* Sales totaled SEK 8,921 M (8,526), an increase of 5%, with -14%
organic growth,
4% acquired growth and exchange-rate effects of 15%.
* The downturn in construction continued on all the world's major
markets.
* Sustained and substantial efficiency gains from restructuring
programs and capacity adjustments throughout the Group
contributed to good earnings and produced a very strong cash
flow.
* Operating income (EBIT) amounted to SEK 1,340 M (1,378), a fall
of 3%, representing a margin of 15.0% (16.2).
* Net income amounted to SEK 852 M (865).
* Earnings per share amounted to SEK 2.25 (2.30), a decrease of 2%.
SALES AND INCOME
Second quarter First half-year
2008 2009 Change 2008 2009 Change
Sales, SEK M 8,526 8,921 +5% 16,728 17,803 +6%
of which,
Organic growth -14% -13%
Acquisitions +4% +4%
Exchange-rate effects -386 1,433 +15% -661 2,893 +15%
Operating income (EBIT),
SEK M 1,378 1,340 -3% 2,621 2,668* +2%
Operating margin (EBIT), % 16.2 15.0 15.7 15.0*
Income before tax, SEK M 1,188 1,176 -1% 2,243 2,299* +2%
Net income, SEK M 865 852 -2% 1,637 1,571** -4%
Operating cash flow, SEK M 1,081 1,584 +47% 1,663 2,422 +46%
Earnings per share (EPS),
SEK 2.30 2.25 -2% 4.38 4.45* +2%
* Excluding restructuring costs amounting to SEK 109 M in 2009.
** Excluding restructuring costs, net income was SEK 1,680 M for the
first half of 2009.
COMMENTS BY THE PRESIDENT AND CEO
"The negative trend on the market continued during the second
quarter. In spite of this, profit and cash flow were maintained at
very high levels as a result of the fast capacity adjustments of
production combined with the successful restructuring program. Our
expectation is still that the remainder of 2009 will be extremely
challenging for both sales and earnings. During the second half of
the year the important US market will weaken further owing to a
severe cutback in commercial construction projects.
Investments in improved market coverage and in new products are
proceeding on an undiminished scale, in parallel with continuing
adaptation of the organization to the current market situation. It is
also very pleasing that we have succeeded in boosting our leading
position in the fast-growing and profitable door automation segment
through the July agreement to acquire Ditec," said Johan Molin,
President and CEO.
SECOND QUARTER
The Group's sales totaled SEK 8,921 M (8,526), representing growth of
5% compared with 2008. Organic growth for comparable units was -14%
(5). Acquired units accounted for 4% (3) of the increase.
Exchange-rate effects had a positive impact of SEK 1,433 M on sales,
i.e. 15% (-5).
Operating income before depreciation, EBITDA, amounted to SEK 1,601 M
(1,599), unchanged from 2008. The EBITDA margin was 17.9% (18.8). The
Group's operating income, EBIT, amounted to SEK 1,340 M (1,378), a
fall of 3%, after positive currency effects of SEK 268 M. The
operating margin was 15.0% (16.2).
Net financial items amounted to SEK 165 M (190), which corresponds to
an average net interest rate of just under 5%. The Group's income
before tax amounted to SEK 1,176 M (1,188), corresponding to a
decrease of 1%. Exchange-rate effects had a positive impact of
SEK 252 M on the Group's income before tax. The profit margin was
13.2% (13.9). The Group's tax charge totaled SEK 323 M (323).
Earnings per share amounted to SEK 2.25 (2.30), a decrease of 2%.
During the second quarter a refinancing of all long-term loans
maturing in 2009 was carried out. In total, SEK 3.3 billion was
borrowed on the capital market, split into seven facilities with
durations of between two and five years. No long-term loans mature in
2010, which means that the next refinancing will be in 2011. In
addition, the back-up facility of SEK 12 billion, which matures in
2014, is unused.
FIRST HALF-YEAR
Sales for the first half of 2009 totaled SEK 17,803 M (16,728), which
represents an increase of 6% compared with 2008. Organic growth was
-13% (3). Acquired units contributed 4% (3). Exchange-rate effects
affected sales positively by SEK 2,893 M, i.e. 15%, compared with the
first half of 2008.
Operating income before depreciation, EBITDA, excluding restructuring
costs, amounted to SEK 3,195 M (3,075) for the half-year. The
corresponding margin was 17.9% (18.4). The Group's operating income,
EBIT, excluding restructuring costs, amounted to SEK 2,668 M (2,621),
representing a small increase after positive exchange-rate effects of
SEK 493 M. The corresponding operating margin (EBIT) was 15.0%
(15.7).
Earnings per share, excluding restructuring costs, for the first
half-year increased to SEK 4.45 (4.38). Operating cash flow for the
half-year amounted to SEK 2,422 M (1,663).
RESTRUCTURING MEASURES
Payments related to the two restructuring programs amounted to SEK
224 M in the quarter.
Progress of the 2006 and 2008 restructuring programs
The two restructuring programs, initiated in 2006 and 2008, have
surpassed the expected cost savings and have led to reductions in
personnel of respectively 2,387 and 1,442 people since the projects
began, a total of 3,829 people. A further 1,085 people will leave
during the second half of 2009 and in 2010.
Total personnel reductions
The world economy began to weaken towards the end of 2007 and
adjustments of the workforce were initiated at this time. From the
fourth quarter of 2007 through the second quarter of 2009 a total of
7,462 people (including 3,184 people during the first half of 2009) -
that is, 23% of the total number of employees - left the Group as a
result of the capacity changes made and the restructuring programs
carried out.
COMMENTS BY DIVISION
EMEA
Sales in EMEA division during the quarter totaled SEK 3,459 M
(3,578), with organic growth of -18%. The weakening on all markets
continued, apart from the UK which seems to be bottoming out.
Acquired growth amounted to 5%. Operating income amounted to
SEK 489 M (608), which represents an operating margin (EBIT) of 14.1%
(17.0). The effects of the restructuring programs and other
efficiency measures compensated for many of the effects of the
reduced sales volume. Return on capital employed excluding
restructuring and non-recurring costs amounted to 15.9% (22.4). The
return was impacted mainly by the lower income. Operating cash flow
before interest paid totaled SEK 597 M (672).
AMERICAS
The quarter's sales in Americas division totaled SEK 2,618 M (2,419),
with -17% organic growth. All units were impacted by the downturn in
the economy and showed negative growth, although the units in Canada,
Mexico and South America were less affected than those in the USA.
Acquired growth amounted to 3%. By means of restructuring and
capacity adjustments, the operating margin was maintained at a very
strong level and amounted to 19.6% (20.5). The operating income
totaled SEK 512 M (497). Return on capital employed amounted to 20.9%
(24.1). Operating cash flow before interest paid totaled SEK 857 M
(564).
ASIA PACIFIC
Sales for the quarter totaled SEK 963 M (856), with -9% organic
growth. The market regions in Australia and New Zealand continued to
show negative growth, while the Chinese market showed a stable trend.
Production for export to Europe and North America fell back
significantly. Acquired growth amounted to 9%. Operating income
totaled
SEK 123 M (104), which represents an operating margin (EBIT) of 12.7%
(12.2). The quarter's return on capital employed amounted to 16.4%
(16.1). Operating cash flow before interest paid totaled SEK 221 M
(55).
GLOBAL TECHNOLOGIES
Sales for the quarter totaled SEK 1,239 M (1,157), with organic
growth of -10%. The division has only commercial customers and the
weakened market situation affected all units and regions. The net
effect of acquisitions and disposals amounted to -1%. The division's
operating income amounted to SEK 194 M (159), giving an operating
margin (EBIT) of 15.6% (13.7). Return on capital employed excluding
restructuring costs amounted to 12.1% (12.6). Operating cash flow
before interest paid totaled SEK 234 M (183).
ENTRANCE SYSTEMS
Entrance Systems division reported sales of SEK 863 M (758) for the
quarter, representing organic growth of -5%. Continued good sales on
the service side compensated to some extent for the reduction in
new-product sales. Acquired growth amounted to 6%. Operating income
amounted to SEK 128 M (105), giving an operating margin (EBIT) of
14.9% (13.8). Return on capital employed amounted to 15.1% (13.5).
Operating cash flow before interest paid totaled SEK 149 M (65).
ACQUISITIONS
During the first half-year four acquisitions were consolidated and
payment was made for the last minority shares in iRevo in Korea. The
combined acquisition price for these acquisitions amounts to SEK 217
M, and preliminary acquisition analyses indicate that goodwill and
other intangible assets with indefinite useful life amount to
SEK 74 M. The acquisition price is adjusted for acquired net debt and
estimated earn-outs.
In July a contract was signed for the acquisition of the Italian
company Ditec. Ditec has annual sales of EUR 80 M and has 550
employees. The acquisition is expected to be completed during the
third quarter. See separate press release.
SUSTAINABILITY
As communicated in the Sustainability Report the Group's move to
water-based washing and degreasing systems with very low
environmental impact is proceeding at a rapid pace.
As a result, ASSA ABLOY reduced the amount of chlorinated organic
solvents (perchloroethylene and trichloroethylene) used in 2008 by
55%, to 42 tonnes.
The program has continued at undiminished pace in 2009 and will
result in annual consumption falling by a further 80%, to less than
10 tonnes, which compares with the 189 tonnes used in 2005.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled
SEK 685 M (1,036) for the half-year. Income before tax amounted to
SEK 1,228 M (1,310). Investments in tangible and intangible assets
totaled SEK 1 M (0). Liquidity is good and the equity ratio was 56.8%
(47.3).
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 56-60 of the 2008 Annual
Report. ASSA ABLOY has subsequently implemented the revised
International Accounting Standard IAS 1, which came into force on 1
January 2009. The change means that additional items are now included
in Other comprehensive income in the Group's income statement. These
items were previously reported in changes to shareholders' equity.
ASSA ABLOY has also implemented IFRS 8, which contains rules about
segment reporting. ASSA ABLOY reports the same operating segments as
before. The Group's Interim Reports are prepared in accordance with
IAS 34. The Parent company applies RFR 2.2.
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 pages 41-43 of the 2008 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 Outlooks published on 22 April 2009 were:
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.
Easter is expected to have a negative impact on sales and earnings in
the second quarter.
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, 29 July 2009
Gustaf Douglas Carl Douglas Jorma Halonen
Chairman Board member Board member
Birgitta Klasén Eva Lindqvist Johan Molin
Board member Board member President and CEO
Sven-Christer Nilsson Lars Renström Ulrik Svensson
Board member Board member Board member
Seppo Liimatainen Mats Persson
Employee representative Employee representative
REVIEW REPORT
We have reviewed this Report for the period 1 January 2009 to 30 June
2009 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 Standards on Auditing in Sweden, RS, 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, 29 July 2009
PricewaterhouseCoopers AB
Peter Nyllinge Bo Karlsson
Authorized Public Accountant Authorized Public Accountant
Auditor in charge
FINANCIAL INFORMATION
The Interim Report for the third quarter will be published on 28
October 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 10.00 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 29 July.
ASSA ABLOY: Continued weak market but strong earnings
| Source: ASSA ABLOY AB
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