ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Assa Abloy's 2024 year-end report. My name is Björn Tebell. I'm heading Investor Relations and joining me here in the studio are our CEO, Nico Delvaux, and our CFO, Erik Pieder. We'll start this conference as usual with a summary now of the report. And then we'll open up for your questions. And we've set aside about one hour for this conference. So with that, over to you, Nico.

Thank you, Bjorn. And also good morning from my side. Q4 results, I would say, very much in line with previous quarters. For Q4, we had a stable organic sales development, to be precise, minus 0.3% organic growth, with strong sales growth in global tech, good sales growth in Americas, a stable sales growth in EMEA, but then sales decline in entrance systems and significant sales decline in APAC, reflecting a little bit market conditions. where we continue to see good momentum on the commercial side, but continue challenging market conditions on the residential side and also for the logistics vertical in entrance systems. But then also this quarter, a flat organic sales that is compensated by very strong growth through acquisitions of net plus 6%. Also held by currency 1%, so top line up 7%, 40 billion SEC. And then I think very strong execution with a strong operating margin of 16.5% and a record operating income of around 6.5 billion SEC. Also very good job well done on the balance sheet side, working capital with an excellent cash conversion of 141% in the quarter, 110% for the full year, and a record cash of 8 billion SEC in the quarter. and we also continue our acquisition pace eight acquisitions completed in the quarter 26 for the full year 26 is a new record it's now the third year in a row that we break the record when it comes to number of acquisitions so very happy with that if you look in the numbers like i mentioned sales close to 40 billion sex seven percent up EBITDA margin of 17.4% on a record level and even above the 16% to 17% bandwidth. An EBIT margin of 16.5% and now also on a 12-month moving trend at 16.2%. So in that 16% to 17% bandwidth we aim for. EBITDA up 14% above 6.5 billion SEC and then earnings per share up 7%. If we then comment a little bit on the different regions, starting with North America, plus one organic road in the quarter, very similar story as previous quarters. We continue to see good momentum on the commercial Perhaps not as hot as two years ago, but still very good momentum. Also good there to see that our specification business came back in a strong way in Q4. We had a high double digit growth for specification activity. and especially the healthcare vertical that the previous quarters was a bit of a concern came back strongly and overcompensated in the quarter, I would say, for the previous two quarters where we had negative development. The other end, residential, still challenging with interest rates not going down fast enough. And then also the logistic vertical still on a lower level affecting our industrial segment business for loading docks in entrance systems. Strong South America, plus 8, still good momentum in, I would say, most, if not all, markets in Latam. Africa, plus 2. Europe, minus 2. Europe, perhaps the minus 2 reflecting what we see in Europe. Also here, similar story as in the U.S. or in North America. Very strong commercial activity, but still lower activity on the residential side. Australia, New Zealand minus six. That's partly linked to also there the residential segment, but it's also more negative down than you would expect due to a difficult comparison for some project orders for HID in Australia last year. And then Asia, minus six, mixed picture. India still growing strong, double digit, but then very challenging market conditions in Greater China, where we have seen a double digit negative growth and also a bit of spillover to some of the Southeast Asian markets of that negative market condition in Greater China. So minus six in that part of the world. If you look at some market highlights and start with some project wins, I will just take a couple of them. We upgrade 100,000, a little bit more than 100,000 mechanical cylinders to E-Click for a German high voltage grid operator. Very nice, big project. We had a restart, I would say, of the loading dock business with some orders, bigger orders for distribution centers in Mexico and Belgium. That's good news because that means that that loading or that logistic vertical is bottoming out. You know that the lead times there are a bit longer. So we will only realize sales there in the second half of this year. And then perhaps also file prevention fingerprint readers for bank terminals in a major South American for major South American bank. That's an important feature. business for our fingerprint products in in hid and that's a continued strong momentum product launches also 2024 was clearly a good year for new product launches with a record number of more than 550 new products launched in the year If I just take one there, new smart lock launches, a lot of new smart lock launches. If I pick one there, Kwikset, Hello Select, our first product range that we launched now for HHI after the acquisition in a combined effort. Very excited about that product launch and there's much more in the pipeline to come for Kwikset this year. So now you see several quarters now with challenging organic growth numbers but then very strong growth through acquisitions. Our sales 48% up if you compare with 2019. Our EBIT margin, like I mentioned, back into the 16% to 17% bandwidth on a 12-month moving trend at 16.2%, and an EBIT margin on a run rate of 17.1%, even slightly above that bandwidth. So better top line, better margins, therefore accelerated operating profit, record operating profit in the quarter, and the run rate EBIT up 63% if you compare with 2019. Acquisitions, like I mentioned, active quarter again with eight acquisitions closed in the quarter, 26 for the full year. Those 26 acquisitions represent an annual sales of close to 8 billion SEC. And then we also now in January divested almost everything of the citizen ID business. There's still a very small part remaining linked to the U.S. green card, a business where administration documents with U.S. government takes a little bit longer. That divestment represents an annualized sales of around 1.4 billion SEC. Some highlights on the acquisition side, Lawrence Doors, an acquisition for Entrance Systems, a US manufacturer of coiling steel doors and shutters, adding complementary products to our core business. And they had the sales of 310 million SEC in 2024. Premier Steel Doors and Frames, an acquisition for the Americas, a US manufacturer of hollow metal doors, complementing our current product portfolio on the Americas side. They had a sales of 380 million SEC in 2024. If we then zoom in into the different divisions, starting with EMEA, EMEA had a stable organic sales development, I think a good result, given the market conditions. They had good sales growth in the Middle East, in Africa, and in Central Europe. stable sales growth in nordics where definitely in sweden we have seen a market uh bottoming out and we should from here onwards start to see a recovery in sweden which is obviously an important market for for us as well top line as bottom line wise And then the sales decline in South Europe and in UK Ireland. Very strong execution with an operating margin of 14.8%. 40 base points better than last year thanks to a strong operating leverage. 80 base points accretion. Good price-cost realization, slightly positive mix, but a lot of good actions on the cost side. Good margin improvement despite a dilution on FX of 40 base points. That's because of the weaker SEC and then M&A was stable. Overall, I think good quarter for EMEA. Good quarter for Americas with an organic sales growth of 2%, with strong sales growth in LATAM and North America non-residential segment. A slight single-digit sales decline for the North America residential segment. An operating margin of 17.7%, also here good operating leverage. FX dilutive 30 base points. And then the M&A shows 40 base points accretive. So perhaps a little bit misleading because the 40 base points accretive comes mainly from the bridge on HHI, where we have a positive year-on-year effect. But on the acquisition side, we had a strong dilution of the Levelock acquisition of 100 base points linked to integration costs, but mainly also linked to investments on the R&D side. They are working on several new product developments, and obviously we want to bring those products as soon as possible to the market. Therefore, the dilution will remain more important also now in, let's say, the first half of the year, and then the second half of the year that should more stabilize to normal levels. If we take then the third geographical division, Asia Pacific, a strong organic sales decline of 11%, strong sales growth in South Korea, sales decline in Pacific, and then a significant sales decline in China, And in Southeast Asia, where I mentioned earlier that we don't see an improvement of the market conditions in greater China, we've already, something we believe the market conditions are further going down. And where there is also some challenging market conditions in some markets in Southeast Asia, like for instance, Vietnam. Operating margin of 5.4%, so a good improvement compared to last year despite a strong decline in top blinds, so very good execution done by the team over there with strong operating leverage of 140 base points. Also here have ex-dilutive 30 base points and they didn't do any acquisitions in the quarter, so a stable M&A. Going to global tech, global tech organic sales of plus 5 with good performance in HID, very strong sales growth in global solutions in the different segments. And then I think an excellent operating margin of 19.3%. With here extreme good, I would say, operating leverage of 400 base points. Of course, good price-cost realization, good cost measures, operational efficiency measures, but also helped by a positive mix in the sense we had more packs for HID, and we had more hospitality for global solutions, and they have higher margins. Also helped a little bit by FX, 20 base points, and then M&A dilutive, 40 base points. So very happy with that result. Entrance systems, last but not least, an organic sales decline of 2%. Strong sales growth in pedestrian, stable sales in perimeter security, but a sales decline in residential and industrial. Residential, of course, linked to the residential market, mainly in the US, and industrial, like I mentioned earlier, linked to loading dock business for the logistic vertical. Despite an organic sales decline of 2%, good operating margin of 17.5%. We've also here strong operating leverage, 50 base points. Halved by FX, 20 base points. And then M&A dilutive, 60 base points. That's mainly ski data. That's a bit lower perhaps than expected because we have already said ski data is around 100 base points, slightly higher than 100 base points dilutive for entrance systems. That has to do with the fact that ski data is seasonal. Q4 is their best season, therefore lower dilution. So we should expect a higher dilution now in Q1 and Q2. And with that, I give the word to Erik for some more details on the financial numbers.

Thank you, Nico. And a very good morning from my side as well. I think Nico has mentioned a lot of the numbers that you see, but sales was up in the quarter with 7%. That's the same as what we had for the full year. And if you look on the quarter, I mean, the difference between, I would say, the year and the quarter is that you can see that acquisitions were slightly lower, 6%. In the quarter, it was 8% on the full year. If you look on the operating income, it's up with 14%. With sort of on the full year, it's up with 10. And the margin, we have 100 base points improvement in the margin in the quarter, so we ended at 16.5. And then, yeah, we are very happy that we, for the full year, are actually within the bandwidth with a 16.2% achievement during the full year. In the quarter, we had a slightly less impact on finance cost. So there you see that it's 16% net income plus six and earnings per share. In the quarter, it was up with 7%, and for the full year, it's up with four. And as mentioned before by Nico, we had a record strong Operating cash flow above 8 billion for the quarter. It's up with 10%. And finally, then the return on capital employed improved sequentially quarter by quarter with 20 base points and ended at 14.4%. If we then look on the bridge, the organic part price versus volume price is a high one, I should say. So probably a little bit closer then to one and a half, which then leaves that the volume is about 1% negative. You see a very good flow through of 120 base points or in value almost 450 million SEC. This comes from price. It comes from lower material cost. We had cost reductions coming out of the MFP of about 170 million SEC. And then we have, of course, other kind of cost control and operational efficiency measures. Currency didn't sort of really have an impact in the quarter. If you look on the acquisitions, I mean, I think Nico mentioned it before, that sort of what makes it a bit strange is the year-on-year effect from the HHI transaction. This is, let's say, it's a bridge phenomena. But then it's also, if you look then on SKI data, it is... slightly lower in the quarter so you can expect because the first half of the year is let's say it's sort of there they have if I call it the lower seasons so you can expect sort of a higher impact in the first quarters of next year and then you can also expect roughly a similar pattern then from the level lock also for the first half of the year. Cost breakdown, positive evolution on the direct material in total 230 base points. Of that roughly 100 base points comes from mix where we had a stronger global tech, we had a weaker APAC, but then we have also some interdivisional mix that explains it. So if you look on the true, if I call it price versus cost, we had a positive impact of 130 base points in the quarter. Conversion cost is impacted by, I would say, inflation and higher wage costs with a negative impact of 90 base points. On the SG&A, you start to see that it's less negative. Now it was 30 base points in the quarter. And sort of, yes, it's impacted by inflation and higher wage costs, but we also continue to do a lot of investments in R&D. You saw before that at a record number of product launches in 2024, as well as investments in our sales organization. Cash flow, a record cash flow, a cash conversion of more than 140% in the quarter. Yes, normally the fourth quarter is our best quarter, but this was exceptionally strong. On the full year basis, we had a cash conversion of 110%. in the quarter the reason why it is so strong is i mean we had a record earning we still had good improvement on the working capital especially an inventory but then we also have a minor impact i would say of sales of a couple of buildings which also sort of impacts it If you look on the gearing, net debt to EBITDA is the same as what it was a year ago. It's 2.3. If you look in actual numbers, our debt is now slightly above 70 billion SEC. It's up with roughly 3 billion SEC versus end of September. But then you should keep in mind that during the quarter, we had sort of impact of roughly 1%. 3 million of currencies, negative impact, 3 million of currencies. We paid a dividend, which is also roughly 3 billion SEC, as well as we had acquisition payments of roughly 3 billion. But that was then compensated by the strong cash flow that we have. So I would still say that we have a very strong financial position on the balance sheet, so we can continue our acquisition strategy. Last slide from my side. I mentioned the numbers before on earnings per share. It went up in the quarter with 7%, and for the full year, we had an increase of 4%. And with that, I give back to Nico for some concluding remarks.