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Assa Abloy - Good start to 2019

First quarter

  • Net sales increased by 16% to SEK 21,505 M (18,550), with organic growth of 5% (4) and acquired net growth of 3% (2)
  • Strong growth in Americas, Global Technologies and Asia Pacific, good growth in Entrance Systems and EMEA
  • Agreement signed to acquire a 54% holding in agta record, a Swiss manufacturer of automatic pedestrian doors with sales of SEK 3.9 billion in 2018. Closing is conditional upon authorities approval
  • Three other acquisitions signed with combined expected annual sales of about SEK 650 M
  • Operating income (EBIT) increased by 15% and amounted to SEK 3,246 M (2,829), corresponding to an operating margin of 15.1% (15.3)
  • Net income amounted to SEK 2,218 M (1,964)
  • Earnings per share amounted to SEK 2.00 (1.77)
  • Operating cash more than doubled to SEK 1,171 M (575)

Sales and income

Comments by the President and CEO

Strong growth and doubled cash flow
We had a good start to 2019 with the first quarter’s sales growing by 16% to SEK 21,505 M. This resulted from strong organic growth of 5%, acquired net growth of 3%, and positive currency effects of 8%.

All divisions reported organic growth. Growth continued to be particularly strong in the Americas and Global Technologies divisions. Entrance Systems and EMEA reported good growth while Asia Pacific’s external growth was flat. Sales growth for electromechanical products remains particularly strong and now represents 31% of total sales.

Operating income increased by 15% to SEK 3,246 M, driven primarily by good operating leverage in Americas and Global Technologies. This was partly offset by weaker performance in Asia Pacific due to flat external growth, increasing low-margin intra-group sales and build-up of the new Chinese organization.

Seasonal effects always impact the operating cash flow in the first quarter, but this year cash flow more than doubled versus last year. The improvement was driven by the higher earnings combined with actions taken in Q4 2018 to balance the seasonal variations between Q4 and Q1.

Innovation enables growth and leadership
One of ASSA ABLOY’s strategic objectives is product leadership through innovation. To maintain our leading position, more than 2,000 engineers are dedicated to continuously developing new solutions for our customers, and this is reflected in that close to 4% of our sales were invested in R&D in the quarter.

Customer focus and innovation efforts pay off in growth and leadership. Sales of electromechanical products increased 30% in the quarter, driven by strong sales in the commercial/institutional segment and by smart locks in the US residential segment. The global sales potential for smart locks is significant, but we expect the growth rate to slow down from the second quarter onwards due to tougher comparatives. Our innovation efforts are also recognized by independent parties. In March, for instance, our new Tanzanian e-Passport, which has been designed and delivered by HID, won an award at the High Security Printing conference in Europe.

ASSA ABLOY to acquire majority stake in agta record
In March we announced the intention to acquire a majority stake in agta record. Subject to anti-trust approval, this will be ASSA ABLOY’s largest acquisition in eight years, and it is expected to add 5% to the revenue base. ASSA ABLOY and agta record complement each other very well, and I am confident that our customers and shareholders will benefit from the strong value we can create together. Our intention is to keep the ‘record’ brand and operate it as a separate unit within Entrance Systems Division.

As a final note, I would once again like to emphasize that ASSA ABLOY’s employees make the difference. In February, we completed the “Together we grow” leadership conference. The focus was on how we can further grow ASSA ABLOY and remain the global leader in access solutions. We have a strong team and we will continue to deliver innovative and smart solutions to our customers.