Fourth quarter
· Sales amounted to SEK 8,799 M (9,444), a decrease by 7%, comprising of
-8% organic growth, 3% acquired growth and a negative currency effect of -2%.
· Europe stabilized, Asia grew and North America remained negative.
· Operating income (EBIT) amounted to SEK 1,398 M* (1,469*), a decrease by
5%. The EBIT margin increased to 15.9%* (15.6*).
· Net income amounted to SEK 200 M** (92**).
· Earnings per share decreased by 2% and amounted to SEK 2.41* (2.45*).
· Continued investments in product development led to strengthened market
leadership through a number of important product launches.
· The 2009 restructuring program was fully expensed during the fourth
quarter, totaling SEK 930 M.
· Significant savings were achieved from the on-going restructuring and
efficiency programs during the quarter.
· Strongest-ever operating cash flow, totaling SEK 2,296 M (1,916).
Full year
· Sales were unchanged and totaled SEK 34,963 M (34,829), comprising -12%
organic growth, 3% acquired growth and exchange-rate effects of 9%.
· Operating income (EBIT) amounted to SEK 5,413 M* (5,526*), a decrease by
2%. The EBIT margin was 15.5%* (15.9*).
· Net income amounted to SEK 2,659 M** (2,438**).
· Earnings per share were unchanged and amounted to SEK 9.22* (9.21*).
· Strongest-ever operating cash flow, totaling SEK 6,843 M (4,769).
· Total restructuring costs during the year amounted to SEK 1,039 M.
· 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 to SEK 1,257 M for the year. Excluding restructuring
and non-recurring costs in 2009 amounting to SEK 930 M for the quarter and to
SEK 1,039 M for the year.
** In 2008, excluding restructuring and non-recurring costs, net income for the
quarter was
SEK 918 M and for the year SEK 3,451 M. In 2009, excluding restructuring and
non-recurring costs, net income for the quarter was SEK 905 M and for the year
SEK 3,474 M.
SALES AND INCOME
Fourth quarter Full year
---------------------------------------------
2008 2009 Change 2008 2009 Change
----------------------------------------------------------------------------
Sales, SEK M 9,444 8,799 -7% 34,829 34,963 +0%
of which,
Organic growth - 8% -12%
Acquisitions +3% + 3%
Exchange-rate effects -185 - 2% +3,491 + 9%
Operating income (EBIT), SEK M 1,469* 1,398* -5% 5,526* 5,413* -2%
Operating margin (EBIT), % 15.6* 15.9* 15.9* 15.5*
Income before tax, SEK M 1,286* 1,292* +0% 4,756* 4,779* +0%
Net income, SEK M 92** 200** - 2,438** 2,659** -
Operating cash flow, SEK M 1,916 2,296 +20% 4,769 6,843 +43%
Earnings per share (EPS), SEK 2.45* 2.41* -2% 9.21* 9.22* +0%
* Excluding restructuring and non-recurring costs in 2008 amounting to SEK
1,010 M for the quarter and to SEK 1,257 M for the year. Excluding restructuring
and non-recurring costs in 2009 amounting to SEK 930 M for the quarter and to
SEK 1,039 M for the year.
** In 2008, excluding restructuring and non-recurring costs, net income for the
quarter was SEK 918 M and for the year SEK 3,451 M. In 2009, excluding
restructuring and non-recurring costs, net income for the quarter was SEK 905 M
and for the year SEK 3,474 M.
COMMENTS BY THE PRESIDENT AND CEO
"Even though 2009 was in market terms the most challenging year in the Group's
history, I can proudly conclude that ASSA ABLOY achieved its highest sales yet,
with continued strong earnings and its strongest-ever cash flow," said Johan
Molin, President and CEO.
"It was especially pleasing that investments in product development continued at
a high level, which has strengthened the Group's market leadership and laid the
ground for good organic growth as the economic situation progressively improves.
"During the year our work on the Group's production structure and adjustment to
the demand situation was successfully carried through. This has resulted in a
total workforce reduction by 25% since the market decline started.
"The financial crisis meant that we stopped the acquisition activity at the
beginning of the year. The situation gradually improved and several important
acquisitions were completed. I look forward to a continued high activity in
2010.
"For 2010 the organic growth is expected to be about zero percent. This is
mainly because the turnaround of the American market will take at least another
six months. Our focus will therefore be on selective investments in growth where
the market is good and continued cost control where market remains weak."
FOURTH QUARTER
The Group's sales totaled SEK 8,799 M (9,444), a fall of 7% compared with 2008.
Organic growth for comparable units was -8% (-4). Acquired units contributed 3%
(4). Exchange-rate effects had a negative impact of SEK 185 M on sales, i.e. -2%
(9).
Operating income before depreciation, EBITDA, excluding restructuring costs,
amounted to SEK 1,648 M (1,703). The corresponding EBITDA margin was 18.7%
(18.0). The Group's operating income, EBIT, excluding restructuring costs,
amounted to SEK 1,398 M (1,469), a fall of 5%. The operating margin, excluding
restructuring costs, was 15.9% (15.6).
Net financial items amounted to SEK 106 M (184), which corresponds to an average
interest rate of 4%. The Group's income before tax, excluding restructuring
costs, amounted to SEK 1,292 M (1,286), effectively unchanged from the previous
year. Exchange-rate effects had a positive impact of SEK 18 M on the Group's
income before tax. The profit margin, excluding restructuring costs, was 14.7%
(13.6). The Group's tax charge totaled SEK 162 M (184). Earnings per share,
excluding restructuring costs, amounted to SEK 2.41 (2.45), a decrease of 2%.
FULL YEAR
Sales for 2009 totaled SEK 34,963 M (34,829), unchanged compared with 2008.
Organic growth was -12% (0). Acquired units contributed 3% (4). Exchange-rate
effects affected sales positively by SEK 3,491 M.
Operating income before depreciation, EBITDA, amounted to SEK 6,426 M (6,447)
excluding restructuring and non-recurring costs. The corresponding margin was
18.4% (18.5). The Group's operating income, EBIT, excluding restructuring and
non-recurring costs, amounted to SEK 5,413 M (5,526), a fall of 2%. The
corresponding operating margin (EBIT) was 15.5% (15.9).
Earnings per share, excluding restructuring and non-recurring costs, were
unchanged and amounted to SEK 9.22 (9.21). Operating cash flow amounted to SEK
6,843 M (4,769).
RESTRUCTURING MEASURES
Payments related to the restructuring programs amounted to SEK 161 M in the
quarter.
Progress of the 2006 and 2008 restructuring programs
The two restructuring programs launched in 2006 and 2008 have surpassed the
expected cost savings and have led to reductions in personnel of respectively
2,718 and 1,913 people since the projects began, a total of 4,631 people. A
further 347 people will leave during 2010.
The 2009 restructuring program
The two successful restructuring programs of 2006 and 2008 have been followed up
by a new project launched in the fourth quarter of 2009. The program has been
expanded compared to earlier communication and will lead to the closing of 11
production units and the conversion of 4 to final assembly. In addition, 11
mainly administrative units will be closed. The total cost is SEK 930 M, which
was expensed against earnings during the quarter. The program started during the
quarter and will achieve a reduction of 1,200 employees in high-cost countries.
Provisions
For all three programs described above, provisions of SEK 1,577 were made in the
balance sheet at year-end for the remaining parts of the programs.
Total personnel reductions
The world economy began to weaken towards the end of 2007 and adjustments of the
workforce were initiated at that time. From the fourth quarter of 2007 up to the
end of 2009 a total of 8,174 people (including 3,898 people during 2009) - that
is, 25% of the total number of employees - left the Group as a result of the
capacity changes made and the restructuring programs carried out. Of the
8,174, 3,598 arose from the restructuring programs described above and 4,576
from other efficiency programs and ongoing capacity changes.
COMMENTS BY DIVISION
EMEA
Sales in EMEA division during the quarter totaled SEK 3,544 M (3,614), with
organic growth of -3%. Demand improved markedly throughout the region during the
quarter, with the UK, Scandinavia and Africa moving to positive growth while
Italy, Spain and eastern Europe remained weak. Acquired growth amounted to 0%.
Operating income amounted to SEK 595 M (562), which represents an operating
margin (EBIT) of 16.8% (15.5). The effects of the restructuring programs and
other efficiency measures made a very substantial contribution to the rise in
income. Return on capital employed, excluding restructuring and non-recurring
costs, amounted to 21.2% (17.5). Operating cash flow before interest paid
totaled SEK 1,133 M (938).
AMERICAS
The quarter's sales in Americas division totaled SEK 2,108 M (2,886), with -21%
organic growth. All units were affected by the continuing low activity in the
non-residential construction sector, and security doors were especially
hard-hit. Canada, Mexico and South America were affected to a rather lesser
extent. Acquired growth amounted to 0%. By means of restructuring and capacity
changes, the operating margin was maintained at a very strong level and amounted
to 19.5% (19.9). Operating income totaled SEK 412 M (574). Return on capital
employed amounted to 19.6% (23.1). Operating cash flow before interest paid
totaled SEK 545 M (707).
ASIA PACIFIC
Sales for the quarter totaled SEK 1,044 M (881), with 10% organic growth. The
major markets in Australia, New Zealand and China all showed growth. Acquired
growth amounted to 4%. Operating income totaled SEK 144 M (92), which represents
an operating margin (EBIT) of 13.8% (10.4). The quarter's return on capital
employed amounted to 20.6% (13.8). Operating cash flow before interest paid
totaled SEK 231 M (194).
GLOBAL TECHNOLOGIES
Sales for the quarter totaled SEK 1,145 M (1,310), with organic growth of -9%.
The division was affected by the downturn in construction on the North American
market, and all units showed negative growth. Acquired growth amounted to 0%.
The division's operating income amounted to SEK 186 M (203), giving an operating
margin (EBIT) of 16.2% (15.5). Return on capital employed, excluding
restructuring costs, amounted to 13.3% (13.8). Operating cash flow before
interest paid totaled SEK 361 M (275).
ENTRANCE SYSTEMS
Entrance Systems division reported sales of SEK 1,152 M (952) for the quarter,
representing organic growth of -4%. Continued good sales on the service side
compensated for much of the reduction in new-product sales. Acquired growth
amounted to 29%. Operating income totaled SEK 196 M (150), giving an operating
margin (EBIT) of 17.0% (15.8). Acquisitions, principally Ditec, affected the
operating margin negatively by 2.8%. Return on capital employed amounted to
19.1% (18.1). Operating cash flow before interest paid totaled SEK 189 M (104).
ACQUISITIONS
During the year eight 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 1,107 M, and preliminary acquisition analyses
indicate that goodwill and other intangible assets with indefinite useful life
amount to SEK 800 M. The acquisition price is adjusted for acquired net debt and
estimated earn‑outs. During the year also, three operations were sold off as
part of the ongoing restructuring.
On 13 November 2009 the acquisition of the Swedish company Portsystem 2000 was
reported. Portsystem has annual sales of SEK 125 M and supplies industrial doors
and docking systems.
On 17 December 2009 the acquisition of the Colombian company Cerracol was
reported. Cerracol has annual sales of SEK 140 M and is a leader on the Central
American lock market.
On 20 January 2010 it was reported that the competition authority has approved
the acquisition of the Chinese company Pan Pan and that consolidation will take
place as soon as the necessary business license has been obtained. This is
expected to happen during the first quarter.
SUSTAINABLE DEVELOPMENT
Sustainable development also affects workplace conditions and responsibilities -
for example in terms of health and safety - and these issues form part of the
Company's long-term sustainability program. In order to obtain continual
feedback in this area, ASSA ABLOY regularly has so-called independent workplace
reviews carried out with the help of an external party.
In 2009 reviews were carried out in South Africa and Mexico. These were
performed in accordance with internationally accepted procedures and involved
meetings with the local company managements and key personnel, visits to
factories, interviews with senior officers, reviews of documentation, interviews
with employees and follow-up meetings
with management. The reviews were carried out independently by the external
party and no-one from Head Office was present on site.
The reviews yielded valuable information and suggestions for improvements as
well as a good overview of ASSA ABLOY's work and the commitment shown by the
local managements in their work on these issues.
The 2009 Sustainability Report, reporting on the Group's targets and giving
other information about sustainable development, will be published at the time
of the Annual General Meeting in April 2010.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 1,398
M (1,775) for the full year. Income before tax amounted to SEK 1,694 M (1,589).
Investments in tangible and intangible assets totaled SEK 1 M (0). Liquidity is
good
and the equity ratio was 55.6% (39.8).
DIVIDEND AND ANNUAL GENERAL MEETING
The Board of Directors proposes a dividend of SEK 3.60 (3.60) per share for the
2009 financial year. The Annual General Meeting will be held on 22 April 2010.
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 implemented the revised
International Accounting Standard 1, which came into force on 1 January 2009.
The change means that additional items are now included in total 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 Quarterly Reports are prepared in accordance with IAS 34.
The Parent company applies RFR 2.2.
The Group has made a reclassification that affects direct distribution costs and
depreciation on capitalized product development expenditure. The reason is to
give a true and fair view of the allocation between direct and indirect costs as
well as for product development expenses. In order to maintain comparability,
the financial statements for 2008 and 2009 have been adjusted. The
reclassification involves the transfer of direct distribution costs from Selling
expenses and Administrative expenses, and where appropriate from Sales, to Cost
of goods sold. In addition, depreciation on product development has been moved
from Cost of goods sold to Selling expenses and Administrative expenses. Both
these adjustments affect Gross income. The effects are reported in the attached
financial statements. Operating income is not affected.
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 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 2010
The organic growth is expected to be about 0 percent.
Stockholm, 12 February 2010
Johan Molin
President and CEO
The End-of-year Report has not been reviewed by the Company's Auditor.
FINANCIAL INFORMATION
The Quarterly Report for the first quarter will be published on 21 April 2010.
The Annual General Meeting will be held on 22 April at the Museum of Modern Art
in Stockholm.
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
<http://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 12 February.
[HUG#1383815]
ASSA ABLOY: Continued high profit level in a slightly improved market
| Source: ASSA ABLOY AB
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