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ASSA ABLOY

Q4 interim report 2020

Strong operational execution

• Organic sales development
• • Stable sales in EMEA and Entrance Systems
  • Sales declined in Americas and APAC
  • Sales declined significantly in Global Technologies
• Solid EBIT-margin
• • Adjusted for acquisitions and divestments the operating margin reached 16%
  • Net costs reduced by SEK 0.5 bn
• Restructuring program, MFP8 launched
• Very strong cash flow, up 6% vs last year

2

Q4 2020 figures in summary

 Sales MSEK 23,298

-7%

• • - 5% organic
  • +5% acquired and divested
  • - 7% currency
• EBITA-margin15.6%* (16.8%)
• EBIT-margin14.9%* (16.2%)

 EBIT MSEK 3,475	-14%
 EPS SEK 2.33	-7%

• Excluding restructuring items. Includes capital loss and other exit costs from divestment of Gardesa MSEK -185.

3

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

Sales	EBIT
-7%	-14%

4 047

3 475

Q4 19		Q4 20
	Sales, MSEK		EBIT, MSEK

1. 500

1. 000

1. 500

1. 000

1. 500

1. 000

1. 500

1. 000

1. 500

Full year 2020 figures in summary

 Sales MSEK 87,649

-7%

• • - 8% organic
  • +4% acquired and divested
  • - 3% currency
• EBITA-margin14.3%* (16.4%)
• EBIT-margin13.6%* (15.9%)

 EBIT MSEK 11,916	-20%
 EPS SEK 7.54	-18%

• Excludes a positive non-cash income from revaluation in associates of MSEK 1,910 and restructuring items.

100 000

95 000

90 000

85 000

80 000

75 000

4

Sales	EBIT
-7%	-20%

14 920

11 916

Q4 19		Q4 20
	Sales, MSEK		EBIT, MSEK

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

Sales by region Oct-Dec 2020

40 -3 -5

41 +8 -3

ASSA ABLOY	100	0	-5
Emerging markets	16	-9	-11

10 -16-15

		1-6-11
3	1	-2

Share of sales, %	Change in local currencies
QTD 2020 vs. QTD 2019, %
	5

5 +15 1

Organic change

QTD 2020 vs. QTD 2019, %

Emerging markets comprise follows IMF's definition as per 2018-12-31

Market highlights

• Project wins
• • Automatic door solutions for university hospital in South Korea
  • Door hardware for airport in China
• Product launches
• • Automatic sliding door with digital OLED signage incorporated into door
  • New Yale Doorman smart lock launched in Scandinavia
  • New HID EikonTouch fingerprint readers
• Awards
• • Good Design Award for Lockwood brass core range
  • Pandemic Tech Innovation Award for HID Digitized Social Distancing Solution
  • Campus Safety BEST Award for HID Location Services for Workplace Safety
  • 4 awards from Transform Awards North America for Yale brand

6

Sales growth

%																																							MSEK
20																																					100 000
15																																					95 000
10																																					90 000
5																																				85 000
0																																			80 000
-5																																						75 000
-10																																						70 000
-15																																						65 000
-20																																						60 000
2015	2016			2017			2018	2019	2020
						Organic growth, %			Acquired growth, %					Sales in fixed currencies, MSEK

7

Operating margin	Adj. for acq & div:
	16.1% in Q4

%		Run rate: EBIT-margin 13.6% (15.9%)		%
18				18
17				17
	Long term target range (average)

16					16
15					15
14					14
13					13
12					12
11					11
10					10
9					9
8					8
2015	2016	2017	2018	2019	2020
	Quarter	EBIT Rolling 12-months	EBITA* Rolling 12-months

Excluding China write-downs, restructuring items and a positive revaluation of agta record.

*) Operating margin before amortization of intangible assets recognized in business combinations.

8

Operating profit

MSEK			-14%		MSEK, 12 months
4 500			vs		16 000
		Q4 LY
4 000					14 000
3 500					12 000
3 000					10 000
2 500					8 000
2 000
1 500					6 000
1 000					4 000
500					2 000
0					0
2015	2016	2017	2018	2019	2020
		Quarter	Rolling 12-months

*) Excluding China write-downs, restructuring items and a positive revaluation of agta record

9

Acquisitions

• Fully active pipeline
• • 4 acquisitions completed in Q4
  • 12 acquisitions completed in 2020
  • Acquired annualized sales of MSEK 5,600
• Divestments
• • agta record and ASSA ABLOY Entrance businesses
  • CEDES
  • Gardesa
  • Divested annualized sales of MSEK 1,600

10

Opening Solutions

EMEA

• Organic sales -1%
• • Strong sales growth in the UK and France
  • Stable sales in Germany and Scandinavia
  • Sales declined in Benelux, Eastern Europe, Middle East/Africa and South Europe
• Operating margin 12.8% (16.0%)
• • Good volume leverage
  • • Continued savings and efficiency improvements
  • FX -10bps
  • M&A -310bps
  • • Capital loss and exit costs from divestment of Gardesa of MSEK 185

22%

of Group sales

	Adj for acq & div:
6 000	15.9% in Q4	20%

5 500	18%
5 000	16%
4 500	14%
4 000	12%
3 500	10%
3 000	8%
2 500	6%
2 000	4%
	Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

Sales, MSEK		Operating margin, %

Excluding MFP restructuring items.

11

Opening Solutions

Americas

• Organic sales declined -4%
• • Very strong sales growth in US Smart Residential, US Residential and Latin America
  • Sales declined in Architectural Hardware, Electromechanical Solutions, Security Doors and in Canada
  • Sales declined significantly in Access & High Security
• Operating margin 20.0% (20.0%)
• • Strong volume leverage (90 bps), due to good cost control and savings, despite negative mix
  • FX -20 bps
  • M&A -70bps
     Move of Perimeter Security to Entrance Systems

20% of Group sales

6 500	24%
6 000	23%
5 500	22%
5 000	21%
4 500	20%
4 000	19%
3 500	18%
3 000	17%
2 500	16%
Q4 18	Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

Sales, MSEK		Operating margin, %
		Excluding MFP restructuring items.

12

Opening Solutions

Asia Pacific

• Organic sales declined -5%
• • Sales declined in Pacific, China and South Korea
  • Significant sales decline in other regions
• New divisional organization from January
• Operating margin 8.2% (8.2%)
• • Good leverage (40 bps)
  • • Strong operational efficiency gains
    • Continued improvements in China
    • Weak performance in India
  • FX -30 bps
  • M&A -10bps

9%

of Group sales

3 000	20%
	15%
2 500	10%
	5%
2 000
	0%
1 500	-5%
	-10%
1 000	-15%
	Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

Sales, MSEK		Operating margin, %

Excluding MFP restructuring items.

13

Global Technologies

• Organic sales declined -17%
• • Sales declined in Identity & Access Mgmt Solutions, Secure Issuance and Physical Access Control
  • Significant sales decline in all other business areas
  • Significant sales decline in Global Solutions
• Operating margin 16.4% (18.3%)
• • Negative volume leverage (-90bps)
  • • Continued strong impact from Covid-19
    • Weak Citizen ID and Hospitality/ Marine
      - Stronger decline in aftermarket business
    • Continued R&D investments
  • FX -70 bps
  • M&A -30 bps

15%

of Group sales

4 500								24%
4 000								22%
3 500								20%
3 000								18%
2 500								16%
2 000								14%
1 500								12%
1 000								10%
500								8%
Q4 18	Q1 19	Q2 19	Q3 19	Q4 19	Q1 20	Q2 20	Q3 20	Q4 20

Sales, MSEK		Operating margin, %

Excluding MFP restructuring items.

14

Entrance Systems

• Organic sales -1%
• • Strong sales growth in Perimeter Security
  • Stable sales in Residential and Industrial
  • Sales declined in Pedestrian
  • Stable sales in service
• Operating margin 15.8% (16.3%)
• • Stable volume leverage (-10 bps)
     Good cost control and savings
  • FX +20 bps
  • M&A -60 bps

34%

of Group sales

8 500						18%
8 000						17%
7 500
7 000						16%
6 500						15%
6 000						14%
5 500						13%
5 000
4 500						12%
4 000						11%
Q4 18	Q1 19	Q2 19	Q3 19	Q4 19	Q1 20	Q2 20 Q3 20* Q4 20

Sales, MSEK		Operating margin, %

Excluding MFP restructuring items.

15

Financial summary, Q4 2020

FX & acquisition 'run-rate' effects in Q1 2021

(31 December 2020):

SALES

FX: -12%

M&A: +4%

			October-December			January-December
		2019	2020*			2020*
	Sales	24,946	23,298	-7%	94,029	87,649	-7%
- Organic growth	147	-1,150	- 5%	2,652	-7,150	-8%
- Acquired net growth	760	1,211	+5%	3,063	3,328	+4%
- FX-differences	872	-1,709	- 7%	4,265	-2,558	-3%

	Operating income (EBIT)*	4,047	3,475	-14%	14,920	11,916	-20%
	EBITA-margin*	16.8%	15.6%	-1.2 pts	16.4%	14.3%	-2.1 pts
	EBIT-margin*	16.2%	14.9%	-1.3 pts	15.9%	13.6%	-2.3 pts
	Income before tax*	3,779	3,306	-13%	13,883	11,133	-20%
	Net income*	2,767	2,582	-7%	10,243	8,375	-18%
	EPS, SEK*	2.49	2.33	-7%	9.22	7.54	-18%
	Operating cash flow	5,235	5,529	6%	14,442	14,560	1%
	ROCE	17%	15%	-2.0 pts	17%	13%	-4.0 pts
	*) Excluding MFP restructuring items. Includes capital loss and other exit costs from divestment of Gardesa MSEK -185
				16

Cost efficiency in everything we do

Progress in Q4

• Operational efficiency with more permanent savings
• Additional permanent headcount reduction of 650
• Travel costs reduced by 60%

MFP8 launched in Q4

• Restructuring costs of SEK 1.4 bn
• Total annual savings SEK 1.0 bn
• Headcount reduction ~2,100
• • 10 factories closures
  • >30 office/ warehouse closures
  • 15 conversion assembly projects

Reduced SG&A and conversion net costs by

~SEK 0.5 bn

in Q4

17	Public

Bridge analysis - Q4 2020

Adj. for acq & div:

16.1% in Q4

MSEK	Q4 2019	Organic	Currency	Acq/Div	Q4 2020
Growth		-5%	-7%	5%	-7%
Sales	24,946	-1,150	-1,709	1,211	23,298
Operating profit*	4,047	-166	-321	-86	3,475
Operating margin, %*	16.2%	14.4%	18.8%	-7.1%	14.9%
Dilution/accretion		0.0 pts	-0.1 pts	-1.2 pts

*) Excluding restructuring items. Includes capital loss and other exit costs from divestment of Gardesa MSEK -185.

Sales decreased MSEK -1,648

• Price +1% and volume -6%

Margin drivers

• Strong operational leverage driven by cost measures of SEK 0.5bn
• Negative Covid-19 effects for all divisions, especially Global Technologies
• M&A effected by operating income of MSEK -185 from divestment of Gardesa (-80bps)
• Dilution from agta record (-40bps)

18

Cost breakdown as % of sales

October - December

		QTD 2020
%	QTD 2019	excl. acq/div		QTD 2020
Direct material	-36.1%	-35.7%	+0.4 pts	-35.6%
Conversion cost	-23.9%	-24.0%	-0.1 pts	-24.6%
Gross margin	40.0%	40.3%	+0.3 pts	39.8%
S, G & A	-23.8%	-24.2%	-0.4 pts	-24.9%
EBIT*	16.2%	16.1%	-0.1 pts	14.9%

*) Excluding restructuring items. Includes capital loss and other exit costs from divestment of Gardesa MSEK -185.

• Operating margin excluding acquisitions and divestments above 16%
• Direct Material - still lower raw material costs and sourcing savings
• Conversion cost - continued savings offsetting negative sales and mix
• SG&A - continued investments in R&D with good savings in sales and admin

19

Operating cash flow, MSEK

Working capital

Record cash flow down SEK 1.8 Bn

Quarter					12 months
6 000					20 000
		12 months cash flow / EBT = 131%		18 000
5 000					16 000
4 000					14 000
					12 000
3 000					10 000
					8 000
2 000					6 000
1 000					4 000
					2 000
0					0
2015	2016	2017	2018	2019	2020
	Quarter, MSEK	Cash rolling 12 months, MSEK		EBT rolling 12 months, MSEK

Excluding MFP restructuring items.

20

Gearing % and net debt, MSEK

Net debt/EBITDA**

1.9 (1.8)

Net debt	Gearing
40 000		80

35 000		Debt/Equity 51% (56%)		70
30 000					60
25 000					50
20 000					40
15 000					30
10 000					20
5 000					10
0					0
2015	2016	2017	2018	2019*	2020
		Net debt, MSEK		Gearing, %

*) IFRS 16 effect on net debt SEK 3.7 bn. **) Excluding MFP restructuring items.

21

Earnings per share, SEK

Quarter		Dividend proposal: SEK 3.90		12 months
2,50			10,00
	split in two payments
2,25					9,00
2,00					8,00
1,75					7,00
1,50					6,00
1,25					5,00
1,00					4,00
0,75					3,00
0,50					2,00
2015	2016	2017	2018	2019	2020

Quarter, SEK		Rolling 12 months, SEK

Excluding restructuring items, impairment of intangible assets in China and a positive revaluation of fair assets in agta record associates. Chart is restated for Stock split 3:1 2015.

22

Conclusions

• Strong operational execution
• • Organic sales declined by 5%
  • Operating margin at 16%, excl acq & div
  • Very strong cash flow up 6% vs. last year
• Short term and long term views
• • Covid-19continues to have negative effects
  • Strong focus on cost and cash flow remains
  • Investments in growth initiatives
  • Strong long term growth drivers remain valid
  • Financial targets stay unchanged
• Total dividend proposal of SEK 3.90
• • Two equal installments in May and November
• Virtual Capital Markets Day 26 May

23

Q&A

Appendix

Cost breakdown as % of sales

		QTD 2020					YTD 2020
		excl.					excl.
%	QTD 2019	acquisitions		QTD 2020		YTD 2019	acquisitions		YTD 2020
Direct material	-36.1%	-35.7%	+0.4 pts	-35.6%		-36.0%	-35.1%	+0.9 pts	-35.2%
Conversion cost	-23.9%	-24.0%	-0.1 pts	-24.6%		-23.9%	-24.6%	-0.7 pts	-25.0%
Gross margin	40.0%	40.3%	+0.3 pts	39.8%		40.1%	40.3%	+0.2 pts	39.8%
S, G & A	-23.8%	-24.2%	-0.4 pts	-24.9%		-24.2%	-26.3%	-2.1 pts	-26.2%
EBIT	16.2%	16.1%	-0.1 pts	14.9%		15.9%	14.0%	-1.9 pts	13.6%

* Excludes a non-cash income from revaluation in associates of MSEK 1,910.

26

Opening Solutions EMEA's bridge

MSEK	Q4 2019	Organic	Currency	Acq/Div	Q4 2020
Growth		-1%	-4%	0%	-5%
Sales	5,525	-35	-244	-3	5,242
Operating income	884	-7	-43	-163	670
Operating margin, %	16.0%	20.2%	17.7%	5069%	12.8%
Dilution/accretion		0.0 pts	-0.1 pts	-3.1 pts

12 months figures

Sales	21,144		18,982
EBIT	3,396		2,263
Operating cash flow before paid	3,515		2,939
interest
Cash flow/EBIT	103%		130%

27

Opening Solutions Americas' bridge

MSEK	Q4 2020	Organic	Currency	Acq/Div	Q4 2020
Growth		-4%	-9%	-10%	-23%
Sales	5,900	-208	-612	-513	4,567
Operating income	1,182	1	-129	-139	915
Operating margin, %	20.0%	-0.5%	21.1%	27.1%	20.0%
Dilution/accretion		0.9 pts	-0.2 pts	-0.7 pts

12 months figures

Sales	23,172		19,013
EBIT	4,673		3,698
Operating cash flow before paid	5,263		4,837
interest
Cash flow/EBIT	113%		131%

28

Opening Solutions Asia Pacific's bridge

MSEK	Q4 2019	Organic	Currency	Acq/Div	Q4 2020
Growth		-5%	-6%	1%	-10%
Sales	2,676	-135	-141	18	2,418
Operating income	220	0	-18	-2	199
Operating margin, %	8.2%	0.1%	13.1%	-11.8%	8.2%
Dilution/accretion		0.4 pts	-0.3 pts	-0.1 pts

12 months figures

Sales	10,689		8,841
EBIT	879		396
Operating cash flow before paid	622		762
interest
Cash flow/EBIT	71%		192%

29

Global Technologies' bridge

MSEK	Q4 2019	Organic	Currency	Acq/Div	Q4 2020
Growth		-17%	-7%	5%	-19%
Sales	4,377	-710	-317	194	3,545
Operating income	800	-156	-83	20	582
Operating margin, %	18.3%	21.9%	26.1%	10.5%	16.4%
Dilution/accretion		-0.9 pts	-0.7 pts	-0.3 pts

12 months figures

Sales	15,423		14,158
EBIT	2,890		2,023
Operating cash flow before paid	3,183		2,509
interest
Cash flow/EBIT	110%		124%

30

Entrance Systems' bridge

MSEK	Q4 2019	Organic	Currency	Acq/Div	Q4 2020
Growth		-1%	-7%	23%	15%
Sales	6,893	-64	-417	1,515	7,927
Operating income	1,125	-21	-52	198	1,251
Operating margin, %	16.3%	32.3%	12.5%	13.1%	15.8%
Dilution/accretion		-0.1 pts	0.2 pts	-0.6 pts

12 months figures

Sales	25,553		28,323
EBIT	3,652		4,093
Operating cash flow before paid	3,655		4,974
interest
Cash flow/EBIT	100%		122%

31

Thank you

assaabloy.com