* Sales increased by 6%, including 1% organic growth, and totaled SEK 11,545 M
(10,841).
* Good growth on the emerging markets in Asia, South America and Africa.
* Stable progress in North America and weak but stable progress in Europe.
* Operating income (EBIT) increased by 10% and amounted to SEK 1,932 M
(1,751). The operating margin was 16.7% (16.2).
* Net income amounted to SEK 1,303 M (1,653*).
* Earnings per share rose by 6% to SEK 3.49 (3.30**).
* Cash flow increased by 29% and amounted to SEK 1,967 M (1,528).
* Contracts have been agreed for the sale of Wangli, which is expected to take
place in the first quarter of 2013.
SALES AND INCOME
Third quarter Jan-Sept
----------------------------------------------
2011 2012 Change 2011 2012 Change
------------------------------------------------------------------------------
Sales, SEK M 10,841 11,545 +6% 30,042 34,380 +14%
of which,
Organic growth +1% +2%
Acquisitions +7% +10%
Exchange-rate effects -151 -2% +502 +2%
Operating income (EBIT), SEK M 1,751 1,932 +10% 4,743 5,471 +15%
Operating margin (EBIT), % 16.2 16.7 15.8 15.9
Income before tax, SEK M 1,582 1,748 +10% 4,256 4,906 +15%
Net income, SEK M 1,653(*) 1,303 -21% 3,751(*) 3,739 0%
Operating cash flow, SEK M 1,528 1,967 +29% 3,286 3,885 +18%
Earnings per share (EPS), SEK** 3.30 3.49 +6% 8.86 10.10 +14%
* Net income for 2011 was affected positively by profit from the disposal of
parts of the Cardo acquisition
** Excluding items distorting comparison
COMMENTS BY THE PRESIDENT AND CEO
"It is pleasing to see that ASSA ABLOY is doing very well in a hard economic
climate," says Johan Molin, President and CEO. "Our good performance in both
sales and income continued this quarter, with rises of 6% and 10% respectively.
In particular, our investments in presence on our emerging markets is bearing
full dividends, with strong growth in Asia, Africa and South America, although I
have to conclude that progress on the mature markets is weak.
"Despite the weak trend on the mature markets ASSA ABLOY has sustained its
success on the American market, with 3% organic growth in both Americas and
Global Technologies. In Europe the position is tough, with continued weakness.
Notwithstanding this, EMEA has succeeded in achieving 1% organic growth, while
Entrance Systems fell back by 2%.
"Investments in market presence and in Research and Development continued at
undiminished levels during the quarter. Sales of new products currently amount
to a full 24%. Among those launched this quarter was Seos, the world's first
commercial ecosystem for issuing, delivering and revoking digital keys. The Seos
system further strengthens ASSA ABLOY's leading positions in Access Control and
Logical Access - two vital future growth areas.
"The impressive 10% improvement in income resulted mainly from efficiency and
restructuring measures and from reduced costs for raw materials. It was also
pleasing that the newly acquired companies continued to produce very good
results.
"Many indicators point that the world economy will remain weak for a foreseeable
future. It is therefore of the utmost importance that ASSA ABLOY continues to
develop its presence on the new markets, which are expected to go on growing,
and that investments in new products and market presence are maintained."
THIRD QUARTER
The Group's sales totaled SEK 11,545 M (10,841), an increase of 6% compared with
the third quarter of 2011. Organic growth for comparable units was 1% (2).
Acquired units contributed 7% (18). Exchange-rate effects had a impact of SEK
-151 M on sales, that is -2% (-6).
Operating income before depreciation, EBITDA, amounted to SEK 2,183 M (2,002).
The corresponding EBITDA margin was 18.9% (18.5). The Group's operating income,
EBIT, amounted to SEK 1,932 M (1,751), an increase of 10%. The operating margin
was 16.7% (16.2).
Net financial items amounted to SEK -184 M (-169). The Group's income before tax
amounted to SEK 1,748 M (1,582), an improvement of 10% compared with the
previous year. Exchange-rate effects had a negative impact of SEK -12 M on the
Group's income before tax. The profit margin was 15.1% (14.6). The estimated
underlying effective tax rate on an annual basis amounted to 24% (22). Earnings
per share excluding items distorting comparison amounted to SEK 3.49 (3.30), an
increase of 6%.
FIRST NINE MONTHS OF THE YEAR
Sales for the first nine months of 2012 totaled SEK 34,380 M (30,042),
representing an increase of 14%. Organic growth was 2% (4). Acquired units
contributed 10% (16). Exchange-rate effects had a positive impact of SEK 502 M
on sales, that is 2% (-9), compared with the first nine months of 2011.
Operating income before depreciation, EBITDA, for the first nine months amounted
to SEK 6,268 M (5,495). The corresponding margin was 18.2% (18.3). The Group's
operating income, EBIT, amounted to SEK 5,471 M (4,743), which was an increase
of 15%. The corresponding EBIT operating margin was 15.9% (15.8).
Earnings per share for the first nine months, excluding items distorting
comparison, amounted to SEK 10.10 (8.86), an increase of 14%. Operating cash
flow totaled SEK 3,885 M (3,286).
RESTRUCTURING MEASURES
Payments related to all restructuring programs amounted to SEK 118 M in the
quarter. The restructuring programs proceeded according to plan and led to a
reduction in personnel of 128 people during the quarter and 6,464 people since
the projects began. A further 1,071 people will leave by the end of 2014.
At the end of the quarter provisions of SEK 1,272 M remained in the balance
sheet for carrying out the programs.
COMMENTS BY DIVISION
EMEA
Sales for the quarter in EMEA division totaled SEK 3,093 M (3,155), with organic
growth of 1% (0). The market situation weakened during the quarter. Growth was
good in the UK, Africa, eastern Europe and Israel. Scandinavia, Finland, France
and Germany were stable, while Spain, Benelux and Italy showed a negative sales
trend. Acquired growth amounted to 3%. Operating income totaled SEK 539 M (535),
which represents an operating margin (EBIT) of 17.4% (17.0). Return on capital
employed amounted to 21.0% (20.9). Operating cash flow before interest paid
totaled SEK 751 M (586).
AMERICAS
Sales for the quarter in Americas division totaled SEK 2,474 M (2,312), with
organic growth of 3% (-1). The sales trends for the Residential Market, Mexico
and South America were strong, and the trend for Electromechanical Products was
good. The sales trends remained stable for Mechanical Products, Security Doors
and the High-Security Market. Acquired growth was 2%. Operating income totaled
SEK 510 M (466) and the operating margin was 20.6% (20.1). Return on capital
employed amounted to 23.9% (23.5). Operating cash flow before interest paid
totaled SEK 529 M (493).
ASIA PACIFIC
Sales for the quarter in Asia Pacific division totaled SEK 1,979 M (1,822), with
organic growth of 3% (7). Growth was strong in Korea and South-East Asia but
there was a weak sales trend in India. Growth was good for all product areas in
China, while the sales trend was strongly negative in Australia and stable in
New Zealand. Acquired growth amounted to 2%. Operating income totaled SEK 293 M
(275), representing an operating margin (EBIT) of 14.8% (15.1). The quarter's
return on capital employed amounted to 22.0% (25.0). Operating cash flow before
interest paid totaled SEK 374 M (232).
GLOBAL TECHNOLOGIES
Sales for the quarter in Global Technologies division totaled SEK 1,568 M
(1,524), with organic growth amounting to 3% (5). HID had strong growth in
identification technology and good growth in access control and secure issuing
of smart cards. Government ID and project orders had negative growth.
Hospitality showed strong growth, principally from the renovation market.
Profitability for both business units improved strongly. Acquired growth
amounted to 1%. The division's operating income amounted to SEK 298 M (248),
giving an operating margin (EBIT) of 19.0% (16.3). Return on capital employed
amounted to 18.3% (16.2). Operating cash flow before interest paid totaled SEK
298 M (285).
ENTRANCE SYSTEMS
Sales for the quarter in Entrance Systems division totaled SEK 2,648 M (2,241),
with organic growth amounting to -2% (5). Growth was good for Crawford, Albany
and Flexiforce. The sales trends for Ditec and the private residential market
remained negative, affected by the weak economic trend in southern Europe.
Acquired growth amounted to 25%. Operating income totaled SEK 370 M (308),
giving an operating margin of 14.0% (13.8). Return on capital employed amounted
to 11.2% (10.7). Operating cash flow before interest paid totaled SEK 327 M
(225).
ACQUISITIONS AND DIVESTMENTS
During the quarter Sanhe in China and two other minor acquisitions were
consolidated.
The combined acquisition price for the eleven companies acquired in the first
nine months of the year amounts to SEK 4,215 M, and preliminary acquisition
analyses indicate that goodwill and other intangible assets with indefinite
useful life amount to SEK 3,162 M.
The acquisition price is adjusted for acquired net debt and estimated earn-outs.
Estimated earn-outs amount to SEK 1,103 M.
Contracts for the sale of Wangli Group have been agreed. The sale is subject to
approval by the authorities and it is expected to be possible to complete it in
the first quarter of 2013.
SUSTAINABLE DEVELOPMENT
ASSA ABLOY works actively to minimize the Group's impact on the environment. As
one part of these efforts, so-called Environmental Product Declarations (EPDs)
for the Group's product groups are being issued. EPDs show in a transparent way
a product's environmental impact through its entire life cycle. The procedures
ensure that production processes are efficient and that customers receive all
relevant information about our products. ASSA ABLOY believes that EPDs will
further improve the Group's environmental operations.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 1,119
M (1,129) for the nine-month period. Income before tax amounted to SEK 1,006 M
(880). Investments in tangible and intangible assets totaled SEK 9 M (3).
Liquidity is good and the equity ratio was 48.2% (36.9). The equity ratio has
risen mainly because of amortization of interest-bearing loans and conversion of
debenture loans.
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 88-93 of the 2011 Annual Report. The agreed revision of
IAS 19 'Employee Benefits' applies from 1 January 2013 with retroactive effect
during 2012. In this recalculation of comparative information for 2012,
unrecognized expenses relating to service provided in previous years and
unrecognized actuarial losses are accounted for as an adjustment of opening
equity taking into account tax effects. The unrecognized balance sheet items
totaled SEK 1,092 M as at 31 December 2011.
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 2011 Annual
Report. No significant risks other than the risks described there are judged to
have occurred.
AUDIT
This Report has not been reviewed by the company's Auditors.
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 27 July 2012:
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.
FINANCIAL INFORMATION
The End-of-Year Report and Quarterly Report for the fourth quarter will be
published on 7 February 2013.
FURTHER INFORMATION CAN BE OBTAINED FROM:
Johan Molin, President and CEO, Tel: +46 8 506 485 42
Carolina Dybeck Happe, 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, +44 207 509 5139 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 29 October.
[HUG#1652942]
Continued good performance by ASSA ABLOY
| Source: ASSA ABLOY AB
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