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Back to growth with increased earnings for ASSA ABLOY


Back to growth with increased earnings for ASSA ABLOY

STOCKHOLM, SWEDEN -- (Marketwired) -- 07/19/13 -- * Sales increased by 2%, with organic growth of 3%, and totaled SEK 12,239 M

(11,997).

* Strong growth in Americas and Global Technologies and good growth in Asia

Pacific.

* Weak but stable development in EMEA and Entrance Systems.

* Operating income (EBIT) increased by 5% and amounted to SEK 1,970 M (1,885).

The operating margin was 16.1% (15.7).

* Net income amounted to SEK 1,374 M (1,306).

* Earnings per share rose by 5% to SEK 3.71 (3.54).

* Cash flow remained good and totaled SEK 1,589 M (1,435).

SALES AND INCOME


 
 
                                    Second quarter       First half-year
                               --------------------------------------------
                                  2012   2013   Change   2012   2013 Change
---------------------------------------------------------------------------
 Sales, SEK M                   11,997 12,239      +2% 22,835 23,108    +1%
 
   of which,
 
   Organic growth                                  +3%                  +1%
 
   Acquisitions                                    +4%                  +4%
 
   Exchange-rate effects                 -509      -5%          -888    -4%
 
 Operating income (EBIT), SEK M  1,885  1,970      +5%  3,540  3,632    +3%
 
 Operating margin (EBIT), %       15.7   16.1            15.5   15.7
 
 Income before tax, SEK M        1,692  1,832      +8%  3,182  3,365    +6%
 
 Net income, SEK M               1,306  1,374      +5%  2,452  2,512    +2%
 
 Operating cash flow, SEK M      1,435  1,589     +11%  1,918  2,087    +9%
 
 Earnings per share EPS), SEK     3.54   3.71      +5%   6.65   6.78    +2%

COMMENTS BY THE PRESIDENT AND CEO

"I am pleased that the organic growth has returned this quarter," says Johan Molin, President and CEO. "It is particularly pleasing that North and South America and Asia showed good growth, while Europe stabilized at around zero. Total growth for the Group was 7% in local currencies, made up of 3% organic growth and 4% acquired growth. However, exchange-rate effects were strongly negative, at -5%, which meant that overall growth was kept to 2%.

"Both earnings and margins continued to improve as a result of a increased share of new products and major savings and efficiency measures in production. Especially satisfying are the strong earnings from EMEA and Entrance Systems despite their lack of growth, at the same time as Americas and Global Technologies showed strongly rising margins.

"Activity on the acquisition front remained very high, with several interesting acquisitions under discussion. However, only two minor acquisitions, which complement Entrance Systems' local presence, came to completion during the quarter.

"My assessment is that the outlook is unchanged, with a continuing weak world economy affected by the budget cutbacks that many countries are making. It is therefore of the utmost importance that ASSA ABLOY should continue its expansion on the new markets, which are expected to go on growing well, and that our investments in new products and market presence are sustained."

SECOND QUARTER

The Group's sales totaled SEK 12,239 M (11,997), an increase of 2% compared with the second quarter of 2012. Organic growth for comparable units was 3% (3). Acquired units contributed 4% (6). Exchange-rate effects had an impact of SEK -509 M on sales, that is -5% (5).

Operating income before depreciation, EBITDA, amounted to SEK 2,226 M (2,157). The corresponding EBITDA margin was 18.2% (18.0). The Group's operating income, EBIT, amounted to SEK 1,970 M (1,885), a rise of 5%. The operating margin was 16.1% (15.7).

Net financial items amounted to SEK -138 M (-192). The Group's income before tax amounted to SEK 1,832 M (1,692), an improvement of 8% compared with the previous year. Exchange-rate effects had an impact of SEK -94 M on the Group's income before tax. The profit margin was 15.0% (14.1). The underlying effective tax rate on an annual basis was estimated to be 25%. Earnings per share amounted to SEK 3.71 (3.54), an increase of 5%.

FIRST HALF-YEAR

Sales for the first half of 2013 totaled SEK 23,108 M (22,835), representing an increase of 1%. Organic growth was 1% (3). Acquired units contributed 4% (12). Exchange-rate effects had an impact of SEK -888 M on sales, that is -4% (4), compared with the first half of 2012.

Operating income before depreciation, EBITDA, for the half-year amounted to SEK 4,138 M (4,086). The corresponding margin was 17.9% (17.9). The Group's operating income, EBIT, amounted to SEK 3,632 M (3,540), which was an increase of 3%. The corresponding EBIT operating margin was 15.7% (15.5).

Earnings per share for the first half-year increased to SEK 6.78 (6.65), a rise of 2%. Operating cash flow for the half-year totaled SEK 2,087 M (1,918).

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 109 M in the quarter. The restructuring programs proceeded according to plan and led to a reduction in personnel of 91 people during the quarter and 6,957 people since the projects began.

At the end of the quarter provisions of SEK 793 M remained in the balance sheet for carrying out the programs.

FINANCING

The Group's credit facility (RCF) was renewed during the second quarter. The value of the facility has been reduced from EUR 1,100 M to EUR 900 M. The duration has been set at five years with the option of extension. The number of banks taking part now totals 14. The credit is primarily a strategic loan reserve and at present is completely unutilized.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,285 M (3,379), with organic growth of 0% (0). The market situation remained weak but stable during the quarter. Growth was good in Africa, the Middle East, eastern Europe, the United Kingdom and Scandinavia. Sales in Germany were stable but growth was negative in Finland, France, the Netherlands and southern Europe. Acquired growth amounted to 1%. Operating income totaled SEK 511 M (533), which represented an operating margin (EBIT) of 15.6% (15.8). Return on capital employed amounted to 18.9% (20.6). Operating cash flow before interest paid totaled SEK 422 M (430).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,620 M (2,548), with organic growth of 8% (5). The sales trends for high-security products, security doors and the residential market were strong, and very strong for electromechanical products. Canada and Mexico showed a weak negative trend while South America was stable. Acquired growth amounted to 1%. Operating income totaled SEK 571 M (540) and the operating margin was 21.8% (21.2). Return on capital employed amounted to 25.5% (24.1). Operating cash flow before interest paid totaled SEK 507 M (500).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 1,904 M (1,892), with organic growth of 3% (5). Growth was strong in Korea, driven by export successes for digital door-locks. China showed continuing weak growth as a result of rather lower activity in new building, while the sales trend in Australia was stable. Acquired growth amounted to 2%. Operating income totaled SEK 269 M (271), representing an operating margin (EBIT) of 14.1% (14.3). The quarter's return on capital employed amounted to 20.4% (20.8). Operating cash flow before interest paid totaled SEK 349 M (373).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,711 M (1,701), with organic growth of 6% (11). HID continued to show strong growth in Access Control, Secure Issuance of smart cards and project sales. New-product launches and innovations contributed to this positive trend. However, Government ID and Identification Technology had negative growth. Hospitality showed strong growth with good profitability. Acquired growth amounted to 0%. The division's operating income amounted to SEK 304 M (289), with an operating margin (EBIT) of 17.8% (17.0). Return on capital employed amounted to 19.8% (17.5). Operating cash flow before interest paid totaled SEK 276 M (273).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 2,960 M (2,725), with organic growth of -1% (-1). Europe continued to be weak while Americas and Asia showed continued growth. Industrial doors and high-speed doors showed continued good growth. Door automatics reported unchanged sales. Acquired growth amounted to 14%. Operating income totaled SEK 400 M (354), giving an operating margin of 13.5% (13.0). Return on capital employed amounted to 11.6% (10.8). Operating cash flow before interest paid totaled SEK 293 M (293).

ACQUISITIONS AND DIVESTMENTS

During the first quarter three minor acquisitions were consolidated. The combined acquisition price for the five acquisitions completed in the half-year period amounted to SEK 191 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 158 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 79 M. In May 2013 the joint-venture contract for Baodean in China was brought to an end when ASSA ABLOY acquired the outstanding 30% of shares.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY published its Sustainability Report for 2012 in April 2013, and the Report indicates that the majority of key indicators are continuing to move in a positive direction.

One high-priority area is the evaluation of the Group's suppliers in low-cost countries. 795 supplier audits were conducted in 2012, compared with 493 audits in the previous year. Originally the supplier audits mainly concerned suppliers in China, but the program has been progressively expanded and now covers all low-cost countries. To be able to evaluate the supplier bases in South and Central America effectively, more than 20 ASSA ABLOY employed auditors had been trained in Mexico and Colombia by the end of the second quarter of 2013. Already suppliers representing 15 percent of procurement value in South and Central America have been evaluated in accordance with the Group's standardized process.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 988 M (898) for the half-year. Income before tax amounted to SEK 1,201 M (966). Investments in tangible and intangible assets totaled SEK 80 M (9). Liquidity is good and the equity ratio was 47.1% (48.2).

ACCOUNTING PRINCIPLES

ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. Significant accounting and valuation principles are detailed on pages 90-95 of the 2012 Annual Report. This Interim Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Interim Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

EFFECTS OF CHANGED ACCOUNTING PRINCIPLES

In 2013 financial reporting is affected by changes relating to the reporting of defined-benefit pension plans. The changed accounting principles remove the option of using the so-called corridor method: that is, the option of reporting only a proportion of actuarial gains and losses as income or expense. The significant changed valuations are instead reported as they arise in 'Other comprehensive income'. The changes also mean that the return on plan assets is no longer reported as expected return but is reported as an interest income item in the income statement, based on the value of the discount rate at the start of the financial year. The accounting principles for defined-benefit pension plans are therefore changed from the Group's accounting principles in the 2012 Annual Report and the Interim Reports published earlier in 2012.

The new principles affect reporting retroactively, and the opening balance at 1 January 2012 has been recalculated, as have the comparatives for 2012, as follows:

On the balance-sheet date of 1 January 2012, pension obligations and net debt increased by SEK 1,092 M. Equity was reduced by SEK 737 M and financial assets increased by SEK 355 M. Operating income for the quarter and the full year 2012 is unchanged. Financial items for the quarter and the full year 2012 improved by SEK 16 M and SEK 53 M respectively. The tax expense for the quarter and the full year 2012 increased by SEK 6 M and SEK 6 M respectively. Net profit for the quarter and the full year 2012 increased by SEK 10 M and SEK 47 M respectively. Earnings per share after dilution for the quarter and the full year 2012 increased by SEK 0.03 per share and SEK 0.13 per share respectively.

TRANSACTIONS WITH RELATED PARTIES

No transactions that significantly affected the company's position and income have taken place between ASSA ABLOY and related parties.

RISKS AND UNCERTAINTY FACTORS

As an international Group with a wide geographic spread, ASSA ABLOY is exposed to a number of business and financial risks. The business risks can be divided into strategic, operational and legal risks. The financial risks are related to such factors as exchange rates, interest rates, liquidity, the giving of credit, raw materials and financial instruments. Risk management in ASSA ABLOY aims to identify, control and reduce risks. This work begins with an assessment of the probability of risks occurring and their potential effect on the Group. For a more detailed description of risks and risk management, see the 2012 Annual Report. No significant risks other than the risks described there are judged to have occurred.

OUTLOOK*

Long-term outlook

Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

* Outlook published on 24 April 2013:

Long-term outlook

Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

The Board of Directors and the President and CEO declare that this half-year report gives an accurate picture of the Parent company's and the Group's operations, position and income and describes significant risks and uncertainty factors faced by the Parent company an d the companies making up the Group.


                         Stockholm, 18 July 2013
 
      Lars Renstroem           Carl Douglas        Birgitta Klasen
 
        Chairman              Vice Chairman           Board member
 
      Eva Lindqvist            Johan Molin        Sven-Christer Nilsson
 
      Board member          President and CEO         Board member
 
      Jan Svensson           Ulrik Svensson          Kurt Hellstroem
 
      Board member            Board member       Employee representative
 
      Mats Persson
 
 Employee representative

REVIEW REPORT

Introduction

We have reviewed this Report for the period 1 January to 30 June 2013 for ASSA ABLOY AB (publ). The Board of Directors and the CEO are responsible for the preparation and presentation of this Interim Report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this Interim Report based on our review.

Scope of Review

We have conducted our review in accordance with the Swedish Standard on Review Engagements SOeG 2410, 'Review of Interim Report Performed by the Independent Auditor of the Entity'. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Interim Report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent company.

Stockholm, 18 July 2013

PricewaterhouseCoopers AB

Bo Karlsson

Authorized Public Accountant

Auditor in charge

FINANCIAL INFORMATION

The Interim Report for the third quarter will be published on 28 October 2013.

ASSA ABLOY is holding an analysts' meeting at 11.00 today at Operaterrassen in Stockholm. The analysts' meeting can also be followed on the Internet at www.assaabloy.com.

It is possible to submit questions by telephone on: +46 8 5055 6476, +44 203 364 5371 or +1 877 679 2993.

This information is that which ASSA ABLOY is required to disclose under the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act.

The information is released for publication at 08.00 on 19 July.

Q2 2013: http://hugin.info/1014/R/1717541/571151.pdf

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: ASSA ABLOY via Thomson Reuters ONE

[HUG#1717541]

FURTHER INFORMATION CAN BE OBTAINED FROM:

Johan Molin President and CEO Tel: +46 8 506 485 42

Carolina Dybeck Happe Chief Financial Officer Tel: +46 8 506 485 72

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