ASSA ABLOY: Quarterly Report Q1 2020

Results impacted by Covid-19

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Apr 29, 2020, 02:46 ET

STOCKHOLM, April 29, 2020 /PRNewswire/ -- First quarter

Net sales increased by 3% to SEK 22,173 M (21,505), with organic growth of -3% (5) and acquired net growth of 3% (3)
Growth in Americas, stable sales levels in Global Technologies and Entrance Systems, but lower sales in Asia Pacific and EMEA
Two acquisitions signed with expected combined annual sales of SEK 200 M
Conditional clearance has been received from the EU Commission to acquire the 54% shareholding in agta record. Closing of the Acquisition is expected in the second half of 2020
Operating income (EBIT) decreased by 15% and amounted to SEK 2,751 M (3,246), corresponding to an operating margin of 12.4% (15.1)
Net income amounted to SEK 1,864 M (2,218)
Earnings per share amounted to SEK 1.68 (2.00)
Operating cash flow increased by 3% to SEK 1,206 M (1,171)
The Board of Directors proposes a revised first dividend for 2019 of SEK 2.00 (3.50) per share.

Sales and income
	Full year			First quarter
	2018	2019	Δ	2019	2020	Δ
Sales, SEK M	84,048	94,029	12%	21,505	22,173	3%
Of which:
Organic growth	3,901	2,652	3%	1,006	-759	-3%
Acquisitions and divestments	1,793	3,063	3%	689	648	3%
Exchange-rate effects	2,217	4,265	6%	1,260	780	3%
Operating income (EBIT)^{1 2}, SEK M	12,909	14,920	16%	3,246	2,751	-15%
Operating margin (EBITA)^{1 2}, %	15.8%	16.4%		15.6%	13.0%
Operating margin (EBIT)^{1 2}, %	15.4%	15.9%		15.1%	12.4%
Income before tax¹ ², SEK M	12,110	13,883	15%	2,997	2,519	-16%
Net income^{1 2}, SEK M	8,984	10,243	14%	2,218	1,864	-16%
Operating cash flow, SEK M	11,357	14,442	27%	1,171	1,206	3%
Earnings per share¹ ², SEK	8.09	9.22	14%	2.00	1.68	-16%


¹Excluding costs for a new manufacturing footprint program launched in 2018, totaling SEK -1,530 M before tax, corresponding to SEK -1,208 M after tax.
²Excluding impairment of goodwill and other intangible assets in Q2 2018, totaling SEK -5,595 M before tax, corresponding to SEK -5,268 M after tax.

Comments by the President and CEO

Results impacted by Covid-19

The outbreak of Covid-19 led to a challenging beginning of 2020, which impacted most industries globally, including us. In the first quarter our organic sales growth was negative (-3%), but due to positive currency effects (3%) and net acquired growth (3%), total sales increased by 3%. Organic growth was positive in Americas (1%), stable in Global Technologies (0%) and Entrance Systems (0%), but decreased in EMEA (-4%) and in Asia Pacific (-34%) due to effects from Covid-19.

Operating income decreased by 15% to SEK 2,751 M and the operating margin was 12.4%. The operating leverage was significantly impacted by lower volumes, particularly in China and Europe, and by higher logistical and other operating costs. The result was further affected by earlier investments made to accelerate growth. Without Covid-19, operating income would have been in line with last year.

Operating cash flow was solid at SEK 1,206 M and cash conversion in the quarter was 48% (39). Our financial position is robust with an EBITDA/net debt of 2.0, down from 2.2 last year. We have access to multiple sources of financing, but as a precautionary measure, we more than tripled our liquidity level during March.

This is a different crisis

The Covid-19 crisis started in February with a significant effect on our operations and demand in China, which then spread to the rest of Asia and in March rapidly affected demand in the rest of the world. Compared to previous downturns, this crisis is different because of the strict regulations and lockdowns imposed by governments in many markets, which caused the business activity to drop to close to zero almost overnight. This affected both new construction and the aftermarket, where social distancing made it harder for locksmiths and service technicians to visit customers.

We are addressing the extraordinary situation

Our first priority has been the wellbeing of our employees and we have therefore introduced stringent health and safety measures in our operations.

We have also initiated a number of cost-saving measures such as reduced working hours, temporary and permanent layoffs, travel bans, reducing external services and delaying projects. These measures will not impact our excellent customer support and our ability to ramp our operations up or down, but they will lower our running costs in an important way. To ensure that we are positioned to accelerate growth after this crisis, we have decided to continue investments in product innovation and specialized sales.

Outlook

Assuming that the demand in our core markets will continue to be significantly affected by Covid-19, as experienced in many markets since February, we expect our sales and our operating margin in the coming months to be significantly lower than in the first quarter. However, when demand recovers and with our strong new- product pipeline, we are confident that we will have the ability to further strengthen our position as the global leader in access solutions.

In conclusion, I would like to thank you for your trust in ASSA ABLOY in these difficult and challenging times.

ASSA ABLOY is holding a telephone and web conference at 09.30 on 29 April 2020 which can be followed on the Internet at www.assaabloy.com.

It is possible to submit questions by telephone on:
+46-8-566-427-06, +44-333-300-9269 or +1-646-722-4957

This information is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CET on 29 April 2020

Further information can be obtained from:
Nico Delvaux,
President and CEO
tel. no: +46-8-506-485-82

Erik Pieder,
Executive Vice President and CFO
tel.no: +46-8-506-485-72

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SOURCE ASSA ABLOY