ASSA ABLOY sees strong performance in commercial, but residential still challenging

STOCKHOLM – While ASSA ABLOY reported strong gains in its commercial business in the fourth quarter, there's a clear drag on profits in its residential business.

It was a strong quarter in many respects for the global manufacturing company, managing a total of six acquisitions in the quarter, and a record number of acquisitions for the year. Several of those acquisitions were in the South American market, where ASSA ABLOY President and CEO Nico Delvaux said the company continues to see good momentum, owing to its traditional business.

"We then go to South America, plus 17%, where we continue to see good momentum in our traditional business, and where the figure is a little bit inflated because of a bigger Citizen ID order for HID in that continent," Delvaux said. "And the same is true for Africa, plus 28%. It's mainly explained by a bigger Citizen ID project for HID." Overall ASSA ABLOY was able to attribute a net 11% growth to acquisitions alone.

The company also touted a number of successful project wins for 2023 including contracts for HID to provide Finland with new high-security driver’s license cards and personalization service solutions and helping to secure 15 mega water reservoir sites in the Middle East with its TESA SMARTair i-Gate solution. ASSA ABLOY celebrated several product launches during 2023 including a smart door lock utilizing biometrics with finger vein reading, facial recognition, and digital door view capabilities that launched in Asia.

Peeling back the good news, however, the softness in the residential market that has plagued several businesses in the security industry continued to be a factor at the end of the year. Despite that, Delvaux believes the scale of sales decline had little effect on the company’s overall operations.

"When I go to (the) Americas, another very strong quarter with an organic sales growth of 5% with good growth in our commercial business in North America, good growth also in Latin America. Sales declined in U.S. residential but that's obviously organically now a very small part of our business here. For residential we should look at HHI. And like I mentioned HHI was having an organic growth of minus 1% in the quarter." Delvaux also echoed a common optimism with his opinion that the decline in the residential sector is bottoming out and will be rebounding soon.

Stats for the quarter are as follows:

• Net sales increased by 12% to SEK 36,970 M (32,915), with positive organic growth of 0% (9) and acquired net growth of 11% (5). Exchange rates affected sales by 1% (14).
• Organic sales growth was strong in Americas and good in entrance systems, while organic sales declined in Asia Pacific, EMEIA and Global Technologies.
• Six acquisitions with combined annual sales of SEK 900 M were signed.
• Operating income (EBIT) increased by 11% and amounted to SEK 5,722 M (5,152), with an operating margin of 15.5% (15.7).
• The operating margin (EBIT) excluding the acquisition of HHI and divestment of the Emtek/U.S. Smart Residential business was 16.8%.
• Net income1 amounted to SEK 3,969 M (3,729).
• Earnings per share1 amounted to SEK 3.56 (3.36).
• Operating cash flow amounted to a record SEK 7,315 M (6,588).
• The Board of Directors proposes a dividend of SEK 5.40 (4.80) per share for 2023, to be distributed in two equal installments.

The quarterly report and webcast can be found online at www.assaabloy.com/group/en/investors.