ASSA ABLOY Interim Report January - June 1998

10 Aug 1998

Sales and income, January-June, 1998
The sales of the ASSA ABLOY Group amounted to 4163 MSEK (3035), an increase of 37%. The organic growth for comparable units and in local currency amounted to 8%. Exchange rate changes have affected sales by +39 MSEK compared to last year and the recently acquired companies represent 790 MSEK of the year's sales.
The Group's result before tax amounted to 340 MSEK (225), corresponding to an increase of 51%. Translation of the foreign subsidaries' result has not had any affect due to the change of exchange rates. Earnings per share increased to 3.25 SEK (2.31) and has been calculated after full conversion and tax as well as on the average number of shares.
Cash flow before tax amounted to 287 MSEK (239).
Development of the subsidiaries
Finland notes a continued strong growth, 15%. The domestic market as well as the export market shows good increase. The deliveries of door closers to the US continue to increase rapidly as does the export to Russia. On the Swedish market, the demand from new construction is gradually increasing, although from a low level. The organic growth amounts to 7% and the different units all shows good growth.
The lock market in Norway shows stable growth and the organic growth amounts to 5%. The merger is now completed and the result is increasing steadily. Denmark notes a lower growth due to the general strike during the spring. The underlying demand is good, however, within all the market segments.
IKON in Germany, who's customers are mainly institutions and public authorities, shows an increasing result on a continued poor market. Sales are practically on the same level as last year, and IKON is estimated to have kept its market shares within its segments. The integration of Dörrenhaus is proceeding according to plan and loss making products are being terminated. The company will start to contribute to the Group's profits next year.
The Czech company FAB shows continued good development and sales increased with 17%. Sales of construction locks are increasing mainly due to the need for better locks in spite of a certain slow down in the construction cycle. Furthermore, the sales of car locks are increasing, primarily thanks to the fact that also Skoda Octavia is now equipped with FAB locks.
Sales in the UK have developed well during the first 6 months, 9%, which is estimated to be better than the market in general.
The French units show a good growth of 8%. The market is improving and the new constructions are gradually increasing. At the same time, the integration work is running smoothly and the goals that were set at the time of the acquisition of a net margin increase of 2-3% will be reached during 1999.
The growth rate for the US units has been good, 10%. The activity weakened somewhat during the second quarter but has accelerated again during the summer and the outlook for the remainder of the year is good. All units show increasing volume as well as sales.
VingCard notes a growth of 9%. The economic downturn in Asia is now having a negative effect on sales in the area. Sales in Europe and Latin America show considerable growth while USA remains on a high level. The integration of Elsafe is running smoothly with expected positive results.
Important events
An agreement has been signed to acquire Securitron Magnalock - USA's leading manufacturer of magnetic locks and electronic panic bars.
The acquisition of Securitron is an important complement to the Group as it adds an important range of electro-mechanical lock products and opens new distribution channels for these products in general. The market for electro-mechanical lock products is one of the lock market's fastest growing segments as these products are important components in all electronic security systems.
The company has high profitability. Sales for 1998 are estimated to amount to 19 MUSD. Goodwill of approximately 15 USD arises through the acquisition. The acquisition is subject to approval from the American Antitrust Authorities.
Furthermore, the Norwegian operation has divested two locksmiths that were part of the Møller Undall Group. The divestiture has affected sales with approximately 20 MSEK during the period.
The acquisition of Medeco was completed on 1 July. The company is the US's leading manufacturer of security cylinders and shows good profitability. Sales are expected to reach 55 MUSD during 1998. The acquisition gives ASSA ABLOY access to a well established cylinder programme that the American units have previously lacked.
During April, 49% of Cerrajeras Scovill in Mexico was acquired. Scovill is one of the country's three leading lock manufacturers. With the acquisition follows a platform for exports to large parts of Latin America. Furthermore, Mexico is part of NAFTA, which gives the Group a cost efficient production unit near the important American market. ASSA ABLOY has an option to acquire the remaining 51% of the shares according to a formula based on the company's profitability development.
The companies are consolidated from 1 July and 1 May respectively, and Scovill will be equity accounted.
Furthermore, Romania's leading lock manufacturer, Urbis, with a market share of 70% has been acquired. The need for security is increasing and with Urbis' market leading position, ASSA ABLOY will get a unique opportunity to contribute to and grow with the development of the Romanian lock and security market. Sales for this year are expected to reach 50 MSEK. The company is consolidated as of the acquisition date.
Outlook for 1998
The expectation expressed earlier of a continued good result and volume development for ASSA ABLOY in 1998 remains unchanged.
Copenhagen, 10 August, 1998
Carl-Henric Svanberg
President and CEO
This interim report has been subject to a limited review by the company auditors.
ASSA ABLOY is the world's leading lock group with sales exceeding 8 000 MSEK. The number of employees is approx. 10 000. ASSA ABLOY develops, manufactures and markets mechanical, industrial, electromechanical and electronic locks and hotel locks. The group has market leading positions in Sweden, Finland, Norway, Denmark, Germany, France, Belgium, the Czech Republic, Romania, Mexico and in the United States as well as within the segment for hotel security world-wide.
For further information, please contact
Carl-Henric Svanberg, President & CEO, tel. +46-8-698 8552 alt. +46-70-510 0551 or Göran Jansson, CFO, tel. +46-8-698 8572 alt. +46-70-748 8572
P.O. Box 70340, S-107 23 Stockholm
Tel: Int+46-8-698 85 70, Fax: Int +46-8-698 85 85
Visiting address: Klarabergsviadukten 90