TIDM77BL
RNS Number : 1714N
ASSA ABLOY AB (publ)
21 October 2016
Organic growth
+2%
Operating income
+2%
Earnings per share
+3%
Stable progress for ASSA ABLOY during the quarter
Third quarter
-- Sales totaled SEK 18,025 M (17,465), with 2% (3) organic growth and 2% (4) acquired growth
-- Strong growth for Global Technologies and Americas
-- Good growth for Entrance Systems and growth for EMEA
-- Negative growth for Asia Pacific due to weak demand in China
-- Trojan in the UK was acquired, with expected annual sales of SEK 220 M
-- Operating income (EBIT) was SEK 3,020 M (2,970). The operating margin was 16.8% (17.0)
-- Net income amounted to SEK 2,122 M (2,069)
-- Earnings per share amounted to SEK 1.91 (1.86)
-- Operating cash flow increased by 1% to SEK 2,830 M (2,816)
Sales and income
Third quarter January-September
================ ======== ==================== ========
2015 2016 <DELTA> 2015 2016 <DELTA>
------------------------------ ------- ------- -------- --------- --------- --------
Sales, SEK M 17,465 18,025 3% 49,799 51,809 4%
Of which:
Organic growth 471 307 2% 1,807 1,308 3%
Acquisitions and divestments 606 429 2% 1,435 1,512 3%
Exchange-rate effects 1,661 -176 -1% 5,561 -810 -2%
Operating income (EBIT),
SEK M 2,970 3,020 2% 8,041 8,340 4%
Operating margin (EBIT),
% 17.0% 16.8% 16.1% 16.1%
Income before tax, SEK
M 2,796 2,844 2% 7,531 7,782 3%
Net income, SEK M 2,069 2,122 3% 5,573 5,786 4%
Operating cash flow,
SEK M 2,816 2,830 1% 5,327 5,846 10%
Earnings per share (EPS),
SEK 1.86 1.91 3% 5.02 5.21 4%
Comments by the President and CEO
"The third quarter of the year showed satisfactory growth for
ASSA ABLOY generally, with the exception of Asia Pacific," says
Johan Molin, President and CEO. "In general the mature markets made
good progress while the growth markets continued to show subdued
demand, apart from Latin America and India.
"In Global Technologies and Americas there was strong growth
during the quarter, driven by successful marketing efforts and the
launch of innovative
new products. Entrance Systems showed good growth. EMEA showed
growth despite some impact from a negative calendar effect. Growth
in Asia Pacific remained negative because of the weak demand in
China.
"The organic growth was rather weaker this quarter and amounted
to 2%. Operating income remained strong and the operating margin
was 16.8% (17.0).
"A number of major exhibitions have taken place during the
quarter, with gratifying results. The Group's innovations have once
again been honored by
the award of several prestigious prizes. The launches of The
Security Continuum (a platform-independent series of commercial
electronic locks) and Accentra
(a cloud-based electronic system for multi-family buildings)
were especially acclaimed. Another interesting new series of
products that was launched was HID Global's virtual authentication
and identification solutions, by which, for example, future
driver's licenses can be securely stored on an ordinary
smartphone.
"The English company Trojan was acquired during the quarter. The
company is a typical example of a complementary acquisition
providing high synergies, by which the company's specialized door
and window products allow us to offer the British market complete
lock and fittings solutions with good profitability.
"Operating income for the quarter amounted to SEK 3,020 M, with
an operating margin of 16.8%, mainly due to positive organic
growth, lower raw-material costs and other significant savings.
Operating cash flow remained strong.
"My judgment is that the global economic trend remains weak, but
with a positive trend in America and parts of Europe. Elsewhere,
many of the emerging markets are stagnating. However, our strategy
of expanding on the emerging markets remains unchanged, since in
the long term they are expected to achieve very good economic
growth. We are also continuing our investments
in new products, especially in the growth area of
electromechanics."
Third quarter
The Group's sales totaled SEK 18,025 M (17,465). Organic growth
amounted to 2% (3). Acquired units contributed 2% (4).
Exchange-rate effects had an impact of SEK -176 M (1,661) on sales,
equivalent to -1% (12). Operating income before depreciation and
amortization, EBITDA, amounted to SEK 3,425 M (3,330). The
corresponding EBITDA margin was 19.0% (19.1).
The Group's operating income, EBIT, amounted to SEK 3,020 M
(2,970) a rise of 2%. The operating margin was 16.8% (17.0).
Adjustment of financial reporting from prior periods for the
Chinese operations affected operating income by SEK
-260 M. The reversal of deferred acquisition payments in
primarily China has been recognized as income of SEK 268 M since
the payments are not expected to take place.
Net financial items amounted to SEK -175 M (-174). The Group's
income before
tax was SEK 2,844 M (2,796), an increase of 2% compared with
last year. Exchange-rate effects had an impact of SEK 1 M (220) on
income before tax. The profit margin was 15.8% (16.0). The
estimated underlying effective tax rate on an annual basis was 26%
(26). Earnings per share amounted to SEK 1.91 (1.86), an increase
of 3% compared with last year.
First nine months of the year
The Group's sales for the first nine months of 2016 totaled SEK
51,809 M (49,799), representing an increase of 4%. Organic growth
was 3% (4). Acquired units contributed 3% (3). Exchange-rate
effects affected sales by SEK -810 M (5,561), equivalent to -2%
(14), compared with last year.
Operating income before depreciation and amortization, EBITDA,
amounted to SEK 9,517 M (9,106). The corresponding margin was 18.4%
(18.3). The Group's operating income, EBIT, amounted to SEK 8,340 M
(8,041), which was an increase of 4% compared with last year. The
corresponding EBIT operating margin was 16.1% (16.1).
Earnings per share amounted to SEK 5.21 (5.02), a rise of 4%
compared with last year. Operating cash flow totaled SEK 5,846 M
(5,327).
Restructuring measures
The planning of a new restructuring program has proceeded during
the year. The launch is scheduled for the fourth quarter. The
closing of about fifty offices and factories is expected to take
place over a period of three years. The cost
of the restructuring is estimated to amount to just over SEK
1,500 M, with a payback time (inclusive of investments) of less
than three years.
Payments related to all currently existing restructuring
programs amounted
to SEK 61 M in the quarter. The restructuring programs proceeded
according to plan and led to a reduction in personnel of 560 people
during the quarter and 11,916 people since the projects began in
2006. At the end of the quarter provisions of SEK 339 M remained in
the balance sheet for carrying out the programs.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,042 M
(4,100), with organic growth of 2% (5). The markets in Scandinavia,
Britain and Israel showed strong growth. Germany, Iberia, Benelux
and Italy showed good growth. France, Finland, eastern Europe and
Africa showed negative growth. The positive trend for
electromechanical products continued. Acquired/disposed growth
amounted to --2% (5). Operating income totaled SEK 673 M (676),
which represented an operating margin (EBIT) of 16.7% (16.5).
Return on capital employed amounted to 18.5% (18.3). Operating cash
flow before interest paid totaled SEK 402 M (642).
Americas
Sales for the quarter in Americas division totaled SEK 4,422 M
(4,064),
with organic growth of 5% (6). Growth was strong for Security
doors, Electromechanical products, Mexico and South America, apart
from Brazil which showed negative growth. The Residential market,
High-security products and Canada showed good growth. Traditional
lock products showed growth. Acquired growth amounted to 3% (2).
Operating income totaled SEK 959 M (884), which represented an
operating margin (EBIT) of 21.7% (21.8). Return on capital employed
amounted to 25.9% (25.5). Operating cash flow before interest paid
totaled SEK 1,018 M (944).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,486
M (2,951), with organic growth of -7% (-3). The Pacific showed good
growth, while the trend was positive in Korea and stable in
South-East Asia. In China demand diminished, with organic growth of
-12%. Acquired growth amounted to 0% (10). Operating income totaled
SEK 306 M (464), which represented an operating margin (EBIT) of
12.3% (15.7). Return on capital employed amounted to 9.8% (15.1).
Operating cash flow before interest paid totaled SEK 653 M
(317).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,439 M (2,210), with organic growth of 7% (0). IAM Solutions,
Government ID, AdvanIDe and Identification Technology (IDT) showed
strong growth within HID Global. Access Control (PACS) showed good
growth. Hospitality showed a stable sales level. Acquired growth
amounted to 5% (0). Operating income amounted to SEK 442 M (410),
which represented an operating margin (EBIT) of 18.1% (18.6).
Return on capital employed amounted to 16.6% (16.3). Operating cash
flow before interest paid totaled SEK 517 M (566).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
4,960 M (4,494), with organic growth of 4% (6). Door automation,
Amarr, High-speed doors and FlexiForce showed strong growth while
growth for Industrial doors and 4Front was good. Sales weakened for
Ditec and Private residential doors in Europe. Acquired growth
amounted to 6% (1). Operating income totaled SEK 709 M (623), which
represented an operating margin (EBIT) of 14.3% (13.9). Return on
capital employed amounted to 15.2% (14.7). Operating cash flow
before interest paid totaled SEK 617 M (590).
Acquisitions and disposals
A total of two minor acquisitions were consolidated during the
quarter. The combined acquisition price for the companies acquired
in the first nine months
of the year amounted to SEK 1,687 M, and preliminary acquisition
analyses indicate that goodwill and other intangible assets with
indefinite useful life amount to SEK 1,196 M. The acquisition price
is adjusted for acquired net debt and estimated deferred
considerations. Estimated deferred considerations amount to SEK 203
M.
On 20 October it was announced that ASSA ABLOY acquired Trojan
in the UK, a leading company in the door and window segment for the
residential market. The company has 65 employees and its sales in
2016 are expected to amount to SEK 220 M.
The contract for the sale of the Group's Car Locks business was
signed with
the Japanese company Alpha Corporation in March. The transaction
was completed in September 2016 after approval by the appropriate
authorities. From 1 January the business was reclassified under
'Assets held for sale' in accordance with IFRS 5. As a result,
sales for the year fell by SEK 424 M compared with the previous
year. The disposal involves a small capital gain, which is reported
as net income of disposal group classified as held for sale.
Sustainable development
Reduced energy consumption in the Group's factories and sales
companies is a prioritized area for achieving a reduced
environmental impact and lower costs. The improvement project is
driven locally in the Group's units, often with support from Kaizen
methodology to identify and prioritize different activities.
Several units have introduced improved systems to measure and
control the temperature of their buildings. At the beginning of
2015 a new control system was installed at EMEA's factory in
Portobello in the UK. Accurate measurement
of both indoor and outdoor temperatures produces control by
means of many small adjustments towards the target values for each
section of the factory.
The system reuses warm air in the ventilation system and
automatically reduces
the temperature when the factory is not in operation. The system
is aware
when external doors or shutters are open, and closes down the
heating temporarily in order to minimize energy losses. The new
system has reduced energy consumption for heating by over 30%.
A similar system was installed in February 2016 at ASSA ABLOY's
factory in Cheltenham in the UK. The energy usage for heating the
5,500-square-meter premises has been reduced by over 30% this
year.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 2,428 M (1,980) for the first nine months of the year.
Operating income
for the same period amounted to SEK 787 M (508). Investments in
tangible and intangible assets totaled SEK 196 M (18). Liquidity is
good and the equity ratio was 42.3% (41.6).
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 92-97 of the 2015
Annual Report. 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'.
ASSA ABLOY makes use of a number of financial performance
measures that are not defined in the reporting rules that the
company uses - so-called 'alternative performance measures'. For
definitions of financial performance measures, refer to Page 17 of
this Quarterly Report and to the company's latest Annual Report. To
check how the financial measurements have been calculated for
current and earlier periods, refer to the tabulated figures in this
Quarterly Report and to the company's Annual Report. The Annual
Reports for the years 1994 to 2015 appear on the company's website
www.assaabloy.com.
Totals quoted in tables and statements may not always be the
exact sum of the individual items because of rounding differences.
The aim is that each line item should correspond to its source, and
rounding differences may therefore arise.
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, financial and tax-related
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 particular risks and risk management, see
the 2015 Annual Report.
Review
The Company's Auditors have not carried out any review of this
Report for the third quarter of 2016.
Stockholm, 21 October 2016
Johan Molin
President and CEO
Financial information
The Year-end Report and Quarterly Report for the fourth quarter
will be published on 2 February 2017.
A capital markets day will be held on 16 November 2016 in
Stockholm, Sweden.
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, Sweden.
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 5055 6476, +44 203 364 5371 or +1 877 679 2993.
This information is information that ASSA ABLOY AB is obliged to make
public pursuant to the EU Market Abuse Regulation. The information
was submitted for publication, through the agency of the contact persons
set out above, at 08.00 CET on 21 October 2016.
ASSA ABLOY AB (publ) Tel +46 (0)8 506 485
Box 703 40 00
107 23 Stockholm Fax +46 (0)8 506 485
Visiting address 85
Klarabergsviadukten www.assaabloy.com No. 14/2016
90, Stockholm, Sweden
Corporate identity number:
556059-3575
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/1714N_-2016-10-21.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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