ASSA ABLOY AB (publ)

Good morning, everyone, and welcome to the presentation of Assa Abloy's Q1 report. My name is Björn Tebella. I'm heading investor relations, and joining me here in the studio are Assa Abloy's CEO, Nico Delvaux, and CFO, Erik Peder. We will now, as usual, start with a summary of the report and then we will open up for your questions and we plan to round off in about one hour's time. So with that, I'd like to hand over to you, Nico.

Thank you, Bjorn. And also good morning from my side. Q1 results, we had a good start of the year. with a 2% organic growth of the top line, and then also good complementary growth again, growth requisitions of net 5%, and held by currency 1%, so top line up 8%. We've seen strong sales growth in global tech, good sales growth in Americas, stable sales in EMEA and entrance systems, and a sales decline in Asia, Pacific, mainly because of Greater China. and improved underlying operating margin. Operating margin EBIT was at 14.9%, but we had 140 base point dilution, mainly, I would say, from one-off acquisition and divestment-related costs. We had a good cash flow, 2.4 billion SEC, and a cash conversion of 51%, which is, I think, a good cash flow for a seasonally lower Q1. Also with that remark that we build up inventory in the quarter to anticipate the tariff uncertainty and that of course had an effect on the cash flow. A good quarter when it comes to acquisitions with six acquisitions completed in the quarter. And then we also launched our MFP10 program, where Eric will give more details later in the presentation. So in numbers, sales at 38 billion SEC, 8% up, like I mentioned, 2% organic sales, 5% net acquisition growth, and then 1% currency. An EBITDA margin of 15.9% and an EBIT margin of 14.9%. EBIT at 5.7 billion SEC, 4% up. And earnings per share, 3% up. If you look a little bit at the different regions, I would say a very similar situation as previous quarters. where in the three main markets we continue to see very good momentum on the commercial, non-residential side. That's the case in North America, in Europe, and in Oceania. But in all three markets, we also continue to see challenging market conditions on the residential side. We had a 2% organic growth in North America, good commercial development in North America with mid-single-digit growth, but then challenging residential conditions with mid-single-digit negative growth. higher interest rates and with also political and economic uncertainty in the US way on consumer confidence affecting our residential business. In South America, plus 7%, so good growth, I would say, in all markets in South America, also helped by good price realization. Euro plus 2, where also commercial, similar picture as in North America, continues to grow on a solid level. And where residential in general remains challenging, although we see at least some light at the end of the tunnel for residential, we have seen definitely in Sweden things leveling or bottoming out and we start to see an increase in the residential replacement market in Sweden. Sweden was the first one to cut interest rates almost a year ago, May last year. They have done four or five interest rates cuts in the meantime and it starts to give a positive effect on the market conditions. We believe also that UK has bottomed out and we have seen some improvement in the UK where obviously South Europe is much later in the cycle when it comes to the residential business. Africa plus eight, Oceania minus one, Australia, same picture as I mentioned for Europe, strong commercial, more challenging residential. New Zealand is perhaps a little bit like Sweden, also in New Zealand there has been several inter-trade cuts already, and also in New Zealand we see residential coming back. And then Asia minus six with a strong India, but higher double-digit negative growth again in greater China where we have seen market conditions further deteriorating and also forecasts on construction site residential in particular this year is even worse than last year. A couple of highlights, and we have changed a little bit the way we present. We zoom in on two market highlights. The first one is a joint effort between Levelock and Baldwin. Levelock is a technology company. we acquired in the US making digital connected locks and we sell those locks on the commercial side for light commercial and multi-family applications and we also sell these locks now through the Baldwin channels bringing digital connected locks into the house. We can have the same form factor as a mechanical lock now and a fully integrated digital lock that you can put on your office door or your sleeping room door without touching the aesthetics of your inner hardware in the house. So quite excited about this collaboration between Baldwin and Level. Another highlight in entrance systems, we launched our Insight Mobile app, giving us the possibility to easily remote control and access manage our doors. And I would say in that aspect we are unique as a full solution provider in the sense that we can provide the door, we can also provide the connectivity and the insights through this Insight Mobile app, and obviously we also do service on our doors. So top line, again, positive organic growth, price and positive volume growth. Top line up 57% on a 12-month moving trend since 2020. Good complementary growth again this quarter from acquisitions, 5% like mentioned earlier. Operating margin on 12-month moving trend within the bandwidth we aim for, the 16%, and an EBITDA margin on the higher end of that bandwidth at 17%. A good operating profit for a seasonally lower Q1, EBITDA up 106% if we compare with 2020. Another quarter where we were very active from an acquisition perspective with six acquisitions completed in the quarter. They represent an annualized sales of around 3.6 billion SEC and then we also divested in the quarter most of the citizen ID business and we also booked a divestment loss of 50 million SEC for that divestment. We still have a very small part of citizen ID in the US, the green card business, where we are still waiting for approval from the local authorities to also divest that part. Some highlights in view. A US-based provider of precision engineered connected asset protection and access control solutions. Really adding complementary products and solutions to our core business. A very nice new vertical in global solutions. Quite excited about this acquisition. They had a sales of 1.9 billion SEC last year. And then Ullmann & Sacher, a German supplier of access control handles, knobs, and corresponding software, adding complementary products and solutions to our core electromechanical business and increasing in a significant way our electromechanical presence in Germany. They fall under the EMEA division, and they had a sales of 240 million SEC last year. If we then zoom in on the different divisions, starting with EMEA, EMEA had a stable organic sales development in the quarter with strong sales growth in Central Europe and the Nordics, Sweden and Finland in particular. A stable sales growth in UK, Ireland, but then sales decline in South Europe and in the Middle East, India, and Africa region, mainly because of the Middle East. An operating margin of 13.8%, 10 base points better than last year. Very good, strong operating leverage of 60 base points due to positive mix, in a sense, more Nordics and less South Europe. Good, strong price realization and also good operational efficiencies. VEX was dilute if 30 base points and M&A dilute if 20 base points. So a good start of the year for EMEA. Americas had an organic sales growth of plus 2% with strong sales growth in Latin America and in North America non-residential segment. Then a sales decline in the North America residential segment as mentioned earlier. An operating margin of 17.1% with a slightly negative operating leverage mainly due to continued investments in R&D and sales and also due to the negative volumes we had on the North America residential segment side. held by FX 30 base points, and then strong dilution from M&A 110 base points. That's the level lock acquisition, integration costs around that acquisition, and also investments in R&D where we are finalizing a couple of new product launches. That dilution will continue in Q2 and then should more normalize towards the second half of the year. If we then go to opening solutions, Asia Pacific, an organic sales decline of 5% with stable sales growth in Pacific Northeast Asia, that subdivision, but then significant sales decline in Greater China, Southeast Asia subdivision. an operating margin of 4.1%, with a negative operating leverage of 50 base points. It's clear that the strong double-digit volume declining in Greater China at the moment becomes difficult to compensate through cost-cutting for that decline in the top line, and that's what we have seen in the operating margin. FX was also diluted 50 base points, mainly because of the weaker Australian dollar, and we have not done any M&A since several quarters in that division. Global tech, strong start of the year, and organic sales growth of plus 8%, with very strong sales growth in global solutions in most, if not all, different verticals. Also strong sales growth in HID. an operating margin of 13.7%, but underlying a very strong operating margin with very good operating leverage of 100 base points, good strong price realization, good realization of operational efficiencies. FxHub has 10 base points, but strong dilution of M&A, 280 base points. That's because of the 50 million SEC capital loss for the divestment of citizen ID. And then one-off acquisition and integration costs mainly related to InView. Underlying, I think, very strong performance of global technologies. Last but not least, entrance systems, a flat organic sales development with very strong sales growth in parameters security, good sales growth in pedestrian, a stable sales in doors and automation and that's the new name for our residential segment we change the name because we believe that doors and automation covers better what we do in that segment we don't only sell residential garage doors we also sell operators we do gate operators and we we automate all the all the doors a sales decline in industrial and then a good but lower sales growth for service in the quarter an operating margin of 16.8 percent also here very good operating leverage 140 base points are creative driven by positive mix price cost and also here very good operational efficiencies avex helped us 30 base points but then strong dilution from an a 190 base points As you know, Ski Data is very seasonal. The first quarter is always much lower top line-wise. As a matter of fact, we made a loss for Ski Data in the quarter, but then as the year evolves, the top line will seasonally improve and also the bottom line will then significantly improve. With that, I give the word to Eric for some more details on the financial numbers.

Thank you, Nico. And also a very good morning from my side. You've heard before that the sales was up with 8%, of which 2% is related to organic growth. Operating income in value was up with 4%. EBIT margin, as also mentioned before, was down with 50 base points. And as also said, is that there was mainly related to acquisitions, integration costs and so forth like that. Income before tax, net income and EPS were all up 3% versus last year. Operating cash flow at 2.4 billion, it's minus 22% versus, I would say, a strong quarter last year. This year, I mean, the cash conversion was at 51%, which is good. But also, of course, it's also impacted by that we have increased our inventory, let's say, ahead of the tariffs. Finally, then on this slide, return on capital employed ended on 14.2%. It's 40 base points lower than the same period last year. But of course, we have been quite active on the acquisition front. If we then look on the bridge, the 2% organic can be split in, I would say, a strong 1% on price and then about, I would say, a low one on volume, but there was volume growth in the quarter. You see a very good organic flow through of 60%, 70 base points accretion to the result. There we've had good help from price, mixed operational efficiencies. We had in the quarter positive savings coming out of the MFP programs of slightly below 200 million. Currency slightly positive on 20 base points. And then we have the acquisition column, which in total sort of had a dilutive effect of 140 base points. Of this, roughly 70 base points come from SkiData, which as mentioned before by Nico, it's predominantly seasonal. Levelock, as mentioned also before, it's a lot of investments into R&D. We then have about 30 base points, which comes from acquisition and integration costs. That one is mainly related to Inview. I should also sort of mention that Inview is also seasonal, which means that they have a lower Q1, but then Q2 and Q3 are much stronger quarters for them. And finally, then on the acquisition, we also had the 50 million. that we booked in divestment loss for Citizen ID. As mentioned by Nico, we have sold the international part. The American part is something that will come in the quarters to come, and that will also generate roughly the same loss as what we saw from the international part. Cost breakdown, direct material, positive with 150 base points. Out of that 50 is related to a positive mix, which leaves 100 base points, which is if I call the true tailwind then from price versus cost. Conversion cost is flat versus the same period last year. There we have been able to offset inflation, higher wage costs, etc. with operational efficiencies. I mentioned sort of the impact of MFP before the roughly slightly below 200 million sgna is dilutive with 60 base points there we have not been able to upset let's say inflation and investments in sales organization with efficiency measures We now launched in Q1 the 10th manufacturing footprint program. It looks a lot like the programs you have seen before. In total it is about 60 projects. The restructuring cost is slightly higher than the MFP9. We ended up on above 1.3 billion SEK. the savings from the program by end of 2027 is estimated to be around 1 billion the payback time is is fast it is slightly below two years if you look for this year total mfp savings that comes from the eight nine and ten programs we estimate the effect for 2025 to be around 800 million sec Operating cash flow, as mentioned before, 2.4 billion, 22% lower than a seasonally strong quarter last year. Cash conversion 51%. Here we had an increase in our inventory ahead of the tariffs. but you also have on capex that last year we sold some buildings in apac this year we have invested predominantly in some buildings in global tech and that also has an impact on the cash flow If you look on the gearing and the net debt, net debt to EBITDA is the same as last year at 2.4. Net debt to equity is slightly higher than at 70%. If you look in total value versus December, our total debt is up with 1.1 billion sec but then we have been rather active i would say on the acquisition front which has a negative impact but then we've also had some help almost offsetting it by the currencies so but all in all i think we have continued to have a very strong balance sheet position and can continue our acquisition strategy also going forward And last for me is then the earnings per share, as mentioned before, up 3% versus the same period last year. And with that, I hand back to Nico for some concluding remarks.