ASSA ABLOY Reports Strong 2Q 2018

ASSA ABLOY reported its second quarter results from 2018. The company noted it had a solid underlying performance, as net sales increased by 9% to SEK 21,140 million ($2.4 billion), with organic growth of 5% and acquired net growth of 2%. Strong growth was shown by Americas, Global Technologies and Entrance Systems and stable growth by Asia Pacific and EMEA.
 
Contracts have been signed for the acquisition of eight companies with expected combined annual sales of about SEK 1,200 million ($136 million). The Wood Door business in the USA, with annual sales of about SEK 600 million ($68 million), has been divested
 
Operating income (EBIT) amounted to SEK 2,911 million ($330 million), with an operating margin of 13.8%. Operating cash flow increased by 11% to SEK 2,855 M ($324 million).
 
“The second quarter continued with strong organic growth of 5%. Organic growth was strong in Americas (9%), Global Technologies (6%) and Entrance Systems (6%), while Asia Pacific and EMEA reported stable organic sales growth of 2%,” Nico Delvaux, president and CEO of ASSA ABLOY, said. “The second quarter’s operating income declined by 6% year-on-year to SEK 2,911 million, corresponding to an operating margin of 13.8%. The Group’s adjusted operating income, excluding write-downs of operating assets of SEK –400 million, was SEK 3,311 million, corresponding to a stable operating margin of 15.7%.
 
“Operating cash flow was strong in the second quarter and increased by 11% to SEK 2,855 million,” he added. “We are continuing with full focus on our current restructuring programs and, as previously announced, we expect to launch a new program by the end of 2018.”
 
Delvaux said that ASSA ABLOY has been exposed to a general market decline in China since the peak in 2014.
 
“The market situation in China continues to be difficult, as previously reported,” he added. “We expect the operating margin to remain low in the Chinese market for the next few years and this has resulted in a required write-down of SEK 5,595 million for impairment of goodwill and other intangible assets. We also made provisions of SEK 400 million for receivables and inventory in the quarter.
 
“After the events of 2016, our focus was internal and directed to stabilizing the organization,” Delvaux continued. “We are now building a focused China organization around our main brands: PanPan, Yale and ASSA ABLOY. China will remain very important to us, and we remain firmly committed to the market. In China we are now seeing continued urbanization, a growing aftermarket for our products, and increasing demand for more advanced security solutions. We are convinced that with our new business strategy in place China will give us good returns in the longer term.”