Quarterly Report Q3 2020

21 Oct 2020

Strong recovery in the quarter

Third quarter

  • Net sales decreased by 8% to SEK 22,225 M (24,034), with organic growth of –5% (4) and acquired net growth of 4% (4)
  • Entrance Systems reported organic sales growth, while EMEA reported stable organic sales development. Global Technologies, Asia Pacific and Americas reported negative organic sales growth. All divisions were strongly negatively affected by Covid-19
  • Sales and income for agta record are fully consolidated into the Group from 31 August 2020
  • Operating income (EBIT1) decreased by 8% to SEK 3,593 M (3,894), corresponding to an operating margin of 16.2% (16.2). This includes operating income of SEK 252 M from the divestment of certain agta record and ASSA ABLOY businesses
  • Net income1 amounted to SEK 2,528 M (2,697)
  • Earnings per share1 amounted to SEK 2.28 (2.43)
  • Operating cash flow amounted to SEK 4,407 M (4,401)
  • The Board of Directors proposes a second dividend for 2019 of SEK 1.85 per share, making the total dividend for the full year SEK 3.85 (3.50) per share.

Sales and income

Third quarter January-September
2019 2020 Δ 2019 2020 Δ
Sales, SEK M 24,034 22,225 –8% 69,082 64,351 –7%
Of which:
Organic growth 807 –1,043 –5% 2,505 –6,001 –9%
Acquisitions and divestments 825 816 4% 2,303 2,118 3%
Exchange-rate effects 1,211 –1,581 –7% 3,393 –849 –1%
Operating income (EBIT)1, SEK M 3,894 3,593 –8% 10,873 8,441 –22%
Operating margin (EBITA)1, % 16.7% 16.8% 16.2% 13.8%
Operating margin (EBIT)1, % 16.2% 16.2% 15.7% 13.1%
Income before tax1, SEK M 3,645 3,417 –6% 10,104 7,828 –23%
Net income1, SEK M 2,697 2,528 –6% 7,477 5,792 –23%
Operating cash flow, SEK M 4,401 4,407 0% 9,208 9,031 –2%
Earnings per share1, SEK 2.43 2.28 –6% 6.73 5.21 –23%
 

Excluding non-cash operating income in Q3 2020 from revaluation at fair value of 39% ownership in agta record (a shareholding in associates), totaling SEK 1,910 M. The operating income has no tax impact.

Comments by the President and CEO

Strong recovery in the quarter
The outbreak of Covid-19 has impacted our lives and how we do business. I am pleased that all our efforts have resulted in a significantly improved result compared to the previous quarter. Compared to the same quarter last year, our organic growth declined by 5%, currency effects were negative at –7%, while acquired growth was positive at 4%. Total sales declined by 8%. But the quarter has seen a strong recovery in all divisions (especially in EMEA), with the slowest recovery in Global Technologies which continues to be affected by Covid-19 in its main customer segments.

Operating income, including divestment gains of SEK 252 M, was SEK 3,593 M and the corresponding margin recovered strongly in the quarter to 16.2%. Significant cost-saving measures have been implemented, partly offsetting the lower volumes. We continued to generate a very strong operating cash flow of SEK 4,407 M and the cash conversion in the quarter was at 129% (121). As a result of the improved financial performance, the Board of Directors has decided to propose a second dividend of SEK 1.85 making the total dividend SEK 3.85 as originally proposed at the beginning of the year before the outbreak of Covid-19.

Strong performance in a difficult world
The quarter continued to be impacted by Covid-19, but most of our important markets showed good recovery. In particular, the markets in Europe recovered faster than in the US, as lockdowns were eased and distributors started to restock. In Asia, China continued to improve, but South Korea and South Asia remained weak. Some customer segments are still impacted by lower mobility and this has negatively affected several business areas in Global Technologies. Entrance Systems continued to improve its performance and reported positive organic growth while we also welcomed agta record into the ASSA ABLOY family.

We have continued to implement significant cost-saving measures with a focus on long-term cost reductions. This unfortunately means we had to reduce the number of employees in the Group and we are cutting costs in all areas except product development and strategic growth areas. In total, these actions have reduced our SG&A and conversion expenditures by around SEK 0.6 billion net during the quarter. In addition, we will be launching another restructuring program, MFP8, in the fourth quarter. The program will have a payback period of about two years, will include the closure of 9 factories and more than 30 offices and will generate annual savings of close to SEK 0.9 billion in 2023.

Covid-19 is continuing to impact our business negatively and we will therefore continue to focus on cost measures, while also investing in growth initiatives that can compensate for the sales declines caused by Covid-19.

Finally, I would like to announce that we are launching a new sustainability program with ambitious targets for 2025 and that we are committing to the science-based targets climate initiative, which aligns us with the Paris Agreement. This demonstrates our desire to lead our industry towards a more sustainable future, and will further improve our competitiveness through sustainable products, solutions and operations. 

Stockholm, 21 October 2020

Nico Delvaux
President and CEO

Further information can be obtained from:

Nico Delvaux,
President and CEO, tel. no: +46 8 506 485 82

Erik Pieder,
Executive Vice President and CFO, tel.no: +46 8 506 485 72

ASSA ABLOY is holding a telephone and web conference
at 09.30 on 21 October 2020

which can be followed on the Internet at www.assaabloy.com.

It is possible to submit questions by telephone on:
+46 8–505 583 54, +44 333 300 9034 or +1 646 722 4957

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 CEST on 21 October 2020.