Good growth and improved operating margin
Second quarter
- Net sales increased by 11% to SEK 23,544 M (21,140), with organic growth of 3% (5) and acquired net growth of 4% (2)
- Strong growth in Americas and Global Technologies, good growth in EMEA and Asia Pacific and growth in Entrance Systems
- Three acquisitions signed with combined expected annual sales of about SEK 800 M
- Operating income (EBIT)[1] increased by 28% and amounted to SEK 3,733 M (2,911), corresponding to an operating margin of 15.9% (13.8)
- Net income[1] amounted to SEK 2,562 M (2,049)
- Earnings per share[1] amounted to SEK 2.31 (1.84)
- Operating cash flow increased by 27% to SEK 3,636 M (2,855)
Sales and income
| Second quarter | First half-year | |||||||
| 2018 | 2019 | Δ | 2018 | 2019 | Δ | |||
| Sales, SEK M | 21,140 | 23,544 | 11% | 39,690 | 45,048 | 14% | ||
| Of which: | ||||||||
| Organic growth | 954 | 692 | 3% | 1,659 | 1,698 |
4% | ||
| Acquisitions and divestments | 366 | 790 | 4% | 633 | 1,478 |
4% | ||
| Exchange-rate effects | 433 | 922 | 4% | –131 | 2,182 | 6% | ||
| Operating income (EBIT)[1], SEK M | 2,911 | 3,733 | 28% | 5,740 | 6,978 | 22% | ||
| Operating margin (EBITA)[1], % | 14.2% | 16.4% | 14.9% | 16.0% |
||||
| Operating margin (EBIT)[1], % | 13.8% | 15.9% |
14.5% | 15.5% | ||||
| Income before tax[1], SEK M | 2,720 | 3,462 | 27% | 5,374 | 6,459 | 20% | ||
| Net income[1], SEK M | 2,049 | 2,562 | 25% | 4,013 | 4,780 | 19% | ||
| Operating cash flow, SEK M | 2,855 | 3,636 |
27% | 3,431 | 4,807 |
40% | ||
| Earnings per share[1], SEK | 1.84 | 2.31 | 25% | 3.61 | 4.30 | 19% | ||
[1] Excluding impairment of goodwill and other intangible assets in Q2 2018, totaling SEK –5,595 M before tax, corresponding to SEK –5,268 M after tax.
Comments by the President and CEO
Good growth and improved operating margin
Following a good start to 2019, the positive performance continued during the second quarter. Total sales grew by 11% with an improved operating margin. Sales growth in the quarter was driven by organic growth of 3%, acquired net growth of 4% and positive currency movements of 4%. Growth was strong in Americas (6%) and Global Technologies (5%). Asia Pacific and EMEA reported good growth, while growth in Entrance Systems was stable.
Operating income excluding non-comparable items in 2018[2]increased by 13% to SEK 3,733 M, driven by good operating leverage. This contributed to an operating margin improved by 20 basis points. The Group has now offset the previous headwind from the higher raw material costs.
Operating cash flow was very strong and improved by 27% to SEK 3,636 M, driven by the improved earnings and positive evolution from working capital. Our cash conversion in the quarter was stable at 105%[2].
Our strategic objectives guide us
Demand has generally been good in 2019, but with variations between different markets. In some markets, uncertainty has increased at the same time due to weaker construction indices and geopolitical challenges. To retain our leadership in the short and long term, it is important to be agile and to focus on our strategic objectives.
It is encouraging to see how cost efficiency in everything we do is driving results. During the second quarter our efficiency programs and other savings generated more than SEK 200 M in efficiencies. We continuously work to identify opportunities for saving across the entire Group, which is critical for our competitive advantage.
We also continue to invest in product leadership through innovation as an enabler of sustainable profitable growth. Our investments in innovation have driven our strong sales growth in electromechanical products during the last year, including 20% growth in the second quarter. Today, we have more than 2,600 people working in R&D and 9,000 patents across our product segments. These resources provide a solid platform for our continuing developments of new solutions that will make life easier and more secure for our customers. Because people are our most important asset, we will continue to invest in training and skills development to stay ahead and lead the development in our industry.
Another driver of growth is the increasing demand for sustainable solutions. With our strong range of products that are both environmentally suited and innovative, we are well positioned to capture these opportunities and grow through customer relevance. This will enable us to continue to create shareholder value while contributing to a greener world.
Stockholm, 17 July 2019
Nico Delvaux
President and CEO
Further information can be obtained from:
Nico Delvaux,
President and CEO, tel. no: +46 8 506 485 82
Erik Pieder,
Executive Vice President and CFO, tel.no: +46 8 506 485 72
ASSA ABLOY is holding a telephone and web conference at 09.30 17 July 2019 which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on: +46 8–505 583 51, +44 333 300 9266 or +1 833 823 0587
This is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CEST on 17 July 2019.
[2] Excluding impairment of goodwill and other intangible assets, totaling SEK –5,595 M and write down of operating assets in China of SEK –400 M in Q2 2018.