Quarterly Report Q2 2020
An extraordinary quarter
Second quarter
- Net sales decreased by 15% to SEK 19,953 M (23,544), with organic growth of –18% (3) and acquired net growth of 3% (4)
- All five divisions reported significant declines in organic growth due to COVID-19. Entrance Systems, reporting organic growth of –8%, was the division least impacted
- Three acquisitions with expected combined annual sales of around SEK 200 M were signed
- To meet a regulatory precondition by the EU Commission for ASSA ABLOY to acquire agta record, agreements for the sale of certain agta record and ASSA ABLOY businesses were signed in June
- Operating income (EBIT) decreased by 44% and amounted to SEK 2,097 M (3,733), corresponding to an operating margin of 10.5% (15.9)
- Net income amounted to SEK 1,400 M (2,562)
- Earnings per share amounted to SEK 1.26 (2.31)
- Operating cash flow amounted to SEK 3,418 M (3,636).
Sales and income
| Second quarter | First half-year | |||||||
| 2019 | 2020 | Δ | 2019 | 2020 | Δ | |||
| Sales, SEK M | 23,544 | 19,953 | –15% | 45,048 | 42,126 | –6% | ||
| Of which: | ||||||||
| Organic growth | 692 | –4,198 | –18% | 1,698 | –4,957 | –11% | ||
| Acquisitions and divestments | 790 | 654 | 3% | 1,478 | 1,302 | 3% | ||
| Exchange-rate effects | 922 | –48 | 0% | 2,182 | 733 | 2% | ||
| Operating income (EBIT), SEK M | 3,733 | 2,097 | –44% | 6,978 | 4,848 | –31% | ||
| Operating margin (EBITA), % | 16.4% | 11.2% | 16.0% | 12.2% | ||||
| Operating margin (EBIT), % | 15.9% | 10.5% | 15.5% | 11.5% | ||||
| Income before tax, SEK M | 3,462 | 1,892 | –45% | 6,459 | 4,411 | –32% | ||
| Net income, SEK M | 2,562 | 1,400 | –45% | 4,780 | 3,264 | –32% | ||
| Operating cash flow, SEK M | 3,636 | 3,418 | –6% | 4,807 | 4,624 | –4% | ||
| Earnings per share, SEK | 2.31 | 1.26 | –45% | 4.30 | 2.94 | –32% | ||
Comments by the President and CEO
An extraordinary quarter
The development of the Covid-19 outbreak has led to an extraordinary situation with more than half of the world population in some form of lockdown during most of the quarter. Our organic sales growth declined by –18%, currency effects were neutral, while net acquired growth was positive at 3%, resulting in a net sales decline of –15%. As a result of the lockdowns, organic sales growth decreased in all divisions with the largest effects in EMEA and Global Technologies.
Operating income decreased by 44% to SEK 2,097 M and the operating margin was 10.5%. Implemented cost measures did not fully offset the significantly lower volumes. However, we continued to generate a strong operating cash flow of SEK 3,418 M and the cash conversion in the quarter was very strong at 181% (105). Our financial position is robust with a Net debt/EBITDA of 2.1.
Our response to a world in lockdown
The second quarter started with more than 30 of our factories closed due to the lockdown measures and with demand in many markets very depressed. To mitigate this, we implemented significant cost-saving measures, including reduced working hours, temporary and permanent layoffs, reduction of consultants, travel restrictions and reduction of other discretionary spending. These measures contributed to that our SG&A and conversion expenditure net decreased by more than SEK 1 bn in the quarter.
In parallel, we have continued to invest in product innovation to position us for long-term growth. For example, in the quarter we launched a scalable commercial digital security ecosystem that connects different access hardware on the same platform. We also launched several touch-free door opening products that will help to create a safer and more open world for our customers.
Positive developments and achievements
Even though some regions of the world are introducing new lockdowns, restrictions have generally eased gradually since May and currently all our factories are open. Improvements in demand combined with stronger effects from implemented cost measures have resulted in a positive financial development during the quarter.
If there are no significant new negative events, we expect the financial performance to continue to gradually improve. The attractive fundamentals of our industry are intact and therefore our financial targets remain valid.
While the health and safety of our employees remain the first priority, our employees’ commitment to support customers in a secure and innovative way has been impressive. I am also pleased that we have made important progress with the acquisition of agta record, which we expect to complete soon. This will further strengthen our product offering and enable us to serve our customers even better.
Stay safe and thank you for your trust in these challenging times.
Stockholm, 17 July 2020
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 on 17 July 2020 which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8–566 426 95, +44 333 300 9273 or +1 646 722 4903
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 2020.