Assa Abloy Profit Beats Estimates as Europe Offsets Weak Asiaby
Europe and U.S. showing growth as emerging markets slow
CEO still expects 2 to 4 percent organic growth in 2016
Assa Abloy AB, the world’s largest lockmaker, reported second-quarter profit that beat analysts’ estimates as growth in Europe and the U.S. offset weakness in China.
Operating profit increased 6.1 percent to 2.91 billion kronor ($339 million), the Swedish company said in a statement Tuesday. Analysts surveyed by Bloomberg had on average predicted 2.85 billion kronor.
“The mature markets in general produced strong growth, something we have not seen since the financial crisis,” Chief Executive Officer Johan Molin said. “Emerging markets continued their slowdown.”
Molin said he still expects organic growth of between 2 and 4 percent for the full year despite a negative development in China. Assa is benefiting from increased construction activity in the U.S., while parts of Europe such as Spain are the strongest they’ve been for years in the second quarter, Molin said.
Assa Abloy shares rose as much as 3.6 percent and were trading 2 percent higher at 180.60 kronor as of 10:37 a.m. in Stockholm.
After years of expansion in emerging markets, the maker of Yale locks is now relying on mature markets. Demand in China weakened in the second half of 2014 and the nation still has a large oversupply of housing that may take years to address, even as a housing recovery fueled by cheap credit has supported growth this year. Assa Abloy’s revenue from China was down by 11 percent in the first half of the year and the company reduced the number of employees in the country by 586.
“Unfortunately, I can tell you that we don’t see much light in the tunnel,” Molin said on a conference call. “We have a big footprint in the northern part of China, and that will continue, as far as we see, negative.”
By contrast, revenue at Assa Abloy’s Americas unit, excluding the effect of acquisitions and currency moves, increased by 8 percent in the second quarter, while the company’s Asia Pacific division saw a 6 percent decline, mainly due to China. For the group as a whole, organic growth was 4 percent.