ASSA ABLOY: Stable growth with strong improvement in earnings

• Sales increased by 25%, including 3% organic growth, and totaled SEK 10,839 M (8,699).
• Continued strong growth in Global Technologies, good and stable progress in Europe and North America, but some weakening in the emerging countries.
• Acquisitions of Dynaco, Traka and Frameworks were completed. Their combined annual sales total SEK 700 M, representing 2% growth.
• Operating income (EBIT) increased by 20% and amounted to SEK 1,655 M (1,377). The operating margin was 15.3% (15.8).
• Net income amounted to SEK 1,140 M (943).
• Earnings per share rose by 23% to SEK 3.10 (2.53).
• Cash flow was normal for the season and amounted to SEK 483 M (448).

SALES AND INCOME                                          

*   Excluding restructuring costs in 2011 amounting to SEK 1,420 M.
** Excluding items affecting comparability, net income for the full year 2011 was SEK 4,605 M.

COMMENTS BY THE PRESIDENT AND CEO
"The year has started well for ASSA ABLOY with 22% growth in local currencies, of which 3% was organic growth and 19% acquired growth," says Johan Molin, President and CEO. "Global Technologies performed particularly strongly, while the trends in Europe and North America were good and stable. For the first time a weakening was noted in the emerging markets, with the pace of growth falling during the quarter from previous levels of 20% to 7%. It was particularly pleasing that our many new products gave a good boost to sales and accounted for more than 20% of turnover, and that our efforts on the specification market produced good results.

"Operating income improved by a full 20%, and it can be noted in particular that the newly acquired units continued to perform well. The underlying profit margin (excluding acquisitions) also improved in a very satisfactory way as a result of the successful efficiency and restructuring measures.

"Activities on the acquisition front continued at undiminished pace and resulted in the acquisitions of Dynaco, Traka and Frameworks. These three exciting acquisitions add 2% to our sales and complement our strategic product portfolio very well.

"Dynaco, which specializes in high-efficiency, high-speed doors, adds market-leading products and geographical coverage to Entrance Systems' rapid expansion. I am also very pleased about the acquisition of the technology company Traka, which complements our existing product range of intelligent systems for key management. Finally, Frameworks is a first step onto the American market for interior door openings in aluminum.

 "The world economy is forecast to remain weak for the rest of the year. On the mature markets stable economic development with unchanged weak growth is expected, while economic growth on the new markets is expected to be less strong than before."

FIRST QUARTER

The Group's sales totaled SEK 10,839 M (8,699), an increase of 25% compared with the first quarter of 2011. Organic growth for comparable units was 3% (6). Acquired units contributed 19% (7). Exchange-rate effects had a positive impact of SEK 149 M on sales, that is 3% (-9).

Operating income before depreciation, EBITDA, amounted to SEK 1,929 M (1,630). The corresponding EBITDA margin was 17.8% (18.7). The Group's operating income, EBIT, amounted to SEK 1,655 M (1,377), an increase of 20%. The operating margin was 15.3% (15.8).

Net financial items amounted to SEK -173 M (-162). The Group's income before tax amounted to SEK 1,481 M (1,215), an improvement of 22% compared with the previous year. Exchange-rate effects had a positive impact of SEK 17 M (-104) on the Group's income before tax. The profit margin was 13.7% (14.0). The estimated underlying effective tax rate on an annual basis amounted to 23% (22). Earnings per share amounted to SEK 3.10 (2.53), an increase of 23%.

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 92 M in the quarter.

All restructuring programs proceeded according to plan and led to a reduction in personnel of 346 people during the quarter and 6,243 people since the projects began. A further 1,292 people will leave by the end of 2014.

At the end of the quarter provisions of SEK 1,569 M remained in the balance sheet for carrying out the programs.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,431 M (3,099), with organic growth
of 4% (0). The market situation remains uncertain but improved during the quarter with good growth in Scandinavia, Finland, Benelux, the UK, Israel and Africa. Sales in France, Germany and eastern Europe were stable while the trend in southern Europe continued to be negative. Acquired growth amounted to 7%. The operating margin was affected by dilution from acquisitions (mainly of Swesafe and Portafeu) of 0.8 of a percentage point. Operating income totaled SEK 574 M (518), which represents an operating margin (EBIT) of 16.7% (16.7). Return on capital employed amounted to 23.1% (21.0). Operating cash flow before interest paid totaled SEK 273 M (276).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,308 M (2,189), with organic growth of 3% (7). The sales trends for high-security products and electromechanics and on the private residential market were good. The trends for security doors and mechanical locks were positive. The sales trends in Canada, Mexico and Brazil were negative. Acquired growth was 1%. Operating income totaled SEK 473 M (440) and the operating margin was 20.5% (20.1). Return on capital employed amounted to 22.3% (22.1). Operating cash flow before interest paid totaled SEK 220 M (231).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 1,319 M (1,192), with organic growth of 3% (10). Growth was good in South-East Asia, India and South Korea. The market in China was affected by lower new-building activity during the quarter. Australia was affected negatively by weak demand from the commercial segment. Acquired growth amounted to 1%. Operating income totaled SEK 138 M (146), representing an operating margin (EBIT) of 10.5% (12.3). The quarter's return on capital employed amounted to 12.2% (14.5). Operating cash flow before interest paid totaled SEK -327 M (-138).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,477 M (1,306), with organic growth amounting to 8% (19). HID had good growth in access control, secure issuing of smart cards and identification technology. Large project orders continued to have a diluting effect on the operating margin. Hospitality continued to record strong growth on all markets. Acquired growth amounted to 3%. The division's operating income amounted to SEK 225 M (187), giving an operating margin (EBIT) of 15.2% (14.3). The operating margin was affected by 0.3 of a percentage point by dilution from exchange-rate effects. Return on capital employed amounted to 13.7% (12.6). Operating cash flow before interest paid totaled SEK 102 M (-51).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 2,526 M (1,097), with organic growth amounting to 3% (4). Growth was good for Besam, Crawford and Flexiforce and in the service sector. Ditec was affected by the negative trend in southern Europe. Acquired growth amounted to 126%. Operating income totaled SEK 307 M (158), giving an operating margin of 12.2% (14.4). The operating margin was affected by 2.7 percentage points by dilution from the acquisitions of Crawford (Cardo) and Albany. Return on capital employed amounted to 10.1% (8.5). Operating cash flow before interest paid totaled SEK 376 M (140).

ACQUISITIONS

During the quarter Albany Door Systems in the USA, Securistyle in the UK and Dynaco in Belgium, together with one minor acquisition, were consolidated. This means that a total of four companies were acquired in the first quarter. The combined acquisition price for these four companies amounted to SEK 2,026 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 1,679 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 277 M.

On 10 April it was announced that ASSA ABLOY had acquired the British company Traka, a leading company in key cabinets and authorization solutions. The company has 92 employees and its sales in 2012 are expected to total SEK 140 M.

On 18 April it was announced that ASSA ABLOY had acquired the US company Frameworks, an American manufacturer of interior doors and frames in aluminum.
The company has 50 employees and its sales in 2012 are expected to total SEK 110 M.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY is publishing its Sustainability Report for 2011 in connection with the Annual General Meeting on 25 April 2012.

Major subjects covered in the Report include the program to survey the Group's suppliers and their sustainability work; water and energy consumption; reduction of organic solvents and environmentally dangerous wastes; independent social audits; and the Group's continuous activities to spread its message and its goals among its employees. Great efforts are also being made in the Group to integrate sustainability considerations within product development with a view to minimizing the products' environmental impact throughout their life cycle.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 322 M (147) for the first quarter. Income before tax amounted to SEK 451 M (21). Investments in tangible and intangible assets totaled SEK 1 M (1). Liquidity is good and the equity ratio was 49.3% (38.7).

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 88-93 of the 2011 Annual Report. Since 2011 ASSA ABLOY has been implementing the International Financial Reporting Standard IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations'. Non-current assets are classified as assets held for sale when their carrying amount will be largely recovered in a sales transaction and a sale is viewed as being highly probable. They are reported at the lower of carrying amount and fair value less costs to sell if their carrying amount can be largely recovered in a sales transaction and not through continuing use and it is highly probable that a sale will occur.

The agreed revision of IAS 19 Employee Benefits applies from 1 January 2013 with retroactive effect during 2012. In this recalculation of comparative information for 2012, unrecognized expenses relating to service provided in previous years and unrecognized actuarial losses are accounted for as an adjustment of opening equity taking into account tax effects. The unrecognized balance sheet items totaled SEK 1,092 M as at 31 December 2011. 

This Interim Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Interim Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

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, see the 2011 Annual Report. No significant risks other than the risks described there are judged to have occurred.

OUTLOOK*

Long-term outlook
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.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

* Outlook published on 10 February 2012:

Long-term outlook
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.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

Stockholm, 24 April 2012

Johan Molin

President and CEO

This Interim Report has not been reviewed by the Company's Auditor.

FINANCIAL INFORMATION

The Quarterly Report for the second quarter will be published on 27 July 2012.

FURTHER INFORMATION CAN BE OBTAINED FROM:

Johan Molin, President and CEO, Tel: +46 8 506 485 42
Carolina Dybeck Happe, Chief Financial Officer, Tel: +46 8 506 485 72

ASSA ABLOY is holding an analysts' meeting at 13.00 today
 at Operaterrassen 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

This information is that which ASSA ABLOY is required to disclose under the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act.
The information is released for publication at 12.00 on 24 April.