ASSA ABLOY

Good performance in a weak market

Fourth quarter

• Sales increased by 4% in the quarter, with 0% organic growth, and totaled SEK 12,239 M (11,744).
• Good growth in Americas and improved performance in Australia and New Zealand.

Markets in EMEA and Asia and Global Technologies were stable, while Entrance Systems was affected negatively by the weak trend in southern Europe.

Acquisition of the US company 4Front was completed. Its annual sales are expected to total SEK 1,100 M, representing 2% growth.

Operating income (EBIT) amounted to SEK 2,030 M (1,881[1]), which represents an increase of 8%. The operating margin was 16.6% (16.0[1]).

Net income amounted to SEK 1,386 M (118[2]).

Earnings per share rose by 9% to SEK 3.74 (3.43[3]).

Record-high operating cash flow totaling SEK 3,160 M (2,794).

Full year

• Sales increased by 12%, including 2% organic growth, and totaled SEK 46,619 M (41,786).
• Operating income (EBIT) amounted to SEK 7,501 M (6,624[1]), representing an increase of 13%. The operating margin was 16.1% (15.9[1]).
• Net income amounted to SEK 5,125 M (3,869[2]).
• Earnings per share rose by 13% to SEK 13.84 (12.30[3]).
• Strong operating cash flow totaling SEK 7,044 M (6,080).
• The Board of Directors proposes a dividend of SEK 5.10 per share (4.50).

[1]  Excluding restructuring costs in 2011 amounting to SEK -1,420 M for the quarter and for the full year.
[2]  If restructuring and one-time items are excluded, net income in 2011 was SEK 1,285 M for the quarter and SEK 4,605 M for the full year.
[3]  Excluding restructuring and one-time items in 2011 amounting to SEK -1,167 M for the quarter and SEK -736 M for the full year.

 

SALES AND INCOME       

	Fourth quarter			Full year
	2011	2012	Change		2011	2012	Change
Sales, SEK M	11,744	12,239	+4%		41,786	46,619	+12%
of which,
Organic growth			+0%				+2%
Acquisitions			+7%				+9%
Exchange-rate effects	-195	-212	-3%		-2,309	290	+1%
Operating income (EBIT), SEK M[1]	1,881	2,030	+8%		6,624	7,501	+13%
Operating margin (EBIT), %[1]	16.0	16.6			15.9	16.1
Income before tax, SEK M[1]	1,723	1,825	+6%		5,979	6,731	+13%
Net income, SEK M[2]	118	1,386	+8%[2]		3,869	5,125	+11%[2]
Operating cash flow, SEK M	2,794	3,160	+13%		6,080	7,044	+16%
Earnings per share (EPS), SEK[2]	3.43	3.74	+9%		12.30	13.84	+13%

[1]  Excluding restructuring costs in 2011 amounting to SEK -1,420 M for the quarter and for the full year.
[2]  If restructuring and one-time items are excluded, net income in 2011 was SEK 1,285 M for the quarter and SEK 4,605 M for the full year.

COMMENTS BY THE PRESIDENT AND CEO

"The fourth quarter showed a satisfactory increase in sales and strong earnings," says Johan Molin, President and CEO. "The weakening of the global economy continued, which resulted in zero organic growth, but at the same time acquired sales revenue added 7% growth. Operating income increased by a full 8%, which was a consequence of increased efficiency in acquired units, reduced raw-material costs and good savings from the restructuring programs we have carried out.

"Sales of new products were stronger than ever before and accounted for 25% of total sales revenue in the fourth quarter. A number of innovative new products in both the mechanical and electromechanical sectors were launched during the year. Particularly successful were the new series of door-closers in Europe, the new generation of digital door-locks, HID's SE readers, RFID locks for hotels, and the new Aperio and Cliq Remote electronic lock systems.

"The full-year operating income for 2012 improved by a full 13%, with strong contributions coming from efficiency improvements and the continuing relocation of production to low-cost countries. Operating cash flow also remained very strong as a result of increased profit and improved effectiveness in managing our working capital.

"Activity in the acquisition field continued at a high level in 2012. A total of 13 acquisitions were completed, whose combined annual sales of SEK 4,500 M represent 11% growth. The expansion of Entrance Systems continued during the year with the strategic acquisitions of Albany, Dynaco and 4Front. The first two of these gave us world leadership in the fast-growing segment of high-speed industrial doors, while 4Front gave us market leadership for docking stations in North America.

"Many indicators suggest that the world economy will remain weak for the foreseeable future, due primarily to the budget cutbacks that many countries are making. It is therefore of the utmost importance that ASSA ABLOY continues its expansion on the new markets, which are expected to go on growing well, while at the same time maintaining its investments in new products and market presence."

FOURTH QUARTER

The Group's sales totaled SEK 12,239 M (11,744), an increase of 4% compared with the fourth quarter of 2011. Organic growth for comparable units was 0% (4). Acquired units contributed 7% (20). Exchange-rate effects had an impact of SEK -212 M on sales, that is -3% (-2).

Operating income before depreciation, EBITDA, amounted to SEK 2,268 M (2,151). The corresponding EBITDA margin was 18.5% (18.3). The Group's operating income, EBIT, excluding items affecting comparability, amounted to SEK 2,030 M (1,881), an increase of 8%. The operating margin was 16.6% (16.0).

Net financial items amounted to SEK -205 M (-158). The Group's income before tax, excluding items affecting comparability, amounted to SEK 1,825 M (1,723), an improvement of 6% compared with the previous year. Exchange-rate effects had a negative impact of SEK 47 M on the Group's income before tax. The profit margin, excluding items affecting comparability, was 14.9% (14.7). The effective tax rate on an annual basis amounted to 24% (24). Earnings per share, excluding items affecting comparability, amounted to SEK 3.74 (3.43), an increase of 9%.

FULL YEAR

Full-year sales for 2012 totaled SEK 46,619 M (41,786), representing an increase of 12%. Organic growth was 2% (4). Acquired units contributed 9% (17). Exchange-rate effects affected sales positively by SEK 290 M, representing 1% (-8), compared with 2011.

Operating income before depreciation, EBITDA, for the full year amounted to SEK 8,536 M (7,646). The corresponding margin was 18.3% (18.3). The Group's operating income, EBIT, excluding items affecting comparability, amounted to SEK 7,501 M (6,624), which was an increase of 13%. The corresponding operating margin (EBIT) was 16.1% (15.9).

Earnings per share, excluding items affecting comparability, amounted to SEK 13.84 (12.30), an increase of 13%. Operating cash flow totaled SEK 7,044 M (6,080).

RESTRUCTURING MEASURES

Payments related to all restructuring programs amounted to SEK 202 M in the quarter. The restructuring programs proceeded according to plan and led to a reduction in personnel of 301 people during the quarter and 6,765 people since the projects began. A further 770 people will leave by the end of 2014.

At the end of the quarter provisions of SEK 1,068 M remained in the balance sheet for carrying out the programs.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,479 M (3,524), with organic growth of -1% (1). The market situation weakened during the quarter. The markets in the UK, France, eastern Europe and Israel showed growth. Scandinavia, Finland, Germany and Spain fell back a little, while Italy and Benelux showed a negative sales trend. Acquired growth amounted to 3%. Operating income totaled SEK 633 M (640). The operating margin (EBIT) was maintained at a continuing high level of 18.2% (18.2). Return on capital employed amounted to 24.0% (25.4). Operating cash flow before interest paid totaled SEK 788 M (851).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,340 M (2,228), with organic growth of 5% (0). The sales trends for the Private Residential Market, Electromechanical Products, Mexico and South America were strong. Locks, Security Doors and the High-Security Market showed stable growth, while sales in Canada diminished. Acquired growth amounted to 2%. Operating income totaled SEK 484 M (450) and the operating margin was 20.7% (20.2). Return on capital employed amounted to 22.9% (21.9). Operating cash flow before interest paid totaled SEK 548 M (525).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 2,034 M (1,990), with organic growth of 2% (9). Growth was strong in Korea and good in China, Australia and New Zealand. In South-East Asia growth continued to weaken. Acquired growth amounted to 0%. Operating income totaled SEK 276 M (280), representing an operating margin (EBIT) of 13.6% (14.1). The quarter's return on capital employed amounted to 20.9% (26.0). Operating cash flow before interest paid totaled SEK 928 M (617).

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,516 M (1,510), with organic growth amounting to 2% (7). HID had strong growth in Logical access and Identification technology, while Access control showed good growth. Government ID was stable and project orders had negative growth. Hospitality continued to show strong growth, principally in the renovation market. Profitability for both business units improved strongly. Acquired growth amounted to 1%. The division's operating income amounted to SEK 262 M (237), giving an operating margin (EBIT) of 17.3% (15.7). Return on capital employed amounted to 17.3% (14.7). Operating cash flow before interest paid totaled SEK 467 M (430).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 3,080 M (2,704), with organic growth amounting to -5% (7). Growth was good for Albany, Dynaco and Flexiforce, while industrial doors and automatic doors showed a slight negative trend. Ditec and the private residential market remained negative. Acquired growth amounted to 22%. Operating income totaled SEK 515 M (449), giving an operating margin of 16.7% (16.6). Return on capital employed amounted to 15.3% (15.6). Operating cash flow before interest paid totaled SEK 651 M (713).

ACQUISITIONS AND DIVESTMENTS

During the quarter 4Front in the USA and one other minor acquisition were consolidated. The combined acquisition price for the thirteen companies acquired during the year amounts to SEK 4,892 M, and preliminary acquisition analyses show that goodwill and other intangible assets with indefinite useful life amount to SEK 3,768 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 923 M.

Contracts for the sale of Wangli Group have been agreed. The sale is subject to approval by the authorities and it is expected to be possible to complete it in the first quarter of 2013.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY's manufacturing processes are continually improved by means of ongoing efficiency measures and investments in environmentally friendly technology. Energy consumption and water consumption are two high-priority areas. One example that can be cited is the Group's lock factory in Romania, which has recently increased the operational efficiency of the painting plant and invested in new technology for recovery of water and has thereby reduced the energy consumption for these processes by 50% and water consumption by 80%. These improvements give the factory annual savings of SEK 1 M.

To enable more effective benchmarking of water consumption in the Group's factories, environmental monitoring has been augmented with a number of new indicators.

The 2012 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 2013.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 1,938 M (1,808) for the full year. Income before tax amounted to SEK 3,507 M (2,297). Investments in tangible and intangible assets totaled SEK 1,063 M (116), of which intangible assets accounted for SEK 1,062 M (115). Liquidity is good and the equity ratio was 50.0% (39.3).

DIVIDEND AND ANNUAL GENERAL MEETING

The Board of Directors proposes a dividend of SEK 5.10 (4.50) per share for the 2012 financial year. The Annual General Meeting will be held on 25 April 2013. The annual report for 2012 will be available as from 27 March 2013 on the corporate website, at www.assaabloy.com.

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 88-93 of the 2011 Annual Report. The agreed revision of IAS 19 'Employee Benefits' applies from 1 January 2013 with retroactive effect during 2012. In this recalculation of comparative information for 2012, unrecognized expenses relating to service provided in previous years and unrecognized actuarial losses are accounted for as an adjustment of opening equity taking into account tax effects. The unrecognized balance sheet items at 31 December 2011 and 31 December 2012 totaled SEK 1,092 M and SEK 1,073 M respectively.

This Year-end Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Year-end 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 2011 Annual Report. No significant risks other than the risks described there are judged to have occurred.

AUDIT

The company's auditors have not conducted a special review of the Q4 report 2012.

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 published on 29 October 2012:

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.

Stockholm, 7 February 2013

Johan Molin
President and CEO

FINANCIAL INFORMATION

The Interim Report for the first quarter will be published on 24 April 2013. The Annual General Meeting will be held on 25 April at the Museum of Modern Art in Stockholm.

FURTHER INFORMATION CAN BE OBTAINED FROM:

Johan Molin, President and CEO, Tel: [phone]
Carolina Dybeck Happe, Chief Financial Officer, Tel: [phone]

ASSA ABLOY is holding an analysts' meeting at 10.00 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: [phone], [phone] or [phone].

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 7 February.

Q4 2012

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Source: ASSA ABLOY via Thomson Reuters ONE

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