* Excluding non-recurring items (restructuring charge SEK 1 320 M)

 

 

The Group's sales for the fourth quarter amounted to SEK 6,096 M (6,389), a reduction of 5%. Organic growth was 2%. Translation of foreign subsidiaries' sales produced a negative effect of SEK 627 M due to exchange-rate changes. Acquired companies had a positive effect of 3% on sales.

 

Sales for the full year amounted to SEK 24,080 M (25,397) M, which represents a reduction of 5%. Organic growth was 0%. Acquired units made a positive contribution of 5%. Exchange-rate effects affected sales negatively by SEK 2,660 M compared with 2002.

 

In the fourth quarter, operating income before depreciation and amortization, EBITDA, amounted to SEK 1,135 M (1,163). The corresponding margin was 18.6% (18.2%). The Group's operating income before goodwill amortization, EBITA, amounted to SEK 912 M (932) after negative exchange-rate effects of SEK 105 M. The operating margin (EBITA) was 15.0% (14.6%). Amortization of goodwill totaled SEK 240 M (246).

 

Operating income before depreciation and amortization, EBITDA, for 2003 amounted to SEK 4,249 M (4,545). The corresponding margin was 17.6% (17.9%). The Group's operating income before goodwill amortization, EBITA, amounted to SEK 3,352 M (3,595) after negative exchange-rate effects of SEK 405 M. The operating margin (EBITA) was 13.9% (14.2%).

 

Income before tax but excluding non-recurring items amounted to SEK 562 M (547) for the fourth quarter, with negative exchange-rate effects of SEK 44 M. The Group's effective tax rate excluding non-recurring items was 36 % (35%).

 

For 2003, income before tax but excluding non-recurring items amounted to SEK 1,903 M (2,015), with negative exchange-rate effects of SEK 186 M.

 

For the quarter, earnings per share excluding non-recurring items amounted to SEK 0.97 (1.00), with negative exchange-rate effects of SEK 0.05 per share. Earnings per share before goodwill amortization, excluding non-recurring items, amounted to SEK 1.61 (1.65), with negative exchange-rate effects of SEK 0.10 per share.

 

For 2003, earnings per share excluding non-recurring items amounted to SEK 3.31 (3.53), with negative exchange-rate effects of SEK 0.22 per share. Earnings per share before goodwill amortization, excluding non-recurring items, amounted to SEK 5.89 (6.13), with negative exchange-rate effects of SEK 0.49 per share.

 

Operating cash flow for the quarter was SEK 1,069 M - representing 190% of income before tax - compared with SEK 994 M last year. Cash flow for 2003 totaled SEK 3,265 M (3,525).

 

The 'Leverage and Growth' action program initiated in November 2003 is proceeding according to plan. A set of measures designed to ensure long-term profitability and growth has been put in hand.

 

The measures include increased focus on end-users' needs; innovations; development of the distribution network; and development of brands. Low-performing units will either be turned round, sold or closed before the end of 2004. Simplifications of the operating structure and an increased tempo in the coordination of purchasing will result in significant savings.

 

Costs arising in connection with the action program are reported as non-recurring items in the income statement. They affect the fourth quarter's figures by a total of SEK 1,320 M.

 

Of this, SEK 935 M will affect cash flow and is mainly due to a reduction of 1,400 in the number of employees. Write offs of SEK 385 M relate to low-performing companies and production assets.

 

From 2005 the annual cost savings are estimated to SEK 450 M. Half this level is expected to be realized in 2004.  

 

 

 

 

 

The fourth quarter's sales in EMEA (Europe, Middle East and Africa) totaled EUR 291 M (293), with 3% organic growth. Operating income before goodwill amortization excluding non-recurring items amounted to EUR 41 M (37) with an operating margin (EBITA) of 14.1% (12.6%). Return on capital employed before goodwill amortization amounted to 31.0% (26.7%). Operating cash flow before interest paid amounted to EUR 63 M (59).

 

Total sales for 2003 amounted to EUR 1,116 M (1,152) with 1% negative organic growth. Operating income before goodwill amortization and excluding non-recurring items totaled EUR 149 M (155), with an operating margin (EBITA) of 13.4% (13.4%). Return on capital employed before goodwill amortization amounted to 29.0% (27.0%). Operating cash flow before interest paid amounted to EUR 172 M (190).

 

Business improved strongly towards the end of the year, although with major differences between the various geographical areas. EMEA, which represents 40% of ASSA ABLOY, was able to report strong sales in October and December. Finland, Benelux and eastern Europe have shown continued organic growth over a longer period. The European mainland (excluding Scandinavia) ended the year with a strong positive trend, and the negative trend in Italy slowed down. Scandinavia succeeded in maintaining its sales volumes.

 

The fourth quarter's sales in Americas totaled USD 262 M (263), with 1% negative organic growth. Operating income before goodwill amortization excluding non-recurring items amounted to USD 46 M (47) with an operating margin (EBITA) of 17.6% (17.9%). Return on capital employed before goodwill amortization amounted to 40.4% (36.5%). Operating cash flow before interest paid amounted to USD 55 M (54).

 

Total sales for 2003 amounted to USD 1,073 M (1,095) with 2% negative organic growth. Operating income before goodwill amortization excluding non-recurring items totaled USD 176 M (178), with an operating margin (EBITA) of 16.5% (16.3%). Return on capital employed before goodwill amortization amounted to 43.8% (39.2%). Operating cash flow before interest paid amounted to USD 189 M (191).

 

Clear signs of a recovery in the US business climate have not yet become apparent, although development in the fourth quarter moved in the right direction. Half of ASSA ABLOY's 42 entities improved their sales in the past year. The Architectural Hardware Group (locks, cylinders, door closers and panic exit devices), which represents about 40% of Americas, showed stable sales development and continued to improve its results.  The Door Group halted its negative sales trend in the final quarter but continues to report weak development. These two Groups together represent two thirds of ASSA ABLOY's business in the Americas.

 

The fourth quarter's sales in Asia Pacific totaled AUD 84 M (84), with 8% organic growth. Operating income before goodwill amortization excluding non-recurring items amounted to AUD 15 M (12) with an operating margin (EBITA) of 17.9% (14.3%). Return on capital employed before goodwill amortization amounted to 43.4% (32.9%). Operating cash flow before interest paid amounted to AUD 16 M (11).

 

Total sales for 2003 amounted to AUD 309 M (307) with 5% organic growth. Operating income before goodwill amortization totaled AUD 46 M (39), with an operating margin (EBITA) of 14.9% (12.8%). Return on capital employed before goodwill amortization excluding non-recurring items amounted to 32.3% (17.3%). Operating cash flow before interest paid amounted to AUD 42 M (43).

 

The fourth quarter's results for Asia Pacific were characterized by the same good development as during the greater part of the year. Increased sales in China improved total sales volumes. All areas improved their margins, although China and South East Asia are running at a lower level.

 

The fourth quarter's sales for Global Technologies totaled SEK 1,186 M (1,089), with 8% organic growth. Operating income before goodwill amortization excluding non-recurring items amounted to SEK 160 M (143) with an operating margin (EBITA) of 13.5% (13.1%). Return on capital employed before goodwill amortization amounted to 73.6% (56.2%). Operating cash flow before interest paid amounted to SEK 163 M (171).

 

Total sales for 2003 amounted to SEK 4,177 M (3,285) with 6% organic growth. Operating income before goodwill amortization totaled SEK 542 M (450), with an operating margin (EBITA) of 13.0% (13.7%). Return on capital employed before goodwill amortization excluding non-recurring items amounted to 46.5% (45.0%). Operating cash flow before interest paid amounted to SEK 549 M (540).

 

Identification continues to develop well, with good growth and margin development. The operating margin (EBITA) was subject to the dilution effects of acquisitions made during the fourth quarter. Hospitality has maintained a similar pace to the previous year in spite of negative exchange-rate effects. The weak dollar and strong euro interfere with the global price position and add uncertainty for our customers. Door Automatics ended the year with invoiced sales that exceeded expectations and with margins higher than last year's.

 

On 5 January 2004 ASSA ABLOY acquired Nemef BV in the Netherlands and Corbin Srl in Italy from Black & Decker. Nemef, based in Apeldoorn, the Netherlands, manufactures and sells a complete range of locks and cylinders. Nemef was established in the early 1900s and is one of Europe's leading manufacturers of lock cases. Corbin, based in Bologna, Italy, manufactures cylinders and sells locks and padlocks. Corbin was established in the early 1960s as part of Corbin Russwin in the USA, a company acquired by ASSA ABLOY in 2000.

 

The acquisition price was EUR 66 M. Goodwill arising in connection with the acquisition amounts to around EUR 40 M. The acquisition will contribute to earnings per share from 2004.

 

The Board of Directors proposes a dividend of SEK 1.25 (1.25) per share for the 2003 financial year. The Annual General Meeting will be held on 27 April 2004.

 

As of 1 January 2004, ASSA ABLOY will adopt the new Swedish accounting standard RR 29 "Employee benefits" based on IAS 19.  The effect of this change in accounting principles will be recorded net after tax directly against shareholders' equity. The negative effect is calculated to approximately SEK 700 M. ASSA ABLOY's pension obligations and other employee benefits are not affected.

 

ASSA ABLOY expects to report stable sales in SEK during 2004. At present foreign exchange rates, organic growth in sales and growth from acquisitions will be offset by negative translation effects and by discontinued volumes from low performers. The EBITA margin is expected to improve mainly due to the Leverage and Growth program. Excluding restructuring payments, the strong cash generation is expected to continue.

Long term, ASSA ABLOY expect an increase in security driven demand. Focus on end-user value and innovations as well as leverage on ASSA ABLOY's strong positions will accelerate growth and increase profitability.

 

Stockholm, 6 February 2004

 

Bo Dankis

President and CEO

 

 

We have reviewed this Interim Report in accordance with the recommendations issued by FAR (the Swedish Financial Accounting Standards). A review is considerably limited in scope compared with an audit. Nothing has come to our attention that causes us to believe that the Interim Report does not comply with the requirements of the Securities and Clearing Operations Act and the Annual Accounts Act.

Stockholm, 6 February 2004

PricewaterhouseCoopers AB

Anders Lundin
Authorized public accountant

 

 

The Annual Report for 2003 will be published in March 2004.

 

The Annual General Meeting will take place at 3 pm on 27 April at Norra Latin, Drottninggatan 71 B, in Stockholm.

 

Quarterly Reports from ASSA ABLOY AB for 2004 will be published on 27 April, 21 July and

2 November.

___________

 

Further information can be obtained from:

Bo Dankis, President and CEO, tel: +46 8 506 485 42

Göran Jansson, Deputy CEO and CFO, tel: +46 8 506 485 72

Martin Hamner, Director of Investor Relations and Group Controller, tel: + 46 8 506 485 79

 

ASSA ABLOY AB (publ)

Box 70340, SE 107 23 Stockholm

Tel: +46 8 506 485 00, Fax: + 46 8 506 485 85

 

An analysts' meeting will be held at 12.00 today at Operaterassen in Stockholm. The meeting can also be followed over the Internet at www.assaabloy.com. It is possible to dial into the conference with questions: +44 (0)20 7162 0186

 

A telephone conference with analysts will be held at 16.00. To participate, please dial +44 (0)20 7162 0184

A recorded version of the conference will subsequently be available at +44 (0)20 8288 4459, access code: 783592.