* Excluding non-recurring items (restructuring charge SEK 1,320 M) in fourth quarter of 2003.

 

 

The Group's sales for the first quarter of 2004 increased by 3% to SEK 6,283 M (6,124). Organic growth was also 3%. Translation of foreign subsidiaries' sales produced a negative effect of SEK -388 M due to changes in exchange rates. Acquired companies had a positive effect of 6% on sales.

 

Operating income before depreciation and amortization, EBITDA, increased by 4% to SEK 1,120 M (1,078). The corresponding margin was 17.8% (17.6). The Group's operating income before goodwill amortization, EBITA, amounted to SEK 890 M (846) after negative exchange-rate effects of SEK -54 M. The operating margin (EBITA) was 14.2% (13.8). Amortization of goodwill totaled SEK 243 M (244).

 

Income before tax increased by 13% to SEK 530 M (468). Exchange rate variations relating to translation of foreign subsidiaries' earnings affected income negatively by SEK -36 M.

 

The Group's tax charged totaled SEK 183 M (165), corresponding to an effective tax rate of 35% (35) in relation to income before tax.

 

Earnings per share after tax, and both before and after full conversion, amounted to SEK 0.94 (0.82). Earnings per share before goodwill amortization amounted to SEK 1.60 (1.48).

 

Operating cash flow for the quarter rose to SEK 615 M (564), excluding restructuring payments. Operating cash flow thus corresponded to 116% of income before tax.

 

The two-year 'Leverage and Growth' action program initiated in November 2003 is proceeding according to plan. The actions include increased focus on end-users' needs; innovations; development of the distribution network; and development of brands. Simplifications of the operating structure and an increased tempo in the coordination of purchasing will result in significant savings. Low-performing units will either be turned around, sold or closed before the end of 2004.

 

Total costs for the program amount to SEK 1,320 M and were reported as a non-recurring item in the income statement for the fourth quarter of 2003. Of the total amount, SEK 935 M are cash costs mainly related to the reduction of 1,400 employees. Annual cost savings are estimated to reach SEK 450 M by 2005. Approximately half of this amount is expected to be realized in 2004.

During the quarter restructuring payments of SEK 35 M have been made and 100 of the 1,400 employees involved have left the Group.

 

 

Sales for the first quarter in EMEA (Europe, Middle East and Africa) totaled EUR 307 M (288), with 2% organic growth. Operating income before goodwill amortization amounted to EUR 46 M (40) with an operating margin (EBITA) of 15.1% (14.0%). Return on capital employed before goodwill amortization amounted to 17.1% (14.7). Operating cash flow before interest paid amounted to EUR 31 M (26).

 

Following the positive organic growth, margins continued to improve for EMEA. France, UK, Germany and Benelux reported above EMEA average organic growth with better margins, while the Nordic countries had a flat development. The Eastern European operation had good sales growth. The acquisitions of Nemef in the Netherlands and Corbin in Italy were completed during the quarter.

 

First-quarter sales in the Americas business area amounted to USD 273 M (263) with 2% organic growth. Operating income before goodwill amortization amounted to USD 45 M (42) with an operating margin (EBITA) of 16.6% (15.8%). Return on capital employed before goodwill amortization amounted to 16.9% (15.1). Operating cash flow before interest paid amounted to USD 38 M (36).

 

The Group's performance in the US has improved, both in terms of sales and margins, but it is too early to interpret this as a sustainable improvement in market conditions. The Architectural Hardware Group, which accounts for approximately 40% of Americas' sales, reported flat sales development with higher margin, thanks to cost control initiatives. The US Door Group returned to positive organic growth with largely unchanged margins. Increases in raw material costs had a limited impact during the quarter, but current steel prices are expected to have a negative effect on the US Door Group during the rest of the year, however. The Residential Group showed good organic growth with higher margins.

 

First-quarter sales in Asia Pacific totaled AUD 72 M (72), representing a 7% organic growth. Operating income before goodwill amortization amounted to AUD 9 M (9) with an operating margin (EBITA) of 12.3% (12.2%). Return on capital employed before goodwill amortization amounted to 12.5% (11.4). Operating cash flow before interest paid amounted to AUD 8 M (7).

 

The positive growth trend in the Asia Pacific region continued, helped by an encouraging development in China. Margins remained flat however, affected by a negative regional sales mix and the general strengthening of the AUD and the NZD.

 

Sales in the first quarter for Global Technologies totaled SEK 1,165 M (1,005), corresponding to 6% organic growth. Operating income before goodwill amortization amounted to SEK 142 M (110) with an operating margin (EBITA) of 12.2% (10.9). Return on capital employed before goodwill amortization amounted to 10.4% (8.1). Operating cash flow before interest paid amounted to SEK 76 M (93).

 

The Identification Technology Group continued its profitable expansion with double-digit organic growth in the quarter. This was achieved in spite of ongoing activities to integrate acquired businesses. Door Automatics reported a small organic sales growth driven by an improvement in service revenues. The Hospitality Group showed flat sales and margin in a generally weak industry environment.

 

ASSA ABLOY signed an agreement in March 2004 to acquire the Security Merchants Group in Australia and New Zealand. The acquired business has a leading position in the specification and supply of electronic and electromechanical security solutions. Security Merchants had sales of NZD 32 M in 2003 and is now part of the Asia Pacific division.

 

ASSA ABLOY adopted the new Swedish accounting standard RR 29 'Employee benefits', based on IAS 19, from 1 January 2004. The effect of this change in accounting principles is recorded net after tax directly against shareholders' equity as an amount of SEK 774 M. The pre-tax amount, SEK 1,108 M, is recorded as an increase in pension provision. ASSA ABLOY's pension obligations and other employee benefits are not affected.

 

In this report ASSA ABLOY has applied the accounting principles disclosed in Note 1 of the Annual Report for 2003, with the exception in relation to RR 29 disclosed above.

 

The outlook remains unchanged except for currency translation effects. Organic growth in sales and growth from acquisitions is expected to be partly 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, we 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, 27 April 2004

 

Bo Dankis

President and CEO

 

 

* The previous outlook published in February 2004 stated:

"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."

 

 

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

 

 

 

Further Quarterly Reports from ASSA ABLOY AB for 2004 will be published on 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 13.00 today at Norra Latin, Drottninggatan 71b in Stockholm. The meeting can also be followed over the Internet at www.assaabloy.com. It is possible to dial into the meeting with questions: +44 (0)20 7162 0181.

 

A telephone conference with analysts will be held at 17.30. To participate, please dial +44 (0)20 7162 0186.

A recorded version of the conference will subsequently be available at +44 (0)20 8288 4459, access code: 248042.'