Lower organic growth with strong profit and cash flow
Fourth quarter
- Net sales increased by 8% to SEK 24,946 M (23,167), with organic growth of 1% (6) and acquired net growth of 3% (3)
- Strong organic growth in Americas, good growth in Global Technologies and stable in EMEA and Entrance Systems, while sales declined in Asia Pacific
- Two acquisitions signed with expected combined annual sales of SEK 800 M
- Tax decision in Finland reconsidered to ASSA ABLOY’s disadvantage. Estimated tax exposure of SEK 920 M, but no material effect on the Group’s net income
- Operating income1 (EBIT) increased by 8% and amounted to SEK 4,047 M (3,746), corresponding to an operating margin of 16.2% (16.2)
- Net income1 amounted to SEK 2,767 M (2,588)
- Earnings per share1 amounted to SEK 2.49 (2.33)
- Operating cash flow increased by 6% to SEK 5,235 M (4,923)
- The Board of Directors proposes a dividend of SEK 3,85 (3.50) per share for 2019
Sales and income
| Fourth quarter | January-December | |||||||
| 2018 | 2019 | Δ | 2018 | 2019 | Δ | |||
| Sales, SEK M | 23,167 | 24,946 | 8% | 84,048 | 94,029 | 12% | ||
| Of which: | ||||||||
| Organic growth | 1,281 | 147 | 1% | 3,901 | 2,652 | 3% | ||
| Acquisitions and divestments | 714 | 760 | 3% | 1,793 | 3,063 | 3% | ||
| Exchange-rate effects | 1,063 | 872 | 4% | 2,217 | 4,265 | 6% | ||
| Operating income (EBIT)1 2, SEK M | 3,746 | 4,047 | 8% | 12,909 | 14,920 | 16% | ||
| Operating margin (EBITA)1 2, % | 16.7% | 16.8% | 15.8% | 16.4% | ||||
| Operating margin (EBIT)1 2, % | 16.2% | 16.2% | 15.4% | 15.9% | ||||
| Income before tax1 2, SEK M | 3,515 | 3,779 | 8% | 12,110 | 13,883 | 15% | ||
| Net income1 2, SEK M | 2,588 | 2,767 | 7% | 8,984 | 10,243 | 14% | ||
| Operating cash flow, SEK M | 4,923 | 5,235 | 6% | 11,357 | 14,442 | 27% | ||
| Earnings per share1 2, SEK | 2.33 | 2.49 | 7% | 8.09 | 9.22 | 14% | ||
1Excluding costs for a restructuring program launched in 2018 , totaling SEK –312 M before tax in Q4 2019 and –1,218 M before tax in Q4 2018, corresponding to SEK –1,208 M after tax in total
2Excluding 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
Lower organic growth with strong profit and cash flow
In the fourth quarter, total sales grew by 8%, driven by organic growth of 1%, acquired net growth of 3% and positive currency effects of 4%. Organic growth was strong in Americas (5%) and good in Global Technologies (2%). EMEA (1%) and Entrance Systems (0%) reported stable growth, while organic sales growth in Asia Pacific was negative (-10%).
Operating income increased by 8% to SEK 4,047 M, which is the first time we have exceeded SEK 4bn in a single quarter. The operating margin was unchanged at 16.2%. The operating leverage was strong due to lower raw material costs, together with mix and efficiency improvements, but this was offset by higher acquisition and integration costs. Operating cash flow improved by 6% to a record high SEK 5,235 M, driven by the improved earnings and positive evolution from working capital. Our cash conversion in the quarter was strong at 139%.
For the full year 2019, total sales grew by 12%, driven by an organic growth of 3%, net acquisitions of 3% and positive currency effects of 6%. The operating income reached SEK 14,920 M with an improved operating margin of 15.9% (15.83) excluding items affecting comparability. Operating cash flow was at a record high SEK 14,442 M.
Stable development in the fourth quarter
Market conditions continued to be mixed during the quarter. New construction indices have remained unchanged in several important markets and geopolitical challenges continue to be a concern.
Despite very tough comparable sales, the Americas division developed strongly, supported by good demand in the commercial and institutional markets. Markets conditions in Europe were mixed with good growth in Scandinavia and Germany, while the UK and Finland were weak. Asia Pacific’s negative development was driven by lower intra group sales and a weak South Korea due to low domestic construction activity. The implementation of our new strategy in China with a more selective sales approach has also had a negative effect on our sales in the short term.
Global Technologies growth was lower due to delayed projects in HID, but Global Solutions performed strongly. Entrance Systems had good growth in service, while sales growth for equipment was slightly negative. During the quarter we announced our new organizational setup for Entrance Systems, which creates four business segments and will become effective in the first quarter.
Acquisitions to drive growth in 2020
Looking into 2020, acquisitions will be a main growth driver once we have consolidated agta record and the AM Group. Because of these businesses current margin levels and their size, our Group operating margin will be diluted. However, as we integrate these highly complementary businesses, they will over time create significant value and margins will improve gradually.
Finally, I would like to thank you for your trust and look forward to a new decade with great opportunities for ASSA ABLOY.
Stockholm, 6 February 2020
Nico Delvaux
President and CEO
3Excluding write-down of operating assets in China of SEK –400 M in Q2 2018.
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
on 6 February 2020
which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8–505 583 53, +44 333 300 9272 or +1 646 722 4904
This information is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CET on 6 February 2020.
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