Assa Abloy sees strong sales growth in fourth quarter
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Assa Abloy sees strong sales growth in fourth quarter

Global security company Assa Abloy, best known for its doors and locks, reported fourth quarter earnings this week that beat analysts’ expectations and sent its share price soaring. Investors liked what they saw – particularly important may have been a reversal of fortunes in China, where Assa Abloy has battled headwinds for years. China is a small market for the company, but one that is seen as vital for further growth. As a result, the company’s share price was up 5% in early trading, and continued to rise throughout the day.

Assa Abloy’s share price jumped as investors reacted to a strong fourth quarter

graph 07 assa

Source: Yahoo Finance

Here are the numbers: Assa Abloy delivered adjusted earnings before interest and tax of 3.75 billion SEK. That toped analysts’ expectations of 3.73 billion SEK. The company also beat on core sales growth, delivering a 6% rise rather than the expected 4% rise. Lastly, Assa Abloy demonstrated strong growth in an important division for the company: electromechanical locks. Sales in this area came in 30% higher than they did in the fourth quarter of 2017, demonstrating Assa Abloy’s winning position in comparison to rivals.

The reason electromechanical locks is a big thing for Assa Abloy is that the company is betting that there will be an accelerating shift towards more modern forms of security than traditional mechanical locks. This week’s results go a long way to showing that the company owns this fast-growing market. Coincidentally, not only were sales in this division 30% up, they also now make up 30% of the company’s overall sales.

If Assa Abloy’s fourth quarter (and full year) had a theme, however, it might have been acquisitions. Discussing the company’s purchases over the period, CEO Nico Delvaux said: “During the quarter we closed five acquisitions with total annualized sales of SEK 0.8 billion. With the acquisition of Luxer One, we will integrate a US market leader in the last mile delivery space, including 'click and collect' at retail stores. We also acquired Lorient, extending our door sealing portfolio alongside the innovative drop-down seals and finger protection solutions from Planet. The three other acquisitions were Exidor, Marenco and Pacific Door Systems. In the full year we acquired 19 companies with annualized sales of SEK 3.8 billion.”

Disclosure

Dominion holds Assa Abloy in its Global Trends Managed Fund.


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