Assa Abloy to Shut 30 Sites in Three-Year Savings EffortNatasha Doff
Assa Abloy AB, the world’s largest lockmaker, plans to close about 30 plants and offices starting this quarter as part of a reorganization costing 1 billion kronor ($158 million).
Savings generated from the measures will help earnings in about three years, Stockholm-based Assa Abloy said today in a statement. The manufacturer’s shares rose to the highest since the company’s initial public offering in November 1994.
Assa Abloy is revamping its business amid a strategy to double revenue from emerging markets to 50 percent of the total by 2025 to make up for performance in Europe, where economic growth has been held back by a sovereign-debt crisis. The company posted third-quarter profit today that beat analysts’ estimates because of gains in the U.S. and Asia, and said there are signs that business has “bottomed out” in its home region.
“The positive outlook in Europe, the savings program and the fact that margins surpassed expectations has caused the share price to rise,” said Max Fryden, an analyst at Erik Penser Fondkommission AB in Stockholm. “It is refreshing to see not only that Europe is growing, but also that there is a positive outlook on it.”
Assa Abloy gained as much as 5.2 percent and was trading up 4.1 percent at 312.6 kronor at 3:33 p.m. in Stockholm. The stock has gained 29 percent this year, valuing the company at 116 billion kronor.
Chief Executive Officer Johan Molin said in late 2011 that the manufacturer was seeking to continue growth through acquisitions. Assa Abloy has purchased 120 companies since 2005 and closed 56 manufacturing sites, Molin said today in a phone interview.
Acquisitions in the past two years have included Metalind in Croatia, window-parts producer Securistyle in the U.K. and Dynaco, a manufacturer of high-speed doors, in Belgium. Assa Abloy said in September that it will buy the fire-door business of Gdansk, Poland-based Mercor SA and earlier this month outlined plans to acquire Chinese fire-and security-door producers Harbin Xinmao Burglarproof Door Manufacturing Co. and Yantai Huasheng Industrial Co Ltd.
“A large portion of the restructuring will be in the entrance systems segment, where we have recently bought lots of companies,” Molin said. “We need to get synergies to come together there.”
The segment, which includes a wide range of door types from revolving doors to gates, accounted for 24 percent of group sales in 2012.
The restructuring will be focused on operations in Asia and Europe, Molin said on the conference call. Assa Abloy will seek to start all the spending-reduction projects immediately, “and if we are successful, the costs will come in full” in the fourth quarter, he said in the interview.
The company is still completing its last restructuring program, which was announced in 2011 and was expected to cost about 1.4 billion kronor.
Third-quarter net income jumped 13 percent from a year earlier to 1.47 billion kronor, Assa Abloy said today. Profit exceeded 1.42 billion-krona average of 13 analyst estimates compiled by Bloomberg. Revenue rose 5.1 percent to 12.1 billion kronor.
The company reduced the average number of employees in the first nine months of the year by 1.3 percent to 42,357. Molin said it would become clear by the end of this quarter how many job cuts would need to be made as part of the changes. He said most job cuts would be in China, where the company is moving into semi-automation.