First quarter
* As expected, the sales trend in Western Europe and North America
was weak during the quarter, while growth remained strong in
Asia, Africa and South America.
* The gross margin continued to improve through increased
efficiency.
* Substantial investments in new products are being made.
* Sales totaled SEK 8,203 M (8,227), with 0% organic growth, 3%
acquired growth and exchange-rate effects of -3%.
* Operating income (EBIT) amounted to SEK 1,244 M (1,289) a
decrease by 3% after negative currency effects of SEK 52 M,
representing a margin of 15.2% (15.7).
* Net income amounted to SEK 772 M (803).
* Earnings per share amounted to SEK 2.08 (2.16) a decrease by 4%.
SALES AND INCOME
Full year First quarter
2006 2007 Change 2007 2008 Change
Sales, SEK M 31,137 33,550 +8% 8,227 8,203 +0%
of which,
Organic growth +7% +0%
Acquisitions +5% +3%
Exchange-rate effects -1,131 -4% -275 -3%
Operating income (EBIT), SEK
M 4,771* 5,458 +14% 1,289 1,244 -3%
Operating margin (EBIT), % 15.3* 16.3 15.7 15.2
Income before tax, SEK M 4,100* 4,609 +12% 1,101 1,055 -4%
Net income, SEK M 1,756** 3,368 +92% 803 772 -4%
Operating cash flow, SEK M 3,528 4,808 +36% 805 583 -28%
Earnings per share (EPS),
SEK 7.99* 9.02 +13% 2.16 2.08 -4%
* Excluding restructuring costs for 2006 amounting to SEK 1,474 M for
the year.
** Excluding restructuring costs, net income in 2006 was SEK 2,988 M
for the year.
COMMENTS BY THE PRESIDENT AND CEO"ASSA ABLOY achieved a stable development in the first quarter
despite the weak sales trend. As a result of efficiency improvements
the gross margin continued to improve. I am also very pleased to
conclude that there was continued strong growth on the emerging
markets, which increased their sales by more than 20%. Investments in
product development continued to be substantial and will give us many
exciting new products going forward," said Johan Molin, President and
CEO.
FIRST QUARTER
The Group's sales totaled SEK 8,203 M (8,227), which was unchanged
compared with 2007. In local currencies the increase amounted to 3%
(14), of which organic growth for comparable units was 0% (8) while
acquired units accounted for 3% (6) of the increase. Exchange-rate
effects had a negative impact of SEK 275 M on sales, i.e. 3%.
Operating income before depreciation, EBITDA, amounted to SEK 1,476 M
(1,518), a decrease of 3% compared with 2007. The EBITDA margin was
18.0% (18.5). The Group's operating income, EBIT, amounted to
SEK 1,244 M (1,289), a decrease of 3%, after negative currency
effects of SEK 52 M. The operating margin was 15.2% (15.7).
Net financial items amounted to SEK 189 M (188), which corresponds to
an average interest rate of about 5.2%. The Group's income before tax
amounted to SEK 1,055 M (1,101), which represents a decrease of 4% on
the previous year. After translation of the subsidiaries' income
statements, exchange-rate effects had a negative impact of SEK 46 M
on the Group's income before tax. The profit margin was 12.9% (13.4).
The Group's tax charge totaled SEK 283 M (298), corresponding to an
effective tax rate of 27% for the quarter. Earnings per share
amounted to SEK 2.08 (2.16), which represents a decrease of 4%.
RESTRUCTURING MEASURES
The comprehensive restructuring program initiated in April 2006
proceeds according to plan. The program includes some 50 individual
restructuring measures. The roles of a large number of production
units will be changed to focus mainly on final assembly, and some
units will be closed. The cost of the program is assessed at SEK
1,274 M and it is expected to generate cost savings of about SEK 600
M a year once the whole program is completed in 2009. The full cost
of the program was expensed in 2006.
Payments related to the restructuring program amounted to SEK 111 M
during the quarter. Savings during the quarter resulting from
measures carried out are assessed at SEK 55 M compared with the same
period last year. The quarterly rate of savings from the start of the
program now amounts to SEK 100 M. So far 1,534 out of the total of
2,000 employees affected by the restructuring program have left the
Group.
COMMENTS BY DIVISION
EMEA
Sales in the EMEA division totaled SEK 3,473 M (3,444), with organic
growth of -2% (+9). The sales trend slowed on the West European
markets but was more positive on the growth markets in Eastern
Europe, the Middle East and Africa. Easter had a negative impact on
volume growth. Acquired growth amounted to 2%. Operating income
amounted to SEK 567 M (593), which represents an operating margin
(EBIT) of 16.3% (17.2). Return on capital employed amounted to 21.0%
(22.7). Operating cash flow before interest paid totaled SEK 241 M
(376).
AMERICAS
Sales in the commercial segment in the Americas division increased
during the quarter, although the pace of growth slowed, mainly
because there were fewer working days in the quarter. The sales trend
in the residential segment was negative, as in the previous quarter.
Total sales amounted to SEK 2,422 M (2,607), with 2% organic growth.
Acquired growth was 0%. The operating margin improved further from an
already good level and amounted to 19.3% (19.0). Return on capital
employed amounted to 22.0% (22.3). Operating cash flow before
interest paid totaled SEK 226 M (449).
ASIA PACIFIC
Sales in the Asia Pacific division grew strongly on the Asian markets
and sales in Australia and New Zealand where stable. Sales totaled
SEK 692 M (539), with 4% organic growth. The new acquisitions,
Baodean and iRevo, were consolidated from the fourth quarter 2007 and
acquired growth was 25%. Operating income improved as a result of
volume growth and price increases and amounted to SEK 54 M (41),
which represents an operating margin (EBIT) of 7.8% (7.7) despite the
expected dilution, mainly from iRevo, which amounted to 1.0
percentage point. The return on capital employed amounted to 8.4%
(8.0). Operating cash flow before interest paid totaled SEK 85 M
(45).
GLOBAL TECHNOLOGIES
The Global Technologies division reported continued growth, partly
due to the launch of a number of new products, with sales of SEK
1,158 M (1,167) in the first quarter of which organic growth
accounted for 3%. Acquired growth amounted to 2%. Growth was good in
Hospitality and in HID excluding the newly merged ITG. The decrease
at ITG was due partly to non-recurring bulk orders in the first
quarter in 2007, and partly to a selective phasing-out of some
customers. The merger of HID and ITG proceeded according to plan and
will in time yield good effects on both sales and production.
Operating income amounted to SEK 160 M (163), which represents an
operating margin (EBIT) of 13.8% (14.0). Return on capital employed
amounted to 13.2% (12.8). Operating cash flow before interest paid
amounted to SEK 40 M (25).
ENTRANCE SYSTEMS
The Entrance Systems division reported sales of SEK 697 M (668) in
the first quarter, representing organic growth of 3%. During the
quarter growth slowed in Europe and North America but remained very
strong in the division's newly established operations in Asia.
Acquired growth amounted to 3%. Operating income amounted to SEK 89 M
(86), which represents an operating margin (EBIT) of 12.7% (12.8).
Return on capital employed amounted to 11.0% (11.0). Operating cash
flow before interest paid amounted to SEK 173 M (177).
ACQUISITIONS
No significant acquisitions were consolidated during the first
quarter.
On 15 February it was announced that the EMEA division has acquired
20% of the Swedish security wholesaler Copiax, a leading supplier to
locksmiths, security installers and the building trade, and that ASSA
ABLOY thus owns 31% of the shares in Copiax. ASSA ABLOY has made an
offer for the outstanding shares, and if approval is received from
the competition authorities the acquisition is expected to be
completed in the second quarter.
On 18 February it was announced that the Asia Pacific division has
signed an agreement to acquire the security-door business of Beijing
Tianming (BJTM). BJTM is one of China's leading companies in the sale
and manufacture of fire-rated steel security doors for the Chinese
market.
SUSTAINABLE DEVELOPMENT
During the quarter ASSA ABLOY continued work to implement its
declared 20-point program of sustainable development. For the second
successive year ASSA ABLOY has published its Sustainability Report,
which is available both in print and on the Group's website. The
Sustainability Report details the advances made during the year,
which include reductions in the use of solvents and the release of
greenhouse gases, and the targets set for the period up to 2010.
Updated information about sustainable development is published on the
Group's website.
PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled
SEK 480 M (176) for the first quarter. Income before tax amounted to
SEK 381 M (789). Investments in tangible and intangible assets
totaled SEK 0 M (1). Liquidity is good and the equity ratio was 47.8%
(47.6).
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 67-71 of the 2007 Annual
Report. New or revised IFRS effective after 31 December 2007 have had
no material effect on the consolidated income statements or balance
sheets. The Group's Interim Reports are prepared in accordance with
IAS 34. The Parent company applies RFR 2.1.
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 refer to the 2007 Annual Report. No significant risks
other than the risks described there are judged to have occurred.
OUTLOOK*)
Organic sales growth is expected to continue at a good rate. The
operating margin (EBIT) and operating cash flow are expected to
develop well.
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.
*)This was the outlook published on 13 February 2008:
Organic sales growth is expected to continue at a good rate. The
operating margin (EBIT) and operating cash flow are expected to
develop well.
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.
Sales growth and profitability during the first quarter will be
affected negatively by the Easter effect. This is expected to be
recovered during the second quarter.
Stockholm, 23 April 2008
Johan Molin
President and CEO
This Interim Report has not been reviewed by the Company's Auditor.
FINANCIAL INFORMATION
The Interim Report for the second quarter will be published on 30
July 2008. The Annual General Meeting will be held on 24 April at the
Museum of Modern Art (Moderna Museet) 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 14.00 today
at Klarabergsviadukten 90 in Stockholm.
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 5052 0270, +44 208 817 9301 or +1 718 354 1226.
ASSA ABLOY discloses the information provided herein pursuant to the
Securities Markets Act and/or the Financial Instruments Trading Act.
The information was submitted for publication at 12:30 CET on 23
April.
The full report with tables can be downloaded via the PDF link at the
top of the page.
Stable development for ASSA ABLOY despite weak sales in the first quarter
| Source: ASSA ABLOY AB
Attachments
