birgitta Klasén
Chairman Board member Board member
Eva Lindqvist Johan Molin Sven-Christer Nilsson
Board member President and CEO Board member
Lars Renström Ulrik Svensson Seppo Liimatainen
Board member Board member Employee representative
Mats Persson
Employee representative
REVIEW REPORT
We have reviewed this Report for the period 1 January to 30 June 2011 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.
We 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.
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 2011
PricewaterhouseCoopers AB
Peter Nyllinge
Authorized Public Accountant
Auditor in charge
FINANCIAL INFORMATION
The Quarterly Report for the third quarter will be published on 28 October 2011.
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 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, +44 208 817 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 08.00 on 27 July.
[HUG#1533681]
Solid progress for ASSA ABLOY
| Source: ASSA ABLOY AB
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