18 Jul 2018

Solid underlying performance for ASSA ABLOY

Second quarter

  • Net sales increased by 9% to SEK 21,140 M (19,387), with organic growth of 5% (2) and acquired net growth of 2% (2)
     
  • Strong growth was shown by Americas, Global Technologies and Entrance Systems and stable growth by Asia Pacific and EMEA
     
  • One-off costs in Asia Pacific during the quarter amounted to SEK –5,595 M for impairment of goodwill and other intangible assets and SEK –400 M for write-downs of operating assets
     
  • Contracts have been signed for the acquisition of eight companies with expected combined annual sales of about SEK 1,200 M. The Wood Door business in the USA, with annual sales of about SEK 600 M, has been divested
     
  • Operating income (EBIT)[1] amounted to SEK 2,911 M (3,114), with an operating margin of 13.8% (16.1)
     
  • Net income[1] amounted to SEK 2,049 M (2,179)
     
  • Earnings per share[1] amounted to SEK 1.84 (1.96)
     
  • Operating cash flow increased by 11% to SEK 2,855 M (2,575).

Sales and income

Second quarter First half-year
2017 2018 Δ 2017 2018 Δ
Sales, SEK M 19,387 21,140 9% 37,529 39,690 6%
Of which:
Organic growth 344 954 5% 1,366 1,659 5%
Acquisitions and divestments 451 366 2% 900 633 2%
Exchange-rate effects 698 433 2% 1,478 –131 –1%
Operating income (EBIT) [1], SEK M 3,114 2,911 –6% 5,901 5,740 –3%
Operating margin (EBITA) [1], % 16.3% 14.2% 16.0% 14.9%
Operating margin (EBIT) [1], % 16.1% 13.8% 15.7% 14.5%
Income before tax [1], SEK M 2,944 2,720 –8% 5,537 5,374 –3%
Net income [1], SEK M 2,179 2,049 –6% 4,097 4,013 –2%
Operating cash flow, SEK M 2,575 2,855 11% 3,399 3,431 1%
Earnings per share [1], SEK 1.96 1.84 –6% 3.69 3.61 –2%

[1] Excluding impairment of goodwill and other intangible assets of SEK -5,595 M in the second quarter of 2018. The effect on net income from the impairment of intangible assets was SEK –5,268 M.
  

Comments by the President and CEO

Strong organic sales growth in the quarter

The second quarter continued with strong organic growth of 5%. Organic growth was strong in Americas (9%), Global Technologies (6%) and Entrance Systems (6%), while Asia Pacific and EMEA reported stable organic sales growth of 2%.

The second quarter’s operating income declined by 6% year-on-year to SEK 2,911 M, corresponding to an operating margin of 13.8%. The Group’s adjusted operating income, excluding write-downs of operating assets of SEK –400 M, was SEK 3,311 M corresponding to a stable operating margin of 15.7%.

Operating cash flow was strong in the second quarter and increased by 11% to SEK 2,855 M. We are continuing with full focus on our current restructuring programs and, as previously announced, we expect to launch a new program by the end of 2018.

Strategic overview in China

Since the peak in 2014 we have been exposed to a general market decline in China. This decline has been particularly evident in the regions where we had our strongest market presence and we have had to adapt to the challenging market conditions.

The market situation in China continues to be difficult, as previously reported. We expect the operating margin to remain low in the Chinese market for the next few years and this has resulted in a required write-down of SEK 5,595 M for impairment of goodwill and other intangible assets. We also made provisions of SEK 400 M for receivables and inventory in the quarter.

After the events of 2016, our focus was internal and directed to stabilizing the organization. We are now building a focused China organization around our main brands: PanPan, Yale and ASSA ABLOY. China will remain very important to us, and we remain firmly committed to the market. In China we are now seeing continued urbanization, a growing aftermarket for our products, and increasing demand for more advanced security solutions. We are convinced that with our new business strategy in place China will give us good returns in the longer term.    

Our innovation recognized

I am very proud and pleased to see that ASSA ABLOY is again on the Forbes list of the top 100 most innovative companies in the world. I am convinced that our strong focus on innovation in both products and processes is the best way for us to continue to be the leader in our industry.

We have the right people and the right culture to make a difference and the organization’s ability to innovate is clearly reflected in the strong demand for our new products.

Stockholm, 18 July 2018

Nico Delvaux
President and CEO

 
Further information can be obtained from:
Nico Delvaux, 
President and CEO, Tel: +46 8 506 485 82

Carolina Dybeck Happe,
Chief Financial Officer, Tel: +46 8 506 485 72

 
ASSA ABLOY is holding a telephone and web conference at 10.00 today the analysts’ meeting can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:+46 8 566 19 353, +44 203 008 9806 or +1 855 831 5945

 
This is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CEST on 18 July 2018.