The Swedish group said that following the improvement, its board now proposed to restore 2019 dividends to 3.85 crowns per share as originally proposed before the wider COVID-19 outbreak.

It had lowered the proposed dividend in March after the Swedish government urged all companies in the country to drop 2019 dividends altogether.

Adjusted operating profits for July-September were down 8% from a year earlier to 3.59 billion crowns ($412 million) against a mean forecast in a Refinitiv poll of analysts of 3.11 billion.

"The quarter continued to be impacted by COVID-19, but most of our important markets showed good recovery. In particular, the markets in Europe recovered faster than in the US, as lockdowns were eased and distributors started to restock," Chief Executive Nico Delvaux said.

Sales were down 8% year-on-year, with sales excluding acquisitions declining 5%.

"Significant cost-saving measures have been implemented, partly offsetting the lower volumes," Delvaux said.

The rival to Allegion and Stanley Black & Decker had in July predicted a gradual improvement after reporting a 44% second-quarter profit plunge and a 15% sales drop, however adding that uncertainty about the recovery remained high in the short term.

The quarterly operating profit is adjusted for 1.9 billion crowns in income from a revaluation of a stake in Swiss company Agta Record that Assa Abloy bought in August.

Assa Abloy's shares were up 1.5% in early trade, resulting in a price roughly unchanged year-to-date.

($1 = 8.7197 Swedish crowns)

(Reporting by Anna Ringstrom; editing by Niklas Pollard and Philippa Fletcher)

By Anna Ringstrom