Quarterly Report Q3 2021
Strong profitable sales growth
Third quarter
- Net sales increased by 8% to SEK 23,930 M (22,225), with organic growth of 7% (–5) and acquired net growth of 2% (4)
- There was very strong organic sales growth in Americas and Entrance Systems and strong organic sales growth in EMEIA and Global Technologies, but sales decreased in Asia Pacific
- An agreement was signed to acquire HHI, a leading provider of security, plumbing, and builders’ hardware products to the North American residential segment. This is an important strategic step in further developing the Group’s residential business in North America
- In addition to HHI, four other acquisitions with combined annual sales of about SEK 1,500 M were signed
- Operating income (EBIT[1]) was SEK 3,392 M (3,593), corresponding to an operating margin of 14.2% (16.2). Excluding an operating loss of SEK 196 M for the CERTEGO divestment in the quarter and a one-time operating gain of SEK 252 M in 2020, the operating margin was 15.0% (15.0)
- Net income1 amounted to SEK 2,392 M (2,528)
- Earnings per share1 amounted to SEK 2.15 (2.28)
- Operating cash flow amounted to SEK 3,619 M (4,407).
Sales and income
| Third quarter | January-September | |||||||
| 2020 | 2021 | Δ | 2020 | 2021 | Δ | |||
| Sales, SEK M | 22,225 | 23,930 | 8% | 64,351 | 69,384 | 8% | ||
| Of which: | ||||||||
| Organic growth | –1,043 | 1,576 | 7% | –6,001 | 6,661 | 11% | ||
| Acquisitions and divestments | 816 | 490 | 2% | 2,118 | 2,211 | 4% | ||
| Exchange-rate effects | –1,581 | –361 | –1% | –849 | –3,839 | –7% | ||
| Operating income (EBIT)[1], SEK M | 3,593 | 3,392 | –6% | 8,441 | 10,168 | 20% | ||
| Operating margin (EBITA)1, % | 16.8% | 14.8% | 13.8% | 15.3% | ||||
| Operating margin (EBIT)1, % | 16.2% | 14.2% | 13.1% | 14.7% | ||||
| Income before tax1, SEK M | 3,417 | 3,233 | –5% | 7,828 | 9,719 | 24% | ||
| Net income1, SEK M | 2,528 | 2,392 | –5% | 5,792 | 7,858 | 36% | ||
| Operating cash flow, SEK M | 4,407 | 3,619 | –18% | 9,031 | 9,881 | 9% | ||
| Earnings per share1, SEK | 2.28 | 2.15 | –5% | 5.21 | 7.07 | 36% | ||
[1] Excluding non-cash operating income in Q3 2020 from revaluation at fair value of 39% ownership in agta record, totaling SEK 1,910 M. The operating income had no tax impact.
Comments by the President and CEO
Strong profitable sales growth
The reopening of society continued in most of our core markets during the quarter. This contributed to a strong organic sales growth of 7% for the Group in the third quarter. Organic sales growth of 7% in EMEIA and 14% in Americas reflected increased mobility, improved commercial performance and continued strong residential demand in our core markets despite high comparatives versus last year. Asia Pacific’s organic sales declined by 7%, due to new lockdowns in core markets and a slow-down in China. Organic growth in Global Technologies was 7%, driven by higher demand for our office-access solutions and strong growth in non-travel- related verticals. However, component shortages affected the growth negatively and our travel-related business is recovering only slowly. Entrance Systems continued to show very strong organic growth of 10%. Sales for all divisions were affected positively by price adjustments to offset the higher material costs.
Operating income, excluding one-time items in both 2020 and 2021, increased by 7% and the adjusted operating margin was 15.0%, the same level as last year on a comparable basis. Thanks to several price adjustments and operational improvements we achieved an operating leverage of 22%, despite the significantly higher material costs, higher logistical costs, and operational challenges linked to component shortages. Operating cash flow was strong and reached SEK 3,619 M with a conversion rate of 112%.
Positive growth generating trends
As society normalizes, we are seeing increased activity levels in the upgrading and renovation of buildings and premises. There is also a strong positive trend in environmentally adapted construction, another area where we lead the industry and where we are continuing to invest in product innovation. Underlying megatrends including digitalization, urbanization and demand for convenient security solutions in the global markets remain solid, and we are seeing a further acceleration towards electromechanical solutions (where sales in fixed currencies grew by 8% during the third quarter).
Acquisitions remain an important pillar of our growth. During the quarter we signed five acquisitions with combined annual sales of about SEK 15 billion. These include, subject to regulatory approval, the Home and Hardware Improvement (HHI) division of Spectrum Brands, which is the largest acquisition in our history. HHI is a great addition to the Group and constitutes an important strategic step in developing our residential business in North America. We look forward to welcoming the HHI employees into the Group and to working together to develop new and exciting residential products that will accelerate our underlying growth.
Looking ahead, we expect the growth in the European and American markets to normalize, while the recovery in the travel-related verticals and in Asia will be slower. We also assume material shortages, logistic challenges and cost inflation to continue to impact our markets during the rest of the year.
Thank you for your continued support and trust in ASSA ABLOY.
Stockholm, 27 October 2021
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 27 October 2021 which can be followed online at www.assaabloy.com.
It is possible to submit questions by telephone on: +46 8 566 426 93, +44 333 300 9031 or +1 833 526 8380
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 CEST on 27 October 2021.
Tags: