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ASSA ABLOY

Earnings Release Jun 30, 2017

2882_ir_2017-06-30_bbe190e8-4106-44de-b6ca-8cf43122f096.pdf

Earnings Release

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  • Net sales increased by 8% to SEK 19,387 M (17,894), with organic growth of 2% (4) and acquired growth of 2% (4)
  • Good growth was shown by EMEA, Americas, Global Technologies and Entrance Systems and negative growth by Asia Pacific
  • Contracts have been signed for the acquisition of five companies with expected combined annual sales of about SEK 900 M
  • Operating income (EBIT) increased by 7% to SEK 3,114 M (2,910). The operating margin was 16.1% (16.3)
  • Net income amounted to SEK 2,179 M (2,026)
  • Earnings per share increased by 8% and amounted to SEK 1.96 (1.82)
  • Operating cash flow increased by 2% to SEK 2,575 M (2,519).
. .
Earnings per
Second quarter First half-year
2016 2017 Δ 2016 2017 Δ
Sales, SEK M 17,894 19,387 8% 33,785 37,529 11%
Of which:
Organic growth1) 602 344 2% 1,002 1,366 4%
Acquisitions 593 451 2% 1,083 900 3%
Exchange-rate effects1) -383 698 4% -633 1,478 4%
Operating income (EBIT), SEK M 2,910 3,114 7% 5,321 5,901 11%
Operating margin (EBIT), % 16.3% 16.1% 15.7% 15.7%
Income before tax, SEK M 2,729 2,944 8% 4,938 5,537 12%
Net income, SEK M 2,026 2,179 8% 3,664 4,097 12%
Operating cash flow, SEK M 2,519 2,575 2% 3,017 3,399 13%
Earnings per share (EPS), SEK 1.82 1.96 8% 3.30 3.69 12%

1) The sales components Organic growth and Exchange-rate effects have been restated for the first half-year of 2016. No effect on sales figures.

"The second quarter was another good quarter for ASSA ABLOY," says Johan Molin, President and CEO. Organic growth was 2% because of the fewer working days resulting from Easter during the quarter. This means that we have an organic growth of 4% for the first half-year. Sales in North America continued to develop well. In Europe the underlying demand is good but we have not seen any appreciable improvement. Sales in China fell once again, and disappointingly they also continued to decrease in Brazil and in the Middle East.

"Entrance Systems, Global Technologies and Americas all produced 3% organic growth, while EMEA grew by 2%. However, Asia Pacific showed negative growth because of weak demand in China.

"It is pleasing to see that our investments in software solutions to support architects and others who specify door solutions are leading to more inquiries and increased sales. It is also very gratifying that we are launching so many new and exciting products, primarily electronic and digital solutions. One example is a new smart handle for inner doors which provides full RFID compatibility and can be installed and integrated cost-effectively with virtually all access control systems on the market, but can also be used as a freestanding unit.

"During the quarter contracts were signed for the acquisition of five companies, including Arjo, a leading supplier of physical and digital identity solutions for national ID documents. The company strengthens our present offering of secure identity solutions and offers complementary growth opportunities.

"Operating income for the quarter increased by 7% and amounted to SEK 3,114 M, with an operating margin of 16.1% (16.3). The margin increased in EMEA and Entrance Systems divisions and remained stable for Americas and Global Technologies, but as expected Asia Pacific was weak. The operating cash flow improved by 2%.

"My judgment is that the global economic trend has improved to some degree compared with last year. On most markets in North and South America and in parts of Europe there is a positive trend, but on some markets, chiefly in Asia and the Middle East, the trend is weak. However, our strategy of expanding our market presence, even on the emerging markets, remains unchanged. We are also continuing our investments in new products, especially in the growth area of electromechanics."

Sales, 12 months

Operating cash flow by quarter and last 12 months

The Group's sales amounted to SEK 19,387 M (17,894). Organic growth for comparable units was 2% (4). Acquired units contributed 2% (4). Exchange-rate effects affected sales by SEK 698 M (-383), equivalent to 4% (-3). Operating income before depreciation and amortization, EBITDA, amounted to SEK 3,543 M (3,305). The corresponding EBITDA margin was 18.3% (18.5). The Group's operating income, EBIT, amounted to SEK 3,114 M (2,910). The operating margin was 16.1% (16.3).

Net financial items amounted to SEK -170 M (-181). The Group's income before tax was SEK 2,944 M (2,729), an increase of 8% compared with last year. Exchange-rate effects had an impact of SEK 96 M (-77) on income before tax. The profit margin was 15.2% (15.2). The underlying estimated effective tax rate on an annual basis was 26% (26). Earnings per share amounted to SEK 1.96 (1.82), an increase of 8% compared with last year.

The Group's sales for the first half of 2017 totaled SEK 37,529 M (33,785), representing an increase of 11%. Organic growth was 4% (3). Acquired units contributed 3% (3). Exchange-rate effects affected sales positively by SEK 1,478 M (-633), equivalent to 4% (-2), compared with the first half of 2016.

Operating income before depreciation and amortization, EBITDA, for the halfyear amounted to SEK 6,752 M (6,092). The corresponding margin was 18.0% (18.0). The Group's operating income, EBIT, amounted to SEK 5,901 M (5,321), which was an increase of 11% compared with last year. The operating margin was 15.7% (15.7).

Earnings per share for the first half-year increased to SEK 3.69 (3.30), an increase of 12% compared with last year. Operating cash flow totaled SEK 3,399 M (3,017).

Payments related to all current restructuring programs amounted to SEK 136 M (50) in the quarter. The restructuring programs proceeded according to plan and led to a reduction in personnel of 158 people during the quarter and 12,477 people since the projects began in 2006.

At the end of the half-year provisions of SEK 1,342 M remained in the balance sheet for carrying out the programs.

Magnus Kagevik, Executive Vice President and Head of Asia Pacific Division, has decided to leave ASSA ABLOY after ten years' service in various management positions in the Group. Recruitment of a replacement has begun. Magnus Kagevik will remain in his present job until a successor is in post.

Juan Vargues, Executive Vice President and Head of Entrance Systems Division, has after a long and successful service time decided to leave ASSA ABLOY for a new positon as CEO of a Swedish listed company. Juan Vargues will remain in his position until the beginning of 2018 and the process of finding his successor has been initiated.

The Stockholm Administrative Court of Appeal decided in June 2017 not to allow tax deductions for interest expenses relating to one of the Group's subsidiaries for the years 2008-2012 on the grounds that the deductions were wrongly allocated. The decision will be appealed.

Including additional tax and other charges, the judgment involves a total tax payment of SEK 847 M. The judgment will have no impact on ASSA ABLOY's net income for the second quarter or for the full year 2017, but will affect cash flow negatively in the third quarter by the same sum as the payment made.

Sales for the quarter in EMEA division totaled SEK 4,529 M (4,234), with organic growth of 2% (6). Growth was strong in Great Britain and in eastern Europe. Southern Europe and Israel had good growth. Scandinavia, Finland, Germany, France and Benelux were stable, while Africa and the Middle East had negative sales growth. The positive trend for electromechanical products continued. Acquired growth was 2%. Exchange-rate effects on sales were 3%. Operating income totaled SEK 713 M (649), which represented an operating margin (EBIT) of 15.7% (15.3). Return on capital employed amounted to 19.0% (18.4). Operating cash flow before interest paid totaled SEK 461 M (581).

Sales for the quarter in Americas division totaled SEK 4,704 M (4,291), with organic growth of 3% (8). Growth was strong for Security doors, Security fencing and High-security products in the USA, and also for Mexico and Latin America apart from Brazil. Sales growth was good for Electromechanical products and in Canada, and stable for Traditional lock products and for the Private residential market in the USA. Brazil continued to show a negative sales development. Acquired growth was 1%. Exchange-rate effects on sales were 6%. Operating income totaled SEK 1,041 M (949), which represented an operating margin (EBIT) of 22.1% (22.1). Return on capital employed amounted to 26.1% (26.0). Operating cash flow before interest paid totaled SEK 1,163 M (1,127).

Sales for the quarter in Asia Pacific division totaled SEK 2,445 M (2,518), with organic growth of -6% (-8). Strong growth was achieved in Japan and South Asia. Sales growth was good in South Korea and in Pacific. Digital door locks grew strongly in the region. However, sales in China fell, mainly because of a strong decline for fire and security doors. Acquired growth was 0%. Exchangerate effects on sales were 3%. Operating income totaled SEK 274 M (355), which represented an operating margin (EBIT) of 11.2% (14.1). Return on capital employed amounted to 9.0% (11.5). Operating cash flow before interest paid totaled SEK 116 M (362).

Sales for the quarter in Global Technologies division totaled SEK 2,640 M (2,424), with organic growth of 3% (5). Access control, Identification technology and Project business had strong growth within HID Global. However, Secure issuance, Logical access and Government ID all had a negative development. Hospitality showed continued strong growth. Acquired growth was 2%. Exchange-rate effects on sales were 4%. Operating income amounted to SEK 486 M (447), which represented an operating margin (EBIT) of 18.4% (18.5). Return on capital employed amounted to 17.0% (17.4). Operating cash flow before interest paid totaled SEK 511 M (320).

Sales for the quarter in Entrance Systems division totaled SEK 5,381 M (4,767), with organic growth of 3% (4). Door components had strong growth, as did Industrial and garage doors in the USA. Door automation, High-speed doors and Gate automation showed good growth, while sales of Industrial doors in Europe were stable. Acquired growth was 5%. Exchange-rate effects on sales were 5%. Operating income totaled SEK 720 M (628), which represented an operating margin (EBIT) of 13.4% (13.2). Return on capital employed amounted to 14.7% (13.7). Operating cash flow before interest paid totaled SEK 638 M (632).

A total of two minor acquisitions were consolidated during the quarter. The combined acquisition price for the seven companies acquired during the halfyear amounted to SEK 671 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 535 M. The acquisition price is adjusted for acquired net debt and estimated deferred considerations. Estimated deferred considerations amounted to SEK 157 M.

On 29 May it was announced that ASSA ABLOY had signed a contract to acquire IDS, the leading South African manufacturer and distributor of electronic security solutions. Its sales in 2017 are expected to amount to SEK 210 M and the acquisition is expected to be completed during the third quarter of 2017.

On 4 July it was announced that ASSA ABLOY had acquired Arjo Systems SAS, a leading supplier of physical and digital identity solutions for national ID documents. The company has 100 employees and its sales in 2017 are expected to amount to SEK 550 M.

The demand for sustainable products is increasing. For ASSA ABLOY this provides a commercial opportunity since customers are choosing energy-efficient solutions and environmentally labeled products to an ever increasing extent. The Group is continuing to develop and launch environmentally friendly products at a rapid pace. During the second quarter Entrance Systems division launched a new energy-efficient version of its '1042' overhead door. The product is one of the division's big sellers and is used in environments with frequent openings, where at the same time a door with a high insulation effect is required. The new overhead door opens and closes four times as fast as the standard model. The increased speed means that the door is open for a shorter time which, together with improved insulation, is calculated to reduce customers' energy consumption by up to 12% compared with a traditional overhead door. The faster opening and closing sequence also produces less draught and thus improves comfort for the people occupying the building.

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 2,113 M (1,963) for the first half-year. Operating income for the first half-year amounted to SEK 950 M (875). Investments in tangible and intangible assets totaled SEK 12 M (7). Liquidity is good and the equity ratio was 41.8% (42.9).

ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. Significant accounting and valuation principles are detailed on pages 68-73 of the 2016 Annual Report. This Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Interim Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

The new standards IFRS 9 (Financial instruments) and IFRS 15 (Revenue from Contracts with Customers) are to be applied from the financial year beginning 1 January 2018, while IFRS 16 (Leases) takes effect on 1 January 2019. Earlier application is allowed for all standards.

The project that began last year because of the introduction of IFRS 15 has proceeded according to plan during the first half-year of 2017 with evaluation and analysis of possible effects on each division. The Group's judgment is that the standard will have little or no impact on the Group's income or financial position.

ASSA ABLOY makes use of a number of financial performance measures that are not defined in the reporting rules that the company uses – so-called 'alternative performance measures'. For definitions of financial performance measures, refer to Page 19 of this Quarterly Report and to the company's latest Annual Report. To check how the financial measurements have been calculated for current and earlier periods, refer to the tabulated figures in this Quarterly Report and to the company's Annual Report. The Annual Reports for the years 1994 to 2016 appear on the company's website www.assaabloy.com.

Totals quoted in tables and statements may not always be the exact sum of the individual items because of rounding differences. The aim is that each line item should correspond to its source, and rounding differences may therefore arise.

No transactions that significantly affected the company's position and income have taken place between ASSA ABLOY and related parties.

As an international Group with a wide geographic spread, ASSA ABLOY is exposed to a number of business, financial and tax-related risks. The business risks can be divided into strategic, operational and legal risks. The financial risks are related to such factors as exchange rates, interest rates, liquidity, the giving of credit, raw materials and financial instruments. Risk management in ASSA ABLOY aims to identify, control and reduce risks. This work begins with an assessment of the probability of risks occurring and their potential effect on the Group. For a more detailed description of particular risks and risk management, see the 2016 Annual Report.

The Board of Directors and the President and CEO declare that this half-year report gives an accurate picture of the Parent Company's and the Group's operations, position and income and describes significant risks and uncertainty factors faced by the Parent Company and the companies making up the Group.

Stockholm, 18 July 2017

Lars Renström Carl Douglas Ulf Ewaldsson
Chairman Vice Chairman Board member
Eva Karlsson Birgitta Klasén Eva Lindqvist
Board member Board member Board member
Johan Molin Sofia Schörling Högberg Jan Svensson
President and CEO Board member Board member

Rune Hjälm Mats Persson Employee representative Employee representative

We have reviewed the condensed Interim Financial Information (interim report) of ASSA ABLOY AB (publ.) as of 30 June 2017 and the six-month period then ended. The Board of Directors and the CEO are responsible for the preparation and presentation of the Interim Financial Information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this Interim Report based on our review.

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Interim Report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, 18 July 2017 PricewaterhouseCoopers

Bo Karlsson Linda Corneliusson Auditor in charge

Authorized Public Accountant Authorized Public Accountant

The Interim Report for the third quarter will be published on 20 October 2017.

A capital markets day will be held on 15 November 2017 in Stockholm, Sweden.

Johan Molin, President and CEO, Tel: +46 8 506 485 42

Carolina Dybeck Happe, Chief Financial Officer, Tel: +46 8 506 485 72

ASSA ABLOY is holding an analysts' meeting at 10.00 today at Operaterrassen in Stockholm, Sweden.

The analysts' meeting can also be followed on the Internet at www.assaabloy.com. It is possible to submit questions by telephone on: +46 8 5055 6476, +44 203 364 5371 or +1 877 679 2993.

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 19 July 2017.

CONSOLIDATED INCOME STATEMENT Q2 Q1-Q2
SEK M 2016 2017 2016 2017
Sales 17,894 19,387 33,785 37,529
Cost of goods sold -10,863 -11,806 -20,459 -22,757
Gross income 7,031 7,581 13,326 14,771
Selling, administrative and R&D costs -4,153 -4,494 -8,070 -8,926
Share of earnings in associates 33 27 65 56
Operating income 2,910 3,114 5,321 5,901
Finance net -181 -170 -383 -365
Income before tax 2,729 2,944 4,938 5,537
Tax on income -709 -765 -1,284 -1,440
Profit from discontinued operations 7 - 10 -
Net income for the period 2,026 2,179 3,664 4,097
Net income for the period attributable to: 2,026 2,178 3,664 4,096
Parent company's shareholders 0 1 0 1
Non-controlling interest
Earnings per share
before and after dilution, SEK 1.82 1.96 3.30 3.69
STATEMENT OF COMPREHENSIVE INCOME Q2 Q1-Q2
SEK M 2016 2017 2016 2017
Net income for the period 2,026 2,179 3,664 4,097
Other comprehensive income:
Items that will not be reclassified to profit or loss
Actuarial gain/loss on post-employment benefit obligations, net after tax -126 -67 -275 -43
Total -126 -67 -275 -43
Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates 75 31 109 70
Cashflow hedges, net investment hedges and other hedges -10 -27 -5 -37
Exchange rate differences 890 -1,382 383 -1,547
Total 956 -1,378 487 -1,514
Total comprehensive income for the period 2,856 734 3,875 2,540
Total comprehensive income for the period attributable to: 2,856 734 3,876 2,540
Parent company's shareholders

Non-controlling interest 0 0 -1 0

CONSOLIDATED BALANCE SHEET 31 Dec 30 Jun
SEK M 2016 2016 2017
ASSETS
Non-current assets
Intangible assets 57,096 53,539 55,652
Property, plant and equipment 8,066 7,884 7,909
Investments in associates 2,109 2,037 2,193
Other financial assets 86 87 85
Deferred tax assets 1,899 1,712 1,758
Total non-current assets 69,257 65,259 67,596
Current assets
Inventories 9,565 8,907 10,090
Trade receivables 12,648 12,833 12,847
Other current receivables and investments 3,062 3,446 3,607
Cash and cash equivalents 750 564 844
Asset of disposal group classified as held for sale - 235 -
Total current assets 26,025 25,984 27,387
TOTAL ASSETS 95,282 91,243 94,984
EQUITY AND LIABILITIES
Equity
Equity attributable to Parent company's shareholders 47,220 42,449 46,374
Non-controlling interest 5 3 5
Total equity 47,224 42,452 46,379
Non-current liabilities
Long-term loans 16,901 15,805 17,450
Deferred tax liabilities 2,344 2,050 2,226
Other non-current liabilities and provisions 6,701 6,239 5,919
Total non-current liabilities 25,945 24,094 25,596
Current liabilities
Short-term loans 3,929 8,736 5,388
Trade payables 7,443 6,336 6,832
Other current liabilities and provisions 10,741 9,516 10,790
Liabilities of disposal group classified as held for sale - 109 -
Total current liabilities 22,112 24,697 23,009
TOTAL EQUITY AND LIABILITIES 95,282 91,243 94,984

CHANGES IN CONSOLIDATED EQUITY Equity attributable to:

Parent Non
company's controlling Total
SEK M shareholders interest equity
Opening balance 1 January 2016 41,575 4 41,579
Net income for the period 3,664 0 3,664
Other comprehensive income 212 0 212
Total comprehensive income 3,876 -1 3,875
Dividend -2,944 - -2,944
Stock purchase plans -59 - -59
Total transactions with parent company's shareholders -3,002 - -3,002
Closing balance 30 June 2016 42,449 3 42,452
Opening balance 1 January 2017 47,220 5 47,224
Net income for the period 4,096 1 4,097
Other comprehensive income -1,557 0 -1,557
Total comprehensive income 2,540 0 2,540
Dividend -3,332 0 -3,332
Stock purchase plans -54 0 -54
Total transactions with parent company's shareholders -3,386 0 -3,386
Closing balance 30 June 2017 46,374 5 46,379
CONSOLIDATED CASH FLOW STATEMENT Q2 Q1-Q2
SEK M 2016 2017 2016 2017
OPERATING ACTIVITIES
Operating income 2,910 3,114 5,321 5,901
Depreciation and amortization 395 429 771 850
Restructuring payments -50 -136 -146 -220
Other non-cash items -26 28 -43 -7
Cash flow before interest and tax 3,229 3,436 5,904 6,524
Interest paid and received -228 -198 -322 -291
Tax paid on income -478 -961 -1,777 -1,590
Cash flow before changes in working capital 2,523 2,277 3,805 4,643
Changes in working capital -139 -207 -1,975 -2,089
Cash flow from operating activities 2,384 2,070 1,830 2,554
INVESTING ACTIVITIES
Net investments in intangible assets and property, plant and equipment -394 -593 -736 -965
Investments in subsidiaries -485 -270 -1,462 -716
Investments in associates - - -1 0
Disposals of subsidiaries -50 0 -50 1
Other investments and disposals 0 0 0 0
Cash flow from investing activities -927 -863 -2,248 -1,680
FINANCING ACTIVITIES
Dividends -2,944 -3,332 -2,944 -3,332
Acquisition of non-controlling interest -27 - -27 -
Net cash effect of changes in borrowings 1,489 2,284 3,448 2,565
Cash flow from financing activities -1,481 -1,049 477 -767
CASH FLOW FOR THE PERIOD -25 159 60 107
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
578 697 501 750
Cash flow for the period -25 159 60 107
Effect of exchange rate differences 10 -12 3 -13
Cash and cash equivalents in disposal group held for sale 0 - 0 -
Cash and cash equivalents at end of period 564 844 564 844
KEY RATIOS Year Q1-Q2
2016 2016 2017
Return on capital employed, % 14.1 15.8 16.2
Return on capital employed excluding items affecting comparability, % 16.5 15.8 16.2
Return on shareholders' equity, % 15.0 17.4 17.5
Equity ratio, % 49.6 46.5 48.8
Interest coverage ratio, times 14.1 15.0 18.2
Total number of shares, thousands 1,112,576 1,112,576 1,112,576
Number of shares outstanding, thousands 1,110,776 1,110,776 1,110,776
Weighted average number of outstanding shares before and after dilution, thousands 1,110,776 1,110,776 1,110,776
Average number of employees 46,928 46,998 46,791
INCOME STATEMENT Q1-Q2
SEK M 2016 2016 2017
Operating income 1,687 875 950
Income before appropriations and tax 2,952 1,497 1,691
Net income for the period 3,619 1,332 1,688
BALANCE SHEET 30 Jun
SEK M 2016 2016 2017
Non-current assets 35,670 35,694 35,834
Current assets 10,548 8,315 10,829
Total assets 46,218 44,009 46,663
Equity 21,190 18,883 19,492
Non-current liabilities 8,894 7,931 9,844
Current liabilities 16,134 17,195 17,327
Total equity and liabilities 46,218 44,009 46,663
Sales
15,891
17,894
18,025
19,484
33,785
71,293
18,142
19,387
37,529
75,037
Organic growth
3%
4%
2%
1%
3%
2%
6%
2%
4%
Gross income excluding items
affecting comparability
6,295
7,031
7,139
7,660
13,326
28,125
7,190
7,581
14,771
29,571
39.6%
39.3%
39.6%
39.3%
39.4%
39.5%
39.6%
39.1%
39.4%
39.4%
Gross margin excluding items affecting comparability
Operating income before depr. & amort. (EBITDA)
excluding items affecting comparability
2,787
3,305
3,425
3,316
6,092
12,833
3,208
3,543
6,752
13,493
Operating margin (EBITDA)
17.5%
18.5%
19.0%
17.0%
18.0%
18.0%
17.7%
18.3%
18.0%
18.0%
Depreciation and amortization
-376
-395
-406
-403
-771
-1,580
-421
-429
-850
-1,659
Operating income (EBIT) excluding
items affecting comparability
2,411
2,910
3,020
2,913
5,321
11,254
2,787
3,114
5,901
11,834
Operating margin (EBIT)
15.2%
16.3%
16.8%
15.0%
15.7%
15.8%
15.4%
16.1%
15.7%
15.8%
Items affecting comparability1)
-
-
-
-1,597
-
-1,597
-
-
-
-1,597
2,411
2,910
3,020
1,316
5,321
9,657
2,787
3,114
5,901
10,237
Operating income (EBIT)
15.2%
16.3%
16.8%
6.8%
15.7%
13.5%
15.4%
16.1%
15.7%
13.6%
Operating margin (EBIT)
Net financial items
-201
-181
-175
-146
-383
-705
-195
-170
-365
-686
Income before tax (EBT)
2,209
2,729
2,844
1,170
4,938
8,952
2,593
2,944
5,537
9,551
Profit margin (EBT)
13.9%
15.2%
15.8%
6.0%
14.6%
12.6%
14.3%
15.2%
14.8%
12.7%
Tax on income
-574
-709
-739
-304
-1,284
-2,328
-674
-765
-1,440
-2,483
Profit from discontinued operations
3
7
17
1
10
28
-
-
-
19
Net income for the period
1,638
2,026
2,122
867
3,664
6,653
1,918
2,179
4,097
7,086
Net income attributable to:
1,638
2,026
2,122
866
3,664
6,651
1,919
2,178
4,096
7,084
Parent company's shareholders
0
0
0
1
0
1
0
1
1
2
Non-controlling interest
OPERATING CASH FLOW
Q1
Q2
Q3
Q4
Q1-Q2
Year
Q1
Q2
Q1-Q2 Last 12
SEK M
2016
2016
2016
2016
2016
2016
2017
2017
2017 months
Operating income (EBIT)
2,411
2,910
3,020
1,316
5,321
9,657
2,787
3,114
5,901
10,237
-
-
-
1,597
-
1,597
-
-
-
1,597
Restructuring costs
376
395
406
403
771
1,580
421
429
850
1,659
Depreciation and amortization
Net capital expenditure
-342
-394
-331
-411
-736
-1,478
-373
-593
-965
-1,708
Change in working capital
-1,836
-139
98
1,939
-1,975
62
-1,882
-207
-2,089
-52
Interest paid and received
-94
-228
-96
-179
-322
-597
-93
-198
-291
-566
Non-cash items
-17
-26
-266
-45
-43
-354
-36
28
-7
-319
Operating Cash flow2)
498
2,519
2,830
4,620
3,017
10,467
824
2,575
3,399
10,849
Operating Cash flow/Income before tax excluding
items affecting comparability1)
0.23
0.92
0.99
1.67
0.61
0.99
0.32
0.87
0.61
1.14
CHANGE IN NET DEBT
Q1
Q2
Q3
Q4
Q1-Q2
Year
Q1
Q2
Q1-Q2
SEK M
2016
2016
2016
2016
2016
2016
2017
2017
2017
Net debt at beginning of period
22,269
24,681
27,122
25,571
22,269
22,269
23,127
23,339
23,127
Operating cash flow
-498
-2,519
-2,830
-4,620
-3,017 -10,467
-824
-2,575
-3,399
Restructuring payments
95
50
61
235
146
442
84
136
220
Tax paid
1,298
478
523
629
1,777
2,928
629
961
1,590
Acquistions and disposals
1,345
556
145
991
1,900
3,037
461
268
729
Dividend
-
2,944
-
-
2,944
2,944
-
3,332
3,332
221
186
105
-374
407
138
-34
99
64
Actuarial gain/loss on post-employment benefit obligation
0
0
0
-
0
-
-
-
-
Net debt of disposal group classified as held for sale
Exchange rate differences and other
-49
746
444
695
697
1,836
-104
-590
-694
Net debt at end of period
24,681
27,122
25,571
23,127
27,122
23,127
23,339
24,970
24,970
Net debt/Equity ratio
0.58
0.64
0.57
0.49
0.64
0.49
0.48
0.54
0.54
NET DEBT
Q1
Q2
Q3
Q4
Q1
Q2
SEK M
2016
2016
2016
2016
2017
2017
Non-current interest-bearing receivables
-34
-36
-41
-41
-41
-39
-270
-222
-168
-169
-113
-211
Current interest-bearing investments including derivatives
Cash and cash equivalents
-578
-564
-604
-750
-697
-844
Pension provisions
3,002
3,258
3,406
3,121
3,058
3,109
Other non-current interest-bearing liabilities
15,668
15,805
16,205
16,901
16,232
17,450
Current interest-bearing liabilities including derivatives
6,893
8,881
6,773
4,065
4,901
5,505
Total
24,681
27,122
25,571
23,127
23,339
24,970
CAPITAL EMPLOYED AND FINANCING
Q1
Q2
Q3
Q4
Q1
Q2
SEK M
2016
2016
2016
2016
2017
2017
67,124
69,449
70,555
70,351
72,333
71,349
Capital employed
- of which goodwill
43,098
44,387
45,077
47,544
47,438
46,252
- of which other intangible assets and
property, plant and equipment
16,613
17,036
17,264
17,618
17,595
17,309
- of which investments in associates
1,970
2,037
2,095
2,109
2,176
2,193
Assets and liabilities of disposal group classified
as held for sale
111
126
-
-
-
-
Net debt
24,681
27,122
25,571
23,127
23,339
24,970
Non-controlling interest
4
3
4
5
4
5
Shareholders' equity
42,551
42,449
44,981
47,220
48,989
46,374
DATA PER SHARE
Q1
Q2
Q3
Q4
Q1-Q2
Year
Q1
Q2
Q1-Q2
SEK
2016
2016
2016
2016
2016
2016
2017
2017
2017
Earnings per share before and after dilution
1.47
1.82
1.91
0.78
3.30
5.99
1.73
1.96
3.69
Earnings per share before and after dilution and
excluding items affecting comparability 1)
1.47
1.82
1.91
1.88
3.30
7.09
1.73
1.96
3.69
THE GROUP IN SUMMARY
SEK M
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1-Q2
2016
Year
2016
Q1
2017
Q2
2017
Q1-Q2 Last 12
2017 months
Shareholders' equity per share after dilution 38.31 38.22 40.50 42.51 38.22 42.51 44.10 41.75 41.75
Q2 and 30 Jun Global Entrance
EMEA Americas Asia Pacific Technologies Systems Other Total
SEK M 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017
Sales, external 4,152 4,450 4,268 4,689 2,332 2,271 2,402 2,621 4,740 5,355 0 0 17,894 19,387
Sales, internal 83 79 23 15 186 174 21 19 27 26 -341 -313 - -
Sales 4,234 4,529 4,291 4,704 2,518 2,445 2,424 2,640 4,767 5,381 -341 -313 17,894 19,387
Organic growth 6% 2% 8% 3% -8% -6% 5% 3% 4% 3% - - 4% 2%
Share of earnings in associates - - - - 5 6 - - 28 22 - - 33 27
Operating income (EBIT) 649 713 949 1,041 355 274 447 486 628 720 -118 -121 2,910 3,114
Operating margin (EBIT) 15.3% 15.7% 22.1% 22.1% 14.1% 11.2% 18.5% 18.4% 13.2% 13.4% 16.3% 16.1%
Capital employed 14,053 14,365 14,900 15,542 12,434 11,804 10,483 11,030 17,640 18,833 -61 -225 69,449 71,349
- of which goodwill 7,953 8,360 10,300 10,399 7,683 7,607 7,545 8,222 10,905 11,664 - - 44,387 46,252
- of which other intangible assets and
property, plant and equipment 3,214 3,360 3,304 3,328 3,898 3,809 2,296 2,450 4,214 4,224 111 138 17,036 17,309
- of which investments in associates 8 9 - - 495 522 - - 1,533 1,662 - - 2,037 2,193
Return on capital employed 18.4% 19.0% 26.0% 26.1% 11.5% 9.0% 17.4% 17.0% 13.7% 14.7% - - 16.9% 16.9%
Operating income (EBIT) 649 713 949 1,041 355 274 447 486 628 720 -118 -121 2,910 3,114
Depreciation and amortization 102 113 79 86 68 76 82 81 62 70 2 3 395 429
Net capital expenditure -104 -190 -103 -120 -59 -126 -67 -69 -55 -73 -5 -14 -394 -593
Change in working capital -67 -174 203 156 -1 -108 -143 14 -4 -80 -127 -14 -139 -207
Cash flow2) 581 461 1,127 1,163 362 116 320 511 632 638 -248 -146 2,772 2,744
Non-cash items -26 28 -26 28
Interest paid and received -228 -198 -228 -198
Operating cash flow2) 2,519 2,575

Q1-Q2 and 30 Jun

Global Entrance
EMEA Americas Asia Pacific Technologies Systems Other Total
SEK M 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017
Sales, external 8,090 8,775 8,212 9,236 3,947 4,021 4,534 5,084 9,002 10,412 0 0 33,785 37,529
Sales, internal 149 159 49 35 329 342 36 37 56 55 -619 -628 - -
Sales 8,238 8,934 8,260 9,271 4,276 4,363 4,570 5,121 9,058 10,467 -618 -627 33,785 37,529
Organic growth 4% 3% 7% 5% -7% -2% 3% 6% 4% 5% - - 3% 4%
Share of earnings in associates - - - - 9 11 - - 56 45 - - 65 56
Operating income (EBIT) 1,283 1,431 1,773 2,002 528 425 810 908 1,157 1,359 -230 -224 5,321 5,901
Operating margin (EBIT) 15.6% 16.0% 21.5% 21.6% 12.4% 9.7% 17.7% 17.7% 12.8% 13.0% - - 15.7% 15.7%
Capital employed 14,053 14,365 14,900 15,542 12,434 11,804 10,483 11,030 17,640 18,833 -61 -225 69,449 71,349
- of which goodwill 7,953 8,360 10,300 10,399 7,683 7,607 7,545 8,222 10,905 11,664 - - 44,387 46,252
- of which other intangible assets and
property, plant and equipment 3,214 3,360 3,304 3,328 3,898 3,809 2,296 2,450 4,214 4,224 111 138 17,036 17,309
- of which investments in associates 8 9 - - 495 522 - - 1,533 1,662 - - 2,037 2,193
Return on capital employed excl.
items affecting comparability 18.7% 19.7% 24.8% 25.4% 8.7% 7.1% 16.0% 16.1% 13.3% 14.2% - - 15.8% 16.2%
Operating income (EBIT) 1,283 1,431 1,773 2,002 528 425 810 908 1,157 1,359 -230 -224 5,321 5,901
Depreciation and amortization 201 220 156 172 136 152 150 160 126 139 3 8 771 850
Net capital expenditure -196 -261 -196 -216 -127 -211 -108 -139 -102 -118 -7 -21 -736 -965
Change in working capital -520 -542 -335 -598 -396 -404 -422 -360 -146 -82 -156 -103 -1,975 -2,089
Cash flow2) 768 848 1,397 1,360 142 -38 430 568 1,034 1,298 -390 -340 3,381 3,697
Non-cash items -43 -7 -43 -7
Interest paid and received -322 -291 -322 -291
Operating cash flow2) 3,017 3,399
Average number of employees 10,921 10,972 8,953 8,859 12,753 11,474 3,823 4,184 10,315 11,033 234 269 46,998 46,791

1) Items affecting comparability consist of restructuring costs.

2) Excluding restructuring payments.

Year and 31 Dec

Global
Entrance
EMEA Americas Asia Pacific Technologies Systems Other Total
SEK M 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016
Sales, external 16,220 16,535 15,588 16,963 9,401 8,491 9,031 9,619 17,858 19,685 0 0 68,099 71,293
Sales, internal 304 302 76 81 770 698 69 78 98 104 -1,317 -1,262 - -
Sales 16,524 16,837 15,665 17,044 10,171 9,189 9,100 9,697 17,957 19,789 -1,317 -1,262 68,099 71,293
Organic growth 4% 3% 7% 5% -3% -9% 7% 3% 5% 4% - - 4% 2%
Share of earnings in associates - - - - 16 23 - - 118 104 - - 134 127
Operating income (EBIT) excl.
items affecting comparability 2,620 2,722 3,363 3,640 1,436 787 1,647 1,752 2,436 2,753 -422 -401 11,079 11,254
Operating margin (EBIT) excl.
items affecting comparability 15.9% 16.2% 21.5% 21.4% 14.1% 8.6% 18.1% 18.1% 13.6% 13.9% - - 16.3% 15.8%
Capital employed 12,916 13,275 13,908 15,749 11,689 11,803 9,815 11,331 16,030 18,291 -509 -98 63,848 70,351
- of which goodwill 7,857 8,348 9,903 11,012 7,690 7,920 7,437 8,784 9,891 11,480 - - 42,777 47,544
- of which other intangible assets and
property, plant and equipment 3,210 3,296 3,184 3,516 3,908 3,900 2,300 2,499 3,939 4,282 107 125 16,649 17,618
- of which investments in associates 8 9 0 - 452 496 - - 1,450 1,605 - - 1,910 2,109
Return on capital employed excl.
items affecting comparability 20.4% 19.9% 24.1% 25.0% 12.6% 6.6% 18.8% 16.6% 14.9% 15.7% - - 17.8% 16.5%
Operating income (EBIT) 2,620 1,942 3,363 3,606 1,436 529 1,647 1,603 2,436 2,546 -422 -569 11,079 9,657
Depreciation and amortization 398 402 300 330 268 283 232 296 231 257 4 11 1,433 1,580
Net capital expenditure -349 -472 -326 -372 -238 -211 -212 -238 -94 -157 -24 -28 -1,241 -1,478
Change in working capital -47 -75 -120 -152 -231 705 -110 -86 63 -141 -57 -188 -502 62
Cash flow2) 2,622 2,577 3,217 3,447 1,235 1,564 1,557 1,724 2,637 2,713 -499 -607 10,770 11,418
Non-cash items -269 -354 -269 -354
Interest paid and received -548 -597 -548 -597
Operating cash flow2) 9,952 10,467
Average number of employees 10,886 10,835 7,957 8,961 13,651 12,481 3,583 3,907 9,686 10,505 231 240 45,994 46,928

1) Items affecting comparability consist of restructuring costs.

2) Excluding restructuring payments.

NOTE 1 SALES BY CONTINENT

Q2 Q1-Q2
SEK M 2016 2017 2016 2017
Europe 6,679 7,201 12,935 14,242
North America 7,016 7,925 13,354 15,353
Central- and South America 484 538 925 1,084
Africa 213 224 404 453
Asia 2,888 2,829 5,006 5,084
Pacific 613 671 1,160 1,312
Total 17,894 19,387 33,785 37,529

NOTE 2 BUSINESS COMBINATIONS

Q2 Q1-Q2
SEK M 2016 2017 2016 2017
Purchase prices
Cash paid for acquisitions during the year 327 221 1,171 526
Holdbacks and deferred considerations for acquisitions during the year 55 54 178 157
Adjustment of purchase prices for acquisitions in prior years 0 4 -91 4
Total 382 279 1,259 687
Acquired assets and liabilities at fair value
Intangible assets 2 12 2 133
Property, plant and equipment 40 8 280 18
Financial assets 14 2 71 3
Inventories 28 33 87 68
Current receivables and investments 58 26 116 128
Cash and cash equivalents 29 11 141 37
Non-current liabilities 55 -56 -184 -68
Current liabilities -90 -18 -338 -93
Total 136 18 175 226
Goodwill 246 261 1,084 462
Change in cash and cash equivalents due to acquisitions
Cash paid for acquisitions during the year 327 221 1,171 526
Cash and cash equivalents in acquired subsidiaries -29 -11 -141 -37
Paid holdbacks and deferred considerations for acquisitions in previous years 186 61 432 227
Total 485 271 1,462 716

Fair value adjustments of acquired net assets from acquisitions made in previous periods are included in the above table.

NOTE 3 FAIR VALUE AND CARRYING AMOUNT ON FINANCIAL ASSETS AND LIABILITIES

30 June 2017 Financial instruments
at fair value
Carrying Fair
SEK M amount value Level 1 Level 2 Level 3
Financial assets
Financial assets at fair value through profit and loss 132 132 132
Available-for-sale financial assets 12 12
Loans and other receivables 13,768 13,768
Derivative instruments - hedge accounting 76 76 76
Financial liabilities
Financial liabilities at fair value through profit and loss 2,129 2,129 108 2,021
Financial liabilities at amortized cost 29,670 29,709
Derivative instruments - hedge accounting 10 10 10
31 December 2016 Financial instruments
at fair value
Carrying Fair
SEK M amount value Level 1 Level 2 Level 3
Financial assets
Financial assets at fair value through profit and loss 78 78 78
Available-for-sale financial assets 11 11
Loans and other receivables 13,476 13,476
Derivative instruments - hedge accounting 88 88 88
Financial liabilities
Financial liabilities at fair value through profit and loss 2,366 2,366 116 2,250
Financial liabilities at amortized cost 28,272 28,381
Derivative instruments - hedge accounting 21 21 21

Organic growth Net debt

Change in sales for comparable units after adjustments for Interest-bearing liabilities less interest-bearing assets. acquisitions and exchange rate effects.

Operating income before depreciation and amortization as a bearing liabilities including deferred tax liability. percentage of sales.

Operating income as a percentage of sales.

Income before tax as a percentage of sales.

See the table on operating cash flow for detailed information. For as a percentage of average parent company's shareholders relationship between operating cash flow and cash flow from equity. operating activities see the company's last Annual Report.

Investments in tangible and intangible assets less disposals of average capital employed excluding restructuring reserves. tangible and intangible assets.

Depreciation

Depreciation and amortization of intangible and tangible assets.

Capital employed

Operating margin (EBITDA) Total assets less interest-bearing assets and non-interest-

Equity ratio

Operating margin (EBIT) Shareholders' equity as a percentage of total assets.

Interest coverage ratio

Profit margin (EBT) Income before tax plus net interest divided by net interest.

Return on shareholders' equity

Operating cash flow Net income attributable to parent company's shareholders

Return on capital employed

Net capital expenditure Income before tax plus net interest as a percentage of

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