Strong end of year for ASSA ABLOY

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ASSA ABLOY (STO:ASSAB):

Fourth quarter

· Sales increased by 8% in the quarter, with 4% organic growth, and totaled SEK 13,242 M (12,239).

· Strong growth in Global Technologies and Americas divisions and good growth in Asia Pacific and Entrance Systems.

· EMEA division stabilized and showed weak growth.

· Acquisitions of Amarr (USA), Ameristar (USA) and Mercor (Poland) with expected annual sales totaling SEK 3,600 M.

· Restructuring program costed at SEK 1,000 M.

· Operating income (EBIT) amounted to SEK 2,202 1) M (2,030), an increase of 8%. The operating margin was 16.6% 1) (16.6).

· Net income amounted to SEK 1,510 2) M (1,405).

· Earnings per share rose by 8% to SEK 4.08 2) (3.79).

· Strong operating cash flow amounting to SEK 2,541 M (3,160).

Full year

· Sales increased by 4%, including 2% organic growth, and totaled SEK 48,481 M (46,619).

· Operating income (EBIT) amounted to SEK 7,9231) M (7,501), representing an increase of 6%. The operating margin was 16.3% 1) (16.1).

· Net income amounted to SEK 5,496 2) M (5,172).

· Earnings per share rose by 6% to SEK 14.84 2) (13.97).

· Strong operating cash flow totaling SEK 6,803 M (7,044).

· The Board of Directors proposes a dividend of SEK 5.70 per share (5.10).

1) Excluding items affecting comparability in 2013 amounting to SEK -1,000 M for both the quarter and the full year.

2) Excluding items affecting comparability in 2013 amounting after tax to SEK -721 M for both the quarter and the full year.

SALES AND INCOME

  Fourth quarter Full year
2012  

2013

  Change

2012

2013

Change

Sales, SEK M 12,239 13,242 8% 46,619 48,481 4%
of which,
Organic growth 4% 2%
Acquisitions 5% 4%
Exchange-rate effects -­212 -134 -1% 290 -1,156 -2%
Operating income (EBIT), SEK M 1) 2,030 2,202 +8% 7,501 7,923 6%
Operating margin (EBIT), % 1) 16.6 16.6 16.1 16.3
Income before tax, SEK M 1) 1,836 2,050 +12% 6,784 7,381 9%
Net income, SEK M 2) 1,405 1,510 +7% 2) 5,172 5,496 +6% 2)
Operating cash flow, SEK M 3,160 2,541 -20% 7,044 6,803 -3%
Earnings per share (EPS), SEK 2) 3.79 4.08 +8% 13.97 14.84 6%

1) Excluding items affecting comparability in 2013 amounting to SEK -1,000 M for both the quarter and the full year.

2) Excluding items affecting comparability in 2013 amounting after tax to SEK -721 M for both the quarter and the full year.

COMMENTS BY THE PRESIDENT AND CEO

“The fourth quarter was very satisfactory, with a strong increase in sales and record earnings,” says Johan Molin, President and CEO. “The global economy continues to remain static, but a continued positive development primarily in Global Technologies and Americas, gave an organic growth of 4%. At the same time acquired sales rose by 5%, mainly through the acquisitions of Ameristar and Amarr.

“Operating income increased by a full 8% as a result of increased efficiency in acquired units, somewhat lower raw-material costs and specific savings from the restructuring programs carried out.

“Sales of new products continued to develop very positively and in the fourth quarter accounted for a full 27% of total sales value. It was also very pleasing that the rapid rise in sales of electromechanical products continued during the quarter.

“Operating income for the full year 2013 improved by a gratifying 6% in spite of the very challenging market. Operating cash flow also remained very good as a result of increased profit and stable working capital but was affected by major investments in buildings.

“Activity in the acquisition field remained high in 2013. Contracts were signed for a total of twelve acquisitions, whose total annual sales of SEK 4,200 M represent 9% added growth. After the quarter ended there was one exciting addition on the technology side for HID with the strategic acquisition of IdenTrust in digital authentication.

“My judgment is that the world economy is slowly on the way to improving, although still affected by the budget cutbacks that many countries are making. Our strategy therefore remains unchanged, to reduce our dependence on mature markets and to expand strongly in the emerging markets, which are expected to go on growing well. Another continuing priority will be investments in new products, especially in the growth area of electromechanics.”

FOURTH QUARTER

The Group’s sales totaled SEK 13,242 M (12,239), an increase of 8% compared with the fourth quarter of 2012. Organic growth for comparable units was 4% (0). Acquired units contributed 5% (7). Exchange-rate effects had an impact of SEK –134 M (-212) on sales, that is –1% (–3).

Operating income before depreciation, EBITDA, amounted to SEK 2,440 M (2,268). The corresponding EBITDA margin was 18.4% (18.5). The Group’s operating income, EBIT, excluding items affecting comparability, amounted to SEK 2,202 M (2,030), an increase of 8%. The operating margin excluding items affecting comparability was 16.6% (16.6).

Net financial items amounted to SEK –152M (–193). The Group’s income before tax, excluding items affecting comparability, amounted to SEK 2,050 M (1,836), an improvement of 12% compared with the previous year. Exchange-rate effects had an impact of SEK -42 M (-47) on the Group’s income before tax. The profit margin, excluding items affecting comparability, was 15.5% (15.0). The effective tax rate on an annual basis amounted to 25% (24). Earnings per share, excluding items affecting comparability, amounted to SEK 4.08 (3.79), an increase of 8%.

FULL YEAR

Full-year sales for 2013 totaled SEK 48,481 M (46,619), representing an increase of 4%. Organic growth was 2% (2). Acquired units contributed 4% (9). Exchange-rate effects affected sales by SEK -1,156 M (290),representing -2% (1), compared with 2012.

Operating income before depreciation, EBITDA, for the full year amounted to SEK 8,917 M (8,536). The corresponding margin was 18.4% (18.3). The Group’s operating income, EBIT, excluding items affecting comparability, amounted to SEK 7,923 M (7,501), which was an increase of 6%. The corresponding operating margin, excluding items affecting comparability, was 16.3% (16.1).

Earnings per share for the full year, excluding items affecting comparability, amounted to SEK 14.84 (13.97), an increase of 6%. Operating cash flow totaled SEK 6,803 M (7,044).

RESTRUCTURING MEASURES

A new restructuring program was launched during the fourth quarter. A total of some thirty production units and offices are expected to be closed over a three-year period. The restructuring costs amount to SEK 1,000 M, with an estimated payback time of just over three years.

Payments related to all existing restructuring programs amounted to SEK 230 M in the quarter. The restructuring programs proceeded according to plan and led to a reduction in personnel of 1,274 people during the quarter and 8,358 people since the projects began.

At the end of the year provisions of SEK 1,369 M remained in the balance sheet for carrying out the programs, of which SEK 896 M relates to this year’s restructuring program.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 3,546 M (3,479), with organic growth of 1% (-1). The markets in Scandinavia, Africa and eastern Europe showed strong growth. Britain showed growth and Germany was stable, but the trend was negative in France, the Netherlands, Spain, Italy and Israel. Acquired growth amounted to 1%. Operating income totaled SEK 631 M (633). The operating margin (EBIT) was sustained at a high level and was 17.8% (18.2). Return on capital employed amounted to 22.9% (24.0). Operating cash flow before interest paid totaled SEK 944 M (788).

AMERICAS

Sales for the quarter in Americas division totaled SEK 2,558 M (2,340), with organic growth of 6% (5). The sales trends for electromechanical products and the private residential market were very strong, and traditional lock products remained strong. Security doors and high-security products showed good growth, while Canada and Mexico showed a stable trend. South America showed strong growth. Acquired growth amounted to 6%. Operating income totaled SEK 525 M (484) and the operating margin was 20.5% (20.7). Return on capital employed amounted to 22.3% (22.9). Operating cash flow before interest paid totaled SEK 656 M (548).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 2,066 M (2,034), with organic growth of 4% (2). South Korea, South-East Asia and New Zealand showed strong growth. The market in China showed strong growth for fire doors, good growth for traditional lock products and a weak trend for security doors. Australia showed a weakly negative trend. Acquired growth amounted to 0%. Operating income totaled SEK 281 M (276), giving an operating margin (EBIT) of 13.6% (13.6). The quarter’s return on capital employed amounted to 14.8% (20.9). Operating cash flow before interest paid totaled SEK 450 M (928), affected by a major investment in building.

GLOBAL TECHNOLOGIES

Sales for the quarter in Global Technologies division totaled SEK 1,690 M (1,516), with organic growth of 13% (2). HID had strong growth in access control and logical access, Government ID and project orders. Hospitality showed strong growth, mainly from the important renovation market. Profitability improved for both Business Units. Acquired growth amounted to 0%. The division’s operating income amounted to SEK 312 M (262), with an operating margin (EBIT) of 18.4% (17.3). Return on capital employed amounted to 20.3% (17.3). Operating cash flow before interest paid totaled SEK 258 M (467), affected by a major investment in building.

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 3,615 M (3,080), with organic growth of 3% (–5). The markets in Americas and Asia showed good growth while demand in Europe stabilized. Sales increased in the segments of industrial doors and high-speed doors, while door automation and docking systems were stable. Ditec continued to show a negative trend, affected by the weak demand in southern Europe. Acquired growth amounted to 15%. Operating income totaled SEK 587 M (515), giving an operating margin of 16.2% (16.7). Return on capital employed amounted to 16.3% (15.3). Operating cash flow before interest paid totaled SEK 594 M (651).

ACQUISITIONS

During the quarter ASSA ABLOY acquired the US company Amarr, the third-largest player on the North American market for overhead doors. The company has about 1,200 employees and its sales in 2014 are expected to total about SEK 2,100 M (USD 330 M).

During the quarter Ameristar (USA), Amarr (USA), Mercor (Poland) and one minor acquisition were consolidated. The combined acquisition price for the ten companies acquired during the year amounted to SEK 4,684 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 3,360 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 602 M.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY places a strong focus on reducing the environmental impact related to the Group’s factories and offices worldwide. In the ongoing consolidation of the Group’s units, efficiency benefits will be realized in the form of reduced energy and water consumption as the number of properties falls and the remaining premises can be utilized more efficiently. In some cases the consolidated units are moving into completely new premises optimized for reduced environmental impact. One example of this is HID’s new North American Operations Center in Austin, Texas. In the new property, the Division’s manufacturing in the USA is brought together in a single unit, which has meant that the energy consumption per manufactured product has been reduced by 20% and the water consumption by over 50%. All lighting in the property uses LED lamps, and a sophisticated system continuously controls and measures energy consumption.

ASSA ABLOY’s Sustainability Report for 2013 will be available from 26 March 2014 on the company’s website, www.assaabloy.com.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 2,261 M (1,938) for the full year. Income before tax amounted to SEK 2,896 M (3,507). Investments in tangible and intangible assets totaled SEK 992 M (1,063), of which intangible assets accounted for SEK 991 M (1,062). Liquidity is good and the equity ratio was 45.1% (50.0).

DIVIDEND AND ANNUAL GENERAL MEETING

The Board of Directors proposes a dividend of SEK 5.70 (5.10) per share for the 2013 financial year. The Annual General Meeting will be held on 7 May 2014. The Annual Report for 2013 will be available from 26 March 2014 on the company’s website, 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 90-95 of the 2012 Annual Report.

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’.

EFFECTS OF CHANGED ACCOUNTING PRINCIPLES

In 2013 financial reporting is affected by changes relating to the reporting of defined-benefit pension plans. The changed accounting principles remove the option of using the so-called corridor method: that is, the option of reporting only a proportion of actuarial gains and losses as income or expense. The significant changed valuations are instead reported as they arise in ‘Other comprehensive income’. The changes also mean that the return on plan assets is no longer reported as expected return but is reported as an interest income item in the income statement, based on the value of the discount rate at the start of the financial year. The accounting principles for defined-benefit pension plans are therefore changed from the Group’s accounting principles in the 2012 Annual Report and the Interim Reports published earlier in 2012.

The new principles affect reporting retroactively, and the opening balance at 1 January 2012 has been recalculated, as have the comparatives for 2012. On the balance-sheet date of 1 January 2012, pension obligations and net debt increased by SEK 1,092 M. Equity was reduced by SEK 737 M and financial assets increased by SEK 355 M. Operating income for the quarter and the full year 2012 is unchanged. Financial items for the quarter and the full year 2012 improved by SEK 11 M and SEK 53 M respectively. The tax expense fell by SEK 8 M for the quarter and increased by SEK 6 M for the full year 2012. Net profit for the quarter and the full year 2012 increased by SEK 19 M and SEK 47 M respectively. Earnings per share after dilution for the quarter and the full year 2012 increased by SEK 0.05 per share and SEK 0.13 per share respectively.

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 2012 Annual Report. No significant risks other than the risks described there are judged to have occurred.

AUDIT

The Company’s Auditor has not carried out any review of the Report for the fourth quarter of 2013.

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 28 October 2013:

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 2014

Johan Molin

President and CEO

FINANCIAL INFORMATION

The Interim Report for the first quarter will be published on 29 April 2014. The Annual General Meeting will be held on 7 May 2014 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

Carolina Dybeck Happe, Chief Financial Officer, Tel: +46 8 506 485 72

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 +46 8 5055 6476, +44 203 364 5371 or +1 877 679 2993.

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.

This information was brought to you by Cision http://news.cision.com

Contacts

ASSA ABLOY
Johan Molin
President and CEO
Tel: +46 8 506 485 42
or
Carolina Dybeck Happe
Chief Financial Officer
Tel: +46 8 506 485 72

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Contacts

ASSA ABLOY
Johan Molin
President and CEO
Tel: +46 8 506 485 42
or
Carolina Dybeck Happe
Chief Financial Officer
Tel: +46 8 506 485 72