direct/ASSA ABLOY (SE) - ASSA ABLOY - CLEAR IMPROVEMENT IN EUROPE

ASSA ABLOY - CLEAR IMPROVEMENT IN EUROPE

The interim report is published earlier than previously announced due to the change of CEO.

- Sales for the third quarter of 2005 increased organically by 5% to SEK 7,019 M (6,447).
- The quarter´s operating income amounted to SEK 1,103 M (965).
- The operating margin (EBIT) for the quarter amounted to 15.7% (15.0).
- Net income for the third quarter amounted to SEK 706 M (617).
- Earnings per share amounted to SEK 1.89 (1.65) for the third quarter, an increase by 14%.
- Operating cash flow for the quarter amounted to SEK 1,190 M (1,082).

"Our strategic initiatives are beginning to produce results, chiefly in the form of increased sales and margin in EMEA," comments President and CEO Bo Dankis. "The report is truly a sign of strength which constitutes a solid foundation for continued good development."

The Group´s sales in the third quarter totaled SEK 7,019 M (6,447), an increase of 9% compared to previous year. Organic growth was 5%. Translation of foreign subsidiaries´ sales to Swedish kronor had a positive effect of SEK 184 M due to changes in exchange rates. Newly acquired companies contributed 1% to sales.

Sales for the first nine months of 2005 totaled SEK 20,272 M (19,263), which represents an increase of 5%. Organic growth was 4%, and acquired companies contributed 1%. Exchange rates affected sales positively by SEK 1 M compared with the equivalent period in 2004.

Operating income before depreciation, EBITDA, for the third quarter amounted to SEK 1,317 M (1,189). The corresponding margin was 18.8% (18.4).

The Group´s operating income, EBIT, amounted to SEK 1,103 M (965) after positive currency effects of SEK 25 M. The operating margin (EBIT) was 15.7% (15.0).

For nine months to September, operating income before depreciation, EBITDA, amounted to SEK 3,662 M (3,456).

The corresponding margin was 18.1% (17.9). The Group´s operating income, EBIT, amounted to SEK 3,015 M (2,763) after negative currency effects of SEK 5 M. The operating margin (EBIT) was 14.9% (14.3).

Income before tax for the third quarter was SEK 969 M (838), including positive currency effects of SEK 12 M due to translation of foreign subsidiaries. Income before tax up to September was SEK 2,633 M (2,397), including negative currency effects of SEK 1 M.

The Group´s tax charge for the quarter totaled SEK 263 M (221), corresponding to an effective tax rate of 27% (26) on income before tax.

Earnings per share for the third quarter amounted to SEK 1.89 (1.65). Earnings per share up to September totaled SEK 5.13 (4.76).

Operating cash flow for the quarter, excluding costs of the restructuring program, amounted to SEK 1,190 M - equivalent to 123% of income before tax - compared with SEK 1,082 M last year. Operating cash flow up to September totaled SEK 2,552 M (2,349).

THE ´LEVERAGE AND GROWTH´ ACTION PROGRAM

The two-year action program initiated in November 2003 will be completed during the fourth quarter. Cost savings are projected to reach SEK 450 M a year by end of 2005. Savings of around SEK 95 M were realized during the third quarter of 2005. In the year so far, payments totaling SEK 157 M relating to the action program have been made. 1,200 of the 1,400 employees becoming redundant have now left the Group.

COMMENTS BY DIVISION

EMEA

Sales for the third quarter in the EMEA division (Europe, Middle East and Africa) totaled EUR 295 M (282), with 4% organic growth. Operating income amounted to EUR 45 M (40) with an operating margin (EBIT) of 15.2% (14.2). Return on capital employed amounted to 15.6% (14.4). Operating cash flow before interest paid totaled EUR 59 M (67).

Scandinavia, the United Kingdom, Israel and eastern Europe are generating strong organic growth. Sales trends in France and Italy improved during the quarter. The structural measures that have been implemented are producing savings as planned. Higher sales volumes are having beneficial effects on income but are being offset by higher selling costs.

AMERICAS

Sales for the third quarter in the Americas division totaled USD 308 M (299) with 4% organic growth. Operating income amounted to USD 58 M (54) with an operating margin (EBIT) of 18.9% (18.0). Return on capital employed amounted to 21.6% (19.8). Operating cash flow before interest paid totaled USD 80 M (49).
The Door Group and the Residential Group report strong growth during the quarter, while growth in the Architectural Hardware Group was weaker this quarter. Sales and earnings in Mexico continued to be weak. Canada and South America are showing stable development. Sales development in the USA drives margin expansion.

ASIA PACIFIC

Sales for the third quarter in the Asia Pacific division totaled AUD 108 M (93) with 5% organic growth. Operating income amounted to AUD 15 M (15) with an operating margin (EBIT) of 13.9% (16.0). Return on capital employed amounted to 18.6% (18.8). Operating cash flow before interest paid totaled AUD 6 M (8).

Asia Pacific´s sales increased primarily as a result of acquisitions made in China and South Korea. Organic growth was strong in Asia and particularly in China. Weak sales in the Australian residential market, lower margin from newly acquired entities and increased costs for restructuring and materials held down the operating margin.

GLOBAL TECHNOLOGIES

The Global Technologies division reported sales of SEK 1,435 M (1,253) in the third quarter, representing organic growth of 8%. Operating income amounted to SEK 212 M (182) with an operating margin (EBIT) of 14.8% (14.5). Return on capital employed amounted to 14.2% (13.0). Operating cash flow before interest paid amounted to SEK 170 M (258).

Global Technologies continues to record strong organic growth. The Identification Technology Group reports high growth in volume and improved margins. The renamed Entrance Systems Group (formerly Automatic Doors) is progressing well, especially in terms of service revenues and on the US market. The Hospitality Group reports good organic growth for the quarter. Improvement of margins is being held back by restructuring costs.

OTHER EVENTS

The acquisitions of Security World, a chain of franchised security stores in South Africa, Tag Technology, a distributor of RFID products in Italy, and two smaller distributors of automatic doors - one in the USA and one in New Zealand - were consolidated during the quarter. The combined annual sales of the companies are about SEK 50 M. The combined acquisition price, including estimated earn-outs, is about SEK 40 M. Preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite life amount to about SEK 35 M.

ACCOUNTING PRINCIPLES

ASSA ABLOY has adopted International Financial Reporting Standards (IFRS) from 1 January 2005 as endorsed by the European Union. The Group´s Interim Report is prepared in accordance with IAS 34 ´Interim Financial Reporting´ under the guidelines given in RR 31 issued by the Swedish Financial Accounting Standards Council. The Parent Company has adopted RR 32. The effects of the transition to IFRS regarding the comparative figures for 2004 were described in a separate report, ´IFRS-adjusted 2004 figures for ASSA ABLOY´, published on 20 April 2005. The accounting principles applied are described in an appendix to the Interim Report for the first quarter of 2005, published on 27 April 2005. These reports are available on ASSA ABLOY´s website. IAS 39 was adopted from 1 January 2005 and the net effect of the change, SEK -77 M, has been taken directly to shareholders´ equity. In accordance with IFRS 1 no adjustment of comparatives has been made. The effect is due to the requirement under IAS 39 that financial instruments are reported at fair value and relates to fair value adjustments on derivative instruments.

OUTLOOK*
Organic sales growth in 2005 is expected to continue at a good rate. The operating margin (EBIT) is expected to rise for the full year, mainly due to savings resulting from the restructuring program. Excluding payments relating to restructuring, the strong cash generation will continue.

Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY´s strong position will accelerate growth and increase profitability.

Stockholm, 28 October 2005


Bo Dankis
President and CEO

*Outlook published in August 2005 read:
Organic sales growth in 2005 is expected to continue at a good rate, although affected by the weaker development in Europe. The operating margin (EBIT) is expected to rise, mainly due to savings resulting from the restructuring program. Excluding payments relating to restructuring, the strong cash generation is expected to continue. Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY´s strong position will accelerate growth and increase profitability.

This Interim Report has not been reviewed by the Group´s Auditor.

FINANCIAL INFORMATION

The Year-End Report from ASSA ABLOY AB will be published on 10 February 2006. The 2005 Annual Report will be published in March 2006. The Annual General Meeting will be held on 25 April 2006.

Further information can be obtained from
Göran Jansson, Deputy CEO and CFO, Tel: +46 8 506 485 72
Martin Hamner, Director of Investor Relations and Group Controller, Tel: + 46 8 506 485 79

ASSA ABLOY is holding a telephone conference at 12.00 today. Dial in number: +44 (0)207 162 0125 or +46 (0)8 5052 0114. The presentation can be followed over the Internet: http://genesys.on24.com/r.htm?e=17382&s=1&k=048F29C58267F986B8D38CC4B401B84A


ASSA ABLOY - CLEAR IMPROVEMENT IN EUROPE

ASSA ABLOY AB (publ)
Box 70340, SE 107 23 Stockholm, Sweden
Tel: +46 8 506 485 00, Fax: + 46 8 506 485 85

www.assaabloy.com

ASSA ABLOY är världens ledande tillverkare och leverantör av säkerhetlösningar som tillgodoser kundernas krav på säkerhet, trygghet och användarvänlighet. Koncernen har cirka 30 000 anställda och en årsomsättning på cirka 3 miljarder EUR.


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