Quarterly Report Q2 2023
Strong performance in the second quarter
Second quarter
- Net sales increased by 17% to SEK 34,474 M (29,466), with organic growth of 3% (13) and acquired net growth of 6% (0). Exchange-rates affected sales by 8% (12).
- Very strong organic sales growth in Global Technologies, good growth in the Americas, stable in Entrance Systems, while organic sales declined in Asia Pacific and EMEIA.
- The acquisition of Spectrum Brands’ Hardware and Home improvement division (HHI) was completed in June.
- The divestment of Emtek and Smart Residential business in the U.S. and Canada to Fortune Brands was completed in June. The divestment gain, including exit costs, totaled SEK 3,661 M for the quarter.
- Impairment of goodwill and other intangible assets in Global Technologies led to one-off costs of SEK 2,268 M before taxes.
- Operating income1 (EBIT) increased by 25% and amounted to SEK 5,500 M (4,406), with an operating margin of 16.0% (15.0).
- The operating margin1 (EBIT) excluding the acquisition of HHI and divestment of the Emtek/U.S. Smart Residential was 16.7%.
- Net income1 amounted to SEK 3,731 M (3,156).
- Earnings per share1 amounted to SEK 3.36 (2.84).
- Operating cash flow amounted to SEK 6,671 M (3,787).
Sales and income
| Second quarter | First half-year | |||||
| 2022 | 2023 | Δ | 2022 | 2023 | Δ | |
| Sales, SEK M | 29,466 | 34,474 | 17% | 56,057 | 66,865 | 19% |
| Of which: | ||||||
| Organic growth | 3,324 | 897 | 3% | 6,610 | 3,115 | 5% |
| Acquisitions and divestments | –16 | 2,002 | 6% | –68 | 3,346 | 6% |
| Exchange-rate effects | 2,510 | 2,109 | 8% | 4,061 | 4,346 | 8% |
| Operating income (EBIT)1, SEK M | 4,406 | 5,500 | 25% | 8,407 | 10,686 | 27% |
| Operating margin (EBITA) 1, % | 15.5% | 16.6% | 15.5% | 16.6% | ||
| Operating margin (EBIT)1, % | 15.0% | 16.0% | 15.0% | 16.0% | ||
| Income before tax1, SEK M | 4,208 | 5,054 | 20% | 8,019 | 9,898 | 23% |
| Net income1, SEK M | 3,156 | 3,731 | 18% | 6,015 | 7,423 | 23% |
| Operating cash flow, SEK M | 3,787 | 6,671 | 76% | 4,699 | 10,741 | 129% |
| Earnings per share1, SEK | 2.84 | 3.36 | 18% | 5.41 | 6.68 | 23% |
1 Adjusted for items affecting comparability. Please see the section ‘Items affecting comparability’ in the report for further details about the financial effects.
Comments by the President and CEO
Strong performance in the second quarter
Following a very strong start to the year, I am pleased to report continued good sales growth with very strong operating margin improvement in the second quarter despite a weak residential market. Our sales grew organically by 3%, acquired net growth was 6% and currency contributed 8%.
Global Technologies delivered very strong organic sales growth of 20% as we further reduced our order backlog in Physical Access Control and saw very strong growth in Hospitality. Activity levels in the Americas were high and we report good sales growth of 4%. Sales in Entrance Systems were flat despite high comparable and lower residential demand. Asia Pacific sales declined 2% due to lower internal sales and low residential business. Sales in EMEIA declined by 5% due to very low activity levels in residential new construction.
Our quarterly operating profit, excluding items affecting comparability, increased strongly by 25%. The corresponding operating margin, also excluding the acquisition of HHI and divestment of the Emtek/U.S. Smart Residential, was 16.7%. The operating leverage was very strong at 75%, driven by lower direct material costs, operational efficiencies, and pricing. The operating cash flow improved strongly by 76% to a record SEK 6,671 M.
Further cost measures
In light of the lower residential construction levels, we have diligently implemented short term cost measures to protect our profitability. During 2023, we expect to realize around SEK 0.9 bn in short-term cost reductions on top of the manufacturing footprint program. We have also accelerated our MFP-program and now expect SEK 0.8 bn in savings this year. Our decentralized organization and structural agility will enable us to optimize efficiency and ensure financial stability.
Even if there is a short-term deceleration in the market, we are confident that the long-term growth drivers for access control remain. This includes the transition to electromechanical products, whose sales after currency adjustment grew by 16% in the quarter. We are therefore continuing to invest in R&D. It is the enabler for growth and creates new opportunities. Our dedication to innovation will continue to allow us to stay ahead and respond effectively to the evolving and growing overall market.
We are happy to welcome HHI to the Group
After reaching a settlement with the Department of Justice in the U.S., we are happy to welcome HHI into the Group. HHI is an excellent addition to ASSA ABLOY, complementing our existing business in a strong way. The integration process has initiated and I’m excited to start to realize the synergies of USD 100 M into our results.
We would also like to extend our appreciation to the Emtek and Smart Residential teams in the U.S./Canada that were divested in connection with the HHI acquisition.
Execution of our overall acquisition strategy will continue with an active pipeline.
Thank you for your continued trust in ASSA ABLOY.
Stockholm, July 19, 2023
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
Björn Tibell,
Head of Investor Relations, tel. no: +46 70 275 67 68,
e-mail: [email protected]
ASSA ABLOY is holding a telephone and web conference at 09.30 on July 19, 2023 which can be followed online at assaabloy.com/investors.
It is possible to submit questions by telephone on: 08–505 100 31, +44 207 107 0613 or +1 631 570 5613
This is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CEST on July 19, 2023.