20% - Assa Abloy

Asia Pacific Division
22
The division manufactures
and sells mechanical and
electromechanical locks,
security doors and fittings
in Asia and Oceania.
1 Excluding restructuring items.
2 2003 has not been adjusted for
IFRS but amortization of goodwill
has been excluded.
Asia Pacific
Strong organic growth and acquisitions
Organic growth in Asia Pacific more than doubled over the
past year, from 4 to 10 percent. In addition to extremely
good growth on local markets, exports to other divisions
also surged. The division carried out three acquisitions
during the year.
Asia Pacific in brief
The division manufactures and sells locks, security doors,
and fittings in Asia and Oceania. The division is divided into
three sub-regions: Pacific (which includes Australia and
New Zealand); China; and the rest of Asia. Pacific accounts
for more than half of sales, China for 30 percent including
exports to fellow subsidiaries in other divisions, and the
rest of Asia for almost 20 percent. The major markets
included in the rest of Asia include Korea, Malaysia, Thailand,
India and Singapore.
60 percent of sales are to the commercial segment and
40 percent to the residential segment. In China the same
types of lock, handle and fittings are often used in both
homes and offices. Sales include products manufactured in
the region and also premium products manufactured in
Europe or North America.
The division’s production plants are located in Australia,
New Zealand, China and Korea. In addition to supporting its
own production units, the division also manufactures components
and finished products for the markets in Europe
and North America.
Report on the year
During the year the division achieved sales of SEK 2,780 M
(2,309), a 20 percent increase. Organic growth was 10 percent
and acquired growth was 14 percent. Operating
income was up 51 percent to SEK 322 M (213), which represents
an operating margin (EBIT) of 11.6 percent (9.2).
Sales and Operating income
Sales Operating income
SEK M SEK M
3,000
400
2,500
2,000
1,500
1,000
500
350
300
250
200
150
0
100
03 04 05 06 07
Sales, SEK M
1, 2
Operating income, SEK M
Capital employed and
Return on capital employed
Capital
employed
SEK M %
3,000
30
2,500
2,000
1,500
1,000
500
Australia and New Zealand
Demand was good during the year and sales showed solid
growth, resulting in increased market share. The strongest
demand was in the commercial segment; demand on the
residential market was somewhat weaker. New products
with improved function or design were important growth
drivers.
A new sales organization was implemented during
2007, based on market segmentation and specification
work, with key-account managers for large national customers.
In Australia ASSA ABLOY’s successful campaign to
expand collaboration with architects led to advances in the
specification market. The division also strengthened its collaboration
with the Royal Australian Institute of Architects
(RAIA) during the year with the purpose of promoting
innovative design concepts by encouraging customers to
influence tomorrow’s door solutions.
In early 2007 ASSA ABLOY acquired the Australian company
Pyropanel, a leading manufacturer of fire doors. The
acquisition strengthens ASSA ABLOY’s position in the commercial
segment and creates further growth opportunities.
China
The Chinese lock market is growing quickly thanks to the
rapid pace of urbanization and modernization of both residential
and commercial buildings, which in turn increases
demand for security. Between 2005 and 2015, 300 million
Chinese are expected to move from the country to the city.
The market is fragmented, but ASSA ABLOY has a leading
position as the largest lock manufacturer in China.
Sales in China take place mainly via distributors. The
network of distributors was substantially expanded during
2007 and today the Group’s products can be found in
about 2,000 sales locations. Distribution will be further
expanded in 2008.
Return on
capital employed
25
20
15
10
0
0
03 04 05 06 07
Capital employed, SEK M
1, 2
Return on capital employed, %
5
Operating income and Cash flow
SEK M
350
300
250
200
150
100
50
0
03 04
05
06
07
1, 2
Operating income, SEK M
1, 2
Cash flow, SEK M