ASSA ABLOY Annual Report 2007

FY2007 Annual Report · ASSA ABLOY

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ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience.

www.assaabloy.com

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ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Sweden
Telephone +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2007

The global leader in
door opening solutions

Contents

ASSA ABLOY in brief
CEO’s statement
Vision and strategy
The security market
Products
EMEA Division
Americas Division
Asia Pacific Division
Global Technologies Division
Entrance Systems Division
Sustainable development
Employees
Glossary
Report of the Board of Directors
Corporate governance report
Sales and earnings
Income statement – Group
Comments by division
Results by division
Financial position
Balance sheet – Group
Cash flow
Cash flow statement – Group
Changes in equity – Group
Parent company financial statements
Financial risk management
Notes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data terms
Proposed distribution of earnings
Audit report
The ASSA ABLOY share
Information for shareholders

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Cover photograph:
Smart Lock makes it easier
to use access control systems.
The lock is low in power
consumption and runs on
batteries, which means that
it can be installed without
cabling. It is activated auto-
matically when the door
closes. Smart Lock is
designed by ASSA ABLOY
Nederland B.V.

ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience.

www.assaabloy.com

A
S
S
A
A
B
L
O
Y

A
n
n
u
a
l

R
e
p
o
r
t
2
0
0
7

ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Sweden
Telephone +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2007

The global leader in
door opening solutions

Contents

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2
6
8
12
16
19
22
25
28
31
34
38
39
41
52
53
54
55
56
57
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60
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63
67
87
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96

2007 in brief

ASSA ABLOY’s divisions

Divisions

Share of Group total

Significant events

• Sales rose to SEK 33,550 M (31,137), with organic growth

• 17 companies were acquired during the year, with annual-

of 7 percent.

• Operating income (EBIT) amounted to SEK 5,458 M

(4,7712), an increase of 14 percent.
• Earnings per share were SEK 9.02 (7.992).
• Operating cash flow amounted to SEK 4,808 M (3,528).
• The three-year restructuring program for the Group’s pro-
duction units continued during the year with great success.

ized sales of about SEK 1,800 M.

• The major acquisitions included Baodean (China), iRevo
(Korea), Aontec (Ireland), Powershield (UK), Pemko
(North America) and Pyropanel (Australia).

• The Group continued its increased investment in product
development and joint product platforms during the year.

Financials in brief

Key data

Sales, SEK M
of which: Organic growth, %
Varav: Acquired growth, %
Varav: Exchange-rate effects, %

Operating income (EBIT), SEK M

Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M
Return on capital employed, %

Data per share, SEK/share

Earnings per share after tax and dilution (EPS)
Equity per share after dilution
Dividend
Number of shares after full dilution, (thousands)

2005

27,802
5
1
3

4,078

14.7
3,556
3,702
15.9

2005

6.97
42.85
3.25
378,718

2006

31,137
9
3
0

4,7712

15.32
4,1002
3,5282
17.12

2006

7.992
39.13
3.25
376,033

2007

33,550
7
5
–4

5,458

16.3
4,609
4,808
18.4

2007

9.02
46.76
3.601
380,713

Change, %

12
36

Change, %

13
19
11

EMEA

The division manufactures and sells locks, cylinders, electro-
mechanical products, security doors and fittings in Europe,
the Middle East and Africa (EMEA). Most sales take place in
Western Europe, but growth markets in Eastern Europe and
the Middle East are gaining in importance. Some of the divi-
sion’s leading brands are ABLOY, ASSA, IKON, TESA, Yale and
Vachette. The division has 12,500 employees and divisional
management is based in London, United Kingdom.

Americas

The division manufactures and sells locks, cylinders, electro-
mechanical products, security doors and fittings in North
and South America. Most sales take place in the United
States, Canada and Mexico. South America is growing in
significance, with Brazil the most important market. Some
of the division’s leading brands are Corbin Russwin, Curries,
Emtek, Medeco, Phillips, SARGENT and La Fonte. The divi-
sion has 9,400 employees and divisional management is
based in New Haven, Connecticut, USA.

Asia Pacific

Group sales
and Operating income

Income before tax and
Operating cash flow

Earnings per share

Global Technologies

The division manufactures and sells locks, cylinders, electro-
mechanical products, security doors and fittings in Asia and
Oceania. The Pacific region (which includes Australia and
New Zealand) accounts for a large part of sales, but China
and other Asian markets are rapidly gaining in importance.
China is also an important country of production. Some of
the division’s leading brands are Lockwood, Guli, Wangli,
Baodean, Interlock and iRevo. The division has 5,400
employees and divisional management is based in Hong
Kong, China.

This global division manufactures and sells products for
electronic access control, secure issuance of cards and
identification technology, and electronic lock products for
hotels. The division consists of two business units,
HID Group and ASSA ABLOY Hospitality, which sell their
products worldwide. Leading brands are HID, Fargo, Elsafe
and VingCard. The division has 2,600 employees and
divisional management is based in Stockholm, Sweden.

Sales
SEK M
42,000

35,000

28,000

21,000

14,000

7,000

Operating income
SEK M
6,000

5,000

4,000

3,000

2,000

1,000

Sales, SEK M
Operating income, SEK M 2, 3

SEK M
6,000

SEK M

35,000

5,000

28,000

4,000

21,000

3,000

2,000

14,000

1,000

7,000

SEK M

5,000

4,000

3,000

2,000

1,000

MSEK

SEK
SEK M
10

5,000

4,000

3,000

2,000

1,000

0
98

00
04

01
05

Earnings per share, SEK M 2, 3

Income before tax, SEK M
Operating cash flow, SEK M 2 , 3

99
02
Income before tax, SEK M
Operating cash flow , SEK M2 , 3

Sales

Operating income, SEK M 2, 3

1 Proposed dividend.
2 Excluding restructuring items.
3 2003 has not been adjusted for IFRS but amortization of goodwill has been excluded.

Entrance Systems

Earnings per share, SEK M

Entrance Systems is a global division that manufactures
and sells automatic door systems and service. The prod-
ucts are sold under the Besam and EntreMatic brands.
The division engages in sales and offers its own direct
service network around the world, with production in
Sweden, the UK, the USA and China. The division has
2,100 employees and divisional management is based
in Landskrona, Sweden.

Sales, %

Operating income (EBIT), %

39.0

39.6

SEK 13,477 M

SEK 2,295 M

Sales, %

Operating income (EBIT), %

30.3

34.4

SEK 10,220 M

SEK 1,995 M

Sales, %

Operating income (EBIT), %

7.6

5.5

SEK 2,780 M

SEK 322 M

Sales, %

Operating income (EBIT), %

14.3

SEK 4,922 M

SEK 754 M

Sales, %

Operating income (EBIT), %

8.8

SEK 2,987 M

SEK 432 M

7.5

Production: Hallvarsson & Halvarsson in cooperation with ASSA ABLOY.
Photos: Magnus Glans, Gerhard Jörén, Dan Kullberg, Emil Larsson, Mats Lundqvist, Magnus Skoglöf, Kristian Älegård, Albert Vecerka/ESTO Photographics,
Getty Images, Woodside and others. Translation: Textforum. English editing: Marcom International. Printing: Ljungbergs tryckeri AB, Klippan March 2008.

2007 in brief

ASSA ABLOY’s divisions

Divisions

Share of Group total

Significant events

• Sales rose to SEK 33,550 M (31,137), with organic growth

• 17 companies were acquired during the year, with annual-

of 7 percent.

• Operating income (EBIT) amounted to SEK 5,458 M

ized sales of about SEK 1,800 M.

• The major acquisitions included Baodean (China), iRevo
(Korea), Aontec (Ireland), Powershield (UK), Pemko
(North America) and Pyropanel (Australia).

• The Group continued its increased investment in product
development and joint product platforms during the year.

Financials in brief

Key data

Sales, SEK M
of which: Organic growth, %
Varav: Acquired growth, %
Varav: Exchange-rate effects, %

Operating income (EBIT), SEK M

Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M
Return on capital employed, %

Data per share, SEK/share

Earnings per share after tax and dilution (EPS)
Equity per share after dilution
Dividend
Number of shares after full dilution, (thousands)

2005

27,802
5
1
3

4,078

14.7
3,556
3,702
15.9

2005

6.97
42.85
3.25
378,718

2006

31,137
9
3
0

4,7712

15.32
4,1002
3,5282
17.12

2006

7.992
39.13
3.25
376,033

2007

33,550
7
5
–4

5,458

16.3
4,609
4,808
18.4

2007

9.02
46.76
3.601
380,713

Change, %

12
36

Change, %

13
19
11

EMEA

Americas

Asia Pacific

Group sales
and Operating income

Income before tax and
Operating cash flow

Earnings per share

Global Technologies

Sales
SEK M
42,000

35,000

28,000

21,000

14,000

7,000

Operating income
SEK M
6,000

5,000

4,000

3,000

2,000

1,000

Sales, SEK M
Operating income, SEK M 2, 3

SEK M
6,000

SEK M

35,000

5,000

28,000

4,000

21,000

3,000

2,000

14,000

1,000

7,000

SEK M

5,000

4,000

3,000

2,000

1,000

MSEK

SEK
SEK M
10

5,000

4,000

3,000

2,000

1,000

0
98

00
04

01
05

Earnings per share, SEK M 2, 3

Income before tax, SEK M
Operating cash flow, SEK M 2 , 3

99
02
Income before tax, SEK M
Operating cash flow , SEK M2 , 3

Sales

Operating income, SEK M 2, 3

1 Proposed dividend.
2 Excluding restructuring items.
3 2003 has not been adjusted for IFRS but amortization of goodwill has been excluded.

Entrance Systems

Earnings per share, SEK M

Sales, %

Operating income (EBIT), %

39.0

39.6

SEK 13,477 M

SEK 2,295 M

Sales, %

Operating income (EBIT), %

30.3

34.4

SEK 10,220 M

SEK 1,995 M

Sales, %

Operating income (EBIT), %

7.6

5.5

SEK 2,780 M

SEK 322 M

Sales, %

Operating income (EBIT), %

14.3

SEK 4,922 M

SEK 754 M

Sales, %

Operating income (EBIT), %

8.8

SEK 2,987 M

SEK 432 M

7.5

ASSA ABLOY in brief
1

ASSA ABLOY is the global leader in door opening

solutions, dedicated to satisfying end-user needs for

security, safety and convenience.

ASSA ABLOY is represented in all major regions,

on both mature and emerging markets, with leading

positions in much of Europe and North America and

in Australia. In the rapidly growing electromechanical

security sector, the Group has a leading position in

fields such as access control, identification technology,

automatic doors and hotel security.

Since its founding in 1994, ASSA ABLOY has grown

from a regional company to an international group with

32,000 employees and sales of over SEK 33 billion.

As the world’s leading lock group, ASSA ABLOY offers

a more complete range of door opening solutions than

any other company on the market.

Statement by the President and CEO
Focus on growth and innovation

CEO’s statement
3

ASSA ABLOY saw strong growth in sales and profit in 2007.
Organic growth amounted to 7 percent while acquired
growth provided another 5 percent for a grand total of 12
percent. Sales amounted to SEK 33,550 M (31,137). Oper-
ating income rose by 14 percent, totaling SEK 5,458 M
(4,771), the highest ever for the Group. I am particularly
pleased to record that all five divisions showed growth,
enhanced profitability and improved return.

ASSA ABLOY’s strong growth is based on long-term struc-
tural growth in demand on our most important markets in
Europe and North America; rising demand on new markets;
and progress in fast-growing segments such as electro-
mechanical locks, access control, secure issuance of smart
cards, automatic doors and identification technology. Dur-
ing the year, the Group acquired 17 companies with annu-
alized sales of about SEK 1,800 M. These acquisitions com-
plemented ASSA ABLOY’s product offering, brought in new
technology and expanded the Group’s geographical reach.
All five divisions acquired new units. Some of the larger
acquisitions included Baodean in China, iRevo in Korea,
Aontec in Ireland, Powershield in Northern Ireland, Pemko
in North America and Pyropanel in Australia. Acquisitions
will continue to be a key part of ASSA ABLOY’s growth strat-
egy, with the goal of adding another 5 percent annually.

The three-year restructuring program for the Group’s
manufacturing units continued to develop well during the
year. All 50 subprojects are progressing according to plan
and over 1,300 people – out of a planned total of over
2,000 – have now left the Group. By the end of 2007 sav-
ings had achieved over 60 percent of the goal, which is to
reach SEK 600 M in annual savings in 2009.

Volume growth, acquisitions, price control and com-
pleted structural changes, as well as continuous improve-
ments in production, administration and marketing activi-
ties, contributed to the strong financial improvement.

During the course of the year we made a few changes in

Group Management. Tim Shea, Head of the Hospitality
business unit of Global Technologies division, and Denis
Hébert, Head of the HID Group business unit of the same
division, were appointed members of the Executive Team.
Both have many years of experience in their fields and have
been business unit managers at ASSA ABLOY for many
years.

important development work in pan-European R&D
groups, several joint product platforms will be launched in
2008. After a few years of low acquisition activity, several
acquisitions went through this year, including Alba in Israel,
Powershield in Northern Ireland and Esety in Italy.

Americas division
The Americas division showed strong growth during the
year, even though organic growth of 5 percent (10) was
lower than last year. Demand in the commercial segment
continued to be strong, while demand in the residential
segment dropped during the year. However, this had little
effect on the division since it has low exposure to the resi-
dential segment. Profitability – the highest in the Group –
was further enhanced during the year through growth and
streamlining measures. Operating income increased by
3 percent. Adoption of Lean methods has advanced a long
way in Americas division. The focus on a joint sales organi-
zation and on stepping up specification work to stimulate
demand has been very successful. During the year, the divi-
sion acquired the Pemko company in the United States,
which makes door components. The integration of previ-
ous acquisitions was completed, with good results.

Asia Pacific division
During the year, the Asia Pacific division made a successful
turnaround, showing an upswing in both growth and prof-
itability. Organic growth more than doubled to 10 percent
(4) and operating income increased by 51 percent. Sales in
Australia, New Zealand, China and the other Asian markets
progressed very well, with strong growth. The marketing
organization was restructured to provide more in-depth
and focused targeting of specific customer segments, and
the product offering was divided into categories for differ-
ent customer needs. Continued structural changes, with
production moving out of Australia and New Zealand, as
well as further price increases, are expected to improve
profitability. Early in the year the Group acquired Pyropanel
in Australia, and towards the end of the year it acquired
iRevo in Korea and Baodean in China. The Korean acquisi-
tion will be very important to advancement in the electro-
mechanical field, and the Chinese acquisition is a key move
in retaining the Group’s leading position on the Chinese
market.

Trends in the divisions
EMEA division
The EMEA division had a strong organic growth of 7 percent
(8) in 2007, although the general market trend was some-
what weaker in the latter half of the year. Operating income
rose by 16 percent. The change process has moved at a
rapid pace all year. The single largest part of the three-year
restructuring program involves the European production
facilities. The change process in the marketing and sales
organizations, which includes combining them under the
ASSA ABLOY brand, has produced good results. After

Global Technologies division
Growth for the Global Technologies division was very
strong during the year, with organic growth of 11 percent
(12). Operating income rose by 23 percent. The HID Group
business unit had great sales success in both electronic
access control and the area of secure issuance of smart
cards. In the latter half of the year the HID Group and ITG
business units were merged, so that the HID Group unit
now also includes identification technology. This fusion will
give good sales synergies and benefits of coordination in
production and administration. During the year, several

The Clarion Hotel Sign is
Stockholm’s biggest hotel
and features solutions
from three of ASSA ABLOY’s
companies, ASSA, Ving-
Card and Besam. Scandina-
vian architecture, design
and gastronomy are the
guiding stars at the hotel.
All areas present classic
furniture from Scandina-
via’s most famous design-
ers – names like Arne
Jacobsen, Bruno Mathsson
and Alvar Aalto. Swedish
architect Gert Wingårdh
designed the building.

CEO’s statement
4

innovative products were launched that will contribute to
future growth.

I see it as a confirmation of our leading position that
other global companies, such as Cisco and Microsoft, are
choosing ASSA ABLOY as their partner and supplier of global
solutions for logical and physical access. Investments for
increased presence in China, India and Brazil continued as
planned. During the course of the year, the Group acquired
Aontec in Ireland, whose products include inlays for pass-
ports, and Integrated Engineering in the Netherlands, which
is active in the field of electronic access control.

Entrance Systems division
The Entrance Systems division showed continued good
organic growth of 6 percent (11) and an increased market
share. Growth was particularly strong on the US and Asian
markets, but slowed somewhat in the second half. Profit
growth was strong and operating income increased by 17
percent. During the course of the year, Entrance Systems
adapted several products to local markets in Asia and
North America. Acquisitions continued with the addition
of further service companies.

Future development
The Group is well positioned for stable long-term growth
thanks to our market-leader status and global presence.
Our focus on the commercial segment, the high proportion
of aftermarket sales and an increasing share of the fast-
growing electromechanical market segment contribute to
stability in growth and earnings. The sales organizations are
increasingly being merged under the ASSA ABLOY name,
and the introduction of a common brand has already
shown good results.

New products are the most important source of organic

growth. In the past two years, 200 engineers have been
hired, and we now have close to 1,000 development engi-
neers. Our development costs have risen by between 10
and 20 percent a year for the past three years. More and
more common product platforms are being launched that
can be adapted to local markets. These product platforms
are being developed by the Group’s common development
division, Shared Technologies, as well as through projects
both within and between divisions, making the most of
collective skills and resources. A large number of new
products will be launched in 2008.

Since the start of the 21st century, the sales share of
electromechanical products has increased dramatically
from 20 percent to 33 percent, and this trend is expected
to continue since growth in the segment is two to three
times higher than for traditional mechanical products. In

the field of electromechanical lock cylinders, we are now
seeing masterkey systems being combined with solutions
from the electronic access control area, resulting in much-
appreciated flexible solutions for the commercial segment.
The acquisition of iRevo will transfer these solutions to the
residential market as well. The electronic access control area,
where ASSA ABLOY is currently launching many new prod-
ucts with good prospects, continues to grow strongly. New
printer products for secure issuance of smart cards have
been very successful on the market. The RFID product area,
based on radio-frequency identification, also has good
growth opportunities due to the superior security and flexi-
bility that these applications offer. The automatic door area
is also growing, in part due to the fact that these products
can now be offered to wider customer groups and that
demand for practical, user-friendly door solutions is on the rise.
The Group is also focusing on increasing its presence on
the growth markets in Asia, Eastern Europe, the Middle East,
Africa and South America. These markets now account for
more than 13 percent of our sales.

ASSA ABLOY is also expanding in all parts of the world,

with very strong growth of profitability and yield. These
successes were made possible by our employees’ great
skills, willingness to grow, and ability to adapt to changes
on the market. I would particularly like to thank everyone
who is working with the restructuring program; I am con-
vinced that we will be able to manage all the new chal-
lenges our dynamic world can throw at us.

After its founding in 1994, ASSA ABLOY quickly estab-
lished a position as global leader. Despite its rapid expan-
sion, the Group still has excellent opportunities for further
growth, both on new markets with a growing need for
security and safety and in the fastest-growing segments
such as electronic cylinders, access control, automatic
doors and identification technology. Our opportunities for
enhancing profitability are also very good, thanks to the
Group’s leading market position, continued growth and the
ongoing restructuring program.

Our future shareholder value will be created through a
combination of profitable organic growth based on innova-
tive products and services, improved efficiency and selec-
tive acquisitions.

Stockholm, 13 February 2008

Johan Molin
President and CEO

Vision and strategy
6

Vision and strategy

Since Securitas and Wärtsilä merged their lock businesses
in 1994 to create ASSA ABLOY, the Group has grown from
SEK 3 billion to SEK 33 billion in sales through both organic
and acquired growth, and profitability has consistently
improved. Today ASSA ABLOY is the world’s leading lock
group, employing 32,000 people in over 50 countries.

Vision
ASSA ABLOY’s vision is:
• To be the world-leading, most successful and most
innovative provider of total door opening solutions.
• To lead in innovation and offer well-designed, con-

venient, safe and secure solutions that create added
value for our customers.

• To be an attractive employer to our workforce.

Financial targets
ASSA ABLOY’s primary financial target is a return on capital
employed (ROCE) exceeding 20 percent. The aim is to
achieve this figure no later than 2008, through the follow-
ing sub-targets:
• Sales should increase by 10 percent per year on average
over a business cycle through organic and acquired
growth.

• The profit margin should improve to 16–17 percent

ORGANIC AND ACQUIRED GROWTH:
(cid:153)(cid:21)(cid:38)(cid:37)(cid:26)(cid:21)(cid:101)(cid:90)(cid:103)(cid:21)(cid:110)(cid:90)(cid:86)(cid:103)(cid:21)(cid:100)(cid:107)(cid:90)(cid:103)(cid:21)
(cid:21) (cid:86)(cid:21)(cid:87)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:88)(cid:110)(cid:88)(cid:97)(cid:90)

through continued growth, a modern product portfolio
and leveraging synergies in the Group.

• The positive long-term trend for ASSA ABLOY’s operat-

ing cash flow should be maintained.

• Capital efficiency should be continuously improved.

(cid:66)(cid:54)(cid:71)(cid:60)(cid:62)(cid:67)(cid:21)(cid:62)(cid:66)(cid:69)(cid:71)(cid:68)(cid:75)(cid:58)(cid:66)(cid:58)(cid:67)(cid:73)(cid:21)(cid:73)(cid:68)(cid:21)(cid:38)(cid:43)(cid:196)(cid:38)(cid:44)(cid:26)(cid:47)
(cid:153)(cid:21)(cid:62)(cid:99)(cid:89)(cid:94)(cid:107)(cid:94)(cid:89)(cid:106)(cid:86)(cid:97)(cid:21)(cid:94)(cid:98)(cid:101)(cid:103)(cid:100)(cid:107)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)
(cid:153)(cid:21)(cid:65)(cid:90)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:90)(cid:21)(cid:104)(cid:110)(cid:99)(cid:90)(cid:103)(cid:92)(cid:94)(cid:90)(cid:104)(cid:21)(cid:108)(cid:94)(cid:105)(cid:93)(cid:94)(cid:99)(cid:21)(cid:105)(cid:93)(cid:90)(cid:21)(cid:60)(cid:103)(cid:100)(cid:106)(cid:101)

Given the potential to benefit from synergies in produc-
tion, capital expenditure can be maintained at today’s
level, below that of current depreciation.

20 %

return on
capital
employed

(cid:72)(cid:73)(cid:71)(cid:68)(cid:67)(cid:60)(cid:21)(cid:56)(cid:54)(cid:72)(cid:61)(cid:21)(cid:59)(cid:65)(cid:68)(cid:76)(cid:47)
(cid:153)(cid:21)(cid:21)(cid:73)(cid:93)(cid:90)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:97)(cid:100)(cid:99)(cid:92)(cid:34)(cid:105)(cid:90)(cid:103)(cid:98)(cid:21)(cid:105)(cid:103)(cid:90)(cid:99)(cid:89)(cid:21)(cid:94)(cid:99)(cid:21)(cid:100)(cid:101)(cid:90)(cid:103)(cid:86)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)
(cid:21) (cid:88)(cid:86)(cid:104)(cid:93)(cid:21)(cid:91)(cid:97)(cid:100)(cid:108)(cid:21)(cid:104)(cid:93)(cid:100)(cid:106)(cid:97)(cid:89)(cid:21)(cid:87)(cid:90)(cid:21)(cid:98)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)

(cid:56)(cid:54)(cid:69)(cid:62)(cid:73)(cid:54)(cid:65)(cid:21)(cid:58)(cid:59)(cid:59)(cid:62)(cid:56)(cid:62)(cid:58)(cid:67)(cid:56)(cid:78)(cid:47)
(cid:153)(cid:21)(cid:66)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)(cid:21)(cid:88)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:21)(cid:90)(cid:109)(cid:101)(cid:90)(cid:99)(cid:89)(cid:94)(cid:105)(cid:106)(cid:103)(cid:90)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:97)
(cid:153)(cid:21) (cid:76)(cid:100)(cid:103)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)

Financial targets

ORGANIC AND ACQUIRED GROWTH:
(cid:153)(cid:21)(cid:38)(cid:37)(cid:26)(cid:21)(cid:101)(cid:90)(cid:103)(cid:21)(cid:110)(cid:90)(cid:86)(cid:103)(cid:21)(cid:100)(cid:107)(cid:90)(cid:103)(cid:21)
(cid:21)(cid:21) (cid:86)(cid:21)(cid:87)(cid:106)(cid:104)(cid:94)(cid:99)(cid:90)(cid:104)(cid:104)(cid:21)(cid:88)(cid:110)(cid:88)(cid:97)(cid:90)

(cid:72)(cid:73)(cid:71)(cid:68)(cid:67)(cid:60)(cid:21)(cid:56)(cid:54)(cid:72)(cid:61)(cid:21)(cid:59)(cid:65)(cid:68)(cid:76)(cid:47)
(cid:153)(cid:21)(cid:73)(cid:93)(cid:90)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:107)(cid:90)(cid:21)(cid:97)(cid:100)(cid:99)(cid:92)(cid:34)(cid:105)(cid:90)(cid:103)(cid:98)(cid:21)(cid:105)(cid:103)(cid:90)(cid:99)(cid:89)(cid:21)(cid:94)(cid:99)(cid:21)
(cid:21) (cid:100)(cid:101)(cid:90)(cid:103)(cid:86)(cid:105)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:86)(cid:104)(cid:93)(cid:21)(cid:91)(cid:97)(cid:100)(cid:108)(cid:21)(cid:104)(cid:93)(cid:100)(cid:106)(cid:97)(cid:89)(cid:21)(cid:87)(cid:90)(cid:21)(cid:98)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)(cid:21)

(cid:56)(cid:54)(cid:69)(cid:62)(cid:73)(cid:54)(cid:65)(cid:21)(cid:58)(cid:59)(cid:59)(cid:62)(cid:56)(cid:62)(cid:58)(cid:67)(cid:56)(cid:78)(cid:47)
(cid:153)(cid:21)(cid:66)(cid:86)(cid:94)(cid:99)(cid:105)(cid:86)(cid:94)(cid:99)(cid:90)(cid:89)(cid:21)(cid:88)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:21)(cid:90)(cid:109)(cid:101)(cid:90)(cid:99)(cid:89)(cid:94)(cid:105)(cid:106)(cid:103)(cid:90)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:97)
(cid:153)(cid:21)(cid:76)(cid:100)(cid:103)(cid:96)(cid:94)(cid:99)(cid:92)(cid:21)(cid:88)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)

(cid:68)(cid:71)(cid:60)(cid:54)(cid:67)(cid:62)(cid:72)(cid:64)(cid:21)(cid:68)(cid:56)(cid:61)(cid:21)(cid:59)(cid:121)(cid:71)(cid:75)(cid:116)(cid:71)(cid:75)(cid:54)(cid:57)(cid:21)(cid:73)(cid:62)(cid:65)(cid:65)(cid:75)(cid:116)(cid:77)(cid:73)(cid:47)

(cid:153)(cid:21)(cid:56)(cid:94)(cid:103)(cid:96)(cid:86)(cid:21)(cid:38)(cid:37)(cid:26)(cid:21)(cid:101)(cid:90)(cid:103)(cid:21)(cid:128)(cid:103)(cid:21)(cid:142)(cid:107)(cid:90)(cid:103)(cid:21)

(cid:21) (cid:90)(cid:99)(cid:21)(cid:96)(cid:100)(cid:99)(cid:95)(cid:106)(cid:99)(cid:96)(cid:105)(cid:106)(cid:103)(cid:88)(cid:110)(cid:96)(cid:90)(cid:97)

(cid:66)(cid:54)(cid:71)(cid:60)(cid:62)(cid:67)(cid:54)(cid:65)(cid:59)(cid:121)(cid:71)(cid:55)(cid:116)(cid:73)(cid:73)(cid:71)(cid:62)(cid:67)(cid:60)(cid:21)(cid:73)(cid:62)(cid:65)(cid:65)(cid:21)(cid:38)(cid:43)(cid:196)(cid:38)(cid:44)(cid:26)(cid:47)

(cid:153)(cid:21)(cid:58)(cid:99)(cid:104)(cid:96)(cid:94)(cid:97)(cid:89)(cid:86)(cid:21)(cid:91)(cid:142)(cid:103)(cid:87)(cid:126)(cid:105)(cid:105)(cid:103)(cid:94)(cid:99)(cid:92)(cid:86)(cid:103)

(cid:153)(cid:21)(cid:72)(cid:86)(cid:98)(cid:100)(cid:103)(cid:89)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:104)(cid:110)(cid:99)(cid:90)(cid:103)(cid:92)(cid:94)(cid:90)(cid:103)(cid:21)(cid:94)(cid:99)(cid:100)(cid:98)(cid:21)(cid:96)(cid:100)(cid:99)(cid:88)(cid:90)(cid:103)(cid:99)(cid:90)(cid:99)

(cid:72)(cid:73)(cid:54)(cid:71)(cid:64)(cid:73)(cid:21)(cid:64)(cid:54)(cid:72)(cid:72)(cid:54)(cid:59)(cid:65)(cid:121)(cid:57)(cid:58)(cid:47)

(cid:153)(cid:21)(cid:57)(cid:90)(cid:99)(cid:21)(cid:101)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:107)(cid:86)(cid:33)(cid:21)(cid:97)(cid:128)(cid:99)(cid:92)(cid:104)(cid:94)(cid:96)(cid:105)(cid:94)(cid:92)(cid:86)(cid:21)(cid:105)(cid:103)(cid:90)(cid:99)(cid:89)(cid:90)(cid:99)(cid:21)(cid:91)(cid:142)(cid:103)(cid:21)(cid:89)(cid:90)(cid:105)(cid:21)

(cid:21) (cid:100)(cid:101)(cid:90)(cid:103)(cid:86)(cid:105)(cid:94)(cid:107)(cid:86)(cid:21)(cid:96)(cid:86)(cid:104)(cid:104)(cid:86)(cid:91)(cid:97)(cid:142)(cid:89)(cid:90)(cid:105)(cid:21)(cid:104)(cid:96)(cid:86)(cid:21)(cid:106)(cid:101)(cid:101)(cid:103)(cid:126)(cid:105)(cid:105)(cid:93)(cid:128)(cid:97)(cid:97)(cid:86)(cid:104)(cid:21)

(cid:64)(cid:54)(cid:69)(cid:62)(cid:73)(cid:54)(cid:65)(cid:58)(cid:59)(cid:59)(cid:58)(cid:64)(cid:73)(cid:62)(cid:75)(cid:62)(cid:73)(cid:58)(cid:73)(cid:47)

(cid:153)(cid:21)(cid:55)(cid:94)(cid:87)(cid:90)(cid:93)(cid:128)(cid:97)(cid:97)(cid:90)(cid:99)(cid:21)(cid:94)(cid:99)(cid:107)(cid:90)(cid:104)(cid:105)(cid:90)(cid:103)(cid:94)(cid:99)(cid:92)(cid:104)(cid:99)(cid:94)(cid:107)(cid:128)(cid:21)

(cid:153)(cid:21)(cid:71)(cid:142)(cid:103)(cid:90)(cid:97)(cid:104)(cid:90)(cid:96)(cid:86)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)

20%

return on
capital
employed

20%

avkastning

på syssel-

satt kapital

Strategy
To enhance the Group’s leading market position, the Execu-
tive Team has worked actively in recent years to renew and
develop its strategy. The overall focus is to spearhead the
trend towards increasing security with a product-driven
offering centered on the customer. The primary product
ranges are mechanical locks and security doors, electro-
mechanical and electronic locks, access control, identifi-
cation technology and automatic doors.

The strategic action plans have been divided into three
focus areas: market presence, product leadership and
cost-efficiency.

Market presence
ASSA ABLOY’s strategy for enhancing its market presence
has three main aspects:
• Exploiting the strength of the brand portfolio.
•
Increasing growth in the core business.
• Expanding into new markets and segments.

Using the strength of the brand portfolio
ASSA ABLOY has many of the industry’s strongest brands.
To better meet the rising demand for more complete secu-
rity solutions, the sales teams on the local markets will
gradually be united under the ASSA ABLOY master brand.
The Group’s local product brands will progressively be
linked more closely to the ASSA ABLOY master brand, and a
number of global brands will supplement the master brand.
Examples of global brands are Yale, which is used in the res-
idential market, and ABLOY, which is used for customers
who demand an extra high level of security.

Organic and acquired growth

%
12

Organic, %

Acquired, %

Vision and strategy
7

Increasing growth in the core business
Growth in the core business will be increased through sev-
eral activities. One of the most important is developing the
specification and project markets through close collabora-
tion with architects, security consultants and major end-
users. Continued development of the distribution channels,
for example through training and clear market segmenta-
tion, is also a priority. In the fast-growing area of electronic
and automatic door solutions, where the Group has a mar-
ket-leading position, continuous investments will be made
to develop channels to market.

Expanding into new markets and segments
The Group will expand into new geographic markets by
developing the distribution channels with customized
product offerings and through acquisitions. The Group’s
presence on the OEM market for door and window manu-
facturers varies between the different markets. There is
great potential here for improved market reach. Efforts to
develop channels and products for the residential market
continue. Exploiting the Group’s strengths in particular
technologies will create interesting new areas for growth.
One example is RFID, which is being adapted to special
areas of use such as electronic passports.

Product leadership
The overall goal is continuous development of products that
offer increased customer benefit and lower product costs. A
key activity for achieving this is to increase the use of com-
mon product platforms with fewer components. For en-
hanced customer benefit, products are also being developed
in close collaboration with end-users and distributors. The
product development process will also be streamlined by
separating the maintenance and improvement of existing
products more clearly from new development. Customers
are demanding more and more from lock and door prod-
ucts, and the technical level is continually rising. To meet
the technical requirements and take advantage of econo-

mies of scale within ASSA ABLOY, the Group function for
product development, Shared Technologies, has responsi-
bility for developing Group-wide electronics and software
platforms.

Cost-efficiency
The Group focuses closely on cost-efficiency in all areas. Its
efforts towards common product platforms, fewer compo-
nents and joint product development have already been
mentioned.

ASSA ABLOY’s restructuring program, running from 2006

to 2009, has progressed very well. The program encom-
passes some 50 individual structural measures. Many pro-
duction units are changing their focus to concentrate on
assembly, and some will be closed down. Much of the stan-
dard production will be moved to low-cost countries and
will be run both within the company and by subcontractors.
The cost of the program, which has already been expensed in
the accounts, amounts to just under SEK 1,500 M , including
the closure of car-lock manufacture in the UK, and it will lead
to annual savings of SEK 600 M once the whole program is
completed in 2009. The program will improve manufactur-
ing infrastructure and production efficiencies while securing
a local presence for fast, efficient assembly of custom
products.

The introduction of Lean methods in the Group’s units
continues. Lean methods lead to more efficient production
flows, better control of material costs, better decision-mak-
ing routines, shorter development times and increased
cooperation with the marketing and sales teams. Many of
the companies in the Group have followed these principles
for many years, enhancing efficiency.

A far-reaching supply management project covering
both raw materials and components has been initiated.
This will become increasingly important as outsourcing of
component supply to external suppliers increases.

Support functions such as IT, customer support and

finance are being coordinated.

Operating margin (EBIT) 1, 2

Operating cash flow

Return on capital employed 1, 2

%
17

1 Excluding restructuring costs.

2 2003 has not been adjusted for

IFRS but amortization of goodwill
has been excluded.

SEK M
5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

%
20

The security market
8

The security market
Great potential on a growing market

ASSA ABLOY is the world-leading supplier of total lock and
door solutions today. As the Group has grown, its product
portfolio has expanded and evolved to cover the widely
varying needs of airports, schools, healthcare, offices,
homes and more. Growth in the security market is mainly
fueled by increasing prosperity, urbanization and a general
trend toward higher security. Another factor is that crime,
violence and terrorism have increased. The underlying
trends and growing uncertainty in the world put security
high on the agenda, pushing the development of increas-
ingly advanced solutions and upgrades of existing security
systems. The total security market consists primarily of
security services and electronic and mechanical security
products.

ASSA ABLOY estimates the total security market to be
worth something over EUR 200 billion. The Group has con-
centrated its efforts on electronic and mechanical security
products, which represent about 15 percent of the total
market. ASSA ABLOY has a market share of over 10 percent.

Electronic and mechanical security products
In the field of electronic security, ASSA ABLOY’s product
range includes electronic cylinders, automatic doors,
secure identification and various products for access con-
trol, some of which use radio-frequency identification
(RFID). As a rule, electronic products offer high functional-
ity and high security, making them ideal for commercial
applications. Focused product development in this area is
continuously expanding the areas of use of ASSA ABLOY’s
electromechanical products.

The annual growth of the market for electronic security
products is two to three times higher than for mechanical
security products. Today electronic products represent
about one-third of the Group’s sales, and that share is
increasing every year.

As well as locks, mechanical security products include
door handles, door closers, emergency exit devices, secu-
rity doors and door and window hardware. Development in
the field of mechanical security products is mainly driven
by renovations and replacements of old locks in existing
windows and doors, as well as new construction. In the
long term this market is expected to grow in tandem with
each country’s GDP (averaged over a business cycle). The
market for mechanical security products is relatively stable

for ASSA ABLOY, both because the large aftermarket makes
this market less sensitive to shifts in the economy, and
because ASSA ABLOY is active in a large number of coun-
tries with different economic cycles. In the mechanical
security products segment, consolidation of players on the
market is common, and this trend is expected to continue.

Complete security solutions
ASSA ABLOY works with architects, authorities and large
end-customers to offer the best security solutions for dif-
ferent types of door openings. The security solution for any
given door must therefore be adapted to the location and
type of use of the door – an entry to a building, or the door
to a computer room or a conference room.

The functions of the door must also be adapted to
needs for security and convenience – for example, whether
it is an interior or exterior door, how often it will be
opened, how many people will use it, and special require-
ments such as fire safety. Customers are also increasingly
demanding that the products can be integrated into new
or existing security systems and IT networks.

Differences between markets
Americans spend more than twice as much on emergency
exit devices as Europeans. Conversely, northern Europeans
spend three to four times as much on high-security locks
for their homes as Americans. Automatic doors are also
much more common in Europe than in the United States.
The prevalence of electromechanical products is signifi-
cantly larger in the commercial segment than in the resi-
dential segment. If the demands for security and evacua-
tion solutions were equally great in Europe and the United
States, the overall market would roughly double. One chal-
lenge for ASSA ABLOY is to develop the market towards
increased growth and thereby reduce the large discrepan-
cies between countries and market segments.

In global terms the lock market is still relatively frag-
mented; however, the market in each country is fairly con-
solidated, because companies in the industrialized parts of
the world are often still family-owned and leaders on their
home markets. They are well-established and have strong
ties with local distributors. In less-developed countries,
however, established lock standards and brands are less
common.

The whole security market

ASSA ABLOY’s sales by product group

Mekaniska lås,
låssystem och
tillbehör, 48%

Alarm centers, 9%

IT security & logical
access control, 4%

Intrusion
protection, 3 %

ASSA ABLOY’s
product areas, 15%

65
Security guards
& other, 27%

Doors & windows, 40%

Fire alarms, 2%

ASSA ABLOYs
produktområden, 15%

Bevakning & Övrigt, 27%
Brandlarm, 2%

Dörrar & fönster, 40%
Intrångsskydd, 3%
IT-säkerhet & logisk
behörighetskontroll, 4%

Larmcentraler, 9%

Elektromekaniska
lås, passagekontroll,
automatiska dörrar och
identifieringstekonologi, 33%

Mechanical locks,
lock systems and
accessories, 48%

Säkerhetsdörrar
och beslag, 19%

Electromechanical locks,
access control, automatic
doors and identification
technology, 33%

Security doors and
fittings,19%

Presence and strong relationships
the key in China

The security market
9

China is an attractive growth market for ASSA ABLOY, not
only because of the security needs of the Olympic Games
and upcoming events such as the 2010 World Expo in
Shanghai, but because of its booming commercial and
industrial sectors.

As regards the Games, ASSA ABLOY Group companies

are involved in more than 50 percent of the high-class
hotel projects and are supplying security solutions to both
the National Stadium (the Bird’s Nest) and the National
Aquatic Center (the Water Cube).

Winning such prestigious projects against tough com-
petition reflects ASSA ABLOY’s reputation in the region for
business know-how and leading-edge technology.

This reputation has been built up over many years and
made possible by having a strong base in the country. The
Group has about 5,000 employees in China, with service
centers in 10 major cities and a strong manufacturing pres-
ence through the Group companies Guli and Wangli and
the recently acquired company Baodean.

Estimated to be worth EUR 2 billion, the Chinese market is
still relatively undeveloped from an international perspec-
tive. It is market that is full of potential considering the
increasing wealth of its residents and urbanization of the
population, which are driving a boom in residential
security.

ASSA ABLOY has a leading position on the Chinese mar-

ket. Projects awarded to ASSA ABLOY in connection with
the 2008 Olympics include:
• VingCard’s access systems for the 5-star, 950-room

hotel connected to the Olympic Green Convention Cen-
ter, which will be the media headquarters and home to
indoor events such as shooting.

• Trimec’s V-Lock solution for the new National Stadium,

also known as the Bird’s Nest.

• ASSA ABLOY’s magnetic locks for the electronic doors in

the Aquatic Center, also known as the Water Cube.

The security market
10

Distribution channels
In the security market today, manufacturers of security
products such as ASSA ABLOY reach their end-customers
mainly through a variety of distribution channels. Many of
ASSA ABLOY’s products are sold in small volumes to many
end-customers with very different needs. This has led to a
largely local and fragmented distribution of mechanical
and electromechanical security products.

Specification of security solutions
of growing importance
Bringing new and innovative solutions to market requires
working closely not only with distributors but also with
architects, security consultants and major end-users. This
collaboration stimulates demand from the distributors and
customers. Construction and lock wholesalers and lock-
smiths have a key role in delivering the products specified
for various construction projects. ASSA ABLOY has devel-
oped a close collaboration with architects and security
consultants to specify appropriate products and achieve a
well-functioning security solution. Many door and window
manufacturers install lock cases and fittings in their prod-
ucts before delivering them to customers.

In contrast, electronic security products go from manu-
facturer to end-user mainly through security installers and
special distributors. The products are also sold through
security integrators who often offer a complete solution for
installation of perimeter protection, access control and
computer security.

The role of distributors
One of the most critical parts of a well-functioning door
and security solution is the installation of the components.
ASSA ABLOY works closely with its distribution channels to

offer the end-customers the right products, a correct instal-
lation and thereby a well-functioning security solution.
The distributors are also important in handling service and
support after installation.

The role of the distributor can vary between different
customer segments. On some markets in the commercial
segment, distributors can act as consultants, technicians
and project managers to create good security solutions.
They are well familiar with the customer’s needs and
ensure that the products meet local regulations.

As technology moves toward more complex security

solutions, the distributors need increasing skills levels.
On many markets specialized security distributors may be
locksmiths with expert knowledge of mechanical and elec-
tromechanical security products. They buy directly from
the manufacturer or via wholesalers, providing advice,
products, installation and service. Some locksmiths now
have an increased focus on electronics, while IT integrators
are beginning to add physical security solutions to their
offer.

Customer groups
Major customers — These include airports, commercial
establishments and hospitals through which a large num-
ber of people pass daily. ASSA ABLOY usually has primary
contact with the customer’s head of security, a person well
familiar with the security needs and who participates
actively in planning the security solutions. Lead times for
this kind of project are often long and based largely on
custom solutions. Distribution and installation are largely
handled by installers and locksmiths. ASSA ABLOY’s princi-
pal end-users are industrial and institutional customers,
who account for 80 percent of sales, while private custom-
ers account for 20 percent.

By combining the
ASSA ABLOY logo with
the individual brand logos
we retain their existing
equity and add the global
power of the master brand
ASSA ABLOY, which we will
continue to build. There
will be some exceptions for
a small number of brands
that have special roles, such
as Yale which targets the
consumer and is already
well respected globally.

What drives demand?

ASSA ABLOY’s total sales by region

Eftermarknad 1), 0.67%
Nybyggnation, 0.33%

Aftermarket1, 67%

New construction, 33%

1 The aftermarket consists

of renovations, rebuilding,
extensions, replacements
and upgrades.

1) Eftermarknaden består av renoveringar, om- och

tillbyggnader, utbyten och uppgraderingar.

Europa, 48
Nordamerika 37
Australien och
Nya Zeeland 6

Europe, 48 %

North America, 37%

Australia and
New Zealand, 6%

Asien 6
Central- och
Sydamerika 2

Afrika 1

Asia, 6%

Central and

South America, 2%

Africa, 1%

The security market
11

Small and medium-sized customers — This segment is
characterized by the customers’ need for professional
advice and installation. This need is primarily met by
specialized distributors and installers: for example, lock-
smiths. ASSA ABLOY works actively to train distributors
and develop custom solutions for small and medium-
sized companies such as stores and offices.

Changing demand
Customers’ preferences for different security solutions
are becoming polarized, and there is a change in demand
patterns for security solutions at different levels. There is
increased demand for complete security solutions in the
higher segment, but also for good-quality products that
meet the basic security requirements.

Consumers – The majority of sales are replacements or
upgrades of existing security products. Private consumers
have a great need for advice and installation assistance.
ASSA ABLOY has developed a number of home security
concepts to meet consumers’ needs. Depending on the
geographical market, ASSA ABLOY also works with door
and window manufacturers or specialized distribution
channels such as home improvement stores and
locksmiths.

Heightened demand for electromechanical products
The heightened demand for electromechanical products
is one of the clearest trends in the security market.
ASSA ABLOY also sees greater technical standardization,
making it easier to integrate different components in the
security solution with each other. This development indi-
cates that manufacturers will be forced to specialize in a
specific product area to be able to maintain their competi-
tive edge. ASSA ABLOY’s products aim for open standards to
allow them to be easily connected to the customers’ other
security and maintenance systems.

Competition
Although some consolidation has taken place over the past
ten years, the security industry is still fragmented in the
global perspective. Some countries have one strong manu-
facturer that holds a large share of the local market and
focuses on that, often with limited international activity.

Globally, ASSA ABLOY is the market leader, with its main
competitors five other major players who are active in parts
of ASSA ABLOY’s segment: Ingersoll-Rand, Black & Decker,
Dorma, Kaba and Stanley Works. Three of them are based
in the United States and two in Europe. All competitors are
strongest on their home markets and also have a presence
on some other markets, although none of them has an in-
ternational market coverage comparable with ASSA ABLOY’s.
The Asian market is still very fragmented; even the largest
manufacturers have quite modest market shares.

In the security market
today, manufacturers of
security products such as
ASSA ABLOY reach their
end-customers through a
variety of distribution chan-
nels. Many of ASSA ABLOY’s
products are sold in small
volumes to many end-
customers with very differ-
ent needs.

Distribution channels for the security market

Integration of

security systems

Locksmiths and

security installers

ASSA ABLOY

Wholesalers – building and
lock suppliers

Retailers – DIY, building suppliers,
ironmongers, security shops

OEMs, door and window
manufacturers

LARGE INSTITUTIONAL AND
COMMERCIAL CUSTOMERS
• Healthcare • Education • Retail
• Hospitality • Offices • Industrial

SMALL AND MEDIUM-SIZED
CUSTOMERS
• Offices • Shops

RESIDENTIAL CUSTOMERS
• Apartments • Houses

Products
12

Products
Faster product development

New and innovative products are strengthening
ASSA ABLOY’s foundation for lasting organic growth,
while intensified efforts to rationalize products and
standardize components are reducing the costs of
the existing product portfolio.

More new products through a common process
In 2007, ASSA ABLOY started to establish a Group-wide
process for product development, with the goal of cutting
product development time in half while increasing the
number of new products.

A clear interdisciplinary process, with defined check-
points – called gateways – speeds up product development,
while a focus on understanding the customer’s problems
and wishes ensures better precision in implementation.

Within the framework of the product development and
purchasing process, ASSA ABLOY initiated a project in 2007
aiming to cut costs in the existing range through better use
of materials and coordination of material and component
standards.

Today’s customer base helps to build
tomorrow’s solutions
ASSA ABLOY has the largest base of traditional locks and
lock systems in the world, well adapted to local and
regional standards. That customer base helps to develop
the solutions of tomorrow, complementing or replacing
mechanical identification with electronic codes.

People are assigned authorization to use specific doors
or computers. Keys, cards and other identification creden-
tials are assigned codes, which are managed securely
and distributed encrypted. The past years’ acquisitions
in new technologies and skills enhancement have given

The intelligent door

ASSA ABLOY all the tools it needs to meet the challenges of
tomorrow.

Security is more than identification
But security is not just identification – far from it. The
mechanical and electromechanical products that prevent
intrusion and permit rapid evacuation are just as important
to the total solution. A well-crafted specification also con-
siders the design of the products and makes sure that they
simplify usage. ASSA ABLOY’s electromechanical products
contribute to meeting all of these requirements. The elec-
tromechanical field is growing quickly and already accounts
for a third of sales.

ASSA ABLOY’s Hi-O communication platform allows the
electromechanical products to be connected together and
the whole door environment to be connected to the Internet.
This means that you can check the status of the door online,
which enhances security and facilitates maintenance.

ASSA ABLOY and Cisco Systems are working together to
define a new network protocol for secure communication
between door devices and access-control host software.
This protocol will facilitate the use of ASSA ABLOY’s intelli-
gent door devices, such as locks, card readers and elec-
tronic cylinders, in security systems using Cisco software
and hardware. A number of other leading security system
companies are also involved in this initiative.

New technology is increasing the number
of controlled doors
RFID – radio-frequency identification – and wireless com-
munication allow ASSA ABLOY to create new security
applications while offering services that assist users.

The intelligent door is con-
nected to a network over
which each individual
component around the
door can communicate
interactively with other
systems, such as security
or maintenance systems.
The advantages are secure
information about each
component, simple installa-
tion through standardized
connections, and remote
configuration over the
network, which can also be
connected to the Internet.

Smart Access Card

Products
13

HID’s Crescendo Smart
Card allows the same
smart card to be used to
gain access to a building
and to log in to the
building’s IT network.

Fargo’s printer uses the
High Definition Printing™
(HDP) technology, which
provides superior printing,
quality on ID cards.

Aperio is a new technology developed by ASSA ABLOY
that allows cost-effective connection of several doors to
an existing access control system. The wireless installation
is based on existing locks, to which are added battery-
operated electromechanical cylinders that can communi-
cate wirelessly with the existing network. No expensive
installation costs, no new keycards and no new access
system are required.

Smartair is a similar solution, in which a simpler access
control system can be offered to those who have previously
relied on mechanical lock systems.

No more waiting in line for hotel guests
For hotel guests, VingCard has made use of RFID and wire-
less mobile technology in combination with a new commu-
nication interface called Near Field Communication (NFC).
The guest’s cellphone becomes both a code bearer and a
key. Guests can use their phones to book a room, check in
and out, gain access to the room and the hotel’s facilities,
and pay their bills over the Internet.

Total door solutions are ASSA ABLOY’s strength
ASSA ABLOY’s business is not based solely on innovations;
the great strength of the Group is the variety of traditional
and new products built into various door environments.
ASSA ABLOY has products for different climates, different
types of buildings and differing security and safety require-
ments. By combining hundreds of thousands of compo-
nents to meet the needs of consumers, architects and
installers, ASSA ABLOY creates products with the right
quality, design and price, ideal for new buildings and reno-
vations alike.

Crescendo™ – award-winning card
HID’s Crescendo™ Smart Card allows the same smart card
to be used to gain access to a building and to log in to the
building’s IT network. The award-winning Crescendo™ card
is compatible with Windows Vista and many Microsoft®
software applications. Crescendo™ combines technolo-
gies, services and know-how to deliver a unique solution
from HID.

Secure card issuance with Fargo
The innovative HDP5000 printer for ID cards is the latest
addition to the Fargo brand of secure ID card issuance sol-
utions. The High Definition Printing™ (HDP) technology
provides superior printing quality on ID cards. HDP uses
reverse transfer print technology in which the image
is printed on the underside of film that fuses to the card
surface. The film conforms to the ridges and indentations
formed by embedded electronics, while providing an extra
layer of card durability and security. The HDP5000 printer’s
versatile modular design makes it easy to upgrade to dual-
sided printing, single-sided or dual-sided lamination and
many other card encoding technologies.

Entrance innovations
Besam’s SW100 is one of the most silent swing-door opera-
tors on the market. Its low energy requirement is compli-
ant with disability standards in North America and the UK.
Safe, reliable and quiet operation makes it the ideal choice
for applications in retail, healthcare, residential, office and
public service environments where accessibility and ease of
use are important.

The changing product mix, 2000–2007

Product mix 2000

Product mix 2007

Mechanical
locks, 66%

Mechanical products, 66%

Electro-
mechanics, 20%

Electromechanical products, 20%

Security doors, 14%

Doors, 14%

Mechanical
locks, 48%
Electromechanics, 33%

Doors, 19%

Mechanical products, 48%

Electromechanical products, 33%

Security doors, 19%

Products
14

The SW100’s motor is
equipped with an elec-
tronic door brake that con-
trols the door’s speed when
it is pushed or blown un-
expectedly. This unique fea-
ture reduces the wear and
tear that results from windy
weather conditions or
harsh treatment by users,
extending the life of the
door opener or door closer.

The LiteGuide system
shows the safe way out
with sound and light.

This development project also provides a platform to allow
other ASSA ABLOY brands to integrate RFID technology in
other relevant areas.

Revolutionary RFID technologies
Medeco Hybrid™ allows mechanical masterkey and elec-
tronic access systems to be merged for maximum flexibility,
security and convenience. The Hybrid platform consists of
dual-technology RFID keys and cylinders which work
together to combine the flexibility of electronics with the
physical protection of mechanics. The Hybrid Cylinder,
which requires no wiring or door and hardware alterations,
gives end-users the functionality of electronic access con-
trol without costly or specialized installation requirements.
In a matter of minutes, a door can be retrofitted with
access control, and can be integrated into most existing
systems at less cost and greater convenience.

ASSA ABLOY contributes to the 2008 Olympics
With the eyes of the world on China in 2008, the Beijing
Olympic Games will be the biggest event of the year.
Honeywell, the electronics contractor for the Bird’s Nest
Project (the National Stadium), has appointed ASSA ABLOY
as its supplier of door opening solutions for all electronic
doors. After thorough consideration, Honeywell decided
that products from effeff and Trimec best met the custom-
er’s requirements.

Among the product’s advantages, the self-adjusting closing
force ensures that the door closes with sufficient force. The
product can also sense when the door has not closed com-
pletely and will cause the door to open and then close fully
for an increased level of security.

Illuminating the route to safety
Life-safety codes throughout the United States have taken
steps to improve building evacuation by increasing the visi-
bility of exit pathways. ASSA ABLOY’s family of LiteGuide
products supplements these emerging codes by incorp-
orating new technologies into doors, frames and hardware.
The latest of these life-safety innovations is the Beacon exit
device from SARGENT.

Beacon is an audible and visual alarm which is con-

nected to a building’s alarm system and has special features
for the disabled. When the alarm is activated, Beacon emits
a pulsating light and white noise. The white noise attracts
attention when visibility is poor and acts as an interference
filter for sound so that people can concentrate on the
emergency announcement saying where the nearest emer-
gency exit is. The exit device emits a laser beam which
assists orientation in a dark and smoke-filled room.

Advanced package solution with RFID strike
A hybrid electric strike from the Group company HES is the
first to combine an integrated HID Proximity contactless
card reader with the physical security of a Grade 1 electric
strike, thereby offering installers and end-users faster instal-
lation and greater security.

It enables installers to pull wires to a single location,
rather than cutting both wall and doorframe. Developed to
work with any Wiegand-compatible access control system,
the strike encompasses everything inside the doorframe
and not only increases tamper-resistance but also improves
the aesthetics of the installation.

Products
15
15

Check in with your cellphone
Signature RFID is the new contactless electronic lock from
VingCard. The lock is compatible with the main RFID stan-
dards and the new NFC (Near Field Communication) tech-
nology for cellphones.

The technology enables hotels to offer remote check-in
capabilities. Hotel chains can send a booking confirmation
number, a room number and an encrypted room key via

text messaging to a guest’s cellphone prior to their arrival
at the hotel. The solution gives the hotel a new level of
service and can be used as a unique benefit in loyalty pro-
grams. Guests avoid long lines at check-in and check-out
and use their own NFC-compliant cellphones to access
their room and hotel facilities during their stay.

EMEA Division
16

EMEA
Rising sales and efficiency
measures lift margins

EMEA expanded and advanced its market position to
achieve strong growth during the year. All regions
increased sales, despite some slowing of the economy
towards the end of the year. Operating income was up
thanks to solid growth in volume, implemented efficiency
measures, compensated raw-material costs, and savings
from the restructuring program.

Acquisitions
In 2007 EMEA acquired several companies; some of the
larger ones included Powershield in Northern Ireland, Esety
in Italy and Alba in Israel. These acquisitions, which were all
complementary in nature, strengthened market presence in
their regions and contributed to continued growth through
their sales channels.

EMEA in brief
EMEA is ASSA ABLOY’S largest division. It has twelve market
regions and its head office is in London. EMEA’s market
position is extremely strong and it is the market leader in
most countries in Europe, the Middle East and Africa. For
the most part, EMEA’s production takes place locally on
each market. In 2006 a change in production began which
involves concentrating on final assembly and customiza-
tion in the division’s own units. Component production,
simple products and subsystems will progressively be out-
sourced, mainly to low-cost countries.

Report on the year
During the year the division achieved sales of SEK 13,477 M
(12,509), an increase of 8 percent, of which 7 percent was
organic growth and 1 percent acquired growth. Operating
income was up 16 percent to SEK 2,295 M (1,972), which
represented an operating margin (EBIT) of 17.0 percent
(15.8).

Although all regions demonstrated growth, some partic-

ularly strong regions included the Scandinavian countries,
Finland, Spain and the UK. Expansion of the marketing
organizations within the growing regions of East Europe and
the Middle East and Africa resulted in highly satisfactory
organic sales improvements in these areas during the year.
Through good growth in volume together with imple-
mented efficiency measures, compensated raw-material
costs and savings resulting from the restructuring program,
EMEA’s operating margin strengthened by more than 1 per-
centage point during the year.

Current initiatives
Products
The substantial increase in investments in Research and
development during 2006 and 2007 resulted in the launch
of a host of new electromechanical and electronic products
in 2007. These products were developed according to the
Group’s new project-development process, shifting the
focus to increased customer value while improving cost-
efficiency and maintaining a higher standard of quality.
The products were well received by customers and have
resulted in strong growth while strengthening the Group’s
leadership in the field of complete security solutions. How-
ever, the majority of products offered within EMEA are still
traditional mechanical locks, which is why a substantial
proportion of the expanded development of resources is
being channeled in that direction. The mechanical lock
market is changing; customers are increasingly demanding
modern design and attractive prices with continued high
quality. Another important aspect is ensuring that products
comply with the latest local building codes for safety and
security.

A pan-European project initiated during the year aims
to formulate common product platforms for the whole of
EMEA for both mechanical and electromechanical prod-
ucts. After adaptation to local standards and design, these
will be sold throughout EMEA. The result will be increased
growth caused by new products reaching multiple markets
faster while production becomes more coordinated and
efficient.

Sales and Operating income

Capital employed and
Return on capital employed

Operating income and Cash flow

Sales

SEK M
14,000

12,000

10,000

8,000

6,000

Operating income

SEK M
2,800

2,400

2,000

1,600

1,200

Sales, SEK M
Operating income, SEK M 1, 2

Capital
employed
SEK M
12,000

Return on
capital employed
%
30

10,000

8,000

6,000

4,000

Capital employed, SEK M
Return on capital employed, % 1, 2

SEK M
2,500

2,000

1,500

1,000

Operating income, SEK M 1, 2
Cash flow, SEK M 1, 2

The division manufactures
and sells mechanical and
electromechanical locks,
cylinders, security doors
and accessories in Europe,
the Middle East and Africa
(EMEA).

1 Excluding restructuring items.

2 2003 has not been adjusted for

IFRS but amortization of goodwill
has been excluded.

EMEA Division
17

Efficiency and restructuring program
The restructuring program continued to concentrate pro-
duction of important components to specialized produc-
tion facilities, such as cylinders in the Czech Republic and
lock cases in Romania. The production of components
continued to be outsourced to preferred suppliers in
low-cost countries. In order to maintain high customer
service standards, Western European production facilities
will focus more on final assembly and customization of
products. The ongoing initiative to coordinate purchasing
resulted in an increased percentage of purchases in low-
cost countries and better use of benefits of scale within
the division.

Shared services
Administrative services will be coordinated on a region-
by-region basis to improve efficiency. Shared services
have already been implemented in regions such as
Germany, which has achieved good results. In 2008 and
2009 all regions will be similarly organized.

Human Resources
During the year EMEA worked proactively to find, train
and keep highly skilled employees. These efforts are par-
ticularly critical, given the considerable change that is
ongoing in the division, such as the extensive restructur-
ing program. Focus on assuring and facilitating internal
recruitment of managers was intensified during the year.

Acquisitions
Despite EMEA’s solid market position, good acquisition
opportunities can still be found. EMEA is actively seeking
acquisition candidates to round out its geographic pres-
ence, for example in German-speaking countries and in
Eastern Europe, as well as companies that can provide
new products or distribution channels.

ASSA ABLOY worked closely
with the architects to spec-
ify the building’s security
solutions. The new dormi-
tory building in the EU
complex will be home to
the 400 members of the
European Parliament and
therefore requires a high
level of security.

Sales organization
Efforts to expand and reorganize the sales organization
continued during the year. Essentially, many sales organiza-
tions have now been coordinated under the ASSA ABLOY
brand, each with a focus on specific market and customer
segments. Moreover, as the specification of total door
solutions has grown in importance for achieving sales, the
number of sales representatives specializing in specification
was substantially increased and collaboration with archi-
tects and security consultants was strengthened.

Sales by product group

Key figures

Mekaniska lås,
låssystem och
tillbehör, 73%
SEK M
Elekromekaniska
och elektroniska, 14%

Säkerhetsdörrar
och beslag, 13%

Income statement
Sales
Organic growth, %
Operating income (EBIT)1
Operating margin (EBIT)1, %

Mechanical locks, lock

systems and accessories, 73%

Electromechanical and
electronic locks, 14%

Security doors and fittings, 13%

Capital employed
Capital employed
– of which goodwill
Return on capital employed 1, %

Cash flow
Cash flow 1

Average number of employees
1 2006 excluding restructuring items.

2006

2007

12,509
8
1,972
15.8

13,477
7
2,295
17.0

9,183
4,631
19.1

10,055
4,926
21.9

1,899

2,267

12,283

12,493

EMEA Division
18

Swiss Railways
switch to VERSO CLIQ

Swiss Federal Railways
(SBB) has 28,000 employ-
ees and carried more than
285 million passengers and
56 million tonnes of freight
in 2006.

An innovative electromechanical locking system from
ASSA ABLOY will improve security and access control as
well as lowering costs for Swiss Federal Railways (SBB).

“Our existing security system is good but not perfect,”

explains Bruno Bönzli, Project Leader at SBB.

“It lacks an overarching concept and in certain cases,
security is less than perfect and our infrastructure adminis-
tration stores redundant data.”

SBB set out to remedy these shortcomings.
“We put our new access and security control project
out to Europe-wide tender and after evaluating the offers
we chose Keso AG as our preferred supplier,” says Bönzli.
Keso, a Swiss company in the ASSA ABLOY Group, is
supplying 35,000 VERSO CLIQ cylinders and 14,000 keys.
When the system is fully installed, it will not only improve
security and access control, it will also allow SBB to save
about CHF 150,000 a year in staff and operating costs.
The first VERSO CLIQ locks were installed in March 2008;
nationwide installation will be complete by July 2010.

The VERSO CLIQ system combines mechanical and elec-
tronic elements. The key has a built-in mechanical code
and contains an electronically coded microcircuit with a
battery, and a matching electronic chip is located in the
cylinder. With this system unauthorized duplication of keys
is impossible; the system can be adapted rapidly and inex-
pensively to future expansions or organizational changes
by re-coding the microcircuit. Cable-laying and alterations
to buildings are not needed since the battery in the key
supplies the current to operate the lock. Authorizations,
with time and/or spatial restrictions, can be assigned to
individual people. Locks in non-critical security locations
work with the mechanical portion of a key alone, while
critical installations need both portions.

Americas
Positive trend despite weaker US market

Americas Division
19

ASSA ABLOY’s growth in the Americas division continued
in 2007 through focused efforts to increase demand for
products primarily in the commercial marketplace. The
division increased its sales and margins through good
growth in the commercial segment and experienced a
relatively minor impact from the US housing slowdown.

Report on the year
During the year the division achieved sales of SEK 10,220 M
(10,142), a 1 percent year-on-year increase. Organic growth
was 5 percent and acquired growth was 5 percent Operat-
ing income was up 3 percent to SEK 1,995 M (1,945), which
represents an operating margin (EBIT) of 19.5 percent (19.2).

Americas in brief
The largest portion of the division’s sales take place in
North America, where ASSA ABLOY has an extensive sales
organization selling through added-value partners in vari-
ous channels. Sales in South America and Mexico take place
through distributors, wholesalers and DIY stores that are
serviced by ASSA ABLOY sales organizations. A small but
growing portion of sales goes to Asia and the Middle East.
Manufacturing takes place primarily in the USA, Brazil,
Mexico and Chile. The plants in Latin America produce fin-
ished products for local markets in addition to components
and finished products sold in North America. The North
American plants also source components from low-cost
countries in Asia.

North America
In North America, unlike in Europe, there is a clear differ-
ence between products intended for the residential seg-
ment and those intended for the commercial segment. The
commercial segment includes institutional and commercial
end-customers such as schools, offices and healthcare facil-
ities, and accounts for a high proportion of the division’s
sales. Few products on the North American market can be
sold in both segments because the distribution channels
are separate.

Sales development was positive in 2007. Demand was
particularly robust for electromechanical products and high-
security products. One particular end-user segment that is
growing strongly is institutions such as educational and
healthcare facilities.

The downturn in housing construction had a negative
impact on ASSA ABLOY due to decreased sales of products
for single-family homes and apartments. Nevertheless,
housing-related products account for only a small portion
of the division’s sales.

In 2007 the division made one significant acquisition,
Pemko Manufacturing Company, which makes thresholds,
door seals and continuous hinges. Pemko has been well
integrated into the Group and enables ASSA ABLOY to pro-
vide the market with a more complete door opening solu-
tion that goes beyond doors and locks.

The division manufactures
and sells mechanical and
electromechanical locks,
cylinders, security doors
and frames on the Ameri-
can continents.

InterActiveCorp’s head-
quarters in the Chelsea
neighborhood of Manhat-
tan was completed in
2007; the architect is Frank
Gehry. Seven hundred
ASSA ABLOY door solu-
tions were installed in the
building.

Sales and Operating income

Capital employed and
Return on capital employed

Operating income and Cash flow

Sales

SEK M
12,000

10,000

8,000

6,000

4,000

Operating income

SEK M
2,400

2,000

1,600

1,200

800

Sales SEK, M
Operating income, SEK M 1, 2

Capital
employed

SEK M
10,000

8,000

6,000

4,000

Return on
capital employed

%
25

Capital employed, SEK M
Return on capital employed, % 1, 2

SEK M
2,500

2,000

1,500

1,000

Operating income, SEK M 1, 2
Cash flow, SEK M 1, 2

1 Excluding restructuring items.

2 2003 has not been adjusted for

IFRS but amortization of goodwill
has been excluded.

3 Sales growth in local currencies

was 10%.

Americas Division
20

ASSA ABLOY provided
security solutions to Metro
Health Hospital in the
United States. The hospital
has about 2,000 doors and
placed rigorous demands
on the specifications for
each door opening.

Latin America
Many Latin American markets are growing rapidly. Gener-
ally speaking, the increased standard of living in these
developing economies has accelerated the need for higher
security levels. Each country requires unique security solu-
tions depending on local standards. For example, several
new products and strong demand for more stringent secu-
rity solutions in high-rise residential construction resulted
in good sales growth for ASSA ABLOY in Brazil.

Current initiatives
Product launches
Towards the end of the year the division introduced Hi-O in
North America. Hi-O stands for Highly Intelligent Operation
and is a new concept for intelligent door systems that sim-
plify installation, service and expansion. Hi-O contains a
network based on the CAN standard, which has existed for
many years and is widely used in the automotive industry.
It enables connected units to carry out an encrypted dialog
with each other. The division will launch a sales campaign
for Hi-O during 2008.

Shared Services
The Americas division continues to coordinate administra-
tive services for companies within the same market seg-
ment. Financial services and human resources are two
areas where collaborative efforts have allowed more effi-
ciency and quality for the Group. Efforts to coordinate
administrative functions will continue in 2008.

Restructuring
Two factories were closed in 2007. A plant in Mexico was
closed and production was moved to another Mexican unit,
and a plant in Pennsylvania, USA, was also closed. Some
portions of production were moved to Connecticut, USA,
while others were outsourced. More efficient production
and coordinated purchasing have led to savings that helped
improve margins during 2007.

Acquisitions
The division is exploring opportunities for acquisitions
in the rapidly growing Latin American market as well as
among specialized companies that could complement
ASSA ABLOY’s existing offering in the division.

Sales and specification
In 2007 the division continued to invest in specification
sales and marketing. The sales force is learning more about
the needs of installers and end-users, and is focused on
selling total door opening solutions, rather than individual
products. At the same time and with equal intensity and
importance, the division’s sales forces are working very
closely with its distributor partners, who are deeply
involved in all aspects of the market from defining the right
products and solutions for specific applications to manag-
ing and ensuring proper installation of door opening solu-
tions for the end-user.

The division is also working with architects and security
consultants early in the building process. ASSA ABLOY helps
with technical specifications while the building is still on
the drawing board. ASSA ABLOY specification consultants
share their door and hardware expertise to ensure that
openings are code-compliant and meet the needs of the
end-user. Such activities strengthen relations with archi-
tects and increase the chance of orders once construction
is underway.

Production
Efficient Lean methods are still a major driving force for
business operations, and these methods have now been
implemented in both production and administration. Lean
methods lead to more efficient product flows, better con-
trol of material costs, improved decision-making proce-
dures, shorter time-to-market and increased cooperation
with marketing and sales teams. Ongoing initiatives with
Lean processes have become ingrained in the division’s way
of working. The division will continue to implement Lean
operations in production and work processes in 2008,
while taking advantage of purchasing synergies.

Sales by product group

Key figures

Mekaniska lås,
låssystem och
tillbehör, 54%

SEK M

Elekromekaniska
och elektroniska, 8%

Income statement
Säkerhetsdörrar
Sales
och beslag, 38%
Organic growth, %
Operating income (EBIT)1
Operating margin (EBIT)1, %

Capital employed
Capital employed
– of which goodwill
Return on capital employed 1, %

Cash flow
Cash flow 1

Average number of employees
1 2006 excluding restructuring items.

Mechanical locks, lock

systems and accessories, 54%

Electromechanical and

electronic locks, 8%

Security doors and fittings, 38%

2006

2007

10,142
10
1,945
19.2

10,220
5
1,995
19.5

8,545
5,076
22.3

8,595
4,928
22.7

1,724

9,641

2,211

9,428

Security a top concern at
new biotechnology facility

Americas Division
21

The newly built HudsonAlpha Institute for Biotechnology
in Huntsville, Alabama, USA, is home to a number of com-
panies conducting cutting-edge research. The discoveries
made within the institute’s walls are closely guarded and
could hold the key to future success for these companies.
Tenants need to be confident that they are working in a
secure facility that will keep proprietary information safe
within its confines. HudsonAlpha was able to provide this
high level of security with a broad range of products from
ASSA ABLOY.

The four-storey building of 25,000 m2 (270,000 sq. ft)
will house up to 900 employees and contains state-of-the-
art laboratories for genomic research and development of
products and services supporting genome-based medi-
cine. The approximately 1,000 doorways in the building
have been equipped with products from Curries, Graham,
HES, McKinney, Rixson, SARGENT and Securitron. In addi-
tion, the locking hardware was supplied with MicroShield
antimicrobial coating and all electromechanical openings
were wired with ElectroLynx connectors, a unique
ASSA ABLOY solution that simplifies installation and
reduces costs.

According to Jim Hudson, President of the Institute,

security was always a priority issue.

“Right from the planning stage, we decided security
was critical and had to be incorporated into the design of
the building. We conveyed these concerns to the architect
who then worked with ASSA ABLOY to address our needs.”
The facility’s access control system makes extensive use
of card readers tied into mortise locks and electric strikes.
Additional levels of protection are provided by a SARGENT
high-security key system backed by the Key Wizard key-
management software.

“We like it that the doorway security system is unobtru-
sive and blends in with the overall facility design,” Hudson
commented.

“This innovative security concept creates a level of con-
venience that gives building occupants a sense of freedom
and makes HudsonAlpha a desirable place to work.”

Asia Pacific Division
22

Asia Pacific
Strong organic growth and acquisitions

The division manufactures
and sells mechanical and
electromechanical locks,
security doors and fittings
in Asia and Oceania.

Organic growth in Asia Pacific more than doubled over the
past year, from 4 to 10 percent. In addition to extremely
good growth on local markets, exports to other divisions
also surged. The division carried out three acquisitions
during the year.

Asia Pacific in brief
The division manufactures and sells locks, security doors,
and fittings in Asia and Oceania. The division is divided into
three sub-regions: Pacific (which includes Australia and
New Zealand); China; and the rest of Asia. Pacific accounts
for more than half of sales, China for 30 percent including
exports to fellow subsidiaries in other divisions, and the
rest of Asia for almost 20 percent. The major markets
included in the rest of Asia include Korea, Malaysia, Thai-
land, India and Singapore.

60 percent of sales are to the commercial segment and

40 percent to the residential segment. In China the same
types of lock, handle and fittings are often used in both
homes and offices. Sales include products manufactured in
the region and also premium products manufactured in
Europe or North America.

The division’s production plants are located in Australia,
New Zealand, China and Korea. In addition to supporting its
own production units, the division also manufactures com-
ponents and finished products for the markets in Europe
and North America.

Report on the year
During the year the division achieved sales of SEK 2,780 M
(2,309), a 20 percent increase. Organic growth was 10 per-
cent and acquired growth was 14 percent. Operating
income was up 51 percent to SEK 322 M (213), which rep-
resents an operating margin (EBIT) of 11.6 percent (9.2).

Australia and New Zealand
Demand was good during the year and sales showed solid
growth, resulting in increased market share. The strongest
demand was in the commercial segment; demand on the
residential market was somewhat weaker. New products
with improved function or design were important growth
drivers.

A new sales organization was implemented during
2007, based on market segmentation and specification
work, with key-account managers for large national cus-
tomers. In Australia ASSA ABLOY’s successful campaign to
expand collaboration with architects led to advances in the
specification market. The division also strengthened its col-
laboration with the Royal Australian Institute of Architects
(RAIA) during the year with the purpose of promoting
innovative design concepts by encouraging customers to
influence tomorrow’s door solutions.

In early 2007 ASSA ABLOY acquired the Australian com-

pany Pyropanel, a leading manufacturer of fire doors. The
acquisition strengthens ASSA ABLOY’s position in the com-
mercial segment and creates further growth opportunities.

China
The Chinese lock market is growing quickly thanks to the
rapid pace of urbanization and modernization of both resi-
dential and commercial buildings, which in turn increases
demand for security. Between 2005 and 2015, 300 million
Chinese are expected to move from the country to the city.
The market is fragmented, but ASSA ABLOY has a leading
position as the largest lock manufacturer in China.

Sales in China take place mainly via distributors. The
network of distributors was substantially expanded during
2007 and today the Group’s products can be found in
about 2,000 sales locations. Distribution will be further
expanded in 2008.

Sales and Operating income

Capital employed and
Return on capital employed

Operating income and Cash flow

Sales

SEK M
3,000

2,500

2,000

1,500

1,000

500

Operating income

SEK M
400

350

300

250

200

150

100

Capital
employed

Return on
capital employed

SEK M
3,000

2,500

2,000

1,500

1,000

500

%
30

Sales, SEK M
Operating income, SEK M 1, 2

Capital employed, SEK M
Return on capital employed, % 1, 2

SEK M
350

300

250

200

150

100

Operating income, SEK M 1, 2
Cash flow, SEK M 1, 2

1 Excluding restructuring items.

2 2003 has not been adjusted for

IFRS but amortization of goodwill
has been excluded.

Asia Pacific Division
23

Current initiatives
Product development and product range
Innovation and continued product development are
important factors for the Asia Pacific division to be able to
maintain an attractive line of products and increase sales.
Electromechanical security products are becoming more
important and there is considerable growth potential in
the commercial segment for electronic cylinders. The Asia
Pacific division is working together with Group companies
ASSA and effeff to develop suitable products for the local
market.

Division-wide Research & Development units will be
established during the year. These will coordinate all the
division’s research in a specific product area, enabling
ASSA ABLOY to achieve economies of scale as well as faster
product development. R&D centers will be located mainly
in Australia and China and possibly in another country too.
The project to add American ANSI locks and European
DIN locks to the product range was completed in the sec-
ond half of the year. The products were well received by
customers, resulting in an expanded portfolio.

Market organization
The sales force has been reorganized in accordance with
the Group’s strategy to develop from a product supplier
into a supplier of total door and security solutions focused
on defined customer segments.

In order to increase sales involving larger projects, Asia

Pacific will also continue to strengthen its specification
resources and develop collaboration with architects.

Production structure
The division has continued to invest in production facilities
in China, mainly to meet rising demand on the home mar-
ket, but also to increase the Group’s internal deliveries to
Europe and North America.

In the past ASSA ABLOY’s products have been in the upper
price segment. In 2007 the division developed a less expen-
sive product series that is manufactured in China, adapted
to local needs and positioned in the middle of the Chinese
price range. China has few national or regional standards
governing how locks, doors and fittings should be designed
and fit together. ASSA ABLOY is working with Chinese regu-
latory authorities to formulate such standards.

In late 2007 ASSA ABLOY acquired the Chinese company

Baodean, which manufactures and sells high-security
locks for the Chinese market. The acquisition strengthens
ASSA ABLOY’s market-leading position on the Chinese
market.

Rest of Asia
Demand was good on all of ASSA ABLOY’s markets. Specifi-
cation work was extended and a number of newly devel-
oped lock ranges were introduced.

In late 2007 ASSA ABLOY acquired iRevo, a Korean com-

pany that is the market leader in digital door locks. This
type of door lock has had great success on the residential
market in both Korea and China, and will become an
extremely important product in the future.

Woodside in Australia is
one of the region’s biggest
companies in research and
production of oil and gas.
ASSA ABLOY has supplied
a large number of blast-
resistant doors to the
company’s liquid natural
gas facility outside the city
of Karratha.

Sales by product group

Mechanical locks, lock

systems and accessories 53%

Electromechanical and
electronic locks 17%

Security doors and fittings 30%

Key figures

Mekaniska lås,
låssystem och
tillbehör, 53%
SEK M

Elekromekaniska
och elektroniska, 17%

Income statement
Sales
Säkerhetsdörrar
Organic growth, %
och beslag, 30%
Operating income (EBIT)1
Operating margin (EBIT)1, %

Capital employed
Capital employed
– of which goodwill
Return on capital employed1, %

Cash flow
Cash flow1

Average number of employees
1 2006 excluding restructuring items.

2006

2007

2,309
4
213
9.2

1,974
955
10.8

2,780
10
322
11.6

2,520
1,211
13.8

112

294

5,099

5,445

Asia Pacific Division
24

High-tech solution for
new Chinese challenge

Competitive pricing, high
quality and technical
know-how, along with
ASSA ABLOY’s reputation
in China, helped to secure
the project.

The new municipal offices in Chengdu, the capital of
China’s Sichuan Province, contain over 6,000 doors. Since
this was the first major project in the region to specify
ANSI standards, it required considerable expertise.

Calling on the extensive ASSA ABLOY product range,
ASSA ABLOY China was able to provide the entire hardware
solution.

Competitive pricing, high quality and technical know-
how, along with ASSA ABLOY’s reputation in China, helped
to secure the enormous project – Phase One covers
310,000 m2 (3.3 million sq. ft).

Involved from an early stage of the construction pro-
ject, the ASSA ABLOY team worked closely with the archi-
tect to specify the project and then create a hardware
schedule.

Hands-on work has continued throughout the delivery

and installation phases, including providing on-site train-

ing to subcontractors and supervision to ensure high
quality and resolve any technical problems.

The 18-month long project involved a significant

degree of coordination to ensure that deadlines were met.
Hong Hong, ASSA ABLOY China’s Sales Manager, says
that establishing strong communication channels with
all players – the municipality, architect, suppliers and sub-
contractors – was a key factor in the project’s success.

“We have a very competent project team with know-
ledge of both the site and the products. We were therefore
able to anticipate possible difficulties and find solutions
before they became problems.

“For example, we were able to reduce the choice of
hinges and door closers from fourteen and nine types
down to two and three types respectively, which drama-
tically improved efficiency on the job site.”

Global Technologies Division
Innovative products produce
strong growth

Global Technologies Division
25

Global Technologies achieved major successes during the
year. Innovative products lifted sales and marketing cam-
paigns continued to drive growth.

Global Technologies in brief
The division consists of two business units, HID Group
and ASSA ABLOY Hospitality. Sales are limited almost exclu-
sively to the commercial segment. The largest markets
are North America and Europe, though Asia is rapidly
growing in importance as a result of marketing initiatives.
In a reorganization towards the end of the year HID and ITG
merged, which is expected to further contribute to growth
and improved profitability.

HID Group
HID Group is active in electronic access control, secure
issuance of smart cards and identification technology.

The HID Group is the market leader in electronic access
control, and the selection of products includes card readers,
cards for access control, and control panels for authori-
zation control. The products make use of several different
technologies, including radio-frequency identification
(RFID), magnetic stripe and biometrics. The products are
sold under brands such as HID, Integrated Engineering and
Indala.

In the field of secure issuance of smart cards, the Group

company Fargo has a number of printer products focused
on distributed management of different types of cards.

Identification technology includes products for reliable
identification, such as ID cards, smart cards and readers, as
well as antennas in electronic passports. The main brands
are Sokymat, ACG and Omnikey.

ASSA ABLOY Hospitality
ASSA ABLOY Hospitality, which produces electronic lock
systems and hotel safes, focuses on the hotel and cruise-
ship markets with leading global brands such as VingCard,
Inhova and Elsafe.

Report on the year
During the year the division achieved sales of SEK 4,922 M
(4,220), a 17 percent increase. Organic growth was 11
percent and acquired growth was 12 percent. Operating
income was up 23 percent to SEK 754 M (612), which rep-
resents an operating margin (EBIT) of 15.3 percent (14.5).
The operating margin increased as a result of better vol-
umes, but was limited by continued initiatives to expand
the sales and marketing organizations in these rapidly
growing segments.

HID Group
HID continued to expand its commercial organization in all
areas, with a special focus on the Asian region. Growth was
strong throughout the year thanks to growing market
investments, many new products and an increased need for
security. Legislation and more rigorous security require-
ments further stimulated demand for the business unit’s
products, such as electronic access systems, secure issu-
ance of smart cards and identification technology.

One clear trend in the market is the merging of physical

and logical access, which means that the same solutions
are used for access control in buildings and for access to
computers. As a result the products will be compatible
with many different types of digital readers and standards
on the market. It is therefore important to collaborate on
technical standards with software companies. HID had a
major success in this area during the year through collab-
oration with Microsoft®, which certified the HID Group’s
Crescendo card for use in Microsoft’s Windows Vista oper-
ating system in 2007.

HID and ITG merged through a reorganization aimed
at strengthening growth and profitability. The units com-
plement each other well through ITG’s strong presence in
Europe and HID’s in the USA. The consolidation will provide
opportunities to realize sales and cost synergies.

Sales and Operating income

Capital employed and
Return on capital employed

Operating income and Cash flow

Sales
SEK M
5,000

4,000

3,000

2,000

Operating income
SEK M
1,000

Capital
employed
SEK M
6,000

Return on
capital employed
%
30

800

600

400

5,000

4,000

3,000

2,000

SEK M
800

700

600

500

400

300

200

Sales, SEK M
Operating income, SEK M 1

Capital employed, SEK M
Return on capital employed, % 1

Operating income, SEK M 1
Cash flow, SEK M 1

The division sells
electronic security
solutions worldwide.

1 Excluding restructuring items.

Global Technologies Division
26

Group company VingCard
will supply smart cards and
locks in the Classic series
to the hotel rooms at the
Sheraton Cable Beach
Resort and the Wyndham
Nassau Resort & Crystal
Palace Casino. These beach-
front hotels are located in
Nassau, a popular tourist
destination in the Bahamas.
They are initiating a major
development program that
will continue for four years.
In all VingCard will supply
smart cards for 6,000 hotel
rooms.

Current initiatives
HID Group and ASSA ABLOY Hospitality continue to focus on
growth opportunities. Organic growth will come from inno-
vative new products, a broader geographical presence and
continued refinement of brand and channel management.
An important trend is the increased cooperation
among all ASSA ABLOY’s technology areas via its Shared
Technologies initiative. When Group companies in other
ASSA ABLOY divisions use RFID and wireless technology in
more traditional products, a merger of the best technology
from the mechanical and the electronic product areas takes
place, generating new growth opportunities for the Group.
The business units are continuing to investigate acquisi-

tion opportunities. Acquisition targets should provide
increased market share, distribution capacity or new products.
Efforts to increase market presence in the rapidly grow-
ing markets in China, India and the rest of Asia are also con-
tinuing. The HID Group is focusing on the consolidation of
HID and ITG and the integration of the newly acquired com-
panies Aontec and Integrated Engineering. The integration of
Fargo has been successful and sales are doing very well.
In addition, production in the ITG portion of HID is
being extensively restructured by moving production to
Malaysia. Towards the end of the year the Ronneby plant
was closed, as were several production lines in other pro-
duction units. The HID Group is also continuing its restruc-
turing program with streamlining and coordination of
administration through the implementation of region-
based shared services. ASSA ABLOY Hospitality is continu-
ing its restructuring and consolidation of production units
and outsourcing its component manufacturing. Hospitality
is exploring the possibility of increasing collaboration with
other parts of the Group based on new-product launches
and increasing sales of its products in segments other than
hotels and cruise ships.

The HID Group carried out two acquisitions during the
year. One was the Dutch company Integrated Engineering,
active in electronic access control. The other was the Irish
company Aontec, which produces inlays, an important
component of items such as electronic passports.

ASSA ABLOY Hospitality
Hospitality’s market was extremely strong with respect to new
hotel construction projects and renovation projects, both of
which usually involve orders for both new lock systems and
hotel safes. Hotels replace or upgrade locks about every ten
years, for both security- and design-related reasons.

The division carried out an extensive project during the
year to find new and better distributors in growth markets,
with extremely good results. Growth was generally strong
and all markets demonstrated good organic growth.

Innovative products have been important for growth.
One example is VingCard’s latest electronic lock solution,
Signature RFID, which allows communication between the
door and the hotel Reception. The system makes it possible
for hotel guests to receive reservation confirmations, room
numbers and an encrypted access code for the room by
SMS before they arrive at the hotel. They do not have to
stand in line at the hotel front desk but can proceed
directly to the room and unlock the door with the help of
their cellphones.

Sales by product group

Key figures

HID Global, 49%

ASSA ABLOY
Identification
Technologies (ITG), 26%

SEK M

ASSA ABLOY
Income statement
Hospitality, 25%
Sales
Organic growth, %
Operating income (EBIT)1
Operating margin (EBIT)1, %

Capital employed
Capital employed
– of which goodwill
Return on capital employed 1 , %

Cash flow
Cash flow1

Average number of employees
1 2006 excluding restructuring items.

Access control, 49%

Identification technology, 26%

Hotel locks, 25%

2006

2007

4,220
12
612
14.5

4,911
3,568
15.5

4,922
11
754
15.3

5,181
3,640
14.7

426

699

2,183

2,650

Efficient security for
global operations

Global Technologies Division
27

“In today’s turbulent times,
businesses must do their
utmost to ensure employee
safety and data security,”
explains John Bennett, Vice
President of the System
Security Group at Merrill
Lynch.

Merrill Lynch, one of the world’s leading finance com-
panies, needed to renew its access control system. With
offices worldwide, the company has 50,000 employees
and 20,000 regular visitors. There were many out-of-date
access cards in circulation, so Merrill Lynch turned to
HID Group for a tailor-made access control solution.

Future-proof solution
The decision to assign new credentials to its users, how-
ever, spawned a larger project within Merrill Lynch. The
goal would be to work towards a centralized access con-
trol system that could link to the company’s IT infrastruc-
ture so that users could use a single card for all their access
needs, whether to buildings or computers.
This of course necessitated a solution that:
• was multi-technology to assist in the migration to

smart cards;

• could be used anywhere in Asia, the USA or Europe;
• was operational around the clock;
• would be capable of future expansion into network

log-on, biometrics and other smart-card applications;

• was suitable for all user groups.

HID Group proposed a new system that would deliver mul-
tiple layers of protection by standardizing procedures for
issuing new and updating existing employee identity cards.

Key components of the successful implementation were
HID iCLASS® smart card technology and the advantages of
HID Group’s Corporate 1000 program, which assigns cus-
tomers a product with a unique format, giving them full
control over its use, rather than using open domain for-
mats. As Merrill Lynch already had Corporate 1000 national
formats, it was a matter of merging them into a single for-
mat, enabling users to access any Merrill Lynch facility, any-
where in the world, with the same card.

Personal service
The next step was to generate and issue new user creden-
tials, valid across nine locations, in three different catego-
ries depending on each user’s access rights. HID Group’s
Card Personalization Service had the capacity, ability and
experience to handle Merrill Lynch’s extensive require-
ments.

Paul Martin, Vice President, System Security Group at
Merrill Lynch, says the sheer volume of the project made it
impossible to achieve in house. “We felt confident that HID
was geared up to do the job. And it was. HID Group quickly
delivered secure, branded cards with visual security fea-
tures and a design that clearly shows the user’s access
rights.”

Entrance Systems Division
28

Entrance Systems
Increased demand for automatic doors
generates growth

ASSA ABLOY Entrance Systems reported solid demand dur-
ing the year, with some weakening toward year-end. In the
European and North American markets new products and
acquisitions contributed to continued strong performance,
and the growth rate in Asia was high. Expanded service
continued to be an important component in the offering.

The division is a global sup-
plier of automatic doors
with a complete range of
services for the aftermarket.

Entrance Systems in brief
The division has its own sales organization in more than 25
countries and distributors in a further 55. Production takes
place in Sweden, the UK, the Czech Republic, the USA and
China. New sales account for 60 percent and services for 40
percent of the division’s sales.

Report on the year
During the year the division achieved sales of SEK 2,987 M
(2,715), a 10 percent increase, 6 percent of which was
organic growth and 4 percent acquired growth. Operating
income was up 17 percent to SEK 432 M (368), which rep-
resents an operating margin (EBIT) of 14.4 percent (13.6).

ASSA ABLOY Entrance
Systems has supplied an
all-glass sliding door to
Atlanta Motor Cars. The
door is customized with
side panels that also open,
thus allowing the doors to
open wide enough to
move cars easily.

The division had good demand on its major markets and
growth was particularly strong in Asia. The improved mar-
gin achieved in 2007 was mainly due to a broader selection
of products and services, growth in volume, efficiency
measures and effective price leadership. During the year
Entrance Systems continued to adapt products for local
markets in Asia and North America, which strengthened
competitiveness on several key markets.

Europe
The sales trend was favorable during the year on most Euro-
pean markets, and the division continued to increase its
market shares. Several factors drove sales, including the
development of new service concepts and new regulatory
requirements for the safety of automatic doors.

America
Sales on the US market increased during 2007, though at
a slower pace than in 2006 due to the slowdown in eco-
nomic growth. Entrance Systems continued to increase its
service presence in top-priority regions through moves
such as the acquisitions of La Force in the United States and
Portronik in Canada. Market adaptation of the products,
such as adjustment to local fire codes or disability regula-
tions, is an important factor for healthy sales in the region.

Asia and Australia
Sales in Asia and Australia continued to be strong during
the year. An intensive effort was also carried out to increase
market penetration in the most important growth markets
in the region, both organically and through acquisitions.

Current initiatives
Products
Investments in product development continued and
the division currently has several important projects in

Sales and Operating income

Capital employed and
Return on capital employed

Operating income and Cash flow

Sales

SEK M
3,500

3,000

2,500

2,000

1,500

Operating income

SEK M
490

420

350

280

210

Capital
employed

SEK M
3,500

3,000

2,500

2,000

1,500

Return on
capital employed

%
14

SEK M
500

400

300

200

Sales, SEK M
Operating income, SEK M 1

Capital employed, SEK M
Return on capital employed, % 1

Operating income, SEK M 1
Cash flow, SEK M 1

1 Excluding restructuring items.

Entrance Systems Division
29

ment. Regular preventive maintenance is beneficial for
customers. Regular contact with the end-customers also
enhances opportunities for additional sales. Great empha-
sis is placed on sales training of service technicians to take
advantage of their daily contacts with customers. Within
the service organization the division is working on becoming
more efficient, automating processes even more, and
increasing the number of customer visits.

Restructuring program
Relocation of parts of production from high-cost to low-
cost countries continued in 2007. The major measures
included closing the production plant in Germany and
starting up a new production facility in the Czech Republic.

Acquisitions
There are major opportunities for acquisitions since the
market for automatic doors is relatively fragmented.
Entrance Systems is actively seeking acquisitions that will
provide a broader geographic base. In Europe and North
America in particular several regional companies sell auto-
matic doors and there are also many smaller local service
companies. There is also a need to increase market pene-
tration in the Asian markets through acquisitions. Oppor-
tunities for acquisitions to further expand Entrance Sys-
tems’ product range can also be found.

Quality and efficiency
Measures to enhance sales and productivity have been
taken in the service organization. For example, service
technicians have been equipped with hand-held compu-
ters to improve their efficiency. The service organization
has standardized its procedures and business processes
to a greater extent than previously, which has improved
quality and reduced the company’s sensitivity to the loss
of employees.

In 2007 ASSA ABLOY
Entrance Systems was cho-
sen to supply a total of 58
doors to Belle Epine, one
of the largest shopping
and entertainment centers
in Paris. The majority were
automated sliding door
solutions.

progress. Entrance Systems is working to develop a global
product range with common components that can be
adapted to local markets. An important new and comple-
mentary product area is low-energy automatic door opera-
tors. These products have several competitive advantages,
including lower operating costs. A number of products in the
field were launched during the year. In 2008 several other
product launches will be carried out in the important prod-
uct areas of swing doors, sliding doors and revolving doors.

Service business upgraded
Entrance Systems is continually working to expand its
customer offer so as to sell complete automatic door
solutions, including service, for the entire door environ-

Sales by product group

Key figures

Automatiska
dörrar, 60%

Service, 40%
SEK M

Income statement
Sales
Organic growth, %
Operating income (EBIT)1
Operating margin (EBIT)1, %

Capital employed
Capital employed
– of which goodwill
Return on capital employed 1, %

Cash flow
Cash flow1

Average number of employees
1 2006 excluding restructuring items.

2006

2007

2,715
11
368
13.6

3,121
2,453
11.5

2,987
6
432
14.4

3,149
2,566
13.7

332

497

1,926

2,137

New sales, 60%

Service, 40%

Entrance Systems Division
30

Halmstad Hospital
chooses hermetic doors

Halmstad Hospital chose
hermetic doors from
ASSA ABLOY Entrance
Systems. The doors are
specially designed for
clean-room environments.

Halmstad Hospital in Sweden compared the offers of three
different companies when making plans to install auto-
mated hermetic doors in the entrances to three hospital
laboratories.

After evaluating proposals from ASSA ABLOY and two
other companies, the hospital chose the Hermetic Auto-
matic Door System from ASSA ABLOY Entrance Systems,
which is specially designed for clean-room environments,
for its radiotherapy department.

Nicholas Nemeth of ASSA ABLOY Entrance Systems in
Sweden says that, in addition to the product’s reliability,
the hospital’s previous experience with the company
helped it to win the contract.

on automating 150 swing doors and 10 sliding doors. We
were able to put together a competitive proposal for a
complete solution.”

That complete solution involves service and mainte-
nance performed by local technicians in the Halmstad area.
“You shouldn’t underestimate the value of being able to

provide a local service organization,” Nicholas explains.

“The hospital’s facilities management staff and a locally
based technician from ASSA ABLOY Entrance Systems will
jointly handle all service and maintenance issues.”

Olle Nilsson, Facility Manager at Halmstad Hospital, is
very pleased with the way ASSA ABLOY handles the educa-
tion of his technicians.

“We have a very good relationship with Halmstad Hos-
pital and this was a prestige project that we really wanted
to be a part of, ”Nicholas explains. “In addition to the her-
metic doors, the hospital had also worked with us this year

“In most cases we deal with the maintenance of our
doors ourselves, but when we run into real difficulties we
need ASSA ABLOY’s assistance,” he says. “They are always
helpful and service-minded.”

Sustainable development
Sustainability in all business processes

Sustainable development
31

More information
about sustainable dev-
elopment is available
in ASSA ABLOY’s 2007
Sustainability Report and
at www.assaabloy.com

ASSA ABLOY’s extensive systematic work on sustainability
issues is integrated in all business processes and through-
out the value chain.

Sustainability initiatives affect both internal and external
stakeholders and are based on an ongoing risk analysis
throughout the value chain as well as on the Group’s Code
of Conduct. The Code of Conduct is based on the Group’s
overarching policies as well as international guidelines such
as the United Nations Declaration of Human Rights and the
core conventions of the International Labor Organization.
The Code of Conduct applies to areas such as the environ-
ment, health and safety, business ethics, working condi-
tions, human rights and social responsibility.

The ongoing initiatives are carried out in a three-step
process of analysis, implementation and follow-up. Essenti-
ally all elements of business activities are affected: manage-
ment, purchasing, production, acquisitions, investment,
Research & Development, sales and human resources.

Organization
Sustainable development efforts are coordinated by the
Group’s Director of Sustainability and at least one person in
each division. Purely employee-related issues are coordina-
ted by the Group’s Director of Human Resources and the
divisions’ HR managers.

The President and/or the HR Director of each Group
company is responsible for ethical and social issues, while
the Environmental Manager is in charge of environmental
matters.

Tools and audits
Internal sustainability development audits are carried out
regularly in the Group’s manufacturing companies. The
audits, which cover the external environment, the working
environment, human rights and business ethics, culminate
in detailed action plans. ASSA ABLOY also applies its inter-
nal audit tools to its suppliers. Many of ASSA ABLOY’s major
suppliers were evaluated on site in 2007.

One important sustainable development tool is
the ISO 14001 environmental management standard.
Reporting is carried out at the C level of the Global
Reporting Initiative (GRI).

Measurements serve as the basis for decision-making
relating to the use of chemicals, energy and water, as well
as matters relating to health and safety and gender equa-
lity. The Code of Conduct’s whistleblower mechanism is a
tool to be used in the event of any violations of the Code.

New 2007–2010 sustainability program
In 2007 ASSA ABLOY adopted a new program for work on
sustainability issues up to 2010. A process to establish the
program in all divisions and at all levels was conducted during
the year. The program contains 20 objectives in the fields
of chemicals handling, energy efficiency, health and safety,
relationships with suppliers, Research & Development,
employee issues and governance. Concrete projects have
been defined with goals, timetables and cost/benefit analyses.
The following activities will be carried out during the
period of this sustainability program:

First results of the sustain-
ability program – for a
few objectives.

Objective

Result 2005

Result 2006

Result 2007

Trend

Energy conservation in manufacturing:
A reduction of 15 percent by 2012 compared to the result in
2006, based on normalized values.

Organic solvents – Phase out all use of perchloroethylene
and trichloroethylene by the end of 2008.

Health and Safety
Zero-vision, with interim objectives to improve health and
safety statistics:
• 2007: IR, injury rate 10; ILDR, injury lost-day rate 220.
• 2008: IR, injury rate 9; ILDR injury lost-day rate 200.
– IR in injuries per million hours worked
– ILDR in lost days per million hours worked

ISO 14001 – Compliance at all factories with significant
environmental impact.

18.72 MWh/SEK M

16.93 MWh/SEK M

15.97 MWh/SEK M

189 tonnes

172 tonnes

93 tonnes

IR 13.6
ILDR 297

IR 10.9
ILDR 242

IR 9.5
ILDR 179

Suppliers – Sustainability assessments; acceptance of the
Code of Conduct a documented requirement for all
suppliers; sustainability audits for all risk-category suppliers.

5 pilot sustain-
ability audits in
China

40 sustainability
audits in China

120 sustainability
audits in China

Gender diversity – Each division is expected to undertake
appropriate measures aimed at improving present levels
of gender diversity at the more senior levels.

Not measured

Level 3: 9%
Level 4: 10%
Level 5: not
measured

Level 3: 14%
Level 4: 19%
Level 5: 22%

n Deterioration n Constant n Improvement

Sustainable development
32

Use of chemicals
ASSA ABLOY is constantly working to reduce hazardous sub-
stances in production and to find replacements for them.
Many production facilities have already phased out
chlorinated solvents. Use continues in a few production
facilities. One of this year’s major successes was the phasing
out of chlorinated solvents, which progressed very well.
Consumption was reduced by 40 percent in 2007, and the
remainder will be phased out in 2008. Current information
about sustainable development is published on the Group’s
website.

ISO 14001
Most of the Group’s production plants had implemented
ISO 14001 environmental management systems or the
equivalent by the end of 2007. The table shows the number
of certificates in 2006 and 2007, along with the correspon-
ding number of certifiable systems for North American
units. Only a small number of production plants have any
form of environmental impact. The goal of the sustainability
program is that all plants that impact the environment
should have been certified, and that newly acquired com-
panies should be certified within two years.

Energy consumption and greenhouse gases
ASSA ABLOY was able to compile measurable results for
energy consumption and carbon dioxide emissions in the
Group companies for the first time in 2005. These figures
will now serve as the baseline for actions taken under the
new sustainability program. The goal applying to all local
units is to achieve total energy savings of 15 percent by the
end of 2012.

ASSA ABLOY will analyze the contribution made by
transport to energy consumption and consider opportuni-
ties to increase coordination in order to reduce emissions.

Suppliers
Beginning in 2008, all of ASSA ABLOY’s global supplier
contracts will have the same format throughout the Group.
Among other things, the contracts include requirements
for suppliers to live up to the Group’s Code of Conduct.
Assessments and audits will ensure a uniform approach to
quality standards and sustainability.

Research & Development
ASSA ABLOY’s Research & Development process, from
preliminary studies to product launch, includes several

‘gateways’ at which the project plan and partial deliveries
are reviewed and decisions made about continuing the
project. Health, safety and environmental issues will be
assessed at these gateway points. The Design for Environ-
ment checklist is a tool used in the product development
process.

Health and safety
The point of departure in ASSA ABLOY’s work on health and
safety in production is based on a zero-tolerance approach
to injuries. New goals have been set for injury rates and for
working days lost due to injuries. Benchmarks will be
implemented at the division level based on reporting from
each production unit. Units will also share their experi-
ences of efforts to prevent drug and alcohol use.

Gender equality and diversity
ASSA ABLOY’s Code of Conduct will work to prevent all
forms of discrimination in the workplace. The company also
wants to work proactively to promote gender equality and
diversity. Each division is expected to take appropriate
measures during recruitment to facilitate opportunities for
women to be promoted. In general, preference will be
given to the under-represented gender in all recruitment,
assuming equal qualifications.

Code of Conduct
As part of the new sustainability program ASSA ABLOY will
update the Code of Conduct during 2008. Among other
things, the Code’s whistleblower mechanism will be clari-
fied with respect to the reporting and handling of com-
plaints.

Dialog with stakeholders
ASSA ABLOY strives to achieve an open dialog with external
stakeholders. The overarching objective is to ensure that
input is received from outside interests with respect to the
company’s strategy choices and to contribute to a sustain-
able development that benefits both the company and its
stakeholders.

As a key component in this effort during the year,
ASSA ABLOY invited ethics analysts to two round-table
discussions, including visits to the La Fonte facility in Brazil.
One of the themes of the discussions was ASSA ABLOY’s
2005–2006 Sustainability Report. A number of analysts
participated in the conference.

Open House in Brazil

Sustainable development
33

Social and environmental campaigns at Brazilian Group
company La Fonte are having an impact on employees
both at work and at home.

“Much of the sustainability work at the company

focuses on healthy employees, an important consideration
in a country with low levels of health care and education,”
says Francisco Bastos, President of La Fonte.

Among programs put in place in recent years are an
exercise regime to counter injuries associated with repeti-
tive actions, subsidized meals at the company’s canteen
(breakfast, lunch and dinner), health insurance covering
visits to the doctor and hospital and laboratory tests, and
employing a full-time nurse and a doctor two days a week
on site.

Filomena Aguiar, Human Resources Manager at La
Fonte, says that employees are also encouraged to take an
active part in the company’s development through the
‘Coffee with the President’ scheme, where staff meet with
top managers to discuss issues that are important to them.
“Pride is also instilled through the family integration
scheme, where families are invited to an Open House at
the factory to learn more about what happens at La Fonte,”
she says.

“Children in particular enjoy the chance to find out
what their parents do, and staff are proud to show off
where they work, introduce their colleagues and present
the results of their efforts.”

La Fonte’s sustainability work also takes in the wider
community through donations of toys. Similar donation
drives for food and clothing have also been very successful.
Daniela Perli is Environment, Health and Safety Manager.

She says that when it comes to the environment, La Fonte
works both on increasing awareness of issues and reducing
waste and the use of dangerous substances. Waste is now
separated prior to disposal to increase recycling. 40 tons of
glass, cardboard and plastics were recovered in six months.
“All staff receive training in the possible impact on the

environment of processes they work with. Among other
things we have made significant reductions in energy and
water consumption.”

Employees
34

Employees
ASSA ABLOY: an attractive workplace

ASSA ABLOY’s vision is to be an attractive workplace for
its employees, which in turn involves a conscious effort to
improve and retain skilled employees and to be able
to recruit new talent where needed.

Common knowledge-base
The ASSA ABLOY Orientation Program was introduced in
the Group in 2006 and was updated during the year. This
interactive web-based program will provide our employees
worldwide with a common knowledge-base about
ASSA ABLOY. Information about the Group’s history,
products, strategy and Code of Conduct can be found here.
The ASSA ABLOY Orientation Program is a mandatory com-
ponent of the introductory process for all employees.

Employee survey follow-up
A global employee survey was carried out for the first time
in 2006. The survey showed that ASSA ABLOY staff mem-
bers are generally satisfied with their working situation.
The survey results were followed up during 2007 through a
host of activities in various parts of the Group, focusing on
those areas where the results were less flattering. Prepara-
tions have also been made for a new survey in early 2008.
The questions in the new survey will largely be the same as
in 2006, which will provide an opportunity for comparison
in assessing the results of follow-up activities.

Development of management skills
ASSA ABLOY conducts two Group-wide training pro-
grams, ASSA ABLOY Management Training (MMT)
and the ASSA ABLOY Business Leadership Program.

ASSA ABLOY Management Training has been in place
since 1996 and about 280 of the Group’s senior executives
have participated to date. The program encompasses four
modules held during the course of one year for the purpose
of facilitating integration among Group companies. Partici-
pants have an opportunity to network, for example, and
through being able to learn about the various operations
and products they can share experiences from all parts of

the Group. In 2007 the eleventh such program was held
with 30 participants.

The ASSA ABLOY Business Leadership Program was
introduced in 2005 and implemented in collaboration with
the Institute of Management Development (IMD) in Lau-
sanne, Switzerland. 30 people also participated here in
2007, which means that 120 executives from various parts
of the Group have completed the program to date.

Development of employee skills
The ASSA ABLOY Scholarship Program provides employees
with the opportunity to work at another Group company
for short periods. Open to all employees, the purpose of
the program is to give participants the opportunity to
share their own knowledge and experiences while learning
about a different culture and other methods and pro-
cedures, which they can bring back to their own workplace.
In 2007 15 employees participated in the program.

Talent management
The goal of ASSA ABLOY’s annual Talent Management Pro-
cess is to take advantage of the entire Group’s resources –
the leaders and specialists of today and tomorrow – as well
as to offer career advancement opportunities outside the
employee’s own unit. The process involves both a struc-
tured review of succession planning as well as skills
enhancement of employees throughout the Group.

Recruitment
The fundamental principle of ASSA ABLOY’s recruitment
policy when filling vacant positions is to give precedence to
internal employees, provided that their qualifications are
equal to those of external applicants. In order to encourage
and facilitate internal employee mobility, all vacant posi-
tions are advertised on the Group’s global Intranet, which
means that in principle all such vacancies are known about
and available.

Number of employees by region

Average number of
employees 2003 –2007

Europa

13824

Nordamerika

10137

Australien och
Nya Zeeland

Number
35,000

Central- och
Sydamerika

1349

695

Distribution men and women

Män, 61%

Kvinnor, 39%

Asien

5508

Afrika

754

30,000

25,000

20,000

Men, 61%

Women, 39%

Europe, 13,824

North America, 10,137

Australia and

New Zealand, 1,349

Central and

South America, 695

Asia, 5,508

Africa, 754

Working together at a distance

Employees
35

Tom Devine from
ASSA ABLOY Australia
and William Burns from
ASSA ABLOY Asia Pacific
were among the 31 partici-
pants in the MMT class of
2008.

The ASSA ABLOY Management Training Program (MMT)
encourages sharing of best practice and information,
and supports networking within the Group. The main
objectives of the program are to increase knowledge of
ASSA ABLOY’s strategy, its products, markets, working tools
and so on, and to support collaboration within the Group
to make the most of its common strengths. Each program
includes four modules, each of which has a different focus.
“You come away from each module with an increased
understanding and a new perspective on ASSA ABLOY and
the key concepts behind our business,” says Tom Platner,
Vice President, Product Engineering at HID Group.

During the program, each participant has to choose a
real-life project they want to conduct. The groups have to

check best practices, investigate threats and opportunities,
and finally come up with recommendations for the chosen
project. The challenge to Tom Platner’s team was to develop
a toolkit that could be used by member companies to
identify best practices in the area of shared services –
specifically IT, finance and accounting, and customer service.
“What has been a challenge, yet a benefit, of the experi-
ence was to get our entire group – with participants from
the Americas, Europe and Africa – to work together remotely
in the periods between modules,” Platner says. “We set up
a web-based, collaborative workspace to help facilitate
communication and coordination. It was a significant
challenge to work as a consulting group and find time to
do it in addition to our everyday responsibilities.”

x
36

Report of the Board of Directors,
Corporate governance report and
financial reports

Contents

Glossary
Report of the Board of Directors
Corporate governance report
Sales and earnings
Income statement – Group
Comments by division
Results by division
Financial position
Balance sheet – Group
Cash flow
Cash flow statement – Group
Changes in equity – Group
Parent company financial statements
Financial risk management
Notes

38
39
41
52
53
54
55
56
57
58
59
60
61
63

67
72

76
77

1 Significant accounting and valuation principles
2 Sales
3 Auditors’ fees
4 Other operating income and expenses
5 Share of earnings in associates
6 Operational leasing agreements
7 Expenses by nature
8 Depreciation and amortization
9 Employee benefits
10 Exchange-rate differences in the income statement
11 Financial income
12 Financial expenses
13 Tax on income
14 Earnings per share
15 Intangible assets
16 Tangible assets
17 Shares in subsidiaries
18 Shares in associates
19 Deferred tax on income
20 Other long-term financial assets
21 Inventories
22 Accounts receivable
23 Derivative financial instruments
24 Cash and cash equivalents
25 Borrowings
26 Parent company’s equity
27 Share capital, number of shares and dividend per share
28 Reserves
29 Post-employment employee benefits
30 Other provisions
31 Other short-term liabilities
32 Accrued expenses and prepaid income
33 Contingent liabilities
34 Net debt
35 Acquisitions
36 Average number of employees, with breakdown into women and men 85
86
37 Cash flow
87
88
89
90
91
92
93
96

Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data terms
Proposed distribution of earnings
Audit report
The ASSA ABLOY share
Information for shareholders

Glossary
38

Glossary

Aperio
Aperio is a new technology that enables mechanical locks
to be wirelessly linked to an existing access control sys-
tem. Aperio locks can be installed in a new or existing
access control system and users can use the same creden-
tials they have for that system.

Lean
The Lean Production philosophy is to use as few resources
as possible. The focus is on just-in-time production, which
means that materials, parts and products are in the right
place at the right time. The Lean philosophy includes
striving for continuous improvement.

ElectroLynx
ElectroLynx is an ASSA ABLOY solution that simplifies the
process of introducing electrical hardware into a door. It
has a wiring scheme and simple, snap-together connec-
tors that can be used with all electrical ASSA ABLOY prod-
ucts and can be installed inside doors as desired. The
solution means that installers themselves do not need to
solder and connect individual wires.

High Definition Printing (HDP)
Fargo HDP – High Definition Printing – is a process used in
the production of tamper-evident and highly wear-resist-
ant ID cards. HDP produces high-quality images that are
sandwiched between Fargo’s HDP film and the card, and
that essentially destroy themselves if there is any attempt
to alter the card.

Hi-O
Highly Intelligent Opening is a standardized new technol-
ogy for security and control of door environments. Hi-O
allows interconnectivity – communication between all
components in a door solution.

Inlay
An RFID inlay is one of the components in a contact-free
card or similar document. It consists of a circuit board
connected to an antenna mounted on plastic film.

NFC
Near Field Communication (NFC) is a short-range wireless
connectivity standard that uses magnetic field induction
to enable communication between devices when they are
touched together or brought within a few centimeters of
each other.

OEM
Original Equipment Manufacturer, a company that makes
the final product that can be sold on the open market.
Usually the OEM company does not sell the product
directly to the public but goes through dealers. The prod-
uct may consist of proprietary components or a combina-
tion of purchased and proprietary.

RFID
Radio Frequency Identification is a technology for reading
and storing information remotely using small radio trans-
mitter/receivers and memories called tags. A tag can be
small enough to fit in a price tag on goods in a store, or
placed in a glass capsule and injected under a pet’s skin
with ID information. One current use of RFID is in key-
cards.

Whistle-blowing
A whistle-blowing mechanism was introduced to provide
a means for employees, in exceptional situations, to
bypass the normal reporting procedures to draw atten-
tion to behavior that they suspect is in breach of the Code
of Conduct. This reporting may be done anonymously.

Report of the Board of Directors

Report of
the Board of Directors
39

The Annual Report of ASSA ABLOY AB (publ.), corporate
identity number 556059-3575, contains the consolidated
financial statements for the financial year 1 January – 31
December 2007. ASSA ABLOY is the global leader in door
opening solutions, dedicated to satisfying end-user needs
for security, safety and convenience.

Significant events

Sales and earnings
During the year, sales rose by 8 percent to SEK 33,550 M
(31,137), with organic growth of 7 percent and acquired
growth of 5 percent. Operating income (EBIT) rose by 14
percent to SEK 5,458 M (4,7711), equivalent to an operat-
ing margin of 16.3 percent (15.31). Income before tax
totaled SEK 4,609 M (2,626).

Operating cash flow, excluding restructuring pay-
ments, amounted to SEK 4,808 M (3,528), an increase of
36 percent. Earnings per share increased by 13 percent to
SEK 9.02 (7.991).

Restructuring
The comprehensive restructuring program that was initiated
in April 2006 is proceeding according to plan. The program
includes around 50 individual restructuring measures. A large
number of production units will switch focus to concentrate
on final assembly, and some units will be closed. The total
cost of the program is estimated at SEK 1,274 M and it is
expected to generate annual cost savings of approximately
SEK 600 M when the whole program has been implemented
in 2009. The full cost of the program was expensed in 2006.
Payments related to the restructuring program

amounted to SEK 424 M for the year. By year-end cost sav-
ings from measures implemented since the project start
amounted to SEK 90 M a quarter. To date, 1,316 out of the
total of 2,000 employees affected by the restructuring pro-
gram have left the Group.

Acquisitions
In January, Americas division acquired Pemko, a leading
US manufacturer of door components. The company has
annual sales of USD 55 M and the acquisition was EPS-
accretive from the acquisition date.

1 Excluding restructuring costs

At the end of January, Asia Pacific division acquired Pyro-
panel, a leading manufacturer of fire-resistant doors in
Australia. Annual sales amount to AUD 19 M and the
acquisition was EPS-accretive from the acquisition date.
In October, Asia Pacific division acquired Baodean,
China’s leading producer of high-security locks and cylin-
ders, and iRevo, South Korea’s largest manufacturer of
digital locks for the residential market. The companies
have combined annual sales of approximately SEK 700 M.
iRevo was weakly EPS-dilutive in 2007, while Baodean was
EPS-accretive from the acquisition date.

In July, EMEA division acquired Esety, a manufacturer
and distributor of high-security locks on the Italian mar-
ket. The company has annual sales of SEK 60 M. In Septem-
ber the Israeli company Alba, a manufacturer of mechani-
cal lock products for the local market, was also acquired.
The company has annual sales of SEK 70 M. In December,
EMEA division acquired Powershield, a leading manufac-
turer of high-security steel doors in Northern Ireland.
Powershield has annual sales of approximately GBP 10 M.
All the acquisitions were EPS-accretive from the acquisi-
tion date.

In April, Global Technologies division acquired Inte-

grated Engineering in the Netherlands. The company
develops and markets advanced smartcard readers based
on RFID technology and has annual sales of SEK 35 M. The
acquisition was EPS-accretive immediately. In July, the
Irish company Aontec Teoranta, which is one of the
world’s largest manufacturers of inlays for electronic
passports, was acquired. The company has annual sales of
approximately SEK 140 M and the acquisition was EPS-
accretive from the acquisition date.

In March, Entrance Systems division acquired the serv-
ice companies La Force Associates in south-west USA and
Portronik in Canada. These companies distribute, install
and service automatic doors and have combined annual
sales of approximately SEK 100 M. The acquisitions were
EPS-accretive from the acquisition date.

In addition, a number of smaller acquisitions were
made during the year. These companies have combined
annual sales of approximately SEK 75 M.

The total acquisition price, on a debt-free basis, of all
acquisitions, including estimated earn-outs, amounted to

Report of
the Board of Directors
40

SEK 1,675 M. Goodwill and other intangible assets with an
indefinite useful life amounted to approximately SEK
1,200 M.

opment costs and a shorter development period for new
products.

Acquisitions in 2008
In 2008, ASSA ABLOY has signed an agreement to acquire
Valli&Valli, a leading Italian producer of designer door
handles. An agreement has also been signed to acquire
the German company SimonsVoss Technologies, a leading
player in the wireless digital locking and access control
systems segment. This acquisition is subject to regulatory
approval and the transaction is expected to be finalized
during the first half of the year. The companies have com-
bined annual sales of just over SEK 700 M and are together
expected to be EPS-accretive in 2008.

Changes in the Executive Team
During the year, Joe Grillo left his post as Head of Global
Technologies division at his own request and conse-
quently also left the Executive Team.

Denis Hébert, Executive Vice President and Head of
the HID Group business unit, and Tim Shea, Executive Vice
President and Head of the ASSA ABLOY Hospitality busi-
ness unit, were appointed new members of the Executive
Team. These business units make up Global Technologies
division, which is headed by Johan Molin.

Incentive program for employees
A global incentive program, Incentive 2007, for employees
in the Group was implemented during the year, whereby
employees were offered an opportunity to share in any
increase in value of the ASSA ABLOY share. Just over 1,400
employees in some 15 countries took part in this pro-
gram, which was fully subscribed. The program is issued
at market price and amounts to EUR 100 M, with a matu-
rity date of June 2012. The maximum dilutive effect of the
program is estimated at 1.2 percent of share capital and
0.8 percent of the total number of votes.

Research & Development
ASSA ABLOY’s expenditure on Research & Development
during the year amounted to SEK 776 M (719), which is
equivalent to 2.3 percent (2.3) of sales.

ASSA ABLOY has a central function, Shared Technolo-

gies, with responsibility for the standardization of elec-
tronics for the Group’s common platforms. The objective
is that this standardization should result in lower devel-

Sustainable development
Two of ASSA ABLOY’s subsidiaries in Sweden carry on
licensable activities in accordance with the Swedish Envi-
ronmental Code. The Group’s licensable and notifiable
activities have an impact on the external environment
mainly through the subsidiaries ASSA AB and ASSA OEM
AB. These companies operate machine shops, foundries
and associated surface-coating plants, which have an
impact on the external environment through emissions
to water and air as well as solid waste.

The subsidiaries ASSA AB and ASSA OEM AB are

actively addressing environmental issues and are certified
in accordance with ISO 14001. The majority of units out-
side Sweden carry on licensable activities and hold equi-
valent licenses under local legislation.

During the year, ASSA ABLOY decided on a 20-point

program for sustainable development, to be imple-
mented during the period 2007 to 2010. This program
covers the phasing out of certain chemicals used in pro-
duction; energy consumption; workplace conditions; and
other social and ethical issues governed by the company’s
Code of Conduct. The objectives also involve the integra-
tion of work on sustainable development into the compa-
ny’s existing processes.

One of the major successes during the year was the
phasing out of chlorinated solvents, which went very well.
Consumption was reduced by 40 percent in 2007 and the
remainder will be phased out in 2008.

The results of this program will be reported in the
Group’s annual Sustainability Report. Current information
on sustainable development is published on the Group’s
website.

Outlook
Organic sales growth is expected to continue at a good
rate. The operating margin (EBIT) and operating cash flow
are expected to develop well.

Long term, ASSA ABLOY expects an increase in secu-
rity-driven demand. Focus on end-user value and innova-
tion as well as leverage on ASSA ABLOY’s strong position
will accelerate growth and increase profitability.

Corporate governance report

Corporate governance report
41

ASSA ABLOY is a Swedish public limited liability company
with registered office in Stockholm, Sweden and head-
quarters at Klarabergsviadukten 90. The Group’s corpo-
rate governance is based on, among other things, its arti-
cles of association, the Swedish Companies Act and the
rules and regulations of the OMX Nordic Exchange Stock-
holm (Stockholm Stock Exchange).

ASSA ABLOY applies the Swedish Code of Corporate
Governance, which forms part of the rules of the Stock-
holm Stock Exchange. This Code is based on the principle
of comply or explain and primarily deals with the organi-
zation and working methods of the Annual General Meet-
ing, the board of directors and the management,
as well as the interaction between these bodies.
ASSA ABLOY deviates from two of the Code’s provisions
and an explanation for these deviations is to be found on
page 50. In other respects, ASSA ABLOY is considered to
comply with the provisions of the Code at year-end 2007.
ASSA ABLOY’s objective is that its activities should
generate good long-term returns for its shareholders and
other stakeholders. An effective scheme of corporate
governance for ASSA ABLOY can be summarized in a
number of interacting components, which are described
below.

Share and dividend policy
ASSA ABLOY’s Series B share is quoted on the Large Cap
list of the Stockholm Stock Exchange. A trading lot com-
prises 200 shares. ASSA ABLOY’s market capitalization at
year-end amounted to SEK 47,203 M. The goal of the
Board of Directors is that, in the long term, the dividend
should correspond to 33–50 percent of earnings after
standard tax of 28 percent, but always taking into
account ASSA ABLOY’s long-term financing requirements.

Annual General Meeting
Shareholders’ rights to decide on the affairs of
ASSA ABLOY are exercised at the Annual General Meeting.
Shareholders who are recorded in the share register on
the record day and have duly notified their intention to
attend are entitled to take part in the Annual General
Meeting, either in person or via a proxy. Resolutions at
the General Meeting are normally passed by simple
majority. However, on certain matters the Swedish
Companies Act prescribes that a proposal should be sup-
ported by a higher majority. Individual shareholders who
wish to have an issue raised at the Annual General Meet-
ing can apply to ASSA ABLOY’s Board of Directors at a spe-
cial address published on the company’s website in good
time before the Meeting.

The Annual General Meeting should be held within six

orting
Financial Rep

Owners
Annual
General Meeting
Nomination Committee

Board of Directors
Audit Committee
Remuneration Committee

Executive Management
(cid:66)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)(cid:21)(cid:101)(cid:93)(cid:94)(cid:97)(cid:100)(cid:104)(cid:100)(cid:101)(cid:93)(cid:110)(cid:21)(cid:153)(cid:21)(cid:60)(cid:106)(cid:94)(cid:89)(cid:90)(cid:97)(cid:94)(cid:99)(cid:90)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:101)(cid:100)(cid:97)(cid:94)(cid:88)(cid:94)(cid:90)(cid:104)
(cid:62)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:86)(cid:97)(cid:21)(cid:88)(cid:100)(cid:99)(cid:105)(cid:103)(cid:100)(cid:97)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:21)(cid:98)(cid:86)(cid:99)(cid:86)(cid:92)(cid:90)(cid:98)(cid:90)(cid:99)(cid:105)

Decentralized Organization

End

Shareholders
At year-end, ASSA ABLOY had 23,961 shareholders.
ASSA ABLOY’s principal shareholders are Investment AB
Latour and SäkI AB (9.8 percent of the capital and 29.7
percent of the votes) and Melker Schörling AB (4.0 per-
cent of the capital and 11.6 percent of the votes). Foreign
shareholders accounted for 49 percent of the share capi-
tal and 33 percent of the votes. The ten largest sharehold-
ers accounted for 40 percent of the share capital and 59
percent of the votes.

Share capital and voting rights
ASSA ABLOY’s share capital at year-end amounted to
SEK 365,918,034, distributed among 19,175,323 Series A
shares and 346,742,711 Series B shares. Each Series A
share carries ten votes and each Series B share one vote.
All shares give the shareholders equal rights to the com-
pany’s assets and earnings.

ortering

months of the end of the company’s financial year. Mat-
ters considered at the Annual General Meeting include: a
dividend; adoption of the income statement and balance
sheet; discharge of the Board of Directors and the CEO
Aktieägare
Bolagsstämma
from liability; election of board members and Chairman
Valberedning
of the Board; appointment of the Nomination Committee
and auditors; and determination of fees for the Board of
Styrelse
(cid:71)(cid:90)(cid:107)(cid:94)(cid:104)(cid:94)(cid:100)(cid:99)(cid:104)(cid:106)(cid:105)(cid:104)(cid:96)(cid:100)(cid:105)(cid:105)
Directors and auditors. An Extraordinary General Meeting
(cid:58)(cid:103)(cid:104)(cid:126)(cid:105)(cid:105)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:106)(cid:105)(cid:104)(cid:96)(cid:100)(cid:105)(cid:105)
may be held if the Board of Directors considers this nec-
VD och koncernledning
essary or if ASSA ABLOY’s auditors or shareholders hold-
(cid:65)(cid:90)(cid:89)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:91)(cid:94)(cid:97)(cid:100)(cid:104)(cid:100)(cid:91)(cid:94)(cid:21)(cid:153)(cid:21)(cid:71)(cid:94)(cid:96)(cid:105)(cid:97)(cid:94)(cid:99)(cid:95)(cid:90)(cid:103)(cid:21)(cid:100)(cid:88)(cid:93)(cid:21)(cid:69)(cid:100)(cid:97)(cid:94)(cid:88)(cid:94)(cid:90)(cid:104)
ing at least 10 percent of the shares so request.
(cid:62)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:21)(cid:96)(cid:100)(cid:99)(cid:105)(cid:103)(cid:100)(cid:97)(cid:97)(cid:21)(cid:100)(cid:88)(cid:93)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:93)(cid:86)(cid:99)(cid:105)(cid:90)(cid:103)(cid:94)(cid:99)(cid:92)

Finansiell rap

Decentraliserad organisation

The 2007 Annual General Meeting
The Annual General Meeting in April 2007 was attended
by shareholders representing 37.9 percent of the compa-
ny’s capital and 58.7 percent of the votes.

ortering

At the Meeting, Gustaf Douglas, Melker Schörling,
Carl-Henric Svanberg, Carl Douglas, Per-Olof Eriksson,
Lotta Lundén, Sven-Christer Nilsson and Johan Molin
Aktieägare
Bolagsstämma
were re-elected as members of the Board. Gustaf Douglas
Valberedning
was re-elected as Chairman of the Board. Melker Schör-
ling and Carl-Henric Svanberg were re-elected as Vice
Styrelse
(cid:71)(cid:90)(cid:107)(cid:94)(cid:104)(cid:94)(cid:100)(cid:99)(cid:104)(cid:106)(cid:105)(cid:104)(cid:96)(cid:100)(cid:105)(cid:105)
Chairmen. Further, it was noted that the 2006 Annual
(cid:58)(cid:103)(cid:104)(cid:126)(cid:105)(cid:105)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:106)(cid:105)(cid:104)(cid:96)(cid:100)(cid:105)(cid:105)
General Meeting had appointed PricewaterhouseCoopers
VD och koncernledning
as auditors, with authorized public accountant Peter
(cid:65)(cid:90)(cid:89)(cid:99)(cid:94)(cid:99)(cid:92)(cid:104)(cid:91)(cid:94)(cid:97)(cid:100)(cid:104)(cid:100)(cid:91)(cid:94)(cid:21)(cid:153)(cid:21)(cid:71)(cid:94)(cid:96)(cid:105)(cid:97)(cid:94)(cid:99)(cid:95)(cid:90)(cid:103)(cid:21)(cid:100)(cid:88)(cid:93)(cid:21)(cid:69)(cid:100)(cid:97)(cid:94)(cid:88)(cid:94)(cid:90)(cid:104)
Nyllinge as Auditor in Charge, for the four-year period up
(cid:62)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:21)(cid:96)(cid:100)(cid:99)(cid:105)(cid:103)(cid:100)(cid:97)(cid:97)(cid:21)(cid:100)(cid:88)(cid:93)(cid:21)(cid:103)(cid:94)(cid:104)(cid:96)(cid:93)(cid:86)(cid:99)(cid:105)(cid:90)(cid:103)(cid:94)(cid:99)(cid:92)
to the 2010 Annual General Meeting.

Finansiell rap

The Meeting approved a dividend of SEK 3.25 per
share, in accordance with the proposal of the Board and
the CEO. In addition, the Meeting passed a resolution on
the fees payable to the Board and the auditors and
appointed the members of the Nomination Committee

Corporate governance report
42

up to the 2008 Annual General Meeting. The Meeting
passed a resolution on a global incentive program for
ASSA ABLOY employees. This incentive program covers
approximately 1,400 employees in 15 countries and runs
until June 2012. For more information about the incentive
program, see Note 25 as well as the ASSA ABLOY website,
www.assaabloy.com, where the minutes of the 2007
Annual General Meeting are also available.

Nomination Committee
The Nomination Committee prior to the 2008 Annual
General Meeting comprises Melker Schörling (Melker
Schörling AB), Chairman, Gustaf Douglas (Investment AB
Latour and SäkI), Marianne Nilsson (Swedbank Robur) and
Björn Lind (SEB funds). If a shareholder represented by
one of the members of the Nomination Committee
ceases to be among the major shareholders in
ASSA ABLOY, the Nomination Committee has the right to
elect another representative of one of the major share-
holders to take the place of such a member. The same
applies if a member of the Nomination Committee ceases
to be employed by such a shareholder or leaves the
Nomination Committee before the 2008 Annual General
Meeting for any other reason.

The Nomination Committee has the task of preparing,

on behalf of the shareholders, decisions on the election
of the Chairman, Vice Chairmen and other members of
the Board of Directors, the appointment of the auditor,
the election of the Chairman of the Annual General Meet-
ing, and fees and associated matters.

Prior to the 2008 Annual General Meeting, the Nomi-
nation Committee has made an assessment of whether
the current Board is appropriately composed and fulfills
the demands made on the Board by the company’s
present situation and future direction. The evaluation of
the Board carried out under the leadership of the Nomi-
nation Committee’s Chairman was part of the basis for
this assessment. The search for suitable board members
continues throughout the year and proposals for new
board members are based in each individual case on a
profile of requirements laid down by the Nomination
Committee.

Shareholders who wish to submit proposals to the
Nomination Committee can do so by e-mailing nomina-
tioncommittee@assaabloy.com. The Nomination Com-
mittee’s proposals and information about its work during
the year are published at the latest in conjunction with
the formal notification of the Annual General Meeting,
which is expected to be issued around 20 March 2008.

Board of Directors
In accordance with the Swedish Companies Act, the
Board of Directors is responsible for the organization and
administration of the Group and for ensuring satisfactory
control of bookkeeping, asset management and other
financial circumstances. The Board decides on the
Group’s overall objectives, strategies and policies as well
as on acquisitions, disposals and investments. The Board
approves the Annual Report and Interim Reports, recom-

mends a dividend and principles for the remuneration of
senior management to the Annual General Meeting and
takes decision concerning the Group’s financial structure.
The Board’s other duties include:
• continuously evaluating the company’s operational

management, including the work of the CEO,

• ensuring that there are effective systems in place for
monitoring and control of the company’s operations
and financial position with reference to its stated
objectives,

• ensuring that the company’s external provision of
information is marked by openness and objectivity,
• ensuring that there is satisfactory control of the com-
pany’s compliance with laws and other regulations
applying to the company’s operations,

• ensuring that necessary ethical guidelines for the

company’s conduct are established.

The Board’s rules of procedure and instructions for the
division of duties between the Board and the CEO are
updated and established at least once a year. The Board
has also issued written instructions specifying how finan-
cial reporting to the Board should be carried out.

In addition to leading the work of the Board, the Chair-
man should continuously monitor the Group’s operations
and development through contact with the CEO. The
Chairman should consult the CEO on strategic issues and
represent the company in matters concerning the owner-
ship structure. The Chairman should also, when neces-
sary, take part in particularly important external discus-
sions and, in consultation with the CEO, in other matters
of particular significance. The Chairman should ensure
that the work of the Board is evaluated each year and that
new members of the Board receive appropriate training.
The Board holds at least four scheduled meetings and

one meeting following election per year. The scheduled
meetings take place in connection with the company’s
publication of its year-end or quarterly results. At least
one of the board meetings is combined with a visit to and
an in-depth review of one of the Group’s businesses. In
addition, extra board meetings are held when necessary.
All meetings follow an approved agenda. Before each
meeting, a draft agenda including documentation relat-
ing to each point is sent to all board members.

The Board has a Remuneration Committee and an
Audit Committee. The purpose of these Committees is to
deepen and streamline the work of the Board and to pre-
pare matters in these areas. The Committees themselves
have no decision-making powers. The members of the
Committees are appointed annually by the Board at the
board meeting following election. Instructions for the
Committees are included in the Board’s working proce-
dures.

The Board’s work during 2007
During the year, the Board held seven meetings. At three
board meetings, one board member was absent. All
members were present at the other meetings.

At the scheduled board meetings, the President and

Corporate governance report
43

CEO reported on the Group’s performance and financial
position, including the outlook for the coming quarters.
Investments, acquisitions and disposals were also consid-
ered. All acquisitions exceeding SEK 100 M are decided by
the Board.

The most important matters dealt with by the Board
during the year included the merger of the two business
units HID and ITG – a merger that was implemented in
order to create further growth opportunities and condi-
tions for continuing leverage of synergies – and the acqui-
sitions of Aontec, Baodean, iRevo and Pemko.

During the year, the Board also decided to propose an

incentive program for Group employees to the Annual
General Meeting and approved the adoption of a new
insider policy. In addition, the Board decided to upgrade
the Group’s financial targets.

Remuneration Committee
During 2007, the Remuneration Committee comprised
Gustaf Douglas (Chairman) and Sven-Christer Nilsson.
The Remuneration Committee’s task is to draw up
guidelines for the remuneration of the Executive Team.
The Board then proposes that the Annual General Meet-
ing should pass a resolution on these guidelines. The
Committee also prepares proposals for changes in the
company’s remuneration policy. This policy includes:
• the balance between fixed and variable remuneration

and the relationship between performance and
remuneration,

• the main terms and conditions for bonus and incen-

tive programs,

• the main terms and conditions for non-monetary ben-
efits, pensions, period of notice and severance pay.

Fees to board members in 2007, SEK thousand (including committee work)

Name and post

Gustaf Douglas, Chairman

Melker Schörling, Vice Chairman

Carl-Henric Svanberg, Vice Chairman

Carl Douglas, Member

Per-Olof Eriksson, Member

Lotta Lundén, Member

Johan Molin, Member, President and CEO

Sven-Christer Nilsson, Member

Employee representatives (4)

Total

Board

Remuneration
Committee

Audit
Committee

Social
Costs

750

550

350

–

350

–

3,250

100

–

150

–

200

–

100

–

400

243

178

113

146

–

130

–

943

The Board’s composition and shareholdings

Name

Post

Elected Born

Remuneration
Committee

Audit
Committee

Series A
shares1

Series B
shares1

Gustaf Douglas

Chairman

1994 1938

Chairman

– 13,865,243 21,750,000

Melker Schörling

Vice Chairman

Carl-Henric Svanberg

Vice Chairman

Carl Douglas

Per-Olof Eriksson

Lotta Lundén

Johan Molin

Member

Member, President
and CEO

1994 1947

1994 1952

2004 1965

1995 1938

2003 1957

2006 1959

–

Sven-Christer Nilsson Member

2001 1944

Member

Seppo Liimatainen

Employee representative

2003 1950

Mats Persson

Employee representative

1994 1955

Per Edvin Nyström

Employee representative,
deputy

1994 1955

Rune Hjälm

Employee representative,
deputy

2005 1964

–

1 Including family and through companies.

Chairman

5,310,080

9,404,734

–

Member

–

3,920,031

–

12,000

–

500,000

440,000

2,500

2,600

–

7,727

7,800

–

Total

937

993

728

463

496

596

–

530

–

4,743

Incentive
program
Series B
shares

–

Corporate governance report
44

Remuneration of the Board
The Annual General Meeting passes a resolution on the
remuneration to be paid to board members. The 2007
Annual General Meeting decided that fees paid to the
Board should comprise a total sum of SEK 3,250,000
(excluding remuneration for committee work), to be
allocated between the members as follows: SEK 750,000
to the Chairman; SEK 550,000 to each of the Vice Chair-
men; and SEK 350,000 to each of the other members not
employed by the company. As remuneration for commit-
tee work, the Chairman of the Audit Committee should
receive SEK 200,000, the Chairman of the Remuneration
Committee SEK 100,000, members of the Audit Commit-
tee SEK 100,000 and members of the Remuneration Com-
mittee SEK 50,000. The Chairman and other board mem-
bers have no pension benefits or severance payment
agreements. The CEO and employee representatives do
not receive any remuneration.

Composition of the Board
ASSA ABLOY’s Board consists of ten members and two
deputies. Eight members are elected by the Annual Gen-
eral Meeting for a period of one year and two of the mem-
bers are appointed by the employee organizations in
accordance with Swedish law. The employee organiza-
tions also appoint two deputies.

With the exception of the CEO, none of the board
members are members of the Executive Team. All board
members are from Sweden and the average age is 57. One
member of the Board is a woman.

The CEO has no significant shareholdings or partner-
ships in companies with significant business relationships
with ASSA ABLOY.

Decisions on the remuneration of the CEO and other sen-
ior executives as well as any changes in the company’s
remuneration policy are made by the Board.

The Committee held one meeting during the year,
which was attended by both members. The most impor-
tant matters dealt with by the Remuneration Committee
during the year included the Board’s proposal for an
incentive program for employees, compensation for the
Executive Team and the adoption of a new policy in view
of changes in the Swedish ITP system.

The meetings of the Remuneration Committee are
minuted, the minutes are sent out with material for the
Board and a verbal report is given at board meetings.

Audit Committee
During 2007, the Audit Committee comprised Melker
Schörling (Chairman), Per-Olof Eriksson and Lotta Lundén.
There is an ongoing dialog with the appointed auditor,
who also attends the Committee’s meetings.
The areas of responsibility of the Audit Committee
include:
• an annual review of the company’s financial policy,
• audit of the company’s financial reporting and internal

reporting and control systems,

• monitoring of operations in the internal audit func-

tion,

• the scope and evaluation of the external audit,
• monitoring of risks.

The Audit Committee held three meetings during the
year, which were attended by all members. The most
important matters dealt with by the Audit Committee
during the year included a review of the Group’s internal
control and legal risk areas. Further, the Committee moni-
tored the accounting aspects that arose in connection
with the restructuring program.

The meetings of the Audit Committee are minuted,
the minutes are sent out with material for the Board and a
verbal report is given at board meetings.

Independence of the Board

Name

Gustaf Douglas

Melker Schörling

Carl-Henric Svanberg

Carl Douglas

Per-Olof Eriksson

Lotta Lundén

Johan Molin

Sven-Christer Nilsson

Independent of
the company
and its
management

Independent of
the company’s
major
shareholders

Yes

–

Yes

–

Yes

Board

Corporate governance report
45

Gustaf Douglas

Melker Schörling

Carl-Henric Svanberg

Carl Douglas

Per-Olof Eriksson

Lotta Lundén

Board members elected at the 2007 Annual General Meeting
Gustaf Douglas, Chairman.
Board member of ASSA ABLOY AB since 1994.
Born 1938.
MBA, Harvard Business School.
Principal shareholder of Investment AB Latour and SäkI AB. Self-employed since 1980.
Other appointments: Chairman of Investment AB Latour and SäkI AB and Vice Chairman of Securitas AB.
Board member of Securitas Direct AB, Stiftelsen Svenska Dagbladet and the Swedish Conservative Party.
Shareholdings (including family and through companies):
6,746,425 Series A shares and 19,450,000 Series B shares through Investment AB Latour, and 7,118,818 Series A
shares and 2,300,000 Series B shares through SäkI AB.

Melker Schörling, Vice Chairman
Board member of ASSA ABLOY AB since 1994.
Born 1947.
Master of Business Administration, Gothenburg School of Economics.
CEO of a number of companies, including Securitas AB 1987–1992 and Skanska AB 1993–1997.
Other appointments: Chairman of MSAB, AarhusKarlshamns AB, Hexagon AB, Securitas AB and Securitas Systems AB.
Board member of Hennes & Mauritz AB.
Shareholdings (including family and through companies): 5,310,080 Series A shares and 9,404,734 Series B shares.

Carl-Henric Svanberg, Vice Chairman
Board member of ASSA ABLOY AB since 1994.
Born 1952.
Master of Engineering, Linköping University, and Bachelor of Economics, Uppsala University.
President and CEO of Telefonaktiebolaget LM Ericsson.
President and CEO of ASSA ABLOY AB 1994–2003.
Other appointments: Chairman of Sony Ericsson Mobile Communications AB. Board member of Melker Schörling AB,
Svenskt Näringsliv and Uppsala University. Carl-Henric Svanberg has been awarded honorary doctorates by Luleå
University of Technology and Linköping University.
Shareholdings (including family and through companies): 3,920,031 Series B shares.

Carl Douglas
Board member of ASSA ABLOY AB since 2004.
Born 1965
Bachelor of Arts.
Self-employed.
Other appointments: Board member of Securitas AB, Securitas Systems AB, Swegon AB and SäkI AB.
Shareholdings (including family and through companies): —

Per-Olof Eriksson
Board member of ASSA ABLOY AB since 1995.
Born 1938.
Master of Engineering, Honorary Doctor of Technology.
President and CEO of Sandvik AB 1984–1994, various posts in the Sandvik Group 1965–1984.
Other appointments: Chairman of Callans Trä AB, Cross Country Systems AB, Odlander, Fredriksson & Co and OFP V
Advisor AB. Board member of Kamstrup-Senea AB, AB Volvo, Investmentbolaget Öresund, Södersjukhuset AB, Biotage
AB and Elkem AS. Member of the Royal Swedish Academy of Engineering Sciences.
Shareholdings (including family and through companies): 12,000 Series B shares.

Lotta Lundén
Board member of ASSA ABLOY AB since 2003.
Born 1957.
Bachelor of Economics.
Founder of and partner in Konceptverkstan since 2004, General Manager of Coop Forum Sweden 2002–2003,
Purchasing Director and later President and CEO of Guldfynd/Hallbergs Guld 1999–2001, various posts mainly in
marketing and sales in IKEA in Sweden and abroad 1980–1991 and 1994–1998.
Other appointments: Board member of Bergendahls Gruppen AB, Expanda AB, Swedish Trade Council, Borås Wäfveri
AB, Green Cargo AB, Akademibokhandeln AB, Twilfit and Sven-Axel Svenssons Bijouterier AB.
Shareholdings (including family and through companies): —

Corporate governance report Board

Board members elected at the 2007 Annual General Meeting
Johan Molin
Board member of ASSA ABLOY AB since 2006.
Born 1959.
Bachelor of Science in Economics.
President and CEO of ASSA ABLOY AB since 2005. CEO of Nilfisk-Advance 2001–2005. Various posts mainly in finance
and marketing, later divisional head in the Atlas Copco Group 1983–2001.
Other appointments: Board member of AB Electrolux.
Shareholdings (including family and through companies): 500,000 Series B shares and Incentive 2006 and Incentive
2007 convertibles corresponding to 440,000 Series B shares.

Sven-Christer Nilsson
Board member of ASSA ABLOY AB since 2001.
Born 1944.
Bachelor of Science, Lund University.
President and CEO of Telefonaktiebolaget LM Ericsson 1998–1999, various posts mainly in marketing and management
in the Ericsson Group 1982–1997.
Other appointments: Chairman of the National Swedish Public Service Broadcasting Foundation (Sveriges Radio AB,
Sveriges Television AB and Sveriges Utbildningsradio AB) and Swedish ICT Research AB. Board member of CEVA, Inc. and
Tilgin AB.
Shareholdings (including family and through companies): 2,500 Series B shares.

Board members appointed by employee organizations
Seppo Liimatainen
Board member of ASSA ABLOY AB since 2003.
Born 1950.
Employee representative, Federation of Salaried Employees in Industry and Services.
Shareholdings: 2,600 Series B shares.

Mats Persson
Board member of ASSA ABLOY AB since 1994.
Born 1955.
Employee representative, Swedish Metal Workers Union.
Shareholdings: —

Deputy board members appointed by employee organizations
Rune Hjälm
Board member of ASSA ABLOY AB since 2005.
Born 1964.
Employee representative, Swedish Metal Workers Union.
Chairman of ASSA ABLOY European Works Council (EWC).
Shareholdings: —

Per Edvin Nyström
Board member of ASSA ABLOY AB since 1994.
Born 1955.
Employee representative, Swedish Metal Workers Union.
Shareholdings: 7,727 Series B shares and Incentive 2004 convertibles corresponding to 7,800 Series B shares.

Johan Molin

Sven-Christer Nilsson

Seppo Liimatainen

Mats Persson

Rune Hjälm

Per Edvin
Nyström

Corporate governance report
47

Operational management and internal control
ASSA ABLOY’s operating activities are split into five divi-
sions, where the fundamental principle is that these divi-
sions should as far as possible be responsible for business
operations, while various functions at Group headquar-
ters are responsible for coordination, monitoring, policies
and guidelines at an overall level. The Executive Team
(Group Management) consists of the CEO, the heads of
the Group’s divisions, the Chief Financial Officer, the
Director for Technology and Product Development and
the Director for Market and Business Development. The
composition of this group gives a geographical and stra-
tegic spread of responsibility designed to ensure short
decision-making paths.

Management philosophy
ASSA ABLOY’s approach is that the people make the com-
pany. The Group’s management philosophy is based on
trust, positive thinking and respect for local conditions
and cultures. Good leadership spurs employees to do
their utmost for the company’s best advantage.

ASSA ABLOY’s Vision is:
• To be the world-leading, most successful and most
innovative provider of total door opening solutions.
• To lead in innovation and offer well-designed, conven-
ient, safe and secure solutions that create added value
for our customers.

• To be an attractive employer to our workforce.

ASSA ABLOY’s primary financial target is a return on capi-
tal employed (ROCE) exceeding 20 percent. The aim is to
achieve this figure no later than 2008, through the follow-
ing sub-targets:
• Sales should increase by 10 percent per year on aver-

age over a business cycle through organic and
acquired growth.

• The profit margin should improve to 16–17 percent
through continued growth, a modern product port-
folio and leveraging synergies in the Group.

• The positive long-term trend for ASSA ABLOY’s operat-

ing cash flow should be maintained.

• Capital efficiency should be continuously improved.
Given the potential to benefit from synergies in pro-
duction, capital expenditure can be maintained at
today’s level, below that of current depreciation.

In order to strive towards this vision and achieve these
financial targets, the strategic action plans have been
divided into three areas: market presence, product lead-
ership and cost-efficiency. The details of these strategic
action plans are to be found on page 6.

Guidelines and policies
The Group’s most important guidelines and policies
define the product areas in which the Group should oper-
ate and describe the principles for market development,
growth, product development, organization, cost-
efficiency and staff development. These principles are
described in the publication Strategy to Action, which
will have been provided to all employees in the Group by
year-end 2008. Other important guidelines and policies
concern financial control, communication matters, the
Group’s brands, business ethics and environmental issues.
Common financial, accounting and investment policies
provide the framework for financial control and monitor-
ing. ASSA ABLOY’s communication policy aims to treat all
stakeholders equally, provide important information at
the right time and in the right way, meet legal require-
ments and comply with current stock market rules.
Guidelines for brands aim to protect and develop the
major assets that the Group’s brands represent.

ASSA ABLOY has adopted a Code of Conduct that

applies to the whole Group. The Code, which is based on a
set of internationally accepted conventions, defines the
values and guidelines that should apply within the Group
with regard to the environment, health, safety, working
conditions, human rights and business ethics.

Decentralized organization with a strong control
environment
ASSA ABLOY’s operations are decentralized. Decentraliza-
tion is a deliberate strategic choice based on the local
nature of the lock industry and a conviction of the bene-
fits of a divisional control model. Another contributory
factor is that the Group has been built up over a relatively
short period through a large number of acquisitions. His-
torically, this structure has meant that internal control
started from a strong, centrally based control environ-
ment, in which the integrity, ethical values, competence
and management philosophy of the Executive Team, as
well as high visibility across the organization, were deci-
sive in forming the basis for other areas of internal con-
trol.

ASSA ABLOY’s operating structure is designed to cre-
ate the greatest possible transparency, to facilitate finan-
cial and operational monitoring and to promote the flow
of information and communication across the Group. The
Group consists of five divisions, which in turn are divided
into around 30 business units. These consist in turn of a
considerable number of sales and production units,
depending on the structure of the business unit con-
cerned. Apart from monitoring by unit, monitoring of
products and markets is also carried out. At all these
levels, there are designated people and a management
group responsible for ensuring that the internal control
of financial reporting maintains a satisfactory quality.

Corporate governance report
48

Financial reporting
All units report their financial results monthly in accord-
ance with the Group’s accounting principles. This report-
ing is consolidated and forms the basis for quarterly
reports and a monthly operating review. Operating
reviews conform to a long-established structure – Lock-
Pack – in which sales, income, cash flow, capital employed
and other important key figures and trends for the Group
are compiled and form the basis for analysis and actions
by management and controllers at different levels. Finan-
cial reviews take place quarterly at divisional board meet-
ings and monthly in the form of performance reviews and
through more informal analysis. Particular attention is
paid to the sales trend, and monitoring takes the form of
daily sales reporting by all the units in the Group. This
monitoring is analyzed weekly by the Executive Team. An
updated sales forecast is made weekly for the current
month. Other important Group-wide components of
internal control are the annual business planning and
budgeting process and quarterly detailed forecasts of all
the financial parameters for the current calendar year.

Group-wide tools for increasing efficiency
In addition to the guidelines and policies discussed above,
some 20 systems and applications for increasing business
efficiency have been developed centrally. These aids are
used by subsidiaries for inventory optimization and cost
control, for example. The tools are mainly intended for
operational use, but in many cases also result in the gen-
eral and specific control activities linked to financial
reporting being implemented in the business, as well as
creating increased awareness of the importance of inter-
nal control.

The acquisition process
A large part of the ASSA ABLOY Group’s historical growth
and present size is based on acquisitions. Acquisitions will
continue to be an important growth factor for expansion
onto new markets, in new technologies and on markets
where the market share is low. Complementary acquisi-
tions on existing markets may also arise.

In these circumstances, ASSA ABLOY has had reason to

establish and follow a special Group-wide acquisition
process, which states how acquisitions should be imple-
mented. The process consists of four phases – strategy,
evaluation, implementation and integration – and each
phase includes various predefined activities, decisions and
documentation requirements.

Goodwill and other intangible assets with an indefinite
useful life resulting from acquisitions are subject to a sim-
plified valuation test quarterly and a detailed, in-depth
impairment test annually.

Group internal control and internal audit function
During the year, the Group internal audit function moni-
tored and coordinated the external audit, as well as evalu-
ating the Group’s internal control. A particular focus area
during the year was the new fast-growing markets, where
the internal audit function carried out audits and also

assisted the subsidiaries with advice regarding the devel-
opment of control procedures. Internal audit is carried
out using central resources and within the divisions,
where experienced financial staff carry out internal audits
in units other than those in which they are employed. The
internal audit function also reports to the Board’s Audit
Committee.

Risks and risk management
As an international group with a wide geographical
spread, ASSA ABLOY is exposed to business and financial
risks. The business risks can be divided into strategic,
operational and legal risks. The financial risks relate to
such factors as exchange rates, interest rates, liquidity,
credit provision, raw materials and financial instruments.
The financial risks and their management by the Group
are described in the section ‘Financial risk management’
on page 63.

Risk management in ASSA ABLOY aims to identify,
control and reduce risks. This work is based on an assess-
ment of the probability of the risks and their potential
effect on the Group. In the decentralized spirit that marks
ASSA ABLOY, and to keep risk analysis and risk manage-
ment as close as possible to the actual risks, a large pro-
portion of risk management takes place at division and
business-unit level.

Strategic and operational risks
The main risks of this nature encountered by ASSA ABLOY
relate to customers, suppliers, employees, competitors
and acquisition situations. In addition, there are country-
specific risks. Customers and suppliers, including the
relationships with them, are subject to continuous local
review. These players, together with employees, are cov-
ered by the Group’s Code of Conduct. As regards competi-
tors, a risk analysis is carried out both centrally and locally.
As regards risks relating to acquisitions, the Group fol-

lows a uniform, predefined process, as described above.

Legal risks
ASSA ABLOY continuously monitors anticipated and
implemented changes in the legislation of the countries
in which it operates. From time to time, ASSA ABLOY is
involved in legal disputes, mainly in areas such as product
liability, protection of intellectual property rights, the
environment, and the interpretation of supplier, distribu-
tion and employment contracts as well as anti-trust mat-
ters. Where it is considered necessary, local legal exper-
tise is engaged to deal with these matters. In order to
identify and control legal risks, there is regular Group-
wide reporting of outstanding legal matters. This is
managed and coordinated by the Group’s central legal
function.

Many of the legal risks, such as those related to prop-
erty and liability issues, are covered by insurance policies.
ASSA ABLOY carries out regular reviews of risks and risk
assessment jointly with insurance company representa-
tives. At present, there are no legal disputes that are
expected to lead to significant costs.

Corporate governance report
49

The Board’s proposed guidelines for the remuneration of
senior management in 2008
The Board of ASSA ABLOY proposes that the 2008 Annual
General Meeting adopts the following guidelines for the
remuneration of senior management. The basic principle
is that the remuneration and other employment condi-
tions of senior management should be in line with market
conditions and competitive, in order to ensure that the
ASSA ABLOY Group can attract and retain competent sen-
ior management. The total remuneration of senior man-
agement should consist of fixed salary, variable salary,
other benefits and pension.

In addition to the fixed salary, the Executive Team
should have the opportunity to receive variable salary,
which should be based on the outcome in relation to tar-
gets for operating income, and in some cases for other key
financial figures, in their individual area of responsibility
(Group or division). Variable salary should be capped at a
maximum 75 percent of the fixed salary for the CEO and
other members of the Executive Team. Under the Board’s
proposal, the cost of variable salary for senior management
is calculated on the basis of current remuneration levels
and maximum outcome (i.e. assuming the fulfillment of all
the targets on which remuneration is based) and will
amount to a total of SEK 30 M, excluding social security
contributions. This calculation is made on the basis of the
current members of the Executive Team. The costs may
change if more people join the Executive Team.

ASSA ABLOY has no outstanding remuneration commit-
ments apart from current commitments to senior manage-
ment in accordance with the remuneration principles
described here, including previous commitments regard-
ing a long-term incentive agreement (see below).

Other benefits, such as company car, extra health insur-
ance or occupational healthcare, should be payable to the
extent this is considered to be in line with market condi-
tions for senior management in equivalent positions in the
labor market in which the executive is employed. All mem-
bers of the Executive Team should be covered by defined-
contribution pension plans, for which pension premiums
are allocated from the executive’s total remuneration and
paid by the company during the period of employment.
If the company gives notice of the termination of the
contract, the CEO is entitled to a maximum 24 months’ sal-
ary and other employment benefits, while the other mem-
bers of the Executive Team are entitled to a maximum 18
months’ salary and other employment benefits. These
guidelines should cover the members of the Executive
Team during the period the guidelines apply. The guide-
lines apply to contracts entered into following the resolu-
tion of the Annual General Meeting, and where amend-
ments are made in existing contracts after this time. The
Board should have the right to deviate from these guide-
lines if there are particular reasons for doing so in an indi-
vidual case.

Remuneration of the Executive Team in 2007
The remuneration of ASSA ABLOY’s senior management in
2007 was determined in accordance with the guidelines

drawn up and adopted by the Board and subsequently
approved by the 2007 Annual General Meeting. During
2007, the same remuneration guidelines were applied as
the Board’s proposal to the 2008 Annual General Meeting
described above, with the exception that the variable salary
was capped at a maximum 70 percent of the fixed salary.
Since the period before the 2007 Annual General
Meeting, ASSA ABLOY has reached a long-term incentive
(LTI) agreement with some members of the Executive
Team (excluding the CEO), which allows them to receive
variable salary based on improvements in earnings per
share (67 percent) and organic growth (33 percent). The
maximum amount of SEK 2 M per person is payable if
earnings per share increase by 12 percent compared with
the previous year and organic growth reaches 7 percent.
One-third of such variable salary is paid the following year,
while two-thirds is retained for one or two years and
grows at the same rate as the Group’s return on capital
employed. The residual two-thirds is paid only if, at the
end of the period, the executive has not left his job on his
own initiative or been dismissed for breach of contract.

During the year, changes occurred in the composition

of the Executive Team. After complying with his contrac-
tual notice period of six months, Joe Grillo terminated his
employment as Executive Vice President and Head of Glo-
bal Technologies division. In this connection, he received
remuneration of SEK 1,300,000 relating to accrued bene-
fits. Denis Hébert, Executive Vice President and Head of
the HID Group business unit, and Tim Shea, Executive Vice
President and Head of the ASSA ABLOY Hospitality busi-
ness unit, were appointed new members of the Executive
Team. These business units make up Global Technologies
division, which is now headed by Johan Molin.

Remuneration and other benefits of
the Executive Team in 2007

SEK thousand

Fixed
salary

Variable
salary

Other
benefits

Pension
costs

Johan Molin

10,200

6,300

100

2,940

Other members of
the Executive Team
(10) 1

Total remuneration
and benefits

27,233

16,902

1,769

8,128

37,433

23,202

1,869

11,068

Total costs 2

45,133

27,842

2,055

13,282

1 During the year Joe Grillo left and Denis Hébert and Tim Shea joined the Execu-
tive Team. The costs tabled above cover the parts of the year during which each
person belonged to the Executive Team.

2 Total costs include social fees on salaries and benefits, special pension tax and

additional costs for other benefits.

External audit
At the 2006 Annual General Meeting, Pricewaterhouse-
Coopers (PwC) were appointed as the company’s external
auditors for a four-year period up to the 2010 Annual Gen-
eral Meeting, with authorized public accountant Peter
Nyllinge as the Auditor in Charge. PwC have been the
Group’s auditors since the Group was formed in 1994.
Peter Nyllinge, born in 1966, is responsible for auditing

Corporate governance report
50

Clause 3.2.4 (relevant parts)
“The majority of the directors elected by the shareholders’
meeting are to be independent of the company and its man-
agement.”

Explanation for the deviation: This clause is not complied
with on account of the so-called 12-year rule, which states
that a director is not deemed to be independent if he has
been a board member of the company for more than 12
years. Four board members out of a total of eight board
members are dependent on the company, as defined
by the Code. For three of these, this dependence only
arises on account of the 12-year rule. The Nomination
Committee does not consider that in a company such
as ASSA ABLOY dependence arises as a result of a board
member working with and getting to know the company
over a longer period.

the following companies besides ASSA ABLOY: Bonnier AB
(publ) and Skandinaviska Enskilda Banken AB (publ).

PwC submits the audit report for ASSA ABLOY AB, the
Group and a large majority of the subsidiaries worldwide.
The audit of ASSA ABLOY AB also includes the administra-
tion by the Board of Directors and the CEO.

The company’s auditor attends all the meetings of the

Audit Committee as well as the board meeting in Febru-
ary, at which he reports his observations and recommen-
dations concerning the Group audit for the year.

The external audit is carried out in accordance with
good auditing practice in Sweden. The audit of the annual
financial statements for legal entities outside Sweden is
carried out in accordance with legal requirements and
other applicable regulations in the country concerned
and in accordance with good auditing practice as defined
by the International Federation of Accountants (IFAC) for
submitting audit reports for the legal entities. For infor-
mation about the fees paid to auditors and other assign-
ments carried out in the Group during the last three
financial years, see Note 3 of this Report and Note 3 on
page 63 of the Annual Report for 2006.

Deviations from the Swedish Code of
Corporate Governance
ASSA ABLOY has chosen to deviate from the following
clauses of the Swedish Code of Corporate Governance:
Clause 2.1.2 (relevant parts)

“The majority of the members of the nomination committee
are not to be members of the board of directors. The chair of
the board of directors or another board member is not to
chair the nomination committee.”

Explanation for the deviation: Prior to the 2008 Annual
General Meeting, the Nomination Committee comprises
four members, two of whom are board members. Half of
the Committee’s members, but not a majority, are thus
not board members. The departure from this clause of the
Code is the result of, on the one hand, the wish to limit
the number of members of the Committee in order not to
jeopardize the effectiveness of the Committee’s nomina-
tion work and, on the other hand, the representation of
the principal shareholders on the Committee. A majority
of external members would have required five members,
which was deemed to be too many. The Chairman of the
Nomination Committee prior to the 2008 Annual General
Meeting is Melker Schörling, who is also a member of
ASSA ABLOY’s Board. The departure from this clause of
the Code is justified by the fact that one of the largest
shareholders in terms of votes naturally also leads the
work of the Committee.

The Executive Team

Corporate governance report
51

From left: Ulf Södergren, Johan Molin, Åke Sund, Martin Brandt, Juan Vargues, Thanasis Molokotos, Tomas Eliasson, Denis Hébert, Tzachi Wiesenfeld, Tim Shea

The Executive Team
Johan Molin
Born 1959
Bachelor of Science in
Economics
President and CEO
Employed since 2005
Shareholdings: 500,000
Series B shares. Incentive
2006 and Incentive 2007
convertibles correspond-
ing to 440,000 Series B
shares.

Martin Brandt
Born 1960
Degree in Business Admin-
istration and Mechanical
Engineering
Executive Vice President
Head of Asia Pacific divi-
sion
Employed since 1996
Shareholdings: Incentive
2006 convertibles corre-
sponding to 60,700 Series
B shares.

Tomas Eliasson
Born 1962
Bachelor of Science in
Economics
Executive Vice President
Chief Financial Officer
(CFO)
Employed since 2006
Shareholdings: Incentive
2006 and Incentive 2007
convertibles correspond-
ing to 108,600 Series B
shares.

Thanasis Molokotos
Born 1958
Master of Science
Executive Vice President
Head of Americas division
Employed since 1996
Shareholdings: 25,000
Series B shares. Incentive
2004, Incentive 2006 and
Incentive 2007 converti-
bles corresponding to
105,400 Series B shares.

Åke Sund
Born 1957
Graduate Diploma in
Marketing
Executive Vice President
Director for Market and
Business Development
Employed since 1994
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 converti-
bles corresponding to
223,900 Series B shares.

Ulf Södergren
Born 1953
Master of Science, Bach-
elor of Economics
Executive Vice President
Director for Technology
and Product Development
Employed since 2000
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 converti-
bles corresponding to
217,600 Series B shares.

Juan Vargues
Born 1959
Graduate in Mechanical
Engineering, MBA
Executive Vice President
Head of Entrance Systems
division
Employed since 2002
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 converti-
bles corresponding to
229,600 Series B shares.

Tzachi Wiesenfeld
Born 1958
MBA and Bachelor of
Science in Industrial
Engineering
Executive Vice President
Head of EMEA division
Employed since 2000
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 converti-
bles corresponding to
183,800 Series B shares.

Denis Hébert
Born 1956
Bachelor of Commerce,
MBA
Executive Vice President
Head of Global Technolo-
gies business unit HID
Group
Employed since 2002
Shareholdings: Incentive
2006 and Incentive 2007
convertibles correspond-
ing to 62,200 Series B
shares.

Tim Shea
Born 1959
Graduate in Mechanical
Engineering, MBA
Executive Vice President
Head of Global Technolo-
gies business unit ASSA
ABLOY Hospitality
Employed since 2004
Shareholdings: Incentive
2006 and Incentive 2007
convertibles correspond-
ing to 21,500 Series B
shares.

ASSA ABLOY
Annual Report 2007
52

Sales and earnings

• Organic growth for comparable units was 7 percent (9),

while acquired growth was 5 percent (3).

• Operating income (EBIT) increased by 14 percent to SEK
5,458 M (4,7711), equivalent to an operating margin of
16.3 percent (15.31).

The Group’s material costs totaled SEK 10,721 M (9,561),
corresponding to 32 percent (31) of sales. This increase
was mainly due to the increased costs of raw materials.

Other purchasing costs totaled SEK 6,424 M (6,532),

corresponding to 19 percent (21) of sales.

• Earnings per share increased by 13 percent to SEK 9.02

Depreciation and write-down of fixed assets amounted

(7.991).

Sales
The Group’s sales rose to SEK 33,550 M (31,137).
Exchange rates had a negative impact of SEK 1,131 M on
sales, compared with 2006.

Change in sales

Organic growth
Acquired growth
Exchange-rate effects
Total

2006

2007

9
3
0
12

7
5
–4
8

Sales rose by 12 percent in local currency, of which organic
growth for comparable units accounted for 7 percent (9)
and acquired units made a positive contribution of 5 per-
cent (3).

Sales by product group

Mechanical locks,
lock systems and accessories
Electromechanical and electronic locks
Security doors and fittings

2006

2007

51
31
18

48
33
19

Mechanical locks, lock systems and accessories accounted
for 48 percent (51) of sales. Sales of electromechanical and
electronic locks rose to 33 percent (31), while security
doors and fittings accounted for 19 percent (18) of sales.

Cost structure
Total wage costs, including social security expenses and
pension expenses, amounted to SEK 10,066 M (9,374),
corresponding to 30 percent (30) of sales. The average
number of employees was 32,267 (31,243).

The average number of employees in the Parent

company was 98 (96).

to SEK 910 M (1,039), corresponding to 3 percent (3) of
sales.

Operating income
Operating income (EBIT) amounted to SEK 5,458 M
(4,7711) after negative exchange-rate effects of SEK 203 M.
The corresponding operating margin was 16.3 percent
(15.31).

Operating income before depreciation and amortiza-

tion (EBITDA) amounted to SEK 6,366 M (5,6691). The
corresponding margin was 19.0 percent (18.21).

Income before tax
Income before tax totaled SEK 4,609 M (2,626), an increase
of 76 percent compared with the previous year. Negative
exchange-rate effects amounted to SEK 182 M. Net finan-
cial items amounted to SEK –849 M (–671). This increase
was mainly due to increased net debt and a one-off cost of
SEK 75 M in the last quarter. The one-off cost related to an
impairment loss for an external development project, in
which ASSA ABLOY took part as one of several financiers.
The profit margin – defined as income before tax in relation
to sales – was 13.7 percent (8.4).

The Parent company’s income before tax amounted to

SEK 2,351 M (1,047).

Tax
The Group’s tax expense totaled SEK 1,240 M (870), corre-
sponding to an effective tax rate of 27 percent (33). The
reduction in the effective tax rate was due to the previous
year’s abnormally high tax rate, which was a result of
deferred tax on certain restructuring costs not being taken
into account.

Earnings per share
Earnings per share amounted to SEK 9.02 (7.991), an
increase of 13 percent.

1 Excluding restructuring costs.

Income statement – Group

ASSA ABLOY
Annual Report 2007
53

SEK M

Sales
Cost of goods sold

Gross income

Selling expenses
Administrative expenses
Research & Development costs
Other operating income and expenses
Share of earnings in associates

Operating income

Financial income
Financial expenses

Income before tax

Tax on income

Net income

Allocation of net income:

Shareholders in ASSA ABLOY AB
Minority interests

Earnings per share

before dilution, SEK
after dilution, SEK

Note

4
5

6 –10

11
10, 12

14
14

2006

31,137
–19,936

11,201

–5,337
–1,847
–719
–9
8

3,297

30
–701

2,626

–870

1,756

1,746
10

4.77
4.72

2007

33,550
–19,751

13,799

–5,664
–1,930
–776
19
9

5,458

27
–876

4,609

–1,240

3,368

3,358
10

9.18
9.02

ASSA ABLOY
Annual Report 2007
54

Comments by division

ASSA ABLOY is organized into five divisions. The three divi-
sions EMEA (Europe, Middle East and Africa), Americas
(North and South America) and Asia Pacific (Asia and Oce-
ania) manufacture and sell mechanical and electromechan-
ical locks, security doors and fittings in their respective geo-
graphical markets. Global Technologies division operates
worldwide in the product areas of access control systems,
secure issuance of cards, identification technology and
hotel locks. Entrance Systems division is a worldwide sup-
plier of automatic doors and service. Group-wide functions
are shown in the column headed ‘Other’ in the table.

with an operating margin (EBIT) of 11.6 percent (9.2).
Return on capital employed was 13.8 percent (10.8). Oper-
ating cash flow before interest paid amounted to SEK 294
M (112).

Asia Pacific more than doubled its organic growth dur-
ing the year and showed a substantial increase in profita-
bility. Demand grew strongly in all significant sub-markets.
Price increases were implemented to compensate for
increased raw material costs, which together with cost sav-
ings resulting from the restructuring program contributed
to increased profitability.

EMEA
Sales totaled SEK 13,477 M (12,509), with organic growth
of 7 percent (8). Operating income amounted to SEK 2,295 M
(1,972), with an operating margin (EBIT) of 17.0 percent
(15.8). Return on capital employed was 21.9 percent
(19.1). Operating cash flow before interest paid amounted
to SEK 2,267 M (1,899).

EMEA performed strongly during the year, even though

the market trend slowed towards the end of the year. All
regions in Western Europe showed positive organic growth
and demand was particularly strong in the Middle East,
Africa and Eastern Europe. Increased sales volumes and
cost savings resulting from the restructuring program had
a positive impact on profitability.

Americas
Sales totaled SEK 10,220 M (10,142), with organic growth
of 5 percent (10). Acquired units contributed 5 percent of
sales. Operating income amounted to SEK 1,995 M (1,945),
with an operating margin (EBIT) of 19.5 percent (19.2).
Return on capital employed was 22.7 percent (22.3). Oper-
ating cash flow before interest paid amounted to SEK 2,211 M
(1,724).

Americas continued to show strong organic growth
during the year and increased profitability from an already
high level. Demand in the commercial segment remained
strong, while the residential segment showed weak
demand-growth. Profitability, which is the highest in the
Group, increased further thanks to growth, good cost
control and streamlining measures.

Global Technologies
Sales totaled SEK 4,922 M (4,220), with organic growth of
11 percent (12). Acquired units contributed 12 percent of
sales. Operating income amounted to SEK 754 M (612),
with an operating margin (EBIT) of 15.3 percent (14.5).
Return on capital employed was 14.7 percent (15.5). Oper-
ating cash flow before interest paid amounted to SEK 699
M (426).

Global Technologies continued to perform positively
during the year and showed very strong organic growth,
driven mainly by new products and marketing initiatives.
The operating margin increased as a result of better sales
volumes, but was limited by the continued focus on
expanded marketing and sales organizations in the fast-
growing segments.

Entrance Systems
Sales totaled SEK 2,987 M (2,715), with organic growth of
6 percent (11). Acquired units contributed 4 percent of
sales. Operating income amounted to SEK 432 M (368),
with an operating margin (EBIT) of 14.4 percent (13.6).
Return on capital employed was 13.7 percent (11.5).
Operating cash flow before interest paid amounted to
SEK 497 M (332).

Entrance Systems’ organic growth remained strong dur-

ing the year and was particularly strong in the USA and
Asia, even though demand slowed somewhat towards the
end of the year. The earnings trend was strong during the
year. New products and acquisitions contributed to the
positive trend.

Asia Pacific
Sales totaled SEK 2,780 M (2,309), with organic growth of
10 percent (4). Acquired units contributed 14 percent of
sales. Operating income amounted to SEK 322 M (213),

Other
The costs of Group-wide functions, such as Group manage-
ment, accounting & finance, supply management and
Shared Technologies, amounted to SEK 340 M (339).

Results by division

ASSA ABLOY
Annual Report 2007
55

SEK M

Sales, external
Sales, internal

Sales
Organic growth
Share of earnings in associates

Operating income (EBIT) excl.
restructuring costs
Operating margin (EBIT)
Restructuring costs

Operating income (EBIT)
Net financial items
Tax on income

Net income

Capital employed
– of which goodwill
Return on capital employed excl.
restructuring items

Assets
– of which, shares in associates
Liabilities

Operating income (EBIT)
Restructuring costs
Depreciation
Investments in fixed assets
Sales of fixed assets
Change in working capital
Cash flow 5

Adjustment for non-cash items
Paid and received interest

Operating cash flow 5

EMEA1
2006

2007

Americas2

2006

2007

Asia Pacific3
2007

2006

Global
Technologies4
2007

2006

Entrance
Systems
2006

2007

Other

Total

2006

2007

2006

2007

12,165 13,073 10,104 10,166
54

344

405

12,509 13,477 10,142 10,220
5%
6

10%
5

7%
3

8%
3

1,972
15.8%
–1,059

913

2,295
17.0%
–

2,295

1,945
19.2%
–169

1,776

1,995
19.5%
–

1,995

2,082
227

2,309
4%
–

213
9.2%
–93

120

2,558
222

2,780
10%
–

322
11.6%
–

322

4,108
112

4,220
12%
–

612
14.5%
–152

460

4,805
117

4,922
11%
–

754
15.3%
–

754

2,678
37

2,715
11%
–

368
13.6%
–1

367

2,949
38

2,987
6%
–

432
14.4%
–

–
–758

–758

–

– 31,137 33,550

–836

–836 31,137 33,550
7%
9

9%
8

–

–339

–340

–

432

–339

–340

4,771
15.3%
–1,474

3,297
–671
–870

1,756

5,458
16.3%
–

5,458
–849
–1,240

3,368

9,183 10,055
4,926
4,631

8,545
5,076

8,595
4,928

1,974
955

2,520
1,211

4,911
3,568

5,181
3640

3,121
2,453

3,149
2,566

–529
–

–879 27,205 28,621
– 16,683 17,270

19.1%

21.9%

22.3%

22.7%

10.8%

13.8%

15.5%

14.7%

11.5%

13.7%

17.1%

18.4%

13,182 13,933
32
3,953

31
3,999

913
1,059
468
–388
137
–290

2,295
–
433
–524
173
–111

9,689
2
1,148

1,776
169
231
–206
7
–253

9,839
2
1,235

1,995
–
218
–187
45
140

1,899

2,267

1,724

2,211

2,410
–
436

3,269
5
763

6,333
–
1,423

6,602
–
1,174

3,665
–
543

3,771
–

317 35,557 37,732
39
33
721 14,363 14,217 21,912 22,064

277
–

–

120
93
64
–113
4
–56

112

322
–
69
–84
27
–40

294

460
152
87
–130
3
–146

426

754
–
138
–197
33
–29

699

367
1
39
–32
2
–45

332

432
–
38
–36
22
41

497

–339
–
9
–24
1
86

–340
–
12
–22
–
–27

3,297
1,474
898
–894
155
–704

5,458
–
909
–1,050
299
–25

4,226

5,591

10
–708

–49
–734

10
–708

–49
–734

3,528

4,808

Investments in subsidiaries
Average number of employees

–84

–275
12,283 12,493

–800
9,641

–319
9,428

–
5,099

–357
5,445

–2,222
2,183

–304
2,650

–16
1,926

–102
2,137

–
111

1 Europe, Middle East and Africa.
2 North and South America
3 Asia, Australia and New Zealand.
4 ASSA ABLOY Hospitality and HID Group.
5 Excluding restructuring payments.

–

–3,122

–1,358
113 31,243 32,267

ASSA ABLOY
Annual Report 2007
56

Financial position

• Capital employed amounted to SEK 28,621 M (27,205).
• Net debt fell to SEK 12,953 M (13,560).
• The net debt / equity ratio was 0.83 (0.99).

Net debt was increased by the dividend to shareholders
and acquisitions, and reduced by the strong operating
cash flow.

SEK M

Capital employed
– of which goodwill
Net debt
Minority interests
Equity

2006

27,205
16,683
13,560
60
13,585

2007

28,621
17,270
12,953
201
15,467

Capital employed
Capital employed – defined as total assets less interest-
bearing assets and non-interest-bearing liabilities including
deferred tax liabilities – amounted to SEK 28,621 M (27,205).
The return on capital employed was 18.4 percent (17.1).

Intangible assets amounted to SEK 18,708 M (17,825).

The increase is mainly due to the acquisitions made. Dur-
ing the year, goodwill and other intangible assets with an
indefinite useful life of approximately SEK 1,200 M have
arisen. A valuation model based on discounted future cash
flows is used for impairment testing of goodwill and other
intangible assets with an indefinite useful life. No impair-
ment was recognized this year.

Tangible assets amounted to SEK 5,345 M (5,121). Capi-
tal expenditure on tangible and intangible assets, less sales
of tangible and intangible assets, totaled SEK 751 M (739).
Depreciation according to plan amounted to SEK 909 M
(898).

Accounts receivable totaled SEK 5,537 M (5,081) and
inventories totaled SEK 4,399 M (4,026). The average col-
lection period for accounts receivable was 54 days (54).
Material throughput time was 104 days (109). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 12,953 M (13,560), of which
pension commitments accounted for SEK 1,156 M (1,297).

External financing
The Group’s long-term loan financing consists mainly of Pri-
vate Placement Programs in the USA totaling USD 630 M
(630), Incentive Programs of EUR 238 M (138) and a three-
year bond totaling SEK 1,500 M (1,500).

The Group’s short-term loan financing consists mainly
of two Commercial Paper Programs for a maximum of USD
1,000 M (1,000) and SEK 5,000 M (5,000). At year-end, SEK
4,166 M (5,048) of the Commercial Paper Programs had
been utilized.

In addition, substantial credit facilities are available,
mainly in the form of a Multi-Currency Revolving Credit
(MCRF) agreement for a maximum of EUR 1,100 M (1,000),
which had not been utilized at all at year-end.

The interest coverage ratio, defined as income before
tax plus net interest, divided by net interest, was 7.4 (5.1).
Fixed interest terms were largely unchanged during the
year, with average terms of 25 months at year-end.

Cash and cash equivalents amounted to SEK 1,338 M
(1,154) and are invested in banks with high credit ratings.
Some of the Group’s main financing agreements con-
tain a customary Change of Control clause. The effect of
the clause is that lenders have the right in certain circum-
stances to demand the renegotiation of conditions or to
terminate the agreement should control of the company
change.

Equity
The Group’s equity totaled SEK 15,668 M (13,645) at year-
end. The return on shareholders’ equity amounted to 21.0
percent (11.5). The equity ratio was 41.5 percent (38.4). The
net debt / equity ratio, defined as net debt divided by share-
holders’ equity, was 0.83 (0.99).

Balance sheet – Group

ASSA ABLOY
Annual Report 2007
57

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Shares in associates
Other long-term financial assets
Deferred tax receivables

Total non-current assets

Current assets
Inventories
Accounts receivable
Current tax receivables
Other short-term receivables
Prepaid expenses and accrued income
Derivative financial instruments
Short-term investments
Cash and cash equivalents
Total current assets

TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Parent company’s shareholders
Share capital
Other contributed capital
Reserves
Retained earnings

Minority interests

Total equity

Non-current liabilities
Long-term loans
Convertible debenture loans
Deferred tax liabilities
Pension provisions
Other long-term provisions
Other long-term liabilities

Total non-current liabilities

Current liabilities
Short-term loans
Derivative financial instruments
Accounts payable
Current tax liabilities
Short-term provisions
Other short-term liabilities
Accrued expenses and prepaid income
Total current liabilities

TOTAL EQUITY AND LIABILITIES

Note

2006

2007

15
16
18
20
19

21
22

25
25
19
29
30

25
23

30
31
32

17,825
5,121
33
241
1,089

24,309

4,026
5,081
227
405
314
40
1
1,154
11,248

35,557

366
8,887
–253
4,585

13,585
60

13,645

6,010
1,252
106
1,297
751
116

9,532

6,281
42
2,143
210
692
681
2,331
12,380

35,557

18,708
5,345
39
170
881

25,143

4,399
5,537
404
449
368
94
0
1,338
12,589

37,732

366
8,887
–540
6,754

15,467
201

15,668

5,805
2,245
119
1,156
774
122

10,221

5,258
26
2,503
249
566
624
2,617
11,843

37,732

ASSA ABLOY
Annual Report 2007
58

Cash flow

• Operating cash flow amounted to SEK 4,808 M (3,528).
• Net capital expenditure amounted to SEK 751 M (739).

Relationship between cash flow from operating activities
and operating cash flow

SEK M

Cash flow from operating activities
Restructuring payments
Net capital expenditure on tangible
assets
Tax paid
Operating cash flow

2006

2,968
342

–739
957
3,528

2007

3,871
424

–751
1,264
4,808

Acquisitions of subsidiaries
The total purchase price for acquisitions of subsidiaries
amounted to SEK 1,675 M (3,553). Acquired net debt
totaled SEK 4 M (–339).

Change in net debt
Net debt was affected mainly by the strong operating cash
flow, the dividend to shareholders and acquisitions.

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions
Dividend
Translation differences
Net debt at 31 December

2006

12,240
–3,528
342
957
3,132
1,189
–772
13,560

2007

13,560
–4,808
424
1,264
1,376
1,189
–52
12,953

Operating cash flow

SEK M

Operating income (EBIT)
Restructuring costs
Depreciation
Net capital expenditure
Change in working capital
Interest paid and received
Adjustments for non-cash items
Operating cash flow 1

Operating cash flow /
Income before tax

2006

3,297
1,474
898
–739
–704
–708
10
3,528

2007

5,458
–
909
–751
–25
–734
–49
4,808

0.86 2

1.04

1 Excluding restructuring payments.
2 Income before tax excluding restructuring costs.

The Group’s operating cash flow amounted to SEK 4,808 M
(3,528), equivalent to 104 percent (86) of income before
tax.

The Parent company’s cash flow amounted to SEK –1 M

(–222).

Net capital expenditure
Direct net capital expenditure on tangible and intangible
assets totaled SEK 751 M (739), equivalent to 83 percent
(82) of depreciation of tangible and intangible assets for
the financial year. The low net capital expenditure is mainly
due to the Group’s long-term efforts to optimize capital
expenditure, and to implemented property sales.

Change in working capital

SEK M

Inventories
Accounts receivable
Accounts payable
Other working capital
Change in working capital

2006

–526
–487
223
86
–704

2007

–148
–256
219
160
–25

Efforts to reduce the Group’s material throughput time in
inventories resulted in a reduction of five days during the
year. The material throughput time was 104 days (109) at
year-end. However, rising material prices and increased vol-
umes during the year increased capital tied up in inventories
somewhat, which had an impact of SEK –148 M (–526) on
cash flow. The increased capital tied up in accounts receiv-
able is mainly due to stronger sales.

Cash flow statement – Group

ASSA ABLOY
Annual Report 2007
59

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation
Reversal of restructuring costs
Restructuring payments
Non-cash items
Cash flow before interest and tax

Paid and received interest
Tax paid on income

Cash flow before changes in working capital

Changes in working capital

Cash flow from operating activities

INVESTING ACTIVITIES
Investments in tangible and intangible assets
Sales of tangible and intangible assets
Investment in subsidiaries
Sales of associates
Other investments

Cash flow from investing activities

FINANCING ACTIVITIES
Dividends
Long-term loans raised
Long-term loans repaid
Net cash effect of changes in other borrowings
Cash flow from financing activities

CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Effect of translation differences
Cash and cash equivalents at 31 December

Note

37
37
37
37
37

2006

3,297
898
1,474
–342
10
5,337

–708
–957

3,672

–704

2,968

–894
155
–3,122
1
–11

–3,871

–1,189
2,570
–3,221
3,043
1,203

300

958
300
–104
1,154

2007

5,458
909
–
–424
–49
5,894

–734
–1,264

3,896

–25

3,871

–1,050
299
–1,358
–
–18

–2,127

–1,189
924
–926
–377
–1,568

176

1,154
176
8
1,338

ASSA ABLOY
Annual Report 2007
60

Changes in equity – Group

SEK M
Opening balance 1 January 2006

Translation differences for the year
Value changes in cashflow hedging instruments
Income/expenses reported directly to equity

Net income from income statement
Total income and expenses

Dividend for 2005
Acquisitions
Closing balance 31 December 2006

Opening balance 1 January 2007

Translation differences for the year
Value changes in cashflow hedging instruments
Income/expenses reported directly to equity

Net income from income statement
Total income and expenses

Dividend for 2006
Acquisitions
Closing balance 31 December 2007

Note
27

Parent company’s shareholders

Share
capital
366

Other
contributed
capital
8,887

Reserves
1,061

Retained
earnings
4,028

Minority
interests
71

–1,313
–1
–1,314

–1,314

1,746
1,746

–1,189

366

8,887

–253

4,585

366

8,887

–253

4,585

–287
0
–287

–287

3,358
3,358

–1,189

366

8,887

–540

6,754

–7

10
3

–14
60

–4

10
6

135
201

Total
14,413

–1,320
–1
–1,321

1,756
435

–1,189
–14
13,645

13,645

–291
0
–291

3,368
3,077

–1,189
135
15,668

Parent company financial statements

ASSA ABLOY
Annual Report 2007
61

Income statement
Parent company

Balance sheet
Parent company

SEK M

Administrative expenses
Research & Development costs
Other operating income and expenses

Operating income

Financial income
Financial expenses

Income before tax

Tax on income
Tax effect of Group contributions

Net income

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Shares in subsidiaries
Receivables from subsidiaries
Other long-term financial assets

Total non-current assets

Current assets
Receivables from subsidiaries
Other short-term receivables
Prepaid expenses and accrued income
Cash and cash equivalents
Total current assets

TOTAL ASSETS

Assets pledged

EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital
Statutory reserve
Fair value reserve
Unrestricted equity
Retained earnings
Net income

Total equity

Provisions
Other provisions

Total provisions

Non-current liabilities
Long-term loans
Convertible debenture loans
Long-term loans to subsidiaries
Other long-term liabilities

Total non-current liabilities

Current liabilities
Short-term loans
Accounts payable
Short-term liabilities to subsidiaries
Current tax liabilities
Other short-term liabilities
Accrued expenses and prepaid income
Total current liabilities

TOTAL EQUITY AND LIABILITIES

Contingent liabilities

Note

3, 6, 8, 9
6, 8, 9
4

11
10, 12

13
13

2006

–478
–52
945

415

1,260
–628

1,047

3
–156

894

2007

–660
–221
1,641

760

2,294
–703

2,351

17
–214

2,154

Note

2006

2007

15
16
17

25
25

407
7
12,474
2,259
174

15,321

16,284
17
27
1
16,329

31,650

None

366
8,905
43

4,033
894

14,241

–

1,500
1,252
2,259
205

5,216

536
32
11,501
3
6
115
12,193

31,650

9,911

692
6
13,266
2,374
101

16,439

14,837
13
31
0
14,881

31,320

None

366
8,905
142

3,186
2,154

14,753

1,500
2,245
2,374
335

6,454

622
28
9,260
1
7
104
10,022

31,320

9,930

ASSA ABLOY
Annual Report 2007
62

Cash flow statement
Parent company

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation
Cash flow before interest and tax

Paid and received interest
Dividends received
Tax paid and received

Cash flow before changes in working capital

Changes in working capital

Cash flow from operating activities

INVESTING ACTIVITIES
Investments in tangible and intangible assets
Sales of tangible and intangible assets
Investments in subsidiaries
Sales of shares in subsidiaries
Other investments

Cash flow from investing activities

FINANCING ACTIVITIES
Dividends
Net cash effect of changes in borrowings

Cash flow from financing activities

CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow

Cash and cash equivalents at 31 December

Note

2006

2007

415
33
448

–28
1,695
3

2,118

–62

2,056

–405
3
–1,435
87
–56

–1,806

–1,189
717

–472

–222

223
–222

760
212
972

170
1,489
3

2,634

–987

1,647

–496
1
–676
–
20

–1,151

–1,189
692

–497

–1

1
–1

Changes in equity
Parent company

SEK M

Note

Opening balance 1 January 2006
Effect of changed accounting principle, financial instruments

Adjusted opening balance 1 January 2006

Changes in value of financial instruments
Group contributions net
Tax effect of Group contributions
Net income from the income statement

Total income and expenses

Dividend for 2005

Closing balance 31 December 2006

Opening balance 1 January 2007
Changes in value of financial instruments
Group contributions net
Tax effect of Group contributions
Net income from income statement

Total income and expenses

Dividend for 2006

Closing balance 31 December 2007

Restricted shareholders' equity

Unrestricted
shareholders' equity

Share-
capital

366

Statutory
reserve

8,905

366

8,905

366

8,905

Fair value
reserve

Retained
earnings

–
156

156

–113

43
99

142

5,607
15

5,622

–556
156
894

494

–1,189

4,927

–766
214
2,154

1,602

–1,189

5,340

Total

14,878
171

15,049

–113
–556
156
894

381

–1,189

14,241

14,241
99
–766
214
2,154

1,701

–1,189

14,753

Financial risk management

ASSA ABLOY
Annual Report 2007
63

ASSA ABLOY is exposed to a variety of financial risks
through its international business operations.

Organization and activities
ASSA ABLOY’s Treasury Policy, which is reviewed annually by
the Board of Directors, constitutes a framework of guide-
lines and regulations for the management of financial risks
and financial activities.

ASSA ABLOY’s financial activities are coordinated cen-

trally within the subsidiary ASSA ABLOY Treasury S.A. in
Switzerland, which is the Group’s internal bank. External
financial transactions are conducted by the internal bank,
which also handles transactions involving foreign curren-
cies and interest rates. The internal bank achieves many
economies of scale when borrowing funds, fixing interest
rates and exchanging currency flows.

Currency risk
Currency risk affects ASSA ABLOY mainly through transla-
tion of capital employed and net debt, through translation
of income in foreign subsidiaries, and through flow of
goods between countries.

Translation exposure
The effect arising on translation of capital employed is limited
by the fact that financing is largely done in local currency.

The capital structure in each country is optimized based

on local legislation. So far as this constraint allows, the cur-
rency exposure and gearing per currency should reflect the
overall exposure and gearing for the whole Group to limit the
effect from movements in individual currencies. The internal
bank uses currency derivatives to supply the appropriate fund-
ing and eliminate currency exposure.

The table ‘Net debt by currency’ below shows the use of
currency forward contracts in association with funding, for the
major currencies. The forward contracts are used to neutralize
the exposure arising between net debt and internal needs.

Net debt by currency (in millions)

Currency
exposure

Forward
contracts

External
borrowing

Currency

USD
EUR
SEK
GBP
Other (SEK)
Total internal bank (SEK)

399
686
6,070
73
1,568
12,567

–231
152
2,570
–73
–1,568

SEK

External loans
Overdrafts
Cash and cash equivalents
Long-term interest-bearing receivables
Pension provisions
Net debt

630
534
3,500
–
–
12,567

498
243
–1,338
–173
1,156
12,953

Exposure of Group earnings
The following table shows the effects on the Group’s
income before tax of a 1 percent weakening or strengthen-

ing of each major currency versus the SEK, with all other
variables held constant. The effects arise mainly as a result
of translation of accounts receivable, accounts payable and
currency-denominated borrowings. The table also shows
the maximum movement in actual average rates in a calen-
dar year over the last 5 years.

Year/currency

Effect of a 1%
change in interest
rates on income
before tax, SEK M

Maximum change in
interest rates in a
calendar year during
the last 5 years, %

2007

USD

EUR

2006

USD

EUR

+/–21

+/–11

+/–20

+/–10

–18

-4

Transaction exposure
Currency risk in the form of transaction exposure, or the
relative values of exports and imports of goods, is limited in
the Group. To manage its transaction exposure, the Group’s
policy is to hedge anticipated cash flows in all tradable cur-
rencies for the 12 months following the balance date. It
does this through derivatives, primarily a currency basket
option with the aims of facilitating contract management
and reducing administrative costs.

Forecast transaction flows by major currency for the coming
year (imports + and exports –)

Currency

USD
EUR
GBP
CHF

Currency exposure (SEK M)

2006

–244
546
351
–306

2007

–254
475
322
–287

Interest rate risk
Interest rate fluctuations have a direct impact on
ASSA ABLOY’s net interest expense. The internal bank is
responsible for identifying and managing the Group’s inter-
est rate exposure. It analyses the Group’s interest rate
exposure and calculates the impact on income of defined
interest rate shifts on a rolling 12-month basis. The Group
seeks to have a mixture of fixed-rate and floating-rate debt
and uses interest rate swaps when it deems necessary. At
year-end, the average interest rate duration, excluding pen-
sion obligations, was about 25 (26) months.

Effective interest rate by currency, 31 December

Currency

USD
EUR
SEK
Average for the Group

1 Including effects of interest rate swaps

Interest rate (%)

2006

2007

5.3
3.7
3.41
4.8

5.1
4.9
5.2
5.3

ASSA ABLOY
Annual Report 2007
64

External funding and interest rate swaps
The table ‘External funding / net debt’ below gives an over-
view of interest rate swaps associated with debt. The inter-
est-rate derivatives are structured to have durations match-
ing the underlying debt securities. The internal bank swaps
parts of the Private Placement program in USD to floating
rates.

Sensitivity analysis
The following table demonstrates the effects on the
Group’s income before tax of a 1 percent change in interest
rates for each of the currencies in which the company
holds significant borrowings, with all other variables held
constant. This is compared to the maximum movement in
actual average rates (3-month Stibor, Euribor and Libor
rates) in a calendar year over the last 5 years.

Year/currency

Effect of a 1%
change in interest
rates on income
before tax, SEK M

Maximum change in
interest rates in a
calendar year during
the last 5 years, %

2007

USD

EUR

2006

USD

EUR

+/–27

+/–35

+/–11

–1

Liquidity risk
Financing and liquidity risks are defined as the risks of
being unable to meet payment obligations as a result of
inadequate liquidity or difficulties in obtaining credit from
external sources. ASSA ABLOY manages liquidity risk on a
consolidated basis. The internal bank is responsible for
external borrowing and external investments. ASSA ABLOY
strives to have access, on every occasion, to both short-
term and long-term loan facilities. The available facilities
should include a reserve (facilities confirmed but not used)
equivalent to 10 percent of the Group’s annual total sales.
During 2007 the Group renegotiated its covenant-free
multi-currency revolving facility for EUR 1.1 billion, available
for a period of 7 years.

Maturity structure
The column ‘End of facility’ in the table ‘External funding /
net debt’ below shows that duration until repayment of
debts contracted by the internal bank is not concentrated
in the short term. When there are many transactions with
different maturities, the duration is computed by weighted
average. At year-end, the average duration, excluding pen-
sion liabilities, was 43 (47) months.

The table 'Maturity' overleaf shows the contractual
undiscounted future cash flows related to the Group’s
financial liabilities, and to derivatives that existed at the
balance sheet date.

External funding / net debt (in millions)

confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed
confirmed

confirmed
confirmed
committed

committed

Credit facilities

Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Private Placement Program
Floating Rate Notes
Incentive Program
Incentive Program
Incentive Program
Other long-term
interest-bearing loans

Total long-term loans
Global CP Program
Swedish CP Program
Bank loan
Other short-term
interest-bearing loans
Overdrafts etc

Total short-term loans
Multi-Currency RF

Total credit facilities

Cash and cash equivalents
Other long-term interest-
bearing investments
Pension obligations
Net debt

1 Hedge accounting.

Amount
SEK

End of
facility

Book

value SEK Currency

Amount
2006

Amount
2007

Market
value SEK

Interest
rate swap

Average interest
rate duration

USD
USD
USD
USD
USD
USD
USD
USD
USD
SEK
EUR
EUR
EUR

EUR/USD
EUR/SEK
EUR

50
80
53
80
76
50
50
122
70
1,500
100
38
–

50
80
53
80
76
50
50
122
70
1,500
100
38
100

315/263

205/0
0/390 25/2,000
66

EUR

1,000

1,100

320
512
336
512
483
320
320
781
448
14,128
942
362
942

272

20,678
6,402
5,000
622

227
1,682

13,933
10,360

44,971

Dec 2011
May 2012
Dec 2013
May 2015
Dec 2016
Apr 2017
May 2017
Dec 2018
May 2020
Nov 2009
Jun 2009
Jun 2011
Jun 2012

–

–
–
Feb 2008

–
–

Jun 2014

320
512
336
512
483
320
320
781
448
1,500
942
362
942

272

8,050
1,931
2,235
622

227
243

5,258
0

13,308

–1,338

–173
1,156
12,953

No
Yes1
No
Yes1
No
No
No
No
No
No
No
No
No

Fixed quarterly
Fixed six-monthly
6 years
Fixed six-monthly
9.1 years
Fixed quarterly
9.5 years
11.1 years
12.5 years
Fixed quarterly
Fixed quarterly
Fixed quarterly
Fixed quarterly

No
No
No

54 days
50 days
1 month

320
534
351
539
505
320
341
823
487
1,500
942
362
942

272

8,238
1,932
2,235
622

227
243

5,258

13,496

–1,338

–173
1,156
13,141

ASSA ABLOY
Annual Report 2007
65

Maturity – financial liabilities and derivatives, SEK M

31 December 2006

< 1 year

> 1 year
< 2 years

> 2 years
<5 years

> 5 years

< 1 year

31 December 2007

> 1 year
< 2 years

> 2 years
<5 years

Long-term loans, hedged

Long-term loans, non-hedged

Convertible debenture loans

Other long-term liabilities

Short-term loans, non-hedged

Accounts payable and other short-
term liabilities

Interest rate derivatives

Forward foreign exchange contracts – outflows

Forward foreign exchange contracts – inflows

–55

–211

–47

–

–5,821

–2,824

–

–6,206

6,202

–55

–271

–47

–23

–

–12

–166

–2,549

– 1,302

–97

–

–12

–1

–1,212

–3,820

–

–12

–

–51

–239

–110

–

–5,088

–3,060

–6,033

6,064

–51

–1,813

–1,029

–25

–

–1

–640

–997

–1,444

–103

–

–8

–

> 5 years

–412

–3,601

–

Rating

Agency

Standard & Poor’s
Moody’s

Short-term Long-term

Outlook

A2
P2

A –
n/a

Stable
Stable

Ratings from both agencies remain unchanged from the
previous year.

Credit risk
Financial risk management exposes ASSA ABLOY to certain
counterparty risks. Such exposure may arise, for example,
from the placement of surplus cash, from accounts receiva-
ble, and from the use of debt securities and derivative
financial instruments.

ASSA ABLOY’s policy is to minimize the potential credit
risk from cash surplus by having no cash in bank accounts
and by using cash available from subsidiaries to amortize
ASSA ABLOY debt. This objective is controlled primarily
through the cash pool network put in place by the internal
bank. About 80 (80) percent of commercial sales were set-
tled through cash pools in 2007. The Group may neverthe-
less deposit surplus funds on a short-term basis with banks
in order to match debt maturities.

Derivative financial instruments are allocated to banks
according to risk factors set in the Group policy in order to
limit counterparty risk.

The internal bank enters into derivative contracts exclu-
sively with banks participating in the syndicated credit sys-
tem or with banks rated AAA and AA.

An ISDA (full netting of transactions in case of default by
one counterparty) is agreed in the case of interest derivatives.
Accounts receivable are spread over a large number of
individual customers, thus minimizing risk. Credit risk from
operating activities is monitored by local management at a
company level and reviewed by the respective division.

Commodity risk
The Group is exposed to price risk related to purchases of
certain commodities (primarily metals) used as raw materi-
als in its business. The Group’s policy is to not enter into
commodity hedge contracts.

Capital risk
The Group’s objectives regarding capital structure are to
safeguard the Group’s ability to continue as a going con-
cern in order to provide returns for its shareholders and
benefits for other stakeholders, and to maintain an optimal
capital structure to reduce the cost of capital. In order to
adjust the capital structure in response to need, the Group
can vary the amount paid as dividend to shareholders,
return capital to shareholders, issue new shares, or sell
assets to reduce debt. The Group monitors capital on the
basis of the ratio between net debt and equity.

Net debt is defined as interest-bearing liabilities less
interest-bearing assets. The table ‘Net debt / Equity’ below
shows the position at 31 December.

Net debt / Equity

Net debt
Equity

Net debt / Equity

31 Dec 2006

31 Dec 2007

13,560
13,645

0.99

12,953
15,668

0.83

Financial instruments
Derivative financial instruments such as currency and inter-
est rate forwards are used to the extent necessary. The use
of derivative financial instruments is solely to reduce expo-
sure to financial risks. Derivative financial instruments are
not used with speculative intent.

The positive and negative market values in the table

‘Outstanding derivative financial instruments’ overleaf
show the market values of instruments outstanding at
year-end, based on available market values, and are the
same as the values reported on the balance sheet. The
nominal value represents the gross value of the contract.

For accounting purposes financial instruments are allo-

cated to categories based on IAS 39. The second table
overleaf provides an overview of financial assets and lia-
bilities, measurement categories and carrying value and
fair value per item.

ASSA ABLOY
Annual Report 2007
66

Outstanding derivative financial instruments at 31 December, SEK M

31 December 2006

31 December 2007

Instrument

Foreign exchange forwards – funding
Foreign exchange forwards – transaction
Currency basket option
Interest rate swaps
Total

Positive
Market Value

Negative
Market Value

Nominal
Value

Positive
Market Value

Negative
Market Value

Nominal
Value

24
4
10
2
40

–20
–4
–
–18
–42

6,226
68
691
2,130
9,115

61
2
6
26
94

–19
–2
–
–5
–26

6,058
31
915
2,089
9,092

Financial instruments: carrying amounts and fair values by measurement categories

2006

IAS 39
category*

Carrying
amount

Fair
value

2007

Carrying
amount

1
1
1

1
3
1

2
4

4
4
4

4
4

241
5,081
405

–

40
40
1
–
1,154
1,154

1,100
4,910
6,010
1,252
116
6,281

24
42
2,143
681

241
5,081
405

–

40
40
1
–
1,154
1,154

1,076
4,847
5,923
1,251
116
6,280

24
42
2,143
681

170
5,537
449

68
94
0
51
1,287
1,338

1,024
4,781
5,805
2,245
122
5,258

–

26
26
2,503
624

Fair
value

170
5,537
449

68
94
0
51
1,287
1,338

1,073
4,920
5,993
2,245
122
5,258

–

26
26
2,503
624

SEK M

Financial assets
Other long-term financial assets
Accounts receivable
Other short-term receivables

Derivative financial instruments
– hedge accounting
Derivative financial instruments
– held for trading

Derivative financial instruments
Short-term investments
Treasury notes/bills
Other cash and cash equivalents
Cash and cash equivalents
Financial liabilities

Long-term loans, hedged
Long-term loans, non-hedged

Long-term loans
Convertible debenture loans
Other long-term liabilities
Short-term loans - non-hedged

Derivative financial instrument
– hedge accounting
Derivative financial instruments
– held for trading

Derivative financial instruments
Accounts payable
Other short-term liabilities

* Applicable IAS 39 categories:
1 = Loans and other receivables.
2 = Financial instruments at fair value through profit and loss.
3 = Available-for-sale financial assets.
4 = Financial liabilities at amortized cost.

Notes

ASSA ABLOY
Annual Report 2007
67

Note 1

Note 1 Significant accounting and valuation principles

The Group
ASSA ABLOY applies International Financial Reporting
Standards (IFRS) as endorsed by the European Union (EU),
the Swedish Annual Accounts Act and standard RR 30:06 of
the Financial Accounting Standards Council. The account-
ing principles are based on IFRS as endorsed by 31 Decem-
ber 2007 and have been applied to all years presented,
unless stated otherwise. This Note describes the most sig-
nificant accounting principles that have been applied in the
preparation of the financial reports, which comprise the
information appearing on pages 38–91.

Basis of preparation
ASSA ABLOY’s consolidated financial statements have been
prepared in accordance with IFRS as endorsed by the EU. The
consolidated financial statements have been prepared under
the historical cost convention, except regarding available-
for-sale financial assets and financial assets and liabilities
(including derivatives) at fair value through profit and loss.

The preparation of financial statements is based on esti-
mates and assumptions made for accounting purposes. The
management also makes judgments about the application
of the Group’s accounting principles. Estimates and
assumptions may affect the income statement and balance
sheet as well as the supplementary information that
appears in the financial reports. Thus changes in estimates
and assumptions may lead to changes in the financial state-
ments.

For example, estimates and assumptions play an im-
portant part in the valuation of items such as identifiable
assets and liabilities in acquisitions, impairment testing of
goodwill and other assets, the fixing of actuarial assump-
tions for calculating employee benefits and other types of
provisions as well as the valuation of deferred taxes. Esti-
mates and assumptions are continually reassessed and are
based on a combination of historical experience and rea-
sonable expectations about the future.

The Group considers that estimates and assumptions

relating to impairment testing of goodwill and other in -
tangible assets with indefinite useful life are of significant
importance to the consolidated financial statements. The
Group tests carrying amounts for impairment on an annual
basis. The recoverable amounts of Cash-Generating Units
are established by calculating their values in use. The calcu-
lations are based on certain assumptions about the future
which, for the Group, are associated with risks of material
adjustments in reported amounts during the next financial
year. Major assumptions and the effects of likely changes to
them are described in Note 15.

New and amended standards not yet effective
The following new IFRS and amendments to current IFRS
have been published but are not yet effective, and have not
been applied in the preparation of the financial reports.
•

IAS 1 Presentation of Financial Statements (amendment),
effective from 1 January 2009. Not yet endorsed by the EU.
IAS 23 Borrowing costs (amendment), effective from 1
January 2009. Not yet endorsed by the EU.
IAS 27 Consolidated and Separate Financial Statements
(amendment), effective from 1 July 2009. Not yet
endorsed by the EU.
IFRS 2 (amendment), effective from 1 January 2009.

•

IFRS 3 Business Combinations (amendment), effective
from 1 July 2009. Not yet endorsed by the EU.
IFRS 8 Operating Segments, effective from 1 January
2008.
IFRIC 11, IFRS 2 – Group and Treasury Share Transactions,
to be applied for annual periods beginning on or after 1
March 2007.
IFRIC 12, Service Concession Arrangements, effective
from 1 January 2008.
IFRIC 13, Customer loyalty programmes, effective from 1
July 2009. Not yet endorsed by the EU.
IFRIC 14, IAS 19 – The limit on a defined benefit asset, min-
imum funding requirements and their interaction, effec-
tive from 1 January 2008. Not yet endorsed by the EU.

Management analyses the impact of the new and amended
standards on the financial reports. Mainly, the amendments
to IAS 1, IAS 27, IFRS 3 and the new IFRS 8 are considered
relevant to the Group. These changes may have certain
impact on the Group’s financial reports. The changes will
not affect the financial reports prepared prior to the effec-
tive dates. The amendments to IAS 1 mainly affect the for-
mats and terms used in the financial reports. The amend-
ments to IAS 27 will have an impact on the accounting for
minority interest in future transactions. IFRS 3 will affect
the accounting of future business combinations regarding
transaction costs, deferred considerations contingent on
future events and business combinations achieved in
stages. IFRS 8 may have an impact on segment reporting. In
other respects, it is currently assessed that none of the new
and amended standards listed above will have a significant
impact on the Group’s financial statements.

Consolidated financial statements
The consolidated financial statements cover ASSA ABLOY
AB (the Parent company) and companies in which the Par-
ent company held, directly or indirectly, more than 50 per-
cent of the voting rights at the end of the period, as well as
companies in which the Parent company exercises control
by some other means, for example by having the power to
govern financial and operating policies. Companies
acquired during the year are included in the consolidated
financial statements with effect from the date when con-
trol was obtained. Companies sold during the year are
included in the consolidated financial statements up to the
date when control ceased.

The consolidated financial statements have been pre-

pared in accordance with the purchase method, which
means that the cost of acquisition of shares in subsidiaries
is eliminated against their equity at the time of acquisition.
In this context, equity in subsidiaries is determined on the
basis of the fair value of assets, liabilities and contingent
liabilities at the date of acquisition. Thus only that part of
subsidiaries’ equity that has arisen after the acquisition is
included in the Group’s equity. A positive difference
between the cost of acquisition and the fair value of the
Group’s share of acquired net assets is reported as good-
will. A negative difference, negative goodwill, is recognized
immediately in the income statement.

Intra-group trans actions and balance sheet items and
unrealized profits on transactions between Group compa-
nies are eliminated in the Group financial statements.

ASSA ABLOY
Annual Report 2007
68

Note 1 cont.

Minority interests
Minority interests are based on subsidiaries’ accounts with
application of fair value adjustments resulting from com-
pleted acquisition analysis. Minority participations in sub-
sidiaries’ income are reported in the income statement
with net income divided between the Parent company’s
shareholders and minority interests. Minority participa-
tions in subsidiaries’ equity are reported as a separate item
in the Group’s equity. Transactions with minority share-
holders are accounted for as third-party transactions.

Associates
Associates are defined as companies which are not subsidi-
aries but in which the Group has a significant, but not a
controlling, interest. This is usually taken to be companies
where the Group’s shareholding represents between 20
and 50 percent of the voting rights.

Participations in associates are accounted for in accord-
ance with the equity method. In the consolidated balance
sheet, shareholdings in associates are reported at cost,
adjusted for participation in income after the date of acqui-
sition. Dividends from associates are reported as a reduction
in the carrying amount of the investment. Participations in
the income of associates are reported in the consolidated
income statement as part of operating income as the invest-
ments are related to business operations.

Segment reporting
The Group’s business operations are split organizationally
into five divisions. Three divisions are based on products
sold in local markets in the respective division: EMEA, Ameri-
cas and Asia Pacific. Global Technologies’ and Entrance Sys-
tems’ products are sold worldwide. The divisions reflect a
partition of the Group’s operations according to major risks
and returns. The divisions form the operational structure
for internal control and reporting and also constitute the
Group’s segments for external financial reporting. There are
no secondary segments.

Foreign currency translation
Functional currency corresponds to local currency in each
country where Group companies operate. Transactions in
foreign currencies are translated to functional currency by
application of the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses arising
from the settlement of such transactions are normally
reported in the income statement, as are those arising
from translation of monetary balances in foreign curren-
cies at the closing-day rate. Exceptions are transactions
relating to qualifying cash flow hedges, which are reported
in equity. Receivables and liabilities are valued at the
closing-day rate.

In translating the accounts of foreign subsidiaries,
prepared in functional currencies other than the Group’s
presentation currency, all balance sheet items except
net income are translated at the closing-day rate and net
income is translated at the average rate. The income
statement is translated at the average rate for the period.
Exchange-rate differences arising from the translation of
foreign subsidiaries are reported in the translation reserve
in equity.

The rates for currencies used in the Group, relative to the

Group’s presentation currency (SEK), were as follows – the
weighted average for the year, and the closing-day rate.

Country

Currency

Average rate
2007
2006

Closing-day rate
2007

2006

ARS
Argentina
AUD
Australia
BRL
Brazil
CAD
Canada
CHF
Switzerland
CLP
Chile
China
CNY
Czech Republic CZK
DKK
Denmark
EEK
Estonia
EUR
Euro zone
United Kingdom GBP
HKD
Hong Kong
HUF
Hungary
ILS
Israel
KES
Kenya
KRW
South Korea
LTL
Lithuania
MXN
Mexico
MYR
Malaysia
NOK
Norway
NZD
New Zealand
PLN
Poland
RUR
Russia
SGD
Singapore
SIT
Slovenia
SKK
Slovakia
THB
Thailand
USD
USA
ZAR
South Africa

2.40
5.57
3.38
6.52
5.88
0.014
0.93
0.33
1.24
0.59
9.26
13.57
0.95
0.035
1.66
0.102
0.0077
2.68
0.68
2.01
1.15
4.82
2.38
0.27
4.64
0.039
0.25
0.19
7.38
1.10

2.16
5.65
3.46
6.29
5.63
0.013
0.89
0.33
1.24
0.59
9.24
13.48
0.86
0.037
1.65
0.100
0.0073
2.68
0.62
1.96
1.15
4.97
2.45
0.26
4.48
0.039
0.27
0.20
6.74
0.96

2.24
5.44
3.22
5.92
5.63
0.013
0.88
0.33
1.21
0.58
9.05
13.49
0.88
0.036
1.63
0.099
0.0074
2.62
0.63
1.95
1.09
4.85
2.36
0.26
4.48
0.038
0.26
0.19
6.87
0.99

2.04
5.64
3.59
6.54
5.68
0.013
0.88
0.35
1.26
0.60
9.42
12.79
0.82
0.037
1.66
0.101
0.0068
2.73
0.59
1.94
1.18
4.97
2.62
0.26
4.45
0.038
0.28
0.19
6.40
0.94

Revenue
Revenue comprises the fair value of goods sold, excluding
VAT and discounts and after eliminating intra-group sales.
The Group’s sales revenue arises principally from sales of
products. Service related to products sold makes up a very
limited fraction of revenue. Revenue from sales of the
Group’s products is recognized when all significant risks and
rewards associated with ownership are transferred to the
purchaser in accordance with applicable conditions of sale,
which is normally upon delivery. If the product requires
installation at the customer’s premises, revenue is recog-
nized when installation is completed. Revenue from service
contracts is recognized through distribution over the con-
tract period.

Intra-group sales
Transactions between Group companies are carried out at
arm’s length and thus at market prices. Intra-group sales
are eliminated from the consolidated income statement,
and profits on such transactions have been eliminated in
their entirety.

Government grants
Grants and support from governments, public authorities
etc are reported when there is reasonable assurance that
the company will comply with the conditions attaching to
the grant and that the grant will be received. Grants
related to assets are handled by reducing the carrying
amount of the asset by the amount of the grant.

Research and development
Research costs are expensed as they are incurred. The
costs of development work are reported in the balance
sheet only to the extent that they are expected to generate
future economic benefits for the Group and provided such

Note 1 cont.

ASSA ABLOY
Annual Report 2007
69

benefits can be reliably measured. Development costs so
reported are amortized over the expected useful life.
Development costs recorded as assets but not yet in use
are subject to annual impairment testing. Costs for devel-
opment of existing products are expensed as they are
incurred.

Borrowing costs
Borrowing costs are recognized as expenses in the period
in which they are incurred.

Other acquisition-related intangible assets consist chiefly
of various types of intangible rights such as brands, patents
and customer relationships. Identifiable acquisition-related
intangible assets are initially recognized at fair value at the
date of acquisition and subsequently at cost less accumu-
lated amortization and impairment losses. Amortization is
on a straight-line basis over estimated useful life. Acquisi-
tion-related intangible assets with indefinite useful life are
tested for impairment every year in the same way as good-
will, as described above.

Tax on income
The income statement includes all tax that is to be paid or
received for the current year, adjustments relating to tax
due for previous years, and changes in deferred tax. Tax
sums have been calculated as nominal amounts in accord-
ance with the tax regulations in each country and in
accordance with tax rates that have either been decided or
have been notified and can confidently be expected to be
confirmed. For items reported in the income statement,
associated tax effects are also reported in the income
statement. The tax effects of items reported directly
against equity are themselves reported against equity.
Deferred tax is accounted for under the liability method.
This means that deferred tax is accounted for on all temp-
orary differences between the carrying amounts of assets
and liabilities and their respective tax bases. Deferred tax
receivables relating to tax losses carried forward or other
future tax allowances are reported to the extent that it is
probable that the allowance can be set against taxable
income in future taxation. Deferred tax liabilities relating to
temporary differences resulting from investments in sub-
sidiaries are not reported in the consolidated financial
statements since the Parent company can control the time
at which the temporary differences are cancelled and it is
not considered likely that such cancellation will occur in
the foreseeable future. Deferred tax receivables and
deferred tax liabilities are offset when there is a legal right
to do so and when the deferred tax amounts concern the
same tax authority.

Cash flow statement
The cash flow statement has been prepared according to
the indirect method. The reported cash flow includes only
transactions involving cash payments.

Other intangible assets
An intangible asset that is not acquisition-related is
reported only if it is likely that the future economic benefits
associated with the asset will flow to the Group and if the
cost of the asset can be measured reliably. Such an asset is
initially recognized at cost and is amortized over its esti-
mated useful life, usually between three and five years. Its
carrying amount is cost less accumulated amortization and
impairment losses.

Tangible assets
Tangible assets are reported at cost less accumulated
depreciation and impairment losses. Cost includes expend-
iture that can be directly attributed to the acquisition of
the asset. Subsequent expenditure is added to the carrying
amount if it is probable that economic benefits associated
with it will flow to the Group and if the cost can be reliably
measured. Expenditure on repairs and maintenance is
expensed as it is incurred. Depreciable amount is the cost
of an asset less its residual value. No depreciation is applied
to land. For other assets, cost is depreciated over estimated
useful life, which for the Group leads to the following
depreciation periods (on average):
• office buildings, 50 years
•
• machinery and other technical plant, 7–10 years
• equipment and tools, 3–6 years.

industrial buildings, 25 years

An asset’s residual value and useful life are reviewed at each
financial year-end and adjusted when needed. Profit or loss
on the disposal of a tangible asset is recognized in the
income statement as ‘Other operating income’ or ‘Other
operating expenses’, based on the difference between the
selling price and the carrying amount.

Cash and cash equivalents
‘Cash and cash equivalents’ covers cash and bank balances
and short-term financial investments with durations of less
than three months from the date of acquisition.

Leasing
The Group’s leasing is chiefly operational leasing. The leasing
payments are expensed at a constant rate over the period
of the contract and are reported as operating costs.

Goodwill and acquisition-related intangible assets
Goodwill represents the positive difference between the
cost of acquisition and the fair value of the Group’s share of
the acquired company’s net identifiable assets at the date
of acquisition, and is reported at cost less accumulated
impairment losses. Goodwill is allocated to Cash-Generat-
ing Units (CGU) and each year is systematically tested for
impairment using a valuation model based on discounted
future cash flow. Deferred tax receivables based on local tax
rates are reported in terms of tax-deductible goodwill
(with corresponding reduction of the goodwill value). Such
deferred tax receivables are expensed as the tax deduction
is utilized.

Impairment
Assets with indefinite useful life are not amortized but are
tested for impairment on an annual basis. For impairment
testing purposes assets are grouped at the lowest organiza-
tional level where there are separate identifiable cash
flows, so called Cash-Generating Units (CGU). For assets
that are depreciated/amortized, impairment testing is car-
ried out when events or circumstances indicate that the
carrying amount may not be recoverable.

When impairment has been established, the value of
the asset is reduced to its recoverable amount. The recov-
erable amount is the higher of the asset’s fair value less
costs to sell, and its value in use.

ASSA ABLOY
Annual Report 2007
70

Note 1 cont.

Inventories
Inventories are valued in accordance with the ‘first in, first
out’ principle at the lower of cost and net realizable value
at year-end. Deductions are made for internal profits aris-
ing from deliveries between Group companies. Work in
progress and finished goods include both direct costs
incurred and a fair allocation of indirect manufacturing
costs.

Accounts receivable
Accounts receivable are reported at their fair value, which
corresponds to amortized cost less any provision for bad
debts. A provision is recognized when it is probable that
the recorded amounts will not flow to the Group. The
year’s change in such a provision is reported in the income
statement.

Financial instruments
Financial instruments are initially recorded at fair value.
Subsequent measurement of financial instruments
depends on the classification at initial recognition, which
in turn depends on the original purpose of acquiring the
instrument. Financial instruments are divided into the fol-
lowing categories:

‘Financial instruments at fair value through profit and
loss’ are financial assets held for trading, financial assets at
fair value through profit and loss (classified at inception)
and derivatives that are not part of a hedge relationship
qualifying for hedge accounting. Gains and losses arising
from changes in the fair value of financial instruments at
fair value through profit and loss are included in the
income statement in the period in which they arise. The
category includes current financial investments and deriva-
tives that are not part of hedge relationships qualifying for
hedge accounting. See also the section below regarding
hedge accounting.

‘Loans and other receivables’ are non-derivative finan-
cial assets, with fixed or determinable payments, which are
not traded on an active market. Such a receivable usually
arises when the Group provides a counterparty with cash
or supplies a customer with goods or services without
intention of trading the receivable. Loans and other receiv-
ables are carried at amortized cost using the effective inter-
est method. The category covers non-current receivables,
accounts receivable and other current receivables.

‘Available-for-sale financial assets’ includes non-deriva-
tive financial assets that are either classified as available for
sale or are not classified in any of the other categories of
financial assets. The Group normally holds a limited
number of positions falling into this category.

‘Financial liabilities at amortized cost’ are financial liabil-
ities which are neither recorded at fair value through profit
and loss nor included in a hedge relationship qualifying for
hedge accounting. Such financial liabilities are reported at
amortized cost using the effective interest method. The
category covers non-current and current loan liabilities
which are not hedged items, other non-current and current
liabilities, and accounts payable.

Acquisitions and disposals of financial instruments are
recognized on trade-date, i.e. when the Group is commit-
ted to the purchase or sale. Transaction costs are included
initially in the fair value of all financial instruments apart
from those reported at fair value through profit and loss.
The fair value of a quoted financial instrument is based

on the bid price on the closing day. Regarding financial

instruments in a non-active market and for unlisted securi-
ties, fair value is determined by using an appropriate method
of valuation, for example using available information on
comparable arm’s length transactions, comparison with
similar instruments, and analysis of discounted cash flows.

The current and non-current distinction is applied con-

sistently to all financial instruments. When settlement or
disposal is expected to occur more than 12 months after
closing day, a financial asset is reported as a non-current
asset. Thus, when settlement or disposal is expected to
occur within 12 months of closing day, financial assets are
reported as current assets.

Financial liabilities with maturity later than 12 months
after closing day are reported as non-current liabilities and
those with maturity within 12 months of closing day as cur-
rent liabilities.

A financial asset is derecognized when the right to
receive cash flow from the asset expires or is transferred to
another party because all risks and rewards associated with
the asset have been transferred to that party. A financial lia-
bility is derecognized when the obligation is discharged or
cancelled or when it expires.

Hedge accounting
Hedge accounting is applied only to transactions that are
designated to hedge a specific risk and that qualify for
hedge accounting. The Group holds a limited number of
such hedge relationships.

A financial liability is a hedged item when it is included

in a hedge relationship qualifying for hedge accounting,
thus effectively hedged by a derivative designated as a
hedging instrument. The liability (the hedged item) as well
as the derivative (the hedging instrument) is recognized at
fair value.

Changes in the fair value of a liability which is the

hedged item of a qualifying fair value hedge are reported in
the income statement in the period in which they arise.
Gain or loss from revaluation of the hedging instrument of
such a qualifying fair value hedge is reported in the income
statement at the same time as gain or loss from the hedged
item.

Gain or loss from revaluation of a hedging instrument

of a cash-flow hedge qualifying for hedge accounting is
reported in equity in the period in which it arises and is
transferred to the income statement in the period that the
hedged cash flow is recognized. Ineffective portion of the
gain or loss is reported in the income statement in the
period in which it arises.

Provisions
Provisions are recognized when the Group has a legal or
constructive obligation resulting from past events and it is
probable that an outflow of resources will be required to
settle the obligation and that a reliable estimate can be
made of the amount. Provisions are reported at a value rep-
resenting the probable outflow of resources that will be
needed to settle the obligation. The amount of a provision
is discounted to present value where the effect of time
value of money is material.

Employee benefits
Both defined contribution and defined benefit pension
plans exist in the Group. Comprehensive defined benefit
plans are found chiefly in the USA, the UK and Germany.
Post-employment medical benefits also exist, mainly in the

Note 1 cont.

ASSA ABLOY
Annual Report 2007
71

Dividend revenue
Dividend revenue is recognized when the right to receive
payment is judged to be firm.

Research and development costs
Research and development costs are expensed as they are
incurred.

Intangible assets
Intangible assets comprise patented technology and other
intangible rights. Intangible assets are amortized over 5
years.

Tangible assets
Tangible assets owned by the Parent company are
reported at cost less accumulated depreciation and any
impairment losses in the same way as for the Group. All
leasing contracts in the Parent company consist of opera-
tional leasing and are reported according to applicable
rules.

Shares in subsidiaries
Shares in subsidiaries are reported at cost less impairment
losses.

Financial instruments
Derivative financial instruments are recorded at fair value.
Changes in the fair values of derivative financial instru-
ments are reported in the income statement with the
exception of exchange rate differences related to a mone-
tary item that forms part of a net investment in a foreign
operation which are reported in the fair value reserve.

Group contributions
The company reports Group contributions in accordance
with UFR 2 (a statement from the Emerging Issues Task
Force of the Swedish Financial Accounting Standards Coun-
cil). Group contributions are reported according to their
financial implications. This means that Group contributions
that are paid with the aim of minimizing the Group’s total
tax charge are reported directly against equity after deduc-
tion for their actual tax effects. Group contributions com-
parable to dividends are reported as such, which means
that received Group contributions and their actual tax
effects are reported in the income statement and paid
Group contributions and their actual tax effects are
reported directly against equity.

USA, which are reported in the same way as defined benefit
pension plans. Calculations related to the Group’s defined
benefit plans are performed by independent actuaries and
are based on a number of actuarial assumptions such as
discount rate, future inflation and salary increases. Obliga-
tions are valued on the closing day at their discounted
value. For funded plans, obligations are reduced by the fair
value of the plan assets. Unrecognized actuarial gains and
losses lying outside the so-called ten-percent corridor (i.e.
exceeding the higher of 10 percent of the present value of
the obligation or the fair value of plan assets) are spread
over the expected average remaining working lives of the
employees. Pension costs for defined benefit plans are
spread over the employee’s service period. The part of the
interest component in the pension cost that relates to the
deficit in pension plans is reported as a financial expense.
The Group’s payments related to defined contribution pen-
sion plans are reported as cost in the period to which they
refer, based on the services performed by the employee.
Swedish Group companies apply UFR 4 which means that
tax on pension costs is calculated on the difference
between pension cost in accordance with IAS 19 and pen-
sion cost determined in accordance with local regulations.

Share-based incentive programs
Current share-based incentive programs were issued at
market value and therefore involve no personnel costs for
the Group.

Dividend
The dividend is reported as a liability once the Annual Gen-
eral Meeting has approved the dividend.

The Parent company
The Group’s Parent company, ASSA ABLOY AB, is responsible
for the management of the Group and handles common
Group functions. The Parent company’s revenue consists of
intra-group franchise and royalty revenues, and its main
balance sheet items consist of shares in subsidiaries, intra-
group receivables and liabilities, and external borrowing.
The Parent company has prepared its annual accounts in
accordance with the Swedish Annual Accounts Act
(1995:1554) and standard RR 32:06 of the Swedish Finan-
cial Accounting Standards Council. RR 32:06 requires the
Parent company, in its annual accounts, to apply all the
International Financial Reporting Standards (IFRS)
endorsed by the EU in so far as this is possible within the
framework of the Annual Accounts Act and with regard to
the relationship between accounting and taxation. RR
32:06 states what exceptions from, and additions to, IFRS
should be made.

Revenue
The Parent company’s revenue consists of intra-group
franchise and royalty revenues. These are reported in the
income statement as ‘Other operating income’ to make it
clear that the Parent company has no product sales simi-
lar to those of other Group companies concerned with
external business.

ASSA ABLOY
Annual Report 2007
72

Notes 2–8

Note 2 Sales
The Group’s sales revenues come chiefly from sales of prod-
ucts. Service related to products sold accounts for a very
limited part of revenues (3-4 percent).

Parent company
Other operating income in the Parent company consists
mainly of franchise and royalty revenues from subsidiaries.

Sales to customers, by country

Note 5 Share of earnings in associates

Group

2007

10,681
2,501
2,179
1,649
1,583
1,547
1,350
1,180
1,144
867
798
679
773
827
699
586
493
410
382
408
302
325
324
290
215
182
174
154
138
127
74
66
56
54
333
33,550

2006

10,421
2,431
2,107
1,610
1,310
1,435
1,168
1,119
1,038
800
702
696
629
597
547
431
455
405
369
343
303
291
279
251
180
178
167
134
118
116
82
59
46
58
262
31,137

SEK M

USA
France
United Kingdom
Germany
Australia
Sweden
Spain
Netherlands
Canada
Finland
Norway
Mexico
Denmark
China
Asia (excluding China)
Middle East
Italy
Belgium
Czech Republic
South America
Switzerland
New Zealand
South Africa
Austria
Russia
Africa (excluding South Africa)
Central America (excluding Mexico)
Baltic countries
Poland
Portugal
Ireland
Romania
Greece
Turkey
Other countries
Total

Note 3 Auditors’ fees

Group

Parent
company

SEK M

Låsgruppen Wilhelm Nielsen AS
Cerraduras de Colombia Cerracol S.A
Total

Group

2006

2007

3
5
8

3
6
9

Note 6 Operational leasing agreements

SEK M

Leasing fees paid during
the year:

Group

2006

2007

Parent company
2007

2006

230

273

SEK M

Nominal value of agreed
future leasing fees:
Due for payment in
2008 (2007)
Due for payment in
2009 (2008)
Due for payment in
2010 (2009)
Due for payment in
2011 (2010)
Due for payment in
2012 (2011)
Due for payment in
2013 (2012) or later
Total

Group

2006

2007

Parent company
2007

2006

207

167

138

100

153
844

254

199

155

113

145
942

11
64

12
72

Note 7 Expenses by nature

In the income statement costs are broken down by func-
tion. Cost of goods sold, Selling expenses, Administrative
expenses and Research & Development costs amount
to SEK 28,121 M (27,839). Below, these same costs are
broken down by nature:

Group

SEK M

2006

2007

2006

2007

SEK M

Audit
Pricewaterhouse-
Coopers
Other
Assignments other
than audit
Pricewaterhouse-
Coopers
Other
Total

19
5

17
4
45

22
6

5
45

3
–

1
–
4

2
–

2
2
6

Remuneration of employees (Note 9)
Direct material costs
Depreciation and write-downs
(Notes 8, 15, 16)
Restructuring costs excluding
write-downs
Other expenses
Total

2006

9,374
9,561

1,039

1,333
6,532
27,839

2007

10,066
10,721

910

–
6,424
28,121

Note 8 Depreciation and amortization

Note 4 Other operating income and expenses

SEK M

Rent received
Net income from sales of fixed assets
Government grants
Business-related taxes
Other, net
Total

Group

2006

2007

19
6
4
–32
–6
-9

14
52
4
–42
–9
19

SEK M

Intangible rights
Machinery
Equipment
Buildings
Land and land
improvements
Total

Group

Parent
company

2006

2007

2006

2007

61
459
246
129

3
898

107
436
239
126

1
909

31
–
2
–

–
33

210
–
2
–

–
212

Notes 9–12

Note 9 Employee benefits

Salaries, wages and other remuneration (of which,
performance-related salary paid to managing directors)

ASSA ABLOY
Annual Report 2007
73

Parent company

2006

2007

2.5
–
2.9
1.9
0.7
2.9
1.7

2.4
*
2.7
1.8
0.9
1.5
*

Absence for illness, %

Total absence for illness
– long-term
– men
– women
– aged 29 or younger
– aged 30-49
– aged 50 or older

* Information not displayed since it could be linked to specific individuals.

Note 10 Exchange-rate differences

in the income statement

Group

Parent
company

SEK M

2006

2007

2006

2007

Exchange-rate differen-
ces reported in the
income statement
Exchange-rate differen-
ces reported in financial
expenses (Note 12)
Total

–9

–20

–

–4
–13

–24
–44

–24
–24

–2

77
75

Note 11 Financial income

Group

Parent
company

SEK M

2006

2007

2006

2007

Earnings from participa-
tions in subsidiaries (A)
Intra-group interest
income
External interest income
and similar items
Total

–

30
30

–

533

1,489

725

803

27
27

2
1,260

2
2,294

(A) Earnings from participations in subsidiaries

Parent
company

SEK M

2007

2006

2007

Group

2006

2007

598 (9)
314 (0)
275 (1)
152 (1)
558 (2)
70 (0)
217 (1)
608 (1)
553 (4)
226 (3)
108 (0)
262 (1)
72 (0)
37 (–)
81 (–)
76 (–)
177 (1)
2,511 (9)
165 (0)
59 (0)
103 (1)
266 (0)
88 (–)
42 (2)
7,618 (36)

587 (8)
329 (0)
276 (1)
185 (0)
625 (3)
67 (0)
227 (2)
635 (4)
554 (4)
212 (1)
120 (1)
280 (2)
90 (0)
48 (–)
87 (–)
69 (–)
205 (1)
2,666 (8)
195 (1)
69 (0)
155 (0)
391 (0)
80 (–)
195 (0)
8,347 (36)

Parent company

2006

109 (6)
7 (–)
116 (6)

2007

96 (6)
12 (–)
108 (6)

SEK M

Sweden
Finland
Norway
Denmark
United Kingdom
Belgium
Netherlands
France
Germany
Switzerland
Italy
Spain
Czech Republic
Romania
Israel
South Africa
Canada
USA
Mexico
South America
China
Australia
New Zealand
Other
Total

SEK M

Sweden
Other
Total

Social costs (of which pensions)

SEK M
Total

Group

2006

2007
1,756 (413) 1,719 (384)

Parent company

2006
64 (29)

2007
55 (21)

Dividends from subsidiaries
Impairment of shares
in subsidiaries
Earnings from sales of shares
in subsidiaries
Total

1,695

1,489

–1,078

–

–84
533

0
1,489

Salaries and remuneration to the Executive Team
Salaries and other remuneration paid to the Executive Team
totaled SEK 63 M (52). Social costs totaled SEK 26 M (23), of
which SEK 13 M (12) are pension costs. The Executive Team
consists of 10 (9) people, all men. Detailed information
about salaries and remuneration to the Executive Team
appears in the Corporate Governance report (pages 49–50).

Salaries and remuneration to the Board of
Directors and the Parent company’s Executive Team
Salaries and other remuneration paid to the Board of Direc-
tors and the Parent company’s Executive Team totaled SEK
34 M (29). Social costs for the Board of Directors and the
Parent company’s Executive Team amounted to SEK 19 M
(18), of which SEK 8 M (9) are pension costs. The Board
(excluding employee representatives) and the Parent com-
pany’s Executive Team consist of 11 (11) people, of whom
1 (1) is a woman.

Severance pay agreement
For the CEO, a period of 24 months’ notice has been agreed
if the company terminates the contract. No severance pay-
ment agreement applies.

Impairment of shares in subsidiaries of SEK 1,078 M in 2006
was mainly due to dividends received from subsidiaries.

Note 12 Financial expenses

Group

Parent
company

SEK M

2006

2007

2006

2007

Intra-group interest
expenses
Interest expenses, con-
vertible debenture loans
Interest expenses,
other liabilities
Interest expenses,
inter est rate swaps
Interest expenses,
foreign exchange
forwards
Exchange-rate
differences on financial
instruments
Fair value adjustments
on derivatives, hedge
accounting
Fair value adjustments
on derivatives, non-
hedge accounting

Fair value adjustments
on borrowings, hedge
accounting

Fair value adjustments
on loan receivables

Other financial expenses
Total

–

–400

-484

–61

–76

–61

–574

–625

–158

–

–34

–53

–

–76

–88

–

–4

–12

–24

–

–15

–28

–30

–23

–18

–

–
–13
–701

–75
–10
–876

–
–23
–628

–75
–28
–703

ASSA ABLOY
Annual Report 2007
74

Notes 13–15

Note 13 Tax on income

Note 14 Earnings per share

SEK M

Current tax paid
Tax attributable to
prior years
Deferred tax
Total

Group

2006

2007

–887

–1,090

5
12

–14
–136
–870 –1,240

Parent
company

2006

–153

–
–
–153

2007

–209

12
–
–197

Explanation for the difference between nominal Swedish
tax rate and effective tax rate based on income before tax:

Percent

2006

2007

2006

2007

Group

Parent
company

Swedish rate of tax
on income
Effect of foreign tax rates
Non-taxable income/
non-deductible
expenses, net
Deductible goodwill
Tax losses utilized
Other
Effective tax rate in
income statement

28
5

–2
2
–1
1

28
3

–3
–1
–1
1

28
–

–13
–
–
–

28
–

–20
–
–
–

Earnings per share before dilution

Earnings assigned to the Parent
company's shareholders
Weighted average number of shares
issued (thousands)
Earnings per share before dilution
(SEK per share)

Earnings per share after dilution

Earnings assigned to the Parent
company's shareholders
Interest expenses for convertible
debenture loans, after tax
Net profit for calculating earnings per
share after dilution
Weighted average number of shares
issued (thousands)
Assumed conversion of convertible
debentures (thousands)
Weighted average number of shares
for calculation (thousands)
Earnings per share after dilution
(SEK per share)

Group

2006

2007

1,746

3,358

365,918

4.77

9.18

Group

2006

2007

1,746

3,358

1,790

3,413

365,918

13,296

12,615

379,214

378,533

4.72

9.02

Group

Intangible
rights

Parent company

Total

Intangible rights

Carrying amount

17,271

1,437

18,708

Note 15 Intangible assets

2007 SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Adjustments for acquisitions in the previous year
Sales/disposals
Reclassifications
Translation differences

Closing accumulated acquisition value

Opening accumulated amortization/impairment
Sales/disposals
Reclassifications
Impairment
Depreciation for the year
Translation differences
Closing accumulated amortization/impairment

Goodwill

16,683
–
1,029
–22
–
–
–419

17,271

–
–
–
–
–
–
–

2006 SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Translation differences

Closing accumulated acquisition value

Opening accumulated amortization/impairment
Sales/disposals
Reclassifications
Impairment
Amortization for the year
Translation differences
Closing accumulated amortization/impairment

Goodwill

15,716
–
2,263
–9
–
–1,287

16,683

–
–
–
–
–
–
–

1,474
103
341
–
–2
–
–50

1,866

–332
2
–
–
–107
8
–429

18,157
103
1,370
–22
–2
–
–469

19,137

–332
2
–
–
–107
8
–429

666
84
828
–9
–
–95

1,474

–305
4
–
–
–61
30
–332

16,382
84
3,091
–18
–
–1,382

18,157

–305
4
–
–
–61
30
–332

Carrying amount

16,683

1,142

17,825

443
495
–
–
–
–
–

938

–36
–
–
–
–210
–
–246

692

41
402
–
–
–
–

443

–5
–
–
–
–31
–
–36

407

Group

Intangible
rights

Parent company

Total

Intangible rights

ASSA ABLOY
Annual Report 2007
75

Note 15 cont.

Intangible rights consist mainly of licenses and brands. The carrying value of intangible rights with indefinite life amounts
to SEK 763 M (587).

Useful life is taken as indefinite where the time period during which it is judged that an asset will contribute economic

benefits cannot be defined.

Amortization and impairment of intangible rights have mainly been reported as costs of goods sold in the income

statement.

Impairment testing of goodwill and intangible rights with indefinite useful life
Goodwill and intangible rights with indefinite useful life are assigned to the Group’s Cash Generating Units (CGU). The
restructuring currently in process in the Group is leading to significantly greater harmonization of product development, pur-
chasing, manufacturing and selling between the business units. As one effect of this, the Group’s five divisions constitute Cash
Generating Units from 2007.

For each Cash-Generating Unit, the Group assesses each year whether any write-down of goodwill is needed, in accord-

ance with the accounting principles described in Note 1. Recoverable amounts for Cash Generating Units have been
established by calculation of value in use. These calculations are based on estimated future cash flows, which in turn are
based on financial budgets approved by the management and covering a three-year period. Cash flows beyond three years
are extrapolated using estimated growth rates according to the principles below.
Main assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the budgeted three-year period.
• Discount rate after tax used for estimated future cash flows.

The management has established the budgeted operating margin on a basis of previous results and its expectations
about future market development. For extrapolating cash flows beyond the three-year period, a growth rate of 3 percent
is used for all Cash Generating Units. This growth rate is thought to be a conservative estimate. In addition, an average dis-
count rate in local currency after tax is used for the Group.

2007
Overall, the discount rate employed varied between 9.0 and 10.0 percent (EMEA 9.0 percent, Americas 9.0 percent, Asia
Pacific 10.0 percent, Global Technologies 10.0 percent and Entrance Systems 9.0 percent).

Goodwill and intangible rights with indefinite useful life were assigned to the Group’s Cash Generating Units as sum-

marized in the following table:

SEK M

Goodwill
Intangible rights with
indefinite useful life

Total

EMEA

4,926

4,999

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

4,928

161

5,089

1,211

219

1,430

3,639

310

3,949

2,566

–

2,566

Total

17,270

763

18,033

2006
Overall, the discount rate employed varied between 7.0 and 9.0 percent (HID Group 9.0 percent, Architectural Hardware
7.5 percent and Entrance Systems 7.0 percent). Goodwill and intangible rights with indefinite useful life were assigned to
the Group’s Cash Generating Units as summarized in the following table:

SEK M

Goodwill
Intangible rights with
indefinite useful life

Total

HID Group

2,977

333

3,310

Architectural
Hardware
Group

ASSA ABLOY
Entrance
Systems

3,012

–

3,012

2,741

2,760

Other

7,953

235

8,188

Total

16,683

587

17,270

Sensitivity analysis
A sensitivity analysis has been carried out for each Cash-Generating Unit. The results of the analyses can be summarized as
follows.

2007
If the estimated operating margin after the end of the budget period had been 10 percent lower than the management’s
figure, total recoverable amount would be 9 percent lower (EMEA 9.0 percent, Americas 10.0 percent, Asia Pacific 9.0 per-
cent, Global Technologies 9.0 percent and Entrance Systems 10.0 percent).

If the estimated growth rate to extrapolate cash flows beyond the budget period had been 10 percent lower than the

starting assumption of 3 percent, total recoverable amount would be 4 percent lower (EMEA 4.0 percent, Americas 4.0
percent, Asia Pacific 4.0 percent, Global Technologies 4.0 percent and Entrance Systems 4.0 percent).

If the estimated weighted capital expenditure used for the Group’s discounted cash flow had been 10 percent higher than

the starting assumption of 9.0 to 10.0 percent, total recoverable amount would be 13 percent lower (EMEA 13.0 percent,

ASSA ABLOY
Annual Report 2007
76

Americas 13.0 percent, Asia Pacific 13.0 percent, Global Technologies 13.0 percent and Entrance Systems 13.0 percent).

These calculations are hypothetical and should not be viewed as an indication that these figures are any more or less

likely to be changed. The sensitivity analysis should therefore be treated with caution.

None of the hypothetical cases above would lead to an impairment of goodwill in a particular Cash-Generating Unit.

2006
If the estimated operating margin after the end of the budget period had been 10 percent lower than the management’s
figure, total recoverable amount, and likewise the recoverable amount for HID Group, Architectural Hardware Group and
Entrance Systems, would be 9 percent lower.

If the estimated growth rate to extrapolate cash flows beyond the budget period had been 10 percent lower than the
starting assumption of 3 percent, total recoverable amount, and likewise the recoverable amount for HID Group, Architec-
tural Hardware Group and Entrance Systems, would be 6 percent lower.

If the estimated weighted capital expenditure used for the Group’s discounted cash flow had been 10 percent higher
than the starting assumption of 7.0 to 9.0 percent, total recoverable amount, and likewise the recoverable amount for HID
Group, Architectural Hardware Group and Entrance Systems, would be 14 percent lower.

These calculations are hypothetical and should not be viewed as an indication that these figures are any more or less

likely to be changed. The sensitivity analysis should therefore be treated with caution.

Note 16

None of the hypothetical cases above would lead to an impairment of goodwill in a particular Cash-Generating Unit.

Note 16 Tangible assets

2007 SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Translation differences

Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Reclassifications
Impairment
Depreciation for the year
Translation differences

Closing accumulated
depreciation/impairment

Construction in progress
Book value

Group

Parent
company

Land and
land im-
provements

Buildings

Machinery

Equipment

Total

Equipment

2,982
166
83
–165
48
19

3,133

–1,282
71
–
–
–126
–15

–1,352

700
5
72
–28
–19
6

736

–24
–
–
–
–1
0

–25

5,575
310
73
–120
58
63

5,959

–3,789
100
18
–
–436
–18

1,764
214
35
–122
66
9

1,966

–1,189
103
–18
–1
–239
–10

11,021
695
263
–435
153
97

11,794

–6,284
274
0
–1
–802
–43

–4,125

–1,354

–6,857

1,781

711

1,834

612

408
5,345

17
3
–
–4
–
–

–10
2
–
–
–2
–

–10

The tax value of the Group’s Swedish buildings was SEK 87 M (82).
The tax value of the Group’s Swedish land was SEK 14 M (12).

2006 SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Translation differences

Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Impairment
Depreciation for the year
Translation differences

Closing accumulated depreciation
/impairment
Construction in progress
Book value

Group

Parent
company

Land and
land im-
provements

Buildings

Machinery

Equipment

Total

Equipment

3,150
74
24
–85
23
–204

2,982

–1,212
13
–34
–129
80

–1,282

1,700

761
2
–
–14
–
–49

700

–24
–
–
–3
3

–24

676

5,745
316
51
–157
50
–430

5,575

–3,676
134
–70
–460
283

1,688
213
45
–110
44
–116

1,764

–1,084
91
–37
–246
87

–3,789

–1,189

1,786

575

11,344
605
120
–366
117
–799

11,021

–5,996
238
–141
–838
453

–6,284
383
5,120

19
2
–
–4
–
–

–9
1
–
–2
–

–10

Notes 17 –18

Note 17 Shares in subsidiaries

ASSA ABLOY
Annual Report 2007
77

Company name

ASSA Sverige AB
Timelox AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Kredit AB
ASSA ABLOY Identification Technology Group AB
ASSA ABLOY Svensk Fastighets AB
ASSA ABLOY Asia Holding AB
ASSA ABLOY IP AB
ASSA ABLOY OY
ASSA ABLOY Norge a.s.
ASSA ABLOY Danmark A/S
ASSA ABLOY Deutschland GmbH
ASSA ABLOY Nederland BV
Nemef BV
Integrated Engineering B.V.
ASSA ABLOY France SAS
Interlock Holding AG
ASSA ABLOY Identification Technologies
Switzerland S.A.
ASSA ABLOY Holding GmbH
ASSA ABLOY Ltd
ITG (UK) Ltd
Aontec Teoranta
Mul-T-Lock Ltd
ASSA ABLOY Holdings (SA) Ltd
ASSA ABLOY Inc
Fleming Door Products, Ltd
ABLOY Holdings Ltd
AAC Acquisition Inc.
ASSA ABLOY Australia Pacific Pty Ltd
ASSA ABLOY South Asia Pte Ltd
Grupo Industrial Phillips, S.A de C.V.
ASSA ABLOY Innovation AB
ASSA ABLOY Hospitality AB
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Total

Note 18 Shares in associates

2007 Company name

Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Papan Security Industries Co. Ltd.
Cerraduras de Colombia Cerracol S.A
Renato Fattorini SRL
Other
Total

2006 Company name

Talleres Agui S.A.
Låsgruppen Wilhelm Nielsen AS
Cerraduras de Colombia Cerracol S.A
Renato Fattorini SRL
Other
Total

Corporate identity number,
Registered office

Number
of shares

% of share
capital

Book value,
SEK M

Parent company

556061-8455 Eskilstuna
556214-7735 Landskrona
556204-8511 Landskrona
556047-9148 Stockholm
556645-4087 Stockholm
556645-0275 Stockholm
556602-4500 Stockholm
556608-2979 Stockholm
1094741-7 Joensuu
979207476 Moss
CVR 10050316 Herlev
HR B 66227 Berlin
23028070 Dordrecht
08023138 Apeldoorn
33216643, Amsterdam
412140907 R.C.S. Versailles
CH-020.3.913.588-8 Zürich

CH-232-0730018-2 Granges
FN 273601f, A-6175 Kematen
2096505 Willenhall
5099094 Haverhill
364896, Galway
520036583 Yavne
1948/030356/06 Johannesburg
39347-83 Salem, Oregon
147126 Ontario
1148165260 St Laurent
002098175 Ontario
ACN 095354582 Oakleigh, Victoria
199804395K Singapore
GIP980312169 Mexico
556192-3201 Stockholm
556180-7156 Göteborg
EC21330 Bermuda
53451 Hong Kong

70
15,000
1,000
400
1,000
1,000
1,000
1,000
800,000
150,000
60,500
2
3,515
4,000
500
12,499,999
10,736

2,500
1
1,330,000
1
501,000
13,787,856
100,220
100
25,846,590
1
1
48,190,000
3,400,000
27,036,635
2,500
1,000
100,100
1,000,000

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
98

100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100

14
22
31
529
220
0
189
0
631
538
376
1,064
88
928
78
1,582
0

47
15
1,705
1
333
901
184
2,259
0
13
78
242
43
765
1
14
303
72
13,266

Country of
registration

Spain
Norway
China
Colombia
Italy

Country of
registration

Spain
Norway
Colombia
Italy

Group

Number
of shares

% of share
capital

Book value
SEK M

4,800
305
123,323
182,682
–
–

Number
of shares

4,800
305
182,682
–
–

40
50
3
29
25
–

14
12
5
2
5
1
39

Group

%,of share
capital

Book value
SEK M

40
50
29
25
–

17
12
2
2
0
33

ASSA ABLOY
Annual Report 2007
78

Notes 19–23

Note 19 Deferred tax on income

Note 22 Accounts receivable

Group

2006

2007

SEK M

Accounts receivable
Provision for bad debts
Total

Group

2006

5,359
–278
5,081

2007

5,831
–294
5,537

There is a limited concentration of credit risks associated
with accounts receivable because the Group has a large
number of customers with a wide international spread.
The fair value of receivables equals their carrying value.

SEK M

Deferred tax receivables
Tax-deductible goodwill
Pensions
Other deferred tax receivables
Deferred tax receivables
Deferred tax liabilities
Deferred tax receivables, net

Change in deferred tax during the year
At 1 January
Acquisitions of subsidiaries
Reported in income statement
Exchange-rate differences
At 31 December

533
250
306
1,089
106
983

1,196
–174
12
–51
983

439
187
255
881
119
762

983
–84
–136
–1
762

The group has additional tax losses carried forward of
some SEK 900 M (700) for which deferred tax receivables
have not been recognized.

Note 20 Other long-term financial assets

Group

Parent
company

SEK M

2006

2007

2006

2007

Other shares and partici-
pations
Interest-bearing long-
term receivables
Other long-term receiv-
ables
Total

128

105

95
241

28
170

118
174

–
101

Other shares and participations are valued at acquisition
value. Interest-bearing long-term receivables and other long-
term receivables are valued at accrued acquisition value.

Maturity analysis

Accounts receivable not due

Accounts receivable past due not impaired
< 3 months
3 –12 months
> 12 months

Impaired accounts receivable
< 3 months
3 –12 months
> 12 months

Provision for bad debts
Total

Carrying amount per currency

EUR
USD
GBP
AUD
SEK
Other currencies
Total

Note 21 Inventories

Current year’s change in provision for bad debts

SEK M

Materials and supplies
Work in progress
Finished goods
Paid in advance
Total

Group

2006

1,171
1,207
1,575
73
4,026

2007

1,157
1,361
1,782
99
4,399

Opening balance
Acquisitions (+) / disposals (–)
Receivables written off
Reversal of unused amounts
Provision for bad debts
Translation differences
Closing balance

Note 23 Derivative financial instruments

Direct material costs during the year amounted to SEK
10,721 M (9,561), of which SEK 103M (185) represented
write-downs of inventory.

SEK M

Derivative, positive value (assets)
Interest rate swaps – fair value hedging
Interest rate swaps – held for trading
Currency basket options
Currency contracts – held for trading

Derivative, negative value (liabilities)
Interest rate swaps – fair value hedging
Interest rate swaps – held for trading
Currency contracts – held for trading

Derivative financial instruments, net
(liability)

Group

2006

2007

–
2
10
28

–18
–
–24
–42

–2

26
–
6
62

–
–5
–21
–26

3,866

1,292
156
17

1,465

216
144
140
500

–294
5,537

1,947
1,621
362
269
202
1,136
5,537

278
8
–71
–23
89
13
294

Notes 24–25

Note 24 Cash and cash equivalents

Group

Parent
company

SEK M

2006

2007

2006

2007

Cash and bank balances
Short-term investments
(duration <3 months)
Total

1,115

1,212

39
1,154

126
1,338

–
1

–
0

Short-term investments shown in the consolidated balance
sheet amounted to SEK 126 M (40) at year-end, of which
SEK 0 M (1) were either non-realizable receivables with a
term to maturity of over three months or investments in
securities. These items are not classified as cash and cash
equivalents and are not included in the table above.

The Parent company’s and cash equivalents are held in

a sub-account to the Group cash pool and from 2007 are
classified as short-term balances with subsidiaries. Compar-
atives have been adjusted accordingly.

Note 25 Borrowings

SEK M

Long-term loans (A)
Convertible debenture
loans long-term part (A, B)
Long-term loans, total (A)
Short-term loans (C)
Short-term loans, total
Total

Group

2006

2007

6,010

5,805

1,252
7,262
6,281
6,281

2,245
8,050
5,258
5,258
13,543 13,308

Parent
company

2006

1,500

1,252
2,752
536
536
3,288

2007

1,500

2,245
3,745
622
622
4,367

Also see the section ‘Financial risk management’ on pages
63-66.

(A) Long-term loans
The Parent company’s long-term loans mature within five
years. The maturities for the Group’s long-term loans,
including the long-term part of convertible debenture
loans, are:

ASSA ABLOY
Annual Report 2007
79

Incentive 2004 has a variable interest rate equivalent to
0.9* EURIBOR + 47 basis points. Any conversion of Incen-
tive 2004 will take place in a 90-day period between March
and June 2009. Full conversion at a conversion rate of EUR
10.20 for Bond 1, of EUR 12.20 for Bond 2, of EUR 14.30 for
Bond 3 and of EUR 16.30 for Bond 4 will add 7,782,155
shares. The dilution effects with full conversion will amount
to 2.1 percent of share capital and 1.4 percent of the total
number of votes.

Incentive 2006 has a variable interest rate equivalent to

0.9* EURIBOR + 45 basis points. Any conversion of Incen-
tive 2006 will take place in a 180-day period between
December 2010 and June 2011. Full conversion at a con-
version rate of EUR 14.60 for Bond 1, of EUR 15.90 for Bond
2, of EUR 17.30 for Bond 3 and of EUR 18.60 for Bond 4 will
add 2,332,350 shares. The dilution effects with full conver-
sion will amount to 0.6 percent of share capital and 0.4
percent of the total number of votes.

Incentive 2007 has a variable interest rate equivalent to

0.9* EURIBOR + 35 basis points. Any conversion of Incen-
tive 2007 will take place in a 30-day period in May and June
2012. Full conversion at a conversion rate of EUR 18.00 for
Bond 1, of EUR 20.50 for Bond 2, of EUR 23.00 for Bond 3
and of EUR 25.40 for Bond 4 will add 4,679,610 shares. The
dilution effects with full conversion will amount to 1.2 per-
cent of share capital and 0.8 percent of the total number of
votes.

Incentive 2007 has been issued at the nominal amount
of the convertible bond. The valuation has been performed
by an external party and based on customary methods, by
the use of Black & Scholes, taking into account conditions
specific for the program.

Full conversion of the three programs will add a total of
14,794,115 shares and result in dilution effects amounting
to 3.9 percent of share capital and 2.6 percent of the total
number of votes. Incentive 2004 has a value of EUR 100 M,
Incentive 2006 has a value of EUR 38 M and Incentive 2007
has a value of EUR 100 M.

SEK M

Corporate credit line
Other short-term loans
Carrying amount

Group

2006

482
5,799
6,281

2007

243
5,015
5,258

Fair value of short-term loans

6,280

5,258

Group

2007

4,850
3,200
8,050

8,238

SEK M

Between two and five years
Over five years
Carrying amount

Fair value of long-term loans

Securities pledged against long-term loans:
Real estate mortgages
Total

(B) Convertible debenture loans

SEK M

Incentive 2004
Incentive 2006
Incentive 2007
Carrying amount

Fair value of convertible debenture loans

2006

3,276
3,986
7,262

7,174

47
47

2006

905
347
–
1,252

1,251

40
40

Overdrafts granted to the Group totaled SEK 1,682 M
(1,226), of which SEK 243M (482) was utilized.

Group

2007

942
362
942
2,245

2,245

ASSA ABLOY
Annual Report 2007
80

Notes 26–29

Note 26 Parent company’s equity
The Parent company’s equity is split between restricted
and unrestricted equity. Restricted equity consists of share
capital, the statutory reserve and the fair value reserve.
Restricted funds must not be reduced by issue of dividends.
Unrestricted equity consists of retained earnings and the
year’s net income.

The statutory reserve contains premiums (amounts
received from share issues that exceed the nominal value
of the shares) relating to shares issued up to 2005.

Note 27 Share capital, number of shares and

dividend per share

Number of shares (thousands)

Series A

Series B

Total

Share
capital
SEK T

19,175

346,743

365,918

19,175

346,743

365,918

191,753

346,743

538,496

19,175

346,743

365,918

19,175

346,743

365,918

191,753

346,743

538,496

Opening balance
at 1 January 2006

Closing balance at
31 December 2006

Number of votes,
thousands

Opening balance
at 1 January 2007

Closing balance at
31 December 2007

Number of votes,
thousands

All shares have a par value of SEK 1.00 and provide the
holders with equal rights to the Company’s assets and
earnings. All shares are entitled to dividends subsequently
issued. Each Series A share carries ten votes and each Series
B share one vote. All issued shares are fully paid-up.

The average number of shares during the year, to the
nearest thousand, was 365,918 thousand (365,918). The
average number of shares after full conversion of outstand-
ing convertible bonds, similarly rounded, was 378,533
thousand (379,214).

Dividend per share
The dividend paid out during the financial year amounted
to a total sum of SEK 1,189 M (1,189), corresponding to
SEK 3.25 (3.25) per share. At the Annual General Meeting
on 24 April 2008, a dividend of SEK 3.60 per share for the
year 2007 – a total sum of SEK 1,317 M – will be proposed.

Note 28 Reserves

Group (SEK M)

Opening balance at
1 January 2006
Translation differences
Financial instruments, fair value
Closing balance at 31
December 2006

Opening balance at
1 January 2007
Translation differences
Financial instruments, fair value
Closing balance at 31
December 2007

Trans-
lation
reserve

1,060
–1,313
–

–253

–253
–287
–

–540

Hedging
reserve

Total

1
–
–1

1,061
–1,313
–1

0
–
0

–253

–253
–287
0

–540

The translation reserve consists of all currency translation
differences that arise in the translation of financial reports
from foreign operations prepared in a currency other than
Swedish kronor, the currency used to present the Group’s
financial reports. If a foreign operation is sold, translation
differences are transferred to the income statement.

Note 29 Post-employment employee benefits
Post-employment employee benefits include pensions and
medical benefits. Pension plans are classified as either
defined benefit plans or defined contribution plans. Pen-
sion obligations reported in the balance sheet are mainly
due to defined benefit pension plans. ASSA ABLOY has
defined benefit plans in a number of countries, those in the
USA and the UK being the most significant ones. There are
also obligations related to post-retirement medical bene-
fits in the USA.

Amounts recognized in the income statement

Pension costs (SEK M)

2006

2007

Defined benefit pension charges (A)
Defined contribution pension charges
Post-employment medical
benefit charges (A)
Total

84
299

30
413

29
326

29
384

Amounts recognized in the balance sheet
Pension provisions (SEK M)

2006

2007

Provisions for defined benefit
pension plans (B)
Provisions for post-employment
medical benefits (B)
Provisions for defined contribution
pension plans
Pension provisions
Financial assets
Pension provisions, net

808

406

83
1,297
–21
1,276

701

383

72
1,156
–20
1,136

Note 29 cont.

A) Specification of amounts recognized in the income statement

ASSA ABLOY
Annual Report 2007
81

Post-employment
medical benefits

Defined benefit
pension plans

Total

Pension cost (SEK M)

2006

2007

Current service cost
Interest on obligation
Expected return on plan assets
Net actuarial losses (gains)
Past service cost
Losses (gains) on curtailments/settlements

Total
of which, included in
Operating income
Net financial items
Total

7
23
–
–
–
–

7
23
30

7
22
–
–
–
–

7
22
29

2006

73
204
–202
1
2
6

82
2
84

2007

58
206
–214
0
0
–21

58
–29
29

2006

80
227
–202
1
2
6

114

89
25
114

2007

65
228
–214
0
0
–21

65
–7
58

Actuarial gains/losses resulting from changes in the actuarial assumptions for defined benefit pension plans are recognized to
the extent that their accumulated amount exceeds the ‘corridor’, i.e. 10 percent of the higher of the obligation’s present
value or the fair value of plan assets. The surplus/deficit outside the 10 percent corridor is recognized as income/expense over
the expected average remaining service period, starting in the year after the actuarial gain or loss arose. Amortization of actu-
arial gains/losses that arose in 2007 will start in 2008.

The actual return on plan assets regarding defined benefit plans was SEK 239 M (267) in 2007.
There are no defined benefit plans with surpluses within the Group. Partly funded or unfunded pension plans are

reported as provisions for pensions.

B) Specification of amounts recognized in the balance sheet

Specification of pension provisions (SEK M)

Present value of funded obligations (C)
Fair value of plan assets (D)
Net value of funded plans
Present value of unfunded obligations (C)
Unrecognized actuarial gains (losses), net
Unrecognized past service cost
Total

C) Movement in pension obligations

SEK M

Opening obligation
Current service cost
Interest on obligation
Actuarial losses (gains)
Curtailments / settlements
Payments
Translation differences
Closing obligation

D) Movement in fair value of plan assets

SEK M

Opening fair value of plan assets
Expected return on plan assets
Actuarial gains (losses)
Curtailments / settlements
Net payments
Translation differences
Closing fair value of plan assets (E)

Post-employment
medical benefits

2006

2007

–
–
–
406
2
–2
406

–
–
–
391
–4
–4
383

Defined benefit
pension plans

Total

2006

3,823
–3,133
690
258
–140
–
808

2007

3,733
–3,177
556
260
–114
–1
701

2006

3,823
–3,133
690
664
–138
–2
1,214

Post-employment
medical benefits

2006

2007

475
7
23
–16
–
–25
–58
406

406
7
22
6
2
–28
–24
391

Defined benefit
pension plans

Total

2006

4,417
73
204
–120
–68
–144
–281
4,081

2007

4,081
58
206
13
–40
–175
–150
3,993

2006

4,892
80
227
–136
–68
–169
–339
4,487

2007

3,733
–3,177
556
651
–118
–5
1,084

2007

4,487
65
228
19
–38
–203
–174
4,384

Defined benefit
pension plans

2006

3,009
202
65
–72
186
–257
3,133

2007

3,133
214
25
–
–16
–179
3,177

ASSA ABLOY
Annual Report 2007
82

Note 29 cont.

E) Plan asset allocation

Plan assets

Shares
Debt instruments
Other assets

Key actuarial assumptions (yearly, weighted average)

Discount rate
Expected return on plan assets1
Future salary increases
Future pension increases
Future medical benefit increases
Expected inflation

As at 31 December

Present value of obligation (+)
Fair value of plan assets (–)
Obligation, net

2004

3,960
–2,243
1,717

2005

4,892
–3,009
1,883

2006

2,355
620
158

3,133

2006

5.2%
7.2%
2.1%
2.7%
12.0%
2.8%

2006

4,487
–3,133
1,354

2007

2,356
633
188

3,177

2007

5.6%
7.1%
2.4%
2.7%
11.0%
2.9%

2007

4,384
–3,177
1,207

1 The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current investment policy. Plan assets
chiefly consist of equity instruments and the expected return reflects long-term rates of return on the market.

Pensions with Alecta
Commitments for old-age pensions and family pensions for salaried employees in Sweden are guaranteed in part through
insurance with Alecta. According to UFR 3 this is a defined benefit plan that covers many employers. For the 2007 financial
year the company has not had access to information making it possible to report this plan as a defined benefit plan. Pen-
sion plans in accordance with ITP that are guaranteed through insurance with Alecta are therefore reported as defined
contribution plans. The year’s contributions that are contracted to Alecta amount to SEK 9 M (11), of which SEK 4 M (4)
relates to the Parent company. Alecta’s surplus may be distributed to the policy-holders and/or the persons insured. At the
end of 2007 Alecta’s surplus expressed as collective consolidation level amounted to 152.0 (143.1) percent. Collective
consolidation level consists of the market value of Alecta’s assets as a percentage of its insurance commitments calculated
according to Alecta’s actuarial calculation assumptions, which do not comply with IAS 19.

Notes 30–35

Note 30 Other provisions

Note 33 Contingent liabilities

SEK M

Opening balance at
1 January 2006
Reclassifications
Provisions for the year
Acquisitions of subsidiaries
Utilized during the year
Translation differences
Closing balance at 31 Dec 2006

Opening balance at
1 January 2007
Reclassifications
Reversal of unused amounts
Provisions for the year
Acquisitions of subsidiaries
Utilized during the year
Translation differences

Closing balance at 31 Dec 2007

Balance-sheet breakdown:

Other long-term provisions
Other short-term provisions
Total

Group

Restruc-
turing
reserve

Other

Total

344
–
1,265
–
–342
–10
1,257

1,257
–3
–74
54
–
–424
18

828

88
91
27
6
–22
–4
186

186
164
–
17
293
–94
–54

512

Group

2006

751
692
1,443

432
91
1,292
6
–364
–14
1,443

1,443
161
–74
71
293
–518
–36

1,340

2007

774
566
1,340

The restructuring reserve is concerned chiefly with the
ongoing three-year restructuring program initiated in
2006. The closing balance of the provision is expected to
be utilized during the coming two-year period and is
mainly related to severance payments. The long-term part
of the restructuring provision totaled SEK 433 M. Detailed
information about the restructuring program appears in
the Report of the Board of Directors. Other provisions
relate to estimates of deferred con siderations related to
acquisitions and legal obligations including future environ-
ment-related requirements.

Parent company
Other provisions in the Parent company relate to esti-
mates of deferred considerations related to acquisitions.

ASSA ABLOY
Annual Report 2007
83

Parent
company

Group

SEK M

2006

2007

2006

2007

Guarantees
Guarantees on behalf of
subsidiaries
Other
Total

837
15
929

135

145

1,126

17
1,222

9,776
–
9,911

9,785
–
9,930

The group has contingent liabilities in the form of bank
guarantees and other guarantees that arose in the normal
course of business. No significant liabilities are expected to
occur through these contingent liabilities.

Note 34 Net debt

SEK M

Long-term interest-bearing receivables
Short-term interest-bearing investments
incl. derivatives
Cash and bank balances
Pension obligations
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
incl. derivatives
Total

Group

2006

–127

–80
–1,115
1,297
7,262

2007

–105

–220
–1,212
1,156
8,050

6,323
13,560

5,284
12,953

Note 35 Acquisitions

2007 (SEK M)

Cash paid, including direct acquisition costs
Unpaid parts of purchase prices

Total purchase price
Fair value of acquired net assets

Goodwill

Acquired assets and liabilities in accordance with
purchase price allocations
Intangible assets
Tangible assets
Inventories
Receivables
Cash and cash equivalents
Interest-bearing liabilities
Other liabilities
Minority interests

Acquired net assets at fair value

Total

1,424
251

1,675
–646

1,029

341
273
253
271
100
–104
–345
–143

646

–328
120

438

1,424
–100

1,324

989
134
46

Note 31 Other short-term liabilities

SEK M

VAT and excise duty
Employee withholding tax
Advances received
Social security contributions
and other taxes
Other short-term liabilities
Total

Group

2006

2007

Fair value adjustments, intangible assets
Fair value adjustments, deferred taxes etc

Acquired net assets at book value

204
69
54

30
324
681

217
74
66

26
241
624

Purchase prices settled in cash
Cash and cash equivalents in acquired subsidiaries
Change in Group cash and cash equivalents resulting
from acquisitions

Net sales from times of acquisition
EBIT from times of acquisition
Net income from times of acquisition

Note 32 Accrued expenses and prepaid income

SEK M

2006

2007

2006

2007

Group

Parent
company

Personnel-related
expenses
Customer-related
expenses
Prepaid income
Accrued interest
expenses
Other
Total

1,072

1,346

349
95

67
748
2,331

438
121

87
625
2,617

–
–

24
20
115

–
–

39
14
104

Total net sales in 2007 of acquired entities amounted to
SEK 1,841 M and net income amounted to SEK 64 M.
No individually material acquisition was performed in
2007. Pemko, Aontec. Baodean and iRevo were the largest
acquisitions during 2007.

ASSA ABLOY
Annual Report 2007
84

Note 35 cont.

Pemko
On 1 January 2007 the Group acquired 100 percent of the
share capital of Pemko Manufacturing Company, a leading
North American producer of door components. The acqui-
sition of Pemko brings into ASSA ABLOY a well recognized
and highly respected producer of door components. The
Pemko product line is complementary to ASSA ABLOY’s
existing product offerings and distribution channels. The
company has its headquarters in Ventura, California, from
where most of the business is conducted. The brand has
been separately recognized and remaining goodwill is
chiefly related to synergies and other intangible assets not
qualifying for separate recognition.

Aontec
On 3 July 2007 the Group acquired 100 percent of the
share capital of Aontec Teoranta, one of the world’s largest
suppliers of RFID inlays for electronic passports. The acqui-
sition expanded the customer base, provided ASSA ABLOY
with yet another secure site for our operations and added
complementary manufacturing technologies for RFID
inlays. Aontec designs and manufactures RFID inlays mainly
for European passport printers and security integrators. The
operations are conducted in high-security premises in Ire-
land. Intangible assets in the form of customer relation-
ships and licenses have been separately recognized.
Remaining goodwill is chiefly related to synergies and other
intangible assets not qualifying for separate recognition.

Baodean
On 1 October 2007 the Group acquired 70 percent of Bao-
dean, a leading Chinese lock company. Baodean manufac-
tures and distributes anti-theft door locks and cylinders
mainly for the Chinese market. The company leads the mar-
ket segment of high-security anti-theft door locks and cyl-
inders in China and has developed an extensive support
and service network. Baodean is located in the Zhejiang
region, south of Shanghai. Based on a preliminary pur-
chase-price allocation, the brand has been separately rec-
ognized and remaining goodwill is chiefly related to syner-
gies and other intangible assets not qualifying for separate
recognition.

iRevo
On 12 October 2007 the Group acquired more than 50
percent of the share capital of iRevo, a Seoul-listed com-
pany and market leader in digital door locks. The acquisi-
tion brings benefits to the ASSA ABLOY Group including a
market-leading position in Korea, access to efficient distri-
bution channels in the residential sector and ability to lev-
erage on ASSA ABLOY’s global distribution network. Based
on a preliminary purchase-price allocation, the brand has
been separately recognized and remaining goodwill is
chiefly related to synergies and other intangible assets not
qualifying for separate recognition.

2006 (SEK M)

Fargo

Other

Total

Cash paid, including
direct acquisition costs
Unpaid parts of purchase prices

Total purchase price
Fair value of acquired net assets

Goodwill

2,486
–

2,486
–939

1,547

Acquired assets and liabilities in accordance
with purchase price allocations
Intangible assets
Tangible assets
Inventories
Receivables
Cash and cash equivalents
Interest-bearing liabilities
Other liabilities

708
30
46
83
313
–
–241

Acquired net assets at fair value

939

1,000
67

1,067
–351

716

120
100
139
160
56
–39
–185

351

3,486
67

3,553
–1,290

2,263

828
130
185
243
369
–39
–426

1,290

Fair value adjustments,
intangible assets
Fair value adjustments,
deferred taxes etc

Acquired net assets at book
value
Purchase price settled in cash
Cash and cash equivalents in
acquired subsidiaries

Change in Group cash and
cash equivalents resulting
from acquisitions

Net sales from times of
acquisition
EBIT from times of acquisition
Net income from times of
acquisition

–708

–118

–826

288

332

519
2,486

277
1,000

796
3,486

–313

–56

–369

2,173

944

3,117

306
58

–3

687
84

993
142

Acquired entities had total net sales of SEK 1,580 M in
2006. Fargo Electronics was the largest acquisition in 2006,
while Adams Rite and Baron were the most important
among the other acquisitions.

Fargo Electronics
On 3 August 2006 the Group acquired 100 percent of the
share capital of Fargo Electronics, a world-leading company
in systems for secure issuance of ID cards including card
printers, peripheral equipment and software. The acquisi-
tion will make possible a unique offering of products and
services for secure issuance of identity and authorization
cards. Fargo is the only manufacturer to offer three com-
pletely different printing technologies – High-Definition
Printing (reverse image), Direct-to-Card printing (dye-
sublimation) and CardJet Printing technology (inkjet) – to
meet the requirements of customers on different markets.
Fargo has a comprehensive patent portfolio that protects
these different technologies. Intangible assets in the form
of technology, brands and customer relationships have
been reported separately. Remaining goodwill lies mainly
in synergies and intangible assets that do not meet the
criteria for separate reporting.

ASSA ABLOY
Annual Report 2007
85

Adams Rite
On 24 March 2006 the Group acquired 100 percent of the
share capital of Adams Rite, a leading American manufac-
turer of locks and fittings for aluminum doors. The acquisi-
tion brings ASSA ABLOY complementary products and new
distribution channels. Adams Rite designs and manufac-
tures mechanical and electromechanical security products.
The company has a strong brand and product range in alu-
minum doors, which are sold through distribution channels
that complement ASSA ABLOY’s existing channels. The
company’s head office is in Pomona, California, where most
of its operations also take place, with a focus on assembly.
In the UK the company is the leading distributor of
mechanical and electromechanical security products for
commercial aluminum doors. The brand has been reported

separately, while remaining goodwill lies mainly in syner-
gies and intangible assets that do not meet the criteria for
separate reporting.

Baron
On 31 March 2006 the Group acquired 100 percent of the
share capital of Baron Metal Industries Inc, Canada’s lead-
ing manufacturer of steel doors and door frames. The
acquisition gives ASSA ABLOY a broader range of steel
doors and frames. The company has its head office and fac-
tory in Woodbridge, Toronto. The brand has been reported
separately, while remaining goodwill lies mainly in syner-
gies and intangible assets that do not meet the criteria for
separate reporting.

Note 36

Note 36 Average number of employees, with breakdown into women and men

Average number of employees by country and by gender

Women

Men

Total

Group

2006

584
435
268
126
664
83
99
913
484
188
134
239
558
414
113
364
95
2,481
1,808
159
181
1,635
290
158
280
12,753

2007

587
457
219
149
717
83
109
889
484
177
178
230
712
350
132
328
113
2,342
1,456
165
252
1,821
318
99
324
12,691

2006

975
676
405
179
1,004
137
513
1,394
818
261
201
540
345
539
301
383
453
4,110
1,077
533
76
2,200
724
199
446
18,489

2007

903
699
466
259
837
128
537
1,376
791
251
228
556
403
489
327
382
451
4,861
915
530
164
2,512
730
202
579
19,576

2006

1,559
1,111
673
305
1,668
220
612
2,307
1,302
449
335
779
903
953
414
747
548
6,591
2,885
692
257
3,835
1,014
357
727
31,243

2007

1,490
1,156
685
408
1,554
211
646
2,265
1,275
428
406
786
1,115
839
459
710
564
7,203
2,371
695
416
4,333
1,048
301
903
32,267

Parent company

2006

2007

2006

2007

2006

2007

Women

Men

Total

Sweden
Other
Total

32
5
37

29
2
31

51
8
59

61
6
67

83
13
96

90
8
98

Gender-split in senior management

Group

Board of Directors1
Executive Team
Total

1 Excluding employee representatives.

Women

Men

Total

2006

2007

2006

2007

2006

2007

1
–
1

7
9
16

7
10
17

8
9
17

8
10
18

ASSA ABLOY
Annual Report 2007
86

Note 37

Note 37 Cash flow

SEK M

Adjustments for non-cash items
Profit on sales of fixed assets
Change of pension obligations
Other

Adjustments for non-cash items

Paid and received interest
Interest paid
Interest received

Paid and received interest

Change in working capital
Inventory increase/decrease (–/+)
Accounts receivable increase/decrease (–/+)
Accounts payable increase/decrease (–/+)
Other working capital increase/decrease (–/+)

Change in working capital

Group

2006

2007

7
2
1

–758
50

–708

–526
–487
223
86

–704

–58
20
–11

–49

–764
30

–734

–148
–256
219
160

–25

Capital expenditure

Purchases of tangible and intangible assets
Sales of tangible and intangible assets

Net capital expenditure

–894
155

–739

–1,050
299

–751

Investments in subsidiaries
Acquired assets and liabilities according
to purchase price allocations

Intangible assets
Tangible assets
Inventory
Accounts receivable
Other receivables
Minority interests
Long-term liabilities
Accounts payable
Other short-term liabilities
Acquired net debt

Purchase price
Less, acquired cash and cash equivalents
Less, unpaid parts of purchase prices
Plus, paid parts of purchase prices relating to
previous years

Investments in subsidiaries

Investments in associates
Investments in associates

Investments in associates

Other investments
Investments in / sales of other shares
Investments in / sales of other financial assets

Other investments

–3,091
–130
–185
–199
–34
–14
223
131
85
–339

–3,553
369
67

–1,370
–273
–253
–206
–65
143
117
154
74
4

–1,675
100
251

–5

–34

–3,122

–1,358

–4
–7

–11

–

–13
–5

–18

Comparatives for 2006 have been adjusted compared to
the 2006 Annual Report. Cash flow from operating activi-
ties has been reduced by restructuring payments for the
year. Cash flow from financing activities has increased by
the same amount.

Five years in summary

ASSA ABLOY
Annual Report 2007
87

2003
Business was affected by weak demand in major markets in
Europe and North America. Substantial negative exchange-
rate effects, mainly due to the weak US dollar, reduced
reported sales and earnings. The main acquisitions were in
Europe in the identification technology sector.

Following the appointment of Bo Dankis as the Group’s

new President and CEO, a new organization consisting of
four divisions (EMEA, Americas, Asia Pacific and Global
Technologies) was implemented. The Executive Team was
reduced from 17 people to 7. A two-year action program
entitled Leverage & Growth was launched towards the end
of the year. The aims of the program were to realize group
synergies and strengthen sustainable organic growth.

2004
Some recovery in demand on major markets contributed
to a notable improvement in organic growth. Acquisitions
contributed to business performance in the EMEA and Glo-
bal Technologies divisions. Negative exchange-rate effects
continued to reduce reported sales and earnings. The
operating margin rose owing to better sales volumes and
cost savings as a result of the ongoing action program,
while higher purchase prices for important metals were
neutralized by higher selling prices and changes in the pur-
chasing structure. Operating cash flow was strong as usual.

During the year, ASSA ABLOY refined the Group’s
strategy with the aim of strengthening organic growth in
ASSA ABLOY’s core business and in attractive and fast-grow-
ing markets and product segments, and of better exploiting
the Group’s size to generate significant cost savings, mainly
in production and purchasing.

2005
Sales were relatively weak at the start of the year but then
steadily improved, which resulted in good organic growth
for the full year. The Group’s performance was founded on
strong demand on the important US market. A number of
small companies were acquired, mainly in the Asia Pacific
and Global Technologies divisions.

The Leverage & Growth program was concluded at year-

end. This program contributed to increasing the Group’s
efficiency and productivity. The operating margin and oper-
ating cash flow both improved during the year. Johan Molin
succeeded Bo Dankis as President and CEO.

ASSA ABLOY strengthened its position by focusing on
customer value in both traditional businesses and segments
with rather higher market growth such as electromechani-
cal locks, automatic doors, access control systems and iden-
tification technology.

2006
This was a very good year for ASSA ABLOY, with the highest
organic growth in the company’s history and a substantial
improvement in profitability. ASSA ABLOY’s robust per-
formance was based on strong economic growth in the

Group’s most important markets in Europe and North
America, as well as success in fast-growing segments such
as electromechanical locks, access control, automatic
doors and identification technology. The acquisition rate
increased and acquisitions included Fargo Electronics, a
global leader in the fast-growing segment of secure card
issuance.

A three-year restructuring program to realize synergies
and increase efficiency in the Group’s manufacturing units
was launched during the year. This program means that a
major part of production will switch focus from full produc-
tion to concentrate on final assembly. Some production will
be relocated to low-cost countries, resulting in the closing
of a number of production units. Total restructuring costs
amounted to SEK 1,274 M and the program is predicted to
produce annual savings of SEK 600 M when fully imple-
mented in 2009.

Sales volume growth, acquisitions and the restructuring
measures implemented contributed to the strong increase
in operating income. During the year, the Group increased a
number of prices to compensate for the substantial rise in
raw-material costs, which therefore had only a modest neg-
ative impact on the operating margin.

2007
The year saw strong growth for ASSA ABLOY, combined
with continued very satisfactory growth in earnings. All five
divisions showed growth, increased profitability and an
improved return. ASSA ABLOY’s strong performance was
based on long-term structural growth in demand in the
Group’s most important markets in Europe and North
America, increasing demand in new markets, and suc-
cesses in fast-growing segments such as electromechanical
locks, access control, secure smartcard issuance, automatic
doors and identification technology. The acquisition rate
remained high during the year and major acquisitions
included Baodean (China), iRevo (Korea), Aontec (Irish
Republic), Powershield (Northern Ireland), Pemko (North
America) and Pyropanel (Australia).

The successful implementation of the three-year restruc-
turing program for the Group’s manufacturing units contin-
ued during the year. All 50 projects are proceeding accord-
ing to plan and more than 1,300 employees out of a
planned total of 2,000 have now left the Group. By year-
end 2007 cost savings were running at over 60 percent of
the final target of achieving annual savings of SEK 600 M
in 2009.

Sales-volume growth, acquisitions, price management

and the restructuring measures implemented, as well as
continuous improvements in production, administration
and market development, contributed to the strong finan-
cial performance.

ASSA ABLOY
Annual Report 2007
88

Five years in summary

(Amounts in SEK M unless stated otherwise)

20031

20041

2005

2006

2007

Sales and income

Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation / amortization (EBITDA)
Depreciation
Operating income (EBIT)
Income before tax (EBT)
Net income

Cash flow

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow
Operating cash flow

Capital employed and financing

Capital employed
– of which, goodwill
Net debt
Minority interests
Shareholders’ equity (excl. minority interests)

Data per share, SEK

Earnings per share after tax and before dilution
Earnings per share after tax and dilution (EPS)
Shareholders’ equity per share after dilution
Dividend per share (for 2007, as proposed by the Board)
Price of Series B share at year-end

Key data

Gross margin (EBITDA), %
Operating margin (EBIT), %
Profit margin (EBT), %
Return on capital employed, %
Return on capital employed excl. restructuring items, %
Return on shareholders’ equity, %
Equity ratio, %
Net debt / Equity ratio, times
Interest coverage ratio, times
Interest on convertible debenture loan after tax
Number of shares, thousands
Number of shares after dilution, thousands
Average number of employees

24,080
0
5
4,249
1,856
1,073
583
9

3,180
–1,827
–1,772
–419
3,265

22,984
14,766
12,290
16
10,678

3.30 2
3.312
31.23
1.25
85.50

17.6
9.9 2
7.9 2
9.6 2
9.6 2
9.9 2
35.9
1.15
4.7
17.8
365,918
370,935
28,708

25,526
5
5
4,606
923
3,683
3,199
2,356

27,802
5
1
4,960
882
4,078
3,556
2,613

3,018
–1,505
–1,413
100
3,4393

3,153
–1,052
–2,027
73
3,702 3

23,461
13,917
12,208
27
11,226

6.42
6.33
34.74
2.60
113.50

18.0
14.4
12.5
15.3
15.3
20.0
37.4
1.09
7.6
24.0
365,918
378,718
29,160

26,653
15,716
12,240
71
14,342

7.13
6.97
42.85
3.25
125.00

17.8
14.7
12.8
15.9
15.9
18.1
42.8
0.85
8.2
33.1
365,918
378,718
29,578

31,137
9
3

5,669 3
898
4,771 3
2,626
1,756

2,968
–3,871
1,203
300
3,528 3

27,205
16,683
13,560
60
13,585

4.77
7.99 3

39.13
3.25
149.00

18.2 3
15.3 3
8.4
12.1
17.1
11.5
38.4
0.99
5.1
43.6
365,918
376,033
31,243

33,550
7
5
6,366
909
5,458
4,609
3,368

3,871
–2,127
–1,568
176
4,808 3

28,621
17,270
12,953
201
15,467

9.18
9.02
46.76
3.60
129.75

19.0
16.3
13.7
18.4
18.4
21.0
41.5
0.83
7.4
55.0
365,918
380,713
32,267

1 2003 has not been adjusted for IFRS. 2004 has been adjusted for IFRS – see information about main effects on pages 85–89 of the 2005 Annual Report.
2 Excluding non-recurring items.
3 Excluding restructuring items.

Quarterly information

ASSA ABLOY
Annual Report 2007
89

THE GROUP IN SUMMARY

(Amounts in SEK M
unless stated otherwise)

Sales
Organic growth
Gross income excl. restructuring costs
Gross income / Sales
Operating income before depreciation
(EBITDA) excl. restructuring costs
Gross margin (EBITDA)
Depreciation
Operating income (EBIT) excl.
restructuring costs
Operating margin (EBIT)
Restructuring costs
Operating income (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax
Net income

Allocation of net income

Shareholders in ASSA ABLOY AB
Minority interests

Q1
2006

7,653
12%
3,114
40.7%

1,332
17.4%
–222

1,110
14.5%
–
1,110
–145
965
12.6%
–261
704

Q2
2006

7,689
7%
3,140
40.8%

1,378
17.9%
–227

1,151
15.0%
–520
631
–156
475
6.2%
–178
297

Q3
2006

7,736
8%
3,118
40.3%

1,464
18.9%
–229

1,235
16.0%
–437
798
–181
617
8.0%
–251
366

Q4 Full year
2006

2006

8,059 31,137
9%
3,303 12,676
40.7%
41.0%

1,494
18.5%
–220

1,274
15.8%
–517
757
–188
569
7.1%
–181
388

5,669
18.2%
–898

4,771
15.3%
–1,474
3,297
–671
2,626
8.4%
–870
1,756

Q1
2007

8,227
8%
3,383
41.1%

1,518
18.5%
–229

1,289
15.7%
–
1,289
–188
1,101
13.4%
–298
803

Q2
2007

8,329
7%
3,425
41.1%

1,554
18.7%
–229

1,325
15.9%
–
1,325
–197
1,128
13.5%
–306
822

Q3
2007

8,274
7%
3,405
41.2%

1,625
19.6%
–221

1,404
17.0%
–
1,404
–193
1,211
14.6%
–327
884

Q4 Full year
2007

2007

8,721
6%
3,587
41.1%

1,670
19.1%
–230

1,440
16.5%
–
1,440
–271
1,168
13.4%
–309
859

33,550
7%
13,799
41.1%

6,366
19.0%
–909

5,458
16.3%
–
5,458
–849
4,609
13.7%
–1,240
3,368

703
1

294
3

364
2

385
3

1,746
10

803
1

820
2

882
2

854
5

3,358
10

OPERATING CASH FLOW

Operating income (EBIT)
Restructuring costs
Depreciation
Net operating capital expenditure
Change in working capital
Paid and received interest
Non-cash items
Operating cash flow1
Operating cash flow / Income before tax2

Q1
2006

1,110
–
222
–180
–492
–114
41
587
0.61

Q2
2006

631
520
227
–180
–163
–176
–26
833
0.84

Q3
2006

798
437
229
–151
–241
–131
–22
919
0.87

Q4 Full year
2006

2006

757
517
220
–228
192
–287
17
1,189
1.09

3,297
1,474
898
–739
–704
–708
10
3,528
0.86

Q1
2007

1,289
–
229
–101
–469
–124
–19
805
0.73

Q2
2007

1,325
–
229
–218
–159
–216
–4
957
0.85

Q3
2007

1,404
–
221
–220
53
–149
–3
1,306
1.08

Q4 Full year
2007

2007

1,440
–
230
–212
550
–245
–23
1,740
1.49

5,458
–
909
–751
–25
–734
–49
4,808
1.04

CHANGE IN NET DEBT

Net debt at start of period
Operating cash flow
Restructuring payments
Tax paid
Acquisitions
Dividend
Translation differences
Net debt at end of period
Net debt / Equity ratio

Q1
2006

Q2
2006

Q3
2006

Q4 Full year
2006

2006

Q1
2007

Q2
2007

Q3
2007

Q4 Full year
2007

2007

–587
161
200
682
–
–190

12,240 12,506 13,127 14,785 12,240 13,560 13,799 14,534 13,456
–1,740
–3,528
209
342
400
957
434
3,132
–
1,189
194
–772
12,506 13,127 14,785 13,560 13,560 13,799 14,534 13,456 12,953
0.83

–1,306
90
258
341
–
–461

–1,189
78
229
8
–
–351

–957
81
433
92
1,189
–103

–833
52
341
255
1,189
–383

–919
51
187
2,187
–
152

–805
44
173
509
–
318

0.91

0.99

1.07

0.98

0.94

0.84

1.02

13,560
–4,808
424
1,264
1,376
1,189
–52
12,953
0.83

NET DEBT

Q1
2006

–61

–87
–958
1,657
4,541

Q2
2006

–65

–179
–833
1,337
3,830

Q3
2006

–73

–181
–841
1,329
3,901

Q4
2006

–127

–80
–1,115
1,297
7,262

Q1
2007

–139

–79
–998
1,337
7,392

Q2
2007

–161

–119
–1,549
1,239
8,218

Q3
2007

–197

–261
–979
1,213
8,002

Q4
2007

–104

–126
–1,212
1,156
8,050

7,414

6,323
9,037 10,650
12,506 13,127 14,785 13,560

6,285

6,906

5,678

5,189

13,799 14,534 13,456 12,953

1 Excluding restructuring payments.
2 Income before tax excluding restructuring costs 2006.

ASSA ABLOY
Annual Report 2007
90

CAPITAL EMPLOYED AND FINANCING

Q1
2006

Q2
2006

Q3
2006

Q4
2006

Q1
2007

Q2
2007

Q3
2007

Q4
2007

Capital employed
– of which, goodwill
Net debt
Minority interests
Shareholders’ equity
(excl. minority interests)

27,368 26,497 28,645 27,205
15,966 15,572 17,237 16,683
12,506 13,127 14,785 13,560
60

28,535 28,822 28,198 28,621
17,375 17,237 17,077 17,270
13,799 14,534 13,456 12,953
201

14,793 13,311 13,796 13,585

14,677 14,232 14,686 15,467

DATA PER SHARE, SEK

Earnings per share after
tax and before dilution
Earnings per share after tax and dilution
Earnings per share after tax and dilution
excl. restructuring costs
Shareholders’ equity per share
after dilution

Q1
2006

Q2
2006

Q3
2006

Q4 Full year
2006

2006

Q1
2007

Q2
2007

Q3
2007

Q4 Full year
2007

2007

1.92
1.88

0.80
0.80

1.00
0.99

1.05
1.05

4.77
4.72

2.19
2.16

2.24
2.20

2.41
2.36

2.34
2.30

1.88

1.95

2.02

2.14

7.99

2.16

2.20

2.36

2.30

9.18
9.02

9.02

44.03

40.93

42.00

39.13

42.46

43.68

44.68

46.76

NUMBER OF SHARES

Number of shares before dilution,
thousands
Number of shares after dilution,
thousands3

3 Weighted average.

Mar
2006

Jun
2006

Sep
2006

Dec Full year
2006

2006

Mar
2007

Jun
2007

Sep
2007

Dec
2007

Full year
2007

365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918

365,918

378,718 379,154 381,050 378,050 379,214 376,033 376,599 380,713 380,713

378,533

Definitions of key data terms

Organic growth:
Change in sales for comparable units after adjustments for
acquisitions and exchange-rate effects.

Equity ratio:
Shareholders’ equity as a percentage of total assets.

Gross margin (EBITDA):
Operating income before depreciation and amortization as
a percentage of sales.

Operating margin (EBIT):
Operating income as a percentage of sales.

Profit margin (EBT):
Income before tax as a percentage of sales.

Operating cash flow:
See the table on page 89 for the items included in operat-
ing cash flow.

Net capital expenditure:
Investments in fixed assets less disposals of fixed assets.

Interest coverage ratio:
Income before tax plus net interest divided by net interest.

Return on shareholders’ equity:
Net income excluding minority interests, plus interest
expenses after tax for convertible debenture loans, as a
percentage of average shareholders’ equity (excluding
minority interests) after dilution.

Return on capital employed:
Income before tax plus net interest as a percentage of
average capital employed.

Earnings per share after tax and before dilution:
Net income excluding minority interests divided by
weighted average number of shares before dilution.

Depreciation:
Depreciation/amortization of tangible and intangible fixed
assets.

Earnings per share after tax and dilution:
Net income excluding minority interests, plus interest
expenses after tax for convertible debenture loans, divided
by weighted average number of shares after dilution.

Net debt:
Interest-bearing liabilities less interest-bearing assets.

Capital employed:
Total assets less interest-bearing assets and non-interest-
bearing liabilities including deferred tax liability.

Shareholders’ equity per share after dilution:
Equity excluding minority interests, plus convertible
debenture loan, divided by number of shares after dilution.

Proposed disposition of earnings

ASSA ABLOY
Annual Report 2007
91

The following retained earnings are available for disposition by the shareholders at the Annual General Meeting:

Net income for the year: SEK 2,154 M
Retained earnings brought forward: SEK 3,186 M
TOTAL: SEK 5,340 M

The Board of Directors and the President and CEO propose that a dividend of SEK 3.60 per share,
a maximum total of SEK 1,317 M, be distributed to shareholders and that the remainder, SEK 4,023 M,
be carried forward to the new financial year.

Tuesday 29 April 2008 has been proposed as the record date for dividends.
If the Annual General Meeting confirms this proposal, dividends are expected to be distributed by VPC AB
on Monday 5 May 2008.

The Board of Directors and the President and CEO declare that the consolidated accounts have been prepared in
accordance with International Financial Reporting Standards, IFRS, as adopted by the EU and give a true and fair view
of the Group’s financial position and results. The Parent company’s annual accounts have been prepared in accordance
with generally accepted accounting principles in Sweden and give a true and fair view of the Parent company’s
financial position and results.

The Report of the Board of Directors for the Group and the Parent company gives a true and fair review of the
development of the Group’s and the Parent company’s business operations, position and results, and describes
significant risks and uncertainties to which the Parent company and the companies that make up the Group are exposed.

Stockholm, 13 February 2008

Gustaf Douglas
Chairman

Melker Schörling
Vice Chairman

Carl-Henric Svanberg
Vice Chairman

Johan Molin
President and CEO

Carl Douglas
Board member

Per-Olof Eriksson
Board member

Lotta Lundén
Board member

Sven-Christer Nilsson
Board member

Seppo Liimatainen
Employee representative

Mats Persson
Employee representative

Our audit report was issued on 13 February 2008

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Auditor in Charge

Bo Karlsson
Authorized Public Accountant

ASSA ABLOY
Annual Report 2007
92

Audit report

To the Annual General Meeting of the shareholders of ASSA ABLOY AB
Corporate identity number 556059-3575

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the
Board of Directors and the President and CEO of ASSA ABLOY AB for the year 2007. (The company’s annual accounts are
presented on pages 39-91 of the printed version of this document.) The Board of Directors and the President and CEO are
responsible for these accounts and the administration of the company as well as for the application of the Annual
Accounts Act when preparing the annual accounts and the application of International Financial Reporting Standards,
IFRS, as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is
to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require
that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board
of Directors and the President and CEO and significant estimates made by the Board of Directors and the President and CEO
when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of informa-
tion in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we
examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability,
if any, to the company of any Board member or the President and CEO. We also examined whether any Board member or the
President and CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles
of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of
the company’s financial position and results of operations in accordance with generally accepted accounting principles in
Sweden. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards,
IFRS, as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group’s financial position and
results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the
consolidated accounts.

We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of
the Parent company and the Group be adopted, that the profit of the Parent company be dealt with in accordance with
the proposal in the administration report and that the members of the Board of Directors and the President and CEO be
discharged from liability for the financial year.

Stockholm, 13 February 2008

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Auditor in Charge

Bo Karlsson
Authorized Public Accountant

The ASSA ABLOY share

The ASSA ABLOY share
93

Share price trend in 2007
The closing price of ASSA ABLOY’s Series B share at the end
of 2007 was SEK 129.75 (149.00), equivalent to a market
capitalization of SEK 47,203 M (54,521). The ASSA ABLOY
share fell 13 percent compared with its closing price at the
end of 2006. During the same period, the OMXS All Share
Index Stockholm fell by 6 percent. The highest closing
price of the share was SEK 164.00, recorded on 3 April, and
the lowest was SEK 124.50, recorded on 20 December.

Listing and trading
ASSA ABLOY’s Series B share is listed on the OMX Nordic
Exchange, Stockholm Large Cap. The share has been listed
on the Stockholm Stock Exchange since 8 November 1994.
During the year, a total of 675 million shares (816)
were traded, which is an average of 2.7 million shares (3.3)
a day and is equivalent to about 195 percent (229) of the
listed shares.

Ownership structure
The number of shareholders at year-end was 23,961
(26,118). Investors outside Sweden accounted for 49 per-
cent (53) of the share capital and 33 percent (36) of the
votes. The ten largest shareholders accounted for 40 per-
cent (32) of the share capital and 59 percent (54) of the

votes. Shareholders with more than 50,000 shares
accounted for approximately 2 percent of the total
number of shareholders, 93 percent of the share capital
and 95 percent of the votes.

Share capital and voting rights
The share capital at year-end amounted to SEK
365,918,034, distributed among 19,175,323 Series A
shares and 346,742,711 Series B shares. All shares have a
par value of SEK 1.00 and provide the holders with equal
rights to the company’s assets and earnings. Each Series A
share carries 10 votes and each Series B share one vote.
The trading lot is 200 shares.

Dividend and dividend policy
The Board of Directors and the President propose that a
dividend of SEK 3.60 per share (3.25), a maximum total
amount of SEK 1,317 M, be paid to shareholders for the
2007 financial year, equivalent to a direct return of 2.8 per-
cent (2.2) on the Series B share. The aim is that, in the long
term, the dividend should be equivalent to 33–50 percent
of ASSA ABLOY’s earnings after standard tax of 28 percent,
but always taking into account ASSA ABLOY’s long-term
financing requirements.

Share price trend and trading 1998–2007

Dividend per share 1998–2007

200

150

100

120,000

100,000

80,000

60,000

40,000

20,000

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Series B share

OMX Stockholm_PI

Shares traded, thousands (incl. off-floor trading)

OMX AB

SEK
4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Dividend per share, SEK
(2007 proposed dividend)

Data per share

SEK/Share1

Earnings after tax
and dilution 8
Dividend
Direct return, % 5
Dividend, % 6, 8
Share price at year-end
Highest share price
Lowest share price
Shareholders’ equity 8
Number of shares
(thousands) 7

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

1.76
0.60
0.8
33.5
75.65
92.73
48.07
9.93

2.003
0.74
0.6
32.6
119.50
140.00
73.21
16.953

2.73
0.90
0.5
30.9
184.50
206.70
110.50
30.583

2.982
1.00
0.7
30.5
151.00
186.00
94.50
35.80

3.53
1.25
1.3
32.2
99.50
159.50
76.50
35.85

3.312
1.25
1.5
33.9
85.50
110.00
67.00
31.23

6.33
2.60
2.3
42.0
113.50
113.50
84.00
34.74

6.97
3.25
2.6
47.6
125.00
126.00
89.25
42.85

7.999
3.25
2.2
64.0
149.00
151.00
109.00
39.13

9.02
3.604
2.8
40.5
129.75
164.00
124.50
46.76

295,448

324,200 356, 712

361,730

370,935

378,718

378,718 376,033

380,713

1 Adjustment made for new issues.
2 Excluding non-recurring items.
3 Key data adjusted following

change in accounting principle.

4 Proposed dividend.

5 Dividend as percentage of share price at year-end.
6 Dividend as percentage of adjusted earnings in line with dividend policy.
7 After full dilution.
8 1998–2003 have not been adjusted for IFRS.
9 Excluding restructuring costs.

The ASSA ABLOY share
94

ASSA ABLOY’s 10 largest shareholders

Based on the share register at 31 December 2007.

Shareholders

Investment AB Latour
SäkI
Melker Schörling AB
Alecta
Swedbank Robur funds
Oppenheimer funds
Fidelity funds
Harbor Funds Inc
SEB funds
Wärtsilä Corporation
Other shareholders
Total number

Source: SIS Ägarservice AB and VPC AB.

A shares

6,746,425
7,118,818
5,310,080

19,175,323

B shares

Share capital, %

Votes, %

19,450,000
2,300,000
9,162,136
26,686,000
14,796,038
12,940,156
12,340,442
12,033,608
8,730,086
7,270,350
221,033,895
346,742,711

7.2
2.6
4.0
7.3
4.0
3.5
3.4
3.3
2.4
2.0
60.4
100.0

16.1
13.6
11.6
5.0
2.7
2.4
2.3
2.2
1.6
1.4
41.0
100.0

Ownership structure (by share capital)

Ownership structure (by votes)

Latour, 7.2 %

SäkI, 2.6 %

Melker Schörling, AB 4.0 %

Alecta, 7.3 %

Swedbank Robur funds, 4.0 %

Oppenheimer funds (US), 3.5 %

Other foreign shareholders, 45.0 %

Other Swedish shareholders, 21.0 %

Other Swedish individuals, 5.4 %

Latour, 16.1 %

SäkI, 13.6 %

Melker Schörling AB, 11.6 %

Alecta, 5.0 %

Swedbank Robur funds, 2.7 %

Oppenheimer funds (US), 2.4 %

Other foreign shareholders, 30.5 %

Other Swedish shareholders, 14.5 %

Other Swedish individuals, 3.6 %

Share capital

ASSA ABLOY’s share capital at 31 December 2007 amounted to SEK 365,918,034, distributed among 19,175,323 Series A
shares and 346,742,711 Series B shares. All shares have a par value of SEK 1.00 and provide the holders with equal rights to
the company’s assets and earnings. Each Series A share carries 10 votes and each Series B share one vote.

Year

Transaction

A shares

C shares

B shares

1989
1994 100:1 split
1994 Bonus issue
1994 Non-cash issue
1996 New share issue
1996 Conversion of C shares into A shares
1997 New share issue
1998 Converted debentures
1999 Converted debentures before split
1999 Bonus issue
1999 4:1 split

1999 New share issue
1999 Converted debentures after split and new issues
2000 Converted debentures
2000 New share issue
2000 Non-cash issue
2001 Converted debentures
2002 New share issue
2002 Converted debentures

Number of shares after full conversion

1 SEK per share – number of shares at year-end.
Source: VPC AB.

1,746,005
2,095,206
3,809,466
4,190,412
4,190,412
4,190,412

16,761,648

18,437,812
18,437,812
18,437,812
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323

2,000

1,428,550
1,714,260

2,000,000

50,417,555
60,501,066
60,501,066
66,541,706
66,885,571
67,179,562

Share capital
SEK1

2,000,000
2,000,000

53,592,110
64,310,532
64,310,532
70,732,118
71,075,983
71,369,974

268,718,248

285,479,896

295,564,487
295,970,830
301,598,383
313,512,880
333,277,912
334,576,089
344,576,089
346,742,711
361,536,826

314,002,299
314,408,642
320,036,195
332,688,203
352,453,235
353,751,412
363,751,412
365,918,034
380,712,149

The ASSA ABLOY share
95

Convertible debentures for personnel
ASSA ABLOY has issued several convertible debentures to
employees in the Group.

The first debenture was issued in 1995 and approxi-

mately 400 employees participated in the issue. The
debenture amounted to approximately SEK 75 M and
expired in 2000. The second debenture was issued in 1997.
A total of 1,400 employees participated in this issue. The
debenture amounted to SEK 250 M and expired in 2002.
In 2001, a convertible debenture amounting to EUR

100 M was issued. This program expired in November
2006 and no conversion took place.

In 2004, it was decided to launch an incentive program,
Incentive 2004. This program amounts to a total of EUR 100
M and is based on four series of convertible bonds, each
series having a par value of EUR 25 M. The only difference
between the series of bonds is the conversion price. On full
conversion, at a conversion price of EUR 10.20 for Series 1,
EUR 12.20 for Series 2, EUR 14.30 for Series 3 and EUR 16.30
for Series 4, an additional 7,782,155 shares would be cre-
ated. Any conversion of Incentive 2004 will take place in a
90-day period between March and June 2009.

amounts to a total of EUR 38.4 M and is based on four
series of convertible bonds, each series having a par value
of EUR 9.6 M. Any conversion of Incentive 2006 will take
place in a 180-day period between December 2010 and
June 2011. On full conversion, at a conversion price of EUR
14.60 for Series 1, EUR 15.90 for Series 2, EUR 17.30 for
Series 3 and EUR 18.60 for Series 4, an additional
2,332,350 shares would be created.

In 2007, it was decided to launch a new incentive pro-
gram, Incentive 2007. This program amounts to a total of
EUR 100 M and is based on four series of convertible
bonds, each series having a par value of EUR 25 M. Any
conversion of Incentive 2007 will take place in a 30-day
period in May and June 2012. On full conversion, at a con-
version price of EUR 18.00 for Series 1, EUR 20.50 for Series
2, EUR 23.00 for Series 3 and EUR 25.40 for Series 4, an
additional 4,679,610 shares would be created.

Full conversion of Incentive 2004, 2006 and 2007
would create an additional 14,794,115 shares, which
would have a dilutive effect of 3.9 percent on the share
capital and 2.6 percent on the total number of votes.

Approximately 2,500 employees in around 15 countries

In 2006, it was decided to launch an incentive program

are participating in the current incentive programs.

for senior managers, Incentive 2006. This program

Financial analysts who follow ASSA ABLOY

Company

Name

Telephone number

E-mail

ABG Sundal Collier
ABN AMRO
Bear Stearns International
Carnegie
Cheuvreux
Credit Suisse
Danske Bank
Deutsche Bank
Dresdner Kleinwort
Goldman Sachs
Handelsbanken Capital Markets
HQ Bank
HSBC
JP Morgan
Kaupthing Bank
Merrill Lynch
Morgan Stanley
SEB Enskilda
Société Générale
Swedbank Markets
UBS

Christer Fredriksson
Klas Bergelind
Nico Dil
Anders Idborg
Lars Norrby
Patrick Marshall
Henrik Breum
Johan Wettergren
Colin Grant
James Moore
Peder Frölén
Patric Lindqvist
Colin Gibson
Nick Paton
Henrik Fröjd
Ben Maslen
Gustaf Lindskog
Julian Beer
Roderick Bridge
Niclas Höglund
Olof Cederholm

+46 8 566 286 25
+46 8 5723 6030
+44 20 7516 5405
+46 8 676 86 88
+46 8 723 51 76
+44 20 7888 0289
+45 33 44 09 04
+46 8 463 55 18
+44 20 7475 9161
+44 20 7774 1515
+46 8 701 12 51
+46 8 696 20 84
+44 20 7991 6592
+44 20 7325 5044
+46 8 791 46 32
+44 20 7996 4783
+44 20 7425 2057
+46 8 522 296 52
+44 207 7672 5086
+46 8 5859 1800
+46 8 453 73 06

christer.fredriksson@abgsc.se
klas.bergelind@se.abnamro.com
ndil@bear.com
andidb@carnegie.se
lnorrby@cheuvreux.com
patrick.marshall@credit-suisse.com
hbre@danskebank.com
johan.wettergren@db.com
colin.grant@dkib.com
james.moore@gs.com
pefr15@handelsbanken.se
patric.lindqvist@hq.se
colin.gibson@hsbcib.com
nicholas.j.paton@jpmorgan.com
henrik.frojd@kaupthing.com
ben_maslen@ml.com
gustaf.lindskog@morganstanley.com
julian.beer@enskilda.se
roderick.bridge@sgcib.com
niclas.hoglund@swedbank.se
olof.cederholm@ubs.com

Information for
shareholders
96

Information for shareholders

Annual General Meeting
The Annual General Meeting of ASSA ABLOY will be held
at Moderna Museet (Museum of Modern Art), Skepps-
holmen, Stockholm at 15.00 on Thursday 24 April 2008.
Shareholders wishing to attend the Annual General Meet-
ing should:
• be registered in the share register kept by VPC AB by

Friday 18 April 2008

• notify ASSA ABLOY AB of their intention to attend by

16.00 on Friday 18 April 2008.

Registration in the share register
Shareholders whose shares are nominee-registered
through a bank or other nominee must request that their
shares be temporarily registered in their own name in the
share register kept by VPC AB by Friday 18 April 2008, in
order to have the right to attend the Annual General
Meeting. Shareholders must notify the nominee of this
well before that date.

Notification of intention to attend
Shareholders must notify ASSA ABLOY of their intention to
attend the Annual General Meeting by 16.00 on Friday 18
April 2008 by:
• Website www.assaabloy.com
• Post

ASSA ABLOY AB ”årsstämman”,
Box 47011, SE-100 74 Stockholm
Sweden

• Telephone +46 8 506 485 14
+46 8 506 485 29
• Fax
(mark notification “ASSA ABLOY”)

The notification should state:
• Name
• Personal identity number or corporate identity

number

• Address and daytime telephone number
• Number of shares held
• Any accompanying advisers

A shareholder who is to be represented by a proxy should
submit a completed form of proxy. If a legal entity appoints a
proxy, a copy of the registration certificate (or similar docu-
ment) for the legal entity should be enclosed. Documents
must not be older than one year. To ensure admission to the
Annual General Meeting, forms of proxy (originals) and reg-
istration certificates should reach the company at the above
address by Friday 18 April 2008.

Nomination Committee
The Nomination Committee has the task of preparing
decisions on the election of the Chairman and other mem-
bers of the Board of Directors, the appointment of the
auditor, the election of the Chairman of the Annual Gen-
eral Meeting, and fees and associated matters. The Nomi-
nation Committee prior to the 2008 Annual General Meet-
ing comprises Melker Schörling (Melker Schörling AB),
Chairman, Gustaf Douglas (Investment AB Latour and
SäkI), Marianne Nilsson (Swedbank Robur) and Björn Lind
(SEB funds).

Dividend
Tuesday 29 April 2008 is proposed as the record date for
dividends. If the Annual General Meeting approves the
proposal of the Board of Directors, dividends are expected
to be distributed by VPC AB on Monday 5 May 2008.

www.assaabloy.com

Reports can be ordered from ASSA ABLOY AB
• Website
• Telephone +46 8 506 485 00
+46 8 506 485 85
• Fax
ASSA ABLOY AB
• Post
Box 70340
SE-107 23 Stockholm
Sweden

Financial reporting
First quarter: 23 April 2008
Second quarter: 30 July 2008
Third quarter: 22 October 2008
Fourth quarter and Year-end Report: February 2009
Annual Report 2008: March 2009

2007 in brief

ASSA ABLOY’s divisions

Divisions

Share of Group total

Significant events

• Sales rose to SEK 33,550 M (31,137), with organic growth

• 17 companies were acquired during the year, with annual-

of 7 percent.

• Operating income (EBIT) amounted to SEK 5,458 M

ized sales of about SEK 1,800 M.

• The major acquisitions included Baodean (China), iRevo
(Korea), Aontec (Ireland), Powershield (UK), Pemko
(North America) and Pyropanel (Australia).

• The Group continued its increased investment in product
development and joint product platforms during the year.

Financials in brief

Key data

Sales, SEK M
of which: Organic growth, %
Varav: Acquired growth, %
Varav: Exchange-rate effects, %

Operating income (EBIT), SEK M

Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M
Return on capital employed, %

Data per share, SEK/share

Earnings per share after tax and dilution (EPS)
Equity per share after dilution
Dividend
Number of shares after full dilution, (thousands)

2005

27,802
5
1
3

4,078

14.7
3,556
3,702
15.9

2005

6.97
42.85
3.25
378,718

2006

31,137
9
3
0

4,7712

15.32
4,1002
3,5282
17.12

2006

7.992
39.13
3.25
376,033

2007

33,550
7
5
–4

5,458

16.3
4,609
4,808
18.4

2007

9.02
46.76
3.601
380,713

Change, %

12
36

Change, %

13
19
11

EMEA

Americas

Asia Pacific

Group sales
and Operating income

Income before tax and
Operating cash flow

Earnings per share

Global Technologies

Sales
SEK M
42,000

35,000

28,000

21,000

14,000

7,000

Operating income
SEK M
6,000

5,000

4,000

3,000

2,000

1,000

Sales, SEK M
Operating income, SEK M 2, 3

SEK M
6,000

SEK M

35,000

5,000

28,000

4,000

21,000

3,000

2,000

14,000

1,000

7,000

SEK M

5,000

4,000

3,000

2,000

1,000

MSEK

SEK
SEK M
10

5,000

4,000

3,000

2,000

1,000

0
98

00
04

01
05

Earnings per share, SEK M 2, 3

Income before tax, SEK M
Operating cash flow, SEK M 2 , 3

99
02
Income before tax, SEK M
Operating cash flow , SEK M2 , 3

Sales

Operating income, SEK M 2, 3

1 Proposed dividend.
2 Excluding restructuring items.
3 2003 has not been adjusted for IFRS but amortization of goodwill has been excluded.

Entrance Systems

Earnings per share, SEK M

Sales, %

Operating income (EBIT), %

39.0

39.6

SEK 13,477 M

SEK 2,295 M

Sales, %

Operating income (EBIT), %

30.3

34.4

SEK 10,220 M

SEK 1,995 M

Sales, %

Operating income (EBIT), %

7.6

5.5

SEK 2,780 M

SEK 322 M

Sales, %

Operating income (EBIT), %

14.3

SEK 4,922 M

SEK 754 M

Sales, %

Operating income (EBIT), %

8.8

SEK 2,987 M

SEK 432 M

7.5

ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience.

www.assaabloy.com

A
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7

ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Sweden
Telephone +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2007

The global leader in
door opening solutions

Contents

1
2
6
8
12
16
19
22
25
28
31
34
38
39
41
52
53
54
55
56
57
58
59
60
61
63
67
87
88
89
90
91
92
93
96