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Assa Abloy: Record Earnings in Severe Market Downturn
Source: Assa Abloy 2009/4/27

"All markets showed a weakening trend during the first quarter. At the same time, ongoing restructuring measures and adjustments in production capacity meant that both income and cash flow continued to improve. Despite this good performance in the first quarter, the remainder of 2009 is expected to be extremely challenging, both in terms of sales and income, since the financial crisis has had severe negative effects on investments in new construction. Implementation of the plan to reduce the number of production units and adjust production capacity is continuing, which will guarantee the Group's long-term competitiveness. Investments in improved market coverage and new products, primarily in the fast-growing electromechanical segment, are continuing with undiminished vigor,” said Johan Molin, President and CEO.

  • There was a severe downturn in new construction on all the world's major markets.
  • All divisions were affected but Entrance Systems, HID and the growth markets remained relatively stable.
  • Sales totaled US$1.08 trillion ($999 million in 2008), an increase of 8 percent, with minus 12 percent organic growth, 4 percent acquired growth and exchange-rate effects of +16 percent.
  • Major efficiency gains throughout the group led to sustained margins and continued strong cash flow. The successful restructuring program is continuing.
  • Operating income (EBIT) amounted to US$162 million (151 million in 2008), an increase of 7 percent excluding restructuring costs of US$13 million, representing a margin of 15.0 percent (15.2 in 2008).
  • Net income excluding restructuring costs amounted to US$101 million (94 million in 2008).
  • Earnings per share excluding restructuring costs amounted to US$0.268 (0.253 in 2008), an increase of 6 percent.


    "All markets showed a weakening trend during the first quarter. At the same time, ongoing restructuring measures and adjustments in production capacity meant that both income and cash flow continued to improve. Despite this good performance in the first quarter, the remainder of 2009 is expected to be extremely challenging, both in terms of sales and income, since the financial crisis has had severe negative effects on investments in new construction. Implementation of the plan to reduce the number of production units and adjust production capacity is continuing, which will guarantee the Group's long-term competitiveness. Investments in improved market coverage and new products, primarily in the fast-growing electromechanical segment, are continuing with undiminished vigor,” said Johan Molin, President and CEO.


    Payments related to the two restructuring programs amounted to US$17.5 million during the quarter. The restructuring program initiated in 2006 has been a great success and will be completed during 2009. More than 2,300 employees have left the Group in connection with the implementation of the program. During the first quarter costs of US$13.3 million where taken for additional costs in two projects. The restructuring program initiated during the second half of 2008 is fully underway and just more than 1,000 people have so far left the Group. The program comprises some 40 projects, is expected to cost US$144 million and will affect a total of 1,800 employees. The payback time is 2 to 3 years.


    Sales in EMEA division during the quarter totaled US$423 million (423 million in 2008), with organic growth of minus 15 percent. The weakening on all markets except Africa continued. Acquired growth amounted to 5 percent. Operating income excluding restructuring costs amounted to US$60.45 million (69.13 million in 2008), which represents an operating margin (EBIT) of 14.3 percent (16.3 in 2008). The effects of the restructuring programs and other efficiency measures compensated for many of the effects of the negative growth in volume. Return on capital employed excluding restructuring costs amounted to 15.2 percent (21 percent in 2008). The return was impacted chiefly by the lower income. Operating cash flow before interest paid totaled US$41.36 million (29.4 million in 2008).


    Organic growth in Americas division turned negative during the quarter. All units apart from Canada and Brazil were affected by the slowing of the economy that has now extended to the non-residential segment. The sales trend in the residential segment remained negative. Total sales amounted to US$335 million (296 million in 2008), with minus 15 percent organic growth. Acquired growth amounted to 3 percent. By means of restructuring and capacity changes, the operating margin was maintained at a very strong level and amounted to 19.2 percent (19.3 percent in 2008). Return on capital employed amounted to 20.2 percent (22 percent in 2008). Operating cash flow before interest paid totaled US$60 million (28 million in 2008).


    Organic growth in Asia Pacific division was negative in the first quarter. The business units in Australia and New Zealand showed negative growth. On the Chinese market too, weakening was seen on the lock side, while security doors showed growth. On the Asian markets apart from China growth was positive. The division's sales totaled US$93 million (85 million in 2008), with minus 6 percent organic growth. Acquired growth amounted to 6 percent. Operating income totaled US$6.6 million (6.6 million in 2008), which represents an operating margin (EBIT) of 7.1 percent (7.8 percent in 2008). The quarter's return on capital employed amounted to 7.4 percent (8.4). Operating cash flow before interest paid totaled US$4.2 million (10.4 million in 2008).


    Global Technologies division reported negative organic growth for the quarter. The weakened market situation made itself felt at all business units except HID/Fargo which remained relatively stable. Total sales in the first quarter were US$157 million (142 million in 2008), with organic growth of minus 8 percent. Acquired growth amounted to 0 percent. The division's operating income amounted to US$24.35 million (20 million in 2008), giving an operating margin (EBIT) of 15.6 percent (13.8 percent in 2008). Return on capital employed amounted to 12.5 percent (13.2 percent in 2008). Operating cash flow before interest paid totaled US$11 million (5.02 million in 2008).


    Entrance Systems division reported sales of US$101 million (85.3 million in 2008) in the first quarter, representing organic growth of minus 2 percent (3 percent). Acquired growth amounted to 5 percent. Demand from the retailing sector weakened but was counteracted to some extent by demand from the hospital and healthcare sector and a positive trend on the service side. Operating income amounted to US$16 million (11 million in 2008), giving an operating margin (EBIT) of 15.5 percent (12.7 percent in 2008). Return on capital employed amounted to 14.8 percent (11 percent in 2008). Operating cash flow before interest paid totaled US$30 million (21.2 million in 2008).


    Four minor acquisitions were consolidated during the first quarter. The combined acquisition price for these acquisitions amounts to US$23.4 million, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to about US$8.6 million. The acquisition price is adjusted for acquired net debt and estimated earn-outs.

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