During 2008 EMEA continued its aggressive marketing efforts to develop and lead the European lock market. The division also made substantial investments in innovative new products, and several Pan-European product platforms will be launched in 2009. In the later part of the year the European lock market weakened progressively, and powerful measures were put in place to counter the downturn. The result was an increase in Operational Excellence activities – a program directed towards Lean methods, purchasing and administration – and significant savings were achieved.
Sales by product group
Market segments
Key figures
| SEK M |
2007 | 2008 |
|---|---|---|
| Income statement |
|
|
| Sales |
13,477 | 13,988 |
| Growth, % |
8 | 4 |
| Operating income (EBIT)1 |
2,295 | 2,289 |
| Operating margin (EBIT)1, % |
17.0 | 16.4 |
| Capital employed |
|
|
| Capital employed |
10,055 | 12,306 |
| – of which goodwill |
4,926 | 5,766 |
| Return on capital employed1, % |
21.9 | 19.9 |
| Cash flow |
|
|
| Cash flow |
2,267 | 2,421 |
| Average number of employees |
12,493 | 11,903 |
Sales and Operating income¹
Capital employed and Return on capital employed ¹
EMEA in brief
The EMEA division manufactures and sells mechanical and electromechanical locks, cylinders, security doors and accessories in Europe, the Middle East and Africa. EMEA consists of a number of companies which have good knowledge of their local, often highly diversified, markets and which sell products under some of the most respected brands in the industry.
Report on the year
The division’s sales during the year totaled SEK 13,988 M (13,477), which was an increase of 4 percent. Operating income (EBIT) excluding restructuring costs and non-recurring charges amounted to SEK 2,289 M (2,295), which represents an operating margin of 16.4 percent (17.0).
The year began with good growth. Towards the end of 2008 the financial crisis led to a slowdown on the housing market and delays on commercial projects. This applied particularly to regions such as the UK, Spain and the Baltic countries and to a lesser extent in France, Italy and Scandinavia. The negative impact on earnings caused by reduced sales was very largely offset by savings resulting from efficiency programs directed at production and the division’s other efforts towards greater efficiency.
Local differences
The EMEA companies operate in a strongly diversified market with significant local differences. Building regulations, security standards and climates vary greatly between the countries of northern Europe and southern Europe, and to some extent the Middle East and Africa. Consequently there are great differences between the products in demand and sold on each local market. ASSA ABLOY’s regional companies have good local knowledge of lock standards and long-term relationships with their distributors, which keeps demand stable. In addition, the aftermarket contributes a significant proportion of sales since the installed lock base consists of many millions of units that are continually replaced and upgraded.
Development of the marketing organization
EMEA’s sales organization is structured by vertical segments in order to serve the market, and the program to develop this continued during the year. Many sales organizations have been coordinated under the ASSA ABLOY master brand. As the specification of total locking solutions has grown in importance for achieving sales, the number of sales representatives specializing in specification has been substantially increased and collaboration with architects and security consultants further strengthened.
Acquisitions
In 2008 EMEA made three large acquisitions: Gardesa, Copiax and Valli&Valli. Gardesa is a leading Italian manufacturer of high-security steel doors, offering both standard and customized doors that can be tailored to the customer’s needs. Copiax is a Swedish wholesaler of security products, focusing on locksmiths, security installers and builders’ merchants. Valli&Valli is a leading Italian manufacturer of designer handles and accessories. The acquisitions further strengthen ASSA ABLOY’s product offering of complete door opening solutions to the market.
Strategic priorities
Product development
Substantially increased investment in research and development in recent years has resulted in the launch of many new electromechanical and electronic products. These include cylinders and lock cases with Aperio technology, and Hi-O solutions. The Group’s new product-development process focuses on increased customer value while improving cost-efficiency and maintaining higher quality. The products have been well received by customers and have strengthened ASSA ABLOY’s market-leading position in complete security solutions.
More effective selling and specification
The program to further strengthen the sales organization on the highly diversified European market is continuing, for example through the appointment of specification salesmen.
Operating under the ASSA ABLOY master brand does not just mean presenting a common face to the customer, but also offering a greatly expanded product portfolio based on the Group’s total range and increasingly on the common product platforms inside and outside the division.
Efficiency programs
In 2006 ASSA ABLOY launched an efficiency program with the aim of improving production efficiency and moving production to low-cost countries. During 2008 the Group continued to outsource the production of components and simple products, mainly to preferred suppliers in low-cost countries. The production of some important components is now concentrated in specialized production plants, for example cylinders in the Czech Republic and lock cases in Romania. In order to maintain high standards of service and remain close to the customers, Western European production facilities will focus on final assembly and customization of products. Most of the projects in the 2006 efficiency program will be completed early in 2009, and there have been a number of plant closures in high-cost countries.
At the end of 2008 a new review of production structures in high-cost countries was initiated, covering the units not yet converted from full production to final assembly and customization. The new program will be implemented from 2009 and aims to be completed by 2011.
An important initiative in EMEA is to coordinate purchasing for the different production units. This has resulted in an increased percentage of purchases in low-cost countries and better exploitation of benefits of scale within the division.
Common administration
Administrative services are being consolidated on a region-by-region basis to improve efficiency. Common administration has already been implemented in Germany, with good results, and in the coming years all regions will be similarly organized.
