ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Assa Abloy's third interim report in 2024. My name is Björn Tebell. I'm heading investor relations and joining me here in the studio are Assa Abloy's CEO, Nico Delvaux, and our CFO, Erik Pieder. As usual, we will now start this conference with a summary of the report before we open up for your questions. So with that, over to you, Nico.

Thank you, Bjorn, and also good morning from my side. Q3 results, we can report good results. We went back to positive organic growth in Q3. I would say small positive organic growth of only 0.3%, but then also this quarter complemented in a good way to strong growth through acquisitions of plus 4%. And then very strong execution with an EBIT of 6.3 billion SEC, record high level, and an EBIT margin of 16.7%, the highest for a Q3 since seven years. And also good execution on the balance sheet side, working capital side, with an excellent cash conversion of 118%. We continue also our high acquisition pace with seven acquisitions completed in the quarter, 18 in the first nine months. If we look in the numbers, a sales of 37.5 billion SEC. 1% up, 5% up currency adjusted. Like I mentioned, there's a very small positive organic growth, 4% net acquired and then minus 3% on the currency. That's mainly SEC versus dollar. We also want to emphasize the EBITDA margin. of 17.7%. That's a record high number since we started reporting EBITDA margin. And as the gap between EBIT and EBITDA margin becomes bigger, you see it's now 1%. We also want to emphasize a bit more the EBITDA number as we want to make sure that you also can compare us with other people on the market in a similar way. Our EBIT margin, like I mentioned, is 16.7%. Percent, the highest number for the last seven years for Q3. A bit of 6.3 billion, 8% up. Earnings per share, 10% up. If you look a little bit at the different regions, and perhaps I comment first a bit on the different segments, I would say Q3 has been very similar as Q1 and Q2 in the sense that non-residential in our three main markets in North America, in Europe, and in Oceania, market conditions continue to be healthy on a good level in all three regions. Whereas residential markets in all three regions continue to be challenging. And like we mentioned earlier, we are still convinced that North America is further down in the cycle, in the sense that in North America, new-built residential has turned, and R&R at least has bottomed out, where Europe then in that cycle is much later in the cycle. If you look at different verticals, an important vertical for us in entrance systems is the logistic vertical, where we continue to see also challenging market conditions as well in North America as in Europe. If you look at the different regions, organic growth of plus 1% in North America. Again, different picture, good development on the commercial side, a flat development on the residential side, and then challenging conditions on the logistic vertical. A flat South America, that's mainly because of a difficult comparison for HID compared to the same quarter a year ago. Plus 2 in Europe, plus 13 in Africa, and minus 5 in Oceania, and minus 8 in Asia, where we have seen market conditions further deteriorating in greater China. We have also seen some spillover of that negative market condition into Southeast Asia. We have seen the government in China making some extra measures to help the construction market. Also some positive numbers on new houses being sold coming out this morning. But we believe that in general those measures are still moderate and it will take some time before we see the market in China recover. So market highlights. I will not go through all the project wins, but if I take a couple of them. We were also present at the Olympic Games. We were able to sell 30,000 lock handles and cylinders for the Olympic Village in Paris. and then we were able to sell dog levers and doors to the european european's largest logistic center product launches let me also only pick one here quick set unite mobile enabled wireless smart lock for multi-family properties let's say the first new product family that we launched now since we acquired quickset very excited about that product range and then on the awards side if i also pick one there i go to see that also our branding marketing activities pay off a blow in finland and fish in france were voted as the most value valued brand in their markets if you see that Abloy in Finland is overall seen as the strongest brand in that country, something we can be really very proud of. So the quarter, again, slight positive organic growth complemented with good growth through acquisitions. Our sales now 46% up on a 12-month moving trend versus 2019. A good improvement of the operating margin with the run rate, 12-month run rate now at 15.9%, so very close to the bandwidth we aim for, and an EBITDA margin of 16.8% on a 12-month moving trend. So better top line, improved margin, therefore accelerated operating profit, record operating profit in the quarter, and run rate of EBIT up 61% versus five years ago. We continue to be very active on the acquisition side with seven acquisitions completed in Q3, 18 acquisitions in the first nine months of the year. Those acquisitions represent an annualized sales of around 7 billion SEC. And then you might have read a couple of days ago that we also are divesting our citizen ID business, our passport business, you could say, in HID. That transaction is expected to close somewhere in Q1 next year. And that business represents an annualized sales of around 1.3 billion SEC. Some highlights on the acquisitions. Levelock, excited about this technology acquisition. It will be integrated in the Americas division and we will run it as a technology hub for connected wireless locks. They had a sales of 170 million SEG last year. They will be dilutive to PS from the start. And in the bigger acquisition, SkiData, an Austrian provider of access management solutions for parkings, for ski resorts and for concert halls and stadiums and so on. They had the sales of 3.5 billion SEC last year, and they will also have a small dilutive effect to EPS from the start. They will be integrated into entrance systems into the pedestrian segment. If we then go into the different divisions, starting with opening solutions in Maya, positive organic sales of plus 1%, good growth in Central Europe, good growth also in the Nordics against an easy comparison last year, I would say. Stable sales in South Europe, but then sales decline in Middle East, India, Africa, and also in UK and Ireland. Strong execution with a good operating margin of 14.5%, with good operating leverage, helped by currency 50 base points because of the stronger SEC, and then also helped by M&A, a creative 20 base points. America's another very strong quarter with an organic sales increase of 4%. Very strong sales growth in Latam. Strong sales growth also in North America, non-residential. And then a stable sales in our North America residential business, you could say the HHI business. Very strong operating margin of 19.2%. We have a very good operating leverage, 80 base points accretive. good price-cost, good margin improvement in general, and definitely also a continued margin improvement in our North America residential business, where, again, we have seen an improvement versus previous quarter and an improvement also versus the same quarter a year ago. And we're confident that that trend will continue as synergies continue to kick in. FX has been dilutive 10 base points recently, And M&A, 160 basements are creative. That has to do with, you know, all the costs that we booked for HHI a year ago. So in the bridge, it gives us a, you know, one time you could say positive effect of 205 million SEC year over year. The more important underlying, the HHI business had a stable top line development and an improved bottom line. Opening solutions, Asia-Pacific, organic sales decline of 6%, with only stable sales in South Korea and negative sales growth in the rest of the division. But like I mentioned earlier, market conditions in China are further declining. Despite the strong organic negative sales evolution, good operating margin of 7.9%, where we only had a smaller dilution because of the negative volume, because we were able to offset that to a big extent, I would say, through efficiency improvements. And then Fx stable, and we didn't do any M&A in this division. Global tech, organic sales back to positive plus 2%, where in HID now the whole story of the backlog we build up and then invoicing on the backlog of packs, cards and readers. It's over since September. September was the first, I would say, normal month again for PECS. And therefore, we have seen also, again, growth of that business area in HID. Also very strong sales growth in global solutions. And I would say strong operating margin of 18.9% with very good operating leverage, 110 base points. So even by efficiency measures, but also a positive mix where we get, again, more relative sales of PECs, which is a more profitable part of the business in global tech. FX and M&A dilutive, 30 base points and 40 base points, respectively. And last but not least, entrance systems, an organic sales decline of 2%. We have seen good sales growth in pedestrian and in perimeter security, but then sales decline in residential. Residential is for us mainly a North American business. The story I told about the residential market. And on the industrial side, very exposed to that logistic vertical where the loading dog business continues to be challenging. Good to see that our service growth continues in line with our ambition to grow high single digit. Strong operating margin of 17.1%. Definitely take into account that we acquired Ski Data in this quarter and had rather higher acquisition-related costs for Ski Data that gave a dilution of 110 base points. fx up 10 base points but then very strong operating leverage and 10 base points very good price cost realization and then also a positive mix and with that i give the word to eric our cfo to give some more details on the financial numbers eric

Thank you, Nico. And also a very good morning from my side. As you heard from Nico, we now turned, so we actually had a positive organic growth in the quarter, a small one, but still it was positive. And in total, the sales increased with 1%. Of course, we'd like also to mention that we had some records, like, for instance, that we had in EBIT value, the 6.3 billion SEC increase, It's a record for Q3 and it's up with 8% versus the same period last year. We also had a record EBITDA margin of 17.7%. It's up with a point. And we had the best EBIT margin for Q3 quarter since 2017. It ended on 16.7%. We had slightly less impacts on the interest rates. We also sort of see a bit, of course, interest rates slightly going down. So income before tax is up with 10%. It's the same with the net income as well as with the EPS versus the same period last year. Operating cash flow is lower than what it was sort of a quarter ago, but remember that we had a very strong operating cash flow in Q2, Q3, and Q4 last year. But if you compare the 6.3 then historically and with a cash conversion of 180%. 18%, it still is very strong. And it's also good to see that return on capital employed improved sequentially with 20 base points and ended the quarter at 14.2%. If we dissect a bit and go a bit to the bridge, if you look on the organic part, price is a strong one which consequently means that volume is negative with about one percent the flow through as you can see is very strong and helps the result with with 90 base points this comes from strong price realization we have lower material cost with mfp savings of roughly 130 million sec in the quarter as well as good cost control Slight negative impact on the currency where, of course, we see that the weakening of the dollar. M&A looks a bit strange this quarter. Nico mentioned it before. The main reason is, let's say, the mechanism of the bridge where we sort of had integration cost and cost related to the HHI acquisition a year ago, which was negative. And then, let's say, this year it turns positive just purely, let's say, due to how the bridge works. However, as you have seen that we have seen before that we have done some acquisitions which in reality have a dilutive impact in the acquisition column ski data as well as level lock. Going forward, ski data is estimated to have on group a negative dilutive impact of 40 base points and on entrance system consequentially roughly 120 base points. We had a good momentum still on direct material, the price versus cost. The mix in total is 240 base points. Roughly 100 base points of that comes from a mix with a stronger global technologies, weaker APAC, as well as the interdivisional mix where you heard Nico mentioned before regarding that service was strong with an equipment in entrance, which sort of helps from a mixed perspective. However, if you look sort of the total, then roughly 140 base points is if I call it the true price versus cost. So we still have a strong tailwind. We sort of we see that we also going to have a tailwind also for Q4 as well as for Q1. They're going to sort of go down slightly, but that is sort of the estimate that we do today. Conversion cost is impacted by inflation and higher wage cost. It's down with 130 base points. Sequentially, then, if you look on SG&A, it is sort of better than when it was in Q2. In Q2, we had roughly a negative impact of 80 base points, whereas then, as you can see, in this quarter, it was 30 base points. We can see sort of despite that we continue to invest in R&D as well as continue to invest in sales, we are sort of still finding efficiency measures in order to, let's say, reduce the impact that we have there. I mentioned before the cash flow of 6.3, cash conversion of 118% in the quarter. We still sort of see that, okay, we had sort of a good EBITDA flow value but we continue to sort of see that working capital is going down which is good let's say for our cash flow position. That sort of leaves that we on the gearing the net debt to EBITDA is now at 2.3 and despite that we have been rather active I would say on acquisition front we were able to reduce our net debt in total with 1.3%. Yes, we had some help from the currency, but we also sort of could see that the strong cash flow where we were able then to sort of to be able to sort of do the acquisition payments that we have done, which means that, you know, at the end of the day, we have sort of still a very strong balance sheet and financial position. So we can continue with our acquisition strategy also going forward. Last slide from me is the EPS, which I mentioned before, is up with 10% versus the same period a year ago. And with that, I hand it back to Nico for some concluding remarks. Thanks, Erik.