Q4 Report 2018 Q4 2018 in brief Strong organic sales developm ent - - PowerPoint PPT Presentation

Q4 Report 2018

Q4 2018 in brief

• Strong organic sales developm ent

– Very strong growth in Americas and APAC – Strong growth in Global Technologies – Good growth in EMEA – Growth in Entrance Systems

• Electrom echanical products up 3 0 %
• Strong EBI T grow th of 1 2 %

– Margin diluted by M&A and raw material headwind

• Launch of the 7 th m anufacturing footprint program
• Strong cash flow of SEK 4 .9 billion

Q4 2018 figures in summary

• Sales SEK 2 3 ,1 6 7 M

+ 1 5 %

– 6% organic – 3% acquired – 6% currency

• EBI TA-m argin* 1 6 .7 % ( 1 7 .1 % )
• EBI T-m argin 1 6 .2 % ( 1 6 .7 % )
• EBI T SEK 3 ,7 4 6 M

+ 1 2 %

– Amortization of acquisition-related intangible assets SEK –113M (-87)

• EPS

SEK 2 .3 3 + 9 %

3 3 5 9 3 7 4 6 2 700 2 800 2 900 3 000 3 100 3 200 3 300 3 400 3 500 3 600 3 700 3 800 3 900 15 000 16 000 17 000 18 000 19 000 20 000 21 000 22 000 23 000 24 000 25 000 Q4 17 Q4 18 Sales, SEK M EBIT, SEK M

Sales + 1 5 % EBI T + 1 2 %

* ) Operating margin before amortization of intangible aseets recognized in business combinations.

Sales by Country

Oct-Dec 2018

4

Emerging markets comprise Africa, Asia (excl. Japan), the Middle East, Latin America and Eastern Europe.

4 1 + 1 4 + 1 0 3 + 7 + 7 3 8 + 7 + 4 2 + 8 + 8 1 3 + 6 + 3 3

• 3
• 4

ASSA ABLOY 1 0 0 + 9 + 6 Emerging markets 2 3 + 8 + 4

Share of sales, % Change in local currencies QTD 2 0 1 8 vs. QTD 2 0 1 7 , % Organic change QTD 2 0 1 8 vs. QTD 2 0 1 7 , %

Market highlights

• Significant grow th in electrom echanical products

– Especially driven by the Americas division and smart locks – Increasing recurring contribution from mobile keys

• Easier for custom er to buy from Entrance system s

– Merger of Industrial doors and high performance doors – Focus on service

• Openings studio continue to lead in BI M specifications

– New release with major user experience and design uplift

Sales growth, currency adjusted

50 000 55 000 60 000 65 000 70 000 75 000 80 000 85 000

• 10
• 5

5 10 15 20 25 2013 2014 2015 2016 2017 2018 Organic growth, % Acquired growth, % Sales in fixed currencies, SEK M 6 SEK M %

2 3 Quarters w ith positive OG

Operating margin, %

13 14 15 16 17 18 13 14 15 16 17 18 2013 2014 2015 2016 2017 2018 Quarter EBIT Rolling 12-months EBITA* * Rolling 12-months 7

Long term target range ( average)

Run rate: EBI T-m argin 1 5 .8 % * ( 1 6 .2 % )

%

* ) Excluding China write-downs and restructuring items. * * ) Operating margin before amortization of intangible aseets recognized in business combinations.

Operating profit, SEK M

2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 2013 2014 2015 2016 2017 2018 Quarter Rolling 12-months 8 SEK M SEK M

Run rate: EBI T SEK 1 3 ,3 0 9 * M ( 1 2 ,3 4 1 ) + 8 %

+ 6 8 % in 5 years

* ) Excluding China write-downs and restructuring items.

Manufacturing footprint

• New program launched in Q4 2 0 1 8 w ith < 3 years payback tim e
• Closure of ~ 15 factories and > 30 offices
• ~ 1,600 FTE net reduction
• Restructuring cost for the full program SEK 1,500 M
• SEK 1,218 M in Q4 2018 and remainder in Q4 2019
• Annual savings of approximately SEK 800 M by 2021
• Status of program s launched 2 0 0 6 -2 0 1 8
• 88 factories closed to date
• 7 factories closed during the quarter
• Total personnel reduction
• 15,362 FTE in total since 2006
• 962 FTE in recent quarter
• 1,408 FTE to be affected in all programs
• SEK 1 ,1 9 0 M provisions rem ain for all program s

Acquisitions

• Fully active pipeline
• 5 acquisitions in Q4 and 19 in 2018
• Acquired annualized sales SEK 3,800 M
• Divestment of Wood Door business SEK 600 M

Luxer One, USA

• Leading advanced package locker solutions business
• Market leader in the last mile delivery space
• Reinforces position in solutions for home delivery
• Compliments the multi-family product offerings
• ‘Click and collect’ at retail stores
• Turnover of SEK 335 M with 130 employees
• Neutral to EPS

Lorient, UK

• A leading designer and manufacturer of door sealing systems
• Complements the acquisition of Planet GDZ
• Turnover of SEK 220 M with 135 employees
• Accretive to EPS

Acoustic, sm oke, fire and therm al seals Architectural seals

(incl. door drop seals)

EMEA

• Organic grow th of 3 %

– Strong growth in Finland, Germany, the UK and Middle East/ Africa – Good growth in Eastern Europe – Stable growth in Scandinavia, Benelux and South Europe – Slight negative growth in France – Strong growth for Electromechanical products

• Operating m argin 1 6 .6 % ( 1 7 .3 % )

– Dilution from FX, M&A and pension costs

12% 13% 14% 15% 16% 17% 18% 19% 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Sales, SEK M Operating margin, % 2 3 %

• f Group

sales

Excluding restructuring items.

Americas

16% 18% 20% 22% 24% 2 500 3 000 3 500 4 000 4 500 5 000 5 500 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Sales, SEK M Operating margin, %

1 4

2 2 %

• f Group

sales

Excluding restructuring items.

• Organic grow th of 1 4 %

– Very strong growth for US Residential, Electromechanical & High Security and Security doors – Strong growth for US Architectural Hardware, Chile and Mexico – Stable in Canada, Brazil, Colombia and the US Perimeter Protection – Very strong growth for Electromechanical products

• Operating m argin 1 9 .9 % ( 1 9 .9 % )

– Good volume leverage, but dilution from raw material costs, mix and M&A

Asia Pacific

0% 5% 10% 15% 20% 1 000 1 500 2 000 2 500 3 000 * Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 * Q2 18 Q3 18 Q4 18 Sales, SEK M Operating margin, % *

1 5

1 1 %

• f Group

sales

• Organic grow th of 1 1 %

– Very strong growth in Japan, South Asia, I ndia and intra-group sales – Good growth in South Korea and China

• New organization established and new

strategy being implemented in China

– Stable growth in Pacific

• Operating m argin 9 .6 % ( 9 .7 % )

– Good volume leverage, but dilution from FX and M&A

* ) Ex restructuring items in China in Q4 2016 and China write down of SEK 400 M in Q2 2018

Global Technologies

• Organic grow th of 8 %

– HID

• Very strong growth in Secure Issuance

and Identify & Access Solutions

• Strong growth in Physical Access

Control

• Good growth in Identification

Technology and Extended Access

• Negative growth in Citizen ID

– ASSA ABLOY Global Solutions grew strongly

• Strong contribution from all verticals
• Operating m argin 1 9 .9 % ( 2 1 .5 % )

– Dilution from M&A and mix

15% 17% 19% 21% 23% 25% 1 000 1 500 2 000 2 500 3 000 3 500 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Sales, SEK M Operating margin, %

1 6

1 6 %

• f Group

sales

Excluding restructuring items.

Entrance Systems

• Organic grow th of 2 %

– Strong growth in US Residential Doors – Good growth in I ndustrial Doors and Pedestrian Doors – Stable growth in Door components – Negative sales in High Performance Doors and EU Residential Doors

• Operating m argin 1 5 .1 % ( 1 5 .9 % )

– Margin affected by lower sales growth, mix and higher project costs

10% 11% 12% 13% 14% 15% 16% 17% 18% 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500 6 000 6 500 7 000 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Sales, SEK M Operating margin, %

1 7

2 8 %

• f Group

sales

Excluding restructuring items.

Erik Pieder CFO

ASSA ABLOY is the global leader in door opening solutions, dedicated to satisfying end-user needs for security, safety and convenience

1 9

FX & acquisition ‘run-rate’ effects in Q1 2 0 1 9 ( 3 1 Dec 2 0 1 8 ) : SALES FX: + 5% Acq: + 4%

Financial highlights 2018

October-Decem ber January – Decem ber SEK M 2 0 1 7 2 0 1 8 Change 2 0 1 7 2 0 1 8 Change Sales 2 0 ,1 0 9 2 3 ,1 6 7 1 5 % 7 6 ,1 3 7 8 4 ,0 4 8 1 0 %

• Organic growth

878 1,281 6% 2,834 3,901 5%

• Acquired net growth

480 714 3% 1,753 1,793 2%

• FX-differences
• 733

1,063 6% 257 2,217 3% Operating incom e ( EBI T) * 3 ,3 5 9 3 ,7 4 6 1 2 % 1 2 ,3 4 1 1 3 ,3 0 9 8 % EBITA-margin* 17.1% 16.7%

• 0.4 pts

16.5% 16.3%

• 0.2 pts

EBIT-margin* 16.7% 16.2%

• 0.5 pts

16.2% 15.8%

• 0.4 pts

Income before tax* * 3,226 3,515 9% 11,673 12,110 4% Net income* * 2,385 2,588 9% 8,635 8,984 4% EPS* * , SEK 2 .1 5 2 .3 3 9% 7 .7 7 8 .0 9 4 % Operating cash flow 4 ,8 7 6 4 ,9 2 3 1 % 1 0 ,9 2 9 1 1 ,3 5 7 4 %

* ) Excluding China write down of SEK 400 M and impairments of SEK 5,595M in Q2 2018. * * ) Excluding the impairment in China of goodwill and other intangible assets.

Bridge Analysis – Q4 2018

Sales up SEK 3 ,0 5 8 M

• Price + 2% and volume + 4%
• Positive development driven by Americas and Global Technology

EBI T up SEK 3 8 7 M

• Strong contribution from Americas and Global Technology

Margin

• Dilution from acquisitions, raw material costs and lower sales in Entrance Systems

2 0

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 6% 6% 3% 15% 20,109 1,281 1,063 714 23,167 Operating profit 3,359 138 190 59 3,746 Operating margin, % 16.7% 10.8% 17.8% 8.3% 16.2% Dilution/ accretion

• 0.3 pts

0.1 pts

• 0.3 pts

FX & acquisition ‘run-rate’ effects in Q1 2 0 1 9 ( 3 1 Dec 2 0 1 8 ) : SALES FX: + 5% Acq: + 4%

P&L components as % of sales January – December 2018

• Direct Material – dilution due to raw material cost (50bps YTD and 20bps in Q4)
• Conversion cost – slight improvement
• SG&A - leverage from strong organic sales

2 1

% YTD 2 0 1 7 YTD 2 0 1 8

• excl. acquisitions

Δ YTD 2 0 1 8 Direct material

• 36.3%
• 36.8%
• 0.5 pts
• 36.2%

Conversion cost

• 24.3%
• 24.2%

0.1 pts

• 24.2%

Gross margin 39.4% 39.0%

• 0.4 pts

39.6% S, G & A*

• 23.2%
• 23.1%

0.1 pts

• 23.7%

EBIT* 16.2% 16.0%

• 0.2 pts

15.8%

* ) Excluding China write down of SEK 400 M in Q2 2018.

2 2

Operating cash flow, SEK M

2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000 1 000 2 000 3 000 4 000 5 000 6 000 2013 2014 2015 2016 2017 2018 Quarter, SEK M Cash rolling 12 months, SEK M EBT rolling 12 months, SEK M Quarter 12 months

1 2 m onths cash flow / EBT* = 9 4 %

* ) Excluding the impairment in China of goodwill and other intangible assets.

2 3

Gearing % and net debt, SEK M

15 30 45 60 75 90 5 000 10 000 15 000 20 000 25 000 30 000 35 000 2013 2014 2015 2016 2017 2018 Net debt, SEK M Gearing, % Net debt Gearing

Debt/ Equity 5 6 % ( 5 0 % ) Net debt/ EBI TDA* 1 .9 ( 1 .8 )

* ) Excluding China write down of SEK 400 M

2 4 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00 0,50 0,75 1,00 1,25 1,50 1,75 2,00 2,25 2013 2014 2015 2016 2017 2018 Quarter, SEK Rolling 12 months, SEK Quarter

Earnings per share, SEK

12 months

YTD EPS + 4 % ( excl MFP) Q4 EPS + 9 %

* Excluding restructuring items and impairment of intangible assets in China. Chart is restated for Stock split 3: 1 2015.

Nico Delvaux President and CEO

Conclusions Q4 2018

• Strong organic sales developm ent

– Very strong growth in Americas and APAC – Strong growth in Global Technologies – Good growth in EMEA – Growth in Entrance Systems

• Electrom echanical products up 3 0 %
• Strong EBI T grow th of 1 2 %

– Margin diluted by M&A and raw material headwind

• Launch of the 7 th m anufacturing footprint program
• Strong cash flow of SEK 4 .9 billion
• Proposed dividend of SEK 3 .5 0 per share

Appendix

EMEA Financial Review

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 Growth 3% 5% 5% 13% Sales 4,869 159 181 276 5,485 Operating income 842 9 21 39 911 Operating margin, % 17.3% 5.6% 11.4% 14.2% 16.6% Dilution/ accretion

• 0.3 pts
• 0.3 pts
• 0.1 pts

12 months figures Sales 18,081 20,201 EBIT 2,990 3,256 Operating cash flow before paid interest 2,977 2,819 Cash flow/ EBIT 99% 87%

2 9

Americas Financial Review

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 Growth 14% 8% 0% 22% Sales 4,243 606 307 17 5,173 Operating profit 847 138 66

• 23

1,027 Operating margin, % 19.9% 22.8% 21.6%

• 138.0%

19.9% Dilution/ accretion 0.4 pts 0.1 pts

• 0.5 pts

12 months figures Sales 17,940 19,817 EBIT 3,815 3,941 Operating cash flow before paid interest 3,491 3,903 Cash flow/ EBIT 92% 99%

3 0

Asia Pacific Financial Review

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 Growth 11% 4% 0% 15% Sales 2,400 263 92 2,756 Operating profit 232 27 7

• 2

264 Operating margin, % 9.7% 10.3% 7.6% n/ a 9.6% Dilution/ accretion 0.1 pts

• 0.1 pts
• 0.1 pts

12 months figures* Sales 9,211 9,949 EBIT 934 892 Operating cash flow before paid interest 859 811 Cash flow/ EBIT 92% 91%

3 1

* ) Excluding China write down SEK 400 M in Q2 2018.

Global Technologies Financial Review

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 Growth 8% 8% 11% 27% Sales 2,835 252 176 339 3,602 Operating profit 608 33 43 33 716 Operating margin, % 21.5% 13.0% 24.2% 9.7% 19.9% Dilution/ accretion

• 0.5 pts

0.0 pts

• 1.1 pts

12 months figures Sales 10,373 11,951 EBIT 1,946 2,387 Operating cash flow before paid interest 1,732 2,463 Cash flow/ EBIT 89% 103%

3 2

Entrance Systems Financial Review

SEK M Q4 2 0 1 7 Organic Currency Acq/ Div Q4 2 0 1 8 Growth 2% 6% 1% 9% Sales 6,072 142 321 82 6,616 Operating profit 966

• 37

56 13 998 Operating margin, % 15.9%

• 25.9%

17.5% 15.6% 15.1% Dilution/ accretion

• 0.9 pts

0.1 pts 0.0 pts 12 months figures Sales 21,781 23,762 EBIT 3,087 3,358 Operating cash flow before paid interest 3,065 2,772 Cash flow/ EBIT 99% 83%

3 3

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