12 Feb 2010
ASSA ABLOY: Continued high profit level in a slightly improved market
Fourth quarter
· Sales
amounted to SEK 8,799 M (9,444), a decrease by 7%, comprising of
-8% organic growth, 3% acquired growth and a negative currency
effect of -2%.
·
Europe stabilized, Asia grew and North America remained
negative.
·
Operating income (EBIT) amounted to SEK 1,398 M* (1,469*), a
decrease by 5%. The EBIT margin increased to 15.9%* (15.6*).
· Net
income amounted to SEK 200 M** (92**).
·
Earnings per share decreased by 2% and amounted to SEK 2.41*
(2.45*).
·
Continued investments in product development led to strengthened
market leadership through a number of important product
launches.
· The
2009 restructuring program was fully expensed during the fourth
quarter, totaling SEK 930 M.
·
Significant savings were achieved from the on-going restructuring
and efficiency programs during the quarter.
·
Strongest-ever operating cash flow, totaling SEK 2,296 M
(1,916).
Full year
· Sales
were unchanged and totaled SEK 34,963 M (34,829), comprising -12%
organic growth, 3% acquired growth and exchange-rate effects of
9%.
·
Operating income (EBIT) amounted to SEK 5,413 M* (5,526*), a
decrease by 2%. The EBIT margin was 15.5%* (15.9*).
· Net
income amounted to SEK 2,659 M** (2,438**).
·
Earnings per share were unchanged and amounted to SEK 9.22*
(9.21*).
·
Strongest-ever operating cash flow, totaling SEK 6,843 M
(4,769).
· Total
restructuring costs during the year amounted to SEK 1,039 M.
· The
Board of Directors proposes a dividend of SEK 3.60 per share
(3.60).
* Excluding restructuring and
non-recurring costs in 2008 amounting to SEK 1,010 M for the
quarter and to SEK 1,257 M for the year. Excluding restructuring
and non-recurring costs in 2009 amounting to SEK 930 M for the
quarter and to SEK 1,039 M for the year.
** In 2008, excluding restructuring and
non-recurring costs, net income for the quarter was
SEK 918 M and for the year SEK 3,451 M. In 2009, excluding
restructuring and non-recurring costs, net income for the quarter
was SEK 905 M and for the year SEK 3,474 M.
SALES AND
INCOME
|
|
Fourth quarter
|
Full year
|
|
|
2008
|
2009
|
Change
|
2008
|
2009
|
Change
|
|
Sales, SEK M
|
9,444
|
8,799
|
-7%
|
34,829
|
34,963
|
+0%
|
|
of which,
|
|
|
|
|
|
|
|
Organic growth
|
|
|
- 8%
|
|
|
-12%
|
|
Acquisitions
|
|
|
+3%
|
|
|
+ 3%
|
|
Exchange-rate effects
|
|
-185
|
- 2%
|
|
+3,491
|
+ 9%
|
|
Operating income (EBIT), SEK
M
|
1,469*
|
1,398*
|
-5%
|
5,526*
|
5,413*
|
-2%
|
|
Operating margin (EBIT), %
|
15.6*
|
15.9*
|
|
15.9*
|
15.5*
|
|
|
Income before tax, SEK M
|
1,286*
|
1,292*
|
+0%
|
4,756*
|
4,779*
|
+0%
|
|
Net income, SEK M
|
92**
|
200**
|
-
|
2,438**
|
2,659**
|
-
|
|
Operating cash flow, SEK M
|
1,916
|
2,296
|
+20%
|
4,769
|
6,843
|
+43%
|
|
Earnings per share (EPS),
SEK
|
2.45*
|
2.41*
|
-2%
|
9.21*
|
9.22*
|
+0%
|
* Excluding restructuring and
non-recurring costs in 2008 amounting to SEK 1,010 M for the
quarter and to SEK 1,257 M for the year. Excluding restructuring
and non-recurring costs in 2009 amounting to SEK 930 M for the
quarter and to SEK 1,039 M for the year.
** In 2008, excluding restructuring and
non-recurring costs, net income for the quarter was SEK 918 M and
for the year SEK 3,451 M. In 2009, excluding restructuring and
non-recurring costs, net income for the quarter was SEK 905 M and
for the year SEK 3,474 M.
COMMENTS BY THE PRESIDENT
AND CEO
"Even though 2009 was in market terms the
most challenging year in the Group's history, I can proudly
conclude that ASSA ABLOY achieved its highest sales yet, with
continued strong earnings and its strongest-ever cash flow," said
Johan Molin, President and CEO.
"It was especially pleasing that investments in
product development continued at a high level, which has
strengthened the Group's market leadership and laid the ground for
good organic growth as the economic situation progressively
improves.
"During the year our work on the Group's
production structure and adjustment to the demand situation was
successfully carried through. This has resulted in a total
workforce reduction by 25% since the market decline started.
"The financial crisis meant that we stopped the
acquisition activity at the beginning of the year. The situation
gradually improved and several important acquisitions were
completed. I look forward to a continued high activity in 2010.
"For 2010 the organic growth is expected to be
about zero percent. This is mainly because the turnaround of the
American market will take at least another six months. Our focus
will therefore be on selective investments in growth where the
market is good and continued cost control where market remains
weak."
FOURTH QUARTER
The Group's sales totaled SEK 8,799 M (9,444), a
fall of 7% compared with 2008. Organic growth for comparable units
was -8% (-4). Acquired units contributed 3% (4). Exchange-rate
effects had a negative impact of SEK 185 M on sales, i.e. -2%
(9).
Operating income before depreciation, EBITDA,
excluding restructuring costs, amounted to SEK 1,648 M (1,703). The
corresponding EBITDA margin was 18.7% (18.0). The Group's operating
income, EBIT, excluding restructuring costs, amounted to
SEK 1,398 M (1,469), a fall of 5%. The operating margin,
excluding restructuring costs, was 15.9% (15.6).
Net financial items amounted to SEK 106 M (184),
which corresponds to an average interest rate of 4%. The Group's
income before tax, excluding restructuring costs, amounted to
SEK 1,292 M (1,286), effectively unchanged from the previous
year. Exchange-rate effects had a positive impact of SEK 18 M
on the Group's income before tax. The profit margin, excluding
restructuring costs, was 14.7% (13.6). The Group's tax charge
totaled SEK 162 M (184). Earnings per share, excluding
restructuring costs, amounted to SEK 2.41 (2.45), a decrease of
2%.
FULL YEAR
Sales for 2009 totaled SEK 34,963 M (34,829),
unchanged compared with 2008. Organic growth was -12% (0). Acquired
units contributed 3% (4). Exchange-rate effects affected sales
positively by SEK 3,491 M.
Operating income before depreciation, EBITDA,
amounted to SEK 6,426 M (6,447) excluding restructuring and
non-recurring costs. The corresponding margin was 18.4% (18.5). The
Group's operating income, EBIT, excluding restructuring and
non-recurring costs, amounted to SEK 5,413 M (5,526), a fall
of 2%. The corresponding operating margin (EBIT) was 15.5%
(15.9).
Earnings per share, excluding restructuring and
non-recurring costs, were unchanged and amounted to SEK 9.22
(9.21). Operating cash flow amounted to SEK 6,843 M (4,769).
RESTRUCTURING
MEASURES
Payments related to the restructuring programs
amounted to SEK 161 M in the quarter.
Progress of the 2006 and 2008
restructuring programs
The two restructuring programs launched in 2006
and 2008 have surpassed the expected cost savings and have led to
reductions in personnel of respectively 2,718 and 1,913 people
since the projects began, a total of 4,631 people. A further 347
people will leave during 2010.
The 2009 restructuring
program
The two successful restructuring programs of 2006
and 2008 have been followed up by a new project launched in the
fourth quarter of 2009. The program has been expanded compared to
earlier communication and will lead to the closing of 11 production
units and the conversion of 4 to final assembly. In addition, 11
mainly administrative units will be closed. The total cost is SEK
930 M, which was expensed against earnings during the quarter. The
program started during the quarter and will achieve a reduction of
1,200 employees in high-cost countries.
Provisions
For all three programs described above, provisions
of SEK 1,577 were made in the balance sheet at year-end for the
remaining parts of the programs.
Total personnel
reductions
The world economy began to weaken towards the end
of 2007 and adjustments of the workforce were initiated at that
time. From the fourth quarter of 2007 up to the end of 2009 a total
of 8,174 people (including 3,898 people during 2009) - that is, 25%
of the total number of employees - left the Group as a result of
the capacity changes made and the restructuring programs carried
out. Of the 8,174, 3,598 arose from the restructuring programs
described above and 4,576 from other efficiency programs and
ongoing capacity changes.
COMMENTS BY
DIVISION
EMEA
Sales in EMEA division during the quarter totaled
SEK 3,544 M (3,614), with organic growth of -3%. Demand
improved markedly throughout the region during the quarter, with
the UK, Scandinavia and Africa moving to positive growth while
Italy, Spain and eastern Europe remained weak. Acquired growth
amounted to 0%. Operating income amounted to SEK 595 M
(562), which represents an operating margin (EBIT) of 16.8% (15.5).
The effects of the restructuring programs and other efficiency
measures made a very substantial contribution to the rise in
income. Return on capital employed, excluding restructuring and
non-recurring costs, amounted to 21.2% (17.5). Operating cash flow
before interest paid totaled SEK 1,133 M (938).
AMERICAS
The quarter's sales in Americas division totaled
SEK 2,108 M (2,886), with -21% organic growth. All units were
affected by the continuing low activity in the non-residential
construction sector, and security doors were especially hard-hit.
Canada, Mexico and South America were affected to a rather lesser
extent. Acquired growth amounted to 0%. By means of restructuring
and capacity changes, the operating margin was maintained at a very
strong level and amounted to 19.5% (19.9). Operating income totaled
SEK 412 M (574). Return on capital employed amounted to
19.6% (23.1). Operating cash flow before interest paid totaled SEK
545 M (707).
ASIA PACIFIC
Sales for the quarter totaled SEK 1,044 M
(881), with 10% organic growth. The major markets in Australia, New
Zealand and China all showed growth. Acquired growth amounted to
4%. Operating income totaled SEK 144 M (92), which represents an
operating margin (EBIT) of 13.8% (10.4). The quarter's return on
capital employed amounted to 20.6% (13.8). Operating cash flow
before interest paid totaled SEK 231 M (194).
GLOBAL
TECHNOLOGIES
Sales for the quarter totaled SEK 1,145 M (1,310),
with organic growth of -9%. The division was affected by the
downturn in construction on the North American market, and all
units showed negative growth. Acquired growth amounted to 0%. The
division's operating income amounted to SEK 186 M (203),
giving an operating margin (EBIT) of 16.2% (15.5). Return on
capital employed, excluding restructuring costs, amounted to 13.3%
(13.8). Operating cash flow before interest paid totaled
SEK 361 M (275).
ENTRANCE
SYSTEMS
Entrance Systems division reported sales of SEK
1,152 M (952) for the quarter, representing organic growth of -4%.
Continued good sales on the service side compensated for much of
the reduction in new-product sales. Acquired growth amounted to
29%. Operating income totaled SEK 196 M (150), giving an
operating margin (EBIT) of 17.0% (15.8). Acquisitions, principally
Ditec, affected the operating margin negatively by 2.8%. Return on
capital employed amounted to 19.1% (18.1). Operating cash flow
before interest paid totaled SEK 189 M (104).
ACQUISITIONS
During the year eight acquisitions were
consolidated and payment was made for the last minority shares in
iRevo in Korea. The combined acquisition price for these
acquisitions amounts to SEK 1,107 M, and preliminary
acquisition analyses indicate that goodwill and other intangible
assets with indefinite useful life amount to SEK 800 M.
The acquisition price is adjusted for acquired net debt and
estimated earn‑outs. During the year also, three operations
were sold off as part of the ongoing restructuring.
On 13 November 2009 the acquisition of the Swedish
company Portsystem 2000 was reported. Portsystem has annual sales
of SEK 125 M and supplies industrial doors and docking systems.
On 17 December 2009 the acquisition of the
Colombian company Cerracol was reported. Cerracol has annual sales
of SEK 140 M and is a leader on the Central American lock
market.
On 20 January 2010 it was reported that the
competition authority has approved the acquisition of the Chinese
company Pan Pan and that consolidation will take place as soon as
the necessary business license has been obtained. This is expected
to happen during the first quarter.
SUSTAINABLE
DEVELOPMENT
Sustainable development also affects workplace
conditions and responsibilities - for example in terms of health
and safety - and these issues form part of the Company's long-term
sustainability program. In order to obtain continual feedback in
this area, ASSA ABLOY regularly has so-called independent workplace
reviews carried out with the help of an external party.
In 2009 reviews were carried out in South Africa
and Mexico. These were performed in accordance with internationally
accepted procedures and involved meetings with the local company
managements and key personnel, visits to factories, interviews with
senior officers, reviews of documentation, interviews with
employees and follow-up meetings
with management. The reviews were carried out independently by the
external party and no-one from Head Office was present on site.
The reviews yielded valuable information and
suggestions for improvements as well as a good overview of ASSA
ABLOY's work and the commitment shown by the local managements in
their work on these issues.
The 2009 Sustainability Report, reporting on the
Group's targets and giving other information about sustainable
development, will be published at the time of the Annual General
Meeting in April 2010.
PARENT COMPANY
'Other operating income' for the Parent company
ASSA ABLOY AB totaled SEK 1,398 M (1,775) for the full year.
Income before tax amounted to SEK 1,694 M (1,589). Investments in
tangible and intangible assets totaled SEK 1 M (0). Liquidity is
good
and the equity ratio was 55.6% (39.8).
DIVIDEND AND ANNUAL GENERAL
MEETING
The Board of Directors proposes a dividend of SEK
3.60 (3.60) per share for the 2009 financial year. The Annual
General Meeting will be held on 22 April 2010.
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 56-60 of the 2008 Annual Report. ASSA ABLOY
has implemented the revised International Accounting Standard 1,
which came into force on 1 January 2009. The change means that
additional items are now included in total income in the Group's
income statement. These items were previously reported in changes
to shareholders' equity. ASSA ABLOY has also implemented IFRS 8,
which contains rules about segment reporting. ASSA ABLOY reports
the same operating segments as before. The Group's Quarterly
Reports are prepared in accordance with IAS 34. The Parent company
applies RFR 2.2.
The Group has made a reclassification that affects
direct distribution costs and depreciation on capitalized product
development expenditure. The reason is to give a true and fair view
of the allocation between direct and indirect costs as well as for
product development expenses. In order to maintain comparability,
the financial statements for 2008 and 2009 have been adjusted. The
reclassification involves the transfer of direct distribution costs
from Selling expenses and Administrative expenses, and where
appropriate from Sales, to Cost of goods sold. In addition,
depreciation on product development has been moved from Cost of
goods sold to Selling expenses and Administrative expenses. Both
these adjustments affect Gross income. The effects are reported in
the attached financial statements. Operating income is not
affected.
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 2008
Annual Report. No significant risks other than the risks described
there are judged to have occurred.
OUTLOOK
Long-term outlook
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.
Outlook for 2010
The organic growth is expected to be about 0
percent.
Stockholm, 12 February 2010
Johan Molin
President and CEO
The End-of-year Report has not been reviewed by
the Company's Auditor.
FINANCIAL
INFORMATION
The Quarterly Report for the first quarter will be
published on 21 April 2010. The Annual General Meeting will be held
on 22 April at the Museum of Modern Art in Stockholm.
FURTHER INFORMATION CAN BE
OBTAINED FROM:
Johan Molin, President and CEO, Tel: +46 8 506 485
42
Tomas Eliasson, Chief Financial Officer, Tel: +46
8 506 485 72
ASSA ABLOY is holding
an analysts' meeting at 10.00 today
at Klarabergsviadukten 90 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 5052 0270, +44
208 817 9301 or +1 718 354
1226
This information is that which
ASSA ABLOY is required to disclose under the
Swedish Securities Exchange and Clearing Operations Act and/or
the Swedish Financial Instruments Trading Act.
The information is released for
publication at 08.00 on 12 February.
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