Assa Abloy (ASSA) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales rose 10% to SEK 37,968 M, driven by 11% acquisition growth, while organic sales declined 1%; operating margin held at 16.0%.

• Record operating profit (EBIT) increased 11% to SEK 6,085 M, with strong cash conversion at 107% and 8 acquisitions completed in Q2, 11 year-to-date.

• Strong performance in Americas and EMEIA, stable in Entrance Systems, but declines in Asia Pacific and Global Technologies due to low construction activity in China and tough comparables.

• HHI integration progressing well, with high-single digit sales growth, margin improvement, and expected USD 100 M in synergies.

• Market conditions remain challenging, especially in residential segments globally, but new build in North America is recovering.

Financial highlights

• Sales reached SEK 37,968 M, up 10% year-over-year; EBIT increased 11% to SEK 6,085 M; EBIT margin steady at 16.0%.

• EBITDA margin was 16.9%–19.7%; gross margin improved to 42.5% from 41.3% year-over-year.

• Net income and EPS increased by 5% to SEK 3,927 M and SEK 3.54, respectively.

• Operating cash flow was SEK 5,604 M, with a cash conversion rate of 107%, though down 16% year-over-year.

• Return on capital employed was 14% for the quarter, with segment ROCE ranging from 5.9% to 20.4%.

Outlook and guidance

• Confident in continued organic growth in H2 2024, expecting improvement in residential markets as interest rates decline.

• Acquisitions and divestments expected to add 4% to Q3 2024 sales, with FX impact of -2%.

• Price component expected to remain at least 2% for the year, with cost versus price accretion positive in Q3 and neutral by Q4.

• PACS backlog impact in Global Tech expected to fade by Q3/Q4, returning to normal growth rates.

• Robust acquisition pipeline and strong financials support continued M&A strategy.