20% - Assa Abloy

The Clarion Hotel Sign is
Stockholm’s biggest hotel
and features solutions
from three of ASSA ABLOY’s
companies, ASSA, Ving-
Card and Besam. Scandinavian
architecture, design
and gastronomy are the
guiding stars at the hotel.
All areas present classic
furniture from Scandinavia’s
most famous designers
– names like Arne
Jacobsen, Bruno Mathsson
and Alvar Aalto. Swedish
architect Gert Wingårdh
designed the building.
Statement by the President and CEO
Focus on growth and innovation
ASSA ABLOY saw strong growth in sales and profit in 2007.
Organic growth amounted to 7 percent while acquired
growth provided another 5 percent for a grand total of 12
percent. Sales amounted to SEK 33,550 M (31,137). Operating
income rose by 14 percent, totaling SEK 5,458 M
(4,771), the highest ever for the Group. I am particularly
pleased to record that all five divisions showed growth,
enhanced profitability and improved return.
ASSA ABLOY’s strong growth is based on long-term structural
growth in demand on our most important markets in
Europe and North America; rising demand on new markets;
and progress in fast-growing segments such as electromechanical
locks, access control, secure issuance of smart
cards, automatic doors and identification technology. During
the year, the Group acquired 17 companies with annualized
sales of about SEK 1,800 M. These acquisitions complemented
ASSA ABLOY’s product offering, brought in new
technology and expanded the Group’s geographical reach.
All five divisions acquired new units. Some of the larger
acquisitions included Baodean in China, iRevo in Korea,
Aontec in Ireland, Powershield in Northern Ireland, Pemko
in North America and Pyropanel in Australia. Acquisitions
will continue to be a key part of ASSA ABLOY’s growth strategy,
with the goal of adding another 5 percent annually.
The three-year restructuring program for the Group’s
manufacturing units continued to develop well during the
year. All 50 subprojects are progressing according to plan
and over 1,300 people – out of a planned total of over
2,000 – have now left the Group. By the end of 2007 savings
had achieved over 60 percent of the goal, which is to
reach SEK 600 M in annual savings in 2009.
Volume growth, acquisitions, price control and completed
structural changes, as well as continuous improvements
in production, administration and marketing activities,
contributed to the strong financial improvement.
During the course of the year we made a few changes in
Group Management. Tim Shea, Head of the Hospitality
business unit of Global Technologies division, and Denis
Hébert, Head of the HID Group business unit of the same
division, were appointed members of the Executive Team.
Both have many years of experience in their fields and have
been business unit managers at ASSA ABLOY for many
years.
Trends in the divisions
EMEA division
The EMEA division had a strong organic growth of 7 percent
(8) in 2007, although the general market trend was somewhat
weaker in the latter half of the year. Operating income
rose by 16 percent. The change process has moved at a
rapid pace all year. The single largest part of the three-year
restructuring program involves the European production
facilities. The change process in the marketing and sales
organizations, which includes combining them under the
ASSA ABLOY brand, has produced good results. After
CEO’s statement
3
important development work in pan-European R&D
groups, several joint product platforms will be launched in
2008. After a few years of low acquisition activity, several
acquisitions went through this year, including Alba in Israel,
Powershield in Northern Ireland and Esety in Italy.
Americas division
The Americas division showed strong growth during the
year, even though organic growth of 5 percent (10) was
lower than last year. Demand in the commercial segment
continued to be strong, while demand in the residential
segment dropped during the year. However, this had little
effect on the division since it has low exposure to the residential
segment. Profitability – the highest in the Group –
was further enhanced during the year through growth and
streamlining measures. Operating income increased by
3 percent. Adoption of Lean methods has advanced a long
way in Americas division. The focus on a joint sales organization
and on stepping up specification work to stimulate
demand has been very successful. During the year, the division
acquired the Pemko company in the United States,
which makes door components. The integration of previous
acquisitions was completed, with good results.
Asia Pacific division
During the year, the Asia Pacific division made a successful
turnaround, showing an upswing in both growth and profitability.
Organic growth more than doubled to 10 percent
(4) and operating income increased by 51 percent. Sales in
Australia, New Zealand, China and the other Asian markets
progressed very well, with strong growth. The marketing
organization was restructured to provide more in-depth
and focused targeting of specific customer segments, and
the product offering was divided into categories for different
customer needs. Continued structural changes, with
production moving out of Australia and New Zealand, as
well as further price increases, are expected to improve
profitability. Early in the year the Group acquired Pyropanel
in Australia, and towards the end of the year it acquired
iRevo in Korea and Baodean in China. The Korean acquisition
will be very important to advancement in the electromechanical
field, and the Chinese acquisition is a key move
in retaining the Group’s leading position on the Chinese
market.
Global Technologies division
Growth for the Global Technologies division was very
strong during the year, with organic growth of 11 percent
(12). Operating income rose by 23 percent. The HID Group
business unit had great sales success in both electronic
access control and the area of secure issuance of smart
cards. In the latter half of the year the HID Group and ITG
business units were merged, so that the HID Group unit
now also includes identification technology. This fusion will
give good sales synergies and benefits of coordination in
production and administration. During the year, several