ASSA ABLOY's interim report January - September 2001
Sales and EARNINGS January - september, 2001 Sales for the period January to September 2001 amounted to SEK 16,304 M (9,747), an increase of 67%. In local currencies the growth in sales volume amounted to 58%, of which organic growth for comparable units contributed 4% while acquired units accounted for 54%. Exchange-rate effects affected sales positively by SEK 918 M (141).
The Group's income before tax increased by 20% to SEK 1,173 M (980). Translation of the foreign subsidiaries' results affected this figure positively by SEK 44 M due to exchange-rate variations.
Earnings per share after tax and full conversion increased by 8% to SEK 2.12 (1.96). The tax burden increased due to the higher level of non-deductible goodwill, and a higher proportion of earnings in countries with high tax rates. Earnings per share, excluding goodwill, increased by 46% to SEK 3.88 (2.66).
Operating cash flow before tax and acquisitions amounted to SEK 1,483 M (1,164).
Development of the subsidiaries Abloy in Finland increased by 3% during the first nine months and returned as expected to good growth during the third quarter. Export sales continues to develop well while domestic sales remains a bit softer.
Scandinavia increased by 3% after a somewhat stronger third quarter. Sweden develops well including the door and window industry that started the year slower. Cost adjustments for the slower growth in Norway and Denmark are starting to have effect.
Growth in Central Europe amount to 3% for the first nine months. Sales during the third quarter were somewhat slower mainly due to a weakening German market. The Lips integration in the Netherlands is running well with gradually increasing profits. Keso in Switzerland, consolidated from June, will strengthen the Group's high security cylinders portfolio.
South Europe shows growth of 5%. In France, the efforts on security focused products continues. Fichet, the high security specialist, and Stremler, manufacturer of locks for glass and aluminum doors, show the strongest growth. Yale Italy has increased its focus on the domestic market and recently acquired MAB, the Italian leader in floor-spring door closers, is adding strength to the product package. Belgium continues to show the strongest growth in the region.
The Group's old units in Great Britain continued to show good growth of 7%. The integration of Yale develops according to plan. Considerable efforts are made in R&D and the expansion of the product portfolio. New products are being launched and have ended the negative sales trend since several years. The implementation of the lean production process proceeds successfully and will improve the operational efficiency considerably.
The old units in North America show growth of 4%. The third quarter's sales showed limited growth as a result of the couple of days standstill following the terrorist attacks. Focus on security is likely to increase over time. Meanwhile, the US economy continues to weaken. This weakening is expected to have limited effects on the Group's development, but in the light of the present situation the near future is hard to predict.
The Yale integration is running very well with steady operational improvements in all the companies. The Folger Adam turnaround continues as planned. The synergy work between the joint venture door companies has started including exchange of products and production. A door package for the Yale group has been established and will strengthen Yale's market position. The Canadian operations continue to show strong growth. Phillips in Mexico will be consolidated from the fourth quarter. There are interesting business development opportunities in this large and growing market and the Group is now well positioned.
The Australian market is strengthening after the weak first six months. Lockwood is showing good growth in the third quarter and a 2% increase year to date. The company is progressing very well and is expected to show good development during the coming years. Interlock, New Zealand, will be consolidated during the fourth quarter and will further strengthen the Group's position in the region.
Growth in New Markets amounted to 18%. Mul-T-Lock develops well although the recent years strong export growth to Japan is slowing. Yale South Africa continues strongly and the integration of Viro has started. Eastern Europe is showing steady development, although car locks sales show limited growth. The Asian market seems affected by the recent events in the US. There is an uncertainty in the market and some larger projects are being put on hold.
Sales in the hotel segment decreased by 3%. The hospitality industry is being severely affected by the decrease in travelling following the terrorist attacks. Occupancy rates have dropped dramatically and as a result lock sales will be correspondingly affected. A restructuring and cost cutting program has been introduced to ensure a continued positive development.
HID showed limited growth in the third quarter due to a continued weak access control market. However, profit development continues in line with plan. HID is likely to early benefit from an increased security focus and sales after the terrorist attacks show signs in this direction.
Acquisition of Indala Indala is a highly respected supplier of radio-frequency identification (RFID) cards and readers for the access control industry. The company is based in San Jose, California and was founded in 1985. The installed base of Indala products is substantial including 60 million cards and 1 million readers.
The business is expected to have sales of USD 25 M this year with low profitability. There are, however, considerable synergies with ASSA ABLOY's subsidiary HID. The goodwill created by the acquisition is minimal and will be tax deductible. The acquisition will be EPS positive from the start.
Acquisition of Interlock Interlock is the leading manufacturer and distributor of window and door security hardware in New Zealand and has developed successful export to Japan, UK and the US. The Company has sales of NZD 60 M with high profitability following several years of steady improving profits. The company has production units in Auckland and Wellington and has 420 employees.
The acquisition will strengthen ASSA ABLOY's position in the region and add interesting cross-sales opportunities. The goodwill created will be tax deductible and the acquisition will be EPS positive from the start.
Acquisition of Phillips, Mexico completed The acquisition of Phillips, Mexico's leading lock manufacturer has been completed. Phillips has sales of approximately USD 60 M and has shown good growth and high profitability over a number of years. Mexico has a population of around 100 million and the country is experiencing strong economic growth. The rate of new construction is high and the demand for security rising.
Rating Standard & Poor's has assigned a single-'A'-minus long-term and 'A-2' short-term corporate credit ratings to ASSA ABLOY. The ratings reflect the group's strong positions in entrenched lock markets, a geographically diverse earnings base, strong cash flows, but also a moderate financial profile.
Employee incentive program An incentive program for the employees within the Group has been introduced. The convertible debenture based program that amount to EURO 100 M. The program is very positively received, more than 4000 employees have signed up and the program is more than 100% over subscribed.
VingCard Appeal The Texas Court of Appeal has confirmed an obligation for VingCard to pay damages amounting to USD 12.5 M plus interest to a Texas R & D company concerning a terminated sub supply contract. As advised by its US lawyers, VingCard has filed an appeal against the above judgement to the Texas Supreme Court. This filing is due in the fourth quarter. ASSA ABLOY intends to provide for the potential cost as a non-recurring item in the financial statements for 2001.
ACCOUNTING PRINCIPLES The new Standard RR 9 'Income Taxes'issued by the Swedish Financial Accounting Standards Council has been adopted from January 1 2001, which represents a change in accounting principles. All other accounting principles remain unchanged.
OUTLOOK The large acquisitions made over the last year have considerably strengthened the Group. The first and critical part of the integration has successfully been concluded and the work to realise the synergies can accelerate.
The development potential for ASSA ABLOY is substantial. The strong position, security-driven growth and potential for continued rationalization as well as the ongoing consolidation of the lock industry create opportunities for continued good growth and profit development.
Stockholm, 6 November 2001
Carl-Henric Svanberg President and CEO
The interim report is unaudited.
Financial information Year-end Report for 2001: February 7, 2002 Annual Report for 2001: March 2002
For further information, please contact Carl-Henric Svanberg, President & CEO, tel: +46-8-506 485 52 or +46-70-510 0551, or Göran Jansson, CFO, tel. +46-8-506 485 72 or +46-70-698 85 72
Information concerning the Investors' Meeting and Web and Telephone Conference later today can be found at ASSA ABLOY's website: www.assaabloy.com
The ASSA ABLOY Group is the world's leading manufacturer and supplier of locking solutions, dedicated to satisfying end-user needs for security, safety and convenience. Current sales for the Group are in excess of SEK 20 billion (approximately USD 2 billion) and the number of employees is more than 25,000.
ASSA ABLOY is the global leader in door opening solutions and offers mecahnical and electromechanical locks, digital door locks, security doors, entrance automation, hotel security and secure identity solutions, primarily in identity and access management, as well as a number of other related products and services.
Since its formation in 1994, ASSA ABLOY has grown from a regional company into an international Group with some 47,000 employees operating in more than 70 countries and sales of around SEK 71 billion.