Assa Abloy AB reported fourth-quarter profit that fell short of analyst expectations as the world’s largest lockmaker had no like-for-like sales growth because of weak demand in Europe and South East Asia.
Net income rose to 1.39 billion kronor ($219 million) from 114 million kronor a year earlier, when the company took a restructuring charge of 1.42 billion kronor, it said in a statement. Analysts expected profit of 1.43 billion, according to the average of 13 estimates compiled by Bloomberg. The shares fell the most in 16 months in Stockholm.
Assa Abloy has countered weak development in Europe and North America by expanding in emerging markets. The 17 members of the euro area entered a recession in the third quarter, and the U.S. economy shrank in the fourth. The Stockholm-based company will continue to make acquisitions to reach a target of 50 percent of sales coming from emerging markets versus one-quarter currently, it said Jan. 9.
“Many indicators suggest that the world economy will remain weak for the foreseeable future, due primarily to the budget cutbacks that many countries are making,” Chief Executive Officer Johan Molin said in the statement. “It is therefore of the utmost importance that Assa Abloy continues its expansion on the new markets, which are expected to go on growing well.”
The shares fell as much as 6.4 percent in Stockholm trading, the biggest intraday decline since Sept. 22, 2011. Assa Abloy traded 2.9 percent lower at 237.70 kronor as of 9:54 a.m., giving the company a market value of 92 billion kronor.
Assa Abloy targets annual growth of 10 percent over a business cycle through a combination of increasing existing sales and adding new companies. It has added 100 new companies since Molin took the helm in 2005 with annual sales increasing 84 percent in the same period, the company said Jan. 9. In 2012, the company made 13 acquisitions that added total annual sales of 4.5 billion kronor, it said today. Sales including acquisitions rose 4.2 percent in the quarter to 12.2 billion kronor.
The company has 10 percent to 15 percent of the global lock market where it competes with New Britain, Connecticut-based Stanley Black & Decker Inc. and Ingersoll-Rand Plc of Swords, Ireland.
Assa Abloy said its cost cuts are progressing according to plan. The company reduced 301 jobs in the quarter and said an additional 770 staff will leave the company before the end of 2014. Assa Abloy currently employs about 41,000 people, according to its website.