Headline: "ASSA ABLOY Reports Robust Q3 Growth Amid Acquisitions"

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Headline: "ASSA ABLOY Reports Robust Q3 Growth Amid Acquisitions"

ASSA ABLOY (ASSA-B.ST), the world's largest lock manufacturer, reported modest organic sales growth and strong performance in acquisitions in its third-quarter interim report for 2024. CEO Nico Delvaux highlighted that total sales increased by 1% from the previous year to 37.5 billion SEK, with organic growth at 0.3% and acquisition-driven growth at 4%. The company achieved a record EBIT of 6.3 billion SEK, an 8% increase from last year, reaching an EBIT margin of 16.7%, the highest for a third quarter since 2017.

Key Points:

  • ASSA ABLOY’s total sales reached 37.5 billion SEK, a 1% increase year-on-year.
  • Organic growth was 0.3%, while growth from acquisitions was 4%.
  • A record EBIT of 6.3 billion SEK with an EBIT margin of 16.7% was achieved, marking an 8% increase from last year.
  • Acquisitions, including Level Lock and SKIDATA, contributed to annual sales of 7 billion SEK.
  • Positive growth was observed in non-residential sectors in North America, while the residential market faced challenges.
  • Africa experienced 13% growth, while Asia saw an 18% decline.
  • The company expects to divest its Citizen ID business in the first quarter of 2025.
  • Cash conversion rate stood at 118% with a return on invested capital at 14.2%.

Outlook:

  • CEO Delvaux expressed uncertainty about market conditions for 2025 due to global political and economic volatility.
  • Interest rate trends are expected to have a positive impact on future performance.
  • The company is investing in growth opportunities and adapting to more challenging market conditions.

Challenges:

  • The residential market continues to pose difficulties.
  • Negative trends in the US market signal that a significant recovery in housing may take time.
  • The EMEIA region is faced with declines in the housing market, affecting overall profitability.

Opportunities:

  • Positive organic growth in Scandinavian countries due to earlier interest rate cuts.
  • The company is ahead of targets in synergies from the SKIDATA acquisition.
  • Expectation of improvements in margins and organic growth with a market growth rate of 4-5%.

Concerns:

  • Volume fell by 1% but was offset by strong price realization and lower material costs.
  • Despite a strong cash conversion rate, operating cash flow was lower than the previous quarter.

Q&A Highlights:

  • Divestment of the Citizen ID business due to challenges in achieving desired margins.
  • Timeline for achieving double-digit EBIT margins from the SKIDATA acquisition within three years.
  • The company is focusing on improving margins by investing in lower-margin areas for faster growth.

ASSA ABLOY demonstrated resilience against diverse global market conditions by achieving record EBIT and EBITDA margins despite challenges in the residential market, particularly in the US and EMEIA regions. The company’s strategic acquisitions and divestments, along with strong operational execution, continue to position it favorably for future growth and profitability.