Q3 Report 2011 Johan Molin President & CEO 1
Financial highlights Q3 2011 Good performance in a weak market Continued strong growth in Asia Stable but slow development in mature markets South America slowing New footprint program with closure of 17 sites Sales 10,841 MSEK +14% +2% organic, +18% acquired growth, -6% currency EBIT 1,751 MSEK +7% Currency effect -112 MSEK EPS 3.30 SEK *) +13% Tax rate reduced to 22% *) Excluding one-off gain of 424 MSEK 2
Financial highlights Jan-Sept 2011 Good development in a weak construction market Sales 30,042 MSEK + 11% +4% organic, +16% acquired growth, -9% currency EBIT 4,743 MSEK +7% Currency effect -388 MSEK EPS 8.86 SEK *) +10% Reduced tax rate to 22% *) Excluding one-off gain of 424 MSEK 3
Market highlights Big potential for HID access control from new US government PIV standard Reader with integrated PIV Yale Real Living New high end digital door lock launched for home automation Good progress from specification work in US and Europe 1 st price in categories Integrated Security Product and Access Control Product of the Year for Aperio and CLIQ Remote at IFSEC (Europe) Yale Real Living 1 st price for best innovation with Secure Element Access Control at ASIS (America) Blackberry delivered with ASSA ABLOY access control Blackberry 4
Hardware manufacturers adapt technology Blackberry release NFC phones, Dell embedd readers in laptops Dell Latitude and Precision Laptops offer contactless smart card reader options embedded in the laptop BlackBerry smartphones are NFCenabled and can be activated with iclass digital credentials Contactless smart card reader embedded in laptop 5
Group sales in local currencies Jan-Sep 2011 29 +9 47 +30 15 +28 2 +8 2-1 5-2 Share of Group sales 2011 YTD, % Year-to-date vs previous year, % 6
Organic growth index Recovery from recession Group -4% Division Index EMEA -9% Americas -17% Asia Pacific +26% Global Tech +9% Entrance -2% 7
Sales growth Q3 2011 - Currency adjusted Sales, MSEK 40 000 38 000 36 000 34 000 32 000 30 000 28 000 26 000 24 000 22 000 2011 Q3 +20% Organic +2% Acquired +18% 2005 2006 2007 2008 2009 2010 2011 Organic Growth Acquired Growth Sales in Fixed Currencies 20 18 16 14 12 10 8 6 4 2 0-2 -4-6 -8-10 -12-14 -16 Growth % 8
Operating income (EBIT), MSEK 1 800 6 400 1 700 1 600 1 500 1 400 1 300 1 200 1 100 1 000 900 800 700 Quarter Run rate 6,349 MSEK (5,838), +9% 6 200 6 000 5 800 5 600 5 400 5 200 5 000 4 800 4 600 4 400 4 200 4 000 3 800 12-months 600 3 600 2005 2006 2007 2008 2009 2010 2011 Quarter Rolling 12-months 9
Operating margin (EBIT), % 17,0 16,0 Long term target range (average) EBIT % 15,0 14,0 Run rate 2011 16.0% (16.2) 13,0 12,0 Quarter Rolling 12-months 2011 Group Dilution Addition of Cardo -0.6% Other acquisitions -0.4% 10
New manufacturing footprint program 17 additional factories to be closed Further consolidation potential within the ASSA ABLOY Group Synergies larger than expected with Crawford Net cost 900 MSEK (after 424 MSEK Cardo capital gain) Cost planned to be booked in Q4, payback 3.1 years Status current manufacturing footprint program: 41 factories closed to date, 10 to go 46 factories converted to assembly, 7 to go 21 offices closed, 4 to go Personnel reduction Q3-181p, tot 5,753p 621 in further planned reductions 688 MSEK of the provision remains 11
Margin highlights Q3 2011 EBIT margin 16.2% (17.2) + Volume increase 0%, price 2% Margin expansion 0.3% + Manufacturing footprint & efficiency improvements - Geographical mix - Dilution from acquisitions by -1.0% - Negative currency effect 0.3% 12
Acquisitions Jan-Oct 2011 Fully active on acquisitions Good pipeline targeting 5% growth 16 acquisitions Jan-Oct 2011 Annualized 7,800 MSEK, +21% Major acquisitions Jan-Oct: Cardo Swesafe Lasercard FlexiForce Portafeu Angel Metal Albany 13
Albany, US 14
Albany Door Systems Market leader in high speed doors Strong presence in Europe and US Sales and service has good fit with Crawford and Besam (direct channel) Total sales 180 MUSD with 700 employees Accretive to EPS from start 15
Angel Metal, Korea Market leader in locks and hardware in Korea Sales 2011 expected to reach 180 MSEK with 54 employees Strong market share in Korea Serving both residential and commercial segments Strong specification presence and innovation capability Accretive to EPS from start 16
Division - EMEA Slow but stable in most parts Growth in Scandinavia, Finland and East Europe France, Belgium, Germany and UK stable SALES share of Group total % 31 Southern Europe with Spain and Italy in strong decline Several large orders from specification with new products EBIT margin maintained Operating margin (EBIT) - Volume +0% - Material cost - Acquisition dilution by 0.3% 19 18 17 16 15 14 13 EBIT % + Restructuring savings 2007 2008 2009 2010 2011 17
Division - Americas Weak institutional construction continues to affect US Brazil, Mexico and Latin America declining Good development of residential and elmech SALES share of Group total % 22 Stable high margin sustained through efficiency gains Investment in R&D and sales maintained Operating margin (EBIT) - Volume -1% 22 EBIT % - Material cost + Efficiency improvement and price 21 20 19 18 2011 2010 2009 2008 2007 19
Division - Asia Pacific Strong growth in Asia, especially South East Asia including India Australia in decline due to end of government stimuli Earth quakes in New Zeeland hampers demand SALES share of Group total % 14 Very good evolution from digital door locks (DDL) Negative mix due to Pacific and China doors EBIT % Operating margin (EBIT) = Volume +7% - Raw material & price - Sales mix 17 15 13 11 9 7 5 2007 2008 2009 2010 2011 21
Division - Global Technologies HID Access control and secure issuance in good growth Strong demand from e-government with LaserCard Identification Technology declining but improved profit SALES share of Group total % 14 Hospitality Good demand for NFC locks, >70% of all new locks Large hotel chains planning for NFC upgrades Aftermarket in good growth due to patented keyways Operating margin (EBIT) + Volume +5% (26), good leverage - Dilution from LaserCard and ActivIdentity with -2.0% - Dilution from currency 19 18 17 16 15 14 13 2007 2008 EBIT % 2009 2010 2011 23
Division - Entrance Systems Good development of automatic doors and Ditec Crawford and FlexiForce experiences good industrial demand SALES share of Group total % 19 Service contract sales in steady growth Synergies from Crawford and Normstahl larger than expected Sales and EBIT more than doubled EBIT % Operating margin (EBIT) + Volume +5% - Dilution from acquisitions -2.0% - Increased R&D and sales costs 19 18 17 16 15 14 13 12 2007 2008 2009 2010 2011 25
The new ASSA ABLOY Entrance Systems ASSA ABLOY Entrance Systems Sales SEK 10.4 B EBIT >12% 3.3 BSEK 3.5 BSEK 0.6 BSEK 1.0 BSEK 0.9 BSEK 1.1 BSEK Direct sales 77% Distribution sales 23% In addition, 38% of Agta Record, Sales SEK 2.0 B 27
Q3 Report 2011 Tomas Eliasson CFO 28
Financial highlights Q3 2011 3rd Quarter Nine months MSEK 2010 2011 Change 2010 2011 Change Sales 9,474 10,841 +14% 27,175 30,042 +11% Whereof Organic growth +2% +4% Acquired growth +18% +16% FX-differences -491-6% -2,113-9% Operating income (EBIT) 1,630 1,751 +7% 4,440 4,743 +7% EBIT-margin (%) 17.2 16.2 16.3 15.8 Operating cash flow 1,890 1,528-19% 4,200 3,286-22% EPS (SEK) 2.93 3.30 +13% 8.03 8.86 +10% 29
Bridge Analysis Jul-Sep 2011 MSEK 2010 Jul-Sep Acq/Div Currency Organic 2011 Jul-Sep 18% -6% 2% 14% Revenues 9,474 1,650-491 208 10,481 EBIT 1,630 176-112 57 1,751 % 17.2% 10.7% 22.8% 27.5% 16.2% Dilution / Accretion -100 bp -30 bp +30 bp 30
P&L Components as % of sales 2010 Q3 2011 Q3 excluding acquisitions 2011 Q3 Direct material 35.0% 36.3% 34.4% Conversion costs 24.4% 23.6% 26.3% Gross Margin 40.6% 40.1% 39.3% S, G & A 23.4% 22.9% 23.1% EBIT 17.2% 17.2% 16.2% 31
Operating cash flow, MSEK 2 000 Back to growth 7 500 7 000 6 500 Quarter 1 500 1 000 500 0 Recession starts 6 000 5 500 5 000 4 500 4 000 3 500 3 000 12-months Quarter Cash Rolling 12-months EBT Rolling 12 months 32
Gearing % and net debt MSEK 30 000 120 25 000 100 20 000 80 Net Debt 15 000 60 Gearing 10 000 5 000 Debt/Equity 51 69 (57) (55) 40 20 0 Net debt/ebitda 0 2.2 Net debt Gearing 33
Gross debt distribution Excluding pension liabilities, derivatives and cash assets Gross debt Net debt 16.4 BSEK 16.2 BSEK Banks 2.5 BSEK Rolling Private placements 4.3 BSEK 1-9 yrs Commercial papers 6.3 BSEK < 1 yr Bonds 3.3 BSEK 2-7 yrs Backup facility 10.0 BSEK untouched 34
Maturities private placements and bonds Strategy not to have in excess of 2 BSEK per annum 4,0 3,5 3,0 2,5 2,0 Banks 2.5 BSEK Rolling Commercial papers 6.3 BSEK < 1 yr Private placements 4.3 BSEK 1-9 yrs Bonds 3.3 BSEK 2-7 yrs 1,5 1,0 0,5 0,0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Backup facility 10.0 BSEK untouched 35
Q3 Report 2011 Johan Molin President & CEO 36
Conclusions Q3 2011 20% underlying growth with 2% organic Strong growth in Asia Stable but slow development in mature markets Good evolution in acquired companies Exciting addition of Albany New manufacturing footprint with 17 closures Strong profit and cash flow 37
Outlook Long Term Organic sales growth is expected to continue at a good rate The operating margin (EBIT) and operating cash flow are expected to develop well 38
Q&A 39