Q3 Report 2010 - Assa Abloy · 3 Financial highlights Jan-Sep 2010 Resumed organic growth and strong profit development Sales 27,175 MSEK +4% 2% organic, +7% acquired growth, -5%

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Q3 Report 2010Johan Molin

President & CEO

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Financial highlights Q3 2010

Strong quarter in all parts– Very solid development (+26%) for Global Technologies– Continued strong growth in APAC and South America– EMEA and Americas bottomed and growing– Margin expansion in all divisions– Bid for ActivIdentity and stake in Agta Record

Sales 9,474 MSEK +13%+6% organic, +10% acquired growth, -3% currency

EBIT 1,630 MSEK +21% Currency effect -28 MSEK

EPS 2.93 SEK +24%Reduced tax rate & depreciation of earn out

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Financial highlights Jan-Sep 2010

Resumed organic growth and strong profit development

Sales 27,175 MSEK +4%2% organic, +7% acquired growth, -5% currency

EBIT 4,440 MSEK +11% Currency effect -191 MSEK

EPS 8.03 SEK +18%Reduced interest and tax rate

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Market highlights

Good growth of electromechanical locks in all parts

Strong customer interest for Cliq Remote

WiFi locks increasingly popular in the USA

Residential digital door locks introduced in Australia

Secure delivery infrastructure introduced in October

WiFi Residential DDLAustralia

Electric strike

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Secure delivery infrastructureLaunched October 2010

Secure encrypted delivery of digital keys– Smart cards– Mobile phones - NFC – ID and banking cards

Online card security management – Card personalization service– Cradle to grave

Secure issuance– Online HDP & DTC printers

Secure vault

TCP/IP Ethernet

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Group sales in local currencies Jan-Sep 2010

2 +30

33 -243 +7

14 +64

6 +8

2 -4

Share of Group sales 2010 YTD, %Year-to-date vs previous year, %

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21 00022 00023 00024 00025 00026 00027 00028 00029 00030 00031 00032 00033 00034 00035 00036 00037 00038 00039 000

2004 2005 2006 2007 2008 2009 2010

Sa

les,

MS

EK

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

Gro

wth

%

Organic Growth Acquired Growth Sales in Fixed Currencies

Sales growth Q3 2010 - Currency adjusted

2010 Q3 +16%Organic +6%Acquired +10%

-2% from 2008 peak

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Operating income (EBIT), MSEK

600

700

800

900

1 000

1 100

1 200

1 300

1 400

1 500

1 600

1 700

2005

2006

2007

2008

2009

2010

3 800

4 000

4 200

4 400

4 600

4 800

5 000

5 200

5 400

5 600

5 800

6 000

Quarter Rolling 12-monthsQuarter 12-months

Run rate 5,838 MSEK (5,484), +6%

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Operating margin (EBIT), %

12,0

13,0

14,0

15,0

16,0

17,020

05

2006

2007

2008

2009

2010

EB

IT %

Quarter Rolling 12-months Long Term Target

Run rate 2010 16.3% (15.5)

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Manufacturing footprint

Conversion to assembly or closures in high cost countries– 37 factories closed to date, 14 to go– 34 factories converted to assembly, 19 to go– 19 offices closed, 6 to go

Consolidation of core production to China and Eastern Europe

Personnel reduction 5,179p, +16% to plan

1,236 more to go

1,106 MSEK remains at the end of the third quarter for all three programs

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Margin highlights Q3 2010

EBIT margin 17.2% (16.0)

- Volume increase of 5%, Price 1%- No acquisition dilution- Negative mix effect due to growth in emerging markets -0.2%+ Manufacturing footprint gives good contribution+ S, G & A cost declining, 23.4% (24.1)

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Acquisitions 2010

Fully active on acquisitions– Growing pipeline with

target 5% growth

11 acquisitions completed in 2010

Annualized 2 300 MSEK, +7%

New acquisitions Q3ActivIdentity 400 MSEK, public offer33% stake in Agta Record

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ActivIdentity, USA

Strengthens HID’s offering in logical access

Products centered around establishing a persons identity when interacting digitally

Strong authentication and card management systems

2,500 customers worldwide, 38% software

220 employees and 400 MSEK

Slightly dilutive 2011

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Agta Record, Switzerland

Same business model as AA Entrance System with end-user focus and service

Reinforces leadership in door automatics

Very complementary with main strength in France and CH

Good synergies within sales, service, products and infrastructure

HQ in Switzerland

1,700 employees and 2,000 MSEK sales

Ambition to acquire over time

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Division - EMEA Slow recovery in all parts

Weak quarter in Eastern Europe, France, Denmark and the Netherlands

Good growth in Finland, Germany, Italy and Spain

Good effect from manufacturing footprint

Strong efficiency gain from seamless flow

Operating margin (EBIT) + Volume 1%+ Good response to new products+ Strong efficiency gains- Raw materials increasing

SALESshare of

Group total %

34

EBIT %

13

14

15

16

17

18

2005

2006

2007

2008

2009

2010

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Division - AmericasSouth America, Mexico and Canada in good growth

Electromechanics developing well

Residential growing for first time since H1 2008

Security doors continued to decline

Strong EBIT performance in all parts

Operating margin (EBIT) + Volume +2%+ Strong efficiency improvement- Raw materials increasing

SALESshare of

Group total %

27

EBIT %

17

18

19

20

21

2005

2006

2007

2008

2009

2010

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Division - Asia Pacific

China sales strong on the back of 3rd tier cities

Korean market continued well

South Asia and especially India is strong

Good growth and solid profit in the Pacific

Good efficiency development

Operating margin (EBIT)+ Volume +15%+ Currency effects-Raw materials increasing

SALESshare of

Group total %

15

EBIT %

6

8

10

12

14

16

2005

2006

2007

2008

2009

2010

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Division - Global Technologies

Fantastic evolution in HID– Access control growing in all parts of the world– Secure issuance benefitting from new printers– Identification solutions in strong demand

Hospitality, first quarter of growth since 2008– Renovation market is back– New RFID systems increasingly popular– Savings and move to China supports profit

Operating margin (EBIT)+ Volume +26%+ All business units doing well

SALESshare of

Group total %

13

EBIT %

1213141516171819

2005

2006

2007

2008

2009

2010

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Division - Entrance Systems

Quotation levels and orders are slightly growing

Service and service contracts growing

Retail coming back, health care weak

Ditec sales stabilised but dilutive by 1.0%

Operating margin (EBIT) - Volume -1% + Efficiency gains

SALESshare of

Group total %

11

EBIT %

12

13

14

15

16

17

18

2005

2006

2007

2008

2009

2010

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Q3 Report 2010Tomas Eliasson

CFO

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Financial highlights Q3 2010

MSEK 2009 2010 Change 2009 2010 Change

Sales 8,405 9,474 +13% 26,163 27,175 +4%Whereof Organic growth +6% +2%Acquired growth +10% +7%FX-differences -216 -3% -1,240 -5%

Operating income (EBIT) 1,346 1,630 +21% 4,014* 4,440 +11%EBIT-margin (%) 16.0 17.2 15.3* 16.3

Operating cash flow 2,125 1,890 -11% 4,547 4,200 -8%

EPS (SEK)* 2.36 2.93 +24% 6.81 8.03 +18%

*Excluding restructuring and one off charges of 109 MSEK in Q1

3rd Quarter Nine months

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Finance net

Interest net on net debt going down 20%

New rules: Earnouts to be discounted

MSEK Jan-Sep 2009

Jan-Sep 2010

Interest net -403 -320

Exchange effects and otherDefined benefit pensionsDiscounted earnouts

Total other

-74

-51

n/a

-125

-14

-111

-34

-159Total -528 -479

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P&L – Components as % of salesQ3 Year-on-Year

Direct material 33.0% 35.0%

Conversion costs 26.9% 24.4%

Gross Margin 40.1% 40.6%

S, G & A 24.1% 23.4%

EBIT 16.0% 17.2%

2009 2010

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Bridge Analysis – Jul-Sep 2010

MSEK 2009

Jul-Sep

Acq/Div Currency Organic 2010

Jul-Sep

10% -3% 6% 13%

Revenues 8,405 798 -216

-28

12.8%

488

184

37.7%

9,474

EBIT 1,346 127 1,630

% 16.0% 16.0% 17.2%

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Operating cash flow, MSEK

0

500

1 000

1 500

2 000

2005

2006

2007

2008

2009

2010

Qua

rter

3 000

3 500

4 000

4 500

5 000

5 500

6 000

6 500

7 000

7 500

12-m

onth

s

Quarter Rolling 12-months

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Gearing % and net debt MSEK

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

2005

2006

2007

2008

2009

2010

Net D

ebt

0

20

40

60

80

100

120

Gea

ring

Net debt Gearing

Debt/Equity 55 (67)

Debt/Equity 55 (67)

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Q3 Report 2010Johan Molin

President & CEO

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Conclusions Q3 2010

6% organic growth and 16% total growth in Q3

Many new exciting products

Margin expansion in all parts

Strong cash flow

Good activity on acquisitions with ActivIdentity and AgtaRecord

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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

Outlook for 2010

Organic growth is expected to be slightly positive

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Q&A