REG - ASSA ABLOY AB - 3rd Quarter Results <Origin Href="QuoteRef">ASSAb.ST</Origin>

Assa Abloy ABAnnouncement

05/01/2016 12:52

RNS Number : 8004C
ASSA ABLOY AB (publ)
20 October 2015
20 October 2015
No. 16/15
Another strong quarter for ASSA ABLOY
 Sales increased by 19% and totaled SEK17,465 M (14,727). Organic growth
was 3% (4). 
 Strong growth in Americas, Entrance Systems and EMEA and a flat development in Global Technologies.
 Negative growth in Asia Pacificdue to weak demand in China.
 Nergeco in France and two other small businesses were acquired during the quarter, with expected annual sales in 2015 of about SEK400 M.
 Operating income (EBIT) for the quarter increased by 19% to SEK 2,970 M (2,499). The operating margin was 17.0% (17.0). 
 Net income for the quarter amounted to SEK 2,069 M (1,749).
 Earnings per share for the quarter rose by 18% and amounted to SEK 1.86 (1.57).
 Operating cash flow for the quarter was SEK 2,816 M (2,249).
SALES AND INCOME 

Third quarter
Jan-Sep

2014
2015
Change
2014
2015
Change
Sales, SEK M
14,727
17,465
+19%
40,996
49,799
+21%
 of which,






 Organic growth


+3%


+4%
 Acquisitions


+4%


+3%
 Exchange-rate effects

+1,661
+12%

+5,561
+14%
Operating income (EBIT), SEK M
2,499
2,970
+19%
6,575
8,041
+22%
Operating margin (EBIT), %
17.0
17.0

16.0
16.1

Income before tax, SEK M
2,364
2,796
+18%
6,145
7,531
+23%
Net income, SEK M
1,749
2,069
+18%
4,548
5,573
+23%
Operating cash flow, SEK M
2,249
2,816
+25%
4,769
5,327
+12%
Earnings per share (EPS), SEK1)
1.57
1.86
+18%
4.09
5.02
+23%
1) Earnings per share has been recalculated for all historical periods as a result of the stock split (3:1) decided on in May 2015.


COMMENTS BY THE PRESIDENT AND CEO
"The third quarter and the first nine months continued very strongly for ASSA ABLOY, with a rise in sales of 19% for the quarter and totaling 21% for the first nine months of the year," says Johan Molin, President and CEO. "Operating income grew very satisfactorily by a full 19% for the quarter and a total of 22% for the 9-month period.
"Organic growth for the quarter was 3%, with the mature markets in the USA, the Pacific and Europe continuing their strong growth. However, Global Technologies showed a weak development during the quarter because of delayed projects on the Government ID side and in Biometry. In Asia, the market downturn in China continued at the same time as other markets in the region showed strong growth.
"ASSA ABLOY's leadership in the field of innovation was recognized once again at ASIS,
the USA's largest security exhibition, where four first prizes were won for innovation. The areas where ASSA ABLOY has been particularly successful include physical access and identity; energy-efficient locks; electromechanical locks; and on-line connected digital door locks for the private residential market. All these areas have great potential for the future, with energy-efficient solutions advancing especially strongly.
"Nergeco, which is the market leader in high-speed doors in the French market and with a strong position in southern Europe in general, was acquired during the quarter. Some further minor acquisitions were made during the quarter. One company acquired was Pickersgill Kaye in the UK, which complements the Group in the high-security lock segment.
"Operating income rose by a full 19% during the quarter. The organic growth of 3% resulted in a good underlying growth in the operating margin, to which continued efficiency improvements contributed especially strongly. However, the margin was unchanged this quarter, being affected by negative exchange-rate effects as well as the normal dilution due to acquisitions. 
"My judgment is that the global economic trend remains weak. Although America is showing a positive trend, Europe and many of the Emerging Markets are stagnating. However, our strategy of expanding on the Emerging Markets remains unchanged,
since in the long term they are expected to achieve very good economic growth. We
are also continuing our investments in new products, especially in the growth area of electromechanics."
THIRD QUARTER
The Group's sales totaled SEK 17,465 M (14,727), an increase of 19% compared with the third quarter of 2014. Organic growth for comparable units was 3% (4). Acquired units contributed4% (11). Exchange-rate effects had a positive impact of SEK 1,661 M on sales, equivalent to 12% (6).
Operating income before depreciation and amortization, EBITDA, amounted to SEK 3,330 M (2,791). The corresponding EBITDA margin was 19.1% (19.0). The Group's operating income, EBIT, amounted to SEK2,970 M (2,499) an increase of 19%. The operating margin was 17.0% (17.0).
Net financial items amounted to SEK -174 M (-136). The Group's income before tax
was SEK2,796 M (2,364), an improvement of 18% compared with the previous year. Exchange-rate effects had a positive impact of SEK220M on the Group's income before tax. The profit margin was 16.0% (16.0). The underlying effective tax rate on an annual basis is expected to be 26% (26). Earnings per share amounted to SEK 1.86 (1.57), an increase of 18%.
FIRST NINE MONTHS OF THE YEAR
Sales for the part-year periodtotaled SEK 49,799 M (40,996), representing an increase of 21%. Organic growth was 4% (3). Acquired units contributed 3% (10). Exchange-rate effects had a positive impact of SEK 5,561 M on sales, that is 14% (3), compared with the corresponding period of 2014. Operating income before depreciation and amortization, EBITDA, for the part-year period amounted to SEK 9,106 M (7,430). The corresponding margin was 18.3% (18.1). The Group's operating income, EBIT, amounted to SEK8,041 M (6,575), which was an increase of 22%. The corresponding EBIT operating margin was 16.1% (16.0).
Earnings per share for the part-year period amounted to SEK 5.02 (4.09), a rise of 23%. Operating cash flow totaled SEK 5,327 M (4,769).
RESTRUCTURING MEASURES
Payments related to all existing restructuring programs amounted to SEK 80 M in the quarter. The restructuring programs proceeded according to plan and led to a reduction
in personnel of 510 people during the quarter and 10,269 people since the projects began. 
At the end of the part-year, provisions of SEK 711 M remained on the balance sheet for carrying out the programs.
COMMENTS BY DIVISION
EMEA
Sales for the quarter in EMEA division totaled SEK4,100 M (3,590), with organic growth
of 5% (3). The markets in Scandinavia, Finland and eastern Europe showed strong growth. Africa, Italy, Spain and Israel achieved good growth while sales were stable in Great Britain and central Europe. Growth was slightly negative in France and Benelux. Acquired growth amounted to 5% (5). Operating incometotaled SEK676M (607), which represented an operating margin (EBIT) of 16.5% (16.9). Return on capital employed amounted to 18.3% (19.2). Operating cash flow before interest paid totaled SEK 642 M (518).
AMERICAS
Sales for the quarter in Americas division totaled SEK 4,064 M (3,205), with organic growth of 6% (5). The sales trends were strong for traditional lock products and Electromechanical products and for Canada, Mexico and South America. The private residential market achieved good growth. The door segment showed a stable trend while High-security products had weakly negative growth. Acquired growth amounted to 2% (12). Operating incometotaled SEK 884 M (697), which represented an operating margin (EBIT) of 21.8% (21.8). Return on capital employed amounted to 25.5% (25.3). Operating cash flow before interest paid totaled SEK944 M (877).
ASIA PACIFIC
Sales for the quarter in Asia Pacific division totaled SEK2,951 M (2,439), with organic growth of -3% (3). New Zealand, South-East Asia and South Korea showed strong growth. Australia showed a stable trend. China showed a continued negative development due to weak domestic demand. Acquired growth amounted to 10% (7). Operating income totaled SEK464M (387), which represented an operating margin (EBIT) of 15.7% (15.9). Return on capital employed amounted to 15.1% (17.9). Operating cash flow before interest paid totaled SEK317 M (216).
GLOBAL TECHNOLOGIES
Sales for the quarter in Global Technologies division totaled SEK 2,210 M (1,889), with organic growth of 0% (2). Identification technology (IDT) and Quantum Secure showedstrong growth. Sales were stable for access control & logical access (IAM), while Government ID and Biometrics showed negative growth. Hospitality continued to show strong growth and income trends, driven by innovative new products. Acquired growth amounted to 0% (5). Operating incomeamounted to SEK410 M (378), which represented an operating margin (EBIT) of 18.6% (20.0). Return on capital employed amounted to 16.3% (19.8). Operating cash flow before interest paid totaled SEK566 M (422).

ENTRANCE SYSTEMS
Sales for the quarter in Entrance Systems division totaled SEK 4,494 M (3,861), with organic growth of 6% (5). Growth was strong for the division's American operations as a whole and for High-speed doors. European industrial doors achieved good growth. Door automation and Components had weak positive growth. Sales levels were stable for 
Ditec and for the private residential market in Europe. Acquired growth amounted to 1% (22). Operating income totaled SEK623 M (508), which represented an operating margin (EBIT) of 13.9% (13.2). Return on capital employed was 14.7% (12.5). Operating cash flow before interest paid totaled SEK590 M (398).
ACQUISITIONS AND DIVESTMENTS
A total of four acquisitions were consolidated during the quarter: Teamware (Malaysia), LDoor (Belgium), Flexim (Finland) and one other minor acquisition. The combined acquisition price for the eight companies acquired this year amounted to SEK 2,820 M,
and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK2,225 M. The acquisition price is adjusted for acquired net debt and estimated earnouts. Estimated earn-outs amount to SEK1,048 M.
SUSTAINABLE DEVELOPMENT
A prioritized area for the Group's factories and sales companies is reduced energy consumption aimed at lessening environmental impact and reducing costs. The improvement project is driven locally in the Group's units, often using support from kaizen methodology to identify and prioritize different activities. Several units have introduced improved systems to measure and control the temperature of their buildings this year, including EMEA's Portobello Works in England. The methodology has produced significant savings and reduced energy consumption compared with the corresponding period of 2014. On an annual basis, it is estimated that the consumption of energy for heating will be reduced by at least 10%. 
STOCK SPLIT
The total number of shares in the company at 30 September 2015 is 1,112,576,334, of which 57,525,969 are A-shares with ten votes each and 1,055,050,365 are B-shares with one vote each. The increase in the numbers of shares and votes during the year is the result of the stock split (3:1) that was decided upon at ASSA ABLOY AB's Annual General Meeting on 7 May 2015.
Share-based key indicators have been recalculated for all historical periods in this Report as a result of the stock split.
PARENT COMPANY
Other operating income for the Parent company ASSA ABLOY AB totaled SEK1,980 M (1,855) for the part-year period. Income before tax amounted to SEK 617 M (1,550). Investments in tangible and intangible assets totaled SEK 18 M (5). Liquidity is good and the equity ratio was 41.6% (43.2).
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 2014 Annual Report.
This Interim Reportwas 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'.
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 2014 Annual Report.
REVIEW
The Company's Auditorshave not carried out any review of this Report.


OUTLOOK
Long-term outlook
Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on enduser 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 17 July 2015:
Long-term outlook
Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on enduser 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.


FINANCIAL INFORMATION
The End-of-Year Report and Quarterly Report for the fourth quarter will be published
on 8 February 2016.
A capital markets day will be held on 18 November 2015 in Stockholm.
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
ASSA ABLOY is holding an analysts' meeting at10.00 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 +1877 679 2993.
http://www.rns-pdf.londonstockexchange.com/rns/8004C_-2015-10-20.pdf
ASSA ABLOY discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 8.00 CET on October 20.

This information is provided by RNS
The company news service from the London Stock Exchange
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