Strong performance in the third quarter
Third quarter
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Net sales increased by 13% to SEK 24,034 M (21,191), with organic growth of 4% (5) and acquired net growth of 4% (2)
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Strong growth in Global Technologies and Americas and good growth in EMEA and Entrance Systems, while sales declined in Asia Pacific
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Five acquisitions signed with combined expected annual sales of about SEK 1,000 M
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Operating income (EBIT) increased by 14% and amounted to SEK 3,894 M (3,424), corresponding to an operating margin of 16.2% (16.2)
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Net income amounted to SEK 2,697 M (2,384)
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Earnings per share amounted to SEK 2.43 (2.15)
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Operating cash flow increased by 47% to SEK 4,401 M (3,004)
Sales and income
| Third quarter | January-September | |||||||
| 2018 | 2019 | Δ | 2018 | 2019 | Δ | |||
| Sales, SEK M | 21,191 | 24,034 | 13% | 60,881 | 69,082 | 13% | ||
| Of which: | ||||||||
| Organic growth | 960 | 807 | 4% | 2,620 | 2,505 | 4% | ||
| Acquisitions and divestments | 446 | 825 | 4% | 1,079 | 2,303 | 4% | ||
| Exchange-rate effects | 1,286 | 1,211 | 5% | 1,154 | 3,393 | 5% | ||
| Operating income (EBIT)1, SEK M | 3,424 | 3,894 | 14% | 9,164 | 10,873 | 19% | ||
| Operating margin (EBITA)1, % | 16.6% | 16.7% | 15.5% | 16.2% | ||||
| Operating margin (EBIT)1, % | 16.2% | 16.2% | 15.1% | 15.7% | ||||
| Income before tax1, SEK M | 3,221 | 3,645 | 13% | 8,595 | 10,104 | 18% | ||
| Net income1, SEK M | 2,384 | 2,697 | 13% | 6,396 | 7,477 | 17% | ||
| Operating cash flow, SEK M | 3,004 | 4,401 | 47% | 6,435 | 9,208 | 43% | ||
| Earnings per share1, SEK | 2.15 | 2.43 | 13% | 5.76 | 6.73 | 17% | ||
1Excluding 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
Strong performance in the third quarter
The positive earnings development continued during the third quarter. Total sales grew by 13% with an improved underlying operating margin. Sales growth in the quarter was driven by organic growth of 4%, acquired net growth of 4% and positive currency movements of 5%. Organic growth was strong in Americas (6%) and Global Technologies (6%). Entrance Systems and EMEA reported good growth (3%), while sales in Asia Pacific declined (-1%).
Operating income increased by 14% to SEK 3,894 M, driven by good operating leverage. The operating margin was unchanged at 16.2%, but if adjusted for acquisition costs of SEK 55 M related to agta record, the margin increased by 20 basis points. The underlying improvement was driven by lower raw material costs, prices increases and operational improvements.
Operating cash flow was very strong and improved by 47% to SEK 4,401 M, driven by the improved earnings and working capital reductions. Our cash conversion in the quarter was 113%.
Good execution in the quarter
Overall, the underlying growth slowed somewhat in the quarter. As new construction indices continue to trend down in some of our more important markets and geopolitical challenges remain, the market conditions have become more challenging and uncertain.
Against that background I am pleased with our strong operational execution. It is encouraging to see that the mitigating actions we initiated last year to compensate for higher raw material costs, have resulted in strong improvements in operating leverage generally and for Entrance Systems, Americas and EMEA in particular.
The negative organic sales growth in Asia Pacific during the quarter was mainly driven by a weak South Korean market and negative growth in China. We are continuing the implementation of our new Chinese business plan where margins are now stabilizing and where we are seeing the first small results from the actions initiated.
Our restructuring programs also continued to advance well and generated savings of around SEK 200 M in the quarter. Due to the high speed of implementation of the most recent program, this level will slow down from the next quarter and in 2020 we expect the savings to be about SEK 300 M.
Acquisitions will add growth
With the acquisitions already announced, and assuming the consolidation of agta record, we have reached our acquisition target of 5% for 2020. Nevertheless, we will continue to work actively on our acquisition pipeline.
Finally, I would like to thank you for your interest in ASSA ABLOY and take this opportunity to inform you that we will host our next Capital Markets Day on 13 May 2020 in London.
Stockholm, 18 October 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 on 18 October 2019
which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8–566 427 07, +44 333 300 9267 or +1 833 526 8383
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 18 October 2019.
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