STOCKHOLM, Sweden, Aug. 17, 2005 (PRIMEZONE) -- ASSA ABLOY:
-- Sales for the second quarter of 2005 increased organically by
6% to SEK 6,984 M (6,533)
-- Quarterly operating income is the highest ever, at SEK 1,022 M
(929)
-- The operating margin (EBIT) for the quarter amounted to 14.6%
(14.2)
-- Net income for the second quarter amounted to SEK 657 M (598)
-- Earnings per share amounted to SEK 1.75 (1.61) for the second
quarter
-- Operating cash flow for the quarter amounted to SEK 813 M (652)
"Global Technologies' sales of electromechanical products increase strongly in response to successful product launches and good market development," says President and CEO Bo Dankis. "Demand on our vital U.S. market remained good. In Europe, continues our work to simplify structures for production, sales and administration."
SALES AND INCOME
Second quarter Half year
2005 2004 Change 2005 2004 Change
Sales, SEK M 6,984 6,533 +7% 13,253 12,816 +3%
of which
Organic growth +6% +4%
Acquisitions +1% +1%
Exchange-rate
effects 22 0% -183 -1%
Operating margin
(EBIT), % 14.6 14.2 14.4 14.0
Income before
tax SEK M 900 808 +11% 1,664 1,559 +7%
of which,
exchange-rate
effects 4 0% -13 -1%
Net income,
SEK M 657 598 +10% 1,216 1,153 +5%
Operating cash
flow, SEK M 813 652 +25% 1,362 1,267 +7%
Earnings per
share (EPS),
SEK 1.75 1.61 +9% 3.24 3.11 +4%
The Group's sales in the second quarter totaled SEK 6,984 M (6,533), an increase of 7% on the previous year. Organic growth was 6%. Translation of foreign subsidiaries' sales to Swedish kronor had a negative effect of SEK 22 M due to changes in exchange rates. Newly acquired companies contributed 1% to sales.
Sales for the first half year of 2005 totaled SEK 13,253 M (12,816), which represents an increase of 3%. Organic growth was 4%, and acquired companies contributed 1%. Exchange rates affected sales negatively by SEK 183 M compared with the first half of 2004.
Operating income before depreciation, EBITDA, for the second quarter amounted to SEK 1,243 M (1,165). The corresponding margin was 17.8% (17.8). The Group's operating income, EBIT, amounted to SEK 1,022 M (929) after positive currency effects of SEK 3 M. The operating margin (EBIT) was 14.6% (14.2).
For the half year, operating income before depreciation, EBITDA, amounted to SEK 2,345 M (2,267). The corresponding margin was 17.7% (17.7). The Group's operating income, EBIT, amounted to SEK 1,912 M (1,798) after negative currency effects of SEK 30 M. The operating margin (EBIT) was 14.4% (14.0).
Income before tax for the second quarter was SEK 900 M (808), including positive currency effects of SEK 4 M due to translation of foreign subsidiaries. Income before tax for the first half year was SEK 1,664 M (1,559), including negative currency effects of SEK 13 M.
The Group's tax charge for the quarter totaled SEK 243 M (210), corresponding to an effective tax rate of 27% (26) on income before tax.
Earnings per share for the second quarter amounted to SEK 1.75 (1.61), and earnings per share for the first half year to SEK 3.24 (3.11).
Operating cash flow for the quarter, excluding costs of the restructuring program, amounted to SEK 813 M -- equivalent to 90% of income before tax -- compared with SEK 652 M last year. Cash flow was affected negatively by higher accounts receivable resulting from strong sales at the end of the quarter. Operating cash flow for the half year totaled SEK 1,362 M (1,267).
Movements in capital employed, net debt and shareholders' equity are largely caused by changed exchange rates mainly related to the U.S. dollar. These movements have a limited effect on key ratios.
THE 'LEVERAGE AND GROWTH' ACTION PROGRAM
The two-year action program initiated in November 2003 is nearing its end. Cost savings are projected to reach SEK 450 M a year by late 2005. Savings of around SEK 85 M were realized during the second quarter of 2005. In the year so far, payments totaling SEK 115 M relating to the action program have been made. 1,050 of the 1,400 employees becoming redundant have left the Group.
COMMENTS BY DIVISION
EMEA
Sales for the second quarter in the EMEA division (Europe, Middle East and Africa) totaled EUR 325 M (313), with 4% organic growth. Operating income amounted to EUR 47 M (45) with an operating margin (EBIT) of 14.5% (14.4). Return on capital employed amounted to 16.4% (15.6). Operating cash flow before interest paid totaled EUR 35 M (33).
As expected, Easter had a positive effect of 3% on the division's sales. Scandinavia, Israel and Eastern Europe are generating strong organic growth, while France and Italy are showing somewhat lower sales volumes. Investments in the Do-It-Yourself sector have generated positive sales growth in the United Kingdom. Restructuring activities are producing savings as planned, but were offset during the quarter by higher selling costs.
AMERICAS
Sales for the second quarter in the Americas division totaled USD 298 M (282) with 7% organic growth. Operating income amounted to USD 53 M (50) with an operating margin (EBIT) of 17.8% (17.7). Return on capital employed amounted to 19.5% (18.2). Operating cash flow before interest paid totaled USD 53 M (40).
The positive trend in Americas continued through the second quarter in terms of sales, volumes and margins. The Door Group and the Residential Group reported strong growth during the quarter. The Architectural Hardware Group showed improved growth and very strong margins. Sales and earnings in Mexico were weak this quarter. Canada and South America are showing stable development. Investments made in the specification segment are achieving good penetration but are temporarily holding back margin expansion.
ASIA PACIFIC
Sales for the second quarter in the Asia Pacific division totaled AUD 95 M (87) with 2% organic growth. Operating income amounted to AUD 12 M (12) with an operating margin (EBIT) of 12.6% (13.8). Return on capital employed amounted to 14.9% (16.2). Operating cash flow before interest paid totaled AUD 19 M (20).
Asia Pacific's sales increased primarily as a result of acquisitions made in China and South Korea. Organic growth was limited by a particularly strong comparison quarter. Growth and income continued to suffer from a weak residential market in Australia and from changed exchange rates on exports from New Zealand. Growth in Asia improved during the quarter, especially in China.
GLOBAL TECHNOLOGIES
The Global Technologies division reported sales of SEK 1,418 M (1,224) in the second quarter, representing organic growth of 11%. Operating income amounted to SEK 196 M (150) with an operating margin (EBIT) of 13.8% (12.3). Return on capital employed amounted to 13.6% (10.7). Operating cash flow before interest paid amounted to SEK 161 M (155).
Global Technologies is continuing to record strong organic growth. All units are showing excellent sales development in the USA. The Identification Technology Group reports high growth in volume following successful product launches. For Automatic Doors, increased service revenues in Europe and the USA are improving both sales and margins. Sales in the Hospitality Group remained strong during the quarter, with markedly improved margins that are held back by previously announced restructuring activities.
OTHER EVENTS
During the quarter a refinancing has been carried out in the form of a private placement in the USA amounting to USD 330 M. The loan comprises five tranches with periods ranging from seven to fifteen years and including both fixed and variable interest rates. It extends the Group's average loan duration to around three years.
The acquired companies WangLi (Asia Pacific) and Habo (EMEA) are consolidated from 1 June. The two companies together have annual sales of about SEK 250 M. The acquisitions have contributed to earnings per share in the current quarter. The combined acquisition cost, including estimated earn-outs, totals about SEK 125 M. Preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite life amount to about SEK 100 M. Complete disclosures in accordance with IFRS 3 regarding acquisitions will be presented in the 2005 annual report.
ACCOUNTING PRINCIPLES
ASSA ABLOY has adopted International Financial Reporting Standards (IFRS) from 1 January 2005 as endorsed by the European Union. The Group's Interim Report is prepared in accordance with IAS 34 'Interim Financial Reporting' under the guidelines given in RR 31 issued by the Swedish Financial Accounting Standards Council. The Parent Company follows RR 32.
The effects of the transition to IFRS regarding the comparative figures for 2004 were described in a separate report, 'IFRS-adjusted 2004 figures for ASSA ABLOY', published on 20 April 2005. Applied accounting principles and key ratio definitions were published in the Interim Report for the first quarter of 2005, published on 27 April 2005. These reports are available on ASSA ABLOY's website.
IAS 39 was adopted from 1 January 2005 and the net effect of the change, SEK -77 M, has been taken directly to shareholders' equity. In accordance with IFRS 1 no adjustment of comparatives has been made. The effect is due to the requirement under IAS 39 that financial instruments are reported at fair value and relates to fair value adjustments on derivative instruments.
OUTLOOK(a)
Organic sales growth in 2005 is expected to continue at a good rate, although affected by the weaker development in Europe. The operating margin (EBIT) is expected to rise, mainly due to savings resulting from the restructuring program. Excluding payments relating to restructuring, the strong cash generation is expected to continue.
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.
Stockholm, 17 August 2005
Bo Dankis President and CEO
(a) The Outlook is unchanged from that published in April 2005.
AUDITORS' REVIEW REPORT
We have conducted a general examination of the interim report for ASSA ABLOY AB (publ.) for the period ended June 30, 2005, in accordance with the recommendation issued by FAR.
A general examination is limited to discussion with the Company's employees and to an analytical examination of financial information and thus provides a lesser degree of certainty than an audit. We have not performed an audit of this interim report and thus have not issued an audit opinion.
Nothing has come to our attention that indicates that the interim report does not fulfill the requirements for interim reports as prescribed in the Swedish Annual Accounts Act and IAS 34.
Stockholm, August 17, 2005
PricewaterhouseCoopers AB
Anders Lundin Authorized Public Accountant
FINANCIAL INFORMATION
The Third Quarter Report from ASSA ABLOY AB will be published on 8 November 2005. The Fourth Quarter Report will be published on 10 February 2006. The 2005 annual report will be published in March 2006. Annual General Meeting will be held on 25 April 2006.
ASSA ABLOY is holding an analysts' meeting at 12.00 today at Operaterrassen in Stockholm.
The analysts' meeting can also be followed over the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on +44 (0)20 7162 0189.
ASSA ABLOY AB (publ) P.O. Box 70340, SE-107 23 Stockholm Phone: +46-8-506 485 00 Fax: +46-8-506 485 85 www.assaabloy.com
ASSA ABLOY is the world's leading manufacturer and supplier of locking solutions, meeting tough end-user demands for safety, security and user friendliness. The Group has some 30,000 employees and annual sales of about EUR 3 billion.