ASSA ABLOY: Quarterly Report Q3 2021

Rhea-AI Summary

ASSA ABLOY reported an 8% increase in net sales for Q3 2021, reaching SEK 23,930 M, driven by strong organic growth of 7% in the Americas and Entrance Systems. However, sales dropped in Asia Pacific due to lockdowns. The company signed agreements for five acquisitions, including HHI, enhancing its North American residential business. Operating income (EBIT) fell 6% to SEK 3,392 M, with an operating margin of 14.2%. Net income decreased by 5% to SEK 2,392 M, while earnings per share were SEK 2.15.

Positive

• Net sales increased by 8% to SEK 23,930 M.
• Organic sales growth of 7% in the Americas reflects robust demand.
• Five acquisitions signed, including HHI, strengthening North American presence.
• Operating cash flow reached SEK 3,619 M, with a conversion rate of 112%.
• Underlying megatrends in digitalization and urbanization remain strong.

Negative

• Operating income (EBIT) declined by 6% to SEK 3,392 M.
• Net income dropped by 5% to SEK 2,392 M.
• Organic sales in Asia Pacific decreased by 7% due to lockdowns.

STOCKHOLM, Oct. 27, 2021 /PRNewswire/ -- Quarterly Report Q3 2021.

Third quarter

• Net sales increased by 8% to SEK 23,930 M (22,225), with organic growth of 7% (–5) and acquired net growth of 2% (4)         
• There was very strong organic sales growth in Americas and Entrance Systems and strong organic sales growth in EMEIA and Global Technologies, but sales decreased in Asia Pacific      
• An agreement was signed to acquire HHI, a leading provider of security, plumbing, and builders' hardware products to the North American residential segment. This is an important strategic step in further developing the Group's residential business in North America        
• In addition to HHI, four other acquisitions with combined annual sales of about SEK 1,500 M were signed           
• Operating income (EBIT^[1]) was SEK 3,392 M (3,593), corresponding to an operating margin of 14.2% (16.2). Excluding an operating loss of SEK 196 M for the CERTEGO divestment in the quarter and a one-time operating gain of SEK 252 M in 2020, the operating margin was 15.0% (15.0)      
• Net income¹ amounted to SEK 2,392 M (2,528)      
• Earnings per share¹ amounted to SEK 2.15 (2.28) 
• Operating cash flow amounted to SEK 3,619 M (4,407).

Sales and income

 

	Third quarter				January-September
	2020	2021	Δ		2020	2021	Δ
Sales, SEK M	22,225	23,930	8%		64,351	69,384	8%
Of which:
Organic growth	–1,043	1,576	7%		–6,001	6,661	11%
Acquisitions and divestments	816	490	2%		2,118	2,211	4%
Exchange-rate effects	–1,581	–361	–1%		–849	–3,839	–7%
Operating income (EBIT)[1], SEK M	3,593	3,392	–6%		8,441	10,168	20%
Operating margin (EBITA)1, %	16.80%	14.80%			13.80%	15.30%
Operating margin (EBIT)1, %	16.20%	14.20%			13.10%	14.70%
Income before tax1, SEK M	3,417	3,233	–5%		7,828	9,719	24%
Net income1, SEK M	2,528	2,392	–5%		5,792	7,858	36%
Operating cash flow, SEK M	4,407	3,619	–18%		9,031	9,881	9%
Earnings per share1, SEK	2.28	2.15	–5%		5.21	7.07	36%
[1] Excluding non-cash operating income in Q3 2020 from revaluation at fair value of 39% ownership in agta record, totaling SEK 1,910 M. The operating income had no tax impact.

Comments by the President and CEO

Strong profitable sales growth

The reopening of society continued in most of our core markets during the quarter. This contributed to a strong organic sales growth of 7% for the Group in the third quarter. Organic sales growth of 7% in EMEIA and 14% in Americas reflected increased mobility, improved commercial performance and continued strong residential demand in our core markets despite high comparatives versus last year. Asia Pacific's organic sales declined by 7%, due to new lockdowns in core markets and a slow-down in China. Organic growth in Global Technologies was 7%, driven by higher demand for our office-access solutions and strong growth in non-travel- related verticals. However, component shortages affected the growth negatively and our travel-related business is recovering only slowly. Entrance Systems continued to show very strong organic growth of 10%. Sales for all divisions were affected positively by price adjustments to offset the higher material costs.

Operating income, excluding one-time items in both 2020 and 2021, increased by 7% and the adjusted operating margin was 15.0%, the same level as last year on a comparable basis. Thanks to several price adjustments and operational improvements we achieved an operating leverage of 22%, despite the significantly higher material costs, higher logistical costs, and operational challenges linked to component shortages. Operating cash flow was strong and reached SEK 3,619 M with a conversion rate of 112%.

Positive growth generating trends

As society normalizes, we are seeing increased activity levels in the upgrading and renovation of buildings and premises. There is also a strong positive trend in environmentally adapted construction, another area where we lead the industry and where we are continuing to invest in product innovation. Underlying megatrends including digitalization, urbanization and demand for convenient security solutions in the global markets remain solid, and we are seeing a further acceleration towards electromechanical solutions (where sales in fixed currencies grew by 8% during the third quarter).

Acquisitions remain an important pillar of our growth. During the quarter we signed five acquisitions with combined annual sales of about SEK 15 billion. These include, subject to regulatory approval, the Home and Hardware Improvement (HHI) division of Spectrum Brands, which is the largest acquisition in our history. HHI is a great addition to the Group and constitutes an important strategic step in developing our residential business in North America. We look forward to welcoming the HHI employees into the Group and to working together to develop new and exciting residential products that will accelerate our underlying growth.

Looking ahead, we expect the growth in the European and American markets to normalize, while the recovery in the travel-related verticals and in Asia will be slower. We also assume material shortages, logistic challenges and cost inflation to continue to impact our markets during the rest of the year.

Thank you for your continued support and trust in ASSA ABLOY.

Stockholm, 27 October 2021
Nico Delvaux
President and CEO

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

ASSA ABLOY is holding a telephone and web conference  at 09.30 on 27 October 2021 which can be followed online at www.assaabloy.com.

It is possible to submit questions by telephone on: +46 8 566 426 93, +44 333 300 9031 or +1 833 526 8380

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 CEST on 27 October 2021.

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SOURCE ASSA ABLOY

FAQ

What were ASSA ABLOY's Q3 2021 net sales?

ASSA ABLOY reported net sales of SEK 23,930 M for Q3 2021, an 8% increase compared to the previous year.

How did ASSA ABLOY's earnings per share change in Q3 2021?

Earnings per share for Q3 2021 were SEK 2.15, a 5% decrease from SEK 2.28 in Q3 2020.

What key acquisitions did ASSA ABLOY announce in Q3 2021?

In Q3 2021, ASSA ABLOY announced five acquisitions, including HHI, aimed at boosting its residential business in North America.

What challenges did ASSA ABLOY face in Asia Pacific during Q3 2021?

ASSA ABLOY experienced a 7% decline in organic sales in Asia Pacific due to new lockdowns and a slowdown in China.

How did ASSA ABLOY's operating income change in Q3 2021?

Operating income (EBIT) for ASSA ABLOY in Q3 2021 fell by 6% to SEK 3,392 M.