ASSA ABLOY AB (publ)

Good morning everyone and welcome to the presentation of Assa Abloy's Q2 report in 2025. 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. We'll start now as usual with a summary of the report before we open up for your questions and then we will round up in about one hour's time. So with that the floor is yours Nico.

Thank you Björn and also good morning from my side. We can report good numbers for Q2. We had a strong overall performance with a good organic growth of 3%, a low 2% price, a high 1% volume. It's also good to see now that we have for the second quarter in a row, again, positive organic volume growth. We have seen good organic sales development or strong sales growth in global tech, good sales growth in Americas, and small sales growth in entrance systems, but then the sales decline in EMEA and in Asia Pacific. Also good to see that organic growth continues to be supported by strong growth through acquisitions, 5% net in the quarter. And then very strong operational execution with a volume leverage of 53% on the 3% organic growth, giving us an EBITDA margin of 17.2% and an EBIT margin of 16.2%. also good work on the balance sheet side with a strong cash flow of 5.5 billion sec and a cash conversion of 103 percent and we continue to be active on the acquisition front with five acquisitions completed in the quarter if you look at the numbers A sales of 38 billion SEC, so the 3% organic, the 5% net acquisition, and unfortunately a strong currency headwind of minus 8%. The EBITDA margin of 17.2%, even above the 16% to 17% bandwidth we aim for, EBITDA up 1%. If we now look a little bit into the different regions, I can repeat what I said in previous quarters. We continue to see strong momentum on the non-residential side, so the commercial side. We see that as well in North America as in Europe as in Oceania. we continue to see more challenging market conditions on the residential side where in north america interest rates remain too high and where the effect of ecb lowering the interest rates in in europe has not translated yet in a recovery of that residential market. Where we see some uptick on the residential side is in Sweden. You know that their interest rates were already cut more than a year ago. In May last year to be exact for the first time we had five rate cuts in Sweden. And we see in Sweden R&R slowly coming back. but no recovery yet on the new belt. Very similar situation in New Zealand that is very comparable to Sweden. It was also good to see that we continue to see more activity on the logistic vertical in Europe and definitely in North America. So North America plus four, where on the commercial side we had a very high single-digit organic growth, and where we had a flat development on the residential side. South America plus four, the American division was flat in South America, but we had a strong global tech development. So continue to be a good momentum in South America, although we are a bit concerned, obviously, with what's going to happen with mainly Brazil and Mexico now with the import tariffs towards the U.S. europe plus one where again on the residential side france especially is is more challenging because france is also very exposed to their essential side but very strong dac and then scandinavia nordics recovering africa plus four Oceania plus one and Asia minus two, where we should make a big distinction between Greater China, where all market indicators continue to be double digit down. You can look at new housing built on the residential side, new permits, finished houses, everything is down double digit. And we also have seen a double digit negative growth in our Greater China business, where the rest of Asia is really strongly positive. Some market highlights, you might have seen this also on social media, SkiData entered a strategic partnership with Samsung so that our SkiData access management solutions for stadiums, now people going to the stadiums can also experience the Samsung wallet experience, the smoothness experience when they use the SkiData access management solutions in those stadiums. Some bigger project wins in South Korea, one of the largest apartment complexes with more than 2500 apartment units using our door hardware. The Freedom of the Seas, one of the biggest cruise ships in the world, in our marine segment in Global Solutions, using our solutions and updating more than 2,700 logs to RFID. And then a stadium in Illinois, focusing also on sustainability, improving energy efficiency using the Americas hardware. So now, like I mentioned, the second quarter in a row with good, strong organic volume growth continue to be complemented with strong growth through acquisitions. Our sales up 59% if we compare with 2020 on a 12-month moving trend. Operating margin within the 16% to 17% bandwidth. A run rate of 16.1% on EBIT and 17.1% on EBITDA. And then a good operating profit for AQ2, an EBIT up with an on-run rate with 108% if we compare with 2020. Acquisitions, as mentioned earlier, five acquisitions completed in the quarter, 11 year to date. They represent an annualized sales of 4.4 billion SEC. And then we also concluded the divestment of the citizen ID business, where we agreed with all parties to keep the US part of that citizen ID business. It's a smaller part. It's around $25 million, depending on year to year. It fluctuates a little bit. It's mainly the green card business that is a project that normally will end somewhere beginning of 2027. And as it's close to the end of that project, all parties agreed that that was the best solution. Some highlights, TeleAlarm, a European, a German provider of remote care technology, reinforcing our product and solution offering within senior care. And they had a sales of 330 million sec last year. And then Kingspan, an acquisition in my country, a Belgian manufacturer of high-quality door panels for sectional doors, residential and commercial doors. They had a sales of 290 million SEC last year. If we then go a bit into the different divisions, EMEA, an organic sales decline of minus 1%, with good sales growth in Central Europe, a small sales growth in the Nordics, where we commented on the recovery of the residential site in Sweden. sales decline in uk ireland mainly related to some timing issues on some bigger projects we are and we remain more positive on uk but then sales decline in south europe mainly because of france residential and also sales decline middle east india and africa mainly because of the middle east an operating margin of 13.9%, where we had a negative operating leverage of 30 base points on the minus one organic sales, but were helped by currency 50 base points and M&A 10 base points. Very strong Americas, an organic sales of 4% with a very high single-digit sales growth for the North America non-residential segment, flat sales in North America residential segment, which I think is a very good achievement given the market conditions, and also flat sales in Latin America against a difficult comparison last year. an operating margin of 18.6% with strong operating leverage 60 base points on the 4% organic growth held by currency 20 base points but then a stronger dilution on the acquisition side 120 base points linked to level lock as we mentioned in Q1 this dilution would continue in Q2 and we foresee now that in the second half of the year that dilution will normalize to more normal M&A dilution levels. Asia Pacific, an organic sales decline of minus 1%, with a strong sales growth in Pacific Northeast Asia, and a significant sales decline in Greater China and Southeast Asia, where we should make a big distinction between Greater China, where we had high double-digit negative growth, and Southeast Asia, where we had double-digit positive growth. But despite the negative organic growth, very good operational execution with excellent operating leverage of 130 base points, giving us an operating margin of 9.6%, with FX dilutive 10 base points. Global technologies, another division with very strong performance in the quarter and organic sales growth of 8%. Very strong sales growth in HID, strong sales growth in global solutions, where I would say all business areas or business units contributed to that strong growth. Also, very good operating margin of 18.5% with an excellent operating leverage, 280 base points accretion. And then FX dilutive, a significant way, 100 base points because of the weaker US dollar. And M&A, a creative 19 basements, mainly because we don't have the citizen ID business outside of the US in our books anymore. And last but not least, entering systems and organic sales of plus 1%, with very strong sales growth in parameter security, good sales growth in doors automation and in pedestrian, but a sales decline still in industrial. Only a small sales growth in service, where we find it challenging to find enough service technicians to execute on all the work that we have in the pipeline. A good operating margin of 16.5% if you take the dilution of SCI data into account. A very strong operating leverage, plus 100 base points. FX dilute is 10 base points. And like we also mentioned, in Q1, SCI data is very seasonal. So Q1 and Q2 are lower quarters from a top line perspective for ski data. Q3 is better and then Q4 is much better. So that dilution will go significantly down now in Q3 and definitely in Q4. And with that, I give the word to Eric for some more details on the financial numbers.

Thank you, Nico. And a very good morning from my side as well. As mentioned before, if you look on the sales, it ended up flat due to the headwind that we have from the currency with minus 8%. Organic growth was strong at 3%. Our EBIT operating income in value is up with 1%. Despite also there, we would have a headwind from the currency. The EBITDA margin And the EBIT margin, 17.2 EBITDA margins, 16.2 on EBIT, stronger than what it was a year ago. Income before tax is up with 2%, net income and EPS is up with 1%. Cash flow, as mentioned before by Nico, was strong at almost 5.5 billion SEK. It's slightly lower than what it was a year ago, but still we had a very good cash conversion of 103%. And finally, then we continue to improve our return on capital employed. It went up with 20 base points and ended at 14.2. If we dissect a bit and look into the bridge, the sales price is... is let's say a low two and volume is a strong one and that combines gives us about three percent we had a very good uh operating leverage of almost 53 this is driven by the tailwind from price cost is driven by operational efficiencies we had savings from the mfp program of above 200 million but we also had other operational savings in there currency had a slight negative impact of 10 base points and then you heard nico talk before about the dilution on the mna of the 60 base points that comes from the ski data as well as the level of acquisition Cost breakdown, direct material, 60 base points better than a year ago. In this 60 base point, there is no mix. So this is pure, let's say, the price versus cost. And as those ones have seen, it starts to go down every quarter, and we expect that to continue, that we'd have a less positive impact in the quarters to come. It's positive to see that the conversion cost is favorable versus the same period last year it's 50 base points better i mentioned before the mfp savings but we also have mfp savings pricing efforts and also other operational efficiencies that we have done we also see less of a dilution on the sgna it was minus 30 base points there our efficiency measures couldn't cover for the inflation, as well as continued investment that we have within our sales organization. Operating cash flow, as mentioned before, it was strong. We still continue to do very well, I would say, on the work in capital management. We had a slight uptick in receivables, but it's not, let's say, it's still sort of very much under control. um and as mentioned before the cash conversion was 103 percent and if you look on the 12-month rolling versus ebt it's 105 percent uh the gearing and net debt went down slightly to 2.3 um net debt to equity is 71 percent in value our debt versus the last quarter went down with roughly half a billion and that is of course on the negative side we have continued acquisitions we have paid half of the dividend on the positive side we had a good cash flow as well as we are helped of the stronger Swedish krona But all in all, I think that we can continue to do our acquisition strategy because our balance sheet still remains strong. And last but not least, you were sort of trying to speed me up there, Nico. Earnings per share, as I said before, is up with 1%. And with that, now you can sort of take your concluding remarks.