ASSA ABLOY: Solid Sales and Profit Despite a Weak Market in 1Q 2013

ASSA ABLOY announced that its sales totaled SEK 10,868 M (10,839 in 2012), with organic growth of -1%. The company enjoyed good growth in Americas and continued growth in Asia, while EMEA and Entrance Systems were affected negatively by the weak economy in Europe. Three minor acquisitions with total annual sales of SEK 130 M were completed during the year.

Operating income (EBIT) amounted to SEK 1,662 M (1,655 in 2012). The operating margin was 15.3% (15.3 in 2012). Net income amounted to SEK 1,138 M (1,146 in 2012). Earnings per share fell by 1% to SEK 3.07 (3.11 in 2012).

“The development for the first quarter was stable for ASSA ABLOY, with a growth of 4% in local currencies, made up of -1% organic growth and 5% acquired growth,” said Johan Molin, president and CEO. “It is particularly pleasing that North and South America and Asia continued to grow. But the European economy continued to weaken, which produced a negative outcome for EMEA and Entrance Systems.

“Against the background of the relatively weak market trend, it gives ASSA ABLOY a great sense of confidence that we have so many new products that are selling well. New products’ share of sales continued to rise to a new record level of 26%.

“Earnings showed a solid performance, with the gross profit margin continuing to improve, as a result of new products and a more efficient production set-up. However, the improvement does not show on the bottom line since we have ongoing investments in Research & Development and market presence.

“Activities on the acquisition front continued to go well, and so far this year we have completed three minor acquisitions. Especially interesting was the acquisition of the Slovakian security-door company Sherlock, which complements our range of total door solutions in the region extremely well.

“My judgment is that the outlook from the fourth quarter 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.”

Sales for the quarter in Global Technologies division totaled SEK 1,426 M, with organic growth of 0%. HID had good growth in access control and major projects. Logical access and identification technology showed a stable trend while Government ID had negative growth. Hospitality continued to show good growth, principally in the renovation market. Profitability for the HID business unit improved strongly. The division’s operating income amounted to SEK 242 M, with an operating margin (EBIT) of 17.0%. Return on capital employed amounted to 16.4%.

Sales for the quarter in Entrance Systems division totaled SEK 2,762 M, with organic growth of -3%. Sales were affected by the weak trend in Europe and a negative day effect. All segments in Europe showed negative growth while sales in America showed strong growth and the trend in Asia was good. Acquired growth amounted to 16%. Operating income totaled SEK 341 M, giving an operating margin of 12.4% .

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.